AutoCanada Reports Record Second Quarter Results - Net Income Of $37.7 Million Outpaces Prior Year by 288% and Adjusted EBITDA of $70.5 Million Ahead of Prior Year by 1,360%

• Revenue was $1,281.1 million as compared to $727.4 million in the prior year, an increase of 76.1% and the highest second quarter revenue reported in the Company's history
• Net income (loss) for the period was $37.7 million versus $(20.1) million in 2020
• Adjusted EBITDA was $70.5 million versus $4.8 million in the prior year, an increase of 1,360%; pre-IFRS 16 Adjusted EBITDA was $59.6 million versus $(5.4) million, an increase of 1,210%; on a trailing twelve month basis, pre-IFRS 16 Adjusted EBITDA was $176.4 million
• Fully diluted earnings per share was $1.23, an increase of $1.95 from $(0.72) in the prior year
• Net indebtedness of $21.6 million at the end of Q2 2021 compares to $72.6 million at the end of Q1 2021; trailing twelve month free cash flow of $159.9 million compares to $179.3 million in the prior year and net debt leverage on a pre-IFRS 16 basis improves to 0.1x from 0.7x at the end of Q1 2021

EDMONTON, AB, Aug. 11, 2021 /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 June 30, 2021.

"We delivered another record-setting performance in Q2 2021, continuing the trend of sustainable improvement and execution of our complete business model and strategic initiatives," said Paul Antony, Executive Chairman of AutoCanada. "We're encouraged by the strong momentum across our business both in Canada and the U.S., particularly the strength of our used vehicle and F&I operations, proactive inventory management and our ongoing disciplined focus on operational excellence."

"For our U.S. operations, Q2 was a breakout quarter as the newly appointed management team drove a fundamental shift in the operating and sales culture, while capitalizing on favourable market conditions.  Specifically, the U.S. increased used retail unit sales to 1,797 from 693 in the prior year, an improvement of 159%, while delivering normalized Adjusted EBITDA of $7.7 million in Q2 2021 against $0.9 million in Q2 2020."

"With a robust acquisition pipeline of dealerships and collision centers representing over $500 million in annual revenue currently being evaluated, we remain well positioned to execute our acquisition strategy in the coming quarters.  We continue to focus our strategy on diversifying by geography and brands, in addition to expanding our network of used dealerships and collision centres."

"We are well positioned to continue to deliver sustainable improvements and build on our positive momentum in a way that carries us through this year and beyond."

Second Quarter Key Highlights and Recent Developments

All comparisons presented below are between the three-month period ended June 30, 2021 and the three-month period ended June 30, 2020, unless otherwise indicated.

The Company reported record-setting performance as revenue for the second quarter of 2021 reached $1,281.1 million as compared to $727.4 million in Q2 2020, an increase of 76.1%. We continued to demonstrate strong growth across all areas of the business, both in our Canadian and U.S. operations. In particular, the record Q2 2021 was driven by strong performance of our used vehicle and finance and insurance ("F&I") business operations.

Net income (loss) for the period was $37.7 million, as compared to $(20.1) million in Q2 2020.

Adjusted EBITDA was $70.5 million in Q2 2021 as compared to $4.8 million reported in Q2 2020. In Q2 2020, the impact of COVID-19 resulted in the recognition of a net charge to earnings of $(17.0) million comprised of CEWS income of $26.2 million, offset by COVID-19 related inventory write-downs and operating provisions of $(38.8) million in Canada and $(4.4) million in the U.S.

Captured within second quarter Adjusted EBITDA of $70.5 million are typically non-recurring government subsidies of $1.6 million for Canada, and $1.3 million for the forgiveness of Paycheck Protection Program ("PPP") loans for the U.S.

Excluding these typically non-recurring items, normalized Adjusted EBITDA was $67.5 million for the quarter as compared to a normalized $21.9 million in the prior year.  On a normalized basis, Adjusted EBITDA margin was 5.3% as compared to a normalized 2.4% in the prior year, an increase of 2.9 percentage points ("ppts").

