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AutoCanada Reports Third Quarter 2017 Results

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EDMONTON, Nov. 9, 2017 /CNW/ - AutoCanada Inc. (TSX: ACQ), one of Canada's largest multi-location automobile dealership groups, today provided a corporate update and reported its financial results for the three-month and nine-month periods ended September 30, 2017.

"We have continued our positive momentum in this quarter," said Steven J. Landry, President & Chief Executive Officer, "the Company reported an increase in revenue, gross profit, net earnings and earnings per share. New vehicle unit sales outpaced the industry while same store revenue, gross profit and unit sales exceed the same quarter last year. We achieved these positive financial and unit results while also adding a new brand and dealership, Planète Mazda, to our portfolio."

Third Quarter Highlights

  • Revenue in the quarter was $834.6 million, up 10.8% compared with the third quarter of 2016. Operating expenses as a percentage of gross profit declined to 80.1% from 80.6% over the same period last year.
  • Gross profit was $138.0 million, up 12.2% compared with the same quarter in 2016, with gross profit as a percentage of revenue increasing to 16.5% from 16.3%.
  • New vehicle sales were 12,014, up 9.4% from 2016. Revenue from new car sales was $497.7 million in the quarter, up 12.0% from 2016. New car sales accounted for 59.6% of the Company's total revenue and 25.7% of gross profit versus 59.0% of revenue and 25.7% of gross profit in the third quarter of 2016.
  • Used vehicle sales were 5,118, up 2.9% from the same quarter last year. Revenue from used car sales was $192.5 million in the quarter, up 7.2% from last year. Used car sales accounted for 23.1% of the Company's total revenue and 8.1% of gross profit, versus 23.8% of revenue and 10.5% of gross profit in 2016.
  • Parts, service and collision repair generated $104.8 million of revenue in the third quarter, up 9.7% from 2016. This accounted for 12.5% of the Company's total revenue and 39.0% of its gross profit, versus 12.6% of revenue and 39.0% of gross profit in 2016.
  • Finance and insurance generated $39.6 million of revenue in the third quarter, an improvement of 18.0% from 2016. This accounted for 4.8% of the Company's total revenue and 26.2% of its gross profit, up from 4.5% of revenue and 25.0% of profit in 2016.
  • EBITDA attributable to AutoCanada shareholders increased by $2.0 million or 8.3% to $25.8 million from $23.8 million last year.
  • Adjusted earnings per share were $0.50, compared with the adjusted earnings per share of $0.38 in the third quarter of 2016.

"This was a good quarter with topline growth across all areas of the business and an overall improvement in profitability," said Chris Burrows, Chief Financial Officer. "Sales are up in every region, and from all but two brands. Our operations are becoming more efficient, and we are seeing a steady rebalancing of our portfolio, across geographies and brands."

The following table summarizes the Company's results for the quarter ended September 30, 2017:




Three months ended September 30

Consolidated Operational Data

2017

2016

% Change

EBITDA attributable to AutoCanada shareholders

25,827

23,842

8.3%

Adjusted EBITDA attributable to AutoCanada shareholders

27,229

23,722

14.7%

Net earnings attributable to AutoCanada shareholders

12,100

(32,619)

N/A

Adjusted net earnings attributable to AutoCanada shareholders

13,581

10,327

31.5%

Basic EPS

0.44

(1.19)

N/A

Adjusted diluted EPS

0.50

0.38

31.6%

New retail vehicles sold (units)

10,334

8,949

15.6%

New fleet vehicles sold (units)

1,680

2,034

(17.4)%

New vehicles sold (units)

12,014

10,983

9.4%

Used retail vehicles sold (units)

5,118

4,972

2.9%

Total vehicles sold (units)

17,132

15,955

7.4%

Revenue

834,571

753,178

10.8%

Gross Profit

137,969

122,937

12.2%

Gross Profit %

16.5%

16.3%

1.2%

Operating expenses

110,560

99,041

11.6%

Operating expenses as % of gross profit

80.1%

80.6%

(0.6)%

Free cash flow

30,213

30,897

(2.2)%

Adjusted free cash flow

23,296

27,766

(16.1)%

*See the Company's Management's Discussion and Analysis for the quarter ended September 30, 2017 for complete footnote disclosures.

