AutoCanada Inc. (AOCIF) Management on Q4 2021 Earnings Call Transcript

AutoCanada Inc. (OTCPK:AOCIF) Q4 2021 Earnings Conference Call March 3, 2022 11:00 AM ET

Company Participants

Michael Borys - CFO

Paul Antony - Executive Chair

Casey Charleson - VP, Finance

Conference Call Participants

Michael Doumet - Scotiabank

Chris Murray - ATB Capital Markets

David Ocampo - Cormark Securities

Luke Hannan - Canaccord

Maggie MacDougall - Stifel

Operator

Good morning. My name is Anis, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the AutoCanada Fourth Quarter 2021 Earnings Call. All line have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

I would like to remind everyone that certain statements in this presentation and on our call forward-looking in nature, including, among other things, future performance and the implementation of the go-forward plan. These include statements involving known and unknown risks, uncertainties and other factors outside of management's control that could cause actual results to differ materially from those expressed in the forward-looking statements.

AutoCanada does not assume any responsibility for the accuracy and completeness of the forward-looking statements and does not undertake any obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

For additional information about possible risks, please refer to our AIF, which is available on SEDAR and on our website within the Investor Documentation and filings section.

I will now turn the call over to Mike Borys, Chief Financial Officer. Please go ahead sir.

Michael Borys

Thank you, Anis. Good morning everyone and thank you for joining us on today's fourth quarter results conference call. For today's call, I'm joined by Paul Anthony, our Executive Chair; Peter Hong, our Chief Strategy Officer; Casey Charleson, our Vice President of Finance.

We released our Q4 results after the market closed yesterday. Copy of our results is available for download on our website. For today's call, we will be discussing the current state of the business, discussing the financial results, and providing an update on both our Canadian and U.S. segments.

With that, I'd like to turn it over to Paul.

Paul Antony

Thank you, Mike and good morning everyone. I'm incredibly proud of what our team was able to accomplish in 2021 and I'm excited for 2022 based on what we're seeing in the first two months of the year.

Our operations delivered yet another record setting quarter in Q4 reflecting the ongoing positive momentum across our business and the fundamental strength and resiliency of our operating platform and balance sheet.

We recorded our highest ever fourth quarter revenue figure of $1.2 billion, which drove adjusted EBITDA of $65.9 million, an increase of 63% over the prior year. That's a tremendous performance from top to bottom.

We're also particularly pleased with the adjusted EBITDA margin improvement in Q4, which was 5.5% versus 4.6% last year. These results continued the trend of sustainable improvement and the execution of a complete business model and strategic initiatives. Our balance sheet also remains exceptionally strong, more so than at any point since the current team arrived in 2018, which Mike is going to detail further in his remarks.

We also announced last night that Michael Rawluk, President of Canadian Operations and Director is departing the company for personal reasons. I want to thank Michael in his role as President of Canadian Operations, for his dedicated service, and substantial contributions to AutoCanada since 2018. He's been instrumental in stabilizing our Canadian dealership platform, strengthening the team of talented professionals, running the business day-to-day, and successfully positioning us to enter our next stage of growth. We wish him well in his future endeavors.

The team we put in place over the last few years is exceptional and we don't anticipate any impact on the company's strong momentum heading into 2022. We've been actively in dialogue with a number of candidates for the role and we expect to make an announcement in the coming weeks given the advance stage of these discussions.

I'll now touch on some operational highlights for the quarter. Our Canadian operations continue to successfully execute including record Q4 2021 earnings. Same-store used vehicle gross profit percentage increased to 8.7% as compared to 7.6% in the prior year.

F&I gross profit per retail unit average increased to $3,130, up 11.1% or $313 per unit. Our used to new retail unit ratio also increased to 1.45 from 0.93, and our trailing 12 months used to new retail units ratio improved to 1.43 as compared to 0.957.

These metrics are particularly important as they demonstrate the diversity of our business model during a time where new vehicle supply remains unclear. We set out to develop the Canadian platform several years ago to deliver the type of performance we saw in 2021 and I'm incredibly proud.

Turning to the supply chain and inventory outlook, OEM production continues to be a concern to the ongoing chip shortage. While we'd like to be surprised, the past year tells us we shouldn't bank on near-term relief for the chip shortage, which has us anticipating new vehicle volume to be lower than prior years for at least the first half of 2022.

