Q4 2025 AutoCanada Inc Earnings Call

March 18, 2026

Speaker #2: 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.

Speaker #2: I encourage you to review AutoCanada's filings on Cedar Plus for a discussion of these risks, the fourth quarter news release, financial statements, and MD&A.

Speaker #2: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you'd like to ask a question at that time, please press star followed by the number one on your telephone keypad.

Speaker #2: If you would like to withdraw your question, please press star followed by the number two. I'd like to remind everyone that this conference call is being recorded today, Wednesday, March 18, 2026.

Operator: If you would like to withdraw your question, please press star followed by the number 2. I'd like to remind everyone that this conference call is being recorded today, Wednesday, 18 March 2026. Now, I'd like to turn the call over to Mr. Samuel Cochrane, Chief Executive Officer and Interim Chief Financial Officer of AutoCanada Inc. Please go ahead, Mr. Cochrane.

Speaker #2: Now, I'd like to turn the call over to Mr. Samuel Cochrane, Chief Executive Officer and Interim Chief Financial Officer of AutoCanada Inc. Please go ahead, Mr. Cochrane.

Speaker #2: Good evening, everyone, and thanks for joining us. I'd like to start by thanking the board for their trust in appointing me to lead AutoCanada at such an important time for the company.

Samuel Cochrane: Good evening, everyone, and thanks for joining us. I'd like to start by thanking the board for their trust in appointing me to lead AutoCanada at such an important time for the company. Before getting into AutoCanada's results, I want to briefly touch on the state of the automotive market. Demand for automotive vehicles in Q4 was impacted by earlier pull-forward activity. Careful related policy changes drove stronger demand in the first half of 2025, and the sunset of Canadian EV tax credits created a tough comparison to the strong Q4 2024 and resulted in softer store traffic. Across the industry, we also saw affordability pressures continue to weigh on consumers. New and used vehicle gross profit per unit declined for many dealer groups as vehicle availability increased, pricing normalized, and consumers made cost-conscious purchasing decisions.

Speaker #2: Before getting into AutoCanada's results, I want to briefly touch on the state of the automotive market. Demand for automotive vehicles in the fourth quarter was impacted by earlier pull-forward activity.

Speaker #2: Carefully aided policy changes drove stronger demand in the first half of 2025, and the sunset of Canadian EV tax credits created a tough comparison to the strong fourth quarter of 2024 and resulted in softer store traffic.

Speaker #2: Across the industry, we also saw affordability pressures continue to weigh on consumers. New and used vehicle gross profit per unit declined for many dealer groups as vehicle availability increased, pricing normalized, and consumers made cost-conscious purchasing decisions.

Speaker #2: At the same time, inflationary pressures and lower GPUs drove SG&A as a percentage of gross profit higher across the sector. With that context, let me discuss 2025 before turning to the quarter.

Samuel Cochrane: At the same time, inflationary pressures and lower GPUs drove SG&A as a percentage of gross profit higher across the sector. With that context, let me discuss 2025 before turning to the quarter. 2025 was a year of significant change for AutoCanada. We undertook one of the most comprehensive transformations in the company's history with a clear objective, reset the cost structure, simplify the business, and position for the next phase of growth. We largely achieved that goal, but work remains. By the end of the year, we reached CAD 115 million in annual run rate cost savings, materially lowering the operating cost base of the company. Operationally, the most challenging issue late in the year was execution at the store level during the transformation.

Speaker #2: 2025 was a year of significant change for AutoCanada. We undertook one of the most comprehensive transformations in the company's history with a clear objective: reset the cost structure, simplify the business, and position for the next phase of growth.

Speaker #2: We largely achieved that goal, but work remains. By the end of the year, we reached $115 million in annual run-rate cost savings, materially lowering the operating cost base of the company.

Speaker #2: Operationally, the most challenging issue late in the year was execution at the store level during the transformation. As we made changes across the organization, some stores temporarily lost momentum, which impacted sales productivity and gross profit performance relative to the market.

Samuel Cochrane: As we made changes across the organization, some stores temporarily lost momentum, which impacted sales productivity and gross profit performance relative to the market. Also, certain initiatives were implemented too broadly and without enough flexibility and alignment, which temporarily impacted store operations. Importantly, we have identified those issues and have put a new operations leadership team in place to stabilize and improve the business and restore execution across the network. In Q3, we were underperforming the market by roughly 19 percentage points in new retail unit volumes. That improved to roughly 10 percentage points in Q4, and we continued to see improvement in Q1 as we correct those execution issues.

