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AutoCanada Inc. (Market cap: $42.53M) reported its financial results for the fourth quarter of 2024, highlighting significant strides in operational transformation despite a slight decline in total sales. The company experienced a robust increase in adjusted EBITDA, while new vehicle sales grew, and operational efficiencies were achieved. The stock remained stable following the announcement, trading near its 52-week high with a notable dividend yield of 7.33%. According to InvestingPro, the company shows relatively low price volatility, making it an interesting option for stability-focused investors.
Key Takeaways
- Adjusted EBITDA increased by 12.8% year-over-year.
- Total sales from continuing operations decreased by 1.2%.
- New vehicle unit sales grew by 4.7%, while used vehicle sales declined by 8.4%.
- A strategic focus on cost savings aims to achieve $100 million by the end of 2025.
Company Performance
AutoCanada’s performance in Q4 2024 reflects a mixed but strategically aligned quarter, with the company focusing on operational efficiencies and cost savings. The 1.2% year-over-year decline in total sales from continuing operations contrasts with a 12.8% increase in adjusted EBITDA, indicating improved operational efficiency. The company has made significant progress in its transformation plan, including the closure of RightRide locations and the sale of non-core dealerships.
Financial Highlights
- Revenue: $1.3 billion from continuing operations, down 1.2% YoY.
- Adjusted EBITDA: $54.1 million, up 12.8% YoY.
- Diluted earnings per share: $0.33.
- New vehicle unit sales: +4.7% YoY.
- Used vehicle unit sales: -8.4% YoY.
- Operating expenses as a percentage of gross profit decreased by 13.2 percentage points.
Outlook & Guidance
AutoCanada is targeting $100 million in annual cost savings by the end of 2025, with a progression plan that anticipates $36 million in savings by Q1 2025 and $100 million by Q4 2025. The company is actively seeking a buyer for its U.S. business assets and aims to reduce its leverage ratio to 2-3 times EBITDA. While InvestingPro analysis indicates net income growth expectations for this year, the Canadian new light vehicle sales market is expected to remain flat in 2025, with potential risks from U.S. tariffs and trade tensions. The company currently operates with moderate debt levels, suggesting room for strategic flexibility.
Executive Commentary
Paul Anthony, Executive Chairman, emphasized the company’s focus on operational improvements: "We’re 100% leaning in on the operations of our business." Sam Cochran, CFO, expressed confidence in the company’s cost-cutting initiatives, stating, "Unless there’s a catastrophic scenario... there’s still opportunity to cut."
Risks and Challenges
- Potential U.S. tariffs and trade tensions could impact sales and profitability.
- The Canadian market’s flat forecast for new light vehicle sales in 2025 may limit growth opportunities.
- The reduction in used car inventory poses a risk if market conditions change unexpectedly.
- Consumer sentiment remains cautious, potentially affecting future sales.
AutoCanada’s strategic initiatives and focus on operational efficiencies position it to navigate potential market challenges while aiming for significant cost savings in the coming year.
Full transcript - Acquazzurra SpA (ACQ) Q4 2024:
John, Moderator: Thank you for joining AutoCanada’s Conference Call to discuss the Financial Results for the Fourth Quarter of twenty twenty four. 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 Autocadis filings on SEDAR Plus for a discussion of these risks, the fourth quarter news release and financial statements and MD and A.
All lines have been placed on mute to prevent any background noise. I’d like to remind everyone that this conference call is being recorded today, Wednesday, 03/19/2025. Now, I’d like to turn the call over to Mr. Paul Anthony, Executive Chairman of AutoCanada. Please go ahead, Mr.
Anthony.
Paul Anthony, Executive Chairman, AutoCanada: Thank you, operator. Good evening, everyone, and thank you for joining us today for our fourth quarter twenty twenty four earnings call. I’m Paul Anthony, Executive Chairman and with me is Sam Cochran, CFO. We appreciate your time and interest. During the fourth quarter, there was good demand for new light vehicles in Canada driven by OEM incentives and lower financing costs following 200 basis points of rate cuts by the Bank of Canada last year.
