ACQ AutoCanada Inc

Adjusted EBITDA of $47.2 million outpaces prior year by 723% and Canadian market outperformance is extended to ninth consecutive quarter

• Revenue was $969.8 million as compared to $708.8 million in the prior year, an increase of 36.8% and the highest first quarter revenue reported in the Company's history
• Net income (loss) for the period was $21.3 million versus $(46.9) million in 2020, which included impairment of non-financial assets of $(31.5) million that was driven by the impact of COVID-19 at the time
• Adjusted EBITDA was $47.2 million versus $5.7 million in the prior year, an increase of 723%; Adjusted EBITDA Pre-IFRS 16 was $36.1 million versus $(4.4) million, an increase of 913%; on a trailing twelve month basis, pre-IFRS 16 Adjusted EBITDA was $111.5 million
• Basic earnings per share was $0.77, an increase of $2.47 from $(1.70) in the prior year
• Outperformed the Canadian new retail vehicle market for the ninth consecutive quarter with same store new retail unit sales increasing 29.8% compared to the Canadian market increase of 15.2% as reported by DesRosiers Automotive Consultants
• Canadian used to new retail unit ratio increased to 1.29 from 1.08 last year and the trailing twelve month ratio improved to 1.01 at Q1 2021 as compared to 0.81 at Q1 2020
• Net indebtedness of $72.6 million at the end of Q1 2021 compares to $89.5 million at the end of Q4 2020, trailing twelve month free cash flow of $144.6 million compares to $105.0 million in the prior year and net debt leverage on a pre-IFRS 16 basis improves to 0.7x from 1.3x at the end of the prior year

EDMONTON, AB, May 5, 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 March 31, 2021.

"We delivered another record-setting performance and a ninth consecutive quarter of market-outpacing growth, as the continued execution of our complete business model positions us to sustain top-tier operating performance and support our next leg of growth," said Paul Antony, Executive Chairman of AutoCanada.

"The success of our recent financing and strength of our operating platform enables us to remain on offense and take advantage of acquisition opportunities while maintaining our strong balance sheet and financial flexibility.  We continue to advance and actively assess strategic acquisition opportunities and have developed a robust pipeline with the goal of diversifying by geography and brands, in addition to expanding our network of used dealerships and collision centres." 

"As we begin to gain perspective on the events over the past year and our response to the COVID-19 pandemic and related market impacts, it is increasingly clear that AutoCanada has emerged even stronger through our relentless focus on the fundamentals. As a company, we are exceptionally well positioned to capitalize on this positive momentum and consolidate our outperformance in a way that carries us through 2021 and beyond."

"While we're incredibly proud of the quarter, we continue to keep our heads down executing as we transition into the summer months, in particular given the breadth of opportunity before us. We also recognize the impact of COVID-19 remains fluid and continue to manage the business accordingly."

2021 First Quarter Key Highlights and Recent Developments

All comparisons presented below are between the three-month period ended March 31, 2021 and the three-month period ended March 31, 2020, unless otherwise indicated.

The Company reported record-setting performance as revenue for the first quarter of 2021 reached $969.8 million as compared to $708.8 million in Q1 2020, an increase of 36.8%. For the ninth consecutive quarter, we outperformed the Canadian new vehicle retail market as our same store new retail unit sales increased by 29.8% as compared to the Canadian market increase of 15.2% as reported by DesRosiers Automotive Consultants.

Adjusted EBITDA was $47.2 million in Q1 2021 as compared to $5.7 million reported in Q1 2020, an improvement of 723%. Captured within first quarter Adjusted EBITDA of $47.2 million is CEWS income of $2.9 million, rent subsidy of $0.2 million and the forgiveness of $5.4 million of Paycheck Protection Program ("PPP") loans received at U.S. dealerships in Q2 2020. Excluding these typically non-recurring income items, normalized Adjusted EBITDA was $38.7 million for the quarter. On a normalized basis, Adjusted EBITDA margin was 4.0% as compared to 0.8% in the prior year, an increase of 3.2 percentage points ("ppts").

Used retail unit sales increased by 51.9% over the prior year, contributing to the consolidated used to new retail unit ratio improving to 1.18 from 1.02, and to 1.01 on a trailing twelve month ("TTM") basis, while gross profit margin on used vehicles also increased to 6.6% as compared to 4.4% in Q1 2020. For the first time since the inception of Project 50, the average trailing twelve month ("TTM") Canadian used retail unit sales per dealership per month, excluding Haldimand Motors, reached 50, as compared to 41 in the prior year.

Finance and insurance ("F&I") gross profit per retail unit increased by 10.8% or $279 per unit to $2,869 per retail unit compared to the prior year and F&I gross margins improved to 93.6% from 92.8% in the prior year.

