AutoCanada Inc.

Thank you for joining AutoCanada's conference call to discuss the financial results for the third quarter of 2025. 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 AutoCanada's filings on CEDAR Plus for a discussion of this risk. the fourth quarter news release, financial statements, and MD&A. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question at that time, please press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star followed by two. I'd like to remind everyone that this conference call is being recorded today, Thursday, November 13, 2025. Now, I'd like to turn the call over to Mr. Samuel Cochrane, Interim Chief Executive Officer of Auto Canada, Inc. Please go ahead, Mr. Cochrane.

Good evening, everyone, and thank you for joining us. This quarter marks an important transition for Auto Canada. As many of you know, Paul Anthony has stepped away from his role as Executive Chair. I want to begin by recognizing Paul's leadership and contributions over the past several years and thank him for his commitment to Auto Canada's transformation and personal mentorship to me. I'm honored to step into the role of interim CEO at such a pivotal time. My focus is to complete the transformation in the coming weeks and then quickly pivot the business's attention towards operational excellence to ensure a successful 2026. The key to 2026 is to build back volumes on our lower cost base by focusing on the fundamental elements of servicing our customers. Turning to the results, recent trends continued from a top-line perspective as we managed through several overlapping factors. Revenue from continuing operations was 1.2 billion compared to 1.4 billion in the prior year. reflecting softer performance across new and used vehicle sales, parts and service, and F&I. As expected, ongoing store restructuring and continued softer demand in certain brands contributed to in-quarter revenue pressure. Additionally, the year-over-year comparison was particularly difficult as Q2 2024's TDK outage shifted some business into Q3 2024, creating an unusually tough comp. Despite these headwinds, the underlying progress of our transformation continued. Adjusted EBITDA from continuing operations was $58.1 million compared to $63.1 million last year, with margins up year-over-year at 4.8%. While volumes were lower, disciplined cost control helped offset a large part of the impact and allowed for continued margin expansion. Our cost transformation remains firmly on track, and we plan to be wrapped up in the next couple weeks. As of September 30th, we've achieved roughly $100 million of our $150 million 2025 annual run rate savings target, driven by headcount optimization, tighter expense and inventory management, procurement efficiencies, and process improvements. The benefits of this leaner structure are already visible in our expanded EBITDA margin and normalized operating expenses, which are down more than 20% year-over-year. The bright spot, again, this quarter was our collision business, which continues to deliver consistent, high-quality growth. Collision revenue grew 19% year-over-year, driven by higher demand, new OEM certifications, and increased insurance referral activity. Subsequent to the quarter, we expanded our network with the acquisition of Doug's Place Rathcona, further strengthening our presence in Edmonton. On the strategic front, we continued to advance the sale of our U.S. dealership. To date, we've received approximately $37 million in proceeds, net of working capital, with another $12 million expected to close before year-end. The remaining transactions are on track to close through the first half of 2026, bringing total anticipated proceeds to around $130 million. near the top end of our previously stated range. These proceeds will be used to reduce debt and enhance balance sheet flexibility. At the end of the quarter, our total net funded debt-to-bank EBITDA ratio was 3.4 times, trending towards our long-term target range of two to three times. We're entering the final stretch of 2025 with a more stable financial position and a simpler, more efficient operating model. Our short-term priorities are clear. deliver the remaining cost reductions, complete the U.S. investitures, and pivot the business towards operational excellence with a focus on the customer. Beyond that, we're beginning to plan for Phase 2 of our turnaround, a shift towards disciplined, profitable growth. As part of our next phase, we will focus on expanding gross profit across a leaner, more durable cost base. Planning for our 2026 dealership operational strategy is already underway, and it's clear there's significant opportunity ahead. In the near term, we will also continue expanding in collision, where we see a low-risk path to sustained double-digit returns on capital. With just a 2% share of the Canadian dealership market and a 1% share in collision, the long-term growth runway remains substantial.

I'd also like to take a moment to acknowledge the leadership changes announced earlier today. As part of strengthening our operational foundation for the next phase of growth, we promoted three outstanding leaders –