December 2, 2020

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AutoCanada Reports Record Setting 2020 Third Quarter Results

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  • Revenue was $1,017.1 million as compared to $981.9 million in the prior year, an increase of 3.6% and the first time the Company has exceeded $1 billion in sales in a single quarter

  • Adjusted EBITDA was $61.1 million versus $32.5 million in the prior year, an increase of 87.9%; Adjusted EBITDA Pre-IFRS 16 was $50.2 million versus $23.0 million, an increase of 118.5%

  • Adjusted EBITDA margin of 6.0% versus 3.3% in the prior year, an increase of 2.7 percentage points

  • Outperformed the Canadian new retail vehicle market for the seventh consecutive quarter with same store new retail unit sales increasing 3.4% compared to the Canadian market decrease of (4.3)% as reported by DesRosiers Automotive Consultants

  • Canadian used to new retail units ratio increased to 0.86 from 0.72 last year and the trailing twelve month ratio improved to 0.93 at Q3 2020 as compared to 0.74 at Q3 2019

  • Net indebtedness decreased by $42.8 million from $124.2 million at the end of Q2 2020 to $81.4 million at the end of Q3 2020

  • Free cash flow of $53.4 million in the quarter compares to $54.8 million in the prior year; free cash flow on a trailing twelve month basis of $178.0 million at Q3 2020 compares to $29.2 million in Q3 2019

EDMONTON, AB, Nov. 12, 2020 /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, 2020.

AutoCanada Inc. (CNW Group/AutoCanada Inc.)

“We achieved a record-setting quarter as the actions and measures taken earlier in the year to strengthen the business model and position the Company for top-decile operating performance were evidenced in these results. Strong used vehicles sales combined with record gross profit levels, continued sequential improvements in new vehicle sales and our actions to manage and reduce costs were key drivers of our performance,” said Paul Antony, Executive Chairman of AutoCanada. “Strengthening the foundation of AutoCanada with a strong balance sheet and consistently outperforming the market allows us to pivot and pursue an acquisition and innovation strategy.

“We continued to advance our pipeline of strategic acquisition opportunities that optimize our brand and geographic diversification as demonstrated by our recent acquisitions of Auto Bugatti, a BMW MINI certified collision centre located in Montreal, and Autohaus Peoria, a luxury dealership in Peoria, IL, with four franchises: Porsche, Audi, Mercedes-Benz and Volkswagen. Autohaus Peoria further bolsters our presence in southern Illinois and is highly complementary to the Company’s existing operations in Bloomington, IL as both dealers are in close proximity of each other and serve similar luxury-brand communities. More significantly, Autohaus Peoria represents the first Porsche dealership under AutoCanada management and we look forward to further developing our relationship with Porsche.

“We also continue to develop our Digital Retail Initiative to drive used vehicles sales through omni-channel and completely online. We believe this strategy will be a foundational business driver for years to come and another example of AutoCanada leadership in the markets we serve.

“We’re confident that with our nimble and proactive focus we will continue to drive industry-leading performance in any environment, and that our complete business model, our balance sheet and our team position us for strength and resilience as the economy recovers.”

2020 Third Quarter Key Highlights and Recent Developments

All comparisons presented below are between the three-month period ended September 30, 2020 and the three-month period ended September 30, 2019, unless otherwise indicated.

For the first time in the Company’s history, revenue exceeded $1 billion in a standalone quarter while gross profit also reached a record high of $179.4 million. Of the gross profit increase of $28.7 million, ahead of prior year by 19.0%, used vehicles contributed $18.1 million; gross profit margin on used vehicles increased to 9.6% as compared to 4.5% in the prior year. Actions taken to manage and reduce costs translated to operating expenses as a percent of gross profit dropping to 70.1%, a significant improvement versus the 82.8% reported in the prior year. Captured within operating expenses is $6.3 million in Canada Emergency Wage Subsidy (“CEWS”) which served to reduce personnel expenses reported in the quarter; excluding CEWS, operating expenses as a percent of gross profit decreases to 73.6%.

