Investor Presentation May 16, 2017 FORWARD-LOOKING STATEMENTS 2 - - PowerPoint PPT Presentation

▶
investor presentation
SMART_READER_LITE
LIVE PREVIEW

Investor Presentation May 16, 2017 FORWARD-LOOKING STATEMENTS 2 - - PowerPoint PPT Presentation

Oct 21, 2022 190 likes •403 views

Investor Presentation May 16, 2017 FORWARD-LOOKING STATEMENTS 2 Certain information contained in this presentation looks payout policies; future intentions relating to financial forward in time and deals with other than historical or

slide-1
SLIDE 1

May 16, 2017

Investor Presentation

slide-2
SLIDE 2

2

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. (“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

  • n

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

2

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

  • n

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.

slide-3
SLIDE 3

3

Prince George Victoria / Duncan Maple Ridge/ Abbotsford Kelowna Grande Prairie Edmonton Ponoka Dartmouth Moncton Winnipeg Calgary Prince Albert Saskatoon Montreal Laval North Battleford Ottawa

Toronto (GTA)

Dealerships FCA 17 General Motors 9 Hyundai 9 Nissan 5 Volkswagen

7

Mitsubishi 2 Subaru 1 Kia 1 Total 51

AUTOCANADA OWNS SOME OF THE TOP PERFORMING DEALERSHIPS

Dealership Locations & Brands

Dealerships 57 OEMs 10 Brands 20 ’16 Total Revenue $2.9 B New Vehicles Sold 40,032 Used Vehicles Sold 19,561

Luxury Dealerships Infiniti 2 Cadillac 2 Audi 1 BMW / MINI 2 Mercedes-Benz 1 Total 8

slide-4
SLIDE 4

4

Platform Brand Mix- New Retail Sales

Sales Platform Mix European Import General Motors

FCA

Asian Import

16.6% 19.5% 24.3% 39.6%

FOCUS ON IMPROVING BALANCE

slide-5
SLIDE 5

5

OPERATIONAL EXCELLENCE

Dealership Performance Same Store Metrics Improved Margins New Technologies

COST CONTROL & BALANCE SHEET

Variable Expenses as % of Gross Profit Interest Expense Manage Debt & Capital Expenditures

ACQUISITION & GROWTH STRATEGY

Diversification Across Canada Brand Portfolio Balance Accretion Dealer Clusters in Key Markets

Strategic Levers

O u r F o c u s

slide-6
SLIDE 6

6

Key Themes

CANADIAN AUTO DEALER MARKET Improving Vehicle Sales in Canada

  • Auto retail sector performed well in 2016; new vehicle sales increased by 2.7%, surpassing the all-time

record

  • In March 2017, Canadian light vehicle sales increase 7.1% Y/Y to 187,540 units
  • Advances in technology, styling and safety expected to drive long-term new vehicle sales gains

Auto Retail Sector is a 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 but Continuing to Consolidate

  • Canadian dealer market is fragmented with approximately 3,300 dealerships with approximately

2,000 owners

  • Industry shifting from “mom & pop” dealerships to larger dealer groups
  • AutoCanada is well positioned to capitalize on this industry consolidation

Succession Planning Opportunity Leading to Significant Ownership Turnover

  • A significant proportion of dealers will be retiring in the next five years creating a “succession planning
  • pportunity”
  • Over 70% of dealers want to be semi-retired or completely out of the business in five years and fully

retired within 10 years(1)

  • Dealership owners are facing increasing facility capital requirements for OEM branding programs

Public Ownership Evolving in Canada

  • OEM acceptance of publicly-listed companies is growing in Canada
  • As evidenced by AutoCanada’s acquisition of Mercedes-Benz Rive-Sud in May 2017

(1) Source: PricewaterhouseCooper’s Automotive Trendsetter Report 2012

slide-7
SLIDE 7

7

  • The auto dealer business model is 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

DIVERSIFIED REVENUE SUPPORTS STRONG BUSINESS MODEL

24.3% 9.7% 41.4% 24.6%

2016

Gross Profit

57.2% 25.1% 13.2% 4.5%

2016

Revenue

New Vehicle Sales Used Vehicle Sales Parts, Services & Collison Repair Finance and Insurance

slide-8
SLIDE 8

8

8

Wellington Motors

ACQUISITION PLAN IN ACTION

  • The transaction closed October 1, 2016
  • Expands AutoCanada’s Ontario platform
  • Annual revenue of $46 million
slide-9
SLIDE 9

9

9

Guelph Hyundai

ACQUISITION PLAN IN ACTION

  • The transaction closed December 19, 2016
  • Expands AutoCanada’s Ontario platform
  • Annual revenue of $31 million
slide-10
SLIDE 10

10

10

Sherwood Park Volkswagen

GROWTH PLAN IN ACTION

  • Opened February 1, 2017
slide-11
SLIDE 11

11

11

Mercedes-Benz Rive-Sud

ACQUISITION PLAN IN ACTION

  • The transaction closed May 1, 2017
  • Expands AutoCanada’s brand offering to 20
  • 2016 annual revenue of $90 million
slide-12
SLIDE 12

12

12

Audi Winnipeg

GROWTH PLAN IN ACTION

  • Construction in progress

– expected completion Q4 2017

  • r early 2018
slide-13
SLIDE 13

13

As at December 31, 2015 2016 % Change New vehicles (units)

