INVESTOR PRESENTATION - Q3, 2017 - AUTOCANADA INVESTOR RELATIONS
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investor Presentation Q3, 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
3 Multiple Touch Points on the Customer Journey
Why Invest in AutoCanada?
4
• Auto retail sector performed extremely well in 2016; on track for all-time
record in 2017
Well Performing Sector
• Sales of 1.6 million vehicles in first nine months of the year
• Advances in technology, styling and safety expected to drive long-term new
vehicle sales
• Annual spending of $143 billion in 2016 up 9.3% compared to 2014
Key Part of the Economy
• Greater than any other Canadian retail segment
• Canadian dealer market is fragmented with approximately 3,300 dealerships
and 2,000 owners
Market Highly Fragmented; • Significant proportion of dealers will be retiring in the next few years
Consolidation creating a “succession planning opportunity”1
Opportunities • Industry shifting from “mom & pop” dealerships to larger dealer groups
• 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
Canada’s only publicly-traded auto retailer
(1) Source: PricewaterhouseCooper’s Automotive Trendsetter Report 2012
5
Unparalleled Presence & Brands
DEALERSHIPS 58
OEMs 11
BRANDS 23
TOTAL REVENUE $2.9B
NEW VEHICLE
SALES (UNITS) 40,032
USED VEHICLE
SALES (UNITS) 19,561
SERVICE BAYS 999
SERVICE ORDERS 863,970
5
*Revenue, Sales and Service figures represent 2016 annual totals
6
Dealership Clusters
• AutoCanada aims to cluster our dealerships in
major metropolitan centres Edmonton
• Clusters allow for the sharing of Management
resources along with the sharing of best practices
• Top performing staff are given further
opportunities at other dealerships in the Cluster,
promoting growth and development
Edmonton and area: 9 dealerships
Calgary and area: 9 dealerships
Grande Prairie: 5 dealerships
Winnipeg: 4 dealerships
Montreal: 4 dealerships
Ottawa: 3 dealerships
Prince George: 3 dealerships
7
Resilient Business Model
2016 2016
• Auto dealerships are resilient in adverse market
conditions
Revenue Gross Profit
• Well-established and accepted dealership model 4.5%
has existed for 50+ years in the Canadian 24.6% 24.3%
13.2%
marketplace
• OEMs committed to dealership success and
profitability
9.7%
• Four business segments provide diversified and 25.1%
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
• Parts & service business is a counter-cyclical
and stable recurring revenue stream
8
O u r F o c u s
Strategic Levers
ACQUISITION & COST CONTROL
OPERATIONAL GROWTH STRATEGY
EXCELLENCE & BALANCE SHEET
STRENGTH
Increase Available System-wide
Brands Improvements
Enhance
Dealership Broaden Geographies Head Office
Performance Efficiencies
Offer All Price Points
Manage Debt &
Capital Expenditures
Dealer Clusters in
Key Markets
9
OPERATIONAL
EXCELLENCE
• Multi-location model serves a diversified geographic customer and
revenue base; cluster strategy enables other scalable benefits
Enhance • Decentralized operations with centralized administration and
Dealership strategy
Performance
• Dealer Support Services empowers the very best of Dealer
Principals to make key operating decisions within a financial and
governance framework
• Dealership support based on brand team platforms better
positioned to meet the needs of dealers and OEMs