Additionally, we saw positive contributions from parts and service, recent acquisitions, reduced floor plan expenses and lower operating costs, which helped offset declines in new, used and F and I GPU and led to our Canadian operations growing adjusted EBITDA by 12.8% year over year in Q4. However, so far in 2025, the Canadian market has cooled and while industry forecasts are for flat new light vehicle unit sales growth in 2025, we’re navigating an increasingly complex landscape. The North American automotive sector and the Canadian economy are very vulnerable to U. S. Tariffs and escalating trade tensions and inflationary pressures present risks to market stability and demand.
Amid these challenges, AutoCanada remains highly focused on executing its transformation plan launched in Q3 of twenty twenty four with three key priorities. The first is operational transformation. We are targeting $100,000,000 in annual run rate cost savings compared to our trailing twelve months second quarter twenty twenty four operating expenses excluding depreciation, amortization and one time items by the end of twenty twenty five. This started with heightened restrictions on discretionary spending and hiring in twenty twenty four September and expanded to include the introduction of the ACX operating method in the fourth quarter. Last year, we realized $7,900,000 in savings from our transformation plan, tracking an annualized run rate savings of $9,000,000 as of December 31.
Key savings schedules are included on investor presentation and include $63,000,000 from standardizing dealership operations, $23,000,000 from enhanced cost controls and financial disciplines, $10,000,000 from improved inventory management, $5,000,000 from centralizing administrative functions. Annual run rate savings should reach $36,000,000 in Q1 twenty twenty five, ’60 ’4 million dollars in Q2, ’80 ’2 million dollars in Q3 and $100,000,000 by the end of Q4. We expect this transformation plan to allow us to realize $32,600,000 in cost savings net of restructuring cost to our bottom line in 2025. Our second priority has been strategic review, which has concluded and aligned our asset portfolio with core Canadian dealerships and collision operations. Key actions taken include closure of all RightRide locations, which incurred a minus $11,000,000 adjusted EBITDA loss in 2024 the sale of three non core Stellantis dealerships generating $59,500,000 in net proceeds and the reclassification of The U.
S. Business as a discontinued operation as of 12/31/2024 following a $24,200,000 adjusted EBITDA loss in 2024 with efforts ongoing to secure a buyer. Finally, our third focus is on reducing our leverage ratio to between two and three times EBITDA through profitability improvements and debt reduction initiatives. Successful execution of the ACX operating method is critical to this effort. Accordingly, we have paused share buybacks and acquisitions since the fall of twenty twenty four until we achieve a more comfortable leverage profile and position.
AutoCanada is committed to its transformation plan and long term value creation. And I would like to thank the team for their dedication as they continue to work diligently towards accomplishing our goals. I also want to take this time to thank our investors and OEM partners for their continued support. With that, I’m going to turn the call over to Sam for a detailed review of Q4 financials. Sam?
Sam Cochran, CFO, AutoCanada: Thank you, Paul, and good evening, everyone. Before I begin, I would like to highlight that unless noted, the financial results discussion will focus on continuing operations, which are the core Canadian operations given that The U. S. Business has been moved to discontinued operations as we actively seek a buyer for these assets. During the fourth quarter, we recorded total sales from continuing operations of $1,300,000,000 down 1.2% year over year adjusted EBITDA of $54,100,000 up 12.8% from Q4 last year and a diluted earnings per share of $0.33 Including discontinued operations, we reported adjusted EBITDA of $47,200,000 which includes a $27,400,000 adjustment for the settlement with the FTC, which was announced late last year.
Our Canadian business performed better than expected during the quarter with the combination of OEM incentives in certain brands and lower interest rates contributing to strong sales activity in October and November. New vehicle unit sales grew 4.7% year over year, while used unit sales fell 8.4% due to inventory mix challenges and industry wide post COVID normalization of the used car market. New and used vehicle gross profit per unit dropped 14.35.4% respectively, offsetting modest growth in parts and service. Operating expenses as a percentage of gross profit decreased 13.2 percentage points driven by lower inventory and floor plan rates, plus $5,600,000 in cost savings resulting from our transformation plan. In total, we realized $7,900,000 in savings from this plan and we are tracking at $9,000,000 in total permanent annual run rate cost savings as of the December ’30 ’1, ’20 ’20 ’4.