Speaker #2: Also, certain initiatives were implemented too broadly and without enough flexibility and alignment, which temporarily impacted store operations. Importantly, we have identified those issues and have put a new operations leadership team in place to stabilize and improve the business and restore execution across the network.

Speaker #2: In the third quarter, we were underperforming the market by roughly 19 percentage points in new retail unit volumes. That improved to roughly 10 percentage points in Q4, and we've continued to see improvement in the first quarter as we correct those execution issues.

Speaker #2: The following chief news we experienced in the third and fourth quarters of 2025 largely reflected used vehicle procurement decisions made earlier in the year that were not well aligned with subsequent reductions in staff and marketing spend.

Samuel Cochrane: The fall in GPUs we experienced in Q3 and Q4 of 2025 largely reflected used vehicle procurement decisions made earlier in the year that were not well aligned with subsequent reductions in staff and marketing spend. This resulted in elevated levels of aged inventory entering 2026. In the near term, we expect to work through that inventory at lower GPUs while implementing stronger controls and reporting around used vehicle purchasing to improve performance going forward. You will see us gradually close the volume gap to the broader market through 2026, with GPUs expected to improve in the second half of the year. With that, let me turn to the quarter. Revenue from continuing operations in Q4 was CAD 1.1 billion, down 11.8% year-over-year, primarily due to lower new and used vehicle volumes.

Speaker #2: This resulted in elevated levels of aged inventory entering 2026. In the near term, we expect to work through that inventory at lower GPUs, while implementing stronger controls and reporting around used vehicle purchasing to improve performance going forward.

Speaker #2: You will see us gradually close the volume gap to the broader market through 2026. With GPUs expected to improve in the second half of the year, with that, let me turn to the quarter.

Speaker #2: Revenue from continuing operations in Q4 was $1.1 billion, down 11.8% year over year, primarily due to lower new and used vehicle volumes. Gross profit declined 19.5% year over year to $174 million.

Samuel Cochrane: Gross profit declined 19.5% year over year to CAD 174 million. Normalized operating expenses declined 13.2% to CAD 131.5 million versus Q4 2024, partially offsetting the impact of market dynamics and operational disruptions. Adjusted EBITDA from continuing operations was CAD 32.7 million compared to CAD 54.4 million in the prior year. Approximately 80% of that decline was related to operational disruptions discussed above, with the remaining 20% driven by market dynamics. For the full year, sales declined 7.1% to CAD 4.9 billion, and gross profit declined 10.4% to CAD 785 million.

Speaker #2: Normalized operating expenses declined 13.2% to $131.5 million versus the fourth quarter of 2024, partially offsetting the impact of market dynamics and operational disruptions. Adjusted EBITDA from continuing operations was $32.7 million, compared to $54.4 million in the prior year.

Speaker #2: Approximately 80% of that decline was related to operational disruptions, discussed above, with the remaining 20% driven by market dynamics. For the full year, sales declined 7.1% to $4.9 billion, and gross profit declined 10.4% to $785 million.

Samuel Cochrane: However, adjusted EBITDA increased to CAD 198 million, up 11.5% year-over-year, highlighting the impact of the structural cost reset alongside continued strength in our collision business. Looking ahead to 2026, our focus is on five key priorities. First, stabilizing and improving our automotive retail business. Second, pursuing disciplined inorganic growth in our collision business. Third, improving the support our head office provides the dealerships and collision centers. Fourth, strengthening our recruitment and retention of top operational leaders across the country. We want AutoCanada to be the best place to work for high performers. Fifth, maintaining a lean and efficient cost structure. To achieve that, there are several areas where we are focused on. First, we need to operate our dealership better. This means improving sales productivity, inventory management, trade capture, and service utilization across the network.

Speaker #2: However, adjusted EBITDA increased to $198 million, up 11.5% year over year, highlighting the impact of the structural cost reset alongside continued strength in our collision business.

Speaker #2: Looking ahead to 2026, our focus is on five key priorities. First, stabilizing and improving our automotive retail business. Second, pursuing disciplined and organic growth in our collision business.