42,457 40,032

  • 5.7%

Used vehicles (units)

20,342 19,561

  • 3.8%

Parts, service, and collision repair

$194M $201M 3.6%

Adjusted net income

$39.9M $40.3M 1.0%

Gross profit %

16.8% 16.8% 0%

Basic adjusted earnings per share

$1.64 $1.46

  • 0.18%

Adjusted free cash flow

$38.8M $68.6M 76.8%

2016 Snap Shot

slide-14
SLIDE 14

14

As at March 31, 2015 2016 2017 % Change

New vehicles (units) 8,933 8,502 8,508 0.1% Used vehicles (units) 7,393 4,799 4,547

  • 5.3%

Parts, Service & Collison Repair $43.9M $47.7M $47.3M

  • 0.8%

Adjusted net income $5.6M $6.3M $4.6M

  • 26.4%

Gross profit % 16.6% 16.8% 17.5% 4.2% Basic adjusted earnings per share $0.20 $0.23 $0.17

  • 0.06%

Adjusted Free Cash Flow

  • $7.4M

$6.0M $15.2M 152%

Q1 2017 Snap Shot

slide-15
SLIDE 15

15

As at March 31,

Q1 2016 Q1 2017 Q1 2016 Q1 2017

New vehicles

7.5% 4.2% 7.5% 7.4%

Used vehicles

5.8% 7.2% 5.8% 7.2%

Parts, Service & Collison Repair

50.3% 52.1% 50.7% 55.6%

Finance & Insurance

91.3% 91.4% 91.4% 90.9%

RETAIL AUTOMOTIVE GROSS PROFIT

Q1 RESULTS Total Same Store

slide-16
SLIDE 16

16

Q1 2017 Snap Shot

$27,267 $10,420 $47,669 $26,353 $25,590 $11,940 $47,284 $26,813

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

New Vehicles Used Vehicles Parts & Services Finance & Insurance Q1 2016 Q1 2017

Q1 2016 vs. Q1 2017

Gross Profit by Department

slide-17
SLIDE 17

17

  • 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

$641 $683 $883 $1,342 $1,668 $1,653 $1,643 19.3 21.5 28.0 36.4 42.5 40.0 40.0 10 20 30 40 50 60 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2011 2012 2013 2014 2015 2016 LTM New Vehicles Sold (000's) Sales (C$M) Sales (C$M) New Vehicles Sold (000's)

Revenue & Units Sold Gross Profit & Gross Margin

$48 $58 $76 $106 $122 $118 $117 7.5% 8.5% 8.6% 7.9% 7.3% 7.2% 7.1% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% $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 (%)

Note: (1) 83% of new vehicle sales were made to retail customers, and the balance to lower margin fleet business

Revenue % Gross Profit %

Q1 2017 55.3% 7.4% 2016 57.2% 7.2%

slide-18
SLIDE 18

18

  • 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

$206 $243 $301 $495 $705 $725 $711 8.7 9.5 10.4 15.7 20.3 19.6 19.3 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)

REVENUE & UNITS SOLD GROSS PROFIT & GROSS MARGIN

$17 $16 $20 $30 $41 $47 $49 8.4% 6.7% 6.7% 6.0% 5.8% 6.5% 6.9% 5% 7% 9% 11% 13% 15% $0 $10 $20 $30 $40 $50 $60 2011 2012 2013 2014 2015 2016 LTM Gross Margin (%) Gross Profit (C$M) Gross Profit (C$M) Gross Margin (%)

Revenue % Gross Profit %

Q1 2017 25.9% 7.2% 2016 25.1% 6.5%

slide-19
SLIDE 19

19

  • 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

19

REVENUE & SERVICE ORDERS GROSS PROFIT & GROSS MARGIN

$110 $114 $142 $256 $388 $383 $379 305 309 364 602 848 864 852 200 400 600 800 1000 $0 $60 $120 $180 $240 $300 $360 $420 2011 2012 2013 2014 2015 2016 LTM Service Orders (000's) Sales (C$M) Sales (C$M) Service Orders (000's) $58 $60 $74 $129 $194 $201 $201 52.2% 52.4% 51.8% 50.3% 50.0% 52.6% 53.0% 40% 45% 50% 55% 60% $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220 2011 2012 2013 2014 2015 2016 LTM Gross Margin (%) Gross Profit (C$M) Gross Profit (C$M) 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 Profit %

Q1 2017 4.6% 55.6% 2016 13.2% 52.6%

slide-20
SLIDE 20

20

  • 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

REVENUE & TOTAL VEHICLES SOLD GROSS PROFIT & GROSS MARGIN

$46 $56 $76 $109 $131 $119 $120 90.7% 92.1% 91.8% 89.9% 91.2% 91.5% 91.6% 84% 88% 92% 96% 100% ($10) $15 $40 $65 $90 $115 $140 2011 2012 2013 2014 2015 2016 LTM Gross Margin (%) Gross Profit (C$M) Gross Profit (C$M) Gross Margin (%) $51 $61 $83 $121 $143 $130 $131 28.0 31.0 38.4 52.1 62.8 59.6 59.3 10 20 30 40 50 60 70 $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)

Revenue % Gross Profit %

Q1 2017 14.2% 90.9% 2016 4.5% 91.5%