AUTOCANADA REPORTS RECORD SECOND QUARTER RESULTS – QNT Press Release

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• Revenue was $1,686.0 million as compared to $1,281.1 million in the prior year, an increase of 32% and the highest second quarter revenue reported in the Company's history
• Net income for the period was $39.1 million, which includes $10.0 million of incremental inventory writedowns, versus net income of $37.7 million in the prior year
• Adjusted EBITDA¹ was $75.6 million versus $70.5 million in the prior year, an increase of 7.2%; normalized increase of 11.9% as compared to prior year normalized adjusted EBITDA¹ of $67.5 million
• Adjusted EBITDA margin¹ was 4.5% versus the normalized adjusted EBITDA margin¹ of 5.3% in the prior year, a decrease of (0.8) percentage points
• Diluted earnings per share was $1.33, an increase of $0.10 from $1.23 in the prior year
• Indebtedness of $375.0 million at the end of Q2 2022 compares to $358.5 million at the end of Q1 2022
• Net indebtedness¹ of $294.1 million at the end of Q2 2022 compares to $248.8 million at the end of Q1 2022

EDMONTON, AB, Aug. 10, 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 June 30, 2022.

"Our positive momentum continued in the second quarter where our team delivered yet another record quarter with exceptional performance across our operations," said Paul Antony, Executive Chairman of AutoCanada.  "Strong results in Q2 reflect the ongoing sustainability of our business model, as well as our ability to continue navigating a range of industry challenges, including OEM production delays and inventory constraints. I am immeasurably proud of what we have built and our platform's ability to thrive in a variety of market conditions and drive industry-leading performance.

"This strength allowed us to continue to advance our acquisition strategy with the recent addition of Burwell Auto Body and Kelleher Ford, further expanding our national collision centre footprint and our dealership platform across Canada. We remain well positioned to continue to execute on our acquisition pipeline in the coming quarters with a number of dealerships and collision centres being evaluated.

"Looking forward to the remainder of 2022, we will continue to build on our strong momentum and focus on our strategic growth pillars to deliver best in class performance and enhance shareholder returns. We also expect to see continued realization of synergies from our acquisitions which will further drive our Adjusted EBITDA performance."

Second Quarter Key Highlights and Recent Developments

The Company set a second quarter record as revenue reached $1,686.0 million compared to $1,281.1 million in the prior year, an increase of 31.6%. Results were driven by continued strong performance across all areas of our complete business model, in particular our finance and insurance ("F&I"), parts, service and collision repair ("PS&CR") business operations, continued improvements from our U.S. Operations, and contributions from our acquisitions.

Net income for the period was $39.1 million, which includes an incremental charge of $10.0 million in our Canadian Operations for the writedown of used vehicle inventory to net realizable value, as compared to $37.7 million in Q2 2021. Diluted earnings per share was $1.33, an increase of $0.10 from $1.23 in the prior year.

Adjusted EBITDA¹ for the period was $75.6 million as compared to $70.5 million reported in Q2 2021, an improvement of 7.2%. Prior year results include $3.0 million of government assistance related to COVID. Excluding these typically non-recurring income items in the prior year, adjusted EBITDA¹ of $75.6 million compares to normalized adjusted EBITDA¹ of $67.5 million in the prior year, a normalized improvement of 11.9%. Adjusted EBITDA margin¹ of 4.5% compares to 5.5% in the prior year, a decrease of (1.0) percentage points ("ppts"), and a decrease of (0.8) ppts as compared to normalized adjusted EBITDA margin¹ of 5.3% in the prior year.

Gross profit increased by $61.4 million to $279.3 million, an increase of 28.2%, as compared to prior year. This increase was largely driven by the increases of $30.7 million from F&I and $22.6 million from PS&CR. F&I gross profit per retail unit average² increased to $3,458, up 24.7% or $684 per unit. Gross profit percentage was 16.6% in the quarter and was impacted by the incremental $10.0 million writedown of used vehicle inventory to net realizable value; this compares to 17.0% in the prior year. Used retail vehicles² sales increased by 4,469 units, up 33.7%, to 17,740, and contributed to the consolidated used to new retail units ratio² moving to 1.80 from 1.31. Used vehicle sales volume contributed to our strong F&I and PS&CR gross profit performance.

Our U.S. Operations continue to demonstrate strong growth and contributed $42.9 million of gross profit, an increase of $13.0 million or 43.6% as compared to prior year. This improvement in gross profit was propelled by gains from F&I and PS&CR, resulting in a gross profit percentage of 17.3%.

Floorplan financing costs increased by $2.5 million, or 70%, to $5.9 million as compared to prior year. The increase is attributable to the combination of rising interest rates and an increase in our used vehicle inventory position. While rising interest rates are expected to impact customer affordability, we consider the availability of vehicle inventory to remain the most significant challenge to sales growth. Additionally, some of the direct impacts of rising interest rates may be offset by vehicle financing products which provide flexibility in financing terms, inclusive of incentives and term extensions. Overall, we currently do not expect interest rates to impact the pace of new and used vehicle sales due to strong levels of demand relative to limited supply. Management continues to monitor the macro environment and will adjust F&I product offerings and other aspects of the business, where necessary, to meet customer needs.