Possibly exaggerating the issue, we've seen reports that the Ukrainian conflict could further strain supply as both Russia and Ukraine are critical supplier of key microchip components.

That being said, there is good news. We have approximately two months' supply on the ground for new vehicles, given our work with our OEM partners to secure inventory. Another proof point for the power of the platform. We continue to work with the OEM partners to aggressively pursue new vehicle allocation whenever opportunity arises.

Production issues with new vehicles as expected and as such, we have anticipated that demand for used vehicles will remain high. We continue to lean into our strategy of increasing used vehicle retail sales volume, and we've been executing our winter buying program in Canada for several months in anticipation of selling season to begin in March.

As of last week, AutoCanada had more retail use inventory list on its website than the next three top competitors in Canada combined. In addition, consumer spending is expected to rise as household savings in Canada remain elevated.

The outlook from recent economic reports is that consumer demand will continue throughout 2022. We anticipate the current environment of high margins will continue to match elevated consumer demand unless OEM production increases more than currently anticipated.

The lower supply combined with the pent-up demand has significantly decreased the need to sell new vehicle at anything less than full market value. We will continue our strategy to realize full margin potential on our vehicle sales by avoiding discounting.

In terms of our expectation for margins, we anticipate margins to continue with used retail vehicles, as well due to scarcity of inventory on the market. A strong inventory position complemented by our best-in-class F&I operation has us confident that we're positioned to be the market leader in used retail sales in Canada in 2022. We expect faster turns of our inventory to result in lower carrying cost of inventory as well.

Switching over to the United States, we continue to see outstanding performance in our U.S. operation. Actions taken previously been a new management team with Jim Douvas include the strategic build-up of used vehicle inventory, the creation of dedicated used -- dedicated used vehicle team, top rating dealership management, expanding teams across all levels of the business, and the execution of operational best practices to improve metrics on multiple fronts.

As a result, we reported fourth quarter U.S. adjusted EBITDA of $10.7 million, an improvement of $9.5 million over the prior year. Gross profit increased to $39.2 million and that's an improvement of $22.6 million or 136%, while gross profit margin of 19.9% set a fourth quarter record for U.S. operation.

U.S. team also increased used retail unit sales to 2,166 from 664 in the prior year. That's an improvement of 226% and a new to used ratio of 1.46 from 0.47. We remain thoroughly impressed with the progress we're seeing from the U.S. team and believe we're on the right path margin for typically our U.S. peers.

Overall, our strong performance in the fourth quarter and two -- and in 2021 reflects the ongoing sustainability of our business model and demonstrate that we're successfully managing through these production and inventory challenges.

We continue to believe the OEM production capacity issues will normalize over the coming quarter and expect the market to begin to return to pre-pandemic levels in late 2022 or early 2023 as vehicle production begins to come back and margins eventually normalized for both new and used vehicle on a sustainable basis.

In the meantime, we're going to continue to build out on our positive momentum and focus on strategic growth initiatives to drive industry leading performance regardless of changing market conditions. We've been building muscle into our complete business model and now we're focusing more resources on the integration of our pipeline of acquisition.

Our employees in Canada and the United States continue to work tirelessly and have once again delivered excellent performance. Without them, we're nothing. Thank you so much. We're encouraged by the very strong momentum across our business and we remain well-prepared to face any challenges in our current environment.

I'll come back at the end to speak more about our outlook and strategy and my concluding remarks, but for now, I'll turn it over to Mike.

Michael Borys

Thanks Paul and good morning again to everyone on the call. I'll take the next few minutes to speak to our recent financing actions and the continued discipline we're applying managing our balance sheet.

First off, I'll reference the recent successful financing over $350 million senior unsecured notes in January and completed in February. Financing allowed us to redeem our outstanding $250 million senior unsecured notes for an interest rate of 8.75% and had another three years to maturity. Our new debentures provide us with a seven-year tenure, three-year non-call and are priced at 5.75%. In addition to the cash interest savings we'll be realizing moving forward, stabilize and strengthen our balance sheet position by extending our tenures to seven years. We were quite pleased with the positive investor reaction to our review of the company's performance over the last two years and how it compared -- how we spoke of our vision and direction in January 2020 with the initial financing.

We made dramatic inroads not only improving our adjusted EBITDA run rate, but also in driving positive free cash flow and reducing your net debt position and maintaining that discipline over our balance sheet.

