• Revenue was $1,342.4 million as compared to $969.8 million in the prior year, an increase of 38.4% and the highest first quarter revenue reported in the Company's history
  • Net income for the period was $4.3 million versus $21.3 million in the prior year and includes a loss on extinguishment of embedded derivative of $(29.3) million and a loss on extinguishment of debt of $(9.9) million in Q1 2022
  • Adjusted EBITDA1 was $62.2 million versus $47.2 million in the prior year, an increase of 31.7%; normalized increase of 60.6% as compared to prior year normalized adjusted EBITDA1 of $38.7 million
    • Adjusted EBITDA margin1 was 4.6% versus 4.9% in the prior year, a decrease of (0.3) percentage points; normalized increase of 0.6 percentage points as compared to prior year normalized adjusted EBITDA margin1of 4.0%
  • Diluted earnings per share was $0.10, a decrease of $(0.61) from $0.71 in the prior year
  • Indebtedness of $358.5 million at the end of Q1 2022 compares to $285.9 million at the end of Q4 2021
  • Net indebtedness1 of $248.8 million at the end of Q1 2022 compares to $212.7 million at the end of Q4 2021

EDMONTON, AB, May 4, 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 March 31, 2022.

AutoCanada Inc. Logo (CNW Group/AutoCanada Inc.)

"We opened 2022 with yet another record first quarter, reflecting ongoing positive momentum and our business as a whole continues to perform better than ever," said Paul Antony, Executive Chairman of AutoCanada. "Our Q1 results speak to the determination, agility and strength of our team, and the trend of sustainable improvement across all areas of our business. Continued strong performance from used vehicles, F&I, and our U.S. operations were key drivers in the quarter.

"We continued to advance our acquisition strategy with the recent addition of the Audi Windsor and Porsche of London dealerships, further expanding our platform in Ontario while adding brand diversity and increasing the mix of luxury dealerships within our overall portfolio. 

"Looking forward to the remainder of 2022, with our newly expanded executive team in place, we will continue to build on our strong momentum and focus on our strategic growth pillars to deliver industry-leading performance and enhance shareholder returns. We remain well positioned to continue to execute on our acquisition strategy in the coming quarters with several dealerships currently being evaluated. We also expect to see continued realization of synergies from our acquisitions which will further drive our 2022 Adjusted EBITDA performance."

AutoCanada also announced today that Maryann Keller will be retiring from the Company's Board of Directors effective May 5, 2022.

Mr. Antony continued, "On behalf of the Board and the management team at AutoCanada, I would like to thank Maryann for her dedication and capable guidance during her board tenure. Maryann has been with us since May 2015, including four years as our Lead Independent Director. Maryann has seen the Company through numerous critical transformations, leaving us with a strong foundation to pursue our growth strategy. We wish her all the best."

1   

See "NON-GAAP AND OTHER FINANCIAL MEASURES" below.

2   

This press release contains "SUPPLEMENTARY FINANCIAL MEASURES". See Section 15. NON-GAAP AND OTHER FINANCIAL MEASURES of the Company's Management's Discussion & Analysis (MD&A) for the three month period ended March 31, 2022 for further information regarding the composition of these measures.


First Quarter Key Highlights and Recent Developments

The Company set another first quarter record as revenue reached $1,342.4 million as compared to $969.8 million in the prior year, an increase of 38.4%. Record Q1 2022 results were driven by strong performance across all areas of our complete business model, in particular our used vehicle and finance and insurance ("F&I") business operations, and continued material improvements from our U.S. Operations.

Net income for the period was $4.3 million, as compared to $21.3 million in Q1 2021, including a loss on extinguishment of embedded derivative of $(29.3) million and a loss on extinguishment of debt of $(9.9) million in Q1 2022. Diluted earnings per share was $0.10, an decrease of $(0.61) from $0.71 in the prior year.