Speaker #2: Third, improving the support our head office provides to the dealerships and collision centers. Fourth, strengthening our recruitment and retention of top operational leaders across the country.

Speaker #2: We want AutoCanada to be the best place to work for high performers. And fifth, maintaining a lean and efficient cost structure. To achieve that, there are several areas where we are focused.

Speaker #2: First, we need to operate our dealership better. This means improving sales productivity, inventory management, trade capture, and service utilization across the network. To do this, we need to empower our general managers and frontline staff to make decisions closest to our customers.

Samuel Cochrane: To do this, we need to empower our general managers and frontline staff to make decisions closest to our customers. We also need to improve our service offerings to our dealerships from our store support center. We believe market-leading volumes can be restored over the next six to nine months, and GPUs will normalize over the coming year as execution continues to improve. Second, we will continue to grow our collision platform. Collision remains one of the most attractive parts of the business, with strong margins, insurance-driven demand, and a highly fragmented market. Our platform today includes 33 locations, and we have the team and strategy to support more than 100 stores. We also have a strong track record of acquiring and integrating collision centers.

Speaker #2: We also need to improve our service offerings to our dealerships, from our store support center. We believe market-leading volumes can be restored over the next six to nine months, and GPUs will normalize over the coming year as execution continues to improve.

Speaker #2: Second, we will continue to grow our collision platform. Collision remains one of the most attractive parts of the business, with strong margins, insurance-driven demand, and a highly fragmented market.

Speaker #2: Our platform today includes 33 locations, and we have the team and strategy to support more than 100 stores. We also have a strong track record of acquiring and integrating collision centers.

Samuel Cochrane: We have a robust pipeline of opportunities and intend to pursue those acquisitions as our balance sheet allows. Third, we are focused on improving the administrative services supplied by our store support center to free up our frontline teams to focus on our customers and operate their businesses effectively. Fourth, we are focused on creating a culture of high performance, which will allow us to recruit, develop, and retain the best operators across the country. We must become the best place to work for high performers. Finally, we will remain disciplined on cost. Turning briefly to the balance sheet. We expect leverage to remain around 4x net funded debt to EBITDA in the near term as we complete the final US dealership sales and continue improving earnings.

Speaker #2: We have a robust pipeline of opportunities and intend to pursue those acquisitions as our balance sheet allows. Third, we are focused on improving the administrative services supplied by our Store Support Center to free up our frontline teams to focus on our customers and operate their businesses effectively.

Speaker #2: Fourth, we are focused on creating a culture of high performance, which will allow us to recruit, develop, and retain the best operators across the performers.

Speaker #2: And finally, we will remain disciplined on cost. Turning briefly to the balance sheet, we expect leverage to remain around 4 times net funded debt to bank EBITDA in the near term, as we complete the final US dealership sales and continue improving earnings.

Samuel Cochrane: We made further progress exiting the US portfolio and continue to expect total proceeds of approximately CAD 130 million, including approximately CAD 81 million that has not yet been received and is expected this year. These proceeds will continue to be used to reduce debt and strengthen the balance sheet. Before opening the line for questions, I want to thank our employees and OEM partners for their commitment during a year of significant change. With that, operator, we are ready to open the line for questions.

Speaker #2: We made further progress exiting the US portfolio and continue to expect total proceeds of approximately $130 million, including about $81 million that has not yet been received and is expected this year.

Speaker #2: These proceeds will continue to be used to reduce debt and strengthen the balance sheet. Before opening the line for questions, I want to thank our employees and OEM partners for their commitment during a year of significant change.

Speaker #2: With that, Operator, we are ready to open the lines for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by 1 on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by 2. If you're using a speakerphone, please lift the handset before pressing any keys. Our first question comes from the line of Luke Hannan from Canaccord Genuity. Your line is now open.

Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the number one on your touch-tone phone.

Speaker #1: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two.

Speaker #1: If you're using a speakerphone, please lift the handset before pressing any keys. Our first question comes from the line of Luke Hannan from Canaccord Genuity. Your line is now open.