In current with the debenture financing, we renewed our credit facility agreement to maintain a three-year tenure. We also added another Tier 1 lender with Toronto Dominion Bank, while keeping all of our existing lenders within the syndicate.

Adding another lender simply allows us more potential liquidity if required to further support our acquisition pipeline and activate our dry powder. Speaking of which we have dry powder well in excess of $500 million to complete deals without having to raise equity, while staying within our target range of debt leverage.

As previously noted, we continue to have excellent relationships with all of our lenders and we see them as our strategic partners in this business. The transaction noted above were preceded by a one notch upgrade to our corporate and senior unsecured ratings by S&P, we moved from a B to a B+ rating. We continue to maintain an open and constructive relationship with S&P as we work to develop our business model. All of these actions noted about speak to and contribute to the strength of our balance sheet and ensure that we continue to have access to capital markets and liquidity.

I'll now speak to our Normal Course Issuer Bid or NCIB announced in mid-December 2021. As we noted in our financials and our MD&A as of yesterday, March 2nd, the company had repurchased and cancelled 542,401 shares under our NCIB for total costs of $20 million. Under the NCIB approved by the TSX, we are authorized to purchase for cancellation up to 1,730,321 common shares. To-date we repurchased and cancelled 31.3% of this amount. This is about actively managing our allocation of capital.

By the time of instituting our NCIB, we believe and stated as such that our shares were undervalued and based on the strength of our balance sheet, coupled with our long-term outlook and the cash flows business generates normal in the course, we saw an opportunity to create value for our shareholders, while continuing to ensure we could execute against our M&A pipeline.

The NCIB as filed remains in place to December 22nd, 2022, or such earlier date as the company may complete its purchases under the NCIB. Last time to speak two years or inclusion within the MD&A of our pro forma adjusted EBITDA as at December 31, 2021.

At the time of our financing, we had indicated that our pro forma normalized adjusted EBITDA at the end of the third quarter was $194.4 million on a pre-IFRS 16 basis or $242.5 million inclusive of IFRS-16 impactful.

Updating for our performance in Q4, our pro forma normalized adjusted EBITDA inclusive of IFRS 16 impact as presented in our MD&A improves to $266 million. On a pre-IFRS 16 basis, the implied pro forma normalized adjusted EBITDA improved to $260 million and in fact, the change from our Q3 pro forma performance metrics is the outperformance of Q4 2021 as compared to Q4 2020. This represent some of our base business operations normalized, but management's estimate of the pre-synergies impact of 12 months of acquisitions completed in the year.

It is our view as we think about what we're seeing in the first month of 2022 and the current market outlook, this represents the floor of our expectations for 2022. As we complete acquisitions in the year, we will continue to update the markdown our pro forma adjusted EBITDA at that point in time, both to provide improved visibility to our stakeholders on the impact of those acquisitions.

I'll turn it over Casey.

Casey Charleson

Thanks Mike. At the consolidated level, revenue came in at $1.2 billion, an increase of $319.7 million or 36%. Gross profit came in at $228.5 million, an increase of $75.8 million or 50%. Net income was $69.4 million versus $24.3 million in the prior year. Net income for the quarter included a recovery of non-financial assets of $39.8 million versus a recovery of $11.2 million in the prior year.

Loss on redemption liabilities of $14.1 million versus a gain of $2.1 million in the prior year, and an unrealized fair value gain on embedded derivative of $24.8 million included in finance costs.

Adjusted EBITDA came in at $65.9 million, which was an increase of $25.4 million, or 63% over Q4 2020. In our Canadian operations, total retail vehicle sold came in at 16,447, an increase of 2,507 units or 18%. The Canadian operations generated revenue of $998.8 million, an increase of 28% versus the prior year.

Gross profit was $189.3 million, an increase of 39%. Net income was $62.3 million versus $25.4 million in the prior year. Adjusted EBITDA was $55.1 million, an increase of $15.9 million.

Other key highlights include the following; same-store gross profit increased by $39.2 million or 29%, and our gross profit percentage increase to 20.2% from 17.8%. Same-store used to new retail units ratio increased to 1.29 in the quarter from 0.93. Same-store F&I gross profit per retail unit increase to $3,312 of 18% or $509 per unit. Same-store F&I gross profit dollars increase $9.4 million or 24%.

