Post on 14-Aug-2020
Q3, 2017
Investor Presentation
2
FORWARD-LOOKING STATEMENTS
2
Certain information contained in this presentation looks
forward in time and deals with other than historical or
current facts for AutoCanada Inc. (“AutoCanada” or the
“Company”). The use of any of the words “could”,
“expect”, “believe”, “will”, “projected”, “estimated” and
similar expressions and statements relating to matters
that are not historical facts are intended to identify
forward-looking information and are based on the
Company’s current belief or assumptions as to the
outcome and timing of such future events. In particular,
forward-looking statements in this presentation include,
but are not limited to, references to: the Company’s
general strategic plans and growth strategies; future
sales and revenue; future dealership acquisitions and
open point dealerships; the Company’s targets relating
to return on investment and financial ratios; dividend
payout policies; future intentions relating to financial
leverage; and the retail automotive industry. Although the
Company believes that the expectations reflected by the
forward-looking statements presented in this presentation
are reasonable, these statements have been based on
assumptions and factors concerning future events that may
prove to be inaccurate. Actual future results may differ
materially. The Company’s annual information form for the
year ended December 31, 2016 and other documents filed
with securities regulatory authorities (accessible through the
SEDAR website www.sedar.com) describe the risks, material
assumptions and other factors that could influence actual
results and which are incorporated herein by reference. The
Company disclaims any intention or obligation to update or
revise any forward-looking information, whether as a result of
new information, future events or otherwise.
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Multiple Touch Points on the Customer Journey
4
Why Invest in AutoCanada?Well Performing Sector
• Auto retail sector performed extremely well in 2016; on track for all-time record in 2017
• Sales of 1.6 million vehicles in first nine months of the year• Advances in technology, styling and safety expected to drive long-term new
vehicle sales
Key Part of the Economy• Annual spending of $143 billion in 2016 up 9.3% compared to 2014
• Greater than any other Canadian retail segment
Market Highly Fragmented; Consolidation Opportunities
• Canadian dealer market is fragmented with approximately 3,300 dealerships and 2,000 owners
• Significant proportion of dealers will be retiring in the next few years creating a “succession planning opportunity”1
• Industry shifting from “mom & pop” dealerships to larger dealer groups• Dealership owners are facing increasing facility capital requirements for OEM
branding programs
Public Ownership Evolving • OEM acceptance of publicly-listed companies is growing in Canada
(1) Source: PricewaterhouseCooper’s Automotive Trendsetter Report 2012
Canada’s only publicly-traded auto retailer
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58DEALERSHIPS
$2.9BTOTAL REVENUE
5
NEW VEHICLE SALES (UNITS) 40,032
USED VEHICLE SALES (UNITS) 19,561
OEMs 11
23BRANDS
SERVICE ORDERS 863,970
SERVICE BAYS 999
*Revenue, Sales and Service figures represent 2016 annual totals
Unparalleled Presence & Brands
6
• AutoCanada aims to cluster our dealerships in major metropolitan centres
• Clusters allow for the sharing of Management resources along with the sharing of best practices
• Top performing staff are given further opportunities at other dealerships in the Cluster, promoting growth and development
Edmonton and area: 9 dealerships
Calgary and area: 9 dealerships
Grande Prairie: 5 dealerships
Winnipeg: 4 dealerships
Montreal: 4 dealerships
Ottawa: 3 dealerships
Prince George: 3 dealerships
Dealership ClustersEdmonton
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• Auto dealerships are resilient in adverse market conditions
• Well-established and accepted dealership model has existed for 50+ years in the Canadian marketplace
