EINC E Automotive Inc

TORONTO, Nov. 8, 2022 /CNW/ - E Automotive Inc. d/b/a E Inc. (TSX: EINC) (the "Company" or "E INC"), a company that connects the automotive wholesale and retail experiences with a proprietary technology platform operating under the brands EBlock and EDealer, today announced its financial and operational results for the three months ("Q3 2022") and nine months ("YTD 2022") ended September 30, 2022. Financial references herein are in U.S. dollars unless otherwise indicated.

"Our performance in the third quarter demonstrates the value of our digital platform and the resilience of our digital-meets-physical strategy," said Jason McClenahan, President & CEO, E INC. "Despite the challenging macro environment affecting demand for vehicles and tight inventory conditions that have been impacting transaction volumes, we grew revenue organically as dealers continue to seek an easy-to-use digital platform that enables them to profitably and effectively manage their inventory. While listings are at robust levels, the conversion rate of listings to sales has declined. As an exchange, our EBlock platform benefits more from higher transaction volumes than higher vehicle prices and as the market normalizes we believe we will be well-positioned to earn more units per customer, more profitably. With a focus on our four existing markets, Canada, the US West, Midwest and Gulf States, we will continue to prioritize achieving greater profitability, sooner."

2022 Q3 Highlights
(Comparison periods in each case are the three months ended September 30, 2021)

• Revenue was up 45.7%, to $28.8 million from $19.8 million in the prior period, due to growth in Vehicles Transacted and increased revenue per vehicle transacted across the Company's marketplace and expansion of marketplace participants and subscriber base.
• Gross transaction value was up 28.8% to $693.6 million in Q3 2022, driven by the volume and dollar value of vehicles transacted.
• Vehicles transacted were up 16.5% to 48,914 in Q3 2022 driven by acquired marketplaces and geographical expansion.
• Marketplace participants grew 43.5% to 12,994, as of September 30, 2022, compared to the same point in 2021, listing a record number of vehicles for sale in the quarter on EBlock.
• Net loss was $10.8 million compared to a loss of $6.3 million in the corresponding period in 2021.
• Adjusted EBITDA loss was $11.7 million in Q3 2022 compared to a loss of $1.8 million in Q3 2021, primarily due to the U.S. expansion strategy which began in Q3 2021 and current macro headwinds impacting sales conversion.
• Entered into non-binding, finalized term sheets with respect to the acquisition of multiple automotive businesses located in the United States for a purchase price of $85 million in cash consideration with a portion of the purchase price payable upon close and the balance payable in equal installments over two years.
• Completed the integration of TradeHelper, with all transactions running across the EBlock platform enabling the sunset of the TradeHelper platform. TradeHelper along with ESP (the "Quebec Acquisitions") provide the opportunity for a full upstream/downstream solution in the Quebec wholesale market, which is the second largest market in Canada.
• Continued the integration of FastLane Auto Exchange ("FastLane") and Louisiana's 1st Choice Auto Auction ("LAFCAA"), collectively the "2022 Acquisitions". FastLane strengthens the Company's wholesale marketplace in both Canada and the U.S., allowing it to offer a comprehensive cross-border dealer to dealer digital auction platform with an end-to-end solution for cross-border buyers. LAFCAA supports the launch of the EBlock Platform in the U.S. Gulf States delivering a digital-friendly experience for dealers looking to expand their inventory strategy.
• On September 7, 2022, to better align operations with the Company's strategic focus, to build digitally around physical auction locations in fewer regions in the US, the Company completed a restructuring of its operations which resulted in a headcount reduction (the "Q3 2022 Restructuring").

M&A Update
The Company has entered into non-binding, finalized term sheets with respect to the acquisition of multiple automotive businesses (the "Proposed Acquisitions"). The Proposed Acquisitions are all located in the United States and transacted approximately 60,000 vehicles in 2021. In addition, The Proposed Acquisitions generated combined unaudited non-IFRS revenue of approximately $38 million and unaudited EBITDA of more than $11.5 million during the twelve-month period ended June 30, 2022. The finalized term sheets provide for a purchase price for the Proposed Acquisitions of approximately $85 million in cash consideration (prior to customary adjustments), of which approximately $30 million would be payable on closing, with the balance payable in equal installments over two years. The Company intends to finance the Proposed Acquisitions with a combination of new equity from Intercap Equity Inc. and new debt, and expects closing to occur during the fourth quarter of 2022. Completion of the Proposed Acquisitions is subject to certain conditions including, but not limited to, the completion of due diligence, the signing of definitive documentation, financing and receipt of all necessary consents and approvals. There can be no assurance that the Company will enter into definitive agreements for the Proposed Transactions or that the Proposed Transactions will occur as proposed or at all. 

Q3 2022 Restructuring
In addition to its acquisition strategy, the Company has taken other steps to actively address the challenging macroeconomic conditions currently facing the broader automotive industry and the Company which are designed to lead the Company on a clearer and quicker path to profitability. Among other things, the Company expects to: 

• Focus on launching digital marketplaces around core physical locations as part of the Company's Digital-Meets-Physical strategy;
• Prioritize the Canadian, U.S. West and Midwest regions for a more targeted approach to long-term profitable growth; and
• Deliver new revenue-generating, value-added products and features.

