Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q1 2020 Earnings Presentation
29 slides from Lithia Motors's earnings presentation, Apr 22, 2020
Slide 1: Investor Presentation April 2020
INVESTOR PRESENTATIO APRIL 2020
Slide 2: Disclosure: Forward-Looking Statements
DISCLOSURE Forward-Looking Statements Certain statements in this presentation, and at times made by our officers and representatives, constitute forward-looking stat in the meaning of the "Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Generally, you can identify fo
Slide 3: A Massive Market
A MASSIVE MARKET Consolidating a highly fragmented industry FRANCHISED DEALER MARKET Lithia 1.0% SHARE Other Top 10 b Source: Dealers 7.0% NADA DATA 2018 Midyear Report, Automotive News Top 180 Dealership All Others 92.0% Groups 2017 » 17mm New Vehicles’ » 40mm Used Vehicles *Units are 2019 for new
Slide 4: Modernizing an Industry
MODERNIZING AN INDUSTRY A high-performing growth company powered by people and innovation NETWORK DIGITAL TECHNOLOGY Capturing meaningful market share requires consolidating a highly fragmented market and creating a retail experience that our customers crave. Profiting from the modernization occurri
Slide 5: #265 on the Fortune 500
#265 on the Fortune 500 @ 3" largest dealership group 19%: 5-year Revenue CAGR 18%: 5-year EPS CAGR LITHIA MOTORS The pragmatic disruptor, backed by our multifaceted proven success strategy, 92% National Coverage with 187 centers ; uniquely poised to lead the modernization of transportation retail a
Slide 6: Pathway to $15 Earnings Per Share
PATHWAY TO *15 EARNINGS PER SHARE EARNINGS/ SW INNOVATION/ CAPITAL ENGINE 4 DIVERSIFICATION Expand customer offerings = Leverage network and digital technologies Vertical and horizontal = Nearly $300MM in annual free adjacencies cash flows for 2019 y VW EXPANDING | WHEREVER g=— CONSUMER | WHENEVER R
Slide 7: Revenues Acquired
L REVENUES ACQUIRED* ($m™) 19% 5-year Revenue CAGR Continually scale nationwide footprint with current 92% reach m 2,600 specific acquisition targets 2010 2011 2013-2014 = 2015 = 2016 = 2017-—S 2018 = 2019 : 484% — 196 136% 138% 100% 64 Accumulated Acquisition return on Equity as of March 3 Averagin
Slide 8: Earnings: Acquire Strong Brands and Capture Opportunity
EARNINGS Acquire strong brands and capture opportunity 100+ 105% Units $1,450 25% 90% <65% 700 75% u % 10% Units New Vehicle Used Vehicle F&l Service & SG&A Market Share Units Profit Parts Reduction ‘A67% improvement Nearly 200% increase Over 100% 150% improvement in Over 36% < 1 9, in OEM Market Sh
Slide 9: Capital Engine
CAPITAL ENGINE Fail Generated nearly $300mm free cash flow for 2019 USES OF CAPITAL: TARGET Internal Investment & Modernization 25% CAPITAL ALLOCATION Actual 5-year average: 19% PRIORITIES _ Share Repurchases 5% = Acquisitions Actual 5-year average: 19% Internal Investment & Modernization r ™ Divide
Slide 10: Innovation & Diversification
il 92% of U.S. = Products and services y . tes —a0 fit every budget and need | CONVENIENCE) 1: \ m 2nd largest owned aN \ INNOVATION & DIVERSIFICATION Create freedom for consumers through our physical network and digital solutions Cia TM Biow ve @. PHYSICAL NETWORK \s 1 DIGITAL SOLUTIONS ~ = Nationw
Slide 11: Profitably Modernizing an Industry
PROFITABLY MODERNIZING AN INDUSTRY We are a growth company powered by people and innovation. We purchase and build strong businesses that have yet to realize their potential. We achieve operational excellence by focusing the business on convenient and transparent consumer experiences and proprietary
Slide 12: (SLITHIA NYSE:LAD APRIL 2020
(SLITHIA NYSE:LAD APRIL 2020
Slide 13: Recent Announcements
RECENT ANNOUNCEMENTS 03.2019 05.2019 07.2019 Lithia Motors and Shift Hamilton Honda joins Lithia Motors promotes Announce National the Lithia family George Hines, Chief Innovation Data Partnership & Technology Officer and Lithia Motors adds Tina Miller, Chief Financial Shauna Mcintyre, Officer Googl
Slide 14: Sector-Leading Leverage
SECTOR-LEADING LEVERAGE Generated nearly $300mm free cash flow for 2019 AUTOMOTIVE RETAIL INDUSTRY HISTORICAL NET DEBT-TO-EBITDA Floorplan adjustment illustration Proven ability to delever 6.1x DEBT (3.9x) sete 22x NET DEBT EBITDA Floorplan Interest Adjusted EBITDA Unadjusted Floorplan Adjusted 2015
Slide 15: Resilient Business Model
