AutoCanada Q2 net income rises 16% to $45 million

All figures in this story are in Canadian dollars unless otherwise noted.

AutoCanada Inc. posted higher second-quarter revenue and net income as vehicle sales climbed to record levels and the service business boomed across the company’s portfolio of 83 franchised dealerships and 11 standalone collision centers.

The Edmonton-based company on Thursday said net income rose 16 percent to $45.2 million ($33.6 million USD). Revenue improved 4.2 percent to $1.76 billion.

AutoCanada Executive Chairman Paul Antony credited improving new-car inventories, greater internal efficiency readying used vehicles for resale and the “robust performance” of dealership service departments for the strong results.

“We’re driving more [vehicles] through the shops and … that performance has helped to elevate our numbers significantly. And you put that alongside of more people on the roads with older cars, we’re now seeing parts, service and collision just firing on all cylinders,” he told analysts during an Aug 10 conference call.

Gross profit was up 23.3 percent in the company’s Canadian parts, service and collision business in the second quarter, and up 16.4 percent in the United States.

AutoCanada owns 65 new-vehicle stores in Canada as well as 18 in Illinois.

Vehicle sales across the dealership group hit new fresh highs, with 11,257 new vehicles and 17,222 used vehicles sold during the quarter.

“New light-vehicle inventories have begun to replenish,” Antony told analysts. Supply is starting to normalize, he added, though “is not fully there,” with pent-up demand remaining in the market.

In the used segment, which has taken on a larger share of AutoCanada’s business since the pandemic, profitability was up considerably.

In Canada, company gross profit per used vehicle rose to $2,320, an increase of 35 percent from the same period last year. In the U.S., the metric jumped 161 percent to $2,435 per vehicle.

Antony said the higher profitability was a result of selling more used vehicles with less inventory, crediting dealerships with improving the amount of time it takes to recondition trade-ins and other used inventory for resale.

Decreasing used-vehicle turn time remains a work-in-progress, Antony added, but one expected to continue to boost the bottom line. Average gross profit per vehicle hovers around $2,300 for a car sold during its first 60 days in inventory, he told analysts. It falls to $1,339 for a vehicle on the lot between 61 and 90 days, and to $437 for a used vehicle sold after being in inventory between 91 and 120 days.

“You are essentially holding a melting ice-cube. … The faster that we can sell that car, the more money can be made on it,” Antony said.

AutoCanada shares spiked following the release of the company’s second-quarter results, with shares up more than 15 percent over the following two trading sessions.