• Uniform application of best practices: innovative ideas,
benchmarking and data analytics
10
ACQUISITION &
GROWTH STRATEGY
Increase Available • Ongoing assessment of acquisition and Open Point opportunities
Brands to diversify geographic reach and brand portfolio
Broaden Geographies • Building on OEM relationships to broaden reach of existing brands,
add new ones
Offer All Price Points
• Focus on immediately accretive acquisitions –15% to 20% pretax
Dealer Clusters in
annual ROI
Key Markets • Dedicated teams for pre-acquisition assessment, post-acquisition
integration
• Integration focus includes continuous improvements in
efficiencies, and deepening IT and analytical capabilities
• Look for flagship stores in metropolitan markets; dealership
clusters to enhance scale opportunities
• Capital is allocated where it has the highest rate of return;
priorities include new Open Point locations, dealership relocations11
COST CONTROL
& BALANCE SHEET
STRENGTH
• Aggressively manage our fixed and variable costs
System-wide
Improvements • Centralized purchasing and shared resources strategy reduce
costs for dealerships on everything from payroll to tires
Head Office
Efficiencies • Business planning process includes expense control and vehicle
delivery targets
Manage Debt &
Capital Expenditures • Inventory management based on on market information and
consumer buying patterns
• Dealer Council provides forum to discuss issues and leverages
successes from across the network
• Company pursuing national procurement initiativesQ3 Update
13
Q3 Financial Highlights
Revenue ($MM) Profit ($MM) Adj. EPS
+10.8% +12.2% +31.6%
Commentary $138.0
$834.6 $0.50
• Top line growth across the
business $0.38
• New vehicles up 9.4%
Used vehicles up 2.9% $753.2 $122.9
Collision/Repair up 9.7%
Fin & Ins up 18.0%
• Grew total same store sales
2.9% 2016 2017 2016 2017 2016 2017
• Annualized dividend of SAME STORE Q3 Revenue %Change Gross Profit %Change
$0.40/share
New vehicles $433.7 4.1 $31.0 6.1
Used vehicles $168.3 (0.1) $11.2 (6.6)
Collision/Repair $89.2 (0.2) $46.9 4.9
Finance & Insurance $35.5 13.3 $32.6 14.114
Q3 Acquisition: Planète Mazda
• First Mazda dealership
• Fourth Montreal dealership
• Expected closing December 1
1415
Sales Platform Mix
European Import Asian Import
21% 17%
General Motors FCA
21% 36%
FOCUS ON IMPROVING BALANCELeadership Team
16
Steven J. Landry Chris Burrows
President & CEO Chief Financial Officer
• Leads all aspects of AutoCanada, • Accomplished finance professional
providing a vision for future growth and • Oversees Cost Control & Balance Sheet
internal development Strength
• Experienced Leader in the Automotive • Managing all financial aspects of
industry AutoCanada while preparing the
• Former CEO of Chrysler Canada and EVP Company for further growth
of Chrysler Group
Mark Warsaba Erin Oor
Chief Operations Officer VP Corporate Development & Admin
• Promotor of Operational Excellence • Spearheads our acquisition and growth
strategy
• Experienced retail automotive
professional • Experienced negotiator and legal
strategist
• Four years as Dealer Principal at St. James • General Counsel for AutoCanada
Volkswagen and Audi Winnipeg • Former Partner at Bryan & Company LLPA Successful Track Record
18
Our Record
New Brands in Last 4 Years
New Locations in Last 4 Years
Duncan BC GM Prince Albert SK GM
