AUTOCANADA REPORTS RECORD THIRD QUARTER RESULTS

• Revenue was $1,623.9 million as compared to $1,206.8 million in the prior year, an increase of 34.6%
• Net income for the period was $32.9 million versus net income of $38.8 million in the prior year
• Adjusted EBITDA¹ was $76.4 million versus $68.3 million in the prior year, an increase of 11.9%
• Adjusted EBITDA margin¹ was 4.7% versus the adjusted EBITDA margin¹ of 5.7% in the prior year, a decrease of (1.0) percentage points

• Diluted earnings per share was $1.16, a decrease of $(0.11) from $1.27 in the prior year
• Indebtedness of $460.3 million at the end of Q3 2022 compares to $375.0 million at the end of Q2 2022
• Net indebtedness¹ of $350.8 million at the end of Q3 2022 compares to $294.1 million at the end of Q2 2022

EDMONTON, AB, Nov. 9, 2022 /CNW/ - AutoCanada Inc. ("AutoCanada" or the "Company") (TSX: ACQ), a multi-location North American automobile dealership group, today reported its financial results for the three month period ended September 30, 2022.

"Results achieved in the third quarter of 2022 demonstrate the ongoing strength of our business model, where our team once again delivered a record quarter with exceptional performance across our operations," said Paul Antony, Executive Chairman of AutoCanada.  "Our performance continues the trend of sustainable improvement and reflects our ability to continue navigating a range of industry challenges, including OEM production delays and inventory constraints. I continue to be immeasurably proud of what we've built and our platform's proven ability to thrive in a variety of market conditions and to drive resiliency and stability.

"This strength has allowed us to focus on advancing our acquisition strategy as evidenced with the recent acquisitions of Kelleher Ford Dealership and Collision Centre, Velocity Auto Body, Auto Gallery of Winnipeg, Kavia Auto Body, North Toronto Auction and Excellence Auto. These acquisitions further expand our dealership network, our used digital retail initiative and our national collision centre footprint across Canada.  Our M&A pipeline remains strong with a number of dealerships and collision centres representing in excess of $250 million in annual revenue currently being evaluated.

"As we look ahead, AutoCanada is very well positioned to continue to build on our strong momentum and execute on our strategic pillars to deliver industry-leading performance and enhance shareholder returns. With respect to our capital allocation priorities, we will remain disciplined in the management of our balance sheet and debt levels as we continue to pursue our organic and inorganic growth strategies."

The Company also announced today the planned retirement of Mike Borys from the role of Chief Financial Officer. A search process for his successor has commenced. Mike will continue as Chief Financial Officer until a successor is in place to ensure a seamless transition of responsibilities.

"On behalf of all of us at AutoCanada, I want to thank Mike for his leadership and dedication to the Company," said Mr. Antony. "I am beyond grateful to Mike for all the contributions he has made to AutoCanada, particularly the outstanding work he has done to strengthen our financial position. We wish him well when he embarks on his next phase. We also sincerely appreciate Mike's full support of the transition to his successor."

"I would like to thank the outstanding team at AutoCanada that I have had the privilege of working with," said Mr. Borys. "I am very proud of the accomplishments AutoCanada has achieved and I have every confidence that the Company will continue to execute against a solid business strategy supported by an excellent leadership team."

Third Quarter Key Highlights and Recent Developments

The Company set a third quarter record as revenue reached $1,623.9 million compared to $1,206.8 million in the prior year, an increase of 34.6%. Results were driven by continued strong performance across all areas of our complete business model, in particular our finance and insurance ("F&I"), parts, service and collision repair ("PS&CR") business operations, continued improvements from our U.S. Operations, and contributions from our acquisitions.

Net income for the period was $32.9 million as compared to $38.8 million in Q3 2021. The $(5.9) million decrease in net income as compared to the prior year is largely driven by an increase of $8.5 million in finance costs and $5.2 million in income taxes, offset by an increase of $6.5 million in operating profit as compared to prior year. Diluted earnings per share was $1.16, a decrease of $(0.11) from $1.27 in the prior year.

Adjusted EBITDA¹ for the period was $76.4 million as compared to $68.3 million in Q3 2021, an improvement of 11.9%. Adjusted EBITDA margin¹ of 4.7% compares to 5.7% in the prior year, a decrease of (1.0) percentage points ("ppts"). This decrease is largely driven by compressed used vehicle gross profit percentage, increased operating expenses before depreciation as a percentage of gross profit, and increased floorplan financing costs.

Gross profit increased by $53.4 million to $273.6 million, an increase of 24.3%, as compared to prior year. This increase was largely driven by the increases of $24.3 million from F&I and $24.0 million from PS&CR. F&I gross profit per retail unit average² increased to $3,521, up 17.4% or $521 per unit. Gross profit percentage² was 16.8% in the quarter as compared to 18.2% in the prior year. This decrease is largely driven by a compression of used vehicle gross profit percentage², as a result of current used vehicle macro environment. As part of our complete business model, while used retail vehicle gross profit percentage² weakened, used retail vehicles sales increased by 3,550 units, up 25.7%, to 17,381, and contributed to the consolidated used to new retail units ratio² moving to 1.89 from 1.49. Used vehicle sales volume also contributed to our strong F&I and PS&CR gross profit performance.