Adjusted EBITDA1 for the period was $62.2 million as compared to $47.2 million reported in Q1 2021, an improvement of 31.7%. Prior year results include $8.5 million of government assistance related to COVID. Excluding these typically non-recurring income items in the prior year, adjusted EBITDA1 of $62.2 million compares to normalized adjusted EBITDA1 of $38.7 million in the prior year, a normalized improvement of 60.6%. Adjusted EBITDA margin1 of 4.6% compares to normalized adjusted EBITDA margin1 of 4.0% in the prior year, an increase of 0.6 percentage points ("ppts").

Gross profit increased by $79.7 million to $247.3 million, an increase of 47.5%, as compared to prior year. This increase was largely driven by the increases of $13.6 million from used vehicles and $26.8 million from F&I. In addition, used retail vehicles2 sales increased by 4,338 units, up 44.6%, to 14,072, which contributed to the consolidated used to new retail units ratio2 moving to 1.55 from 1.18. F&I gross profit per retail unit average2 increased to $3,406, up 17.9% or $516 per unit. Gross profit percentage2 of 18.4% was a result of strong performance across all areas of the business and compares to 17.3% in the prior year.

Our U.S. Operations continues to demonstrate strong growth and contributed $38.9 million of gross profit, an increase of $23.5 million or 152% as compared to prior year. This improvement in gross profit was driven by gains across all aspects of the business, resulting in a gross profit percentage of 18.4%.

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 first quarter. We continue to manage our new vehicle inventory as the chip shortage remains an issue, particularly impacting new vehicle inventory supply. While we are gradually seeing improvements in both available new vehicle inventory and allocations, we are not expecting a return to "normalcy" in inventory levels until late 2023 to 2024. Compensating for reduced new vehicle supply, we more than doubled our used vehicle inventory position to $717.3 million as at March 31, 2022 as compared to $311.4 million in Q1 2021. Management continues to monitor the used vehicle market and actively manage our used vehicle inventory position to ensure it is appropriate to meet current market demand.

Net indebtedness1 increased by $36.0 million from December 31, 2021 to $248.8 million at the end of Q1 2022. This increase is primarily driven by the repurchase and cancellation of $(31.2) million of shares under the authorized Normal Course Issuer Bid ("NCIB"). Free cash flow1 on a trailing twelve month ("TTM") basis was $93.6 million at Q1 2022 as compared to $144.6 million in Q1 2021; the decline in free cash flow1 between years was driven primarily by reduced government assistance in 2021, increased cash taxes, stock based compensation related cash payments, and changes in working capital. Additionally, our net indebtedness leverage ratio1 of 1.1x remained well below our target range at the end of Q1 2022, as compared to 0.7x in Q1 2021.

Had all of the completed acquisitions, as identified in Section 5 Acquisitions, Divestitures, Relocations and Real Estate, occurred at April 1, 2021, consolidated pro forma net income would have been $155.7 million for the TTM ended March 31, 2022, as compared to consolidated pro forma net income of $174.8 million for the year ended December 31, 2021. Pro forma normalized adjusted EBITDA1 would be $282.4 million for the TTM ended March 31, 2022, as compared to pro forma normalized adjusted EBITDA1 of $266.4 million for the year ended December 31, 2021. 

We remain well-positioned to continue to execute on our acquisition strategy in the coming quarters. We continue to develop a transaction pipeline with a number of dealerships currently being evaluated.

The Company welcomed Jeffery Thorpe, President, Canadian Operations, Brian Feldman, Senior Vice President, Canadian Operations and Disruptive Technologies, and Lee Wittick, Senior Vice President, Operations and OEM Relations to the executive team April 2022 to continue to drive the Company's ongoing growth, synergies, and efficiencies. All three executive team members have significant industry expertise operating a dealership platform at scale using centralized services through head office, which closely mirrors AutoCanada's operating rhythm. With our 2022 strategic growth pillars and the new executive team in place, we are poised to demonstrate our best in class operations, and continue to grow our scalable and repeatable business model.

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 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.

1 

See "NON-GAAP AND OTHER FINANCIAL MEASURES" below.

2 

This press release contains "SUPPLEMENTARY FINANCIAL MEASURES". See Section 15. NON-GAAP AND OTHER FINANCIAL MEASURES of the Company's Management's Discussion & Analysis (MD&A) for the three month period ended March 31, 2022 for further information regarding the composition of these measures.