 

Outlook

The Canadian new vehicle market continues to outpace all previous years for sales. Nine months into the year, new vehicle sales have hit monthly records eight times. Total sales of 1.59 million vehicles at the end of September are 5.5% greater than 2016, the previous record year. The market has grown in every region of the country, with growth in the west being particularly strong.

This has been of added benefit to AutoCanada, whose business is more heavily weighted in the west. Sales for the Company were up 9.4% in the third quarter, out-performing the national sales increase of 6.8%.

AutoCanada's growth strategy will continue to focus on increasing the brands and range of vehicles it offers, with dealers clustered in key markets across a broader range of geographies. The recent addition of the Company's first Mazda dealership, AutoCanada's 23rd brand, located in the Montreal region where it already has three other dealerships, is in keeping with this strategy. 

AutoCanada's success includes used car sales, parts, service & collision repair, and financing & insurance. Through acquisitions, the Company has increased its service bays to 977 from 898 one year ago and the new Mazda dealership adds 22 more. The Mercedes-Benz Rive-Sud dealership acquired earlier in 2017 added 28 new services bays.

We will also continue to focus on advancing our progress on integration, continuous improvements in efficiencies and deepening our IT and analytical capabilities across AutoCanada's network of dealerships and at the corporate office. Acquiring new dealerships and effectively integrating them is key to our long-term success. Same store results, reflecting the performance of dealerships that have been owned for at least two full years since acquisition or opening, is an important metric to assess how well we are doing at integration. Same store sales saw an uptick in the third quarter, with revenue up 2.9% and gross profit up 6.3%. Only one new store was added to our same store count in the third quarter, with only one more to follow by the end of the year.    

Dealership relocations and expansions are important steps to provide customer loyalty and long-term earnings sustainability. Our capital expenditure on relocations and expansions in 2017 continue on track. At September 30, the Company was committed to capital expenditure obligations of $8.3 million related to dealership facilities.

Dividends

Management reviews the Company's financial results on a monthly basis. The Board of Directors reviews the financial results periodically to determine whether a dividend shall be paid based on a number of factors with a goal to efficiently allocate capital to fuel AutoCanada's future growth while also rewarding and sharing the company's success with our shareholders.

On November 9, 2017, the Board declared a quarterly eligible dividend of $0.10 per common share on AutoCanada's outstanding Class A common shares, payable on December 15, 2017 to shareholders of record at the close of business on November 30, 2017.

For purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) (the "ITA") and any corresponding provincial and territorial tax legislation, all dividends paid by AutoCanada or any of its subsidiaries in 2010 and thereafter are designated as "eligible dividends" (as defined in 89(1) of the ITA), unless otherwise indicated. Please consult with your own tax advisor for advice with respect to the income tax consequences to you of AutoCanada Inc. designating dividends as "eligible dividends".

SELECTED QUARTERLY 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.










(in thousands of dollars, except Gross Profit %, Earnings per
share, and Operating Data)

