Mr. Paul Antony reports

AUTOCANADA ANNOUNCES SECOND QUARTER RESULTS

AutoCanada Inc. has released its financial results for the three-month period ended June 30, 2023.

"AutoCanada's strong second quarter results were fuelled by the team's focus on operational initiatives, supported by higher new retail vehicle sales volumes as new car inventories replenish. This, coupled with pent-up demand for vehicles following the pandemic, has resulted in higher vehicle prices and GPUs. We continued to grow used car volumes in Canada, selling 670 more used vehicles with 25 fewer days of supply, compared to the same period last year. Our parts, service and collision repair operations had robust performance, due to initiatives to increase service bay occupancy combined with the contribution from recent acquisitions, and an older car park which is requiring more frequent and higher-cost service to stay on the road," said Paul Antony, executive chairman of AutoCanada.

"Notably, our same store finance and insurance gross profit per retail unit marked its 19th consecutive quarter of year-over-year growth. The quarter's trend of continuous improvements led to record-breaking performance in May and June, 2023, across various segments and we are well positioned to capitalize on our numerous growth opportunities."

"Our solid Q2 2023 results were accompanied by a significant achievement -- the release of AutoCanada's inaugural environment, social and governance (ESG) report. This comprehensive report reflects our dedication to responsible practices and showcases our commitment to transparency and sustainable value creation for our stakeholders and the communities we serve."

The company invites all interested parties to explore AutoCanada's inaugural ESG report on-line.

Second quarter key highlights and recent developments

Consolidated gross profit increased by 14.1 per cent to $318.7-million, with gross profit percentage1 increasing by 1.5 percentage points (ppt) to 18.1 per cent in the quarter as compared with 16.6 per cent in the prior year. The primary drivers of the increase in gross profit were higher new retail vehicles sales volume (by 14.0 per cent) as new car inventories continue to recover; used retail vehicle gross profit per retail unit1 increasing to $2,333 per retail unit, an increase of $759 per retail unit or 48.2 per cent from the prior year, strong performance in parts, service and collision repair (PS&CR) and contributions from recent acquisitions. Higher total retail vehicle sales volumes also contributed to the company's strong finance, insurance and other (F&I), and PS&CR gross profit performance. In particular, the company's same store F&I gross profit per retail unit average1 increased, for the 19th consecutive quarter of year-over-year growth, to $3,772 per unit.

Operating expenses before depreciation increased by $14.4-million due primarily to acquisitions. Normalized operating expenses before depreciation as a percentage of gross profit decreased by (3.9) ppt to 66.8 per cent as a result of higher gross profits and focus on operating initiatives.

Floor plan financing costs increased by $9.6-million as a result of the higher interest rates partially offset by interest rate swaps in place. In response to rising interest rates, management has actively managed its used vehicle inventory to reduce both excess inventory and floor plan financing costs while supporting vehicle sales. Used vehicle inventories decreased by $232.5-million (or 33 per cent) to $466.5-million compared with the prior year, while used retail vehicle unit sales only decreased by 518 units or 2.9 per cent from the prior year, ensuring inventory is optimized for both consumer preferences and current market demands.

Net income for the period was $45.2-million as compared with $39.1-million in Q2 2022. The Q2 2022 net income included a used vehicle inventory writedown that was $7-million higher than in 2023. Diluted earnings per share was $1.75, an increase of 42 cents from $1.33 in the prior year.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the period was $94.1-million as compared with $75.6-million in Q2 2022. Adjusted EBITDA margin was 5.4 per cent compared with 4.5 per cent in the prior year, an increase of 0.9 ppt. This increase was driven by strong performance as noted across multiple areas of our business and a $7-million reduction in the used vehicle inventory provision, offset by an increase of $9.6-million in floor plan financing costs as a result of higher interest rates.

Free cash flow on a trailing 12 month (TTM) basis was $166.5-million at Q2 2023 as compared with $89.1-million in Q2 2022 with the increase in free cash flow driven primarily by recent acquisitions, improved operating performance and higher working capital.

Canadian operations highlights

Over all, gross profits increased by $43.1-million or 18.2 per cent to $279.5-million as compared with prior year as a result of new acquisitions and the 8.7 per cent increase in total retail vehicle unit sales, which also contributed to an increase in other areas of the business, including PS&CR and F&I. The strong Q2 2023 results reflected a trend of continuous improvements in operating results during the quarter to a record May and June, 2023, in several segments.

