Investor Presentation May 16, 2017
FORWARD-LOOKING STATEMENTS 2 Certain information contained in this presentation looks payout policies; future intentions relating to financial forward in time and deals with other than historical or leverage; and the retail automotive industry. Although the current facts for AutoCanada Inc. (“AutoCanada” or the Company believes that the expectations reflected by the “Company”). The use of any of the words “could”, forward-looking statements presented in this presentation “expect”, “believe”, “will”, “projected”, “estimated” and are reasonable, these statements have been based on similar expressions and statements relating to matters assumptions and factors concerning future events that may that are not historical facts are intended to identify prove to be inaccurate. Actual future results may differ forward-looking information and are based on the materially. The Company’s annual information form for the Company’s current belief or assumptions as to the year ended December 31, 2016 and other documents filed outcome and timing of such future events. In particular, with securities regulatory authorities (accessible through the forward-looking statements in this presentation include, SEDAR website www.sedar.com) describe the risks, material but are not limited to, references to: the Company’s assumptions and other factors that could influence actual general strategic plans and growth strategies; future results and which are incorporated herein by reference. The sales and revenue; future dealership acquisitions and Company disclaims any intention or obligation to update or open point dealerships; the Company’s targets relating revise any forward-looking information, whether as a result of to return on investment and financial ratios; dividend new information, future events or otherwise. 2
AUTOCANADA OWNS SOME OF THE TOP PERFORMING DEALERSHIPS 3 Prince Grande Prairie George Edmonton Dealership Ponoka North Prince Albert Maple Ridge/ Battleford Abbotsford Moncton Winnipeg Locations & Saskatoon Laval Calgary Victoria / Kelowna Duncan Montreal Dartmouth Dealerships Brands FCA 17 Ottawa Toronto (GTA) General Motors 9 Hyundai 9 Luxury Dealerships Nissan 5 Infiniti 2 Volkswagen 7 Cadillac 2 Mitsubishi 2 Audi 1 Subaru 1 BMW / MINI 2 Dealerships 57 Kia 1 Mercedes-Benz 1 Total 51 Total 8 OEMs 10 Brands 20 ’16 Total Revenue $2.9 B New Vehicles Sold 40,032 Used Vehicles Sold 19,561
Platform Brand Mix- New Retail Sales 4 Sales Platform Mix Asian Import European Import 24.3% 16.6% General Motors FCA 19.5% 39.6% FOCUS ON IMPROVING BALANCE
5 O u r F o c u s Strategic Levers ACQUISITION & OPERATIONAL COST CONTROL GROWTH STRATEGY EXCELLENCE & BALANCE SHEET Diversification Across Dealership Performance Variable Expenses as Canada % of Gross Profit Same Store Metrics Brand Portfolio Balance Interest Expense Improved Margins Accretion Manage Debt & Capital Expenditures New Technologies Dealer Clusters in Key Markets
CANADIAN AUTO DEALER MARKET 6 Key Themes • Auto retail sector performed well in 2016; new vehicle sales increased by 2.7%, surpassing the all-time Improving Vehicle Sales in record Canada • In March 2017, Canadian light vehicle sales increase 7.1% Y/Y to 187,540 units • Advances in technology, styling and safety expected to drive long-term new vehicle sales gains Auto Retail Sector is a Key • Annual spending of $143 billion in 2016 up 9.3% compared to 2014 Part of the Economy • Greater than any other Canadian retail segment • Canadian dealer market is fragmented with approximately 3,300 dealerships with approximately Market Highly Fragmented 2,000 owners but Continuing to • Industry shifting from “mom & pop” dealerships to larger dealer groups Consolidate • AutoCanada is well positioned to capitalize on this industry consolidation Succession Planning • A significant proportion of dealers will be retiring in the next five years creating a “succession planning Opportunity Leading to opportunity” Significant Ownership • Over 70% of dealers want to be semi-retired or completely out of the business in five years and fully retired within 10 years (1) Turnover • Dealership owners are facing increasing facility capital requirements for OEM branding programs Public Ownership Evolving • OEM acceptance of publicly-listed companies is growing in Canada in Canada • As evidenced by AutoCanada’s acquisition of Mercedes-Benz Rive-Sud in May 2017 (1) Source: PricewaterhouseCooper’s Automotive Trendsetter Report 2012