Luke Hannan: Yeah, thanks, and good afternoon. Quite a bit to get into here, but look, I'd like to start with the used performance, I guess. You touched on, you know, the fact that there was issues when it came to aged inventory and sourcing from earlier in the year, and you're sort of paying the price for that now, and that was something that had impacted you in Q3 as well. Can you just frame up for us as far as where you stand going into 2026? We understand that GPUs are still gonna be pressured in the near term. I mean, overall, how do you feel about your used inventory still, in light of that?

Speaker #3: Thanks. Good afternoon. There's quite a bit to get into here, but I'd like to start with the used performance. I guess, Sam, you touched on the fact that there was inventory and sourcing from earlier in the year, and you're sort of paying the price for something that had impacted you in Q3 as well.

Speaker #3: But can you just frame up for us, as far as where you stand going into 2026? We understand that GPUs are still going to be pressured in the near term, but overall, how do you feel about your used inventory still, in light of that?

Luke Hannan: Because look, AutoCanada, if we were to look back over the past, there's been several times in the past where it felt like used has been an issue. It seems like it still is. What's gonna be put in place to try and put some guardrails around this, these sorts of issues don't happen again?

Speaker #3: Because look, AutoCanada, if we were to look back over the past, there's been several times in the past where it felt like used has been an issue.

Speaker #3: It seems like it still is. What's going to be put in place to try and put some guardrails around this, so these sorts of issues don't happen again?

Samuel Cochrane: Yeah, thank you. Let me sort of dive into it. The used vehicle GPUs declined due to a combination of inventory purchasing decisions, reduced marketing spend, and reduced headcount in the dealerships. Again, this goes back to execution on the cost out. It wasn't exactly where I wanted it to be. And now that I'm in the role, we have a new operations team who's really focused on, you know, the future. Let me answer the first question. GPUs on used will remain tight in Q1. They'll get a little bit better, you know, slightly better in Q2, and we'll begin to fully normalize in Q3 and Q4. The second half of the year, we should get back to normal used GPUs.

Speaker #1: Yeah, thank you. So let me sort of dive into it. So the used vehicle GPUs declined, right, due to a combination of inventory purchasing decisions ahead of reduced marketing spend.

Speaker #1: And reduced headcount in the dealerships. Again, this goes back to execution on the cost-out. It wasn't exactly where I wanted it to be.

Speaker #1: And now that I'm in the role, we have a new operations team who's really focused on the future. So, let me answer the first question.

Speaker #1: GPUs on used will remain tight in Q1. They'll get a little bit better, slightly better, in Q2, and they'll begin to fully normalize in Q3 and Q4.

Speaker #1: The second half of the year, we should get back to normal used GPUs. And then, to your question on how do we install discipline to make sure it doesn't happen again—obviously, we hired Fate to be COO; he started in January.

Samuel Cochrane: To your question on how do we instill discipline to make sure it doesn't happen again? Obviously, we hired Fade, to be COO. He started in January, and, you know, a few things he's doing is it's really a full used vehicle strategy reset, including a pricing reset, right? We're gonna price more accurately to market, and we're gonna actually, you know, be able to make the turnover quicker. We're also gonna organize proper mix analysis per store and put in a buy box strategy per rooftop. What does that mean practically speaking? If you look back to 25, if we bought a used Ford at a Audi dealership, I'm just using a random example, and in the past, we've had success selling that car, and then all of a sudden we turned off AutoTrader.

Speaker #1: And a few things he's doing is, it's really a full used vehicle strategy reset. Including a pricing reset, right? So we're going to price more accurately to market.

Speaker #1: And we're going to actually be able to make the turnover quicker. We're also going to organize proper mix analysis per store, and put in a buy box strategy per rooftop.

Speaker #1: What does that mean, practically speaking? So if you look back to '25, if we bought a used Ford at an Audi dealership—I'm just using a random example.

Speaker #1: And then in the past, we've had success selling that car. And then, all of a sudden, we turned off Trader; no one could see that car anymore.

Samuel Cochrane: No one could see that car anymore, so it was hard to move, right? That was compounded by we didn't have the right discipline on pricing. That car aged, right? Going forward, we are turning AutoTrader back on. It is back on in all of our stores. We are putting more discipline around what we buy per rooftop, what that mix is. We are gonna reset minimal margin expectations on acquisitions. You can't just buy anything. There's gonna be a minimal margin expectation on each used car that's bought. Between the buy box, the mix analysis, the pricing reset, and the minimal margin expectations, this will all lead to improved turns on used inventory, reduce price to market gaps. What does that mean?

