AutoCanada (TSX:ACQ) reported first-quarter financial results on Wednesday. The transcript from the company’s first-quarter earnings call has been provided below.
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Summary
ACQ reported a decline in adjusted EBITDA to $31 million from $43 million year-over-year, influenced by a $5 million forfeiture of share-based compensation.
The company is seeing progress in rebuilding sales productivity and dealership business, with improved trends in used vehicle profitability.
ACQ’s collision business continues to grow, despite challenges from reduced hail activity, with strategic acquisitions like Modern Auto Body in Edmonton.
Efforts to improve operational efficiency include enhancing sales productivity, improving inventory management, and reducing corporate costs.
The company aims to complete the divestiture of its US dealership portfolio, expecting $130 million in total proceeds, which will be largely used for debt reduction.
ACQ is cautiously optimistic about operational improvements showing early positive trends, particularly in used vehicle sales.
Management emphasizes a disciplined approach to capital allocation, focusing on debt reduction and strategic investments in collision business expansion.
Full Transcript
OPERATOR
Thank you for joining AutoCanada’s conference call to discuss the financial results for the first quarter of 2026. I’m Ludy, 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 SEDAR+ for a discussion of these risks, the first 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. I’d now like to turn the call over to Mr. Samuel Cochrane, Chief Executive Officer and Interim Chief Financial Officer of AutoCanada Inc. You may begin.
Samuel Cochrane (Chief Executive Officer and Interim Chief Financial Officer)
Good evening everyone and thank you for joining us. Before discussing our quarter, I want to begin with a few comments on the broader operating environment as we move through the first quarter and into the early part of the second quarter. The Canadian automotive market remained soft. Industry demand for new light vehicles continued to decline year over year as consumers faced elevated vehicle pricing, persistent affordability concerns, rising fuel costs and broader macroeconomic uncertainty. Fuel prices are an important factor to monitor closely. Higher fuel costs can influence consumer appetite for vehicle purchases, impact discretionary spending on service and maintenance which can sometimes be deferred and even affect kilometers driven which has implications for collision demand over time. While collision remains a resilient business, we are mindful that consumer behavior can shift in this type of environment. Against that backdrop, our our first quarter results were largely as expected with adjusted EBITDA from continuing operations of $31 million compared to $43 million in the prior year. The $31 million in adjusted EBITDA included a $5 million forfeiture of share based compensation expense related to departing executives. These results are below our long term expectations for the business. That being said, we saw meaningful progress towards rebuilding sales productivity and in our dealership business late in the quarter and into April and I’m encouraged by the momentum being built by fate and his team. We also continue to see growth in our core collision business despite the hail business lagging due to reduced storm activity and are set up well for continued collision expansion. In the automotive retail business, the largest area of pressure continued to be used vehicle profitability. Used vehicle gross profit per unit was negative. 48 in the quarter as we worked through aged inventory and operated in a broader used market that remained highly competitive and margin challenged. We expect used gross profit per unit to improve sequentially over the year as we enhance the tools and analytics available to our buyers, which will improve sourcing, build better merchandising habits and increase the speed of our reconditioning.
Samuel Cochrane (Chief Executive Officer and Interim Chief Financial Officer)
At the same time, there were several important positives and areas of progress during the quarter that reinforce why we believe the automotive retail business is moving in the right direction operationally. The key theme for Q1 was restoring operational adequacy and stability. Since the leadership changes implemented in mid February, we have taken decisive actions to simplify the organization and get closer to our core operations, improve accountability, strengthen operational oversight and refocus the business on execution fundamentals.
Samuel Cochrane (Chief Executive Officer and Interim Chief Financial Officer)
This work is still early, but we are beginning to see encouraging signs. March and April showed sequential improvement in used vehicle profitability trends supported by stronger sales productivity and better inventory pricing and management. We also added regional and functional leadership during the quarter who are both experienced Canadian automotive executives. They will focus on strengthening performance management and accountability at the dealerships.
Samuel Cochrane (Chief Executive Officer and Interim Chief Financial Officer)
Our view is straightforward. While macro conditions are outside of our control, operational execution is not. Our automotive retail priorities remain centered on the key controllable drivers of the business improving sales productivity and conversion, rebuilding new vehicle margins, increasing fixed operation absorption and service utilization, improving inventory discipline and working capital efficiency and maintaining expense discipline. While we grow our top line, we believe these actions are establishing a stronger operational foundation that will allow the business to perform more consistently.
Samuel Cochrane (Chief Executive Officer and Interim Chief Financial Officer)
Turning to Collision operations this continues to be a strategically important part of the company Collision gross profit increased year over year and margins remained strong despite a challenging comparison related to elevated hail activity and in the prior year. In the first half of 2025 we worked through a significant backlog of hail related repairs stemming from the catastrophic Calgary storm in July 2024. The quarter was also impacted by the recent opening of three new collision centers which are still ramping towards full utilization.
Samuel Cochrane (Chief Executive Officer and Interim Chief Financial Officer)
Together the difficult hail comparison and the added cost associated with these new facilities account for approximately 2.5 million of the year over year. Decline in Collision EBITDA this quarter the underlying traditional collision business continues to perform well supported by strong insurance related demand, banning OEM certifications and growing insurer relationships. During the quarter we completed the acquisition of Modern Auto Body in Edmonton which expands our regional density and enhances OEM certifications in an important market. Modern Auto Body did not have any insurance partners at the time of closing which is one of the areas of synergies we are focused on post closing. We continue to view Collision as a highly attractive long term growth platform due to its resilient margin profile, fragmented market structure and strong consolidation opportunities. Importantly, our strategy here remains disciplined and we intend to continue pursuing targeted accretive collision acquisitions focused on regional density, OEM certification capabilities and long term margin expansion.
Samuel Cochrane (Chief Executive Officer and Interim Chief Financial Officer)
Art and the team have demonstrated an ability to meaningfully improve both cost and revenue post acquisition operationally. Several important initiatives are also underway within Collision including expanding OEM certifications, increasing insurance ERP partnerships, scaling apprenticeship and technician development programs, advancing the national operating model, expanding higher margin services such as diagnostics calibrations and coatings and and continuing the rollout of our national collision brand strategy. These initiatives are intended to improve long term operating leverage, margin stability and referral volumes across the platform. Turning to the Balance Sheet Strengthening financial flexibility and reducing leverage remained a major priority during the quarter, we continued to make meaningful progress on the divestiture of our US dealership portfolio. To date, we have received approximately 65.8 million in gross proceeds from from completed transaction and continue to expect total proceeds of approximately 130 million upon completion of the remaining divestitures.
Samuel Cochrane …
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