Our U.S. Operations continue to demonstrate strong growth and contributed $40.1 million of gross profit, an increase of $7.5 million or 23.2% as compared to prior year. This improvement in gross profit was primarily driven  by F&I and PS&CR performance.

Operating expenses before depreciation as a percentage of gross profit² increased by 3.3 ppts to 71.1%. The increase is  largely due to increased M&A activity and related costs, inclusive of the expansion of an acquisition and integration team, and increased head count to facilitate organizational growth.

Floorplan financing costs increased by $6.1 million, or 241%, to $8.7 million as compared to prior year. The increase is attributable to the combination of rising interest rates and an increase in our used vehicle inventory position. While rising interest rates are expected to impact customer affordability, we consider the availability of vehicle inventory to remain the most significant challenge to sales growth. Additionally, some of the direct impacts of rising interest rates may be offset by vehicle financing products which provide flexibility in financing terms, inclusive of incentives and term extensions. Overall, we currently do not expect interest rates to impact the pace of new and used vehicle sales due to strong levels of demand relative to limited supply. Management continues to monitor the macro environment and will adjust F&I product offerings and other aspects of the business, where necessary, to meet customer needs.

We continue to actively manage our vehicle inventory as the chip shortage remains an issue and continues to impact the supply of new vehicle inventory. While we have seen positive indicators and noted gradual improvements in both the availability of inventory and product allocations, we are not anticipating a return to "normalcy" in inventory levels until late 2023 to 2024. Compensating for constrained new vehicle supply, we have managed our used vehicle inventory position to meet current market demands. As a result of the incremental used vehicle writedown taken in Q2 2022, we were able to more effectively sell through our used vehicle inventory position by (15.7)%, as compared to Q2 2022. No incremental used vehicle writedown to net realizable value was recognized in Q3 2022.

Net indebtedness¹ increased by $56.8 million from June 30 2022 to $350.8 million at the end of Q3 2022. This increase is primarily driven by the purchase and cancellation of $(32.5) million of shares under a Substantial Issuer Bid ("SIB"), the acquisitions of multiple dealerships and collision centres, including Kelleher Ford Dealership and Collision Centre, Velocity Auto Body Inc. collision centre, Auto Gallery of Winnipeg Inc. used vehicle dealership, and North Toronto Auction, a fee-based used vehicle auction business. Free cash flow¹ on a trailing twelve month ("TTM") basis was $112.1 million at Q3 2022 as compared to $118.8 million in Q3 2021; the decrease in free cash flow between years was driven primarily by reduced government assistance, increased cash taxes, stock based compensation related cash payments, and changes in working capital. Additionally, our net indebtedness leverage ratio¹ of 1.5x remained well below our target range at the end of Q3 2022, as compared to 0.2x in Q3 2021.

Had all of the acquisitions, completed as of Q3 2022, occurred at October 1, 2021, pro forma net income would have been $146.8 million for the TTM ended September 30, 2022, as compared to pro forma net income of $174.8 million for the year ended December 31, 2021. Pro forma normalized adjusted EBITDA¹ would be $289.9 million for the TTM ended September 30, 2022, as compared to pro forma normalized adjusted EBITDA¹ of $266.4 million for the year ended December 31, 2021.

We have established an acquisition pipeline, with dealerships and collision centres representing in excess of $250 million in annual revenue currently being evaluated. We are at varying stages of the acquisition process with these targets, ranging from signed letters of intent to signed purchase agreements, with the potential deals remaining subject to due diligence, OEM approvals, and other standard closing conditions. We remain well-positioned to continue to execute on our acquisition strategy in the coming quarters.

Our performance, both in Canada and U.S. Operations, continues our trend of sustainable improvement and demonstrates the efficacy of our complete business model and strategic initiatives. We remain aware that uncertainty continues to exist in the macroeconomic environment given the ongoing challenges associated with the lingering effects of the global pandemic, inflation, rising interest rates, technical recession, and the Russia-Ukraine war. Uncertainties may include potential economic recessions or downturns, continued disruptions to the global automotive manufacturing supply chain, and other general economic conditions resulting in reduced demand for vehicle sales and service. We will continue to remain proactive and vigilant in assessing the impacts on our organization and remain committed to optimizing and building stability and resiliency into our business model to ensure we are able to drive industry-leading performance regardless of changing market condition.

Consolidated AutoCanada Highlights

ANOTHER RECORD SETTING THIRD QUARTER

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

• Revenue was $1,623.9 million, an increase of $417.2 million or 34.6%
• Total vehicles² sold were 27,000, an increase of 3,556 units or 15.2%
• Used retail vehicles² sold increased by 3,550 or 25.7%
• Net income for the period was $32.9 million (or $1.16 per diluted share) versus $38.8 million (or $1.27 per diluted share)
• Adjusted EBITDA¹ increased by 11.9% to $76.4 million, an increase of $8.1 million
• Adjusted EBITDA¹ on a TTM basis was $280.0 million as compared to 226.5 million in the prior year
• Net indebtedness¹ of $350.8 million reflected an increase of $56.8 million from Q2 2022
• Net indebtedness leverage ratio¹ of 1.5x at the end of Q3 2022, as compared to 1.3x in Q2 2022

Refer to Section 5 Acquisitions, Divestitures, Relocations and Real Estate of the MD&A for acquisitions included in Q3 2022 results.