We outperformed the Canadian new vehicle retail market for the seventh consecutive quarter and delivered the eighth consecutive quarter of year-over-year improvement in our used to new retail units ratio. Furthermore, we increased our same store finance and insurance gross profit by 14.9% and our same store finance and insurance gross profit per unit by 3.0% which is the ninth consecutive quarter of year-over-year growth. Net indebtedness was reduced by another $42.8 million from June 30, 2020 and by $120.9 million compared to September 30, 2019. Free cash flow on a trailing twelve month (“TTM”) basis was $178.0 million at Q3 2020 as compared to $29.2 million in Q3 2019. Additionally, our net indebtedness leverage ratio improved to 1.6x at the end of Q3 2020.

Strong revenue and gross profit performance combined with a much-improved cost profile led to the Company generating Adjusted EBITDA of $61.1 million, a record high and an improvement of 87.9% compared to the $32.5 million posted in Q3 2019. Excluding $6.3 million in CEWS recognized in the quarter, normalized Adjusted EBITDA moves to $54.8 million, an increase of 68.7% versus the prior year.

In the U.S., the path toward profitability continued as previously implemented cost control measures and improvements to the business positioned the platform to benefit from the market turnaround as government restrictions were lifted. This translated to third quarter Adjusted EBITDA of $4.7 million, an increase of $3.2 million from 2019 and the fifth consecutive quarter of year-over-year improvement of normalized Adjusted EBITDA. The previously implemented cost control measures contributed to this $3.2 million increase in the form of a decrease of (22.2) percentage points (“ppts”) in operating expenses as a percentage of gross profit as compared to the prior year.

The strategic initiatives introduced during Q2 2020 in response to COVID-19 focused on mitigating losses, managing inventory, reducing costs and preserving liquidity and were undertaken with the goal of ensuring the Company entered Q3 2020 well-positioned to deliver exceptional operating performance. The successful execution of this strategy coupled with a strong recovery in motor vehicle sales across North America provided the opportunity for the Company’s complete business model – embodied by the Go Forward Plan – to demonstrate its capabilities and produce strong results across all operational segments.

Looking ahead, there are still high levels of market uncertainty due to COVID-19 and other macro market conditions. We have taken our learnings from this situation to re-evaluate and adapt our business to drive industry-leading performance. We are confident that we will be a top decile performer in any environment. With our complete business model, our strong balance sheet and our team, we are well positioned to emerge from this pandemic even stronger.

Consolidated AutoCanada Highlights

RECORD SETTING THIRD QUARTER

As a result of the continued execution of various initiatives and elements of our complete business model, along with the actions taken in the second quarter, and the considerable improvement in market outlook and demand during Q3 2020, AutoCanada delivered a record setting third quarter.

For the three-month period ended September 30, 2020:

  • Revenue was $1,017.1 million, an increase of $35.2 million or 3.6%

  • Total vehicles sold were 20,168, an increase of 516 units or 2.6%

  • Net income (loss) for the period was $36.0 million (or $1.23 per diluted share) versus $(4.1) million (or $(0.15) per diluted share)

  • Adjusted EBITDA increased by 87.9% to $61.1 million, an increase of $28.6 million

  • Ending net indebtedness of $81.4 million reflected an improvement of $42.8 million from the end of Q2 2020

Canadian Operations Highlights

OUTPERFORMED CANADIAN NEW RETAIL MARKET FOR SEVENTH CONSECUTIVE QUARTER

Management continued to execute its complete business model during the quarter. For the seventh consecutive quarter, we outperformed the Canadian market, as same store new retail unit sales increased by 3.4% as compared to the market decrease of (4.3)%, for brands represented by AutoCanada, as reported by DesRosiers Automotive Consultants. Our used vehicle segment was a key driver of the success in Q3 2020. Same store used vehicle gross profit percentage increased to 9.9% as compared to 5.4% in the prior year. Our used to new retail units ratio increased to 0.86 from 0.72 in the prior year, the eighth consecutive quarter of year-over-year improvement and our trailing twelve month used to new retail units ratio improved to 0.93 at Q3 2020 as compared to 0.74 at Q3 2019.