Kelowna BC GM Saskatoon SK FCA, GM
Calgary AB FCA (3), Hyundai (2), Mitsubishi, Winnipeg MB Audi, Volkswagen, FCA, GM
Volkswagen, Nissan, Infiniti Guelph ON Hyundai, FCA
Edmonton AB Kia, Volkswagen, GM (3), FCA Ottawa ON Nissan (2), Infiniti
Grande Prairie AB Volkswagen Toronto ON FCA
North Battleford SK GM Montreal QC Mercedez-Benz, Smart, BMW (2),
MINI (2); Mazda19
Successful Integration
BMW Laval and BMW Canbec were acquired in 2014
NEW VEHICLE SALES 2015 CSI 2016 NEW VEHICLE SALES CSI 2016
2015
2015 2016 2015 2016
59.0 74.7 51.7 57.9
2,210 2,321 1,576 1,579 Benchmark: 53.7 Benchmark: 69.4
Benchmark: 53.7 Benchmark: 69.4
USED VEHICLE SALES 2015 SSI 2016 USED VEHICLE SALES 2015 SSI 2016
2015 2016 2015 2016
87.2 91.7 73.5 72.0
648 757 Benchmark: 86.5
526 576 Benchmark: 82.1 Benchmark: 86.5
Benchmark: 82.1
1920
Dealership Profitability
Long-term Integration and
Growth
Sherwood Park Chevrolet – acquired April 30, 2012
2012 2013 2014 2015 2016
Sherwood Park Buick GMC – acquired May 31, 2012 Sherwood Park Chevrolet Sherwood Park Buick GMC
2021 21
Audi Winnipeg
Dealership Relocatio
• Construction in
progress
• Expected
completion Q4
2017 or early
20182016 Snap Shot
22
As at December 31, 2016 2015 % Change
New vehicles (units) 40,032 42,457 -5.7%
Used vehicles (units) 19,561 20,342 -3.8%
Revenue $2.89B $2.90B -0.4%
Adjusted net income $39.9M $40.3M -1.0%
Gross profit % 16.8% 16.8% 0%
Basic adjusted earnings per
share $1.45 $1.64 -11.6%
Adjusted free cash flow $68.6M $38.8M 76.7%2017 Q3 Highlights
23
As at September 30, 2017 2016 % Change
New vehicles (units) 12,014 10,983 9.4%
Used vehicles (units) 5,118 4,972 2.9%
Revenue $834.6M $753.2M 10.8%
Adjusted net income $13.6M $10.3M 31.5%
Gross profit % 16.5% 16.3% 1.2%
Basic adjusted earnings per share $0.44 $(1.19) N/A
Adjusted free cash flow $23.3M $27.8M -16.1%Year to Date 2017 Snap Shot
24
Gross Profit by
Department
$157,395
$148,302
$100,951 $98,898
$93,255 $90,663
$37,128 $36,175
New vehicles Used vehicles Parts, service and collision repair Finance, insurance and other
2016 2017Additional Information
26
NEW VEHICLE SALES
Revenue % Gross Margin % Revenue & Units Sold Gross Profit & Gross Margin
YTD 2017 58.6% 7.2%
$140 16%
2016 57.2% 7.2% $2,000 60
$126
$1,758 $122 15%
$1,800 $118
$1,668 $1,653 $120
• New vehicle sales drive high-margin $1,600
50 $106 14%
related transactions, including resale of
New Vehicles Sold (000's)
$1,342 $100 13%
42.5 42.5
$1,400
trade-ins, sale of third-party financing,
Gross Profit (C$M)
40.0 40
Gross Margin (%)
12%
service or insurance products and $1,200 36.4 $80
$76
Sales (C$M) $883
recurring service and repair business $1,000 30
11%
28.0 $58
$683 $60
$641 $48 10%
$800
• AutoCanada sold 40,032 new vehicles 19.3
21.5
20 9%
$40
in 2016 (1) $600
8.5% 8.6%
7.9% 8%
$400
10 $20 7.5%
7.3% 7.2% 7.2% 7%
$200
$0 6%
$0 0
2011 2012 2013 2014 2015 2016 LTM
2011 2012 2013 2014 2015 2016 LTM
Gross Profit (C$M)
Sales (C$M) New Vehicles Sold (000's)
Gross Margin (%)
Note:
(1) 83% of new vehicle sales were made to retail customers, and the balance to lower margin fleet business27
USED VEHICLE SALES
Revenue % Gross Margin % REVENUE & UNITS SOLD GROSS PROFIT & GROSS MARGIN
YTD 2017 23.3% 6.6%
2016 25.1% 6.5% $50 15%
$800 40 $47 $46
$725
$705
• Used vehicle sales also drive related higher- $700
$699
35
$41