Canadian Operations Highlights

TOTAL GROSS PROFIT INCREASED BY 24%

Our F&I and PS&CR segments were key drivers of the record performance in Q3 2022. F&I gross profit increased by $19.0 million or 32.8% to $76.9 million and PS&CR gross profit increased by $19.0 million or 33.1% to $76.5 million as compared to prior year.

Unless stated otherwise, all results for acquired businesses are included in all Canadian references in the press release.

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

• Revenue was $1,388.0 million, an increase of 36.3%
• Used retail unit² sales increased by 3,030 or 26.4%
• Average TTM Canadian used retail unit sales per dealership per month, excluding Used Digital Retail Division dealerships², improved to 61, as compared to 59 in the prior year
• Used to new retail units ratio² increased to 1.84 from 1.48
• According to DesRosiers Automotive Consultants ("DesRosiers"), our performance places us well ahead of our peers as historical Canadian market used to new retail unit ratio was 0.68 in 2021
• TTM used to new retail ratio² improved to 1.63 at Q3 2022 as compared to 1.30 at Q3 2021
• F&I gross profit per retail unit average² increased to $3,431, up 14.1% or $425 per unit
• Net income for the period was $30.3 million, down (10.5)% from a net income of $33.8 million in 2021
• Adjusted EBITDA¹ increased by 11.1% to $67.6 million, an increase of $6.7 million
• Adjusted EBITDA margin¹ was 4.9% as compared to adjusted EBITDA margin¹ of 6.0% in the prior year, a decrease of (1.1) ppts driven primarily by compressed used vehicle gross profit percentage, increased operating expenses before depreciation as a percentage of gross profit, and increased floorplan financing costs

U.S. Operations Highlights

USED RETAIL VEHICLES SOLD INCREASED BY 22%

U.S. Operations continues to improve, as demonstrated by the sixth consecutive quarter of year-over year growth in adjusted EBITDA¹. This growth was driven by improvements across all aspects of the business, including an 8.5% increase in total retail unit² sales and a 22.2% increase in used retail vehicles².

• Revenue was $235.9 million, an increase of 25.3%, from $188.3 million
• Used retail vehicles² sold increased by 520 units or 22.2%
• F&I gross profit per retail unit average² increased to $4,009 per unit, up 35.0% or $1,038 per unit
• Net income for the period decreased by $(2.3) million to $2.6 million from $4.9 million
• Net income on a TTM basis was $22.2 million as compared to $8.9 million in the prior year
• Adjusted EBITDA¹ was $8.8 million as compared to $7.4 million, an increase of $1.4 million
• Adjusted EBITDA¹ on a TTM basis was $38.5 million as compared to $21.7 million in the prior year

Same Store Metrics - Canadian Operations

F&I GROSS PROFIT PER RETAIL UNIT AVERAGE INCREASED TO $3,796, UP 21% OR $657 PER UNIT

The continued optimization of the Company's complete business model is highlighted by the year-over-year 8.7% improvement in gross profit, which collectively totaled $197.0 million..

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

• Revenue increased to $1,147.9 million, an increase of 17.6%
• Gross profit increased by $15.7 million or 8.7%
• Used to new retail units ratio² increased to 1.75 from 1.29
• Used retail unit sales² increased by 12.0%, an increase of 1,202 units
• F&I gross profit per retail unit average² increased to $3,796, up 20.9% or $657 per unit; F&I gross profit increased to $66.9 million as compared to $55.9 million in the prior year, an increase of 19.8%
• PS&CR gross profit increased to $60.6 million, an increase of 11.3%
• PS&CR gross profit percentage² decreased to 55.1% as compared to 55.7% in the prior year

Financing and Investing Activities and Other Recent Developments

ACQUISITION PIPELINE SUPPORTED BY HEALTHY BALANCE SHEET AND LIQUIDITY STRUCTURE

Net indebtedness¹ of $350.8 million resulted in a net indebtedness leverage ratio¹ of 1.5x. Financing and investing activities included the following:

Acquisitions

The Company completed $45.2 million of acquisitions in Q3 2022, and $124.1 million year-to-date. The acquisitions support management's strategic objectives of expanding the Company's presence across Canada and operational capacity.

• On August 2, 2022, the Company acquired 100% of the shares of Kelleher Ford Dealership and Collision Centre ("Kelleher Ford"), a new and used vehicle Ford dealership and collision centre in Brandon, Manitoba.
• On August 12, 2022, the Company acquired 100% of the shares of Velocity Auto Body Inc. ("Velocity Autobody"), a luxury-brand focused collision centre in Markham, Ontario.
• On September 22, 2022, the Company acquired 100% of the shares of Auto Gallery of Winnipeg Inc. ("Auto Gallery of Winnipeg"), an independent used vehicle dealership in Winnipeg, Manitoba.
• On September 28, 2022, the Company acquired 100% of the shares of Northern Auto Auctions of Canada Inc. ("North Toronto Auction"), an entity that operates the North Toronto Auction, a fee-based used vehicle auction business, serving dealers and consumers, located in Innisfil, Ontario.
• On October 27, 2022, the Company acquired 100% of the shares of Kavia Auto Body Inc. ("Kavia Auto Body"), a collision centre located in Saskatoon, Saskatchewan.
• On November 4, 2022, the Company acquired 100% of the shares of Excellence Auto Collision Limited ("Excellence Auto Collision"), two collision centres located in Scarborough, Ontario and Toronto, Ontario.