Consolidated AutoCanada Highlights

ANOTHER RECORD SETTING FIRST QUARTER

AutoCanada delivered another record setting first quarter.

Refer to Section 5 Acquisitions, Divestitures, Relocations and Real Estate of the Company's MD&A for the three month period ended March 31, 2022 for acquisitions included in Q1 2022 results.

For the three-month period ended March 31, 2022:

  • Revenue was $1,342.4 million, an increase of $372.6 million or 38.4%
  • Total vehicles sold2 were 23,414, an increase of 4,707 units or 25.2%
    • Used retail vehicles2 sold increased by 4,338 or 44.6%
  • Net income for the period was $4.3 million (or $0.11 per basic share) versus $21.3 million (or $0.71 per diluted share)
    • Loss on extinguishment of embedded derivative of $(29.3) million and loss on extinguishment of debt of $(9.9) million were recognized in Q1 2022
  • Adjusted EBITDA1 increased by 31.7% to $62.2 million, an increase of $15.0 million
    • Adjusted EBITDA1 increased by 60.6% over prior year normalized adjusted EBITDA1 of $38.7 million, an increase of $23.5 million
    • Adjusted EBITDA1 on a trailing twelve month basis was $266.8 million
  • Net indebtedness1 of $248.8 million reflected an increase of $36.0 million from the end of Q4 2021

Canadian Operations Highlights

OUTPERFORMED NEW RETAIL MARKET BY 6.6 PPTS, USED RETAIL UNIT2 SALES INCREASED BY 30%

We outperformed the Canadian market, as same store new retail unit2 sales decreased by (6.8)% as compared to the market decrease of (13.4)%, for same store brands represented by AutoCanada as reported by DesRosiers Automotive Consultants ("DesRosiers"), an outperformance of 6.6 ppts.

Our used vehicle and F&I segments were key drivers of the record earnings in Q1 2022. Used vehicle gross profit percentage2 increased to 7.0% as compared to 6.7% in the prior year. F&I gross profit per retail unit average2 increased to $3,368, up 12.7% or $379 per unit.

Unless stated otherwise, all results for acquired businesses are included in all Canadian references in the MD&A.

For the three-month period ended March 31, 2022:

  • Revenue was $1,131.0 million, an increase of 30.9%
  • Used retail vehicles2 sold increased by 2,620 or 29.6%
    • Average TTM Canadian used retail unit2 sales per dealership per month, excluding Used Digital Retail Division dealerships2, improved to 54, as compared to 50 in the prior year
  • Used to new retail units ratio2 increased to 1.50 from 1.29
    • TTM used to new retail ratio2 improved to 1.48 at Q1 2022 as compared to 1.01 at Q1 2021
  • F&I gross profit per retail unit average2 increased to $3,368, up 12.7% or $379 per unit
  • Net loss for the period was $(1.0) million, down (104.8)% from a net income of $21.0 million in 2021
    • Loss on extinguishment of embedded derivative of $(29.3) million and loss on extinguishment of debt of $(9.9) million were recognized in Q1 2022
  • Adjusted EBITDA1 increased 23.6% to $53.4 million, an increase of $10.2 million
    • Adjusted EBITDA1 increased by 33.1% over prior year normalized adjusted EBITDA1 of $40.1 million
    • Adjusted EBITDA margin1 was 4.7% as compared to normalized adjusted EBITDA margin1 of 4.6% in the prior year, an increase of 0.1 ppts

1   

See "NON-GAAP AND OTHER FINANCIAL MEASURES" below.

2   

This press release contains "SUPPLEMENTARY FINANCIAL MEASURES". See Section 15. NON-GAAP AND OTHER FINANCIAL MEASURES of the Company's Management's Discussion & Analysis (MD&A) for the three month period ended March 31, 2022 for further information regarding the composition of these measures.