• OEMs committed to dealership success and profitability
• Four business segments provide diversified and stable revenue
• Dealerships have a variable cost structure, with the parts & service business covering most of the fixed costs of the entire dealership
• Parts & service business is a counter-cyclical and stable recurring revenue stream
24.3%
9.7%
41.4%
24.6%
2016Gross Profit
57.2%25.1%
13.2%
4.5%
2016Revenue
Resilient Business Model
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OPERATIONALEXCELLENCE
Enhance Dealership
Performance
COST CONTROL & BALANCE SHEET
STRENGTH
System-wide Improvements
Head Office Efficiencies
Manage Debt & Capital Expenditures
ACQUISITION & GROWTH STRATEGY
Increase Available Brands
Broaden Geographies
Offer All Price Points
Dealer Clusters in Key Markets
Strategic LeversO u r F o c u s
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• Multi-location model serves a diversified geographic customer and revenue base; cluster strategy enables other scalable benefits
• Decentralized operations with centralized administration and strategy
• Dealer Support Services empowers the very best of Dealer Principals to make key operating decisions within a financial and governance framework
• Dealership support based on brand team platforms better positioned to meet the needs of dealers and OEMs
• Uniform application of best practices: innovative ideas, benchmarking and data analytics
OPERATIONALEXCELLENCE
Enhance Dealership
Performance
10
ACQUISITION & GROWTH STRATEGY
Increase Available Brands
Broaden Geographies
Offer All Price Points
Dealer Clusters in Key Markets
• Ongoing assessment of acquisition and Open Point opportunities to diversify geographic reach and brand portfolio
• Building on OEM relationships to broaden reach of existing brands, add new ones
• Focus on immediately accretive acquisitions –15% to 20% pretax annual ROI
• Dedicated teams for pre-acquisition assessment, post-acquisition integration
• Integration focus includes continuous improvements in efficiencies, and deepening IT and analytical capabilities
• Look for flagship stores in metropolitan markets; dealership clusters to enhance scale opportunities
• Capital is allocated where it has the highest rate of return; priorities include new Open Point locations, dealership relocations and upgrades
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COST CONTROL & BALANCE SHEET
STRENGTH
System-wide Improvements
Head Office Efficiencies
Manage Debt & Capital Expenditures
• Aggressively manage our fixed and variable costs
• Centralized purchasing and shared resources strategy reduce costs for dealerships on everything from payroll to tires
• Business planning process includes expense control and vehicle delivery targets
• Inventory management based on on market information and consumer buying patterns
• Dealer Council provides forum to discuss issues and leverages successes from across the network
• Company pursuing national procurement initiatives
Q3 Update
13
Commentary
• Top line growth across the business
• New vehicles up 9.4% Used vehicles up 2.9% Collision/Repair up 9.7% Fin & Ins up 18.0%
• Grew total same store sales 2.9%
• Annualized dividend of $0.40/share
Q3 Financial Highlights
$753.2
$834.6
Revenue ($MM)+10.8%
2016 2017
$122.9
$138.0
Profit ($MM)+12.2%
2016 2017
$0.38
$0.50
Adj. EPS+31.6%
2016 2017
SAME STORE Q3 Revenue %Change Gross Profit %Change
New vehicles $433.7 4.1 $31.0 6.1
Used vehicles $168.3 (0.1) $11.2 (6.6)
Collision/Repair $89.2 (0.2) $46.9 4.9
Finance & Insurance $35.5 13.3 $32.6 14.1
14
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Q3 Acquisition: Planète Mazda• First Mazda dealership• Fourth Montreal dealership• Expected closing December 1
15
Sales Platform MixEuropean Import
General Motors FCA
Asian Import
21%
21%
17%
36%
FOCUS ON IMPROVING BALANCE
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Leadership Team
• Leads all aspects of AutoCanada, providing a vision for future growth and internal development