As of 12/31/2024, we had $157,000,000 outstanding on our $375,000,000 revolving credit facility with a total net funded debt to bank EBITDA covenant ratio of 4.89. As Paul noted in his opening remarks, the outlook for 2025 remains uncertain. While strong consumer demand boosted sales in October and November, December saw a sharp slowdown and so far in 2025, Canadian new light vehicle sales have declined 2.8% year over year. Currently consumer sentiment indicators suggest a cautious approach reflecting heightened economic uncertainty. As we navigate these challenging dynamics, we are highly focused on disciplined execution of our transformation plan to build resilience, reduce leverage and secure a stable foundation for the future.
That concludes our prepared remarks. At this time, I’d like to turn the call over to the operator to open the line for Q and A. Thank
John, Moderator: Your first question comes from the line of Luke Hannon from Canaccord. Your line is now open.
Luke Hannon, Analyst, Canaccord: Thanks and good evening everybody. I’d like to hear, I guess, overall how it is that you guys are handling the current tariff situation right now. I realize it’s incredibly fluid environment. It’s possible a couple of weeks from now it might not even necessarily be an issue. But at this point, it certainly seems like it will be at this point.
So just trying to figure out really two things. One, what is your base case going forward as to the impact on your business? And then secondly, what exactly are you doing on a day to day basis just as far as planning maybe conversations with OEMs that sort of thing to best strategize around this?
Paul Anthony, Executive Chairman, AutoCanada: Yes. So, Luke, I would say with regards to the tariffs, I think that I don’t think it’s possible for any of us to answer competently what potentially can happen. I think that anything can happen. And so we’re really focused on our controllables. And our controllables are the cost out.
So we’re 100% leaning in on the operations of our business, making sure that we operate in line with our peers. And we’re kind of looking at this kind of in some ways kind of like COVID. It was just very unknown and we’re trying to build the best balance sheet we possibly can with the most efficient operating model that we can with the things that we know that we can control, if that makes sense. As far as the tariffs go, we have some risk mitigation in place that we’re discussing internally, but it’s anybody’s guess as to where the world goes with tariffs on either side of the border.
Luke Hannon, Analyst, Canaccord: Okay, that makes sense. Thanks. And then I also wanted to ask about the decision to sell The U. S. Business.
Maybe it’s a two part question here. First, I know when it comes to Paul when you’ve done M and A here at AutoCanada in the past, one of the things that’s come up is this sort of bid ask spread that develops as a result of one party thinking normalized earnings is one number, the other party thinking it’s another and then just not being able to bridge that gap as part of the negotiation process. What’s your view on what the normalized earnings for this U. S. Business is as of today?
That’s part number one of the question. And then number two is, again, sort of related to tariffs, do you see the process being slowed down at all just as a result of this sort of macro uncertainty?
Paul Anthony, Executive Chairman, AutoCanada: So in The U. S, I don’t really think that we have a view on what normalized results are in The U. S. And the reason is, look, we’ve tried time and time again to rebuild that business and it just seems like we probably don’t have the right talent in there until now. We’re actually doing a bit of a cost out on that business as well, trying to make it turnaround.
But from our perspective, I don’t think that we have what normalized earnings should be in The United States. I think that was a question. And if that was a question, under somebody else’s leadership that might change. We think that there’s a lot of people that have a better capability to run that business. With that said, these are all highly desirable brands in The United States.
Mercedes Benz, Porsche, Toyota, Honda, Subaru, Hyundai, Kia, General Motors, Chrysler, like they’re all great brands. And so we think that the desirability for these assets will be strong and we’ve made a decision to move on from The U. S. Market.
