AutoCanada Inc. ((TSE:ACQ)) has held its Q4 earnings call. Read on for the main highlights of the call.
AutoCanada Inc. recently held its earnings call, revealing a mixed outlook for the company. While there were positive developments in Canadian operations and strategic asset realignments, challenges remain with declines in sales, economic uncertainties, and losses in U.S. operations impacting overall performance.
Canadian Operations Adjusted EBITDA Growth
Canadian operations experienced a noteworthy 12.8% year-over-year growth in adjusted EBITDA during the fourth quarter. This growth was primarily driven by OEM incentives, lower financing costs, and significant contributions from parts and service. These factors have bolstered the company’s Canadian performance amidst broader economic challenges.
Transformation Plan and Cost Savings
AutoCanada’s transformation plan is progressing well, with the company on track to achieve $100 million in annual run rate cost savings by the end of 2025. In 2024, the company realized $7.9 million in savings, with an annualized run rate savings of $9 million by December 31. This plan underscores the company’s commitment to enhancing operational efficiency and cost management.
Profitability Improvements in Canadian Business
The Canadian business segment showed resilience with a 4.7% year-over-year growth in new vehicle unit sales, contributing to a better-than-expected performance in the fourth quarter. This growth highlights the strength of AutoCanada’s Canadian operations despite market challenges.
Sale of Non-Core Assets
In a strategic move, AutoCanada sold three non-core Stellantis dealerships, generating $59.5 million in net proceeds. This sale is part of the company’s strategic asset realignment, aimed at focusing on core operations and improving financial health.
Decline in New Vehicle Sales and Gross Profit
Despite some positive developments, total sales from continuing operations decreased by 1.2% year-over-year. Additionally, new and used vehicle gross profit per unit dropped by 14.3% and 5.4%, respectively, indicating challenges in maintaining profitability across all segments.
Challenges in U.S. Operations
The U.S. business faced significant challenges, reporting a $24.2 million adjusted EBITDA loss in 2024. Consequently, the U.S. operations have been reclassified as a discontinued operation, reflecting the company’s strategic decision to focus on more profitable segments.
Negative Impact of Tariffs and Economic Uncertainty
The Canadian automotive sector is grappling with challenges due to U.S. tariffs, trade tensions, and inflationary pressures. These factors have contributed to a 2.8% year-over-year decline in new light vehicle sales in 2025, highlighting the broader economic uncertainties impacting the industry.
Closure of Right Ride Locations
The closure of all Right Ride locations resulted in an $11 million adjusted EBITDA loss in 2024. This decision aligns with the company’s efforts to streamline operations and focus on more profitable ventures.
Forward-Looking Guidance
Looking ahead, AutoCanada anticipates continued robust demand for new light vehicles in Canada, driven by OEM incentives and favorable interest rate conditions. The company is committed to executing its transformation plan, with key savings expected from standardizing dealership operations, enhanced cost controls, improved inventory management, and centralizing administrative functions. The focus remains on reducing the leverage ratio and pursuing the sale of U.S. assets to strengthen financial stability.
In summary, AutoCanada’s earnings call highlighted a mixed performance with positive strides in Canadian operations and strategic asset sales, countered by challenges in the U.S. and broader economic uncertainties. The company’s transformation plan and cost-saving initiatives are pivotal as it navigates these challenges and seeks to enhance profitability and operational efficiency.