Earnings call transcript: AutoCanada Q2 2025 earnings beat expectations

AutoCanada Inc. reported its Q2 2025 earnings, surpassing expectations with a diluted EPS of $0.72, significantly higher than the forecast of $0.5512. The company’s revenue from continuing operations reached $1.34 billion, slightly below the forecast of $1.35 billion. Following the announcement, AutoCanada’s stock price rose by 0.97% in after-hours trading, closing at $29.23. According to InvestingPro data, the company has shown impressive revenue growth of 632.61% in the last twelve months, with a market capitalization of $49.54 million.

Key Takeaways

• Diluted EPS increased to $0.72, beating the forecast of $0.5512.
• Revenue from continuing operations was $1.34 billion, a 3% decline YoY.
• Adjusted EBITDA surged by 92.4% to $64.4 million.
• Stock price increased by 0.97% following the earnings report.

Company Performance

AutoCanada demonstrated robust financial performance in Q2 2025, with substantial improvements in profitability despite a slight decline in revenue. The company’s adjusted EBITDA nearly doubled compared to the same period last year, reflecting successful cost management and operational efficiency. The rise in net income from $3.9 million to $18.9 million underscores the effectiveness of AutoCanada’s strategic initiatives.

Financial Highlights

• Revenue: $1.34 billion (3% YoY decline)
• Earnings per share: $0.72 (up from $0.12 YoY)
• Adjusted EBITDA: $64.4 million (92.4% increase)
• Net income: $18.9 million (up from $3.9 million YoY)
• Cash on hand: $62.4 million
• Available liquidity: $257.4 million

Earnings vs. Forecast

AutoCanada’s actual EPS of $0.72 exceeded the forecasted $0.5512, representing a positive surprise of approximately 30.6%. The company’s revenue, however, was slightly below expectations, coming in at $1.34 billion against a forecast of $1.35 billion. The significant EPS beat indicates strong operational performance and cost control.

Market Reaction

The market responded positively to AutoCanada’s earnings report, with the stock price rising by 0.97% in after-hours trading. This movement places the stock closer to its 52-week high of $30.65, reflecting investor confidence in the company’s strategic direction and financial health. InvestingPro analysis indicates the stock’s RSI suggests overbought territory, while maintaining strong returns over the past year (+16.26%) and six months (+7.71%). With a beta of 0.37, the stock shows lower volatility compared to the market. Get access to 8 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.

Outlook & Guidance

Looking ahead, AutoCanada plans to complete the rollout of its ACX operating method and refocus on volume growth. The company anticipates net year savings of $48.5 million and is exploring potential M&A opportunities within the Canadian market. These initiatives aim to strengthen AutoCanada’s competitive position and drive future growth.

Executive Commentary

Paul Anthony, Executive Chairman, emphasized the company’s transformative efforts, stating, "We took the business down to the studs to rebuild with the right cost structure." He also highlighted the importance of digital innovation, noting, "The digital disruption going on in this business is significant."

Risks and Challenges

• Potential supply chain disruptions could impact inventory levels.
• Economic fluctuations may affect consumer demand for new vehicles.
• Competitive pressures from digital automotive marketplaces.
• Regulatory changes or tariffs could alter market dynamics.

Q&A

During the earnings call, analysts inquired about AutoCanada’s digital strategy and used car procurement. Executives explained their conscious decision to sacrifice volume for cost optimization and highlighted improvements in inventory management.

Full transcript - Autocanada Inc (ACQ) Q2 2025:

John, Moderator: Thank you for joining AutoCanada’s conference call to discuss the financial results for the 2025. I’m John, your moderator for today’s call. Before we begin, I’d like to remind everyone that today’s discussion may include forward looking statements, which are subject to risks and uncertainties. Actual results could differ materially from those anticipated in these forward looking statements. I encourage you to review AutoCanada’s filings on SEDAR plus for a discussion of these risks, the fourth quarter news release, financial statements and MD and A.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. I’d like to remind everyone that this conference call is being recorded today, Wednesday, 08/13/2025. Now I’d like to turn the call over to Mr. Paul Anthony, Executive Chairman of AutoCanada Inc.

