Autocanada Inc. · TSX:ACQ
Autocanada — Q4 2020 Earnings Presentation
45 slides from Autocanada's earnings presentation, March 2021
Slide 1: AutoCanada Investor Presentation March 2021
AUTOCANADA INVESTOR PRESENTATION MARCH 2021
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain information contained in this presentation looks forward in time and deals with other than historical or current facts for AutoCanada Inc. (the “Company”). The use of any of the words “could”, “expect”, “believe”, “will”, “projected”, “estimated”, “anticipated” and
Slide 3: Who We Are
WHO WE ARE
Slide 4: AutoCanada Overview
AutoCanada Overview A Leading North American Multi-Location Automobile Dealership Group At a Glance1 • One of Canada’s largest multi-location automobile dealership groups with ~4,000 49 17 Franchises in Canada Franchises in Illinois, U.S. employees • Only publicly listed auto dealership group in Can
Slide 5: Investment Highlights
Investment Highlights Large and Highly Fragmented Canadian Resilient Strong Stewards Market with Significant Business Model of Capital Consolidation Opportunities Accelerated Growth Through Complete Business Model Significant Experienced First Mover Advantage Organic Growth Leadership with Canadian
Slide 6: Attractive Canadian Market
Attractive Canadian Market 3,357 Dealerships in Canada AutoCanada NEW 2% VEHICLE MARKET Other Dealers 98% $246 BILLION + 1.6 Million New Vehicles MARKET 3.0 Million Used Vehicles Used Car USED Dealers Franchised New Car VEHICLE 36% Dealers 40% MARKET SHARE Private Parties AutoCanada 22% 2% 6 Source:
Slide 7: Stable Canadian Automotive Markets
Stable Canadian Automotive Markets Resilient Business Model Historically Stable Growing New and Used Retail Vehicle Sales in Canada1 ($M) • Consumers continue to buy more vehicles every • Increase in first-time buyers supports increasing year, further supporting our continued growth used vehicle sal
Slide 8: Revenue Diversity Across Brands and Geographies
Revenue Diversity Across Brands and Geographies Resilient Business Model % of AutoCanada Revenue by Region 1 AUTOCANADA CANADIAN BC NEW VEHICLE MIX % 23.6% 13.0% 12.8 Segment Brand AB Segment Brand Revenue % % 24.6% (excl. Calgary) MB Hyundai 8% 7.3% Nissan 6% CALGARY SK QC Import 25% Infiniti 1% 9%
Slide 9: Dealership Locations and Brands
Dealership Locations and Brands Resilient Business Model AutoCanada Owns Some of the Best Performing Dealerships in Canada British Columbia Alberta Dealership Awards1 Abbotsford Volkswagen Airdrie Dodge Fish Creek Nissan Grande Prairie Volkswagen Ponoka Chrysler Chilliwack Volkswagen Capital Jeep Do
Slide 10: Profitable Product Mix & Diverse Earnings Streams Provide Stability
Profitable Product Mix & Diverse Earnings Streams Provide Stability Resilient Business Model New Used PS&CR F&I 5% 17% 12% 29% 30% 67% Go Forward initiatives 38% focused on higher margin 83% segments 53% 13% 33% 20% REVENUE1 GROSS PROFIT1 ~20% of our revenue drives ~70% of gross profit 1For the FY 2
Slide 11: Drive Growth Through Optimization of Finance & Insurance
Drive Growth Through Optimization of Finance & Insurance Significant Organic Growth Opportunities Resiliency • Dedicated F&I team with in-house training team to Same Store F&I Gross Profit ($M) educate dealership network on standardized 41 product portfolio and sales process 33 36 36 32 31 26 27 • N
Slide 12: Service Bay Occupancy & Business Development Centre (BDC)
Service Bay Occupancy & Business Development Centre (BDC) Significant Organic Growth Opportunities • BDC is a call centre dedicated to handle all Same Store Parts, Service & Collision Repair service work appointment bookings across Gross Profit ($M) our Canadian dealerships 52 49 50 50 48 44 41 38 P
Slide 13: RightRide – Fueling Organic Growth
RightRide – Fueling Organic Growth Significant Organic Growth Opportunities • Operate within 1 dealership and have opened 6 standalone locations as at Q4 2020 • Ability to offer attractive financing products to credit-challenged customers • No credit risk retained by AutoCanada • Geared to today’s e
Slide 14: Project 50 – Increasing Used Vehicles Sales
Project 50 – Increasing Used Vehicles Sales Significant Organic Growth Opportunities • Additive to new vehicles to grow total unit sales • Large addressable used market in Canada • Drives incremental revenues in high margin business segments (F&I and PS&CR) • Counter-cyclical and protects against re