• Experienced Leader in the Automotive industry
• Former CEO of Chrysler Canada and EVP of Chrysler Group
• Accomplished finance professional• Oversees Cost Control & Balance Sheet
Strength• Managing all financial aspects of
AutoCanada while preparing the Company for further growth
• Promotor of Operational Excellence
• Experienced retail automotive professional
• Four years as Dealer Principal at St. James Volkswagen and Audi Winnipeg
• Spearheads our acquisition and growth strategy
• Experienced negotiator and legal strategist
• General Counsel for AutoCanada• Former Partner at Bryan & Company LLP
Steven J. LandryPresident & CEO
Mark WarsabaChief Operations Officer
Erin OorVP Corporate Development & Admin
Chris BurrowsChief Financial Officer
A Successful Track Record
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New Brands in Last 4 YearsO u r R e c o r d
New Locations in Last 4 YearsDuncan BC GM Prince Albert SK GM
Kelowna BC GM Saskatoon SK FCA, GM
Calgary AB FCA (3), Hyundai (2), Mitsubishi, Winnipeg MB Audi, Volkswagen, FCA, GM
Volkswagen, Nissan, Infiniti Guelph ON Hyundai, FCA
Edmonton AB Kia, Volkswagen, GM (3), FCA Ottawa ON Nissan (2), Infiniti
Grande Prairie AB Volkswagen Toronto ON FCA
North Battleford SK GM Montreal QC Mercedez-Benz, Smart, BMW (2),
MINI (2); Mazda
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19
59.0 74.7
CSI2015 2016
2,210 2,321
NEW VEHICLE SALES
2015 2016
Benchmark: 53.7 Benchmark: 69.4
87.2 91.7
SSI2015 2016
648 757
USED VEHICLE SALES
2015 2016
Benchmark: 82.1 Benchmark: 86.5
51.7 57.9
CSI2015 2016
1,576 1,579
NEW VEHICLE SALES
2015 2016
Benchmark: 53.7 Benchmark: 69.4
73.5 72.0
SSI2015 2016
526 576
USED VEHICLE SALES
2015 2016
Benchmark: 82.1 Benchmark: 86.5
Successful IntegrationBMW Laval and BMW Canbec were acquired in 2014
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20
Long-term Integration and Growth
2012 2013 2014 2015 2016
Dealership Profitability
Sherwood Park Chevrolet Sherwood Park Buick GMC
Sherwood Park Chevrolet – acquired April 30, 2012
Sherwood Park Buick GMC – acquired May 31, 2012
21 21
Audi Winnipeg
• Construction in progress
• Expected completion Q4 2017 or early 2018
Dealership Relocatio
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As at December 31, 2016 2015 % Change
New vehicles (units) 40,032 42,457 -5.7%
Used vehicles (units) 19,561 20,342 -3.8%
Revenue $2.89B $2.90B -0.4%
Adjusted net income $39.9M $40.3M -1.0%
Gross profit % 16.8% 16.8% 0%
Basic adjusted earnings per share $1.45 $1.64 -11.6%
Adjusted free cash flow $68.6M $38.8M 76.7%
2016 Snap Shot
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As at September 30, 2017 2016 % Change
New vehicles (units) 12,014 10,983 9.4%
Used vehicles (units) 5,118 4,972 2.9%
Revenue $834.6M $753.2M 10.8%
Adjusted net income $13.6M $10.3M 31.5%
Gross profit % 16.5% 16.3% 1.2%
Basic adjusted earnings per share $0.44 $(1.19) N/A
Adjusted free cash flow $23.3M $27.8M -16.1%
2017 Q3 Highlights
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Year to Date 2017 Snap Shot
Gross Profit by Department
$93,255
$37,128
$148,302
$90,663
$100,951
$36,175
$157,395
$98,898
New vehicles Used vehicles Parts, service and collision repair Finance, insurance and other
2016 2017
Additional Information
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• New vehicle sales drive high-margin related transactions, including resale of trade-ins, sale of third-party financing, service or insurance products and recurring service and repair business
• AutoCanada sold 40,032 new vehicles in 2016 (1)
NEW VEHICLE SALESRevenue & Units Sold Gross Profit & Gross Margin
Note:(1) 83% of new vehicle sales were made to retail customers, and the balance to lower margin fleet business
Revenue % Gross Margin %
YTD 2017 58.6% 7.2%
2016 57.2% 7.2%
$641 $683
$883
$1,342
$1,668 $1,653
$1,758
19.3 21.5
28.0
36.4
42.5
40.0
42.5
0
10
20
30
40
50
60
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2011 2012 2013 2014 2015 2016 LTM
New
Veh
icle
s So
ld (0
00
's)
Sale
s (C
$M
)
Sales (C$M) New Vehicles Sold (000's)