Please go ahead, Mr. Anthony.

Paul Anthony, Executive Chairman, AutoCanada Inc.: Good evening, everyone, and thanks for joining us. This quarter marks a significant milestone for AutoCanada. And for me personally, it represents the culmination of the work we began in 2018 when I assumed the role of the Executive Chair shortly after the acquisition of our U. S. Operations.

At the time, AutoCanada was under severe strain, financially vulnerable and operationally overextended. The US acquisition was an ambitious move, but one that quickly revealed structural and cultural misalignment with our Canadian core. The company was quite frankly at risk prior to us getting here. What followed was a multiyear effort to stabilize, restructure, and ultimately transform the business. That journey hasn’t always been linear.

It was disrupted by the pandemic and other challenges, but I’m proud to say we’ve achieved what we set out to do. Today, AutoCanada is a more focused, disciplined, and resilient organization. We’ve reshaped the business around a scalable Canadian platform, improved our cost structure, and returned to profitable fundamentals. We’ve already realized $80,000,000 of our original $100,000,000 cost savings target. And with continued momentum, we’ve now raised that goal to $115,000,000 by year end.

These are not hypothetical targets. These are real, bankable savings that are materially strengthening our earnings profile. We’ve also made decisive progress in closing the chapter on The U. S. Business.

One sale has been closed and we have a clear path to divesting the remaining dealerships. In total, we expect $115,000,000 to $130,000,000 in no net proceeds from a group of dealerships that lost more than $20,000,000 in adjusted EBITDA last year. These proceeds will allow us to reduce leverage to well within our long term target range, leaving the company on strong financial footing. By the end of this year, AutoCanada will have come full circle, returning to its roots as a focused consolidator of Canadian franchise dealerships and collision centers. That was the job that I came to do.

And with the major pieces now in place, the time is right for a leadership transition. Before I pass it over to Sam, I want to briefly touch on our second quarter performance, which represents the operating leverage and financial discipline now embedded in the business. Adjusted EBITDA from continuing operations nearly doubled to $64,400,000 with margins improving two forty basis points to 4.8%. This was driven by a leaner cost base, tighter inventory management, reduced floor plan expenses, and significantly higher used vehicle gross profit per unit, clear evidence that the ACX operating method is gaining traction. Even as volume softened partly due to store architect transitions, we grew gross profit, cut normalized operating expense by 10%, and meaningfully enhanced our earnings power.

There’s more work ahead, but AutoCanada is now operating from a position of strength. The business is more resilient. The path forward is clear, and I have every confidence in this team’s ability to deliver continued progress. I want to sincerely thank our employees across the country who have worked relentlessly to drive this transformation and also our OEM partners for their continued support. It has been a privilege to lead this company through such a critical chapter in its history.

With that, I’ll hand it over to Sam to take you through the quarter in more details.

Sam, CFO, AutoCanada Inc.: Thanks, Paul, and good evening, everyone. Our second quarter results reflect continued progress on our transformation plan. With improving margin performance, disciplined cost control and encouraging signs of operational leverage, even as we manage through near term sales softness amid cost savings activities and ongoing portfolio reshaping. Revenue from continued operations declined 3% year over year to 1,340,000,000.00 reflecting lower volumes, particularly in new vehicles and F and I. This was expected as several dealerships undergo archetype transitions, which temporarily impact frontline capacity and sales execution.

Our Canadian platform is performing well with growth in collision, improving performance in used vehicle profitability and operating expense reductions dropping to the bottom line. Gross profit from continuing operations grew by 2.1% with margin improving 80 basis points to 16.8%. This was driven by stronger retail and wholesale used vehicle gross profit per unit, collision strength and benefits from tighter inventory management. Normalized operating expenses declined by $16,900,000 or 10% year over year, reflecting the benefit of cost savings realized under the ACX operating method. These efficiencies along with more stable footprint costs contributed to a meaningful improvement in earnings.

