AutoCanada TSE: ACQ reported higher second-quarter revenue but lower profitability as vehicle margins and fixed operations performance remained under pressure in a soft Canadian auto market.
Revenue from continuing operations increased 6% year over year to CAD 1.4 billion, while same-store revenue rose 5.5%, Chief Financial Officer Mike Woodward said on the company’s second-quarter 2026 earnings call. Growth in new- and used-vehicle sales and finance-and-insurance operations was partly offset by lower parts-and-service and collision revenue.
Gross profit declined 8.1% to CAD 207 million, and gross profit margin fell 220 basis points to 14.6%. Adjusted EBITDA from continuing operations decreased to CAD 52 million from CAD 64 million a year earlier, with the adjusted EBITDA margin narrowing to 3.7% from 4.8%.
Net income from continuing operations was CAD 12.1 million, or CAD 0.46 per diluted share, compared with CAD 18.9 million, or CAD 0.72 per diluted share, in the prior-year period.
Used Vehicles and F&I Show Improvement
Chief Executive Officer Samuel Cochrane said the Canadian automotive market remained soft during the quarter as consumers faced affordability concerns, elevated financing costs and broader economic pressures. The company expects challenging conditions through the remainder of 2026.
Still, Cochrane said AutoCanada made progress in areas it can control, including used-vehicle sales, inventory turnover and finance-and-insurance execution. Used-vehicle revenue increased 13.3%, supported by a 10% increase in retail units and a 2.9% increase in average selling prices, Woodward said.
Used-vehicle gross profit improved sequentially, although it remained pressured as the company worked through aged inventory. Cochrane said inventory velocity had improved, with the company generating more revenue while carrying lower used-vehicle inventory.
“We’re getting good velocity,” Cochrane said, adding that the company expects to work through some remaining long-dated vehicles during the end of the summer selling season. He said AutoCanada does not expect a substantial improvement in front-end gross profit per unit during the third quarter, but expects more normalized front-end gross profit per unit in the fourth quarter and into 2027.
Finance and insurance remained a relative strength. F&I gross profit increased 4%, while average gross profit per retail unit rose to CAD 3,410 from CAD 3,337 a year earlier, which Woodward attributed to stronger dealership execution and product penetration.
New-Vehicle Recovery Efforts Continue
New-vehicle sales and gross profit per unit remained under pressure during the quarter, reflecting both industry conditions and the company’s ongoing effort to rebuild sales productivity and knowledge throughout its dealer network.
AutoCanada is deploying an in-house sales training program and continuing to build its operating team. Cochrane said those initiatives are expected to begin improving new-vehicle sales and gross profit per unit early in 2027.
During the question-and-answer session, Cochrane said performance improved as the second quarter progressed. He said AutoCanada gained market share in new vehicles in June and continued to do so in July when measured against its represented brands. The company does not operate Toyota or Tesla dealerships, two brands he said were experiencing a particularly strong summer.
Cochrane characterized the company’s opportunity primarily as a growth issue rather than a major expense-cutting opportunity. Operating expenses before depreciation declined 2.7% to CAD 153 million in the quarter. While management sees an estimated CAD 4 million to CAD 5 million of potential operating expense improvement through automation, processes and technology, Cochrane said the larger opportunity is improving new- and used-vehicle volumes and margins.
Collision Platform Adds Locations Despite Hail-Related Headwinds
AutoCanada continued expanding its collision-repair business during the quarter, adding Contemporary Coachworks North and South in Calgary, Maskinongé in Thunder Bay and ACX Stratford in Ontario.
Collision revenue and adjusted EBITDA comparisons were affected by reduced hail-related repair work and recently opened locations that have not yet reached capacity, Cochrane said. However, collision gross profit increased and margins improved, supported by a stronger mix and contributions from acquired businesses.
The company plans to focus on integrating the newly acquired operations, expanding certifications and insurer relationships, raising throughput, developing technicians and growing higher-value services such as diagnostics and calibrations.
While Cochrane did not provide a specific organic growth figure for the collision segment, he said the “vast majority” of collision centers were growing and that lower hail activity accounted for much of the reported revenue decline. He said hail activity had increased in the Prairie provinces later in the summer and that he expects stronger collision results in the third and fourth quarters.
Divestitures and Debt Reduction Remain Priorities
AutoCanada continued simplifying its portfolio through U.S. and Canadian dealership divestitures. During the quarter, it completed the sales of Hyundai of Lincolnwood and Toyota of Lincolnwood. The company has received about CAD 106 million from its U.S. divestiture program and expects total proceeds of at least CAD 130 million, subject to customary closing conditions and original equipment manufacturer approvals.
Cochrane said the revised expectation reflects, in part, land holdings in Chicago and Peoria, as well as dealership goodwill. After the quarter ended, AutoCanada also sold three British Columbia dealerships. He said those locations had generated zero trailing-12-month EBITDA and had been losing money.
The company’s total net funded debt-to-bank EBITDA ratio was 3.6 times at the end of the quarter. In April, AutoCanada amended and restated its syndicated credit agreement, creating CAD 1.38 billion in aggregate bank commitments, eliminating the prior borrowing-base structure and extending the facility’s term to November 2028.
Woodward, who joined AutoCanada as CFO in July, said the company intends to use proceeds from the remaining U.S. divestitures to reduce debt. AutoCanada’s target leverage range is two to three times total net funded debt to bank EBITDA.
Management said its capital allocation priorities for the rest of the year are to protect liquidity and flexibility, invest in high-return operating initiatives, selectively pursue accretive acquisitions where balance-sheet capacity allows, and consider share repurchases when appropriate.
Cochrane described 2026 as a transition year for the dealership business and a year of disciplined growth for collision operations. The company plans to continue improving dealership performance, integrate recent collision acquisitions, complete the remaining U.S. exits and reduce debt.
About AutoCanada (TSE:ACQ)
AutoCanada's Canadian Dealership Operations include 64 franchised dealerships representing 23 automotive brands across eight provinces, as well as three independent used dealerships. The Company currently sells Acura, Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler, Dodge, Ford, GMC, Honda, Hyundai, Infiniti, Jeep, Kia, Mazda, Mercedes-Benz, MINI, Nissan, Porsche, Ram, Subaru, and Volkswagen vehicles. In 2024, AutoCanada's Canadian dealerships sold approximately 85,000 new and used retail vehicles.
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