Investor Presentation Q3, 2017 FORWARD-LOOKING STATEMENTS 2 - - PowerPoint PPT Presentation

Q3, 2017

Investor Presentation

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FORWARD-LOOKING STATEMENTS

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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

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the Company’s current belief or assumptions as to the

• utcome 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

• pen 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

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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

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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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DEALERSHIPS

$2.9B

TOTAL REVENUE

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NEW VEHICLE SALES (UNITS)

40,032

USED VEHICLE SALES (UNITS)

19,561

OEMs

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BRANDS SERVICE ORDERS

863,970

SERVICE BAYS

999

*Revenue, Sales and Service figures represent 2016 annual totals

Unparalleled Presence & Brands

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• 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
• pportunities 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 Clusters

Edmonton

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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%

2016

Gross Profit

57.2% 25.1% 13.2% 4.5%

2016

Revenue

Resilient Business Model

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OPERATIONAL EXCELLENCE

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 Levers

O 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 OPERATIONAL EXCELLENCE

Enhance Dealership Performance

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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

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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

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Q3 Acquisition: Planète Mazda

• First Mazda dealership
• Fourth Montreal dealership
• Expected closing December 1

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Sales Platform Mix

European 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
• f 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. Landry President & CEO Mark Warsaba Chief Operations Officer Erin Oor VP Corporate Development & Admin Chris Burrows Chief Financial Officer

A Successful Track Record

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New Brands in Last 4 Years

O u r R e c o r d

New Locations in Last 4 Years

Duncan 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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59.0 74.7

CSI 2015 2016

2,210 2,321

NEW VEHICLE SALES

2015 2016

Benchmark: 53.7 Benchmark: 69.4

87.2 91.7

SSI 2015 2016

648 757

USED VEHICLE SALES

2015 2016

Benchmark: 82.1 Benchmark: 86.5

51.7 57.9

CSI

2015 2016

1,576 1,579

NEW VEHICLE SALES

2015 2016

Benchmark: 53.7 Benchmark: 69.4

73.5 72.0

SSI 2015 2016

526 576

USED VEHICLE SALES

2015 2016

Benchmark: 82.1 Benchmark: 86.5

Successful Integration

BMW Laval and BMW Canbec were acquired in 2014

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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

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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 SALES

Revenue & 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 10 20 30 40 50 60 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 2011 2012 2013 2014 2015 2016 LTM New Vehicles Sold (000's) Sales (C$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 $140 2011 2012 2013 2014 2015 2016 LTM Gross Margin (%) Gross Profit (C$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 SALES

REVENUE & UNITS SOLD GROSS PROFIT & GROSS MARGIN

Revenue % 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 5 10 15 20 25 30 35 40 $0 $100 $200 $300 $400 $500 $600 $700 $800 2011 2012 2013 2014 2015 2016 LTM Used Vehicles Sold (000's) Sales (C$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 $50 2011 2012 2013 2014 2015 2016 LTM Gross Margin (%) Gross Profit (C$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 $402 305 309 364 602 848 864 864 200 400 600 800 1000 $0 $60 $120 $180 $240 $300 $360 $420 $480 2011 2012 2013 2014 2015 2016 LTM Service Orders (000's) Sales (C$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 $240 2011 2012 2013 2014 2015 2016 LTM Gross Margin (%) Gross Profit (C$M) Gross Profit (C$M) Gross Margin (%)

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• 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 & OTHER

REVENUE & TOTAL VEHICLES SOLD GROSS PROFIT & GROSS MARGIN

Revenue % 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 $175 2011 2012 2013 2014 2015 2016 LTM Total Vehicles Sold (000's) Sales (C$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 $125 2011 2012 2013 2014 2015 2016 LTM Gross Margin (%) Gross Profit (C$M) Gross Profit (C$M) Gross Margin (%)

Chris Burrows, CFO cburrows@autocan.ca