Adjusted EBITDA from continuing operations increased 92.4% to 64,400,000 and margin expanded two forty basis points to 4.8%. This is a strong signal that our transformation strategy is working and that the cost savings already realized are having a real and measurable impact on profitability. Net income from continuing operations was 18,900,000.0 compared to $3,900,000 in Q2 last year. Diluted EPS was $0.72 up from $0.12 per share. Turning to the cash flow, we generated $19,600,000 of operating cash flow in the quarter.

We also closed the quarter with $62,400,000 of cash on hand and approximately $257,400,000 of available liquidity under our revolving credit facility. As Paul noted, The U. S. Divestiture is progressing well. Once complete, the expected total proceeds of $115,000,000 to $130,000,000 net of working capital will allow us to materially reduce leverage and bring our total net funded debt to bank EBITDA ratio within our normal covenant thresholds.

We remain highly focused on liquidity and balance sheet strength through the remainder of 2025, while near term volume softness may persist as we complete dealership transitions and optimize our cost structure, the financial foundation is stronger and our ability to generate more resilient earnings is improving quarter by quarter. With that, I’ll turn the call back to Paul to discuss the outlook. Paul?

Paul Anthony, Executive Chairman, AutoCanada Inc.: Thanks, Sam. Right now, the team is highly focused on delivering the balance of the transformation plan. By year end, we expect to generate $48,500,000 in net in year savings after absorbing $29,000,000 in restructuring costs. On an annualized basis, we’re on track to achieve $115,000,000 in cumulative run rate savings in 2025, above the original $100,000,000 target we set out with a couple of quarters ago. On the market front, Canadian new vehicle demand has been stronger than expected, supported by improved OEM incentives, lower interest rates, and a pull forward of demand tied to potential tariffs.

However, as we complete the ACX operating method rollout, we do expect some temporary softness in our same store sales versus the broader market. This is just a function of resource reallocation as frontline teams focus on execution and efficiency gains, and we believe that this will normalize as the transformation concludes. We took the business down to the studs to rebuild with the right cost structure. And with that foundation in place, we’ll begin to refocus on adding volume back into the business, this time on a significantly more efficient and profitable platform. As we close out the year, our priorities are clear: finalize The U.

S. Divestiture deliver the remaining cost savings, deleverage the balance sheet, and exit 2025 as a simpler, stronger, more profitable operator positioned as the true Canadian platform that has been purpose built for focused and disciplined consolidation and growth. Thank you. And with that, we’ll open up the line for any questions.

John, Moderator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed with the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press 2.

If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Chris Murray from ATB Capital Markets. Your line is now open.

Chris Murray, Analyst, ATB Capital Markets: Yes. Thanks, folks. Good morning or good afternoon. So just maybe looking a little bit at some of the margin performance. Paul, I think in your script, you talked about maybe same store will be a little bit soft, but it seems like the margin performance, both in the gross margin and the operating expenses was a lot better than I think we had initially anticipated going into the quarter.

Can you just talk about the sustainability of that margin and how you think that will evolve?

Paul Anthony, Executive Chairman, AutoCanada Inc.: Yeah, listen, I think for the sustainability, we think that the business now is resilient. We foundationally changed the structure of the business. And so I think that it’s definitely the business is now structurally different than what it was a year ago, two years ago, three years ago. And the next order of operations for us is to actually start adding back volume. And I know you didn’t ask this question, but I guess I’ll give this answer.

The cost base of this business, the actual structure of this business is now set up to take on additional volume without incurring kind of the same sort of expense that we had previously. So we actually think that we might see margins even going up.

Chris Murray, Analyst, ATB Capital Markets: Okay. Thanks. That’s helpful. Know, another couple of questions. And Paul, guess, first of all, congratulations on, I guess, I don’t know if I’d call it your retirement, but certainly with your time in the role so far at AutoCanada.

