AUTOCANADA REPORTS RECORD SECOND QUARTER RESULTS

Loading...
Loading...
  • Revenue was $1,686.0 million as compared to $1,281.1 million in the prior year, an increase of 32% and the highest second quarter revenue reported in the Company's history
  • Net income for the period was $39.1 million, which includes $10.0 million of incremental inventory writedowns, versus net income of $37.7 million in the prior year
  • Adjusted EBITDA1 was $75.6 million versus $70.5 million in the prior year, an increase of 7.2%; normalized increase of 11.9% as compared to prior year normalized adjusted EBITDA1 of $67.5 million
    • Adjusted EBITDA margin1 was 4.5% versus the normalized adjusted EBITDA margin1 of 5.3% in the prior year, a decrease of (0.8) percentage points
  • Diluted earnings per share was $1.33, an increase of $0.10 from $1.23 in the prior year
  • Indebtedness of $375.0 million at the end of Q2 2022 compares to $358.5 million at the end of Q1 2022
  • Net indebtedness1 of $294.1 million at the end of Q2 2022 compares to $248.8 million at the end of Q1 2022

EDMONTON, AB, Aug. 10, 2022 /CNW/ - AutoCanada Inc. ("AutoCanada" or the "Company") ACQ, a multi-location North American automobile dealership group, today reported its financial results for the three month period ended June 30, 2022.

"Our positive momentum continued in the second quarter where our team delivered yet another record quarter with exceptional performance across our operations," said Paul Antony, Executive Chairman of AutoCanada.  "Strong results in Q2 reflect the ongoing sustainability of our business model, as well as our ability to continue navigating a range of industry challenges, including OEM production delays and inventory constraints. I am immeasurably proud of what we have built and our platform's ability to thrive in a variety of market conditions and drive industry-leading performance.

"This strength allowed us to continue to advance our acquisition strategy with the recent addition of Burwell Auto Body and Kelleher Ford, further expanding our national collision centre footprint and our dealership platform across Canada. We remain well positioned to continue to execute on our acquisition pipeline in the coming quarters with a number of dealerships and collision centres being evaluated.

"Looking forward to the remainder of 2022, we will continue to build on our strong momentum and focus on our strategic growth pillars to deliver best in class performance and enhance shareholder returns. We also expect to see continued realization of synergies from our acquisitions which will further drive our Adjusted EBITDA performance."

Second Quarter Key Highlights and Recent Developments

The Company set a second quarter record as revenue reached $1,686.0 million compared to $1,281.1 million in the prior year, an increase of 31.6%. 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 $39.1 million, which includes an incremental charge of $10.0 million in our Canadian Operations for the writedown of used vehicle inventory to net realizable value, as compared to $37.7 million in Q2 2021. Diluted earnings per share was $1.33, an increase of $0.10 from $1.23 in the prior year.

Adjusted EBITDA1 for the period was $75.6 million as compared to $70.5 million reported in Q2 2021, an improvement of 7.2%. Prior year results include $3.0 million of government assistance related to COVID. Excluding these typically non-recurring income items in the prior year, adjusted EBITDA1 of $75.6 million compares to normalized adjusted EBITDA1 of $67.5 million in the prior year, a normalized improvement of 11.9%. Adjusted EBITDA margin1 of 4.5% compares to 5.5% in the prior year, a decrease of (1.0) percentage points ("ppts"), and a decrease of (0.8) ppts as compared to normalized adjusted EBITDA margin1 of 5.3% in the prior year.

Gross profit increased by $61.4 million to $279.3 million, an increase of 28.2%, as compared to prior year. This increase was largely driven by the increases of $30.7 million from F&I and $22.6 million from PS&CR. F&I gross profit per retail unit average2 increased to $3,458, up 24.7% or $684 per unit. Gross profit percentage was 16.6% in the quarter and was impacted by the incremental $10.0 million writedown of used vehicle inventory to net realizable value; this compares to 17.0% in the prior year. Used retail vehicles2 sales increased by 4,469 units, up 33.7%, to 17,740, and contributed to the consolidated used to new retail units ratio2 moving to 1.80 from 1.31. Used vehicle sales volume contributed to our strong F&I and PS&CR gross profit performance.