Share Purchases

• On August 15, 2022, the Company completed a SIB, by way of a modified Dutch auction, to purchase, for cancellation, the common shares of the Company (the "Shares", or, the "Offer"). The Company purchased and cancelled 1,159,707 Shares at a purchase price of $28.00 per share under the Offer, representing an aggregate purchase price $32.5 million, which represents 4.37% of the total issued and outstanding Shares of the Company before giving effect to the Offer.
• On November 9, 2022, the Company announced a SIB offer to purchase, for cancellation, up to $50 million in value of its outstanding common shares at a price range of $25 to $28 per share. The offer is set to expire on December 16, 2022.

Third Quarter Financial Information

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

	Three Months Ended September 30
Consolidated Operational Data	2022	2021	% Change
Revenue	1,623,949	1,206,754	34.6 %
Gross profit	273,634	220,192	24.3 %
Gross profit %	16.8 %	18.2 %	(1.4) %
Operating expenses	207,266	159,880	29.6 %
Operating profit	69,303	62,841	10.3 %
Net income for the period	32,870	38,769	(15.2) %
Basic net income per share attributable to AutoCanada shareholders	1.22	1.37	(10.9) %
Diluted net income per share attributable to AutoCanada shareholders	1.16	1.27	(8.7) %
Adjusted EBITDA^1	76,374	68,265	11.9 %
Basic weighted average number of shares outstanding	25,876,198	27,483,596	(5.8) %
Diluted weighted average number of shares outstanding	27,177,819	29,599,494	(8.2) %
Common shares outstanding as at quarter-end date	25,402,988	27,493,016	(7.6) %
New retail vehicles^2 sold (units)	9,186	9,255	(0.7) %
New fleet vehicles^2 sold (units)	433	358	20.9 %
Total new vehicles^2 sold (units)	9,619	9,613	0.1 %
Used retail vehicles^2 sold (units)	17,381	13,831	25.7 %
Total vehicles^2 sold	27,000	23,444	15.2 %
Same store new retail vehicles^2 sold (units)	6,400	7,771	(17.6) %
Same store new fleet vehicles^2 sold (units)	386	358	7.8 %
Same store used retail vehicles^2 sold (units)	11,228	10,026	12.0 %
Same store total vehicles^2 sold	18,014	18,155	(0.8) %
Same store^2 revenue	1,147,921	976,454	17.6 %
Same store^2 gross profit	197,003	181,291	8.7 %
Same store^2 gross profit %	17.2 %	18.6 %	(1.4) %

1	See "NON-GAAP AND OTHER FINANCIAL MEASURES" below.
2	This press release contains "SUPPLEMENTARY FINANCIAL MEASURES". Section 15. NON-GAAP AND OTHER FINANCIAL MEASURES of the Company's Management's Discussion & Analysis for the three month period ended September 30, 2022 ("MD&A") is hereby incorporated by reference for further information regarding the composition of these measures (accessible through the SEDAR website at www.sedar.com).

SELECTED QUARTERLY FINANCIAL INFORMATION

The following table shows the unaudited results of the Company for each of the eight most recently completed quarters. The results of operations for these periods are not necessarily indicative of the results of operations to be expected in any given comparable period.

