AutoCanada Reports Record Third Quarter Results - Record Revenue of $1.2 Billion - Adjusted EBITDA of $68.3 Million Ahead of Prior Year by 12% and by 25% on a Normalized Basis

• Revenue was $1,206.8 million as compared to $1,017.1 million in the prior year, an increase of 19% and the highest third quarter revenue reported in the Company's history
• Net income for the period was $38.8 million versus $36.0 million in 2020
• Adjusted EBITDA was $68.3 million versus $61.1 million in the prior year, an increase of 12%; normalizing for non-recurring government assistance of $6.3 million in the prior year, results were ahead of prior year by 25%
• Net indebtedness of $29.8 million at the end of Q3 2021 compares to $21.6 million at the end of Q2 2021; net debt leverage on a pre-IFRS 16 basis was 0.2x

EDMONTON, AB, Nov. 9, 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 September 30, 2021.

"Our team's focus on operational excellence once again delivered record-setting results in Q3 2021, highlighting the strength and resiliency of our business model," said Paul Antony, Executive Chairman of AutoCanada. "We continue to make great progress on almost every key measure, particularly driven by strong performance in our used vehicle, F&I and U.S. operations, along with an overall improvement in market outlook and demand.

"This strong performance reflects the sustainability of our business model and demonstrates that we're successfully managing through the current market environment of global supply chain challenges impacting OEM production. We believe these OEM production capacity issues will normalize over the coming quarters and expect the market to return to pre-pandemic levels in late 2022 or early 2023. In the meantime, we will continue to build on our positive momentum and focus on strategic growth initiatives to drive industry-leading performance regardless of changing market conditions.

"We remain well positioned to execute on our acquisition strategy in the coming quarters with a robust pipeline of dealerships and collision centres representing over $400 million in annual revenue currently being evaluated."

Third Quarter Key Highlights and Recent Developments

The Company reported another record-setting performance as revenue for the third quarter of 2021 reached $1,206.8 million compared to prior year third quarter revenue of $1,017.1 million, an increase of 18.6%. In particular, the record Q3 2021 was driven by the continued strong performance of our used vehicle and finance and insurance ("F&I") business operations, and our U.S. Operations.

Net income for the period was $38.8 million, as compared to $36.0 million in Q3 2020. Fully diluted earnings per share was $1.27, an increase of $0.04 from $1.23 in the prior year.

Adjusted EBITDA for the period was $68.3 million as compared to $61.1 million reported in Q3 2020.

Normalizing for the typically non-recurring Canada Emergency Wage Subsidy ("CEWS") income of $6.3 million in the prior year, Adjusted EBITDA margin was 5.7% as compared to a normalized 5.4% in the prior year, an increase of 0.3 percentage points ("ppts").

Total gross profit increased by 22.7% to $220.2 million, attributable to the Company's continued focus on the used vehicle market and strong F&I outperformance. Canadian used retail unit sales increased by 43.8% and U.S. used retail unit sales increased by 178%, respectively, over the prior year; consolidated used retail unit sales of 13,831 exceeded the 8,836 reported in the prior year, an increase of 56.5%. Strong used retail sales resulted in our consolidated used to new retail unit ratio improving to 1.49 from 0.82, and to 1.22 on a trailing twelve month ("TTM") basis, moving beyond the targeted annual 1.0 ratio. Consolidated used vehicle gross profit increased by 45.1% to $43.3 million as compared to the prior year. Same store F&I gross profit per retail unit average increased to $3,139 per unit, an increase of $650 per unit, the twelfth consecutive quarter of year-over-year growth.

Q3 2021 was another strong quarter for U.S. Operations, with Adjusted EBITDA setting a third quarter U.S. record at $7.4 million, an improvement of $2.7 million or 57.7%, against $4.7 million reported in Q3 2020. The strong performance, while capitalizing on favourable market conditions, was a result of the successful fundamental shift in the operating and sales culture. Specifically, gross profit increased by $14.5 million to $32.5 million, an improvement of 80.7%.