Our U.S. Operations continue to demonstrate strong growth and contributed $42.9 million of gross profit, an increase of $13.0 million or 43.6% as compared to prior year. This improvement in gross profit was propelled by gains from F&I and PS&CR, resulting in a gross profit percentage of 17.3%.

Floorplan financing costs increased by $2.5 million, or 70%, to $5.9 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 manage our new 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 more than doubled our used vehicle inventory position to $699.0 million as at June 30, 2022 as compared to $309.8 million in Q2 2021. Based on our current used vehicle inventory composition and market conditions, management determined that $10.0 million writedown of incremental used vehicle inventory was required to calibrate our cost of used vehicle inventory to the changing macro environment. We will continue to assess the net realizable value of our inventory in the quarters ahead and actively manage our inventory position to ensure it remains appropriate to meet current market demand.

Net indebtedness1 increased by $45.3 million from March 31, 2022 to $294.1 million at the end of Q2 2022. This increase is primarily driven by the repurchase and cancellation of $25.4 million of shares under the authorized Normal Course Issuer Bid ("NCIB"), the acquisitions of Porsche Centre London and Audi Windsor dealerships, and the Burwell Auto Body collision centre. Free cash flow1 on a trailing twelve month ("TTM") basis was $89.1 million at Q2 2022 as compared to $159.9 million in Q2 2021; the decline in free cash flow1 between years was driven primarily by reduced government assistance in 2021, increased cash taxes, stock based compensation related cash payments, and changes in working capital. Additionally, our net indebtedness leverage ratio1 of 1.3x remained well below our target range at the end of Q2 2022, as compared to 0.1x in Q2 2021.

Had all of the acquisitions, completed as of Q2 2022, occurred at July 1, 2021, consolidated pro forma net income would have been $155.3 million for the TTM ended June 30, 2022, as compared to consolidated pro forma net income of $174.8 million for the year ended December 31, 2021. Pro forma normalized adjusted EBITDA1 would be $286.9 million for the TTM ended June 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 $125 million in annual revenue currently being evaluated. We are at varying stages of the acquisition process with these targets, ranging from signed letters of intent to signed purchase agreements, with the potential deals remaining subject to due diligence, OEM approvals, and other standard closing conditions. We remain well-positioned to continue to execute on our acquisition strategy in the coming quarters.

Our performance, both in Canada and U.S. Operations, continues our trend of sustainable improvement and demonstrates the efficacy of our complete business model and strategic initiatives. We remain aware that uncertainty continues to exist in the macroeconomic environment given the ongoing challenges associated with the lingering effects of the global pandemic, inflation, rising interest rates, and the 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 SECOND QUARTER

AutoCanada delivered another record setting second quarter.

Refer to Section 5 Acquisitions, Divestitures, Relocations and Real Estate of the MD&A for acquisitions included in Q2 2022 results.

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

  • Revenue was $1,686.0 million, an increase of $405.0 million or 31.6%
  • Total vehicles2 sold were 28,115, an increase of 4,162 units or 17.4%
    • Used retail vehicles2 sold increased by 4,469 or 33.7%
  • Net income for the period was $39.1 million (or $1.40 per basic share) versus $37.7 million (or $1.23 per diluted share), which includes $10.0 million of incremental inventory writedowns in Q2 2022
  • Adjusted EBITDA1, which includes $10.0 million of incremental inventory writedowns, increased by 7.2% to $75.6 million, an increase of $5.1 million
    • Adjusted EBITDA1 increased by 11.9% over prior year normalized adjusted EBITDA1 of $67.5 million, an increase of $8.0 million
    • Adjusted EBITDA1 on a trailing twelve month basis was $271.9 million
  • Net indebtedness1 of $294.1 million reflected an increase of $45.3 million from Q1 2022.