Slide 15: Collision Centre Expansion
Collision Centre Expansion Significant Organic Growth Opportunities • Currently operating 16 locations, predominantly within dealerships • Collision centre operations add to stability of revenues, significant growth opportunity in a $6B market1 • Initiatives include: o Consolidation of existing cent
Slide 16: Generated $131M of Free Cash Flow
Generated $131M of Free Cash Flow Increase of ~$32M TTM Compared to Prior Year PROVEN ABILITY TO REDUCE LEVERAGE ($M) • Target net debt leverage of ~2.5x Debt EBITDA NET DEBT LEVERAGE Q4 2020 ($M) Floorplan 761.9 • Expect to trend back towards target debt leverage or better in 2021 Long Term Debt 19
Slide 17: Capital Allocation Strategy
Capital Allocation Strategy Strong Stewards of Capital • AutoCanada capital allocation aligned with business strategy, growth opportunities and free cash flow profile CAPITAL ALLOCATION PRIORITIES 1 2 3 4 Organic Growth / Internal M&A / Strategic Liability Management Return to Shareholders Investmen
Slide 18: Well Positioned for Industry Consolidation Through Disciplined M&A Strategy
Well Positioned for Industry Consolidation Through Disciplined M&A Strategy Significant Consolidation Opportunities Acquisitions are a key part of Elements of Attractive Acquisitions capital allocation strategy Disciplined approach to evaluating ▪ Accretive acquisitions ▪ Attractive balance sheet me
Slide 19: Strategic Acquisitions in Q4 2020
Strategic Acquisitions in Q4 2020 ▪ Collision centre specializing in luxury vehicles Auto Bugatti Inc., ▪ BMW MINI certified and will provide support to AutoCanada's two Montreal, Quebec BMW MINI dealerships in Montreal ▪ Luxury dealership with franchise rights for Porsche, Audi, Mercedes-Benz, and
Slide 20: New Management Team With Proven Track Record Driving Vision & Strategy
New Management Team With Proven Track Record Driving Vision & Strategy Experienced Leadership Team Paul Antony Michael Rawluk Mike Borys Tamara Darvish Peter Hong Executive Chairman President of Canadian Chief Financial Officer President of U.S. Chief Strategy Officer Operations Operations Joined Ma
Slide 21: Used Digital Retail Strategy
USED DIGITAL RETAIL STRATEGY
Slide 22: COVID-19 Pandemic Accelerating Consumer Shift to Digital
COVID-19 Pandemic Accelerating Consumer Shift to Digital U.S. eCommerce penetration experienced Increased Focus on Car Ownership and 10 years’ growth in 3 months eCommerce1 93% Using personal cars more often 40% Considering buying a car 33% Moving faster to buy a car due to COVID-19 Open to Car Buyi
Slide 23: AutoCanada's Digital Evolution Begins with a Focus on the Stable Canadian Pre-Owned Vehicle Market
AutoCanada’s Digital Evolution Begins with a Focus on the Stable Canadian Pre-Owned Vehicle Market Canadian Used Vehicle Market – Stable Through Economic Cycles1 (units, 000’s) 3000 2000 1000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Sou
Slide 24: Embracing Secular Trends
Used Digital Retail Initiative Focus on the Canadian Pre-Owned Seamless Omni-Channel Vehicle Market Experience (Largest Segment of Market) (Fully Online to In-Store) AutoCanada’s Used Digital Retail Strategy Build-out / Acquire Used Car Superstores to Build Foundation Draw on AutoCanada’s Expertise
Slide 25: Used Digital Retail Strategy Highlights
Used Digital Retail Strategy Highlights First-mover with significant structural advantage – scale, AutoCanada leadership and domain expertise Attractive market entry with low capital intensity Drive meaningful improvement beyond current ~1:1 Used to New ratio Attract consumers earlier in car buying
Slide 26: Crawl, Walk, Run – Disciplined Approach
Crawl, Walk, Run – Disciplined Approach RUN WALK CRAWL 26
Slide 27: Used Digital Retail Division Structure & Governance
USED DIGITAL RETAIL DIVISION STRUCTURE & GOVERNANCE
Slide 28: Used Digital Retail Division Structure Introduction
Used Digital Retail Division Structure Introduction • In December 1, 2020, we announced the Haldimand acquisition which was the first by our newly formed Used Digital Retail Division created to drive used vehicle sales across all channels (omni-channel), including completely online • The new Divisio
Slide 29: Used Digital Retail Division Structure
Used Digital Retail Division Structure • Used Digital Retail Division has been established to conduct business of selling/purchasing used vehicles in manner not associated with OEMs and to launch an associated online platform • Excludes AutoCanada’s OEM dealers and RightRide and Export Divisions • U