margin transactions, including service $40 13%
Used Vehicles Sold (000's)
Gross Profit (C$M)
contracts, reconditioning opportunities for $600 30
Gross Margin (%)
parts and service, recurring parts and service $495
Sales (C$M)
$500 25 $30
$30 11%
business and financing commissions
$400 20.3 20
19.6 19.0 $17
$16 $20
• Trade-ins also help support new vehicle sales $300
$301
15.7
15 $20 9%
by reducing the consumers net cash cost of $206
$243 8.4%
the new vehicle $200
8.7
9.5
10.4 10
$10 7%
6.7% 6.7% 6.6%
$100 5 6.5%
• The sale of used vehicles are not tightly 6.0%
5.8%
controlled by the OEM’s, allowing $0
2011 2012 2013 2014 2015 2016 LTM
0
$0 5%
2011 2012 2013 2014 2015 2016 LTM
AutoCanada to take trade-ins and resell any
vehicle brand Sales (C$M) Used Vehicles Sold (000's) Gross Profit (C$M)
Gross Margin (%)PARTS, SERVICE & COLLISION
28
REPAIR
% Revenue Gross Margin % REVENUE & SERVICE ORDERS GROSS PROFIT & GROSS MARGIN
YTD 2017 13.4% 52.4%
$480 1000
2016 13.2% 52.6% $388 $383 $402 $240 60%
$420 864 864 $220 $210
848 $194 $201
800 $200
• Absorption rate of 87% in 2016(1) $360
Service Orders (000's)
Gross Profit (C$M)
$180 55%
Gross Margin (%)
Sales (C$M)
$256
$160
$300
• In 2016, AutoCanada completed 863,970 602 600
$140
52.2%
52.4%
51.8% $129
52.6% 52.4%
service orders on 928 service bays (year $240 $120 50.3% 50.0% 50%
end) $142 $100
400 $74
$180 $110 $114 364 $80 $58 $60
• Parts & service activity is generally 305 309
$60 45%
considered counter-cyclical $120
$40
200
$60 $20
• Vehicle service under the manufacturer $0 40%
warranty must be completed at a $0 0
2011 2012 2013 2014 2015 2016 LTM
franchised dealer providing a large 2011 2012 2013 2014 2015 2016 LTM
captive market Gross Profit (C$M)
Sales (C$M) Service Orders (000's) Gross Margin (%)
• Independent repair shops are closing as
Note:
highly specialized, capital intensive (1) Absorption rate is the extent to which the gross profit of the parts & service segment covers its own operations plus the fixed costs of operating the
equipment and skilled labour is required dealerships (fixed salaries and benefits, administration costs, occupancy costs, insurance expense, utilities expense and non-floorplan interest expense;
28
excludes all costs pertaining to head office)
to service increasingly complex vehicles29
FINANCE, INSURANCE & OTHER
Revenue % Gross Margin % REVENUE & TOTAL VEHICLES SOLD GROSS PROFIT & GROSS MARGIN
YTD 2017 4.6% 91.6%
$175 90
2016 4.5% 91.5%
$131 98%
$128
• Every vehicle sale presents AutoCanada $150 $143
$139
80
$125 $119
with an opportunity to increase profits
Total Vehicles Sold (000's)
$130 $109
70
$121
through the sale of additional products $125
Gross Profit (C$M)
Gross Margin (%)
62.8 $100
61.5
Sales (C$M)
60 94%
such as third party financing or lease $100
59.6
$76
$56
arrangements, extended warranties, $83 52.1
50 $75
92.1%
$46 91.8%
service contracts and insurance $75
$61
91.2%
91.5% 91.6%
40 90.7%
products $51 38.4
$50
89.9% 90%
$50
31.0 30
28.0
• AutoCanada is paid a commission on $25
20
$25
the transaction and retains no financing
$0 10
risk 2011 2012 2013 2014 2015 2016 LTM
$0
2011 2012 2013 2014 2015 2016 LTM
86%
Gross Profit (C$M)
− High margin and excellent growth Sales (C$M) Total Vehicles Sold (000's)
Gross Margin (%)
• Represented 91.5% gross margin in 2016Chris Burrows, CFO cburrows@autocan.ca
You can also read