Canadian Operations Highlights

TOTAL GROSS PROFIT INCREASED BY 26%

Our F&I and PS&CR segments were key drivers of the record performance in Q2 2022. F&I gross profit per retail unit average increased to $3,349, up 17.2% or $491 per unit. PS&CR gross profit increased by $17.7 million or 29.3% to $78.2 million.

Unless stated otherwise, all results for acquired businesses are included in all Canadian references in the MD&A.

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

  • Revenue was $1,437.9 million, an increase of 32.0%
  • Used retail unit2 sales increased by 3,017 or 26.3%
    • Average TTM Canadian used retail unit sales per dealership per month, excluding Used Digital Retail Division dealerships2, improved to 60, as compared to 57 in the prior year
  • Used to new retail units ratio2 increased to 1.69 from 1.48
    • TTM used to new retail ratio2 improved to 1.56 at Q2 2022 as compared to 1.13 at Q2 2021
  • F&I gross profit per retail unit average2 increased to $3,349, up 17.2% or $491 per unit
  • Net income for the period was $31.9 million, which includes $10.0 million of incremental inventory writedowns, down (3.1)% from a net income of $33.0 million in 2021
  • Adjusted EBITDA1 increased by 6.4% to $65.4 million, an increase of $3.9 million
    • Adjusted EBITDA1 increased by 9.3% over prior year normalized adjusted EBITDA1 of $59.9 million
    • Adjusted EBITDA margin1 was 4.6% as compared to normalized adjusted EBITDA margin1 of 5.5% in the prior year, a decrease of (0.9) ppts

U.S. Operations Highlights

USED RETAIL VEHICLES SOLD INCREASED BY 81%

U.S. Operations continues to improve, as demonstrated by the fifth consecutive quarter of year-over year growth in adjusted EBITDA1. This growth was driven by improvements across all aspects of the business and resulted in an increase in gross profit percentage by 1.7 ppts to 17.3% and a 10.3% increase in total retail unit2 sales.

  • Revenue was $248.1 million, an increase of 29.5%, from $191.6 million
  • Used retail vehicles2 sold increased by 1,452 units or 81%
  • F&I gross profit per retail unit average2 increased to $4,005 per unit, up 68.2% or $1,624 per unit
  • Net income for the period increased by $2.4 million to $7.1 million from $4.7 million
    • Net income on a trailing twelve month basis was $24.5 million
  • Adjusted EBITDA1 was $10.1 million as compared to $9.0 million, an increase of $1.1 million
    • Adjusted EBITDA1 increased by $2.5 million as compared to normalized adjusted EBITDA1 of $7.7 million for the prior year
    • Adjusted EBITDA1 on a trailing twelve month basis was $37.1 million

Same Store Metrics - Canadian Operations

F&I GROSS PROFIT PER RETAIL UNIT AVERAGE INCREASED TO $3,683, UP 25% OR $741 PER UNIT

The continued optimization of the Company's complete business model is highlighted by the year-over-year 10.3% improvement in gross profit, which collectively totaled $201.5 million. PS&CR performance has improved as a result of the continued recovery in kilometres driven, implementation of Business Development Centre, operational process improvements, and optimization of the PS&CR pricing strategy to maintain margins within the current macro economic conditions..

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

  • Revenue increased to $1,214.5 million, an increase of 14.2%
  • Gross profit increased by $18.8 million or 10.3%
  • Used to new retail units ratio2 increased to 1.59 from 1.37
    • Used retail unit sales2 increased by 7.3%, an increase of 772 units
  • For the fifteenth consecutive quarter of year-over-year growth, F&I gross profit per retail unit average2 increased to $3,683, up 25.2% or $741 per unit; F&I gross profit increased to $68.2 million as compared to $54.0 million in the prior year, an increase of 26.2%
  • PS&CR gross profit increased to $64.6 million, an increase of 13.7%
    • PS&CR gross profit percentage2 increased to 57.2% as compared to 55.5% 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 $294.1 million resulted in a net indebtedness leverage ratio1 of 1.3x. Financing and investing activities included the following:

Acquisitions

  • The Company completed $78.8 million of acquisitions in Q2 2022
  • On May 2, 2022, the Company acquired substantially all of the assets, including the underlying real estate, used in or relating to the Audi Windsor and Porsche Centre London dealerships, located in Windsor and London, Ontario, respectively. The acquisition further establishes our presence in the province of Ontario, increasing both brand diversity and luxury mix within our portfolio.
  • On June 30, 2022, the Company acquired 100% of the shares in Burwell Auto Body Ltd., a luxury-brand focused collision centre. The acquisition expands our collision centre capacity, and allows the Company to leverage existing dealerships in Ontario.
  • On August 2, 2022, the Company acquired 100% of the shares of Kelleher Ford Dealership and Collision Centre. The acquisition supports management's strategic objectives of further establishing the Company's presence in the province of Manitoba.

Non-Recourse Mortgage Financing

  • On June 22 and June 30, 2022, the Company executed $32.2 million of non-recourse mortgage financings with the Bank of Nova Scotia for previously purchased properties. The non-recourse mortgages will fund land value and construction costs associated with the development of two dealerships in Maple Ridge, BC, and real estate value for two dealerships in Ontario. The underlying real estate is pledged as collateral on the non-recourse mortgage in the amount of the loan. The credit facility allows for up to $100 million of non-recourse mortgage financing. The non-recourse mortgage liability is not considered a liability for purposes of calculating our credit facility financial covenants.

Share Purchases

  • The Company completed its normal course issuer bid on May 19, 2022, purchasing and cancelling 1,730,321 shares for an aggregate purchase price of $56.6 million.
  • On June 28, 2022, the Company announced a Substantial Issuer Bid ("SIB") offer to purchase up to $100 million in value of its outstanding common shares at a price range of $22 to $25 per share. The offer was set to expire on August 4, 2022.
  • On August 2, 2022, the Company announced an expiration date extension and a revised price range for the SIB. The SIB's price range was revised from $22 to $25 per share to $25 to $28 per share, and the expiration date was revised from August 4, 2022 to August 15, 2022.

Second Quarter Financial Information

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




Three Months Ended June 30

Consolidated Operational Data

2022

2021

% Change

Revenue

1,686,026

1,281,055

31.6 %

Gross profit

279,278

217,841

28.2 %

Gross profit %

16.6 %

17.0 %

(0.4) %

Operating expenses

212,709

154,773

37.4 %

Operating profit

69,954

66,153

5.7 %

Net income for the period

39,058

37,698

3.6 %

Basic net income per share attributable to AutoCanada shareholders

1.40

1.33

5.3 %

Diluted net income per share attributable to AutoCanada shareholders

1.33

1.23

8.1 %

   Adjusted EBITDA1

75,561

70,491

7.2 %





   New retail vehicles2 sold (units)

9,878

10,107

(2.3) %

   New fleet vehicles2 sold (units)

497

575

(13.6) %

   Total new vehicles2 sold (units)

10,375

10,682

(2.9) %

   Used retail vehicles2 sold (units)

17,740

13,271

33.7 %

   Total vehicles2 sold

28,115

23,953

17.4 %

   Same store new retail vehicles2 sold (units)

7,139

7,763

(8.0) %

   Same store new fleet vehicles2 sold (units)

440

575

(23.5) %

   Same store used retail vehicles2 sold (units)

11,371

10,599

7.3 %

   Same store total vehicles2 sold

18,950

18,937

0.1 %

   Same store2 revenue

1,214,485

1,063,275

14.2 %

   Same store2 gross profit

201,493

182,716

10.3 %

   Same store2 gross profit %

16.6 %

17.2 %

(0.6) %

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 June 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