Proactive inventory management for both new and used vehicles was a key driver to the Company's success in delivering both strong revenue and margin growth across all our business operations in this first quarter. Consolidated gross profit margin increased by 0.8 ppts to 17.3% as compared to the prior year.

Normalized operating expenses as a percent of gross profit was 81.4% (normalized for CEWS income of $2.9 million, rent subsidy of $0.2 million and the previously noted PPP loan forgiveness of $5.4 million). This contrasts with the 99.5% reported in Q1 2020, and is well below the five-year first quarter historical average of 92.2%. 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 improved by $(16.9) million from December 31, 2020 to $72.6 million. Free cash flow on a TTM basis was $144.6 million at Q1 2021 as compared to $105.0 million in Q1 2020. Additionally, our net indebtedness leverage ratio improved to 0.7x at the end of Q1 2021, as compared to 1.3x in the prior year.

Subsequent to the quarter-ended March 31, 2021, the Company successfully completed an add-on offering of $125.0 million senior notes to its existing 8.75% senior unsecured notes due 2025 and also amended and extended its existing credit facility for three years to 2024. The add-on offering was completed at a premium to par, resulting in a yield of 5.595%. The amended credit facility increases the revolving credit facility by $50 million to $225 million and includes a $1,060 million wholesale floorplan financing facility and a $15 million wholesale leasing facility for total aggregate bank facilities of $1.3 billion.

On April 14, 2021, S&P Global Ratings ("S&P") issued a research update whereby it revised the Company's outlook to stable, raised the issuer credit rating to 'B' from 'B-', and raised the rating of the Company's senior unsecured notes to 'B' from 'CCC+'.

Coupled with the strength of our operating performance and resiliency of our business model, the refinancing actions have further solidified our balance sheet and added financial flexibility which will allow us to move forward on acquisitions in a strategic manner.

Looking ahead, while we are confident that the measures we have taken over the past year in response to COVID-19 have strengthened and streamlined the Company's business model, 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 FIRST QUARTER

As a result of the continued execution of our complete business model, along with the improvement in market outlook and demand during Q1 2021, AutoCanada delivered a record setting first quarter.

For the three-month period ended March 31, 2021:

• Revenue was $969.8 million, an increase of $261.0 million or 36.8%
• Total vehicles sold were 18,707, an increase of 4,972 units or 36.2%
• • Used retail vehicles sold increased by 3,325 or 51.9%
• Net income (loss) for the period was $21.3 million (or $0.77 per basic share) versus $(46.9) million (or $(1.70) per basic share) in 2020, which included impairment of non-financial assets of $(31.5) million that was driven by the impact of COVID-19 at the time
• Adjusted EBITDA increased by 723% to $47.2 million, an increase of $41.5 million
• • COVID-19 related normalizing items in the quarter: CEWS of $2.9 million, rent subsidy of $0.2 million and forgiveness of $5.4 million of PPP loans received in Q2 2020 for U.S. dealerships. Adjusting for these typically non-recurring income items, normalized Adjusted EBITDA was $38.7 million, ahead of prior year by $33.0 million; normalized pre-IFRS 16 Adjusted EBITDA was $27.6 million, as compared to $(4.4) million
• Ending net indebtedness of $72.6 million reflected a decrease of $(16.9) million from Q4 2020

Canadian Operations Highlights

OUTPERFORMED CANADIAN NEW RETAIL MARKET FOR NINTH CONSECUTIVE QUARTER

For the ninth consecutive quarter, we outperformed the Canadian market, as same store new retail unit sales increased by 29.8% as compared to the market increase of 15.2%, for brands represented by AutoCanada as reported by DesRosiers Automotive Consultants ("DesRosiers"), an outperformance of 14.6 percentage points ("ppts").

Our used vehicle and F&I segments were key drivers of improved earnings in Q1 2021. Same store used vehicle gross profit percentage increased to 6.8% as compared to 5.5% in the prior year and same store F&I gross profit percentage increased to 93.3% as compared to 92.4% in the prior year.

Current period results include the acquisitions of Auto Bugatti collision centre and Haldimand Motors which occurred in Q4 2020. Unless stated otherwise, all Canadian references include Haldimand Motors.