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 retail margin growth across all our business operations in the third quarter.

Normalizing for CEWS income in the prior year, operating expenses as a percentage of gross profit improves by 1.0 ppts to 72.6% in the current year as compared to a normalized 73.6% in the prior year, and is well below the five-year third quarter historical average of 81.5%. 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 increased by $8.2 million from June 30, 2021 to $29.8 million. Acquisition expenditures in the quarter were $18.2 million. Free cash flow for the quarter was $12.4 million at Q3 2021 as compared to $53.4 million in Q3 2020, and on a TTM basis was $118.8 million at Q3 2021 as compared to $178.0 million in Q3 2020. Additionally, our net indebtedness leverage ratio remained well below our target range at 0.2x at the end of Q3 2021, as compared to 0.1x in Q2 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 $400 million in annual revenue under signed letters of intent ("LOI's") and purchase agreements. LOI's, subject to due diligence, represent $100 million in annual revenue. Signed purchase agreements for dealerships located in Ontario, subject to OEM approvals and other standard closing conditions, represent $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. 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 THIRD QUARTER

Owing to execution against its complete business model strategy, AutoCanada delivered a record setting third quarter and continues to experience strong performance.

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

• Revenue was $1,206.8 million, an increase of $189.7 million or 18.6% and the highest third quarter revenue reported in the Company's history
• Total vehicles sold were 23,444, an increase of 3,276 units or 16.2%
• Used retail vehicles sold increased by 4,995 or 56.5%
• Net income for the period was $38.8 million (or $1.37 per basic share) versus $36.0 million (or $1.29 per basic share) in 2020
• Adjusted EBITDA increased by 11.8% to $68.3 million, an increase of $7.2 million
• Adjusting for CEWS income of $6.3 million in Q3 2020, Adjusted EBITDA was $68.3 million, ahead of normalized prior year Adjusted EBITDA by $13.5 million or 24.6%
• Pre-IFRS 16 Adjusted EBITDA was $57.4 million, as compared to normalized $43.9 million in the prior year, an improvement of 30.7%
• Ending net indebtedness of $29.8 million reflected an increase of $8.2 million from Q2 2021.

Canadian Operations Highlights

USED RETAIL UNIT SALES GROWTH OF 44%

Used vehicle and F&I segments were key drivers of improved earnings in Q3 2021. Total gross profit percentage increased to 18.4% as compared to 17.7% in the prior year. Used vehicle gross profit increased by 32.2% to $35.0 million as compared to the prior year. For the twelfth consecutive quarter of year-over-year growth, same store F&I gross profit per retail unit average increased to $3,139, up 26.1% or $650 per unit from prior year.

Current period results include the acquisitions of Auto Bugatti collision centre and Haldimand Motors which occurred in Q4 2020, PG Klassic Autobody collision centre on April 1, 2021, Mark Wilson's Better Used Cars on August 9, 2021, and Autolux MB Collision on September 9, 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 September 30, 2021:

• Revenue was $1,018.4 million, an increase of 11.7%; the highest third quarter Canadian revenue reported in the Company's history
• Total retail vehicles sold were 19,264, an increase of 2,000 units or 11.6%
• Used retail unit sales increased by 3,499 or 43.8%
• Average TTM Canadian used retail unit sales per dealership per month, excluding Used Digital Retail Division dealerships, reached 59, as compared to 45 in the prior year
• Used to new retail units ratio increased to 1.48 from 0.86
• Trailing twelve month ratio improved to 1.30 at Q3 2021 as compared to 0.93 at Q3 2020
• Finance and insurance gross profit per retail unit average increased to $3,005, up 15.9% or $412 per unit
• Net income for the period was $33.8 million, down $(0.5) million from a net income of $34.3 million in 2020
• Income tax expense increased by $3.6 million to $8.4 million primarily due to adjustments in respect of prior years and other permanent items
• Adjusted EBITDA increased 8% to $60.8 million, an increase of $4.5 million
• Adjusting for CEWS income in the prior year, Adjusted EBITDA increases to $60.8 million, ahead of normalized prior year Adjusted EBITDA by $10.8 million or 21.5%
• Adjusted EBITDA margin was 6.0% as compared to normalized 5.5% in the prior year, an increase of 0.5 ppts
• Pre-IFRS 16 Adjusted EBITDA was $51.1 million, as compared to normalized $40.1 million in the prior year, an improvement of 27.4%