Luke Hannon, Analyst, Canaccord: Last question and then I’ll pass the line here as mentioned in the press release just as far as subsequent events. It looks like you guys, if I’m reading this correctly, as of earlier this month, you’re entitled to roughly $15,000,000 from repayment of loans related to subsidiary and then there’s an additional $16,000,000 that you’re entitled to. So what exactly is this, I guess? And when roughly might we expect this to flow through on your balance sheet?
Paul Anthony, Executive Chairman, AutoCanada: Sam, over to you.
Sam Cochran, CFO, AutoCanada: Yes. So this was a structure in place for a certain dealership where we didn’t have full ownership of it, but we had control through a loan. I would expect that to hit our balance sheet in Q1, Luke.
Luke Hannon, Analyst, Canaccord: Okay, great. Thank you.
John, Moderator: Your next question comes from the line of David Ocampo from Cormark Securities. Your line is now open.
David Ocampo, Analyst, Cormark Securities: Thanks. Good evening, everyone. Paul, I get tariffs are a little bit fluid, but just following up on Luke’s question or line of questioning there. Have you guys altered your inventory mix at all, whether increasing the amount of new or used vehicles that you have on the lot or opposite decreasing the amount of cars that you have on the lot?
Paul Anthony, Executive Chairman, AutoCanada: Yes. So on the used side, we’re significantly down in the number of used cars that we have in stock. And the reason for that is that buying cars in the face of a tariff war that might or might not happen at this point in time could potentially result in us overpaying for cars. And if for whatever reason come September, October that the tariffs don’t take place, you’d be sitting on just a pile of inventory that would potentially be overpriced. And it’s just not a risk that we’re willing to walk into right now.
And so we’re thinking more strategically. And from our perspective, having less inventory right now in the used car side makes a lot more sense than having more inventory. The downside risk if the tariffs actually happen versus don’t happen, I think the way we’ve kind of gone through it is that the downside risk of having more cars is far worse than the upside that we could pick up if the tariffs go into place.
David Ocampo, Analyst, Cormark Securities: Okay. That seems to make a lot of sense and it is prudent. Maybe Sam or you can handle this Paul, but just moving The U. S. Operations to discontinued ops, I think IFRS standards means that the business or the expectation that you guys have is it will be sold in the next twelve months.
So is your base case that the assets are sold or do you guys terminate franchise agreements like you guys are doing with Volvo?
Paul Anthony, Executive Chairman, AutoCanada: I mean, I’m happy to take it. Like, we’re fully committed to selling these. We have a banker in place. And I think that well, I think we would look at each other and say that all these stores have value. And so we don’t see a point where we’re terminating anything at this point.
Sam Cochran, CFO, AutoCanada: And the timeline sorry, go ahead, Volvo.
Paul Anthony, Executive Chairman, AutoCanada: Volvo was a little bit of a different story. They didn’t want to be in that market any longer. And frankly, it’s one of six stores under one roof. And so it made more sense for us to close down the brand.
Sam Cochran, CFO, AutoCanada: Got you.
David Ocampo, Analyst, Cormark Securities: Okay. And maybe a last one. Now that you guys have completed the pilot program and it does seem like there’s a high degree of certainty that the exit run rate from the cost savings initiatives will be around $100,000,000 It may be too early, but do you think there’s more to squeeze out of the lemon here beyond the $100,000,000
Paul Anthony, Executive Chairman, AutoCanada: I mean, I think that what we’ve told everybody is what we feel comfortable and confident we’re going to get. And I think that there might be more beyond that, but let’s focus on what we’ve told everybody and let’s deliver what we’ve told everybody.
David Ocampo, Analyst, Cormark Securities: Okay. That’s it for me. Thanks a lot, everyone.
John, Moderator: Your next question comes from the line of Maxim Sychev from National Bank Financial. Your line is now open.
Maxim Sychev, Analyst, National Bank Financial: Hi, good afternoon, gentlemen. Maybe the first question for Sam, if I may, how should we think about leverage? Am I just providing some data points as like if you’re trying to sort of provide a bit of sensitivity, let’s say EBITDA is kind of flat, how should we think about leverage trending as the year progresses? And I guess like the impacts on working capital etcetera. Thanks.