In our U.S. operations, revenue was $197 million, an increase from Q4 2020 of 102%. Gross profit was $39.2 million, an increase of 136%. Net income was $7.1 million, an increase of $8.2 million. Adjusted EBITDA was $10.7 million, an increase of $9.5 million from 2020.

New vehicle gross profit increased by $11.3 million and new vehicle gross profit percentage increased by 12.8 percentage points to 16.8%. Used vehicle revenue increased by 321% and used vehicle gross profit increased by 68%. The number of used retail vehicle sold increased by 226%, 2,166 units.

And I'll turn the call back over to Paul to discuss our outlook and strategy.

Paul Antony

Thanks Casey. Our strong performance this quarter reflects the fundamental strength and resiliency of our business model. Our operational playbook allows us to be ready to execute on our next leg of growth and acquisition strategies. As part of that growth, we significantly advanced our acquisition strategy in the fourth quarter with the recent Autopoint transaction providing strong brand and geographic diversification and adding considerable size, scale, and scope to AutoCanada's existing platform in a growing market.

In terms of our ongoing strategy, we remain well-positioned to execute on acquisition pipeline in the coming quarters. Our current transaction pipeline with dealerships and collision centers represents over $100 million in annual revenue currently being evaluated under signed LOIs and purchase agreements.

Beyond these deals, we're at varying stages of the acquisition process with other targets that have not yet reached the signed LOI stage. As always, we will remain disciplined in our approach to capital allocation. We continue to assess our extensive pipeline of acquisition opportunities, qualitatively and quantitatively with the goal of diversifying by geography and brand in addition to expanding our network of used dealerships and collision centers.

In terms of industry themes and where we continue to see things heading, we believe our business model remains resilient to fluctuations and the new vehicle sales cycle given a diversified business mix and flexible cost structure, in addition to several growth factors, new cars aside, including F&I, parts and service, collision repair, near-prime subprime, and use-only retail, we believe that any near-term pressure with inventory constraints is likely a positive dynamic for the industry as it creates additional pent-up demand that would be more rationally released over a multi-year recovery.

All that reinforces my continued belief that remain in this golden age for auto dealerships with larger platforms like AutoCanada, positioned as the primary beneficiaries. That momentum combined with a continuation of the trends we saw in 2021 in the early 2022, enhances our optimism for the year ahead. We expect to see continued realization of synergies from our acquisition, which will further drive 2022 adjusted EBITDA performance.

As we've said before, we continue to be proactive and vigilant as to what the future holds with any ongoing impacts from the macro-economic environment related to COVID.

We'll continue to build on our positive momentum and focus on strategic growth initiatives to drive industry-leading performance and enhance shareholder return regardless of changing market conditions.

We're excited about what the future holds for AutoCanada and remain poised to take advantage of the disruption and consolidation in the industry and continue to blaze a new path forward in the evolution of the company.

Thanks so much to our team for the quarter and thank you to you as our customers for supporting us. Now, I'll turn it over to the operator for any questions.

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]

Your first question comes from Michael Doumet with Scotiabank. Please go ahead.

Michael Doumet

Hey, good morning, guys.

Michael Borys

Hey good morning.

Michael Doumet

Yes, first question, Mike, if I heard you correctly, the $266 million of pro forma EBITDA, which happens to be just a tad above our consensus for 2022. If I heard you correctly said that that would represent a floor for EBITDA expectation going forward?

And I guess that makes sense given the synergy opportunity, there's right ride and the exit rates, parts and service, GP are quite strong in Q4 even versus the rest of the year. So, yes, if you can correct me if I'm wrong, if I miss quoted you there and maybe just talk about some of the offsets and how we should triangulate 2022 expectations?

Michael Borys

I think that's exactly right. I mean, we put together the pro forma EBITDA to give a little bit more color and guidance to the market. It is going to be based on what we did in the prior year. It is going to be based on the pre-synergy EBITDA for the acquisitions and as you indicated, we would expect to begin to realize on some of those synergies in 2022.

We've talked about the current environment that we're in at being golden age of dealerships. With continuing production shortfalls with OEM, microchips, and so on, we continue to expect elevated margins on new and used margins. And we're confident that as I mentioned that would be the floor, or what we would be expecting to see in 2022.