But one of the things that I know you were always one of the leaders of was the digital strategy. We’re starting to see some more, I guess, Amazon starting to roll out some new programs. I know you’ve worked with some different partners over the last few years. And I know that AutoCanada actually sort of internalized the digital strategy. Can you just maybe talk about where you’re at on this journey and kind of where we’ve left it today and where we should expect it to be going in the next little while?

Paul Anthony, Executive Chairman, AutoCanada Inc.: Sure. I mean, the digital disruption going on in this business is significant. I think you’re probably reading the same things that everybody’s reading. We’re getting tons of questions on is the way cars are acquired. A lot of, like, CarMax, Carvana, the way they purchase the vehicle from the consumer.

That’s kind of that’s changed the game for a lot of dealers. They’re the most profitable, fastest turning vehicles. As you know, we we did a deal with Kijiji back a year and a half ago, and we’ve been building up that muscle. And in fact, we’re now live across Canada, buying cars direct from consumers through Kijiji. So they have, one option to, list their car online.

Another option is to sell them to us. We’re using that same team that’s actually doing the buying on Kijiji and giving offers. And that same team will start to enable our dealerships to put values on vehicles rather than these widgets, these valuation widgets, we’ll be able to target and drive better offers, higher, more accurate offers for consumers for a way better consumer experience. On the other side that you were talking about with Amazon getting into the market, Amazon getting into the market is not a new thing. They actually tested it out in The States with Hyundai on the new car side.

The used car side, it’s a little bit tougher. Like if you think about this, Amazon charges right now, they charge per sale. They charge per transaction, like completed transaction. I think with used cars, it’s a little bit tougher. And so I think the whole way that Amazon needs to think about things, would seem to me that they have to get into the lead selling business versus the actual completed transaction business.

And TBD, what that looks like, I don’t think that any of us has a view on it. I do know that when Amazon puts their mind to anything, it’s probably going to win. And so you want to probably be on the right side of it. But we’re open for business and we’re happy to be a source of inventory for Amazon to market our vehicles on. They have such a reach.

I mean, I’ve said this, we talked about this at our board meeting. Like when I order something on Amazon, even though I know I’m buying from Jeff’s Flowers, I actually think I’m buying from Amazon, not Jeff’s Flowers. Right? So that’s the only thing that everybody needs to be thinking about is their own brand for their own business and what they give away by selling on these marketplaces. But we’ve spending a lot of time and energy thinking about digital disruption and how do we disrupt our own business.

I think that that’s prudent for any business owner. It’s probably my favorite part of of this business is thinking about how to disrupt it perversely. Like, that’s that’s what I enjoy doing. And so I think this company is in in great shape.

Chris Murray, Analyst, ATB Capital Markets: Okay. That’s helpful. Thank you. And then maybe if I can just squeeze in one more. On m and a, you know, this is like the whole the whole discussion around, you know, kind of returning to being an acquirer in the Canadian market has been on pause for quite a few number of periods as you’ve kind of gone through some of this restructuring.

I guess two parts to the question. One, is there a trigger point where you start feeling more comfortable on actually starting to acquire that you feel like the balance sheet’s in the right place that you can support that? And then I guess second, what would a pipeline look like right now for opportunities across the marketplace? Is there any sort of differentiator on different brands or types of brands that you’re seeing that there’s more opportunities or more willing sellers? Any sort of color you could add into the marketplace would be great.

Paul Anthony, Executive Chairman, AutoCanada Inc.: So I think that’s for the next group of leaders of this company. But I would say if it were me, the way I would be thinking about it is I think that I’m going to take a victory lap for our entire company right now, for our team. The way this company is performing versus our peers, even though our peers might have outsold us, I think we’ve out earned the market. And our margins now give us the right to go become a serial acquirer and actually snap in stores and put them under our operating method once it’s proven out. I would say though, there’s still a little bit of a hangover from COVID where dealers have this belief that their dealerships are still worth a lot of money and actually significantly more than in The United States.