Q3
2017

Q2
2017

Q1
2017

Q4
2016

Q3
2016

Q2
2016

Q1
2016

Q4
2015

Income Statement Data










New vehicles

497,711

558,682

353,540

348,107

444,482

497,025

363,181

368,242


Used vehicles

192,473

182,913

165,408

157,724

179,582

208,016

180,108

167,100


Parts, service and collision repair

104,816

113,983

90,735

92,310

95,585

100,317

94,721

102,220


Finance, insurance and other

39,571

39,324

29,344

31,133

33,529

36,899

28,862

34,752

Revenue

834,571

894,902

639,027

629,274

753,178

842,257

666,872

672,314


New vehicles

36,806

38,555

25,590

25,042

31,578

34,410

27,267

27,482


Used vehicles

11,140

13,095

11,940

10,064

12,950

13,758

10,420

10,326


Parts, service and collision repair

53,805

56,306

47,284

52,957

47,676

52,957

47,669

51,760


Finance, insurance and other

36,218

35,867

26,813

28,722

30,733

33,577

26,353

34,354

Gross profit

137,969

143,823

111,627

116,785

122,937

134,702

111,709

123,922

Gross Profit %

16.5%

16.1%

17.5%

18.6%

16.3%

16.0%

16.8%

18.4%

Operating expenses

110,560

112,897

98,170

97,397

99,041

107,932

96,047

101,310

Operating expenses as a % of gross profit

80.1%

78.5%

87.9%

83.4%

80.6%

80.1%

86.0%

81.8%

Net earnings (loss) attributable to AutoCanada shareholders

12,100

24,978

3,678

13,785

(32,619)

14,158

7,272

(7,361)

Adjusted net earnings attributable to AutoCanada shareholders

13,581

15,547

4,602

7,536

10,327

15,523

6,253

8,610

EBITDA attributable to AutoCanada shareholders

25,827

43,683

14,136

25,260

23,842

27,072

18,312

23,353

EBITDA attributable to AutoCanada shareholders as a % of Sales

3.1%

4.9%

2.7%

4.5%

3.6%

3.7%

3.2%

3.5%

Free cash flow

31,114

10,982

621

23,424

30,897

37,922

4,045

9,066

Adjusted free cash flow

23,296

36,277

15,217

13,133

27,766

21,632

6,035

8,078

Basic earnings per share

0.44

0.91

0.13

0.50

(1.19)

0.53

0.27

(0.29)

Diluted earnings per share

0.44

0.91

0.13

0.50

(1.19)

0.53

0.27

(0.29)

Basic adjusted earnings per share

0.50

0.57

0.17

0.28

0.38

0.57

0.23

0.34

Diluted adjusted earnings per share

0.50

0.57

0.17

0.27

0.38

0.57

0.23

0.34

Operating Data









Vehicles (new and used) sold

17,132

18,490

13,055

12,912

15,955

17,425

13,301

14,150

New vehicles sold

12,014

13,429

8,508

8,449

10,983

12,098

8,502

9,210

New retail vehicles sold

10,334

10,545

6,753

7,590

8,949

9,374

7,078

8,016

New fleet vehicles sold

1,680

2,884

1,755

859

2,034

2,724

1,424

1,194

Used retail vehicles sold

5,118

5,061

4,547

4,463

4,972

5,327

4,799

4,940

# of service and collision repair orders completed

220,669

228,872

197,069

217,418

209,912

227,446

209,194

230,772

Absorption rate

87%

87%

82%

86%

89%

90%

83%

93%

# of dealerships at period end

57

57

56

55

53

53

53

54

# of same stores dealerships

48

47

47

44

33

27

27

28

# of service bays at period end

977

977

949

928

898

898

898

912

Same stores revenue growth

2.9%

0.1%

(7.1)%

(10.0)%

(9.2)%

(3.2)%

(3.1)%

(12.1)%

Same stores gross profit growth

6.3%

1.1%

(1.2)%

(5.8)%

(11.0)%

(5.3)%

(5.5)%

(14.3)%

*See the Company's Management's Discussion and Analysis for the quarter ended June 30, 2017 for complete footnote disclosures.

 

The following tables summarizes the results for the quarter ended September 30, 2017 on a same store basis by revenue source and compares these results to the same period in 2016.