Slide 30: Used Digital Retail Division Structure (Continued)
Used Digital Retail Division Structure (Continued) • Limited Partner Interests represent remaining equity in Partnership after satisfaction of AutoCanada’s Preferred Interest • Executive Chairman holds 15% of Limited Partner Interests • In addition to the Executive Chairman's 15% interest, there are
Slide 31: Indicative Partnership Structure Chart
Indicative Partnership Structure Chart 31
Slide 32: Governance
Governance • Board of Directors of AutoCanada has full oversight over Used Digital Retail Division and must approve: • Material decisions of Used Digital Retail Division, including acquisitions • Transactions between Used Digital Retail Division and other divisions of AutoCanada, including allocatio
Slide 33: Limited Partner Liquidity Rights
Limited Partner Liquidity Rights Executive Chairman • Executive Chairman may seek liquidity for his Limited Partner Interest by specifying a price for the Limited Partner Interest, after which a process is in place to consider liquidity options • After 10 years, Executive Chairman and AutoCanada hav
Slide 34: In Conclusion – Key Takeaways
In Conclusion – Key Takeaways • Strong progress on building a ‘Complete’ Business Model o Go Forward Plan initiatives taking hold, driving resiliency to deliver top-decile performance in any economic environment • Strengthened Balance Sheet and capital structure supports ample liquidity to address a
Slide 35: Q4 2020 Results
Q4 2020 RESULTS
Slide 36: Q4 2020 Results Overview
Q4 2020 Results Overview Record-Setting Quarter, Outperformed Market, Significantly Reduced Net Debt Fourth Quarter 2020 Highlights • Revenue was $876.1 million as compared to $809.1 million in the prior year, an increase of 8.3% and the highest fourth quarter revenue reported in the Company's histo
Slide 37: Q4 2020 Results Continued
Q4 2020 Results Continued Record Fourth Quarter Adjusted EBITDA of $40.5 Million, an increase of 92.1% ($M, unless otherwise noted) Q4 2020 Q4 2019 Change Consolidated Revenue 876.1 809.1 8.3% Gross Profit % 17.4% 17.3% 0.1 ppts Adjusted EBITDA 40.5 21.1 92.1% Adjusted EBITDA % 4.6% 2.6% 2.0 ppts Ad
Slide 38: Q4 2020 Results Continued – Canadian Operations
Q4 2020 Results Continued Canadian Operations Results • For the eighth consecutive quarter, we outperformed the Canadian market as same store new retail unit sales increased by 0.7% as compared to the market decrease of (4.9)%1 • Canadian used to new retail units ratio increased to 0.93 from 0.84 an
Slide 39: Q4 2020 Results Continued – U.S. Operations
Q4 2020 Results Continued U.S. Operations Results • Continued focus on cost management and profitability along with continued demand resulted in improved results, despite significant inventory shortages in the U.S.. The prior year comparative period includes two franchises which ceased operations on
Slide 40: Free Cash Flow
Free Cash Flow Strong and Consistent Free Cash Flow Generation Over the Past Six Quarters • Free cash flow was $19.2 million in Q4 2020 as compared to $65.8 million in the prior year Year Over Year Swing of Close to $32M ($M) 75 $99.9M $131.4M 65.8 54.8 52.6 53.4 50 25 19.2 6.2 1.0 0 (21.8) Q1 19 Q2
Slide 41: Proven Ability to Outperform in New Vehicle Sales
Proven Ability to Outperform in New Vehicle Sales For Seventh Consecutive Quarter, Outperformed Canadian New Retail Market • AutoCanada has been able to outperform the Canadian new vehicle market despite the impact of COVID 19 in 2020 Outperformance largely due to increased experience of general man
Slide 42: Managing Through COVID-19 Enhancing Agility and Financial Flexibility
Managing Through COVID-19 Enhancing Agility and Financial Flexibility Focus on Preserving Cash and Strengthening the Business • Actions taken with both an eye to managing range of COVID-19 impacts and ensuring we move forward well positioned to deliver exceptional operating performance ✓ Amended Cre
Slide 43: Appendix
APPENDIX
Slide 44: Supplemental Information
Supplemental Information EBITDA and Adjusted EBITDA $M FY 2020 FY 2019 FY 2018 Net (loss) income (7) (27) (85) Addback: Income taxes 5 1 2 Depreciation and amortization 42 43 20 Interest charges 39 39 20 EBITDA 79 56 (43) Addback: Impairment of non-financial assets, net 24 36 102 Financing and risk
Slide 45: Thank You
AUTOCANADA THANK YOU INVESTORS.AUTOCAN.CA