Mr. Paul Antony reports

AUTOCANADA ANNOUNCES FOURTH QUARTER RESULTS

AutoCanada Inc. has released its financial results for the three-month period ended Dec. 31, 2023.

"During the fourth quarter, AutoCanada experienced solid growth in new vehicle sales and a robust contribution from parts, service and collision repair [PS&CR]. These gains were tempered by a decrease in used vehicle sales, primarily in the U.S. market, as well as higher interest rates impacting floor plan, finance costs and consumer preferences for affordable vehicles and minimal financing," said Paul Antony, AutoCanada's executive chair.

"Significant progress has been made on Project Elevate initiatives since its launch at the end of August, with key management changes announced in November, 2023, allowing us to begin executing against this five-year strategic plan in earnest. To date this has included completing a U.S. restructuring, initiating best practice playbooks across several functions, implementing training programs, beginning corporate infrastructure modernization projects and creating operating expense targets by brand, which are expected to be implemented in Canada this summer. This foundational work is critical to our core Project Elevate objectives which are to maximize gross profit, optimize our cost structure and modernize our corporate infrastructure. I am very proud of the hard work and dedication of our team, who are doing an excellent job navigating challenging market conditions. I would like to thank our OEM partners for their continued support."

Consolidated revenue increased due to higher new vehicle sales, contributions from PS&CR and recent acquisitions offset by lower used vehicle sales in U.S. operations. Growth in new vehicle revenue was driven primarily from higher new vehicle sales volumes and reflecting the continued recovery in new vehicle inventories. PS&CR revenue growth reflected continued strong demand, with aftermarket operations continuing to benefit from increased average age of vehicle that resulted from constrained new light vehicle supply during the pandemic.

Consolidated gross profit increased as a result of contributions from new vehicle sales, PS&CR operations, and recent acquisitions.

Operating expenses increased primarily as a result of share-based compensation expenses related to the consolidation of ownership of the used digital division. Normalized operating expenses before depreciation, which excludes stock-based compensation, transaction costs and other non-recurring costs, increased as a result of recent acquisitions.

Floor plan financing expenses increased as a result of higher interest rates and rising new inventory levels partially offset by lower used vehicle inventory levels.

The net loss for the period resulted from higher gross profits and operating expenses for the reasons stated above, including share-based compensation expense related to the ownership consolidation of the used digital division, combined with higher floor plan financing expenses.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the period and adjusted EBITDA margin decreased primarily as result of higher operating expenses combined with increased flooring expenses.

Canadian operations highlights

Revenue increased as a result of contributions from new vehicle sales, higher PS&CR operating performance, and recent acquisitions, offset by declines in used vehicle revenues. Growth in new vehicle revenue was driven by higher new retail vehicle sales volumes and higher average selling prices. PS&CR gross profit increased as a result of strong customer demand for maintaining existing vehicles and recent acquisitions. F&I (finance, insurance and other) gross profit per retail unit average decreased, reflecting a growing proportion of retail vehicle sales being purchased without dealer financing, resulting in fewer opportunities to sell higher-margin warranty and insurance products.

Adjusted EBITDA was up due to contributions from stronger new vehicle sales and PS&CR operations, and recent acquisitions, partially offset by higher operating expenses and floor plan financing expenses.

U.S. operations highlights

Revenue and gross profit declined due to lower used vehicle sales and lower F&I performance offset by contributions from PS&CR operations and new vehicle sales. Used vehicle revenue declines reflect lower sales volumes which also impacted F&I through lower warranty and insurance sales. Used vehicle performance was negatively impacted by historical inventory procurement and management processes as well as market dynamics that made sourcing optimal used vehicle inventory more challenging. New vehicle sales volumes increased significantly, offset by lower average selling prices as new inventory levels continued to normalize.

Adjusted EBITDA declined due to lower used vehicle and F&I gross profit coupled with higher operating expenses and floor plan financing costs.