We continue to manage our new vehicle inventory as the chip shortage remains an issue and continues to impact the supply of new vehicle inventory. While we have seen positive indicators and noted gradual improvements in both the availability of inventory and product allocations, we are not anticipating a return to "normalcy" in inventory levels until late 2023 to 2024. Compensating for constrained new vehicle supply, we more than doubled our used vehicle inventory position to $699.0 million as at June 30, 2022 as compared to $309.8 million in Q2 2021. Based on our current used vehicle inventory composition and market conditions, management determined that $10.0 million writedown of incremental used vehicle inventory was required to calibrate our cost of used vehicle inventory to the changing macro environment. We will continue to assess the net realizable value of our inventory in the quarters ahead and actively manage our inventory position to ensure it remains appropriate to meet current market demand.

Net indebtedness¹ increased by $45.3 million from March 31, 2022 to $294.1 million at the end of Q2 2022. This increase is primarily driven by the repurchase and cancellation of $25.4 million of shares under the authorized Normal Course Issuer Bid ("NCIB"), the acquisitions of Porsche Centre London and Audi Windsor dealerships, and the Burwell Auto Body collision centre. Free cash flow¹ on a trailing twelve month ("TTM") basis was $89.1 million at Q2 2022 as compared to $159.9 million in Q2 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 1.3x remained well below our target range at the end of Q2 2022, as compared to 0.1x in Q2 2021.

Had all of the acquisitions, completed as of Q2 2022, occurred at July 1, 2021, consolidated pro forma net income would have been $155.3 million for the TTM ended June 30, 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 $286.9 million for the TTM ended June 30, 2022, as compared to pro forma normalized adjusted EBITDA¹ of $266.4 million for the year ended December 31, 2021.

We have established an acquisition pipeline, with dealerships and collision centres representing in excess of $125 million in annual revenue currently being evaluated. We are at varying stages of the acquisition process with these targets, ranging from signed letters of intent to signed purchase agreements, with the potential deals remaining subject to due diligence, OEM approvals, and other standard closing conditions. We remain well-positioned to continue to execute on our acquisition strategy in the coming quarters.

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 lingering effects of the global pandemic, inflation, rising interest rates, 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.

Consolidated AutoCanada Highlights

ANOTHER RECORD SETTING SECOND QUARTER

AutoCanada delivered another record setting second quarter.

Refer to Section 5 Acquisitions, Divestitures, Relocations and Real Estate of the MD&A for acquisitions included in Q2 2022 results.

For the three-month period ended June 30, 2022:

• Revenue was $1,686.0 million, an increase of $405.0 million or 31.6%
• Total vehicles² sold were 28,115, an increase of 4,162 units or 17.4%
• Used retail vehicles² sold increased by 4,469 or 33.7%
• Net income for the period was $39.1 million (or $1.40 per basic share) versus $37.7 million (or $1.23 per diluted share), which includes $10.0 million of incremental inventory writedowns in Q2 2022
• Adjusted EBITDA¹, which includes $10.0 million of incremental inventory writedowns, increased by 7.2% to $75.6 million, an increase of $5.1 million
• Adjusted EBITDA¹ increased by 11.9% over prior year normalized adjusted EBITDA¹ of $67.5 million, an increase of $8.0 million
• Adjusted EBITDA¹ on a trailing twelve month basis was $271.9 million
• Net indebtedness¹ of $294.1 million reflected an increase of $45.3 million from Q1 2022.

Canadian Operations Highlights

TOTAL GROSS PROFIT INCREASED BY 26%

Our F&I and PS&CR segments were key drivers of the record performance in Q2 2022. F&I gross profit per retail unit average increased to $3,349, up 17.2% or $491 per unit. PS&CR gross profit increased by $17.7 million or 29.3% to $78.2 million.

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

For the three-month period ended June 30, 2022:

• Revenue was $1,437.9 million, an increase of 32.0%
• Used retail unit² sales increased by 3,017 or 26.3%
• Average TTM Canadian used retail unit sales per dealership per month, excluding Used Digital Retail Division dealerships², improved to 60, as compared to 57 in the prior year
• Used to new retail units ratio² increased to 1.69 from 1.48
• TTM used to new retail ratio² improved to 1.56 at Q2 2022 as compared to 1.13 at Q2 2021
• F&I gross profit per retail unit average² increased to $3,349, up 17.2% or $491 per unit
• Net income for the period was $31.9 million, which includes $10.0 million of incremental inventory writedowns, down (3.1)% from a net income of $33.0 million in 2021
• Adjusted EBITDA¹ increased by 6.4% to $65.4 million, an increase of $3.9 million
• Adjusted EBITDA¹ increased by 9.3% over prior year normalized adjusted EBITDA¹ of $59.9 million
• Adjusted EBITDA margin¹ was 4.6% as compared to normalized adjusted EBITDA margin¹ of 5.5% in the prior year, a decrease of (0.9) ppts

U.S. Operations Highlights

USED RETAIL VEHICLES SOLD INCREASED BY 81%

U.S. Operations continues to improve, as demonstrated by the fifth 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 an increase in gross profit percentage by 1.7 ppts to 17.3% and a 10.3% increase in total retail unit² sales.