Q2

2022

Q1

2022

Q4

2021

Q3

2021

REVISED

Q2

2021

REVISED

Q1

2021

REVISED

Q4 2020

Q3 2020

Income Statement Data

4









New vehicles 4

7

583,870

511,195

467,085

498,142

547,593

451,061

466,468

544,415

Used vehicles 4

7

840,998

595,514

524,043

518,791

539,785

354,922

257,301

309,193

Parts, service and collision repair 4

7

160,307

152,009

136,800

116,953

122,459

108,427

105,362

111,739

Finance, insurance and other 4

7

100,851

83,720

67,854

72,868

71,218

55,414

46,990

51,753

Revenue


1,686,026

1,342,438

1,195,782

1,206,754

1,281,055

969,824

876,121

1,017,100

New vehicles 4

7

58,950

53,384

50,632

46,525

44,619

34,639

31,199

42,230

Used vehicles 4

7

34,125

36,772

38,118

39,669

40,269

23,206

19,787

29,819

Parts, service and collision repair 4

7

90,713

78,431

75,917

64,748

68,115

57,874

58,109

59,056

Finance, insurance and other 4

7

95,490

78,752

63,847

69,250

64,838

51,917

43,642

48,307

Gross Profit


279,278

247,339

228,514

220,192

217,841

167,636

152,737

179,412

Gross profit %


16.6 %

18.4 %

19.1 %

18.2 %

17.0 %

17.3 %

17.4 %

17.6 %

Operating expenses


212,709

193,646

170,008

159,880

154,773

127,948

119,442

125,785

Operating expenses as a % of gross
profit


76.2 %

78.3 %

74.4 %

72.6 %

71.0 %

76.3 %

78.2 %

70.1 %

Operating profit


69,954

56,690

99,410

62,841

66,153

41,664

46,664

56,884

Recovery of non-financial assets


(39,846)

(11,248)

Net income


39,058

4,322

69,398

38,769

37,698

21,334

24,320

35,962

Basic net income per share
attributable to AutoCanada
shareholders


1.40

0.11

2.54

1.37

1.33

0.77

0.87

1.29

Diluted net income per share
attributable to AutoCanada
shareholders


1.33

0.10

2.38

1.27

1.23

0.71

0.81

1.23

Dividends declared per share


  Adjusted EBITDA 1

2

75,561

62,196

65,873

68,265

70,491

47,234

40,472

61,054

  Free cash flow 1

2

63,318

5,852

7,603

12,372

67,803

19,391

19,240

53,444











Operating Data

4









  New retail vehicles2 sold

3

9,878

9,052

8,204

9,255

10,107

8,233

8,623

10,750

  New fleet vehicles2 sold

3

497

290

199

358

575

740

964

582

  Total new vehicles2 sold

3

10,375

9,342

8,403

9,613

10,682

8,973

9,587

11,332

  Used retail vehicles2 sold

3

17,740

14,072

11,893

13,831

13,271

9,734

7,389

8,836

Total vehicles2 sold

3

28,115

23,414

20,296

23,444

23,953

18,707

16,976

20,168

# of service and collision repair
orders2 completed

3, 5

261,671

221,632

232,373

199,870

214,149

182,869

203,086

195,004

# of dealerships at period end

6

82

80

80

68

67

67

67

62

# of same store dealerships

1

49

49

49

49

49

49

47

47

# of service bays at period end


1,322

1,293

1,303

1,108

1,098

1,098

1,098

1,039

Same stores2 revenue growth

1

14.2 %

17.2 %

14.1 %

15.0 %

54.2 %

27.8 %

6.3 %

(1.1) %

Same stores2 gross profit growth

1

10.3 %

23.2 %

29.4 %

18.6 %

102.5 %

35.0 %

7.7 %

17.1 %

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 June 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 June 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 June 30, 2022, 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, 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, normalized adjusted EBITDA margin, income statement impacts and adjusted EBITDA on a pre-IFRS 16 basis, adjusted EBITDA margin on a pre-IFRS 16 basis, pro forma adjusted EBITDA, 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:

  • CEWS income expected to recur until the Company is no longer eligible for the 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.
Loading...
Loading...

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 six-months ended June 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 June 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.