	MD&A Footnote Reference^3	Q3 2022	Q2 2022	Q1 2022	Q4 2021	Q3 2021 REVISED	Q2 2021 REVISED	Q1 2021 REVISED	Q4 2020
Income Statement Data	4
New vehicles ^4	6	557,492	583,870	511,195	467,085	498,142	547,593	451,061	466,468
Used vehicles ^4	6	807,236	840,998	595,514	524,043	518,791	539,785	354,922	257,301
Parts, service and collision repair ^4	6	161,805	160,307	152,009	136,800	116,953	122,459	108,427	105,362
Finance, insurance and other ^4	6	97,416	100,851	83,720	67,854	72,868	71,218	55,414	46,990
Revenue		1,623,949	1,686,026	1,342,438	1,195,782	1,206,754	1,281,055	969,824	876,121
New vehicles ^4	6	58,760	58,950	53,384	50,632	46,525	44,619	34,639	31,199
Used vehicles ^4	6	32,627	34,125	36,772	38,118	39,669	40,269	23,206	19,787
Parts, service and collision repair ^4	6	88,707	90,713	78,431	75,917	64,748	68,115	57,874	58,109
Finance, insurance and other ^4	6	93,540	95,490	78,752	63,847	69,250	64,838	51,917	43,642
Gross Profit		273,634	279,278	247,339	228,514	220,192	217,841	167,636	152,737
Gross profit %		16.8 %	16.6 %	18.4 %	19.1 %	18.2 %	17.0 %	17.3 %	17.4 %
Operating expenses		207,266	212,709	193,646	170,008	159,880	154,773	127,948	119,442
Operating expenses as a % of gross profit		75.7 %	76.2 %	78.3 %	74.4 %	72.6 %	71.0 %	76.3 %	78.2 %
Operating profit		69,303	69,954	56,690	99,410	62,841	66,153	41,664	46,664
Recovery of non-financial assets		—	—	—	(39,846)	—	—	—	(11,248)
Net income		32,870	39,058	4,322	69,398	38,769	37,698	21,334	24,320
Basic net income per share attributable to AutoCanada shareholders		1.22	1.40	0.11	2.54	1.37	1.33	0.77	0.87
Diluted net income per share attributable to AutoCanada shareholders		1.16	1.33	0.10	2.38	1.27	1.23	0.71	0.81
Dividends declared per share		—	—	—	—	—	—	—	—
Adjusted EBITDA ^1	2	76,374	75,561	62,196	65,873	68,265	70,491	47,234	40,472
Free cash flow ^1	2	35,319	63,318	5,852	7,603	12,372	67,803	19,391	19,240
Operating Data	4
New retail vehicles^2 sold	3	9,186	9,878	9,052	8,204	9,255	10,107	8,233	8,623
New fleet vehicles^2 sold	3	433	497	290	199	358	575	740	964
Total new vehicles^2 sold	3	9,619	10,375	9,342	8,403	9,613	10,682	8,973	9,587
Used retail vehicles^2 sold	3	17,381	17,740	14,072	11,893	13,831	13,271	9,734	7,389
Total vehicles^2 sold	3	27,000	28,115	23,414	20,296	23,444	23,953	18,707	16,976
# of service and collision repair orders^2 completed	3	241,907	261,671	221,632	232,373	199,870	214,149	182,869	203,086
# of dealerships at period end	5	85	82	80	80	68	67	67	67
# of same store dealerships	1	49	49	49	49	49	49	49	47
# of service bays at period end		1,331	1,322	1,293	1,303	1,108	1,098	1,098	1,098
Same stores^2 revenue growth	1	17.6 %	14.2 %	17.2 %	14.1 %	15.0 %	54.2 %	27.8 %	6.3 %
Same stores^2 gross profit growth	1	8.7 %	10.3 %	23.2 %	29.4 %	18.6 %	102.5 %	35.0 %	7.7 %

1	See "NON-GAAP AND OTHER FINANCIAL MEASURES" below.
2	This press release contains "SUPPLEMENTARY FINANCIAL MEASURES". Section 15. NON-GAAP AND OTHER FINANCIAL MEASURES of the Company's Management's Discussion & Analysis for the three month period ended September 30, 2022 ("MD&A") is hereby incorporated by reference for further information regarding the composition of these measures (accessible through the SEDAR website at www.sedar.com).
3	See the Company's MD&A for the quarter ended September 30, 2022 for complete footnote disclosures.
4	In Q4 2021, it was determined there were Revenues and Cost of sales accounts incorrectly classified between revenue streams in the first three quarters of 2021 within the U.S. Operations segment. As a result, the classification of these accounts has been corrected and we have revised the Q1, Q2, and Q3 2021 amounts. This reclassification had no impact on total gross profit.

MD&A and Financial Statements

Information included in this press release is a summary of results. It should be read in conjunction with AutoCanada's Consolidated Financial Statements and Management's Discussion and Analysis for the quarter ended September 30, 2022, which can be found on the Company's website at www.autocan.ca or on www.sedar.com.

NON-GAAP AND OTHER FINANCIAL MEASURES

This press release contains certain financial measures that do not have any standardized meaning prescribed by Canadian GAAP. Therefore, these financial measures may not be comparable to similar measures presented by other issuers. Investors are cautioned these measures should not be construed as an alternative to net earnings (loss) or to cash provided by (used in) operating, investing, financing activities, cash and cash equivalents, and indebtedness determined in accordance with Canadian GAAP, as indicators of our performance. We provide these additional non-GAAP measures, capital management measures, and supplementary financial measures to assist investors in determining our ability to generate earnings and cash provided by (used in) operating activities and to provide additional information on how these cash resources are used.

Adjusted EBITDA, adjusted EBITDA margin, normalized adjusted EBITDA, income statement impacts and adjusted EBITDA on a pre-IFRS 16 basis, pro forma adjusted EBITDA, pro forma net income, pro forma normalized adjusted EBITDA, free cash flow, net indebtedness, and net indebtedness leverage ratio are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP. Investors are cautioned that these non-GAAP measures should not replace net earnings or loss (as determined in accordance with GAAP) as an indicator of the Company's performance, of its cash flows from operating, investing and financing activities or as a measure of its liquidity and cash flows. The Company's methods of calculating referenced non-GAAP measures may differ from the methods used by other issuers. Therefore, these measures may not be comparable to similar measures presented by other issuers.