• Revenue was $248.1 million, an increase of 29.5%, from $191.6 million
• Used retail vehicles² sold increased by 1,452 units or 81%
• F&I gross profit per retail unit average² increased to $4,005 per unit, up 68.2% or $1,624 per unit
• Net income for the period increased by $2.4 million to $7.1 million from $4.7 million
• Net income on a trailing twelve month basis was $24.5 million
• Adjusted EBITDA¹ was $10.1 million as compared to $9.0 million, an increase of $1.1 million
• Adjusted EBITDA¹ increased by $2.5 million as compared to normalized adjusted EBITDA¹ of $7.7 million for the prior year
• Adjusted EBITDA¹ on a trailing twelve month basis was $37.1 million

Same Store Metrics – Canadian Operations

F&I GROSS PROFIT PER RETAIL UNIT AVERAGE INCREASED TO $3,683, UP 25% OR $741 PER UNIT

The continued optimization of the Company's complete business model is highlighted by the year-over-year 10.3% improvement in gross profit, which collectively totaled $201.5 million. PS&CR performance has improved as a result of the continued recovery in kilometres driven, implementation of Business Development Centre, operational process improvements, and optimization of the PS&CR pricing strategy to maintain margins within the current macro economic conditions..

Refer to Section 19 Same Store Results Data of the MD&A for the definition of same store and further information.

• Revenue increased to $1,214.5 million, an increase of 14.2%
• Gross profit increased by $18.8 million or 10.3%
• Used to new retail units ratio² increased to 1.59 from 1.37
• Used retail unit sales² increased by 7.3%, an increase of 772 units
• For the fifteenth consecutive quarter of year-over-year growth, F&I gross profit per retail unit average² increased to $3,683, up 25.2% or $741 per unit; F&I gross profit increased to $68.2 million as compared to $54.0 million in the prior year, an increase of 26.2%
• PS&CR gross profit increased to $64.6 million, an increase of 13.7%
• PS&CR gross profit percentage² increased to 57.2% as compared to 55.5% in the prior year

Financing and Investing Activities and Other Recent Developments

ACQUISITION PIPELINE SUPPORTED BY HEALTHY BALANCE SHEET AND LIQUIDITY STRUCTURE

Net indebtedness¹ of $294.1 million resulted in a net indebtedness leverage ratio¹ of 1.3x. Financing and investing activities included the following:

Acquisitions

• The Company completed $78.8 million of acquisitions in Q2 2022
• On May 2, 2022, the Company acquired substantially all of the assets, including the underlying real estate, used in or relating to the Audi Windsor and Porsche Centre London dealerships, located in Windsor and London, Ontario, respectively. The acquisition further establishes our presence in the province of Ontario, increasing both brand diversity and luxury mix within our portfolio.
• On June 30, 2022, the Company acquired 100% of the shares in Burwell Auto Body Ltd., a luxury-brand focused collision centre. The acquisition expands our collision centre capacity, and allows the Company to leverage existing dealerships in Ontario.
• On August 2, 2022, the Company acquired 100% of the shares of Kelleher Ford Dealership and Collision Centre. The acquisition supports management's strategic objectives of further establishing the Company's presence in the province of Manitoba.

Non-Recourse Mortgage Financing

• On June 22 and June 30, 2022, the Company executed $32.2 million of non-recourse mortgage financings with the Bank of Nova Scotia for previously purchased properties. The non-recourse mortgages will fund land value and construction costs associated with the development of two dealerships in Maple Ridge, BC, and real estate value for two dealerships in Ontario. The underlying real estate is pledged as collateral on the non-recourse mortgage in the amount of the loan. 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.

Share Purchases

• The Company completed its normal course issuer bid on May 19, 2022, purchasing and cancelling 1,730,321 shares for an aggregate purchase price of $56.6 million.
• On June 28, 2022, the Company announced a Substantial Issuer Bid ("SIB") offer to purchase up to $100 million in value of its outstanding common shares at a price range of $22 to $25 per share. The offer was set to expire on August 4, 2022.
• On August 2, 2022, the Company announced an expiration date extension and a revised price range for the SIB. The SIB's price range was revised from $22 to $25 per share to $25 to $28 per share, and the expiration date was revised from August 4, 2022 to August 15, 2022.

Second Quarter Financial Information

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

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.

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