U.S. Operations Highlights

REVENUE DOUBLED TO $211 MILLION

U.S. Operations continues to improve under the new management team, as demonstrated by the fourth consecutive quarter of year-over year growth in adjusted EBITDA1. This growth was driven by improvements across all aspects of the business and resulted in a gross profit percentage of 18.4% and a 77.3% increase in total retail unit sales.

  • Revenue was $211.4 million, an increase of 99%, from $106.0 million
  • Used retail vehicles2 sold increased by 1,718 units or 192%
  • F&I gross profit per retail unit average2 increased to $3,583 per unit, up 62.3% or $1,375 per unit
  • Net income for the period increased by $5.0 million to $5.3 million, from $0.3 million
    • Net income on a trailing twelve month basis was $22.1 million
  • Adjusted EBITDA1 was $8.8 million as compared to $4.0 million, an increase of $4.8 million
    • Normalized adjusted EBITDA1 for the prior year was $(1.4) million, resulting in a normalized increase of $10.2 million
    • Adjusted EBITDA1 on a trailing twelve month basis was $36.0 million

Same Store Metrics - Canadian Operations

F&I GROSS PROFIT PER RETAIL UNIT AVERAGE2 INCREASED TO $3,702, UP 20% OR $617 PER UNIT

We outperformed the Canadian market by 6.6 ppts as same store new retail units2 decreased by (6.8)% as compared to the market decrease of (13.4)%, for same store brands represented by AutoCanada as reported by DesRosiers. The continued optimization of the Company's complete business model is highlighted by the year-over-year 23.2% improvement in gross profit across each individual business segment which collectively totaled $179.6 million.

Refer to Section 19 Same Stores Results Data of the Company's MD&A for the three month period ended March 31, 2022 for the definition of same store and further information.

  • Revenue increased to $926.7 million, an increase of 17.2%
  • Gross profit increased by $33.8 million or 23.2%
  • Used to new retail units ratio2 increased to 1.46 from 1.19
    • Used retail unit2 sales increased by 14.0%, an increase of 1,144 units
  • For the fourteenth consecutive quarter of year-over-year growth, F&I gross profit per retail unit average2 increased to $3,702, up 20.0% or $617 per unit; gross profit increased to $58.1 million as compared to $46.3 million in the prior year, an increase of 25.4%
  • Parts, service and collision repair ("PS&CR") gross profit increased to $59.2 million, an increase of 17.3%
    • PS&CR gross profit percentage2 decreased to 52.2% as compared to 54.6% in the prior year

Financing and Investing Activities and Other Recent Developments

ISSUED $350 MILLION SENIOR UNSECURED NOTES

Net indebtedness1 of $248.8 million resulted in a net indebtedness leverage ratio1 of 1.1x. Financing and investing activities included the following:

  • On January 12, 2022, S&P Global Ratings ("S&P") issued a research update and raised both the issuer credit rating and the Company's senior unsecured notes to 'B+'.
  • On February 7, 2022, amended and extended our existing credit facility for total aggregate bank facilities of $1.3 billion, with a maturity date of April 14, 2025.
  • On February 7, 2022, issued $350 million of Senior Unsecured Notes at 5.75%, due February 7, 2029, with the proceeds used to fund the redemption of the outstanding $250 million 8.75% Senior Unsecured Notes due February 11, 2025, to reduce the outstanding balance under its syndicated credit facility and for general corporate purposes including acquisitions.
  • On May 2, 2022, the Company acquired substantially all of the assets used in or relating to the Audi Windsor and Porsche of London dealerships, located in London and Windsor, Ontario, respectively. The acquisition supports management's strategic objectives of further establishing the Company's presence in the province of Ontario, increasing both brand diversity and luxury mix within our portfolio. The acquisition included the underlying real estate for both dealerships.
  • On May 4, 2022, the Company entered into an arrangement with the Bank of Nova Scotia to provide non-recourse mortgage financing for a previously purchased property in Maple Ridge, BC. The non-recourse mortgage arrangement will fund land value as well as construction costs associated with the development of two dealerships. The non-recourse mortgage is secured by the real estate as collateral. The credit facility allows for up to $100 million of non-recourse mortgage financing. The non-recourse mortgage liability is not considered a liability for purposes of calculating our credit facility financial covenants.

