In This Article:
Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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AutoCanada Inc (AOCIF) has initiated a strategic review of non-core assets, leading to the divestment of two Stellantis dealerships, which allows the company to focus on core areas with greater strategic and financial potential.
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The company has partnered with Bain to guide its transformation process, aiming for $100 million in run-rate operational expense savings by the end of 2025.
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New vehicle sales increased by 4.5% during the third quarter, indicating some resilience in the new vehicle market.
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AutoCanada Inc (AOCIF) has implemented a pause on acquisitions and capital return initiatives to prioritize its transformation plan and enhance profitability.
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The company received an amendment to its senior credit facility, providing additional financial flexibility to execute its transformation plan with Bain.
Negative Points
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Total sales for the third quarter were down 1.8% year over year, with adjusted EBITDA down 20% from the previous year.
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The Canadian operations reported a 4.7% decline in gross profit, and adjusted EBITDA was down 5.6%.
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The U.S. operations faced structural issues, resulting in a 13.2% drop in revenue and a 35.4% decline in gross profit.
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Higher flooring costs contributed to the decline in Canadian adjusted EBITDA compared to the previous year.
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The company is experiencing lower gross profit per unit and reduced demand for finance and insurance products due to softer market conditions and affordability pressures.
Q & A Highlights
Q: What milestones are you looking for in the pilot programs at the four dealerships before rolling them out to the rest of the group, and how long will the pilot last? A: We are assessing the effectiveness of the pilot programs over a period of 3-4 months to see how changes impact our bottom line. We selected a representative sample of stores to help us understand how to tweak the program before a full rollout. Sam Cochran, Co-CEO
Q: Is the reduction in operating expenses this quarter a permanent change, or will those costs return once discretionary spending resumes? A: In the short term, these reductions will remain, at least for the next couple of quarters. We will gradually release these constraints as we see progress in our transformation project with Bain. However, they are not permanent. Sam Cochran, Co-CEO
Q: Can you provide examples of areas where you are looking to achieve the $100 million cost savings target? A: We are focusing on heightened controls on hiring and T&E spending, optimizing store operations, and centralizing procurement and shared services. For instance, consolidating contracts across dealerships to leverage scale for better terms. Sam Cochran, Co-CEO