For the three-month period ended June 30, 2023:

• Revenue was $1,548.6-million, an increase of 7.7 per cent:
  • New retail vehicles sold increased 1,334 units or 15.6 per cent.
  • Used retail vehicles sold increased by 670 units or 4.6 per cent.
  • Used to new retail units ratio was 1.53 compared with 1.69 .
  • Used retail vehicle gross profit per retail unit increased to $2,320, up 35.0 per cent or $601 per unit.
• PS&CR gross profit increased by $18.2-million, an increase of 23.3 per cent.
• F&I gross profit per retail unit average increased to $3,410 per unit, up 1.8 per cent or $60 per unit.
• Net income for the period was $45.7-million, up from $31.9-million in 2022.
• Adjusted EBITDA increased 36.2 per cent to $89.2-million, an increase of $23.7-million:
  • Adjusted EBITDA margin was 5.8 per cent as compared with 4.6 per cent in the prior year, an increase of 1.2 ppt.

U.S. operations highlights

Total gross profit decreased by 8.5 per cent to $39.3-million and was largely driven by the current macroeconomic environment resulting in fewer total retail vehicles sold and lower F&I gross profit, partially offset by an increase in used vehicle and PS&CR gross profit. As new vehicle inventories continued to recover during the quarter, this resulted in lower selling prices for new vehicles compared with the prior year:

• Revenue was $207.6-million, a decrease of 16.3 per cent, from $248.1-million:
  • New retail vehicles sold increased 45 units or 3.4 per cent.
  • Used retail vehicles sold decreased by 1,188 units or 36.6 per cent.
  • Used to new retail units ratio was 1.51 compared with 2.47.
  • Used retail vehicle gross profit per retail unit increased to $2,435, up 161.7 per cent or $1,505 per unit.
• PS&CR gross profit increased by $2-million, an increase of 16.4 per cent.
• F&I gross profit per retail unit average1 decreased to $3,794 per unit, down 5.2 per cent or $210 per unit.
• Net loss for the period decreased to $400,000, from $7.1-million.
• Adjusted EBITDA was $4.9-million as compared with $10.1-million, a decrease of $5.2-million:
  • Adjusted EBITDA margin was 2.4 per cent as compared with 4.1 per cent in the prior year, a decrease of 1.7 ppt.

Same store metrics -- Canadian operations

Gross profit increased by 6.9 per cent as a result of strong performance from all areas of the business, particularly PS&CR department:

• Revenue decreased to $1,224.1-million, a decrease of 1.8 per cent:
  • New retail vehicles sold increased by 303 units or 4.2 per cent.
  • Used retail vehicles sold decreased by 524 units or 4.3 per cent.
  • Used to new retail units ratio was 1.56 compared with 1.70.
  • Used retail vehicle gross profit per retail unit increased to $2,213 per unit, up 10.7 per cent or $213 per unit.
• PS&CR gross profit increased by $9-million to $73.7-million, an increase of 13.8 per cent:
  • Improvements in PS&CR was due to increased customer spending per repair order along with increased warranty repairs.
• F&I gross profit increased by $2.6-million to $71.8-million, an increase of 3.8 per cent:
  • F&I gross profit per retail unit average increased to $3,772, up 5.0 per cent or $179 per unit; the 19th consecutive quarter of year-over-year growth.

Financing and investing activities and other recent developments

Acquisitions and other recent developments

During the quarter:

• On April 17, 2023, the company acquired substantially all of the assets of Premier Chevrolet Cadillac Buick GMC dealership and collision centre located in Windsor, Ont.
• On May 1, 2023, the company acquired 100 per cent of the shares of London Auto Collision Ltd., a collision centre located in London, Ont.
• On June 26, 2023, Standard & Poor's Ratings Services (S&P) issued a research update where the company's credit rating remained unchanged at B-plus.

Conference call

A conference call to discuss the results for the three months ended June 30, 2023, will be held on Aug. 10, 2023, at 9 a.m. MT/11 a.m. ET. 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 on-line.

About AutoCanada Inc.

AutoCanada is a leading North American multilocation automobile dealership group currently operating 83 franchised dealerships, comprising 28 brands, in eight provinces in Canada, as well as a group in Illinois, United States.

We seek Safe Harbor.