U.S. Operations Highlights

USED RETAIL UNIT SALES GROWTH OF 178%

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 and led to improved metrics on multiple fronts. Strategic decisions executed throughout Q2 2021 set the U.S. Operations for another strong quarter, where, along with a 64.6% improvement in retail unit sales, total gross profit percentage set a third quarter record of 17.3%. Actions taken over the last two quarters 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 $188.3 million, an increase of 79.3%
• Retail unit sales increased to 3,822 units, up 1,500 units or 64.6%
• Used retail unit sales increased by 1,496 or 177.7%
• Net income for the period increased by $3.3 million to $4.9 million from $1.7 million in 2020
• Adjusted EBITDA was $7.4 million, an increase of $2.7 million from 2020, an improvement of 57.7%
• Adjusting for COVID-19 related typically non-recurring items, normalized Adjusted EBITDA on a TTM basis was $15.0 million as compared to $1.6 million in 2020

Same Store Metrics - Canadian Operations

SAME STORE F&I GROSS PROFIT PER RETAIL UNIT AVERAGE OF $3,139 PER UNIT

We outperformed the Canada market by 1.5 ppts. Same store new retail units decreased by (16.2)% as compared to the market decrease of (17.7)%, for brands represented by AutoCanada as reported by DesRosiers Automotive Consultants ("DesRosiers"). Same store used retail units increased by 2,032 retail units to 10,026, an increase of 25.4% as compared to prior year. The continued optimization of the Company's complete business model is highlighted by the year-over-year 18.6% improvement in gross profit across every business segment which collectively totaled $28.2 million.

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

• Revenue increased to $983.9 million, an increase of 15.0%
• Gross profit increased by $28.2 million or 18.6%
• Used to new retail units ratio increased to 1.29 from 0.86
• Used retail unit sales increased by 25.4%, an increase of 2,032 units
• F&I gross profit per retail unit average increased to $3,139, up 26.1% or $650 per unit; gross profit increased to $55.9 million as compared to $43.0 million in the prior year, an increase of $12.9 million or 30.0%
• Parts, service and collision repair gross profit increased to $54.4 million, an increase of 5.2%
• Parts, service and collision repair gross profit percentage increased to 55.7% as compared to 52.4% in the prior year, an increase of 3.4 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

In the quarter, net indebtedness increased by $8.2 million to $29.8 million, resulting in a net debt leverage of 0.2x. Acquisition expenditures in the quarter were $18.2 million.

The following acquisitions occurred:

• On August 9, 2021, the Company acquired 100% of the shares in 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.
• On September 9, 2021, the Company acquired 100% of the shares in Autolux MB Collision, a luxury-brand focused collision centre located in Montreal, Quebec.
• On October 1, 2021, the Company acquired 100% of the shares in Airdrie Autobody Ltd., a collision centre located in Airdrie, Alberta.
• On November 4, 2021, the Company acquired substantially all of the assets of Crystal Lake Chrysler Jeep Dodge Ram Inc., a Stellantis dealership located in Crystal Lake, Illinois.