Again, we kind of get into this whole discussion around sustainability and we think 2022 is going to be strong. That should continue into 2023 until we see microchips beginning to stabilize and our model remains strong. So, there's a whole bunch of components of our business model that we're continuing to improve even before the pandemic started.

I think that's where we have to differentiate ourselves from other U.S. peers, which tends to be more of a pandemic pickup. We have in fact, we have good systemic improvements that we think are sustainable. So, long winded way of saying, yes, you captured it right.

Michael Doumet

No, that's helpful. And look, I think it's a good number. The second question I had was a question around capital allocation and how you're thinking about share repurchases versus M&A at this point. Specifically on the share repurchases, can you one, maintain the pace of the buyback, maybe expanding the opportunity there? And then just on M&A, how to think about M&A going forward? And if the focus is still kind of on large platform deals, or it could be from a range of tuck-in to platform deals, just a general question on capital allocation?

Michael Borys

I'll touch on the NCIB, the share buybacks first and then I'll turn it over to Paul on M&A. So, listen -- we had to -- if I go back to December, we were looking at where our share price was. We absolutely believed that the share price was not reflective of what we believe the intrinsic value of our shares -- of our company was or what share should have been.

We have the NCIB in place through the end of or -- through December 22nd, 2022. As we've indicated, we purchased $20 million. There's still more room on the NCIB and as the company, we'll continue to take a look at where the shares are trading and take action appropriately, but the entire view remains open.

So, we'll always have our eye on where the market happens to be in. And if we want to go into it, we will. We're also mindful that $20 million is a -- is not a overly material amount, when you think about where our balance sheet happens to be and how much cash we're actually generating. And we're also mindful of where our acquisition pipeline happens to be. So, everything is in balance as we're looking at. We are going to be smart about how we manage the balance sheet, as well as how we look at where the shares happen to be trading. So, that'll be the NCIB component. I'll turn it over to Paul to talk about the acquisition pipeline.

Paul Antony

Thanks, Mike. Look, we have tons of opportunity in front of us. We're just mindful that, no, it's the golden age of the car dealer for us. But it's also the golden age of car dealer for everybody. And so when we think about acquisitions, and think about being disciplined, it's important for us to consider acquisitions that are either A, strategic or B, accretive, that we can actually buy down the multiple by implying our synergies on to.

And so we've got a lot of opportunities in front of us, we have a lot of collision opportunities in front of us, and also throwing up right stores. We're just being disciplined how we think about things.

That said, and to back-up Mike, we think our share price is cheap and so relatively buying shares of AutoCanada where we can't buy a dealership, we think that we at least we know what we have versus buying a dealership and really stretching.

You said -- you mentioned buying tick-ins or buying big dealer groups. Listen, the next leg of the journey for us. It is around buying stores for sure and growing through acquisition, but part of that is also a team. And so we think a lot about the team that we could be assuming when we're buying dealerships.

And so as much as we're evaluating a dealership, we're evaluating the people at the dealerships and how well they perform and how well they would integrate. And so for us, whether it be one store, or five stores or nine stores, as Mike said, we have a $500 million war chest to go by and for us, it's -- we've -- the company has now turned around and now it's just about allocation of capital.

Michael Doumet

Got it. Makes sense. Thanks, guys.

Michael Borys

Thank you.

Operator

Thank you. Your next question comes from Chris Murray with ATB Capital Markets. Please go ahead.

Chris Murray

Thanks folks. Good morning. One of the questions I get a lot is about you kind of alluded to the sustainability of margins. But the question is, is really -- is this as about as good as it gets, just because you've got restricted supply? And can you just maybe give us an understanding, maybe as you think about how the business evolves as margins, maybe array supply starts to normalize, as we go into later this year and into next year?

Michael Borys

No, Chris, like -- if you listen to the earnings calls of every one of the consolidators right now, this the same question over and over again, and I don't think anybody's given an answer. So, I mean the sustainability of the margins has been the number one question that everybody asked. I would tell you, my belief is that there's still more to go. Like, we really feel strongly that the numbers that we posted. I don't want to blow our cover here, but we think we're going to kill it this year also, and that's because we don't think this is going to be a normal year.

We think 2022 is going to be impacted much like 2021, I think we said that on the previous call. And so what you're asking -- or what I think everybody's asking is, what will the world look like when everything normalizes? And I mean, I have no idea. I don't think anybody in this room is qualified. I don't think anybody in this call is, maybe Siri. Hey, Siri. I mean I have no idea like, we're all kind of grasping at this.