For the three-month period ended September 30, 2020:

  • Revenue was $912.1 million, an increase of 4.7%

  • Total retail vehicles sold were 17,264, an increase of 2,009 units or 13.2%

  • Used to new retail units ratio increased to 0.86 from 0.72

  • Finance and insurance gross profit per retail unit average increased to $2,593, up 5.6% or $137 per unit

  • Net income for the period was $34.3 million, up 220.3% from a net income of $10.7 million in 2019

  • Adjusted EBITDA increased 82.1% to $56.3 million, an increase of $25.4 million

  • CEWS of $6.3 million was recorded in the quarter

  • Excluding CEWS, normalized Adjusted EBITDA improves to $50.1 million as compared to $30.9 million in the prior year, an increase of 61.9%

U.S. Operations Highlights

ADJUSTED EBITDA OF $4.7 MILLION

Continued focus on cost management and profitability along with the easing of government restrictions imposed during Q2 2020, and strong market demand contributed to improved results for the U.S. platform. The comparative period includes two franchises which ceased operations on November 11, 2019.

  • Revenue was $105.1 million, a decrease of (5.1)%

  • Retail unit sales decreased to 2,322 units, down (226) units or (8.9)%

  • Net income (loss) for the period was $1.7 million, an increase of 111.2% from $(14.8) million in 2019

  • Adjusted EBITDA was $4.7 million, an increase of $3.2 million from 2019

Same Store Metrics

SAME STORE USED RETAIL UNIT SALES GROWTH OF 22.8%

Total same store new and used retail unit sales for Canadian Operations increased by 11.5% to 16,235 units; new retail units increased by 3.4% and used retail units increased by 22.8%. The increase of new retail units by 3.4% outperformed the market decrease of (4.3)% in the Canadian new vehicle market for the brands represented by AutoCanada, as reported by DesRosiers Automotive Consultants.

The continued optimization of the Company’s complete business model is highlighted by the year-over-year improvement in gross profit across each individual business segment which collectively totaled $21.8 million, or 17.1%.

All same store metrics include only Canadian dealerships which have been owned for at least two full years since acquisition.

  • Revenue decreased to $819.9 million, a decrease of (1.1)%

  • Gross profit increased by $21.8 million or 17.1%

  • Used to new retail units ratio increased to 0.86 from 0.72

  • Finance and insurance gross profit per retail unit average increased to $2,521, up 3.0% or $74 per unit; gross profit increased to $40.9 million as compared to $35.6 million in the prior year, an increase of 14.9%

  • Parts, service and collision repair gross profit increased to $49.7 million, an increase of 0.7%

Financing and Investing Activities and Other Recent Developments

NET INDEBTEDNESS DECREASED BY $42.8 MILLION TO $81.4 MILLION

Our immediate focus has been and continues to be on preserving cash and managing liquidity.

As at September 30, 2020, based on cash and cash equivalents and availability on our Credit Facility, our liquidity was $220.7 million. In the quarter, net indebtedness was reduced by $42.8 million to $81.4 million.

COVID-19 Response

Actions Taken in Response to COVID-19

Since the outset of COVID-19, the Company has carefully followed the most current direction of government and related health agencies in our policies and procedures across our operations. To that end, we continue to implement stringent operating practices to ensure personal protection, cleanliness, distancing, overall employee and customer safety, work from home protocols wherever possible, halting all non-essential travel, and following established guidelines.

The Company continues to monitor local government orders regarding business operations to ensure that our operations comply with all applicable restrictions.

Across all our operations, AutoCanada will continue to safely support customers with their vehicle servicing and purchasing requirements, and customers are encouraged to contact their local dealership as needed.

Combined with the measures taken as identified below, and the Company’s comprehensive business model, management believes the Company to be well-positioned to operate within the COVID-19 environment. We continue to be mindful of the potential impacts of COVID-19 over the coming months.