1 

 See "NON-GAAP AND OTHER FINANCIAL MEASURES" below. 

2    

This press release contains "SUPPLEMENTARY FINANCIAL MEASURES". See Section 15. NON-GAAP AND OTHER FINANCIAL MEASURES of the Company's Management's Discussion & Analysis (MD&A) for the three month period ended March 31, 2022 for further information regarding the composition of these measures.

 

First Quarter Financial Information

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


Three Months Ended March 31

Consolidated Operational Data

2022

2021

% Change

Revenue

1,342,438

969,824

38.4%

Gross profit

247,339

167,636

47.5%

Gross profit %

18.4%

17.3%

1.1%

Operating expenses

193,646

127,948

51.3%

Operating profit

56,690

41,664

36.1%

Net income for the period

4,322

21,334

(79.7)%

Basic net income per share attributable to AutoCanada shareholders

0.11

0.77

(85.7)%

Diluted net income per share attributable to AutoCanada shareholders

0.10

0.71

(85.9)%

   Adjusted EBITDA1

62,196

47,234

31.7%





   New retail vehicles2 sold (units)

9,052

8,233

9.9%

   New fleet vehicles2 sold (units)

290

740

(60.8)%

   Total new vehicles2 sold (units)

9,342

8,973

4.1%

   Used retail vehicles2 sold (units)

14,072

9,734

44.6%

   Total vehicles2 sold

23,414

18,707

25.2%

   Same store new retail vehicles2 sold (units)

6,383

6,848

(6.8)%

   Same store new fleet vehicles2 sold (units)

264

739

(64.3)%

   Same store used retail vehicles2 sold (units)

9,306

8,162

14.0%

   Same store total vehicles2 sold

15,953

15,749

1.3%

   Same store2 revenue

926,660

790,798

17.2%

   Same store2 gross profit

179,559

145,799

23.2%

   Same store2 gross profit %

19.4%

18.4%

1.0%

 

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
Reference3

Q1

2022

Q4 2021

Q3

2021

REVISED

Q2

2021

REVISED

Q1

2021

REVISED

Q4 2020

Q3 2020

Q2 2020

Income Statement Data

4









    New vehicles 4

7

511,195

467,085

498,142

547,593

451,061

466,468

544,415

381,427

    Used vehicles 4

7

595,514

524,043

518,791

539,785

354,922

257,301

309,193

215,032

    Parts, service and collision repair 4

7

152,009

136,800

116,953

122,459

108,427

105,362

111,739

90,417

    Finance, insurance and other 4

7

83,720

67,854

72,868

71,218

55,414

46,990

51,753

40,571

Revenue


1,342,438

1,195,782

1,206,754

1,281,055

969,824

876,121

1,017,100

727,447

    New vehicles 4

7

53,384

50,632

46,525

44,619

34,639

31,199

42,230

10,634

    Used vehicles 4

7

36,772

38,118

39,669

40,269

23,206

19,787

29,819

4,224

    Parts, service and collision repair 4

7

78,431

75,917

64,748

68,115

57,874

58,109

59,056

45,836

    Finance, insurance and other 4

7

78,752

63,847

69,250

64,838

51,917

43,642

48,307

37,185

Gross Profit


247,339

228,514

220,192

217,841

167,636

152,737

179,412

97,879

    Gross profit %


18.4%

19.1%

18.2%

17.0%

17.3%

17.4%

17.6%

13.5%

    Operating expenses


193,646

170,008

159,880

154,773

127,948

119,442

125,785

99,736

    Operating expenses as a % of gross profit


78.3%

74.4%

72.6%

71.0%

76.3%

78.2%

70.1%

101.9%

    Operating profit (loss)


56,690

99,410

62,841

66,153

41,664

46,664

56,884

(4,388)

    (Recoveries) impairment of non-financial assets


(39,846)

(11,248)

3,910

    Net income (loss)


4,322

69,398

38,769

37,698

21,334

24,320

35,962

(20,052)

