Release Date: May 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AutoCanada Inc (AOCIF, Financial) reported a 2.3% year-over-year revenue growth in Q1 2025, driven by gains in new vehicle sales and collision services.
- The company achieved a 130 basis point expansion in adjusted EBITDA margin, benefiting from early improvements in operating leverage due to cost reduction initiatives.
- Annualized run rate cost savings reached $48.1 million in Q1, contributing to a total of $57.1 million since the launch of the ACX operating method.
- The collision business performed strongly, with OEM certifications and insurance volumes contributing to its success.
- AutoCanada Inc (AOCIF) has access to $218.2 million under its revolving credit facility, providing financial flexibility during its transformation process.
Negative Points
- Leverage remains above the target range due to the ongoing US business divestiture, and the company has paused acquisitions and share repurchases.
- There are significant uncertainties ahead, including tariff risks, weakening consumer sentiment, and broader macroeconomic pressures.
- Gross profit was flat compared to Q1 2024, with lower retail gross profit units offsetting gains in used wholesale and collision.
- The company faces heightened liquidity risk as it undergoes restructuring and divestiture processes.
- Demand trends are uncertain, with signs of consumer fatigue and potential slowdowns in May, following strong performance in March and April.
Q & A Highlights
Q: Can you elaborate on the ACX operating method and how it contributed to cost savings in Q1?
A: (Unidentified_3) We accelerated the implementation of the store archetype, moving some scheduled changes from April and May into March. This allowed us to achieve cost savings faster than anticipated.
Q: What is driving the strong performance in the collision business?
A: (Unidentified_5) Our collision business is benefiting from OEM certifications and increased insurance volumes. The industry is moving towards OEM certification, which we have focused on, and it is yielding positive results.
Q: Can you provide an update on the divestiture of US assets?
A: (Unidentified_3) The process is active and progressing well, with a target completion by the end of the year. There is significant interest in the market, and we are optimistic about meeting our timeline.
Q: How are you managing leverage, and what impact will the US divestiture have?
A: (Unidentified_3) We have stabilized leverage and expect a significant improvement once the US assets are divested. Additionally, ongoing operational improvements will contribute to better leverage metrics.
Q: Is there potential to exceed the $100 million cost savings target by the end of 2025?
A: (Unidentified_3) While we are focused on achieving the $100 million target, we view this as a continuous improvement process. Some savings may extend into 2026, but our current focus remains on reaching the initial goal.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