Total gross profit increased by 123% to $217.8 million, propelled by the Company's continued focus on the used vehicle market and strong F&I outperformance. Canadian used retail unit sales increased by 75.6% and U.S. used retail unit sales increased by 159%, respectively, over the prior year; consolidated used retail unit sales of 13,271 exceeded the 7,228 reported in the prior year, an increase of 83.6%. Strong used retail sales resulted in our consolidated used to new retail unit ratio improving to 1.31 from 0.96, and to 1.13 on a trailing twelve month ("TTM") basis, moving beyond the targeted annual 1.0 ratio. Same store F&I gross profit per retail unit average increased to $2,942 per unit, an increase of $305 per unit, the eleventh consecutive quarter of year-over-year growth.

In the U.S., Q2 2021 was a breakout quarter as the newly appointed management team drove a fundamental shift in the operating and sales culture, while capitalizing on favourable market conditions. Significant strategic operational changes, including establishing a dedicated used vehicle team and actively top-grading talent across all functional areas, positioned the U.S. well for selling season and led to improved metrics on multiple fronts. Specifically, the U.S.  increased used retail unit sales to 1,797 from 693 in the prior year, an improvement of 159%, while reporting normalized Adjusted EBITDA of $7.7 million in Q2 2021 against $0.9 million reported in Q2 2020.

Similar to Q1 2021, proactive inventory management for both new and used vehicles continued to be a key driver to the Company's success in delivering both strong revenue and margin growth across all our business operations in the second quarter. Consolidated used vehicle gross profit margin increased by 6.0 percentage points ("ppts") to 8.0% as compared to the prior year. Normalizing for the COVID-19 related used inventory write-down recognized in Q2 2020, used vehicle gross profit margin increased to 8.0% as compared to 4.4% in Q2 2020.

Operating expenses as a percentage of gross profit decreased by (31.0) ppts to 71.0%, as compared to prior year.  Normalized operating expenses as a percentage of gross profit improved to 72.4% as compared to 87.2% in the prior year, and is well below the five-year second quarter historical average of 87.0%. The Company's ability to control and rationalize costs underscores the effectiveness of the actions taken during 2020 to streamline the Company's cost structure while optimizing operating leverage.

Net indebtedness improved by $(51.0) million from March 31, 2021 to $21.6 million. Free cash flow on a TTM basis was $159.9 million at Q2 2021 as compared to $179.3 million in Q2 2020. Additionally, our net indebtedness leverage ratio improved to 0.1x at the end of Q2 2021, as compared to 0.7x in Q1 2021.

The Company remains well-positioned to execute on its acquisition strategy in the coming quarters. We have established a substantial transaction pipeline with a number of dealerships currently being evaluated. We currently have $500 million in annual revenue under signed letters of intent ("LOI's") and purchase agreements. LOI's, subject to due diligence, represent $200 million in annual revenue. Signed purchase agreements for dealerships located in Ontario, subject to OEM approvals and other standard closing conditions, represent over $300 million in annual revenue – inclusive of brands we do not currently operate today.

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. However, we remain aware that uncertainty continues to exist in the macroeconomic environment given the ongoing challenges associated with the global pandemic. 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 how COVID-19 may impact 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 conditions.

Consolidated AutoCanada Highlights

RECORD SETTING SECOND QUARTER

As a result of the continued execution of our complete business model, along with the improvement in market outlook and demand during Q2 2021, AutoCanada delivered a record setting second quarter.

For the three-month period ended June 30, 2021:

• Revenue was $1,281.1 million, an increase of $553.6 million or 76.1% and the highest second quarter revenue reported in the Company's history
• Total vehicles sold were 23,953, an increase of 8,859 units or 58.7%
• Used retail vehicles sold increased by 6,043 or 83.6%
• Net income (loss) for the period was $37.7 million (or $1.33 per basic share) versus $(20.1) million (or $(0.72) per basic share) in 2020
• Adjusted EBITDA increased by 1,360% to $70.5 million, an increase of $65.7 million
• Adjusting for COVID-19 related typically non-recurring items of $3.0 million in Q2 2021 and $(17.0) million in Q2 2020, normalized Adjusted EBITDA was $67.5 million, ahead of prior year by $45.7 million; normalized pre-IFRS 16 Adjusted EBITDA was $56.6 million, as compared to $11.7 million
• Ending net indebtedness of $21.6 million reflected a decrease of $(51.0) million from Q1 2021, driven primarily by the strength of our operating performance. Free cash flow on a TTM basis was $159.9 million at Q2 2021 as compared to $179.3 million in Q2 2020.