It should be noted that certain of the financial measures described below include pro forma items estimating the impact of the acquisitions if they had occurred on the first day of the relevant period, or as of a specified date. Readers should understand that these estimates were determined by management in good faith and are not indicative of what the historical results of the businesses acquired in the acquisitions actually were for the relevant period, or what those results would have been if the acquisitions had occurred on the dates indicated, or what they will be for any future period. As a result, the pro forma financial measures may not be indicative of the Company's financial position that would have prevailed, or operating results that would have been obtained, if the transactions had taken place on the dates indicated or of the financial position or operating results which may be obtained in the future. These pro forma financial measures are not a forecast or projection of future results. The actual financial position and results of operations of the Company for any period following the closing of the acquisitions will vary from the amounts set forth following pro forma financial measures, and such variation may be material.

We list and define these "NON-GAAP MEASURES" below:

Adjusted EBITDA

Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is an indicator of a company's operating performance over a period of time and ability to incur and service debt. Adjusted EBITDA provides an indication of the results generated by our principal business activities prior to:

• Interest expense (other than interest expense on floorplan financing), income taxes, depreciation, and amortization;
• Charges that introduce volatility unrelated to operating performance by virtue of the impact of external factors (such as share-based compensation amounts attributed to certain equity issuances as a part of the Used Digital Retail Division);
• Non-cash charges (such as impairment, recoveries, gains or losses on free-standing derivatives, revaluation of contingent consideration and revaluation of redemption liabilities);
• Charges outside the normal course of business (such as restructuring, gains and losses on dealership divestitures and real estate transactions); and
• Charges that are non-recurring in nature (such as provisions for wholesale fraud and settlement income).

The Company believes adjusted EBITDA provides improved continuity with respect to the comparison of our operating performance over a period of time.

Normalized Adjusted EBITDA

With the onset of COVID-19 during the second quarter of 2020, the impact of COVID-19 related government restrictions resulted in charges that are one-time in nature, and related government programs resulted in subsidies that are non-recurring in the future.

Normalized adjusted EBITDA is an indicator of a company's operating performance over a period of time and ability to incur and service debt, normalized for charges that are non-recurring in nature related to the pandemic such as:

• Canada Emergency Wage Subsidy ("CEWS") income expected to recur until the Company is no longer eligible for the subsidy;
• Canada Emergency Rent Subsidy ("CERS") expected to recur until the Company is no longer eligible for the subsidy; and
• One-time forgiveness of Small Business Association PPP loans.

The Company believes normalized adjusted EBITDA provides improved continuity with respect to the comparison of our operating performance normalized for impacts related to the COVID-19 pandemic. Refer to the COVID-19 impacts section of Note 4 of the Interim Consolidated Financial Statements for the nine-months ended September 30, 2022 for further details.

Pro Forma Adjusted EBITDA and Pro Forma Normalized Adjusted EBITDA

The Company believes pro forma adjusted EBITDA and pro forma normalized adjusted EBITDA provides improved understanding of the progress of our acquisition strategy as if the acquisitions had occurred at the beginning of the period. Pro forma adjusted EBITDA and pro forma normalized adjusted EBITDA includes management's estimate of the net income generated by our acquisitions prior to interest expense (other than interest expense on floorplan financing), income taxes, depreciation, and amortization, assuming acquisitions in the year had occurred on the first day of the 12 month period ended September 30, 2022, prior to any synergies, pursuant to the terms of the credit facilities. Pro forma adjustments estimated by management were derived from dealership financial statements. The Company's blended rate of Canadian corporate tax of 25.5% was applied to pro forma adjustments where applicable.

Refer to the Company's Management Discussion & Analysis for the year ended December 31, 2021 for the reconciliation of the pro forma normalized adjusted EBITDA for the year ended December 31, 2021.

Pro Forma Net Income

The Company believes pro forma net income provides improved understanding of the progress of our acquisition strategy as if the acquisitions had occurred at the beginning of the period. Pro forma net income includes management's estimate of the net income generated by our acquisitions, assuming acquisitions in the year had occurred on the first day of the 12 month period ended September 30, 2022, prior to any synergies, pursuant to the terms of the credit facilities. Pro forma adjustments estimated by management were derived from dealership financial statements. The Company's blended rate of Canadian corporate tax of 25.5% was applied to pro forma adjustments where applicable.

Adjusted EBITDA Margin

Adjusted EBITDA margin is an indicator of a company's operating performance specifically in relation to our revenue performance.

The Company believes adjusted EBITDA margin provides improved continuity with respect to the comparison of our operating performance with retaining and growing profitability as our revenue and scale increases over a period of time.

Income Statement Impacts and Adjusted EBITDA on a Pre-IFRS 16 basis

The Company adopted IFRS 16 on January 1, 2019. On adoption of IFRS 16, the Company recognized lease liabilities in relation to leases, which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate. There are also corresponding income statement impacts to net income and other comprehensive income.

The Company believes adjusted EBITDA on a pre-IFRS 16 basis provides improved continuity for purposes of comparing to our historical operating performance prior to fiscal year 2019. Our Credit Facility financial covenants are calculated and presented on a pre-IFRS 16 basis. In addition, the net indebtedness leverage ratio is calculated on a pre-IFRS 16 basis.

Adjusted EBITDA on a pre-IFRS 16 basis is calculated as adjusted EBITDA less the rental expense, fair market value rent adjustment, and step lease rent adjustment eliminated from the adoption of IFRS 16 lease liabilities accounting standards.

