AutoCanada (ACQ) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue declined 1.8% year-over-year to $1,627.9 million, with gross profit down 8.7% to $265.0 million and net income attributable to shareholders dropping 69.8% to $6.0 million.

• Canadian operations had flat revenue but lower gross profit and adjusted EBITDA, while U.S. operations faced double-digit declines in revenue and profitability due to structural issues.

• Strategic actions included divesting two Stellantis dealerships, restructuring RightRide by closing seven unprofitable locations, and pausing acquisitions and capital returns to focus on transformation.

• A transformation plan with Bain & Company was launched, targeting at least $100 million (CAD 100 million) in annualized operational expense savings by the end of 2025, with pilot dealerships in Western Canada.

• Strategic review of non-core assets and operational restructuring were implemented, with all M&A and capital return initiatives paused.

Financial highlights

• Adjusted EBITDA for Q3 2024 was $53.2 million, down 20.2% year-over-year; diluted EPS was $0.25, and basic EPS was $0.26.

• Gross profit decreased 8.7% to $265.0 million, with gross margin dropping to 16.3% from 17.5%.

• Canadian operations: revenue stable at $1.4 billion, gross profit down 4.7% to $240.7 million, adjusted EBITDA down 5.6%.

• U.S. operations: revenue declined 13.2% to $188.2 million, gross profit down 35.4% to $24.3 million, and adjusted EBITDA loss of $8 million.

• New vehicle sales grew 4.5%–6.7%, while used vehicle sales fell 5.5%; new vehicle and F&I gross profit per unit dropped 20% and 2.1%, respectively.

Outlook and guidance

• Management expects Q4 sales and gross profit to reflect ongoing affordability pressures, inventory oversupply, and seasonality.

• The transformation plan aims to achieve at least $100 million in annualized operational expense savings by end of 2025, focusing on staffing optimization and operational efficiencies.

• Caution is advised due to risks in realizing cost savings, potential restructuring overruns, and market uncertainties.