Canadian Operations Highlights

RETAIL UNIT SALES GROWTH OF 47.4%

Our used vehicle and F&I segments were key drivers of improved earnings in Q2 2021. Normalizing for COVID-19 related inventory write-downs taken in Q2 2020, total gross profit percentage increased to 17.3% as compared to 15.8% in the prior year and used vehicle gross profit percentage increased to 7.7% as compared to 3.8% in the prior year. For the eleventh consecutive quarter of year-over-year growth, same store F&I gross profit per retail unit average increased to $2,942, up 11.6% or $305 per unit from prior year.

Current period results include the acquisitions of Auto Bugatti collision center and Haldimand Motors which occurred in Q4 2020 and PG Klassic Autobody collision center which occurred on April 1, 2021. 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, 2021:

• Revenue was $1,089.5 million, an increase of 66.0%; the highest second quarter Canadian revenue reported in the Company's history and the first time Canadian revenue has exceeded $1 billion in a single quarter.
• Total retail vehicles sold were 19,237, an increase of 6,184 units or 47.4%
• Used retail unit sales increased by 4,939 or 75.6%
• Average trailing twelve month Canadian used retail unit sales per dealership per month, excluding Haldimand Motors, reached 57, as compared to 42 in the prior year
• Used to new retail units ratio increased to 1.48 from 1.00
• Trailing twelve month ratio improved to 1.13 at Q2 2021 as compared to 0.88 at Q2 2020
• Finance and insurance gross profit per retail unit average increased to $2,858, up 8.0% or $212 per unit
• Net income for the period was $33.0 million, up $46.7 million from a net loss of $(13.7) million in 2020
• Adjusted EBITDA increased 637% to $61.5 million, an increase of $53.2 million
• Adjusting for COVID-19 related, typically non-recurring items, normalized Adjusted EBITDA decreases to $59.9 million, ahead of prior year by $38.9 million; normalized pre-IFRS 16 Adjusted EBITDA was $49.9 million, as compared to $11.8 million
• Normalized Canadian Adjusted EBITDA margin was 5.5% as compared to 3.2% in the prior year, an increase of 2.3 ppts

U.S. Operations Highlights

RETAIL UNIT SALES GROWTH OF 143%

The U.S. management team transition that occurred in late Q1 2021 drove a fundamental shift in the operating and sales culture of the dealerships. Strategic decisions executed throughout Q2 2021 resulted in a breakout quarter, where, along with a 143% improvement in retail unit sales, total gross profit percentage set a second quarter record of 15.6%. Actions taken included the strategic build-up of used vehicle inventory, the creation of a dedicated used vehicle team, top-grading dealership management, expanding team across all levels of the business, and the execution of operational best practices.

Current period results include the acquisition of Autohaus of Peoria which occurred on October 29, 2020.

• Revenue was $191.6 million, an increase of 170%
• Retail unit sales increased to 4,141 units, up 2,440 units or 143%
• Net income (loss) for the period increased by $11.1 million to $4.7 million from $(6.4) million in 2020
• Adjusted EBITDA was $9.0 million, an increase of $12.5 million from 2020
• Adjusting for COVID-19 related typically non-recurring items, normalized Adjusted EBITDA increases to $7.7 million, an increase of $6.7 million from prior year normalized Adjusted EBITDA of $0.9 million; normalized pre-IFRS 16 Adjusted EBITDA was $6.7 million, as compared to $(0.1) million

Same Store Metrics - Canadian Operations

SAME STORE USED RETAIL UNIT SALES GROWTH OF 61.7%

Same store new and used retail unit sales increased by 40.5% to 18,362 units; new retail units increased by 19.1% and used retail units increased by 61.7%. The continued optimization of the Company's complete business model is highlighted by the year-over-year improvement in gross profit across every business segment which collectively totaled $89.8 million, or 103%.