    Basic net income (loss) per share attributable to AutoCanada shareholders


0.11

2.54

1.37

1.33

0.77

0.87

1.29

(0.72)

   Diluted net income (loss) per share attributable to AutoCanada shareholders


0.10

2.38

1.27

1.23

0.71

0.81

1.23

(0.72)

    Dividends declared per share


      Adjusted EBITDA1

2

62,196

65,873

68,265

70,491

47,234

40,472

61,054

4,828

      Free cash flow1

2

5,852

7,603

12,372

67,803

19,391

19,240

53,444

52,557











Operating Data

4









      New retail vehicles2 sold

3

9,052

8,204

9,255

10,107

8,233

8,623

10,750

7,526

      New fleet vehicles2 sold

3

290

199

358

575

740

964

582

340

      Total new vehicles2 sold

3

9,342

8,403

9,613

10,682

8,973

9,587

11,332

7,866

      Used retail vehicles2 sold

3

14,072

11,893

13,831

13,271

9,734

7,389

8,836

7,228

Total vehicles2 sold

3

23,414

20,296

23,444

23,953

18,707

16,976

20,168

15,094

# of service and collision repair orders2  completed

3, 5, 6

221,632

232,373

199,870

214,149

182,869

203,086

195,004

172,956

# of dealerships at period end

6

80

80

68

67

67

67

62

63

# of same store dealerships

1

49

49

49

49

49

47

47

48

# of service bays at period end


1,293

1,303

1,108

1,098

1,098

1,098

1,039

1,044

Same stores2  revenue growth

1

17.2%

14.1%

15.0%

54.2%

27.8%

6.3%

(1.1)%

(22.4)%

Same stores2  gross profit growth

1

23.2%

29.4%

18.6%

102.5%

35.0%

7.7%

17.1%

(33.9)%

 

1   

See "NON-GAAP AND OTHER FINANCIAL MEASURES" below.

2   

This press release contains "SUPPLEMENTARY FINANCIAL MEASURES". See Section 15. NON-GAAP AND OTHER FINANCIAL MEASURES of the Company's Management's Discussion & Analysis (MD&A) for the three month period ended March 31, 2022 for further information regarding the composition of these measures.

3   

See the Company's MD&A for the quarter ended March 31, 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 March 31, 2022, 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, 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, normalized adjusted EBITDA margin, income statement impacts and adjusted EBITDA on a pre-IFRS 16 basis, adjusted EBITDA margin on a pre-IFRS 16 basis, pro forma adjusted EBITDA, 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") income expected to recur until the Company is no longer eligible for the subsidy; and
  • One-time forgiveness of Small Business Association Paycheck Protection Program ("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.

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 December 31, 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 25.4% was applied to pro forma adjustments where applicable.

Refer to the MD&A for the year ended December 31, 2021 for the reconciliation of the pro forma normalized adjusted EBITDA for the year ended December 31, 2021.

Adjusted EBITDA Margin, Normalized Adjusted EBITDA Margin, and Adjusted EBITDA Margin on a Pre-IFRS 16 Basis

Adjusted EBITDA margin is an indicator of a company's operating performance specifically in relation to our revenue performance. Normalized adjusted EBITDA margin is an indicator of a company's operating performance specifically in relation to our revenue performance, normalized for government programs subsidies that are non-recurring in nature related to the pandemic such as:

  • CEWS income expected to recur until the Company is no longer eligible for the 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 adjusted EBITDA margin, normalized adjusted EBITDA margin and adjusted EBITDA margin on a pre-IFRS 16 basis 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 March 31, over the last two years of operations:


2022

2021

Period from January 1 to March 31



Net income for the period

4,322

21,334

Add back:



Income tax (recovery) expense

(463)

7,220

Depreciation of property and equipment

4,740

4,054

Interest on long-term indebtedness

7,158

4,663

Depreciation of right of use assets

7,431

6,344

Lease liability interest

7,372

5,722


30,560

49,337

Add back:



    Loss on extinguishment of debt

9,860

    Unrealized fair value changes in derivative instruments

(7,795)