Speaker #1: So it was hard to move, right? And then that was compounded by—we didn't have the right discipline on pricing. And so that car aged, right?

Speaker #1: So, going forward, we are turning AutoTrader back on. It is back on at all of our stores. We are putting more discipline around what we buy per rooftop, what that mix is.

Speaker #1: We are going to reset minimal margin expectations on acquisitions. So you can't just buy anything. There's going to be a minimal margin expectation on each used car that's bought.

Speaker #1: And so, between the buy box, the mix analysis, the pricing reset, and the minimal margin expectations, this will all lead to improved turns on used inventory and reduced price-to-market gaps. What does that mean?

Samuel Cochrane: Like, we're not gonna have these big gaps where we're priced higher than market, and stabilize our front-end margins. You'll see those GPUs stabilize. Going forward, even beyond that, we're also gonna implement service lane acquisitions and the strategy across the network. Listen, disappointing for sure, but I do believe we have the right team to fix this. All the issues have been identified. Those controls are being put in place as we speak and looking back a bit. We just have to get through that old inventory. You'll see those GPUs normalize in sort of late Q2 into the second half of the year. Does that make sense?

Speaker #1: We're not going to have these big gaps where we're priced higher than market, and stabilize our front-end margin. So you'll see those GPUs stabilize.

Speaker #1: So, and then going forward, even beyond that, we're also going to implement service lane acquisitions and the strategy across the network. So, listen, disappointing for sure, but I do believe we have the right team to fix this.

Speaker #1: All the issues have been identified. Those controls are being put in place, as we speak, and looking back a bit. And we just have to get through that old inventory.

Speaker #1: And so you'll see those GPUs normalize in, sort of, late Q2 into the second half of the year. Does that make sense?

Luke Hannan: It does. Thanks. Thanks for all that color. Maybe if we flip over to the new business, it's mentioned in the MD&A here that there was a provision taken against specific brand. Is that? Well, the commentary, I'm not sure if this is specific to new, but it looks like it is talking about aged new units. Is that specific to certain brands? Is that across portfolio? Just wanna shed some more light on what exactly that is.

Speaker #3: It does. Thanks. Thanks for all that color. And then maybe if we flip over to the new business, it's mentioned in the MD&A here that there was a provision taken against specific brands.

Speaker #3: Well, the commentary—I’m not sure if this is specific to new, but it looks like it is talking about aged new units. Is that specific to certain brands?

Speaker #3: Is that across portfolio? Just want to get some more light shed on what exactly that is.

Samuel Cochrane: Yeah, I'm not gonna call out individual brands, but it is very brand specific. If you look at the press releases or news releases you've seen from the OEMs, there's been a lot of write-offs on EV strategies and this sort of stuff. Think of this as sort of older cars that are new, potentially EVs, harder to move, right, in certain brands. That we do believe this is again, a one-time item in this quarter on the new side. It is sort of part of that cleanup of the, you know, continuing that trend you've seen from all the OEMs when they've done their earnings calls.

Speaker #1: Yeah, I'm not going to call out individual brands, but it is very brand-specific. And if you look at the press releases or news releases you've seen from the OEMs, there's been a lot of write-offs on EV strategies and this sort of stuff.

Speaker #1: So, think of this as sort of older cars that are new, potentially EVs, harder to move, right? In certain brands. So, we do believe this is, again, a one-time item in this quarter.

Speaker #1: On the new side, and it's just sort of part of that cleanup, of continuing that trend you've seen from all the OEMs when they've done their earnings calls.

Luke Hannan: Got it. Thanks. Then one other comment that you made, Sam, was about, in basically 6 to 9 months, we should start to see what AutoCanada looks more like on sort of a normalized basis going forward. Again, going through the MD&A, there is a comment mentioning about how it's to get dealership performance back to, we'll call it just industry benchmarks. It's gonna take 12 to 18 months of execution. Can you just help us reconcile those different outlooks?

Speaker #3: Got it, thanks. And then one other comment that you made, Sam, was about—in basically six to nine months—we should start to see what AutoCanada looks more like on sort of a normalized basis going forward.

