What AutoCanada (ACQ) Said on Its Q3 Earnings Call

Key Points

• AutoCanada’s Q3 revenue from continuing operations rose 3.1% to CAD 1.2 billion, and it returned to profit, reporting CAD 40.3 million in net income versus a year-earlier loss of CAD 2.9 million.
• Vehicle margins remain pressured by affordability concerns and tariffs, though gross profit increased 4.9%. Management expects margins to begin stabilizing and improving in spring 2027, helped by cleaner used-vehicle inventory and sales training.
• Net debt declined to CAD 322 million, while leverage improved to 3.4 times—still above the company’s 2–3 times target. AutoCanada is pursuing U.S. divestitures to reduce debt and continues a strategic review of its growing collision business.

AutoCanada TSE: ACQ reported higher third-quarter revenue and a return to profit from continuing operations, while executives said vehicle margins remained under pressure from affordability concerns and tariffs.

Revenue from continuing operations rose 3.1% year over year to CAD 1.2 billion, supported by new and used vehicle sales and collision operations, Chief Financial Officer Mike Woodward said on the earnings call. Lower parts and service revenue partially offset the growth.

Net income from continuing operations was CAD 40.3 million, or CAD 1.63 per diluted share, compared with a loss of CAD 2.9 million, or CAD 0.14 per diluted share, a year earlier. Adjusted EBITDA from continuing operations was CAD 48.4 million, with a margin of 3.9%.

Chief Executive Officer Samuel Cochrane said the company was selling more vehicles but had to adjust prices to meet customers’ needs. He expects margins to begin stabilizing and improving in the spring of 2027, supported by a better Canadian economic backdrop and new sales training programs.

Vehicle margins remain a focus

Gross profit rose 4.9% to CAD 197 million, and the gross profit margin increased 30 basis points to 15.9%. Woodward attributed the improvement primarily to collision and used vehicles, partly offset by lower gross profit per unit on new vehicles.

Used vehicle revenue increased 6.9%, as retail unit sales rose 7.4% and the average selling price slipped 0.4%. Used vehicle gross profit improved from the previous quarter but remained under pressure as the company worked through older inventory, Woodward said.

Cochrane said vehicles held for more than 90 days fell to 22% of used inventory from 34%. The company is holding less inventory and selling about half of its used stock each month, he said. He expects cleaner inventory to help used vehicle margins rise in 2027, although economic conditions could affect the extent of the improvement.

In response to an analyst’s question about market share, Cochrane said AutoCanada had gained share for four consecutive months when sales were weighted for the brands it operates. He said standardized sales processes and training by manufacturer should help rebuild new vehicle margins.

Finance and insurance gross profit increased 5.5%, while average gross profit per retail unit rose to CAD 3,381 from CAD 3,346 a year earlier, according to Woodward.

Collision review and acquisitions

AutoCanada’s ACX collision business grew adjusted EBITDA by 58.7% year over year, Cochrane said. Since the third quarter of 2025, the company has added 10 collision shops that it expects to contribute CAD 7.1 million in annual post-rent EBITDA at maturity.

Woodward said AutoCanada has historically acquired collision businesses at six to eight times post-rent EBITDA and reduced the effective multiple to three to four times as earnings improved. Reaching that point has taken up to three years in the past, he said.

A strategic review of the collision business remains active. Cochrane declined to provide details about the process, but said the business could grow faster with greater access to capital, while AutoCanada could focus on its dealership operations and reduce leverage. Woodward said collision operations could fund acquisitions at a lower pace on their own.

Cochrane said another collision acquisition would probably close before year-end, with more expected in the new year. On the dealership side, he said it was too early to discuss a return to a regular acquisition pace, although the company could test one or two small transactions over the next year.

Debt reduction and portfolio changes

AutoCanada ended the quarter with CAD 171 million in cash, up from CAD 142 million at the end of the second quarter. Woodward attributed the increase to divestiture proceeds and improved working capital, partly offset by a payment to unwind the Used Digital limited partnership. Cochrane said the unwind would save approximately CAD 6 million annually.

Net debt fell to CAD 322 million from CAD 361 million at the end of the second quarter. Total net funded debt declined to CAD 362 million from CAD 412 million, and the ratio of total net funded debt to bank EBITDA fell to 3.4 times from 3.6 times. The company’s target range is two to three times.

Woodward said proceeds from remaining U.S. divestitures are intended for debt reduction. Cochrane said those sales were progressing but did not give a date for reaching the leverage target. Woodward noted that collision acquisitions, which are effectively funded with net debt, work in the opposite direction to cash generated by operations.

AutoCanada also sold three British Columbia dealerships that had collectively lost CAD 1.1 million in adjusted EBITDA year to date. Cochrane said he did not expect further Canadian dealership changes in the near term, but the company would consider divesting assets that fail to meet its return thresholds.

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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