My face -- did went on. So, we're all trying to figure that out as well. But again, what we've said over and over again, is that we're going to continue to outperform on the market and as long as we outperform the market, we know that we're doing the best we can. If you're trying to fortune tell what the market looks like when it is normal, I'd say let's talk in 2024-2025. Sorry to be evasive.

Chris Murray

No, I guess we'll work with that. Along those lines to the other kind of major initiative that that really haven't had a lot of discussion around was around the digital initiative in the used car expansion. Any updates you can provide us with how the digital development is going. And I know there's been some other competitors that have been making some pretty aggressive moves. But just wondering how you guys are feeling about your own offering right now?

Michael Borys

Yes, like, our team is schooled up and they are building up the solution. I would say that the two acquisitions that we made really overperformed what our expectations were. And there can be more announced here very shortly as to how we've progressed far as the development, we've got a full development team building up the solution, and they're very, very talented. We have high expectations and hope for that division.

Chris Murray

Okay. Let me stop [ph] there. Thanks folks.

Michael Borys

Thank you.

Operator

Thank you. Your next question comes from David Ocampo with Cormark. Please go ahead.

David Ocampo

Thank you. Good morning, everyone.

Michael Borys

Good morning David.

David Ocampo

Sticking with Chris' question about the used vehicle strategy, I was curious kind of what you're seeing in terms of the M&A environment. I know you commented on M&A in general. But are you now leaning more towards Greenfield opportunities? Given that we haven't seen too many announcements from you guys?

Michael Borys

Well, we were running down, potentially buying an existing digital offering that we looked at that we could overlay on our business. And we looked at the whole build versus buy strategy. And we came to the conclusion that for us, it made more sense to build out and that way we get a tailor-made solution.

I know you didn't ask that question you said, are we thinking about more Greenfield versus buying? Again, we're being opportunistic, when there's an opportunity to go and buy a high quality asset that we think that will blend in, we're happy to do that.

But at the same time, we're also building out our digital solution to make sure that it's compatible with our new car dealerships. And it's a little bit trickier for us, because we have new car dealers selling used cars, and we have a used only solution. And so for us to make sure that everybody's working together, it's not just as simple as throwing up a new store necessarily competing with ourselves want to do it in such a way that we're complementary.

And so we're open to building our own. But again, to that crawl, walk, run, we're still in the crawl phase. And as I think I've told you in a previous call, this is more complex than I actually thought about. But we're still going to get there. It's just taking more time.

And frankly, I know when you say that other competitors are in market or ahead of us or whatever, I actually think that our used division is probably selling as many cars if not more than them right now. So, I don't necessarily agree with that. I think we're doing a great job.

David Ocampo

No, that's very useful color. Just moving over to the theme of normalization, but maybe drilling more specifically into one category. Your F&I GPU just continues to grind higher here. But I'm trying to get a sense do you extract more GPU out of a new car versus a used car? So, when things begin to normalize here and the shipments to new vehicle that we can actually see this prime even higher?

Michael Borys

Look, I think that we surprised ourselves. Our F&I team deserve a major shout out. These are a group of professionals I've never seen anything like it. And what they've been able to accomplish is nothing short less vacuous. When you compare an overlay to any of the other consolidators and anybody that we can put we actually can be within the market.

And frankly where we end up, if that's what you're trying to solve for, I actually don't know. I don't know where we ultimately end up. What I do know is the new F&I has more opportunity on a GPU basis. So, we're extremely excited about the future and we definitely have the right team in place to actually go and execute on that.

Paul Antony

Hey, David, just a little bit more coming. And I get we don't really, you don't break yourself but generally new and used GPU is not materially different. So, they're pretty close.

David Ocampo

Okay, that's it for me. Thank you so much guys.

Operator

Thank you. Your next question comes from Luke Hannan with Canaccord. Please go ahead.

Luke Hannan

Yes, thanks. Good morning. I wanted to drill in on the parts, service, and collision repair because I imagine that it's something that we'll see snapped back in more dramatic fashion in 2022. How do you think about your -- how well-positioned that you are there, Paul, with the I guess, specifically dig in on the supply of technicians that you have there? Do you have the capacity to be able to support higher than level pre-pandemic levels of service there?