Same stores metrics include only Canadian dealerships which have been owned for at least two full years since acquisition.

• Revenue increased to $971.2 million, an increase of 54.2%
• Gross profit increased by $89.8 million or 103%
• Used to new retail units ratio increased to 1.37 from 1.01
• New and used retail unit sales increased by 40.5% to 18,362 units
• Used retail unit sales increased by 61.7%, an increase of 4,046 units
• Finance and insurance gross profit per retail unit average increased to $2,942, up 11.6% or $305 per unit; gross profit increased to $54.0 million as compared to $34.5 million in the prior year, an increase of $19.6 million or 56.8%
• Parts, service and collision repair gross profit increased to $56.8 million, an increase of 43.1%
• Parts, service and collision repair gross profit percentage increased to 55.5% as compared to 49.4% in the prior year, an increase of 6.1 ppts, driven by various initiatives to improve margin retention

Financing and Investing Activities and Other Recent Developments

ACQUISITION PIPELINE SUPPORTED BY HEALTHY BALANCE SHEET AND LIQUIDITY STRUCTURE

Our focus has been and continues to be on preserving cash and managing liquidity. In the quarter, net indebtedness decreased by $(51.0) million to $21.6 million, resulting in a net debt leverage of 0.1x.

The following occurred:

• Amended and extended our existing credit facility on April 14, 2021 for total aggregate bank facilities of $1.3 billion, with a maturity date of April 14, 2024, maintaining a three-year tenor to our facility.
• S&P Global Ratings ("S&P") issued a research update on April 14, 2021 whereby it revised the Company's outlook to stable, raised the issuer credit rating to 'B', and raised the rating of the Company's senior unsecured notes to 'B'.
• Issued an additional $125 million add-on on April 15, 2021 to our existing 8.75% senior unsecured notes, due February 11, 2025. The add-on offering was completed at a premium to par, resulting in a yield of 5.595%.
• On August 9, 2021, the Company completed the acquisition of Mark Wilson's Better Used Cars, an independent used vehicle dealership in Guelph, Ontario as part of the development of the Used Digital Retail Division.

Second Quarter Financial Information
The following table summarizes the Company's performance for the quarter:

	Three Months Ended June 30
Consolidated Operational Data	2021	2020	% Change
Revenue	1,281,055	727,447	76.1%
Gross profit	217,841	97,879	122.6%
Gross profit %	17.0%	13.5%	3.5%
Operating expenses	154,773	99,736	55.2%
Operating profit (loss)	66,153	(4,388)	1607.6%
Net income (loss) for the period	37,698	(20,052)	288.0%
Basic net income (loss) per share attributable to AutoCanada shareholders	1.33	(0.72)	284.7%
Diluted net income (loss) per share attributable to AutoCanada shareholders	1.23	(0.72)	270.8%
Adjusted EBITDA^1	70,491	4,828	1360.0%
New retail vehicles sold (units)	10,107	7,526	34.3%
New fleet vehicles sold (units)	575	340	69.1%
Total new vehicles sold (units)	10,682	7,866	35.8%
Used retail vehicles sold (units)	13,271	7,228	83.6%
Total vehicles sold	23,953	15,094	58.7%
Same store new retail vehicles sold (units)	7,763	6,518	19.1%
Same store new fleet vehicles sold (units)	575	337	70.6%
Same store used retail vehicles sold (units)	10,599	6,553	61.7%
Same store total vehicles sold	18,937	13,408	41.2%
Same store revenue	971,184	629,637	54.2%
Same store gross profit	177,439	87,613	102.5%
Same store gross profit %	18.3%	13.9%	4.4%

See the Company's Management's Discussion and Analysis for the quarter ended June 30, 2021 for complete footnote disclosures.

The following table shows the segmented operating results for the Company for the three month periods ended June 30, 2021 and June 30, 2020.