Speaker #3: But again, going through the MD&A, there is a comment mentioning about how it's to get dealership performance back to—we'll call it just industry benchmarks—it's going to take 12 to 18 months of execution.

Speaker #3: So, what can you—just help us reconcile those different outlooks?

Samuel Cochrane: Yeah. I think what you'll see over the next 6 to 9 is the GPU starting to perform better and the momentum turning in the business. If you wanted like the full picture of what this business can do, I think the 12 to 18 is the better time frame. The 6 to 9 is you'll see the momentum building back, in the business.

Speaker #1: Yeah, I think what you'll see over the next six to nine months is the GPU starting to perform better and the momentum turning in the business.

Speaker #1: If you wanted the full picture of what this business can do, I think the 12 to 18 is the better timeframe. The six to nine is, you'll see the momentum building back in the business.

Luke Hannan: Okay.

Samuel Cochrane: In terms of used GPU start going up again and volume, the volume gap to market, it was 18% in Q3, was 10% in Q4. Also, you know, there's been a multiyear market share decline in the company, right? We're turning that around. It's yes, we got to fix that gap that just happened, that curve steepened, but we also have to get back to winning market share. Again, we have a new team. I think they're focused on the right things. 12 to 18 months to see the full true run rate of these assets. 6 to 9 to really see the momentum being built in the business.

Speaker #3: Okay. So then if.

Speaker #1: In terms of used GPUs, start going up again, and the volume gap to market—it was 18% in Q3; it was 10% in Q4.

Speaker #1: And also, there’s been a multi-year market share decline in the company, right? So we’re turning that around. Yes, we’ve got to fix that gap that just happened, that curve steepened.

Speaker #1: But we also have to get back to winning market share. So again, we have the new team. I think they're focused on the right things.

Speaker #1: It takes 12 to 18 months to see the full, true run rate of these assets—six to nine months to really see the momentum being built in the business.

Luke Hannan: Okay, thanks. Last one just to clarify, and then I'll pass the line here. When you began the cost out process in your continuing operations, I think you were doing trailing twelve monthly, but close to CAD 175 million. You've taken out-

Speaker #3: Okay, thanks. Last one, just to clarify, and then I'll pass the line here. So when you began the cost-out process in your continuing operations, I think you were doing trailing 12-month EBITDA close to $175 million.

Samuel Cochrane: That's right.

Luke Hannan: ... now CAD 115 million of costs. I realize the market is what it is right now, so it's not like all that's gonna fall to the bottom line. Is it fair to say if we're looking at this today, it's probably gonna take closer to 12 to 18 months before you actually do see the full sort of run rate effect of those costs actually flow down to the bottom line, and this business is operating more on a, you're generating even though that's more-

Speaker #3: You've taken out, now, $115 million of cost. I realize the market is what it is right now, so it's not like all that's going to fall to the bottom line.

Speaker #3: But is it fair to say, if we're looking at this today, it's probably going to take closer to 12 to 18 months before you actually do see the full sort of run-rate effect of those costs actually flow down to the bottom line?

Speaker #3: And this business is operating more on it. You're generating EBITDA that's more normalized compared to where you are today.

Samuel Cochrane: Yeah

Luke Hannan: Normalized compared to where you are today.

Samuel Cochrane: Yeah. I mean, listen, 80% of this quarter was execution and things we did to ourselves through the cost out. 20% was macro. We did have a little bit of macro impact in the quarter as well. It started to turn a little bit. I sort of talked about that at the beginning of my call, of the call script of the call today. You know, the macro will be what it is. We'll start to improve compared to that. The cost out, yeah, to see the full impact of the cost out, you're gonna have to see us get back that gross, right? Because it's just hard to see with how much volumes have gone down and where the gross profit is. I think you're right, Luke. Like 12 to 18 months, I think is right.

Speaker #1: Yeah. I mean, listen, 80% of this quarter was execution and things we did to ourselves through the cost-out. Twenty percent was macro. So we did have a little bit of macro impact in the quarter as well.

Speaker #1: It started to turn a little bit. I sort of talked about that at the beginning of my call—of the call script of the call today.

Speaker #1: So the macro will be what it is. We'll start to improve compared to that. The cost out—yeah, to see the full impact of the cost out, you're going to have to see us get back that gross, right?