(2,919)

    Amortization of loss on terminated hedges

817

817

    Unrealized foreign exchange (gains) losses

(268)

57

    Loss on extinguishment of embedded derivative

29,306

    Gain on disposal of assets

(284)

(58)

Adjusted EBITDA

62,196

47,234

Normalizing items:



Less:



    Canada Emergency Wage Subsidy

(2,901)

    Canada Emergency Rent Subsidy

(200)

    Forgiveness of PPP loans

(5,398)

Normalized Adjusted EBITDA

62,196

38,735

 

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 March 31, over the last two years of operations:


Three Months Ended March 31, 2022


Three Months Ended March 31, 2021


Canada

U.S.

Total


Canada

U.S.

Total

Period from January 1 to March 31








Net (loss) income for the period

(1,006)

5,328

4,322


21,044

290

21,334

Add back:








Income tax (recovery) expense

(677)

214

(463)


7,220

7,220

Depreciation of property and equipment

4,382

358

4,740


3,745

309

4,054

Interest on long-term indebtedness

5,787

1,371

7,158


2,825

1,838

4,663

Depreciation of right of use assets

6,759

672

7,431


5,677

667

6,344

Lease liability interest

6,492

880

7,372


4,786

936

5,722


21,737

8,823

30,560


45,297

4,040

49,337

Add back:








   Loss on extinguishment of debt

9,860

9,860


   Unrealized fair value changes in derivative instruments

(7,795)

(7,795)


(2,919)

(2,919)

   Amortization of loss on terminated hedges

817

817


817

817

   Unrealized foreign exchange (gains) losses

(268)

(268)


57

57

   Loss on extinguishment of embedded derivative

29,306

29,306


   Gain on disposal of assets

(284)

(284)


(58)

(58)

Adjusted EBITDA

53,373

8,823

62,196


43,194

4,040

47,234

Normalizing Items:








Less:








   Canada Emergency Wage Subsidy


(2,901)

(2,901)

   Canada Emergency Rent Subsidy


(200)

(200)

   Forgiveness of PPP loans


(5,398)

(5,398)

Normalized Adjusted EBITDA

53,373

8,823

62,196


40,093

(1,358)

38,735

 

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 March 31, over the last two years of operations:


2022

2021

Period from April 1 to March 31



Net income for the period

150,187

61,564

Add back:



Income tax expense

46,338

15,775

Depreciation of property and equipment

17,958

17,039

Interest on long-term indebtedness

24,395

17,190

Depreciation of right of use assets

27,507

24,895

Lease liability interest

24,712

22,274


291,097

158,737

Add back:



     (Recoveries) impairment of non-financial assets, net

(39,846)

(7,338)

     Share-based compensation (Used Digital Retail Division)

435

     Loss (gain) on redemption liabilities

14,116

(762)

     Loss on extinguishment of debt

10,988

     Unrealized fair value changes in derivative instruments

(12,749)

(1,579)

     Amortization of loss on terminated hedges

3,268

2,810

     Unrealized foreign exchange (gains) losses

(210)

2,193

     Loss on termination of lease, net

427

     Gain on disposal of assets

(266)

(1,399)

Adjusted EBITDA

266,825

153,097

Normalizing items:



Add back:



     Inventory write-down

22,725

     Severance charges

8,170

     Write-off of prepaid advertising leads

2,131

     One-time retention and recognition payments for key dealership employees

1,742

     One-time write-off of accounts receivable and onerous provisions

5,633

     Other charges including true-up of accruals and other liabilities

4,686

     One-time employee recognition payments

309

     Operational incentive payments

851

Less:



     Canada Emergency Wage Subsidy

(1,487)

(38,165)

     Canada Emergency Rent Subsidy

(136)

(400)

      Forgiveness of PPP loans

(1,330)

(5,398)

Normalized Adjusted EBITDA

263,872

155,381

Pro forma items had the acquisitions occurred on April 1:



Net income for the period

5,481

2,153

Add back:



Income tax expense

1,769

695

Depreciation of property and equipment

1,262

504

Interest on long-term indebtedness

3,966

1,732

Depreciation of right of use assets

2,278

946

Lease liability interest

3,738

1,498

Pro Forma Adjusted EBITDA

285,319

160,625

Pro Forma Normalized Adjusted EBITDA

282,366

162,909

 

Quarter-to-Date Adjusted EBITDA Margin

The following table illustrates adjusted EBITDA margin for the three-month periods ended March 31, over the last two years of operations:


2022

2021

Period from January 1 to March 31



Adjusted EBITDA

62,196

47,234

Revenue

1,342,438

969,824

Adjusted EBITDA Margin

4.6%

4.9%


Quarter-to-Date Normalized Adjusted EBITDA Margin

The following table illustrates normalized adjusted EBITDA margin for the three-month periods ended March 31, over the last two years of operations:


2022

2021

Period from January 1 to March 31



Normalized Adjusted EBITDA

62,196

38,735

Revenue

1,342,438

969,824

Normalized Adjusted EBITDA Margin

4.6%

4.0%


Quarter-to-Date Adjusted EBITDA Margin on a Pre-IFRS 16 basis

The following table illustrates adjusted EBITDA margin on a pre-IFRS 16 basis for the three-month periods ended March 31, over the last two years of operations:


2022

2021

Period from January 1 to March 31



Adjusted EBITDA on a pre-IFRS 16 basis

49,196

36,100

Revenue

1,342,438

969,824

Adjusted EBITDA Margin on a Pre-IFRS 16 basis

3.7%

3.7%


Quarter-to-Date Adjusted EBITDA on a Pre-IFRS 16 Basis Reconciliation

The following table illustrates segmented adjusted EBITDA on a pre-IFRS 16 basis, for the three-month periods ended March 31, over the last two years of operations:


Three Months Ended March 31, 2022


Three Months Ended March 31, 2021


Canada

U.S.

Total


Canada

U.S.

Total

Adjusted EBITDA

53,373

8,823

62,196


43,194

4,040

47,234

Rental expense

(11,616)

(2,160)

(13,776)


(9,921)

(2,182)

(12,103)

FMV rent adjustment

1,040

1,040


1,056

1,056

Step lease adjustment

(252)

(12)

(264)


(87)

(87)

Adjusted EBITDA on a pre-IFRS 16 basis

41,505

7,691

49,196


33,186

2,914

36,100


Free Cash Flow

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


Q1 2022

Q4 2021

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Cash provided by operating activities 

7,279

10,153

13,721

68,604

20,506

20,447

54,366

54,114

Deduct:









Purchase of non-growth property and equipment

(1,427)

(2,550)

(1,349)

(801)

(1,115)

(1,207)

(922)

(1,557)

Free cash flow

5,852

7,603

12,372

67,803

19,391

19,240

53,444

52,557

Free cash flow - TTM

93,630

107,169

118,806

159,878

144,632

131,396

177,981

179,325


Net Indebtedness and Net Indebtedness Leverage Ratio Reconciliation

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


March 31, 2022

$

December 31, 2021

$

Syndicated Credit Facility - Revolving Credit

13,886

63,842

Senior unsecured notes (including embedded derivative asset)

344,120

221,965

Mortgage and other debt

501

101

Total indebtedness

358,507

285,908

   Add back:



      Embedded derivative asset

29,306

Indebtedness for net indebtedness purpose

358,507

315,214

Cash and cash equivalents

(109,753)

(102,480)

Net indebtedness

248,754

212,734

   Adjusted EBITDA pre-IFRS 16 - trailing twelve months

219,680

206,584

Net indebtedness leverage ratio

1.1x

1.0x

 

Conference Call

A conference call to discuss the results for the three months ended March 31, 2022 will be held on May 5, 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-q1-conference-call/

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 80 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. Additionally, the Company's Canadian Operations segment currently operates 2 used vehicle dealerships supporting the Used Digital Retail Division, the RightRide division operates 7 locations, and 4 stand-alone collision centres (within our group of 18 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.

Copyright 2022 Canada NewsWire

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