Adjusted EBITDA Margin, Normalized Adjusted EBITDA Margin, and Adjusted EBITDA Margin on a Pre-IFRS 16 Basis

Adjusted EBITDA margin is an indicator of a company's operating performance specifically in relation to our revenue performance. Normalized adjusted EBITDA margin is an indicator of a company's operating performance specifically in relation to our revenue performance, normalized for government programs subsidies that are non-recurring in nature related to the pandemic such as:

  • CEWS income expected to recur until the Company is no longer eligible for the 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 adjusted EBITDA margin, normalized adjusted EBITDA margin and adjusted EBITDA margin on a pre-IFRS 16 basis 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 June 30, over the last two years of operations:


2022

2021

Period from April 1 to June 30



Net income for the period

39,058

37,698

Add back:



Income tax expense

9,685

13,932

Depreciation of property and equipment

5,077

4,267

Interest on long-term indebtedness

6,610

5,485

Depreciation of right of use assets

7,561

6,147

Lease liability interest

6,946

5,333


74,937

72,862

Add back:



Loss on extinguishment of debt

1,128

Unrealized fair value changes in derivative instruments

(182)

50

Amortization of loss on terminated hedges

817

817

Unrealized foreign exchange losses

84

298

Gain on disposal of assets

(95)

(20)

Adjusted EBITDA

75,561

70,491

Normalizing items:



Less:



Canada Emergency Wage Subsidy

(1,487)

Canada Emergency Rent Subsidy

(136)

Forgiveness of PPP loans

(1,330)

Normalized Adjusted EBITDA

75,561

67,538

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 June 30, over the last two years of operations:


Three Months Ended June 30, 2022


Three Months Ended June 30, 2021


Canada

U.S.

Total


Canada

U.S.

Total

Period from April 1 to June 30








Net income for the period

31,938

7,120

39,058


32,968

4,730

37,698

Add back:








Income tax expense

9,454

231

9,685


13,932

13,932

Depreciation of property and equipment

4,609

468

5,077


3,972

295

4,267

Interest on long-term indebtedness

5,831

779

6,610


3,009

2,476

5,485

Depreciation of right of use assets

6,858

703

7,561


5,519

628

6,147

Lease liability interest

6,130

816

6,946


4,469

864

5,333


64,820

10,117

74,937


63,869

8,993

72,862

Add back:








Loss on extinguishment of debt


1,128

1,128

Unrealized fair value changes in derivative instruments

(182)

(182)


50

50

Amortization of loss on terminated hedges

817

817


817

817

Unrealized foreign exchange losses

84

84


298

298

Unrealized fair value changes on embedded derivative


(4,644)

(4,644)

Gain on disposal of assets

(95)

(95)


(20)

(20)

Adjusted EBITDA

65,444

10,117

75,561


61,498

8,993

70,491

Normalizing Items:








Less:








Canada Emergency Wage Subsidy


(1,487)

(1,487)

Canada Emergency Rent Subsidy


(136)

(136)

Forgiveness of PPP loans


(1,330)

(1,330)

Normalized Adjusted EBITDA

65,444

10,117

75,561


59,875

7,663

67,538

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 June 30, over the last two years of operations:


2022

2021

Period from July 1 to June 30



Net income for the period

151,547

123,328

Add back:



Income tax expense

42,091

35,302

Depreciation of property and equipment

18,768

18,247

Interest on long-term indebtedness

25,520

22,086

Depreciation of right of use assets

28,921

26,592

Lease liability interest

26,325

25,140


293,172

250,695

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

(762)

Loss on extinguishment of debt

9,860

1,128

Unrealized fair value changes in derivative instruments

(12,981)

(3,469)

Amortization of loss on terminated hedges

3,268

3,268

Unrealized foreign exchange (gains) losses

(424)

221

Loss on extinguishment of embedded derivative

29,306

Loss on termination of lease, net

427

Unrealized fair value changes on embedded derivative

(24,662)

(4,644)

Gain on disposal of assets

(341)

(1,608)

Adjusted EBITDA

271,895

234,016

Normalizing items:



Less:



Canada Emergency Wage Subsidy

(2,901)

Canada Emergency Rent Subsidy

(200)

Forgiveness of PPP loans

(5,398)

Normalized Adjusted EBITDA

271,895

225,517

Pro forma items had the acquisitions occurred on July 1:



Net income for the period

3,725

4,014

Add back:



Income tax expense

1,202

1,296

Depreciation of property and equipment

1,106

992

Interest on long-term indebtedness

5,307

3,631

Depreciation of right of use assets

1,356

1,868

Lease liability interest

2,272

2,964

Pro Forma Adjusted EBITDA

286,863

248,781

Pro Forma Normalized Adjusted EBITDA

286,863

240,282

Quarter-to-Date Adjusted EBITDA Margin

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


2022

2021

Period from April 1 to June 30



Adjusted EBITDA

75,561

70,491

Revenue

1,686,026

1,281,055

Adjusted EBITDA Margin

4.5 %

5.5 %

Quarter-to-Date Normalized Adjusted EBITDA Margin

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


2022

2021

Period from April 1 to June 30



Normalized Adjusted EBITDA

75,561

67,538

Revenue

1,686,026

1,281,055

Normalized Adjusted EBITDA Margin

4.5 %

5.3 %

Quarter-to-Date Adjusted EBITDA Margin on a Pre-IFRS 16 basis

The following table illustrates adjusted EBITDA margin on a pre-IFRS 16 basis for the three-month periods ended June 30, over the last two years of operations:


2022

2021

Period from April 1 to June 30



Adjusted EBITDA on a pre-IFRS 16 basis

62,083

59,600

Revenue

1,686,026

1,281,055

Adjusted EBITDA Margin on a Pre-IFRS 16 basis

3.7 %

4.7 %

Quarter-to-Date Adjusted EBITDA on a Pre-IFRS 16 Basis Reconciliation

The following table illustrates segmented adjusted EBITDA on a pre-IFRS 16 basis, for the three-month periods ended June 30, over the last two years of operations:


Three Months Ended June 30, 2022


Three Months Ended June 30, 2021


Canada

U.S.

Total


Canada

U.S.

Total

Adjusted EBITDA

65,444

10,117

75,561


61,498

8,993

70,491

Rental expense

(11,811)

(2,224)

(14,035)


(9,742)

(2,116)

(11,858)

FMV rent adjustment

1,044

1,044


1,039

1,039

Step lease adjustment

(372)

(115)

(487)


(185)

113

(72)

Adjusted EBITDA on a pre-IFRS 16 basis

53,261

8,822

62,083


51,571

8,029

59,600

Free Cash Flow

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


Q2 2022

Q1 2022

Q4 2021

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Cash provided by operating activities 

64,935

7,279

10,153

13,721

68,604

20,506

20,447

54,366

Deduct:









Purchase of non-growth property and equipment

(1,617)

(1,427)

(2,550)

(1,349)

(801)

(1,115)

(1,207)

(922)

Free cash flow

63,318

5,852

7,603

12,372

67,803

19,391

19,240

53,444

Free cash flow - TTM

89,145

93,630

107,169

118,806

159,878

144,632

131,396

177,981

Net Indebtedness and Net Indebtedness Leverage Ratio Reconciliation

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


June 30, 2022

$

March 31, 2022

$

Syndicated Credit Facility - Revolving Credit

(1,292)

13,886

Senior unsecured notes (including embedded derivative asset)

344,053

344,120

Non-recourse mortgages and other debt

32,280

501

Total indebtedness for net indebtedness purpose

375,041

358,507

Cash and cash equivalents

(80,991)

(109,753)

Net indebtedness

294,050

248,754

Adjusted EBITDA pre-IFRS 16 - trailing twelve months

222,163

219,680

Net indebtedness leverage ratio

1.3x

1.1x

Conference Call

A conference call to discuss the results for the three months ended June 30, 2022 will be held on August 11, 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-q2-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. Additionally, the Company's Canadian Operations segment currently operates 2 used vehicle dealerships supporting the Used Digital Retail Division, the RightRide division operates 10 locations, and 5 stand-alone collision centres (within our group of 20 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.

Loading...
Loading...
Posted In: EarningsPress ReleasesautomotiveTransportation/Trucking/Railroad
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...