Free Cash Flow

Free cash flow is a measure used by Management to evaluate the Company's performance. While the closest Canadian GAAP measure is cash provided by operating activities, free cash flow is considered relevant because it provides an indication of how much cash generated by operations is available after capital expenditures. It shall be noted that although we consider this measure to be free cash flow, financial and non-financial covenants in our credit facilities and dealer agreements may restrict cash from being available for distributions, re-investment in the Company, potential acquisitions, or other purposes. Investors should be cautioned that free cash flow may not actually be available for such purposes. References to "Free cash flow" are to cash provided by (used in) operating activities (including the net change in non-cash working capital balances) less capital expenditure (not including acquisitions of dealerships and dealership facilities).

Net Indebtedness Leverage Ratio

Net indebtedness leverage ratio is a measure used by management to evaluate the liquidity of the Company.

The Company believes presenting the net indebtedness leverage ratio on a pre-IFRS 16 basis provides improved continuity for purposes of comparing to our historical operating performance prior to fiscal year 2019 and remains relevant while our Credit Facility financial covenants continues to be calculated and presented on a pre-IFRS 16 basis. Net indebtedness leverage ratio is calculated as net indebtedness compared to Adjusted EBITDA pre-IFRS 16 on a TTM basis.

We list and define "CAPITAL MANAGEMENT MEASURES" below:

Net Indebtedness

Net indebtedness is used by management to evaluate the liquidity of the Company.

Net indebtedness is calculated as indebtedness, net of unamortized deferred financing costs, adding back embedded derivative asset, and less cash and cash equivalents.

NON-GAAP AND OTHER FINANCIAL MEASURES RECONCILIATIONS

Adjusted EBITDA and Normalized Adjusted EBITDA

The following table illustrates adjusted EBITDA and normalized adjusted EBITDA, for the three-month period ended September 30, over the last two years of operations:

	2022	2021
Period from July 1 to September 30
Net income for the period	32,870	38,769
Add back:
Income tax expense	13,608	8,406
Depreciation of property and equipment	5,371	4,121
Interest on long-term indebtedness	7,436	5,591
Depreciation of right of use assets	7,463	6,464
Lease liability interest	7,227	5,487
	73,975	68,838
Add back:
Unrealized fair value changes in derivative instruments	1,152	(2,151)
Amortization of loss on terminated hedges	817	817
Unrealized foreign exchange gains	(121)	(265)
Loss on termination of lease, net	—	919
Unrealized fair value changes on embedded derivative	—	116
Loss (gain) on disposal of assets	551	(9)
Adjusted EBITDA	76,374	68,265
Normalized Adjusted EBITDA	76,374	68,265

Segmented Adjusted EBITDA and Segmented Normalized Adjusted EBITDA

The following table illustrates the segmented adjusted EBITDA and normalized adjusted EBITDA, for the three-month period ended September 30, over the last two years of operations:

	Three Months Ended September 30, 2022				Three Months Ended September 30, 2021
	Canada	U.S.	Total		Canada	U.S.	Total
Period from July 1 to September 30
Net income for the period	30,288	2,582	32,870		33,839	4,930	38,769
Add back:
Income tax expense	10,941	2,667	13,608		8,406	—	8,406
Depreciation of property and equipment	4,958	413	5,371		3,811	310	4,121
Interest on long-term indebtedness	5,887	1,549	7,436		4,979	612	5,591
Depreciation of right of use assets	6,758	705	7,463		5,767	697	6,464
Lease liability interest	6,344	883	7,227		4,618	869	5,487
	65,176	8,799	73,975		61,420	7,418	68,838
Add back:
Unrealized fair value changes in derivative instruments	1,152	—	1,152		(2,151)	—	(2,151)
Amortization of loss on terminated hedges	817	—	817		817	—	817
Unrealized foreign exchange gains	(121)	—	(121)		(265)	—	(265)
Loss on termination of lease, net	—	—	—		919	—	919
Unrealized fair value changes on embedded derivative	—	—	—		116	—	116
Loss (gain) on disposal of assets	551	—	551		(9)	—	(9)
Adjusted EBITDA	67,575	8,799	76,374		60,847	7,418	68,265
Normalized Adjusted EBITDA	67,575	8,799	76,374		60,847	7,418	68,265

Pro Forma Adjusted EBITDA and Pro Forma Normalized Adjusted EBITDA Reconciliation

The following table illustrates pro forma adjusted EBITDA and pro forma normalized adjusted EBITDA for the trailing twelve month period ended September 30, over the last two years of operations:

	2022	2021
Period from October 1 to September 30
Net income for the period	145,648	122,121
Add back:
Income tax expense	47,293	37,588
Depreciation of property and equipment	20,018	17,265
Interest on long-term indebtedness	27,365	19,703
Depreciation of right of use assets	29,920	24,992
Lease liability interest	28,065	21,798
	298,309	243,467
Add back:
Recoveries of non-financial assets, net	(39,846)	(11,248)
Share-based compensation (Used Digital Retail Division)	—	435
Loss (gain) on redemption liabilities	14,116	(2,108)
Loss on extinguishment of debt	9,860	1,128
Unrealized fair value changes in derivative instruments	(9,678)	(5,861)
Amortization of loss on terminated hedges	3,268	3,268
Unrealized foreign exchange (gains) losses	(280)	532
Loss on extinguishment of embedded derivative	29,306	—
(Gain) loss on termination of lease, net	(492)	919
Unrealized fair value changes on embedded derivative	(24,778)	(4,528)
Loss on disposal of assets	219	458
Adjusted EBITDA	280,004	226,462
Normalizing items:
Add back:
Inventory write-down	—	1,841
One-time employee recognition payments	—	309
Operational incentive payments	—	851
Less:
Canada Emergency Wage Subsidy	—	(7,177)
Canada Emergency Rent Subsidy	—	(536)
Forgiveness of PPP loans	—	(6,728)
Normalized Adjusted EBITDA	280,004	215,022
Pro forma items had the acquisitions occurred on October 1:
Net income for the period	1,103	3,585
Add back:
Income tax expense	378	1,227
Depreciation of property and equipment	820	1,011
Interest on long-term indebtedness	4,907	4,604
Depreciation of right of use assets	1,029	1,945
Lease liability interest	1,670	3,050
Pro Forma Adjusted EBITDA	289,911	241,884
Pro Forma Normalized Adjusted EBITDA	289,911	230,444
Pro Forma Net Income	146,751	125,706

Quarter-to-Date Adjusted EBITDA Margin

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

	2022	2021
Period from July 1 to September 30
Adjusted EBITDA	76,374	68,265
Revenue	1,623,949	1,206,754
Adjusted EBITDA Margin	4.7 %	5.7 %

Free Cash Flow

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

	Q3  2022	Q2 2022	Q1 2022	Q4 2021	Q3 2021	Q2 2021	Q1 2021	Q4 2020
Cash provided by operating activities	37,662	64,935	7,279	10,153	13,721	68,604	20,506	20,447
Deduct:
Purchase of non-growth property and equipment	(2,343)	(1,617)	(1,427)	(2,550)	(1,349)	(801)	(1,115)	(1,207)
Free cash flow	35,319	63,318	5,852	7,603	12,372	67,803	19,391	19,240
Free cash flow - TTM	112,092	89,145	93,630	107,169	118,806	159,878	144,632	131,396

Net Indebtedness and Net Indebtedness Leverage Ratio Reconciliation

The following table illustrates the Company's net indebtedness and net indebtedness leverage ratio as at September 30, 2022 and December 31, 2021:

	September 30, 2022 $	December 31, 2021 $
Syndicated Credit Facility - revolving credit	83,615	63,842
Senior unsecured notes (including embedded derivative asset)	344,277	221,965
Non-recourse mortgages and other debt	32,426	101
Total indebtedness	460,318	285,908
Add back:
Embedded derivative asset	—	29,306
Total indebtedness for net indebtedness purpose	460,318	315,214
Cash and cash equivalents	(109,478)	(102,480)
Net indebtedness	350,840	212,734
Adjusted EBITDA - pre-IFRS 16 - trailing twelve months	227,852	206,584
Net indebtedness leverage ratio	1.5x	1.0x

Conference Call

A conference call to discuss the results for the three months ended September 30, 2022 will be held on November 10, 2022 at 9:00am Mountain (11:00am Eastern). To participate in the conference call, please dial 1.888.664.6392 approximately 10 minutes prior to the call.

This conference call will also be webcast live over the internet and can be accessed by all interested parties at the following URL: https://investors.autocan.ca/event/2022-q3-conference-call/

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 81 franchised dealerships, comprised of 28 brands, in eight provinces in Canada as well as a group in Illinois, USA. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC, Buick, Cadillac, Ford, Infiniti, Nissan, Hyundai, Subaru, Audi, Volkswagen, Kia, Mazda, Mercedes-Benz, BMW, MINI, Volvo, Toyota, Lincoln, Acura, Honda and Porsche branded vehicles. In addition, AutoCanada's Canadian Operations segment currently operates 3 used vehicle dealerships and 1 used vehicle auction business supporting the Used Digital Retail Division, 11 RightRide division locations, and 9 stand-alone collision centres within our group of 24 collision centres. In 2021, our dealerships sold approximately 86,000 vehicles and processed over 800,000 service and collision repair orders in our 1,303 service bays generating revenue in excess of $4 billion.

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

Forward Looking Statements

Certain statements contained in this press release are forward-looking statements and information (collectively "forward-looking statements", including "with respect to", "among other things", "future performance", "expense reductions" and the "Go Forward Plan"), within the meaning of the applicable Canadian securities legislation. We hereby provide cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in these forward-looking statements. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "will continue", "is anticipated", "projection", "vision", "goals", "objective", "target", "schedules", "outlook", "anticipate", "expect", "estimate", "could", "should", "plan", "seek", "may", "intend", "likely", "will", "believe", "shall" and similar expressions) are not historical facts and are forward-looking and may involve estimates and assumptions and are subject to risks, uncertainties and other factors some of which are beyond our control and difficult to predict.

Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Therefore, any such forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this press release.

The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website at www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference.

Further, any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by applicable law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

Additional Information

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

SOURCE AutoCanada Inc.

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