Paul Antony

For sure we do. We -- so, I think we're seeing our parts and service come back in a meaningful way. And that has to do with miles driven as things open up, we're definitely positioned well for that. Our collision repair business separately, as there's more vehicles on the road, there's a higher frequency of collision and accidents. And so I expect that to absolutely take hold as well. And as we've said before, we're in the market to buy more collision repair centers to support our existing framework of dealerships.

Luke Hannan

Got it. And then when we think about also the margin drivers for that business in 2022, I think clearly scale is a pretty big contributor there, but are there any mix implications that we should be thinking about 2022 as well, just taking into consideration that there's the car park has aged considerably over the last two years and the higher mix of used vehicles that are now on the road? Like, are you expecting anything different internally, from a mix perspective than maybe you would have seen pre-pandemic?

Paul Antony

I think so I think that you hit the nail on the head, because there's more used cars out there, there's likely a higher propensity for service and repair and so we can expect that the volume should be driven up.

Luke Hannan

Got it. Last one for me, and then I'll pass the line. I think you had mentioned that there was about two months of new car inventory in Canada that you have on the ground as of today. I'm just curious how that compares to your competitors.

Michael Borys

I can't comment I think that we I don't really have the answer to that. I do know, two months in Canada, we have one month, new car volume for the U.S. And I know that we were aggressive like the whole team was aggressively trying to source new vehicle inventory and used vehicle inventory over the winter months. And as we said, we have you know, more volume in used than anybody else, the three top consolidators in Canada combined. I would only imagine that were likely heavier in new as well, but I can't. I can't comment on that exact number.

Luke Hannan

Okay, understood. I appreciate the color. Thanks.

Michael Borys

Thanks. Take care.

Paul Antony

Thank you.

Operator

Thank you. Your next question comes from Maggie MacDougall with Stifel. Please go ahead.

Maggie MacDougall

Thank you. I wanted to ask a question following on the parts and service commentary. You haven't yet seen the parts and service business fully recovered back to pre-pandemic levels, but it does look like it is getting there, at least slowly but surely. If it did snap back, would you have any concern about availability of parts versus supply of parts in light of the challenges that are were already in supply chain, but now have gotten worse with the unfortunate Ukrainian situation?

Paul Antony

So, yes, it's definitely a concern. It's on our radar. It hasn't impacted that yet. But it definitely could potentially impact us in the future. I think that's just a wait and see. Again, Maggie, we can't be fortuneteller. So, we'll know we're hoping for the best, but we also are prepared for the worst.

Maggie MacDougall

And secondary question on M&A, we talk a lot about acquisition of dealerships used car platforms, that type of thing. We have seen tech valuations to reset significantly in the general marketplace. And I'm wondering if there is any interest or if you have heard of any transactions occurring whereby more traditional business like yourself, her line retail looks to take advantage of the multiple contraction and buy some interesting software that could plug into your omni-channel strategy?

Paul Antony

The answer to that is yes, we've been diligent thing. A bunch of different opportunities, all up and down software around automotive as well.

Maggie MacDougall

Great. Thanks. And then final question. When I go to your website and then look at what's listed for sale, you've got new, used, and certified. I understand this is probably more of a lead generation tool on the new side. But it does strike me as though being able to show those categories, in addition to the used vehicles could actually be a differentiator in terms of your online used offering. Are you able to describe how you envision that working? Will there be a synergy there? Or is that not necessarily going to be the case?

Paul Antony

I can't comment at this point in time. At this point in time, we're not able to mix the certified preowned from the dealership to our used car platform. That's the current state of affair. But no, as things change and evolve, and I'm sure they will, we'll keep you posted.

Maggie MacDougall

Okay, thanks. Have a good day.

Paul Antony

Thank you.

Operator

Thank you. There are there for the questions at this time. Mr. Anthony, you may proceed.

Paul Antony

Listen, we -- again, we really appreciate everybody's patience as we work through the pandemic. Now, this has been a journey for this company. We have exciting news to announce over the coming weeks and we think that we're in a great position to execute on the next several years of what we think are going to be highlights to the automotive industry. So thanks, everybody, for your support, from our OEM partners, to our customers to everybody that works within AutoCanada. Thank you very much. We appreciate everybody's time.

Michael Borys

Thank you.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.