Speaker #1: Because it's just hard to see with how much volumes have gone down and where the gross profit is. But I think you're right, Luke—like, 12 to 18 months, I think, is right.

Samuel Cochrane: The important part on the cost out is we broke all the bad habits. We now have a culture of just staying lean and keeping the cost out. We will rebuild on this better cost structure, and we sort of reset the culture of the business around cost. I believe it's fruits are gonna pay in the future.

Speaker #1: The important part on the cost-out is we broke all the bad habits. We now have a culture of just staying lean and keeping the cost out.

Speaker #1: So we will rebuild on this better cost structure, and we’ve sort of reset the culture of the business around cost. So I believe, yeah, its fruits are going to pay in the future.

Luke Hannan: Okay. I'll leave it there. Thanks.

Speaker #3: Okay, I'll leave it there. Thanks.

Samuel Cochrane: Thanks, Luke.

Speaker #1: Thanks, Luke.

Operator: As a reminder, if you have any questions or follow-up, please press star one. Our next question comes from the line of Chris Murray from ATB Capital Markets. Your line is now open.

Speaker #4: I said, reminder: if you have any questions or follow-up, please press *1. Our next question comes from the line of Chris Murray from ATB Capital Markets.

Speaker #4: Your line is now open.

Chris Murray: Yeah. Hi, guys. Good evening. Sam, just maybe kind of following on some of the questions, maybe a couple of other segments just to talk about. Parts and service was also negatively impacted. You know, probably not an inventory issue, but I think, you know, you did mention in the MD&A maybe some of the ACX issues. Maybe if you could just spend some time talking about parts and service and how that was impacted and kind of what gets changed, because even in this environment, if people are trying to hold on to cars and cut costs, you would think that parts and service would still be doing okay.

Speaker #5: Yeah. Hi, guys. Good evening. So, Sam, just maybe kind of following on some of the questions, maybe a couple of the other segments, just to talk about.

Speaker #5: So parts and service would also be negatively impacted—probably not an inventory issue, but I think you did mention in the MD&A maybe some of the ACX issues.

Speaker #5: So maybe if you can just spend some time talking about parts and service and how that was impacted, and kind of what gets changed. Because even in this environment, if people are trying to hold onto cars and cut costs, you would think that parts and service would still be doing okay.

Chris Murray: Also on the collision repair, it was a little softer than I think we were looking for just in terms of the top line. You've been having some good success there. Just any thoughts around those segments would be helpful, please.

Speaker #5: And also on the collision repair, it was a little softer than I think we were looking for, just in terms of the top line.

Speaker #5: You've been having some good success there. So, just any thoughts around those segments would be helpful, please.

Samuel Cochrane: I'll start with the collision one because that one's a bit easier to answer. There was a big hailstorm in 2024, and our hail business has been sort of at the buffet eating off that for a while. 2025 was a lighter hail season, so I think that's what you're seeing in the top line. That's what you're seeing there on collision. Now on the parts and service, again, this kind of goes back to execution of the cost out. It was the right idea. I just believe we could have executed it a lot better. In some areas, we painted with too broad of a brush and weren't flexible enough. This led to turnover in parts and service at unacceptable levels.

Speaker #1: I'll start with the collision one because that one's a bit easier to answer. There was a big hailstorm in '24, and our hail business has been sort of at the buffet, eating off that for a while.

Speaker #1: ’25 was a lighter hail season, so I think that’s what you’re seeing in the top line. So that’s what you’re seeing there on collision.

Speaker #1: Now, on the parts and service—again, this kind of goes back to execution of the cost out. It was the right idea; I just believe we could have executed it a lot better.

Speaker #1: And in some areas, we painted with too broad of a brush and weren't flexible enough. This led to turnover in Parts and Service.

Speaker #1: Add on acceptable levels. And with that turnover, you lose team members. You learn you lose knowledge. And then the GMs are stuck having to rebuild.

Samuel Cochrane: With that turnover, you know, you lose team members, you lose knowledge, and then the GMs are stuck having to rebuild. Again, these issues have been addressed and fixed, but during the year, there was unacceptable levels of turnover in our parts and service staff, and it came down to execution. We'll improve that, and we've already started. You'll start to see that firm up.

