- 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.