Same Store Revenue and Vehicles Sold



Three Months Ended September 30

(in thousands of dollars)

2017

2016

% Change

Revenue Source





New vehicles ‑ Retail

373,749

348,102

7.4%


New vehicles ‑ Fleet

59,999

68,720

(12.7)%

Total New vehicles

433,748

416,822

4.1%


Used vehicles ‑ Retail

116,218

114,402

1.6%


Used vehicles ‑ Wholesale

54,145

54,203

(3.8)%

Total Used vehicles

168,363

168,605

(0.1)%

Finance, insurance and other

35,542

31,358

13.3%

Subtotal

637,653

616,785

3.4%

Parts, service and collision repair

89,169

89,358

(0.2)%

Total

726,822

706,143

2.9%

New retail vehicles sold (units)

8,779

8,246

6.5%

New fleet vehicles sold (units)

1,634

2,003

(18.4)%

Used retail vehicles sold (units)

4,403

4,609

(4.5)%

Total

14,816

14,858

(0.3)%

Total vehicles retailed (units)

13,182

12,855

2.5%

 

Same Store Gross Profit and Profit Percentage




Three Months Ended September 30


Gross Profit

Gross Profit %

(in thousands of dollars)

2017

2016

% Change

2017

2016

Revenue Source







New vehicles ‑ Retail

29,769

28,135

5.8%

8.0%

8.1%


New vehicles ‑ Fleet

1,199

1,057

13.4%

2.0%

1.5%

Total New vehicles

30,968

29,192

6.1%

7.1%

7.0%


Used vehicles ‑ Retail

9,844

10,391

(5.3)%

8.5%

9.1%


Used vehicles ‑ Wholesale

1,372

1,619

(15.3)%

2.6%

3.0%

Total Used vehicles

11,216

12,010

(6.6)%

6.7%

7.1%

Finance, insurance and other

32,566

28,530

14.1%

91.6%

91.0%

Subtotal

74,750

69,732

7.2%

11.7%

11.3%

Parts, service and collision repair

46,856

44,657

4.9%

52.5%

50.0%

Total

121,606

114,389

6.3%

16.7%

16.2%

 

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, 2017, 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; EBITDA; Adjusted EBITDA; Adjusted Net Earnings and Adjusted Net Earnings per Share; EBIT; Free Cash Flow; Adjusted Free Cash Flow; Adjusted Average Capital Employed; Absorption Rate; Average Capital Employed; Return on Capital Employed; and Adjusted Return on Capital Employed.

Conference Call

A conference call to discuss the results for the quarter ended September 30, 2017 will be held on November 10, 2017 at 9:00 am MT (11:00 am ET).  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: http://www.autocan.ca/investors/Q32017.

About AutoCanada

AutoCanada is one of Canada's largest multi-location automobile dealership groups, currently operating 57 franchised dealerships, comprised of 65 franchises, in eight provinces and has over 4,500 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC, Buick, Cadillac, Infiniti, Nissan, Hyundai, Subaru, Mitsubishi, Audi, Volkswagen, Kia, Mercedes-Benz, Smart, BMW, and MINI branded vehicles.  In 2016 with $2.9 billion in revenue, our dealerships sold approximately 60,000 vehicles and processed approximately 864,000 service and collision repair orders in our 928 service bays.

Dealerships generate their revenue from the following four inter-related business operations: new vehicle sales; used vehicle sales; parts, service and collision repair; and finance and insurance. While new vehicle sales are the most important source of revenue, they generally result in lower gross profits than parts, service and collision repair operations and finance and insurance sales. Overall gross profit margins increase as revenues from higher margin operations increase relative to revenues from lower margin operations. The Company earns fees for arranging financing on new and used vehicle purchases on behalf of third parties. Under agreements with retail financing sources, the Company is required to collect and provide accurate financial information, which if not accurate, may require us to be responsible for the underlying loan provided to the consumer.

Forward Looking Statements

Certain statements contained in management's discussion and analysis 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 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" 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 document.

The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website 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.

View original content: http://www.newswire.ca/en/releases/archive/November2017/09/c5773.html

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