AutoCanada Q1 Earnings Call Highlights

Key Points

• AutoCanada’s Q1 adjusted EBITDA fell to CAD 31 million from CAD 43 million a year ago, reflecting a soft Canadian auto market, weaker new-light-vehicle demand, and pressure in used-vehicle margins.
• Used-vehicle profitability was the biggest operational issue, with used gross profit per unit at CAD -48 in the quarter. Management expects improvement as inventory is cleaned up and analytics, sourcing, and reconditioning processes improve.
• Debt reduction and balance-sheet repair remain top priorities, with about CAD 65.8 million already received from U.S. dealership divestitures and roughly CAD 130 million expected in total, largely to be used for debt repayment.

AutoCanada TSE: ACQ reported first-quarter 2026 adjusted EBITDA from continuing operations of CAD 31 million, down from CAD 43 million a year earlier, as the company continued to work through a soft Canadian automotive market and margin pressure in used vehicles.

Samuel Cochrane, AutoCanada’s chief executive officer and interim chief financial officer, said the quarter was “largely as expected,” but added that results remain below the company’s long-term expectations. He said Canadian new light-vehicle demand continued to decline year over year as consumers faced elevated vehicle pricing, affordability concerns, rising fuel costs and broader macroeconomic uncertainty.

“While macro conditions are outside of our control, operational execution is not,” Cochrane said, outlining a focus on sales productivity, used-vehicle margins, fixed operations, inventory discipline, working capital efficiency and expense control.

Used-vehicle profitability remains key pressure point

The largest area of pressure in AutoCanada’s automotive retail business was used-vehicle profitability. Cochrane said used-vehicle gross profit per unit was CAD -48 in the quarter as the company worked through aged inventory in a competitive and margin-challenged market.

He said AutoCanada expects used gross profit per unit to improve sequentially over the year as it enhances tools and analytics available to buyers, improves sourcing, strengthens merchandising habits and increases reconditioning speed.

In response to a question from Chris Murray of ATB Cormark Capital Markets, Cochrane said positive trends in used-vehicle gross profit per unit and volumes seen in March continued into April and May. He said used GPUs should improve in the second quarter from the first quarter and begin to normalize in the second half of the year.

“You’ll see quicker improvement on the used side, like even next quarter,” Cochrane said, while adding that new vehicles and parts and service may take nine to 12 months to return to more normal conditions.

Cochrane said AutoCanada has been rolling out a “buy box” tool to stores to give buyers better analytics before purchasing used vehicles. The tool is intended to show the minimum acceptable profit on a vehicle before acquisition. He also referenced other tactics under review, including increasing trade-ins and service-lane acquisitions.

Management points to operational reset

Cochrane said the main theme of the quarter was restoring operational stability after leadership changes implemented in mid-February. The company has moved to simplify the organization, improve accountability, strengthen operational oversight and refocus on execution fundamentals.

AutoCanada also added regional and functional leadership during the quarter, which Cochrane described as experienced Canadian automotive executives focused on performance management and dealership accountability.

Asked by Murray how much of the turnaround depends on the broader economy, Cochrane said the company cannot control the macro environment but sees several internal opportunities within its control. He cited recruiting more technicians and improving service bay utilization as one example, describing it as a CAD 20 million opportunity in fixed operations.

Cochrane reiterated that the turnaround is expected to take 12 to 18 months, saying the company should be operating with more normalized teams by then and can be judged against the market at that time.

New-vehicle gross profit may come down as volume improves

Analysts also asked about the new-vehicle business. Luke Hannan of Canaccord Genuity asked whether AutoCanada is closer to outperforming the Canadian new-vehicle market, as it has in the past. Cochrane said the company is closer, but still has work to do rebuilding teams and product knowledge after turnover over the past year.

Ty Collin of CIBC asked about the improvement in new-vehicle gross profit per unit. Cochrane said new-vehicle GPUs were “a bit too high” and that the company may have been able to drive more volume by giving up more gross profit.

“I wouldn’t take that as a run rate,” Cochrane said. “I would expect that to come down over the year, and I expect our volume to increase.”

Collision business grows, but hail comparison weighs

AutoCanada’s collision business remained a strategic focus. Cochrane said collision gross profit increased year over year and margins remained strong, but collision EBITDA declined due to a difficult comparison with the prior year’s elevated hail activity and the cost of three new collision centers that are still ramping toward full utilization.

He said those two factors accounted for approximately CAD 2.5 million of the year-over-year decline in collision EBITDA in the quarter.

In response to Collin, Cochrane explained that a catastrophic Calgary storm in July 2024 created a large backlog of hail-related work that supported revenue through much of 2025. He said hail revenue was about CAD 8 million in the first quarter of last year compared with about CAD 1 million this year.

Despite the hail-related headwind, Cochrane said the underlying traditional collision business continues to perform well, supported by insurance-related demand, expanding OEM certifications and growing insurer relationships.

During the quarter, AutoCanada completed the acquisition of Modern Auto Body in Edmonton. Cochrane said the acquisition expands regional density and enhances OEM certifications in an important market. He noted that Modern Auto Body did not have insurance partners at closing, which is one of the synergy areas AutoCanada is focused on post-closing.

Debt reduction and U.S. divestitures remain priorities

Cochrane said strengthening financial flexibility and reducing leverage remained major priorities. AutoCanada has received approximately CAD 65.8 million in gross proceeds from completed U.S. dealership divestitures and continues to expect total proceeds of about CAD 130 million once remaining transactions are complete.

He said proceeds are expected to be directed primarily toward debt reduction. Subsequent to quarter-end, AutoCanada completed an amended and extended syndicated credit facility that extends maturity through 2028, simplifies the facility structure and provides additional operating flexibility.

Asked by Hannan about the timing of remaining U.S. divestiture proceeds, Cochrane said another deal should occur in the summer, with the rest expected in the fall. He said a “big chunk” would likely come in the summer, with the remainder trailing in the fall.

Looking ahead, Cochrane described 2026 as a transitional year for the dealership business and a growth-focused year for collision. He said AutoCanada remains cautious about market conditions but is “cautiously optimistic” about the quarters ahead due to early signs of stabilization in used volumes and profitability.

“While there is still meaningful work ahead, we believe the foundation being established today positions the company to deliver stronger and more sustainable performance over time,” Cochrane said.

About AutoCanada TSE: ACQ

AutoCanada Inc operates car dealerships in Canada. The company offers new and used vehicles, spare parts, maintenance services, and customer financing. AutoCanada retails brands such as Chrysler, Dodge, Jeep, Ram, Cadillac, Chevrolet, Buick, GMC, Audi, Volkswagen, BMW, Mini, Infiniti, Nissan, Hyundai, Kia, Fiat, Mitsubishi, and Subaru. The majority of revenue is generated in the new-vehicles sales segment.

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