For the three-month period ended March 31, 2021:

• Revenue was $863.8 million, an increase of 37.9%
• Total retail vehicles sold were 15,685, an increase of 4,730 units or 43.2%
• • Used retail unit sales increased by 3,156 or 55.6%
  • For the first time since the inception of Project 50, the average trailing twelve month Canadian used retail unit sales per dealership per month, excluding Haldimand Motors, reached 50, as compared to 41 in the prior year
• Used to new retail units ratio increased to 1.29 from 1.08
• • Trailing twelve month ratio improved to 1.01 at Q1 2021 as compared to 0.81 at Q1 2020
• Finance and insurance gross profit per retail unit average increased to $2,989, up 11.5% or $309 per unit
• Net income for the period was $21.0 million, up $53.7 million from a net loss of $(32.6) million in 2020, which included impairment of non-financial assets of $(22.7) million
• Adjusted EBITDA increased 394.9% to $43.2 million, an increase of $34.5 million
• • Adjusting for COVID-19 related CEWS of $2.9 million, rent subsidy of $0.2 million, normalized Adjusted EBITDA decreases to $40.1 million, ahead of prior year by $31.4 million; normalized pre-IFRS 16 Adjusted EBITDA was $30.1 million, as compared to $(0.5) million

U.S. Operations Highlights

RETAIL UNIT SALES GROWTH OF 30.9%

Despite facing market headwinds, including inventory shortages and stringent pandemic related restrictions in the City of Chicago, U.S. operations were buoyed by strong market demand and posted improved results, as compared to Q1 2020. Current period results include the acquisition of Autohaus of Peoria which occurred on October 29, 2020.

• Revenue was $106.0 million, an increase of 29.0%
• Retail unit sales increased to 2,282 units, up 539 units or 30.9%
• Net income (loss) for the period increased by $14.5 million to $0.3 million from $(14.2) million in 2020, which included impairment of non-financial assets of $(8.9) million
• Adjusted EBITDA was $4.0 million, an increase of $7.0 million from 2020
• • Adjusting for the forgiveness of $5.4 million of PPP loans received in Q2 2020, normalized Adjusted EBITDA decreases to $(1.4) million, an increase of $1.6 million from prior year Adjusted EBITDA of $(3.0) million

Same Store Metrics - Canadian Operations

SAME STORE USED RETAIL UNIT SALES GROWTH OF 43.7%

Same store new and used retail unit sales increased by 37.0% to 15,010 units; new retail units increased by 29.8% and used retail units increased by 43.7%. The increase of new retail units by 29.8% outperformed the market increase of 15.2% in the Canadian new vehicle market for the 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 improvement in gross profit across every business segment which collectively totaled $37.8 million, or 35.0%.

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

• Revenue increased to $790.8 million, an increase of 27.8%
• Gross profit increased by $37.8 million or 35.0%
• Used to new retail units ratio increased to 1.19 from 1.08
• • New and used retail unit sales increased by 37.0% to 15,010 units
  • • Used retail unit sales increased by 43.7%, an increase of 2,481 units
• Finance and insurance gross profit per retail unit average increased to $3,085, up 15.5% or $413 per unit; gross profit increased to $46.3 million as compared to $29.3 million in the prior year, an increase of $17.0 million or 58.2%
• Parts, service and collision repair gross profit increased to $50.4 million, an increase of 15.0%
• • Parts, service and collision repair gross profit percentage increased to 54.6% as compared to 48.4% in the prior year, an increase of 6.2 ppts, driven by a combination of a change in product mix and various initiatives to improve margin retention

Financing and Investing Activities and Other Recent Developments

S&P UPGRADES SUPPORT SUCCESSFUL ADD-ON DEBENTURE OFFERING OF $125 MILLION

CREDIT FACILITY AMENDED AND EXTENDED

Our focus has been and continues to be on preserving cash and managing liquidity. In the quarter, net indebtedness decreased by $(16.9) million to $72.6 million, resulting in a net debt leverage of 0.7x.

Subsequent to quarter-end, the Company completed the following transactions on April 14, 2021:

• Amended and extended our existing credit facility for total aggregate bank facilities of $1.3 billion, with a maturity date of April 14, 2024, maintaining a three-year tenor to our facility
• Issued an additional $125 million add-on to our existing 8.75% senior unsecured notes, due February 11, 2025
• S&P issued a research update whereby it revised the Company's outlook to stable, raised the issuer credit rating to 'B' from 'B-', and raised the rating of the Company's senior unsecured notes to 'B' from 'CCC+'

First Quarter Financial Information

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

See the Company's Management's Discussion and Analysis for the quarter ended March 31, 2021 for complete footnote disclosures.

The following table shows the segmented operating results for the Company for the three month periods ended March 31, 2021 and March 31, 2020.

See the Company's Management's Discussion and Analysis for the quarter ended March 31, 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 March 31, 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; 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 March 31, 2021 will be held on May 6, 2021 at 9:00am Mountain (11:00am Eastern). To participate in the conference call, please dial 1.888.231.8191 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/q12021-presentation/

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 66 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 one used vehicle dealership supporting the Used Digital Retail Division, and two stand-alone collision centres (within our group of 17 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.