And so as we’re seeing the market normalized, a few quarters of this over time, I think the reality on the ground that COVID’s not coming back and they need to actually do the hard work that we just did, or think about exiting the business, starts getting into place. And so I think that over the course of the next year, year and a half, there’s probably going to be a significant funnel of stores to be bought and to be bolted in using the ACX operating method and for us to take advantage of our size and scale to actually open up geographically and by brand. And so when you were asking about brands, I would say what we what what at least I’ve noticed is all brands cycle up and all brands cycle down. And it’s up to us to have a balanced portfolio of brands and geographies across the country. And I think that that’s what we’ll aim to do as a company is just balance the portfolio across the organization and operate using the ACX operating method, which I’m going to actually on this call, I’d like to give credit for the name ACX to Art Crawford, who’s running our collision business.

It’s him and his team that came up with it, we’ve stolen it from him. So we owe it to him to say that the ACX operating method, though it is AutoCanada, it it started it started in in Art’s garage. Okay. Is that helpful, Chris?

Chris Murray, Analyst, ATB Capital Markets: I’ll leave it there. That is helpful. Thank you very much, Paul.

Paul Anthony, Executive Chairman, AutoCanada Inc.: Okay. Thanks, Bud.

John, Moderator: Your next question comes from the line of Maxim Sytchev from National Bank Financial. Your line is now open.

Maxim Sytchev, Analyst, National Bank Financial: Hi. Good evening, gentlemen.

Paul Anthony, Executive Chairman, AutoCanada Inc.: Hey, Max.

Maxim Sytchev, Analyst, National Bank Financial: Maybe, Paul and Sam, the first question is, has anything changed in terms of your used procurement strategy? Because I mean, obviously, the margin dynamic is quite favorable right now as we see from the results. Thanks.

Paul Anthony, Executive Chairman, AutoCanada Inc.: So the procurement strategy to use cars, there’s a bunch of different methods for used cars. One is to buy them off the street. So buying from individuals, which we are not great at, but getting better for sure. Like our numbers are going up every every month, and we have a team of people purpose built for that. Another method is buying from auctions, which is a very costly method of acquiring inventory.

Another method is trade ins. And so the more new cars you sell, the more used cars you can potentially get a trade. And those are wonderful opportunities. And then there’s rental car purchases. And rental car purchases are probably our last resort, though they’re fine cars to sell.

They’re kind of fillers. They’re loss leaders. Like, everybody has them. And so very easy to shop. And basically, we’re just using that to fill volume.

I would say that where we have the opportunity right now is buying off the street. And our intention as a company is to really build that muscle out over time. And I think that that’s probably the number one focus of the business on the used car side is actually acquiring inventory in a really, really responsible way. And in order to maximize maximize the sale price and then honestly, actually to push them out that much faster. The vehicles that we buy from trade ins and from off the street turn faster for more money.

And so that obviously is our number one objective.

Maxim Sytchev, Analyst, National Bank Financial: Okay. Super helpful. Thank you so much. And maybe just the last question. And I think you kind of touched on this in response to Chris’s question.

But in relation to having that balance of having the cost out and the ability to support growth, do you mind providing just a couple of examples that sort of enables you to do that? I mean, obviously, like sort of the CFO function procurement, etcetera, that’s being rolled out right now. Do you mind kind of like reinterpreting this and providing a bit more color around that dynamic? That can be super helpful. Thanks.

Paul Anthony, Executive Chairman, AutoCanada Inc.: I’ll let Sam take this.

Sam, CFO, AutoCanada Inc.: Yes. So I’m actually looking for examples of where we’re getting cost out. Is that the question?

Maxim Sytchev, Analyst, National Bank Financial: Well, just that whole dynamic, obviously, you’re getting the cost out, but you’re also talking about being able to handle more volume, which historically was not exactly Yeah. There was not a negative correlation. You know what I mean?

Sam, CFO, AutoCanada Inc.: I understand. Yeah. Let me pass it back to Paul. I think he has an answer he wants to give.