RESILIENT BUSINESS MODEL Profitable business with diversified product mix and multiple earnings streams LITHIA BUSINESS MIX Mi New Vehicles Ml Used Vehicles Ml Parts & Service Ml F&I REVENUE GROSS PROFIT Note: Revenue and gross profit mix for the three-months ended March 31, 2020 (SLITHIA LITHIA NEW
Slide 16: Valuation Benchmarks Yield P/E Opportunity
20x VALUATION BENCHMARKS YIELD P/E OPPORTUNITY 10-17x P/E opportiunity through existing business lines 2020E EV/Revenue - Average 3.7x 12.9% 46x ———_ ll — dx 2020E P/E"! - Average 17.3x 27.8x 17.4x 16.7x - : " LJ High Growth REITs 5 ty Finance Specialty Retail ie Monster, Shake Shack, Monro Service,
Slide 17: Q1 '20 Income Statement Summary
Q1 ‘20 INCOME STATEMENT SUMMARY COMMENTARY ™ Increased total used vehicle sales 6% ™ Increased total gross profit 2% ™ Increased F&l per unit 6% ™ Increased total vehicle gross profit per unit 3% (SLITHIA Q1 2020 HIGHLIGHTS TOTAL GROSS Fal PER TOTAL VEHICLE GROSS PROFIT ($MM) UNIT ($) PROFIT PER UNI
Slide 18: Supplemental Information: 2020 Quarterly Income Statement
SUPPLEMENTAL INFORMATION 2020 Quarterly Income Statement $M Q4 Q3 a2 Qi YTD 2019 New Vehicle $1,373.5 $1,373.5 Used Vehicle 874.4 874.4 Wholesale used vehicles 66.7 66.7 Finance and insurance 121.9 121.9 Service, body and parts 329.9 329.9 Fleet and other 37.4 37.4 Total Revenues $2,803.8 $2,803.8 N
Slide 19: Supplemental Information: 2020 Adjusted Non-GAAP Reconciliation
SUPPLEMENTAL INFORMATION 2020 Adjusted Non-GAAP Reconciliation YTD Gain on store Insurance Acquisition YTD 03/31/2019 disposals Reserves expenses 03/31/2020 $M, except for per share amounts As Reported Qi Qi Qi Adjusted Selling, general and administrative 346.0 0.1 (0.8) (0.5) 344.8 Income from oper
Slide 20: Supplemental Information: 2019 Quarterly Income Statement
SUPPLEMENTAL INFORMATION 2019 Quarterly Income Statement $M as a3 a2 ai YTD 2019 New Vehicle $1,805.8 $1,824.8 $1,707.4 $1,461.1 $6,799.1 Used Vehicle 894.7 916.3, 888.3 827.9 3,527.2 Wholesale used vehicles 67.7 hh 81.7 714 301.2 Finance and insurance 136.0 136.3 129.0 117.3 518.6 Service, body and
Slide 21: Supplemental Information: 2019 Adjusted Income Statement Details
SUPPLEMENTAL INFORMATION 2019 Adjusted Income Statement Details YTD Gain on store Asset Insurance Acquisition YTD 12/31/19 disposals impairment Reserves expenses 12/31/19 $M, except for per share amounts AsReported Q1 Q2 Q3 Q4 Q1 Q4 Q2 Q3 Ql a2 Q3 Adjusted Asset impairments $2.6 - - - - (0.5) | (2.1
Slide 22: Supplemental Information: 2018 Adjusted Income Statement Details
SUPPLEMENTAL INFORMATION 2018 Adjusted Income Statement Details YTD Reserve Asset Acquisition Tax Net gain (loss) YTD 12/31/2018 Adjustments Impairment — expenses attributes* onsale of store 12/31/2018 $M, except for per share amounts As Reported Q2 Q4 Q2 Q2 Q3. 4 Q3 Q4 Adjusted Selling, general and
Slide 23: Supplemental Information: 2017 Adjusted Income Statement Details
SUPPLEMENTAL INFORMATION 2017 Adjusted Income Statement Details YTD OEM Net gain (loss) Reserve Acquisition YTD 12/31/2017 settlements onsaleofstore adjustments expenses Tax act 12/31/2017 $M, except for per share amounts As Reported Qi Q4 Q2 Q3 Q2 Q3 Adjusted Selling, general and administrative $1,
Slide 24: Supplemental Information: 2016 Adjusted Income Statement Details
SUPPLEMENTAL INFORMATION 2016 Adjusted Income Statement Details YTD Net gain (loss) Equity investment fair Legal reserve Tax YTD 12/31/2016 onsale of stores valuation adjustment adjustment attribute 12/31/2016 $M, except for per share amounts As Reported Qi Qi Q2 Q3 Q4 Qi Q4 Q4 Adjusted Asset impair
Slide 25: Supplemental Information: 2015 Adjusted Income Statement Details
SUPPLEMENTAL INFORMATION 2015 Adjusted Income Statement Details YTD Net gain (loss) Asset Transition YTD 12/31/2015 onsaleofstores impairment Agreement Equity Investment 12/31/2015 $M, except for per share amounts As Reported lel] Q2 Q2 Q4 Q3 Qi Q2 Q3 Q4 Adjusted Asset impairments $20.1 _ (2.0) | (1
Slide 26: Supplemental Information: EBITDA and Adjusted EBITDA
SUPPLEMENTAL INFORMATION EBITDA and Adjusted EBITDA $M YTD 2020 FY 2019 FY 2018 Net income $46.2 $271.5 $265.7 Add: flooring interest expense 14.0 $72.8 $62.3 Add: other interest expense 17.0 60.6 56.0 Add: income taxes 18.0 103.9 18 Add: depreciation and amortization 22.0 82.4 75.4 EBITDA $117.2 $5
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