DIVERSIFIED REVENUE SUPPORTS STRONG BUSINESS MODEL 7 2016 2016 • The auto dealer business model is resilient in Gross Profit Revenue adverse market conditions • Well-established and accepted dealership model 4.5% has existed for 50+ years in the Canadian 24.3% 24.6% 13.2% marketplace • OEMs committed to dealership success and profitability 9.7% 25.1% • Four business segments provide diversified and 57.2% stable revenue 41.4% • Dealerships have a variable cost structure, with the parts & service business covering most of the fixed costs of the entire dealership New Vehicle Sales Used Vehicle Sales • Parts & service business is a counter-cyclical Parts, Services & Collison Repair and stable recurring Finance and Insurance revenue stream
ACQUISITION PLAN IN ACTION 8 8 • Wellington Motors The transaction closed October 1, 2016 • Expands AutoCanada’s Ontario platform • Annual revenue of $46 million
ACQUISITION PLAN IN ACTION 9 9 • The transaction closed December 19, 2016 Guelph Hyundai • Expands AutoCanada’s Ontario platform • Annual revenue of $31 million
GROWTH PLAN IN ACTION 10 10 Sherwood Park • Opened February 1, 2017 Volkswagen
ACQUISITION PLAN IN ACTION 11 11 Mercedes-Benz • The transaction closed May 1, 2017 Rive-Sud • Expands AutoCanada’s brand offering to 20 • 2016 annual revenue of $90 million
GROWTH PLAN IN ACTION 12 12 • Construction in progress Audi Winnipeg – expected completion Q4 2017 or early 2018
2016 Snap Shot 13 % As at December 31, 2015 2016 Change New vehicles (units) 42,457 40,032 -5.7% Used vehicles (units) 20,342 19,561 -3.8% Parts, service, and collision repair $194M $201M 3.6% Adjusted net income $39.9M $40.3M 1.0% Gross profit % 16.8% 16.8% 0% Basic adjusted earnings per share $1.64 $1.46 -0.18% Adjusted free cash flow $38.8M $68.6M 76.8%
Q1 2017 Snap Shot 14 % As at March 31 , 2015 2016 2017 Change New vehicles (units) 8,933 8,502 8,508 0.1% Used vehicles (units) 7,393 4,799 4,547 -5.3% Parts, Service & Collison Repair $43.9M $47.7M $47.3M -0.8% Adjusted net income $5.6M $6.3M $4.6M -26.4% Gross profit % 16.6% 16.8% 17.5% 4.2% Basic adjusted earnings per share $0.20 $0.23 $0.17 -0.06% Adjusted Free Cash Flow -$7.4M $6.0M $15.2M 152%
RETAIL AUTOMOTIVE GROSS PROFIT 15 Q1 RESULTS Same Store Total Q1 2016 Q1 2017 Q1 2016 Q1 2017 As at March 31, New vehicles 7.5% 4.2% 7.5% 7.4% Used vehicles 5.8% 7.2% 5.8% 7.2% Parts, Service & Collison Repair 50.3% 52.1% 50.7% 55.6% Finance & Insurance 91.3% 91.4% 91.4% 90.9%
Q1 2017 Snap Shot 16 Q1 2016 vs. Q1 2017 Gross Profit by Department $60,000 $47,669 $47,284 $50,000 $40,000 $27,267 $26,353 $26,813 $25,590 $30,000 $20,000 $10,420 $11,940 $10,000 $0 New Vehicles Used Vehicles Parts & Services Finance & Insurance Q1 2016 Q1 2017
17 NEW VEHICLE SALES Revenue % Gross Profit % Revenue & Units Sold Gross Profit & Gross Margin Q1 2017 55.3% 7.4% $140 15% 2016 57.2% 7.2% $122 14% $1,800 60 $1,668 $118 $117 $1,653 $120 $1,643 $106 $1,600 13% • New vehicle sales drive high-margin 50 $1,342 $100 related transactions, including resale of $1,400 New Vehicles Sold (000's) 12% Gross Profit (C$M) Gross Margin (%) 42.5 trade-ins, sale of third-party financing, $76 40.0 40.0 $1,200 40 $80 11% service or insurance products and 36.4 $883 Sales (C$M) $1,000 recurring service and repair business $58 10% 30 $60 $683 28.0 $641 $48 $800 • 9% AutoCanada sold 40,032 new vehicles 21.5 $600 20 $40 8.6% 8.5% 19.3 in 2016 (1) 8% 7.9% $400 7.5% 7.3% $20 10 7.2% 7.1% 7% $200 $0 6% $0 0 2011 2012 2013 2014 2015 2016 LTM 2011 2012 2013 2014 2015 2016 LTM Sales (C$M) New Vehicles Sold (000's) Gross Profit (C$M) Gross Margin (%) Note: (1) 83% of new vehicle sales were made to retail customers, and the balance to lower margin fleet business
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