Financial Resilience Measures Taken

Our main priorities continue to be the management of our inventory and cash and to ensure we remain adaptable and resilient through the coming quarters. The Company has taken measures to enhance financial resilience in response to the evolving market conditions due to COVID-19. These measures are designed to address immediate challenges, while reinforcing the balance sheet to ensure we are well-prepared to respond to market conditions given the pandemic is expected to continue for an unknown period of time.

Measures Taken

Impact of Measures Taken

Amended Credit Facility

Staged covenant relief thresholds for the Total and Senior Net Funded Debt to Bank EBITDA and Fixed
Charge Coverage Ratios through to Q2 2021

Employee Reductions and
Compensation

At the peak of the COVID-19 situation, the Company had reduced its workforce by approximately
1,700, or 40%

Adjusted pay plans to further bias to variable cost structure

Discretionary Vendor and
Landlord Expenses

Deferred, reduced, or eliminated most discretionary and non-essential operational and administrative
spending

Worked with several vendors and landlords to reduce costs through this period and/or defer payments
on goods, services, and rent through to the end of Q3 2020

Reduced Capital Expenditures

At the onset of the pandemic, in order to delay all non-essential spending and retain cash, we reduced
our capital spending forecast for the year from the approximate $29 million two year average

As our liquidity improved, with the increase in operating levels through Q2 and Q3, our current capital
expenditure levels have returned to normalized levels. We remain in active communication with
OEM’s to manage spending and capital commitments where possible

Suspension of Dividend

Suspension represents approximately $11 million in annualized cash savings; approximately $8 million
for 2020

Non-Core Asset Portfolio

Since the start of the year, we have reduced non-core assets from $14.2 million to $1.0 million

Realized proceeds of $8.1 million in Q3 2020 with the sale of three properties and year-to-date
proceeds of $9.2 million

Reclassified $5.4 million land asset out of held for sale into property and equipment in Q3 2020

Government Program and
Subsidies

CEWS provided a total of $32.5 million in income for the 28 week period from March 15 to September
26, 2020

Recognized income of $26.2 million in Q2 2020 and $6.3 million in Q3 2020

Will assess eligibility for the remaining period of the program (September 27, 2020 to June 2021) in
accordance with relevant program requirements

U.S. dealerships received a loan of $5.4 million (USD) in Q2 2020 under the Paycheck Protection
Program implemented by the Small Business Administration, with opportunity for forgiveness; to date,
the loan has not been recognized into income

Hedging Actions

Restructured nearly half of interest rate swap portfolio in the first half of the year, to drive
approximately $2.2 million in annual cash savings

COVID-19 Operating Impacts to Business Objectives and Strategy

Our business model continues to operate well, and we have gained traction from the success of the Go Forward Plan initiatives to manage impacts from COVID-19. We have created a detailed plan to ensure we successfully weather the pandemic, while also improving and strengthening our business model to best address changing market conditions. This includes actively managing headcount, continued focus on used retail sales, leveraging our Business Development Centre (“BDC”) to drive parts and service, and ensuring pay plan programs align with changing market conditions to drive greater consistency across platforms and better alignment with operating targets.

Management is actively assessing what the “new normal” will be. We will continue to respond according to market conditions as they evolve.

The Company intends to emerge from this unprecedented period of time as a stronger and more efficient operating entity.

Third Quarter Financial Information
The following table summarizes the Company’s performance for the quarter:

Three Months Ended September 30

Consolidated Operational Data

2020

2019

% Change

Revenue

1,017,100

981,870

3.6%

Gross profit

179,412

150,754

19.0%

Gross profit %

17.6%

15.4%

2.2%

Operating expenses

125,785

124,772

0.8%

Operating (loss) profit

56,884

16,695

240.7%

Profit (loss) for the period

35,962

(4,104)

976.3%

Basic earnings (loss) per share attributable to AutoCanada shareholders

1.29

(0.15)

960.0%

Adjusted EBITDA 1

61,054

32,489

87.9%

New retail vehicles sold (units)

10,750

10,419

3.2%

New fleet vehicles sold (units)

582

1,849

(68.5)%

Total new vehicles sold (units)

11,332

12,268

(7.6)%

Used retail vehicles sold (units)

