Car Holdings Update for May 2018

Dear Investor,

We’re pleased to present another update to shareholders regarding the recent progress of CAR Holdings.

Recent Highlights:

Here are some highlights from the past few months:

  • Finalizing the brand for our repair and service shops. This brand will be called mechaniQ. Renovations are near complete at our Midas Oakville location which will be operating under this brand in May, 2018. We intend to rebrand our repair and service shops to the MechaniQ brand by early 2019. Please check out our website and we invite you to provide us with feedback on the new brand and design.

  • Acquisition of Aquitaine Auto Service in Mississauga, Be Safe Tire & Auto Service in Vaughan and Superb Tire & Auto Service in Brampton. The acquisitions bring the total number of retail after-market automotive service locations (under corporate ownership) to 13.

  • We are currently performing acquisition due diligence on five locations in the Greater Toronto Area. We are confident in meeting our acquisition target of one store per month for 2018.

  • We have developed a sophisticated acquisition score-card model which uses store data from historical acquisitions to help predict successful, future acquisitions. Our investment criteria continues to remain chiefly focused on the following store measures:

  • Cash flow positive

  • Annual revenues exceeding $1 million

  • Good location

  • Strong staff

  • High car count

  • Located in Ontario

The scorecard will prove to be a valuable tool in analyzing all potential acquisitions.

  • We are also innovating the way we structure store acquisitions by the inclusion of vendor take back financing and vendor shared-risk models. This allows us to make more acquisitions with our available capital and lowers risk in the future performance of new stores.

  • The PitCar joint-venture based in Romania has been a success to date. Operations kicked off in mid-February. Annualised revenues are over $1M CAD with car count expected to exceed 12,000. Perhaps most importantly, PitCar provides CAR Holdings’ access to skilled automotive technicians in Romania & Eastern Europe; offering those with top talent the opportunity to join our retail service operations in Canada.

  • Tire Hotel has proven to be an excellent acquisition to compliment our retail after-market automotive service business. We were able to execute our plan to restructure the business as we consolidated three warehouses into one to increase operational efficiencies. We spent a lot of time reviewing the costs and reviewing transportation vendors. The net result was an overall reduction in transportation, and directionally choosing to acquire some of our own fleet vehicles to improve cost efficiencies. We will continue to closely monitor the number of sets we store in our warehouse, as we intend to hit the projected target of 20,000 sets for the upcoming spring season.

  • We are in the process of starting a new business line called autologiQ which we expect will go live in the summer of 2018. autologiQ is the first to market Canadian vehicle subscription service, offering customers an all-inclusive price for their vehicle needs, including repairs and maintenance, licensing, insurance, tire storage and road-side assistance. autologiQ will compliment our current model by driving business to mechaniQ and Tire Hotel while offering an “all-in” vehicle one-stop-shop. autologiQ will also provide services to the “consumer to consumer” used vehicle market space currently available only through vehicle dealers. Expect to hear more about autologiQ in the upcoming months.

  • We secured a subordinated debt facility in the amount of $7.5M.

  • We also secured an operating line of credit with RBC in the amount of over $800k.

  • We are continuing to raise equity when needed. To date, we have raised equity of almost $10M.

  • Increase in total employees to approximately 100.

  • We currently employ three registered students within our Institute of Chartered Professional Accountants training facility.

  • Complete revamp of the CAR Holdings’ website: https://www.carholdings.ca/

  • We had a successful open house in February for investors to tour the CAR Holdings’ facilities and learn about what’s next.

Financials Update:

Total sales in the quarter increased 157%, to $1,880,652 from $730,415 in the third quarter of 2017. This increase is primarily the result of the contributions from 9 new locations added since March 31st, 2017 with same-store growth increasing by 9% or $157,000. Acquisition momentum has continued into the fourth quarter with one location to be added in each month.

In the third quarter of 2018, normalized EBITDA was approximately $(915,000), compared with normalized EBITDA of approximately $(11,000), in the third quarter of 2017. Platform development costs along with acquisition costs are driving the loss in normalized EBITDA as we continue to scale our operations.

The Road Ahead:

We are continuing to hit our goals as we move forward. 2018 is proving to be the year of excitement as we start to rebrand the repair and service shops to MechaniQ and start receiving recognition in the marketplace. Adding to the excitement is our building of the first auto subscription service in Canada under autologiQ.

We are confident we will reach our target of acquiring one repair and service shop per month for 2018. However, our ability to source good reputable stores is something that we need to be dedicated to until we have established brand recognition in the marketplace.

We are starting to see the benefits of our connections with industry experts as CAR Holdings is being approached for potential larger opportunities and partnerships. We expect to capitalize on some of these opportunities in the upcoming year.

The single biggest challenge we have is finding great people and ensuring they are in the right seat. We continue to refine our recruiting strategy as we grow and create an outstanding employee-work culture at CAR Holdings.

*****

You can expect another investor update in several months, and we will report on the progress for the current quarter. Please do not hesitate to reach out in the interim if you have any questions. We are always available.

As we say at CAR Holdings, Onwards & Upwards!

Executive Team at CAR Holdings


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