Other recent developments

During the quarter:

• On Nov. 16, 2023, the company announced that it had been awarded the rights to open a Porsche Classic & Service Centre in Windsor, Ont. The centre will be the first Porsche Classic centre in Canada and will be a genuine Porsche service and parts centre. It is expected to be completed in the fourth quarter of 2025.
• On Nov. 17, 2023, the company entered into a $25-million forward interest rate swap with a deferred start date of Dec. 1, 2023 and fixed one-month Canadian-dollar offered rate (CDOR) of 4.10 per cent. The swap has an initial settlement date of Dec. 1, 2026, and may be extended by the counterparty to Dec. 1, 2028.
• On Dec. 27, 2023, iA Financial Group invested $25-million for a 10-per-cent common equity interest in AutoCanada's business unit that will sell finance, insurance and warranty products to buyers of private owner-sold vehicles on Kijiji's on-line marketplace (on-line C2C F&I business). The company also purchased the 19.1-per-cent interest in its used digital division from the executive chair of the company and other sellers (collectively the minority interest holders) for $23.9-million in cash, financed from the proceeds of the iA investment and $7.5-million in share units issuable to the executive chair and issuance of performance share units (PSUs) to the other sellers. The share units and PSUs will be settled through the delivery of AutoCanada shares acquired in the market. The minority interest holders have agreed to use their after-tax cash proceeds to purchase AutoCanada shares in the market.

After the quarter:

• On Feb. 1, 2024, the company entered into a $75-million interest rate swap with a fixed one-month CDOR of 3.77 per cent. The swap has an initial settlement date of Feb. 1, 2027, and may be extended by the counterparty to Feb. 1, 2029.
• On Feb. 1, 2024, the company completed the previously announced sale of two properties located in British Columbia and Alberta to CanadaOne Auto Group for cash consideration of $41.4-million plus customary closing adjustments. The land and buildings were presented on AutoCanada's balance sheet as assets held for sale as at Dec. 31, 2023.
• On March 1, 2024, the newly built open point dealership, Maple Ridge GM, located in Maple Ridge, B.C., commenced operations. The dealership consists of a dealership and service facility with 14 service bays and is the company's first GM dealership in the Metro Vancouver area.

Renewal of normal course issuer bid

AutoCanada announced today that it has received approval from the Toronto Stock Exchange (TSX) for the renewal of its normal course issuer bid (NCIB). Pursuant to the NCIB, AutoCanada may purchase up to 1,329,106 common shares during the 12-month period commencing March 11, 2024, and ending March 10, 2025, or such earlier date as the company may complete its purchases under the NCIB.

The renewal of the NCIB follows on the conclusion of AutoCanada's previous NCIB that expired on Dec. 27, 2023. From Dec. 28, 2022, to Dec. 27, 2023, no common shares were purchased under AutoCanada's previous NCIB.

The number of common shares authorized for purchase under the NCIB represents 10 per cent of AutoCanada's public float as of March 4, 2024 (calculated in accordance with TSX rules). As at March 6, 2024, there were 23,611,175 common shares issued and outstanding. Purchases will be made through the facilities of the TSX and/or alternative Canadian trading systems at prevailing market prices in accordance with the rules and policies of the TSX and applicable securities laws. Daily repurchases will be limited to a maximum of 12,118 common shares, representing 25 per cent of the average daily trading volume for the six months ended Feb. 29, 2024, except where purchases are made in accordance with the block purchase exception of the TSX rules. All common shares purchased under the NCIB will be cancelled.

Although the company has a present intention to acquire its common shares pursuant to the NCIB, the company will not be obligated to make any purchases and purchases may be suspended by the company at any time. The company reserves the right to terminate the NCIB earlier if it feels it is appropriate to do so.

Conference call

A conference call to discuss the results for the three months ended Dec. 31, 2023, will be held on March 7, 2024, at 9 a.m. Mountain Time (11 a.m. Eastern Time). 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 AutoCanada's website

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 year ended Dec. 31, 2023, which can be found on the company's website or on SEDAR+.

All comparisons presented in this press release are between the three-month period ended Dec. 31, 2023, and the three-month period ended Dec. 31, 2022, unless otherwise indicated. Results are reported in Canadian dollars and have been rounded to the nearest thousand dollars, unless otherwise stated.

About AutoCanada Inc.

AutoCanada is a leading North American multilocation automobile dealership group currently operating 84 franchised dealerships, comprising 28 brands, in eight provinces in Canada as well as a group in Illinois, United States. AutoCanada currently sells Acura, Alfa Romeo, Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler, Dodge, Fiat, Ford, GMC, Honda, Hyundai, Infiniti, Jeep, Kia, Lincoln, Mazda, Mercedes-Benz, Mini, Nissan, Porsche, Ram, Subaru, Toyota, Volkswagen and Volvo branded vehicles. In addition, AutoCanada's Canadian operations segment currently operates three used vehicle dealerships and one used vehicle auction business supporting the used digital retail division; 13 RightRide division locations; and 11 stand-alone collision centres within its group of 27 collision centres. In 2023, the company generated revenue in excess of $6-billion and its dealerships sold over 100,000 retail vehicles.

We seek Safe Harbor.