$48
$58
$76
$106
$122 $118
$126
7.5%
8.5% 8.6%
7.9%
7.3% 7.2% 7.2%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
$0
$20
$40
$60
$80
$100
$120
$140
2011 2012 2013 2014 2015 2016 LTM
Gro
ss Marg
in (%
)
Gro
ss P
rofi
t (C
$M
)
Gross Profit (C$M)
Gross Margin (%)
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• Used vehicle sales also drive related higher-margin transactions, including service contracts, reconditioning opportunities for parts and service, recurring parts and service business and financing commissions
• Trade-ins also help support new vehicle sales by reducing the consumers net cash cost of the new vehicle
• The sale of used vehicles are not tightly controlled by the OEM’s, allowing AutoCanada to take trade-ins and resell any vehicle brand
USED VEHICLE SALESREVENUE & UNITS SOLD GROSS PROFIT & GROSS MARGINRevenue % Gross Margin %
YTD 2017 23.3% 6.6%
2016 25.1% 6.5%
$206 $243
$301
$495
$705 $725
$699
8.7 9.5
10.4
15.7
20.3 19.6 19.0
0
5
10
15
20
25
30
35
40
$0
$100
$200
$300
$400
$500
$600
$700
$800
2011 2012 2013 2014 2015 2016 LTM
Use
d V
eh
icle
s So
ld (0
00
's)S
ale
s (C
$M
)
Sales (C$M) Used Vehicles Sold (000's)
$17 $16 $20
$30
$41
$47 $46
8.4%
6.7% 6.7%
6.0%5.8%
6.5% 6.6%
5%
7%
9%
11%
13%
15%
$0
$10
$20
$30
$40
$50
2011 2012 2013 2014 2015 2016 LTM
Gro
ss Marg
in (%
)Gro
ss P
rofi
t (C
$M
)
Gross Profit (C$M)
Gross Margin (%)
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• Absorption rate of 87% in 2016(1)
• In 2016, AutoCanada completed 863,970 service orders on 928 service bays (year end)
• Parts & service activity is generally considered counter-cyclical
• Vehicle service under the manufacturer warranty must be completed at a franchised dealer providing a large captive market
• Independent repair shops are closing as highly specialized, capital intensive equipment and skilled labour is required to service increasingly complex vehicles
PARTS, SERVICE & COLLISION REPAIR
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REVENUE & SERVICE ORDERS GROSS PROFIT & GROSS MARGIN
Note: (1) Absorption rate is the extent to which the gross profit of the parts & service segment covers its own operations plus the fixed costs of operating the
dealerships (fixed salaries and benefits, administration costs, occupancy costs, insurance expense, utilities expense and non-floorplan interest expense; excludes all costs pertaining to head office)
% Revenue Gross Margin %
YTD 2017 13.4% 52.4%
2016 13.2% 52.6%
$110 $114
$142
$256
$388 $383 $402
305 309
364
602
848 864 864
0
200
400
600
800
1000
$0
$60
$120
$180
$240
$300
$360
$420
$480
2011 2012 2013 2014 2015 2016 LTM
Serv
ice O
rders (0
00
's)
Sale
s (C
$M
)
Sales (C$M) Service Orders (000's)
$58 $60
$74
$129
$194 $201 $210
52.2% 52.4%51.8%
50.3% 50.0%
52.6% 52.4%
40%
45%
50%
55%
60%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
$220
$240
2011 2012 2013 2014 2015 2016 LTM
Gro
ss Marg
in (%
)
Gro
ss P
rofi
t (C
$M
)
Gross Profit (C$M)
Gross Margin (%)
29
• Every vehicle sale presents AutoCanada with an opportunity to increase profits through the sale of additional products such as third party financing or lease arrangements, extended warranties, service contracts and insurance products
• AutoCanada is paid a commission on the transaction and retains no financing risk
− High margin and excellent growth
• Represented 91.5% gross margin in 2016
FINANCE, INSURANCE & OTHERREVENUE & TOTAL VEHICLES SOLD GROSS PROFIT & GROSS MARGINRevenue % Gross Margin %
YTD 2017 4.6% 91.6%
2016 4.5% 91.5%
$51 $61
$83
$121
$143
$130 $139
28.0 31.0
38.4
52.1
62.8 59.6
61.5
10
20
30
40
50
60
70
80
90
$0
$25
$50
$75
$100
$125
$150
$175
2011 2012 2013 2014 2015 2016 LTM
To
tal V
eh
icle
s So
ld (0
00
's)S
ale
s (C
$M
)
Sales (C$M) Total Vehicles Sold (000's)
$46
$56 $76
$109
$131
$119
$128
90.7%
92.1%91.8%
89.9%
91.2%91.5% 91.6%
86%
90%
94%
98%
$0
$25
$50
$75
$100
$125
2011 2012 2013 2014 2015 2016 LTM
Gro
ss Marg
in (%
)
Gro
ss P
rofi
t (C
$M
)
Gross Profit (C$M)
Gross Margin (%)
Chris Burrows, CFOcburrows@autocan.ca