8,836

7,384

19.7%

Total vehicles sold

20,168

19,652

2.6%

Same store new retail vehicles sold (units)

8,726

8,443

3.4%

Same store new fleet vehicles sold (units)

542

1,780

(69.6)%

Same store used retail vehicles sold (units)

7,509

6,114

22.8%

Same store total vehicles sold

16,777

16,337

2.7%

Same store revenue

819,895

829,158

(1.1)%

Same store gross profit

148,976

127,194

17.1%

Same store gross profit %

18.2%

15.3%

2.9%

See the Company’s Management’s Discussion and Analysis for the quarter ended September 30, 2020 for complete footnote disclosures.

The following table shows the segmented operating results for the Company for the three month periods ended September 30, 2020 and September 30, 2019.

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Canada
$

U.S.
$

Total
$

Canada
$

U.S.
$

Total
$

New vehicles

483,117

61,298

544,415

492,149

63,694

555,843

Used vehicles

282,396

26,797

309,193

235,955

26,342

262,297

Parts, service and collision repair

98,539

13,200

111,739

101,189

15,250

116,439

Finance, insurance and other

47,998

3,755

51,753

41,885

5,406

47,291

Total revenue

912,050

105,050

1,017,100

871,178

110,692

981,870

New vehicles

38,639

3,591

42,230

35,035

1,720

36,755

Used vehicles

26,444

3,375

29,819

9,690

2,041

11,731

Parts, service and collision repair

51,553

7,503

59,056

52,150

7,491

59,641

Finance, insurance and other

44,769

3,538

48,307

37,468

5,159

42,627

Total gross profit

161,405

18,007

179,412

134,343

16,411

150,754

Employee costs

73,760

7,340

81,100

65,478

8,934

74,412

Government assistance

(6,252)

(6,252)

Administrative costs

34,971

5,282

40,253

33,568

5,621

39,189

Facility lease and storage costs

377

377

60

508

568

Depreciation of property and equipment

3,815

296

4,111

4,295

232

4,527

Depreciation of right-of-use assets 2

5,710

486

6,196

5,518

558

6,076

Total operating expenses

112,381

13,404

125,785

108,919

15,853

124,772

Operating profit before other income

49,024

4,603

53,627

25,424

558

25,982

Operating data

New retail vehicles sold 1

9,270

1,480

10,750

8,857

1,562

10,419

New fleet vehicles sold 1

582

582

1,815

34

1,849

Total new vehicles sold 1

9,852

1,480

11,332

10,672

1,596

12,268

Used retail vehicles sold 1

7,994

842

8,836

6,398

986

7,384

Total vehicles sold 1

17,846

2,322

20,168

17,070

2,582

19,652

# of service and collision repair orders completed 1

160,069

27,170

187,239

186,384

32,139

218,523

# of dealerships at period end

49

13

62

50

14

64

# of service bays at period end

865

174

1,039

886

200

1,086

See the Company’s Management’s Discussion and Analysis for the quarter ended September 30, 2020 for complete footnote disclosures.

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, 2020, which can be found on the Company’s website at www.autocan.ca or on www.sedar.com.

Non-GAAP 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, and financing activities determined in accordance with Canadian GAAP, as indicators of our performance. We provide these 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. The following “Non-GAAP Measures” are defined in the annual MD&A: Adjusted EBITDA; Free Cash Flow; Net Indebtedness and Lease Adjusted Leverage Ratio.

Conference Call

A conference call to discuss the results for the three months ended September 30, 2020 will be held on November 13, 2020 at 9:00am Mountain (11:00am Eastern). To participate in the conference call, please dial 1.888.231.8191 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://www.autocan.ca/investors/q32020-presentation/

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 63 franchised dealerships, comprised of 27 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, Honda and Porsche branded vehicles. In 2019, our dealerships sold approximately 71,000 vehicles and processed approximately 900,000 service and collision repair orders in our 1,047 service bays generating revenue in excess of $3 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”), 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 of 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.

Cision
Cision

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2020-11-12 19:50:00


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