As part of the cost optimization plans and focused growth strategy, E INC has implemented cost efficiencies during the third quarter of 2022 while continuing to support its overall growth strategy. The cost efficiencies include reductions to operating costs, primarily in the Southeast and Western U.S. markets, and costs related to marketing, professional fees and other general and administrative expenses. Once these actions are fully implemented, the Company expects to achieve $10 million to $15 million in annualized cost savings by the fourth quarter of 2022.

E INC's unaudited financial statements for the three and nine months ended September 30, 2022 and Management's Discussion & Analysis for the same period have been filed on SEDAR at www.sedar.com.

Notice of Conference Call
E INC will host a conference call Tuesday, November 8, 2022 at 5:00 PM ET to discuss its financial results. Jason McClenahan, President & CEO, and Andy Bohlin, CFO, will co-chair the call. All interested parties can join the call by dialing (647) 794-4605 or (800) 218-2154 with the conference identification of 6391688. Please dial in 15 minutes prior to the call to secure a line. A live audio webcast of the conference call will also be available at investors.e.inc or https://app.webinar.net/0G86Pr6PEpW. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.

About E INC
E INC's mission is to optimize the online vehicle buying, selling, and management experience for automotive dealers and consumers. E INC has a digital platform (the "Platform") that provides automotive dealerships with access to an online wholesale auction marketplace where they can purchase or sell vehicles to other dealers, as well as access innovative software solutions to support dealers' digital retailing and inventory management. Access to E INC's Platform is complemented by ancillary service offerings to assist dealers with supplementary auction-related needs, along with driving consumer traffic to their digital properties and optimizing other business processes. E INC's digital wholesale marketplace goes to market under the brand EBlock, and E INC's digital suite of retail products goes to market under the brand EDealer.

Non-IFRS Financial Measures
This press release makes reference to certain non-IFRS financial measures and industry metrics. These measures are not recognized measures under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS financial measures, including "Adjusted EBITDA". This press release also makes reference to "vehicles transacted", "marketplace participants", "subscribers", "gross transaction value", each of which are operating metrics used in our industry. Non-IFRS financial measures and industry metrics are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS financial measures and industry metrics in the evaluation of issuers. Management also uses non-IFRS financial measures and industry metrics in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and forecasts and determine components of management compensation.

Non-IFRS Measures
"Adjusted EBITDA" means net loss for the period, adjusted to exclude: finance expense, net, income tax expense (recovery), net, depreciation and amortization, share-based compensation expense, acquisition-related expenses, restructuring costs, and other expense (income), net.

The following table reconciles net loss to Adjusted EBITDA loss for the three and nine months ended September 30, 2022 and September 30, 2021: 

Forward Looking Statements
This press release contains forward-looking information and statements within the meaning of applicable securities legislation, which reflect management's current expectations regarding future events. These statements are based on the Company's expectations, estimates, forecasts, and projections and include, without limitation, statements regarding the including statements regarding the Proposed Acquisitions, the related financing, its plan to optimize costs, anticipated cost savings and expectations regarding future profitability.

The forward-looking statements in this press release are based on certain assumptions, including that the Proposed Acquisitions will be completed on the terms proposed, cost savings will materialize as expected, the macro environmental and other factors affecting the Company's business will normalize in the near term, and that other challenges won't arise.

While these assumptions are considered by the Company to be appropriate and reasonable as of the date of this press release, they are subject to known and unknown risks, uncertainties, and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information. These risks include but not limited to: failure of the Company to enter into definitive agreements for the Proposed Acquisitions on satisfactory terms, or at all; failure of the Company to obtain financing or the required approvals or consents for, or satisfy other conditions to effect, the Proposed Acquisitions; the risk that the Proposed Acquisitions may involve unexpected costs, liabilities or delays; the risk that, prior to or as a result of the completion of the Proposed Acquisitions, the business of the targets or E INC may experience significant disruptions, including loss of clients or employees due to transaction related uncertainty, industry conditions or other factors; risks relating to employee retention; the risk that legal proceedings may be instituted; risks related to the diversion of management's attention from E INC's ongoing business operations; the risk that anticipated costs savings won't materialize as expected or other costs will arise; and  those risks discussed under the "Risk Factors" section of our annual information form, which is available under our profile on SEDAR at www.sedar.com. If any of these risks or uncertainties materialize, or if the opinions, estimates, or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information.

There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the Company assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

All of the forward-looking information contained in this press release is expressly qualified by the foregoing cautionary statements.

Unaudited Interim Condensed Consolidated Statements of Loss and Other Comprehensive Loss
[Expressed in thousands of US dollars, except per share data and number of shares]

Unaudited Interim Condensed Consolidated Statements of Financial Position
[Expressed in thousands of US dollars]

Unaudited Interim Condensed Consolidated Statements of Cash Flows
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SOURCE E Automotive Inc.