	Three Months Ended June 30, 2021				Three Months Ended June 30, 2020
	Canada $	U.S. $	Total $		Canada $	U.S. $	Total $
New vehicles	443,648	90,504	534,152		337,999	43,428	381,427
Used vehicles	477,222	76,667	553,889		200,088	14,944	215,032
Parts, service and collision repair	107,571	14,651	122,222		80,493	9,924	90,417
Finance, insurance and other	61,018	9,774	70,792		37,801	2,770	40,571
Total revenue	1,089,459	191,596	1,281,055		656,381	71,066	727,447
New vehicles	35,931	4,890	40,821		12,485	(1,851)	10,634
Used vehicles	36,523	7,887	44,410		2,839	1,385	4,224
Parts, service and collision repair	60,510	8,104	68,614		40,008	5,828	45,836
Finance, insurance and other	54,981	9,015	63,996		34,534	2,651	37,185
Total gross profit	187,945	29,896	217,841		89,866	8,013	97,879
Employee costs	85,590	13,575	99,165		66,167	6,129	72,296
Government assistance	(1,623)	(1,330)	(2,953)		(26,223)	—	(26,223)
Administrative costs	39,460	8,306	47,766		37,237	5,409	42,646
Facility lease and storage costs	381	—	381		648	—	648
Depreciation of property and equipment	3,972	295	4,267		3,744	307	4,051
Depreciation of right-of-use assets	5,519	628	6,147		5,682	636	6,318
Total operating expenses	133,299	21,474	154,773		87,255	12,481	99,736
Operating profit (loss) before other income	54,646	8,422	63,068		2,611	(4,468)	(1,857)
Operating data
New retail vehicles sold ^1	7,763	2,344	10,107		6,518	1,008	7,526
New fleet vehicles sold ^1	575	—	575		337	3	340
Total new vehicles sold ^1	8,338	2,344	10,682		6,855	1,011	7,866
Used retail vehicles sold ^1	11,474	1,797	13,271		6,535	693	7,228
Total vehicles sold ^1	19,812	4,141	23,953		13,390	1,704	15,094
# of service and collision repair orders completed ^1, 2	185,917	28,232	214,149		152,818	20,138	172,956
# of dealerships at period end	50	17	67		50	13	63
# of service bays at period end	902	196	1,098		867	177	1,044

See the Company's Management's Discussion and Analysis for the quarter ended June 30, 2021 for complete footnote disclosures.

MD&A and Financial Statements

Information included in this press release is a summary of results. It should be read in conjunction with AutoCanada's Consolidated Financial Statements and Management's Discussion and Analysis for the quarter ended June 30, 2021, 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 quarterly MD&A: adjusted EBITDA; normalized adjusted EBITDA; free cash flow; net indebtedness, net indebtedness leverage ratio and lease adjusted leverage ratio.

Conference Call

A conference call to discuss the results for the three months ended June 30, 2021 will be held on August 12, 2021 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/investors/q22021-presentation/

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 66 franchised dealerships, comprised of 27 brands, in eight provinces in Canada as well as a group in Illinois, USA. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC, Buick, Cadillac, Ford, Infiniti, Nissan, Hyundai, Subaru, Audi, Volkswagen, Kia, Mazda, Mercedes-Benz, BMW, MINI, Volvo, Toyota, Lincoln, Honda and Porsche branded vehicles. Additionally, the Company's Canadian operations segment currently operates two used vehicle dealerships supporting the Used Digital Retail Division, and two stand-alone collision centres (within our group of 17 collision centres). In 2020, our dealerships sold approximately 66,000 vehicles and processed over 756,000 service and collision repair orders in our 1,098 service bays generating revenue in excess of $3 billion.

Additional information about AutoCanada Inc. is available at www.sedar.com and the Company's website at www.autocan.ca.

Forward Looking Statements

Certain statements contained in this press release are forward-looking statements and information (collectively "forward-looking statements", 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.

Mike Borys, Chief Financial Officer, Phone: [phone], Email: [email protected]

Related Links

http://www.autocan.ca/