Sam Cochran, CFO, AutoCanada: Yes. I think we ended the year around five leverage. I think you should think of leverage to sort of staying a bit elevated throughout the year in that sort of scenario until we exit The U. S. Businesses.
The way that our EBITDA works for bank purposes is The U. S. Losses don’t get backed out until the stores are actually sold. So they don’t get the discontinued ops treatment. So when those dealerships are actually sold and closed and we expect those to happen within the year, you’ll start to see the leverage come down based on that sort of soft scenario you’re saying.
Does that make sense, Max?
Maxim Sychev, Analyst, National Bank Financial: Yes, that’s perfect. Thank you. And then there was language around us. I presume a small inventory adjustment on the used side of things. Do you mind maybe just quantifying how much that was in the quarter?
Sam Cochran, CFO, AutoCanada: I don’t know exactly what you’re looking at there, but we did do an actual new inventory provision this quarter for about $2,600,000 And so the reason behind that was we had some 23s and 22s that were getting a bit old. So being a bit conservative, we took a provision on some older new vehicles. I think that might be what you’re seeing. The actual used provision in the quarter was quite small.
Maxim Sychev, Analyst, National Bank Financial: Okay. Okay. That’s great. And then, Paul, if I may, in terms of and again, correct me if I’m wrong, the language around macro needing to stay kind of flattish in order to fully realize cost savings opportunity, is that kind of accurate or am I misreading the verbiage? Thanks.
Paul Anthony, Executive Chairman, AutoCanada: That’s absolutely accurate.
Maxim Sychev, Analyst, National Bank Financial: And I guess do you mind maybe delving a little bit about why that’s the case if we’re kind of looking specifically at the cost side of the equation or are you taking into account operating leverage etcetera?
Paul Anthony, Executive Chairman, AutoCanada: I think the way we’re thinking about it is, we’re controlling what we can, right? And so we’re making the assumption that last year was a bit of the low watermark. And we’re basically looking at the hard costs out of the business, things that we can control.
Maxim Sychev, Analyst, National Bank Financial: Right. And so, I mean, if hypothetically, I don’t know, like new car sales are down 10%, does it mean that the cost savings opportunity is going to kind of grind down to like $80,000,000 versus $100,000,000 Is that so the level of sensitivity we should be thinking about?
Sam Cochran, CFO, AutoCanada: So Max, no, I think go ahead, Paul.
Paul Anthony, Executive Chairman, AutoCanada: Yes, we’re going to say no. We think there’s $100,000,000 opportunity to take out of the business, but I’ll let you carry on, Sam.
Sam Cochran, CFO, AutoCanada: Yes, no, exactly. We think it’s sort of $100,000,000 I mean, unless there’s a sort of catastrophic scenario, Max, where but even in that case, sort of deal and volumes go down, there’s still opportunity to cut, right? So you got to think about the store archetype. Really what the store archetype is, is how many salespeople per deal? What’s our strategy on reception?
What’s our strategy on lot attendance, right? So even in a soft scenario, resetting those headcounts, those are real hard costs, right? It’s renegotiating contracts. It’s shared services, right? So these things are all hard costs.
So even in a soft scenario, we’re going to be able to get to the $100,000,000 Does that make sense?
Maxim Sychev, Analyst, National Bank Financial: Yes. No, 100%. I just want to clarify that that’s exactly the case. Yes. That’s great.
Yeah. Okay. Okay. That’s it for me. Thank you so much, gentlemen.
Super helpful.
John, Moderator: There are no further questions at this time. I will now turn the call back to Mr. Paul Anthony. Please continue.
Paul Anthony, Executive Chairman, AutoCanada: Listen, we appreciate everybody’s time on this call and look forward to presenting to everybody back for the next May board meeting. And while there’s uncertainty in the market, we’re going to be doing the best we can to remain disciplined and continue to work our plan. So thanks everybody and look forward to talking to everybody in May.
John, Moderator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
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