Third Quarter Financial Information

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

	Three Months Ended September 30
Consolidated Operational Data	2021	2020	% Change
Revenue	1,206,754	1,017,100	18.6%
Gross profit	220,192	179,412	22.7%
Gross profit %	18.2%	17.6%	0.6%
Operating expenses	159,880	125,785	27.1%
Operating profit	62,841	56,884	10.5%
Net income for the period	38,769	35,962	7.8%
Basic net income per share attributable to AutoCanada shareholders	1.37	1.29	6.2%
Diluted net income per share attributable to AutoCanada shareholders	1.27	1.23	3.3%
Adjusted EBITDA ^1	68,265	61,054	11.8%
New retail vehicles sold (units)	9,255	10,750	(13.9)%
New fleet vehicles sold (units)	358	582	(38.5)%
Total new vehicles sold (units)	9,613	11,332	(15.2)%
Used retail vehicles sold (units)	13,831	8,836	56.5%
Total vehicles sold	23,444	20,168	16.2%
Same store new retail vehicles sold (units)	7,771	9,270	(16.2)%
Same store new fleet vehicles sold (units)	358	582	(38.5)%
Same store used retail vehicles sold (units)	10,026	7,994	25.4%
Same store total vehicles sold	18,155	17,846	1.7%
Same store revenue	983,897	855,591	15.0%
Same store gross profit	179,870	151,636	18.6%
Same store gross profit %	18.3%	17.7%	0.6%

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

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

	Three Months Ended September 30, 2021				Three Months Ended September 30, 2020
	Canada $	U.S. $	Total $		Canada $	U.S. $	Total $
New vehicles	422,605	66,587	489,192		483,117	61,298	544,415
Used vehicles	430,712	98,115	528,827		282,396	26,797	309,193
Parts, service and collision repair	103,357	13,367	116,724		98,539	13,200	111,739
Finance, insurance and other	61,770	10,241	72,011		47,998	3,755	51,753
Total revenue	1,018,444	188,310	1,206,754		912,050	105,050	1,017,100
New vehicles	37,345	6,810	44,155		38,639	3,591	42,230
Used vehicles	34,971	8,291	43,262		26,444	3,375	29,819
Parts, service and collision repair	57,449	7,777	65,226		51,553	7,503	59,056
Finance, insurance and other	57,895	9,654	67,549		44,769	3,538	48,307
Total gross profit	187,660	32,532	220,192		161,405	18,007	179,412
Employee costs	85,969	16,428	102,397		73,760	7,340	81,100
Government assistance	(317)	—	(317)		(6,252)	—	(6,252)
Administrative costs	38,608	8,502	47,110		34,971	5,282	40,253
Facility lease and storage costs	105	—	105		377	—	377
Depreciation of property and equipment	3,811	310	4,121		3,815	296	4,111
Depreciation of right-of-use assets ^2	5,767	697	6,464		5,710	486	6,196
Total operating expenses	133,943	25,937	159,880		112,381	13,404	125,785
Operating profit (loss) before other income	53,717	6,595	60,312		49,024	4,603	53,627
Operating data
New retail vehicles sold ^1	7,771	1,484	9,255		9,270	1,480	10,750
New fleet vehicles sold ^1	358	—	358		582	—	582
Total new vehicles sold ^1	8,129	1,484	9,613		9,852	1,480	11,332
Used retail vehicles sold ^1	11,493	2,338	13,831		7,994	842	8,836
Total vehicles sold ^1	19,622	3,822	23,444		17,846	2,322	20,168
# of service and collision repair orders completed ^1, 2	169,510	30,360	199,870		167,834	27,170	195,004
# of dealerships at period end	51	17	68		49	13	62
# of service bays at period end	912	196	1,108		865	174	1,039

See the Company's Management's Discussion and Analysis for the quarter ended September 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 September 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 September 30, 2021 will be held on November 10, 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://www.autocan.ca/investors/q32021-presentation/

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 67 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 2 used vehicle dealerships supporting the Used Digital Retail Division, and 4 stand-alone collision centres (within our group of 18 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/