AutoCanada (ACQ) Q2 2024 earnings summary

Executive summary

• Q2 2024 performance was significantly impacted by the CDK outage, weaker market conditions, mounting OEM inventory (notably Stellantis), higher floorplan costs, and economic headwinds such as rising unemployment and falling GDP in a high-rate environment.

• Revenue declined 8.8% year-over-year to $1,601.0 million, with net loss attributable to shareholders of $34.3 million, including $11.3 million impairment of intangible assets and $13.2 million write-off of U.S. deferred tax assets.

• Adjusted EBITDA fell 71.3% to $27.0 million, with margin dropping to 1.7% from 5.4% year-over-year.

• Strategic initiatives include halting all M&A and capital return initiatives, freezing discretionary spending, reviewing all non-core and underperforming assets, and engaging Bain & Company for operational improvements.

• New CFO Sam Cochrane was appointed to help lead the transformation.

Financial highlights

• Q2 2024 revenue was $1,601.0 million, down 8.8% year-over-year; gross profit was $249.7 million, down 21.7%.

• Adjusted EBITDA was $27.0 million, a 71.3% decrease from Q2 2023.

• Diluted loss per share was $1.47.

• Canadian revenue fell 9% year-over-year to $1.4 billion; same-store sales declined 10.5%.

• US revenue fell 7.9% year-over-year to $191.2 million; US gross profit declined 34.2% to $25.8 million.

Outlook and guidance

• Focus will be on improving core dealership profitability, reducing leverage, and adapting to market changes, with all M&A and capital return initiatives suspended.

• Macro-economic headwinds such as a softening Canadian economy, high vehicle prices, and elevated interest rates are expected to persist.

• Q3 2024 operating conditions anticipated to mirror Q2 2024, with high new vehicle inventory and constrained supply of affordable used vehicles.

• Bain & Company engaged for a comprehensive business review and execution support.

• Commitment to transparency and regular updates to stakeholders.