Paul Anthony, Executive Chairman, AutoCanada Inc.: Yeah. Yeah. I mean, it’s not I want to give this, but what we did Max, maybe I miss misspoke. We sacrificed volume is what I said. We sacrificed volume right now to get really good on the cost out.

And so I’m sitting actually with one of our star dealers right now as we’re having this call, and he he understands, like, though his volumes haven’t suffered a ton, they’ve gone down a little bit. We actually made a decision consciously as a company and intentionally that we’re gonna sacrifice volume right now to get really good and in rhythm with the expense cost out. And so we can build the muscle within our organization to be able to start accepting more cars with this new level and this new structure for everybody to get used to first. And so we’ve now operated several quarters with the new structure, and we’re now ready to start adding back volume. What I would say is like, I don’t know how to, I guess maybe to explain it another way is we couldn’t do both things at once.

When we, yeah, it’s a bit of an order of operations. Like we could have, like, during COVID, we over indexed to try and sell more cars. And we didn’t worry about costs. And so what happened? Our costs got out of hand.

And then we ended up as we did in 2023 and 2024. And so what we said was that we need to foundationally change the company, and so we’re going to focus on cost out. And so we have been religious about cost out. And Drew Ford is sitting with me. He’s been the chief transformation officer kind of overseeing this.

And that is the foundation of the company. And so what I meant by this whole thing was it’s now going to be time to add back volume and start taking back our unfair share of the market.

Maxim Sytchev, Analyst, National Bank Financial: Okay. Understood and appreciate the color. And then just one quick cleanup, if I may. In terms of sort of the days outstanding or how many days of inventory do you have for used and new? I haven’t had a chance to go through the entire MD and A.

Is it possible to provide any color there? Thank you.

Sam, CFO, AutoCanada Inc.: Yeah, they’re definitely down as we have a more disciplined approach to inventory. As you can see in our floor plan expenses is also decreased with less inventory. Also a couple of rate decreases over the last year, but they’re definitely down max and we expect that to be sustainable going forward. So happy to chat about that more in our one on ones, but that’s, those are the metrics.

Paul Anthony, Executive Chairman, AutoCanada Inc.: The other thing I might say, Max, I know you didn’t ask this, but when we’re talking about inventory levels, the one thing that I actually I I wanna say now that I’ve been embarrassed about in the past, but I don’t think this company is ever gonna be embarrassed about in the future was the write downs, and not managing inventory the way the market like, to make us an investable company in the future. I think we’ve got this company in such a position now where this I’m going to knock on wood, but I don’t think you’re going to see write downs for inventory for this company again. We’ve built in the muscle, and we built in a pretty good hedge against all of our inventory writing it to market every quarter. And I think that’s something that I’m super proud of.

Maxim Sytchev, Analyst, National Bank Financial: Yeah, absolutely. And yeah, Paul, I don’t know if you’re to be on sort of subsequent quarrels, but if not, obviously all the best and well done here. Thank you.

Paul Anthony, Executive Chairman, AutoCanada Inc.: Max, one of the things that’s been on my mind for the longest time is winning you over. And I will tell you, I hope we’ve done that now. It’s been a long road. And thanks for your support.

Maxim Sytchev, Analyst, National Bank Financial: My pleasure.

John, Moderator: There are no further questions at this time. I will now turn the call back to Paul. Please continue.

Paul Anthony, Executive Chairman, AutoCanada Inc.: Yeah. So again, I really just want to thank all of our OEM partners. Without you, we clearly wouldn’t be hanging a shingle up front and selling vehicles. I want to thank all of our staff. It’s been a really, really hard year.

I remember, I think a year ago, maybe a year and a half ago, telling everybody that there’s fruit, it’s just not low hanging. I didn’t realize how high it was. And it’s been a really, really hard go for everybody in this company to actually go and perform like they are right now. But you’re getting to see the results as everybody has leaned in and really, really made this happen. And so to this entire company, I am very grateful.

Thank you.

John, Moderator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

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