Speaker #1: So again, these issues haven't been addressed and fixed. But during the year, there were unacceptable levels of turnover in our parts and service staff. And it came down to execution.

Speaker #1: So, we'll improve that. And we've already started, so you'll start to see that firm up.

Chris Murray: Okay. As I kind of listen to you know, it sounds like you maybe, as you said, starting to stabilize probably 6 to 9 months. How do we think about the earnings cadence as we go through next year? I mean, I think it, we're all a little bit, you know, surprised by the numbers out of Q4 a little bit lower than, you know, where the consensus number was. Do you think we can start seeing a recovery? Is it gonna be kind of gradual, or would you think it's more, kind of a step function as we get to midyear? How do we think about how some of the key drivers, in terms of the recovery, at least the way you guys are looking at it?

Speaker #5: Okay, so as I kind of listened to you, it sounds like you've maybe, as you said, started to stabilize—probably six to nine months.

Speaker #5: How do we think about the earnings cadence as we go through next year? I mean, I think we're all a little bit surprised by the numbers out of Q4—a little bit lower than the consensus number was.

Speaker #5: But do you think we can start seeing a recovery? Is it going to be kind of gradual, or would you think it's more kind of a set function as we get to mid-year?

Speaker #5: And how do we think about some of the key drivers in terms of the recovery, at least the way you guys are looking at it?

Samuel Cochrane: Well, in Q1 here, we'll still be turning over some of the problem inventory that we sort of inherited, and a little bit into Q2. What I think you'll see is Q1 will remain challenged. Q2, you'll start to see improvement, especially in the second half. What you'll see in Q3 is we'll start performing much closer to market, plus GPUs are starting to come back. I think that's how you're gonna wanna model for the year. Listen, like, there's no hiding it, these results are unacceptable, right? They do not show the true run rate of our business.

Speaker #1: Well, in Q1 here, we'll still be turning over some of the problem inventory that we've sort of inherited. And a little bit into Q2.

Speaker #1: So, what I think you'll see is Q1 will remain challenged. Q2, you'll start to see improvement, especially in the second half. And then what you'll see in Q3 is we'll start performing much closer to market, plus GPUs are starting to come back.

Speaker #1: So I think that's how you're going to want to model for the year. And listen, there's no hiding it. These results are unacceptable, right?

Speaker #1: And they do not show the true run rate of our business. But with our new culture, focused on staying lean and focused on automotive retail and collision—our two pillars of growth—and a new operations team, and the automotive retail side dead set on improved execution, I'm confident the second half of this year we will show meaningful momentum towards the true potential of this business.

Samuel Cochrane: With our new culture focused on staying lean and focused on automotive retail and collision, our two pillars of growth, and a new operations team in the automotive retail side, deeply focused on improved execution, I'm confident the second half of this year we will show meaningful momentum towards the true potential of this business. My job now is simple, keep the team focused on our five pillars, right? Our five key things we're working on. Stabilize and improve automotive retail, disciplined organic and inorganic growth in collision, improve services from our store support center, and then rebuild that culture around performance and retaining and attracting the best talent. Of course, staying lean. Like, if we do those five things, and we will, you're gonna see that momentum build in the second half of the year.

Speaker #1: My job now is simple. Keep the team focused on our five pillars, right? Our five key things we're working on: stabilize and improve automotive retail; disciplined, organic and inorganic growth and collision; improve services from our Store Support Center; and then rebuild that culture around performance and retain, attracting the best talent.

Speaker #1: And, of course, staying lean. If we do those five things—and we will—you're going to see that momentum build in the second half of the year.

Chris Murray: Okay, I'll leave it there and pass the line. Thank you.

Speaker #5: Okay, I'll leave it there and pass the line. Thank you.

Operator: There are no further questions at this time. I will now turn the call over to Sam Cochrane. Please continue, sir.

Speaker #4: There are no further questions at this time. I will now turn the call over to Sam Cochrane. Please continue, sir.

Samuel Cochrane: Well, thank you for joining the call and for the questions. Thanks again to all the OEM partners, staff, and shareholders. Have a great night.

Speaker #1: Well, thank you for joining the call and for the questions. And thanks again to all the ROEM partners and staff. And shareholders, have a great night.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Q4 2025 AutoCanada Inc Earnings Call

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