Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q4 2023 Earnings Presentation
31 slides from Lithia Motors's earnings presentation, Feb 14, 2024
Slide 1: Investor Presentation
Investor Presentation FEBRUARY 2024
Slide 2: Disclosure
NYSE: LAD Disclosure Forward-Looking Statements Any forward-looking statement made by us in this presentation is based only on information currently available to us and Certain statements in this presentation, and at times made by our officers and representatives, constitute forward- speaks only as
Slide 3: Lithia & Driveway: Profitably Modernizing an Industry
NYSE: LAD Lithia & Driveway Profitably Modernizing an Industry Building a profitable platform with the ability to respond to changing consumer and industry trends. HIGHLIGHTS EBITDA GROWTH +1,018% Strategy § Diverse synergistic portfolio of businesses § Complete ownership lifecycle attachment +225%
Slide 4: LAD Strategy Design
NYSE: LAD KEY Verticals – Consumer Growth (REV) LAD Strategy Design Horizontals – Consumer Synergies (EPS) 4
Slide 5: Key Strategic Highlights
NYSE: LAD Key Strategic Highlights Profitably Modernizing an Industry Building a profitable platform with the ability to respond to changing consumer and industry trends. 01 LARGEST RETAIL INDUSTRY Early stages of consolidation and modernization. Variety of brands, financing solutions, leasing, repa
Slide 6: Over $3 Trillion in Revenue Across Industries
NYSE: LAD 01 LARGEST RETAIL INDUSTRY Over $3 Trillion in Revenue Across Industries PUBLIC USED ONLY AUTO TRADITIONAL NEW RETAILERS FRANCHISE DEALERS $3T Mobility $900B Diversified Mobility Verticals Used $800B Combined market share In-Store & Online Retail Marketplaces for New & Used: ~2% New $700B
Slide 7: Strategic Omnichannel Ecosystem
NYSE: LAD 02 CONSUMER ECOSYSTEM Wherever, whenever, however Strategic Omnichannel Ecosystem Wherever, Whenever, However CUSTOMER EXPERIENCE • Customer portal, easy access to variety of offerings • Omni-channel with in-store and online solutions • Creating infectious customer loyalty Shop, Sell & Tra
Slide 8: Operating Results and Efficiency
In NYSE: LAD 03 OPERATIONAL EXCELLENCE Operating Results and Efficiency Competitive Advantage – LAD vs Brick & Mortar Retailers1 2023 Vehicle Operations SG&A Performance at a Store Level PER LOCATION PER EMPLOYEE 36% range between top and 22% range between top and 20% range between top and bottom qu
Slide 9: Regenerative Growth Engine
NYSE: LAD 03 OPERATIONAL EXCELLENCE Regenerative Growth Engine LAD Growth Strategy vs. Peer Share Buyback Strategy Free Cash Flow Generation (EBITDA) Capital Allocation $2 .5 bn 25% CAGR LAD PEERS 25% CAGR $2 .0 bn 8% $1 .5 bn 11% CAGR 2% Debt Paydown 78% 11% CAGR Cash Dividends 31% $1 .0 bn Acquisi
Slide 10: Leveraging Growth & Scale
NYSE: LAD 04 GROWTH & SCALE Leveraging Growth & Scale 90% Reach, 100-mile Density 90% Reach, 200-mile Density 90% Reach, 300-mile Density With a focus on consumer convenience and a disciplined, proven M&A strategy, LAD is reducing the distance to our customers. National network works in tandem with
Slide 11: Mergers & Acquisitions
NYSE: LAD 04 GROWTH & SCALE Mergers & Acquisitions U.S. PUBLIC DEALERSHIP TRANSACTIONS & HISTORICAL RETURNS BY VINTAGE ANNUALIZED REVENUES (R) ACQUIRED 364 22 5% 30 0 205% Number of Dealerships 216 15 0% 20 0 131% Cumulative Return 154 (42%) R: $15.4B 88% 100% return 77% 10 0 75 % 66 (31%) R: $6B 50
Slide 12: Driveway Finance Corporation (DFC)
NYSE: LAD 05 ADJACENCIES Driveway Finance Corporation (DFC) $20B $1B Business Proposition Portfolio Design Serving LAD customers through: • Full credit spectrum lender • Variety of financing options • Focus on prime FICO portfolio $16B $800M • Integration throughout Lithia profile platform • Maximiz
Slide 13: Driveway Finance Corporation (DFC) Metrics
NYSE: LAD 05 ADJACENCIES Driveway Finance Corporation (DFC) UNDERWRITING METRICS PORTFOLIO SIZE 80 0 13 % $3 .5 bn 4.50 % Average ~730+ 3.90% 70 0 12 % $3 .0 bn 4.00 % NET CHARGE-OFFS1 60 0 10.31% 11 % $2 .5 bn 3.50 % ORIGINATIONS ($) 10.00% 9.52% APR, FICO 50 0 10 % $2 .0 bn 3.00 % 8.99% 2.40% 2.40
Slide 14: Future Growth
NYSE: LAD 06 PREMIER RETAILER Future Growth Revenue: $75-100B EPS PER $1B OF REVENUE METRIC $1B Revenue = $1.75 - $2 EPS $0.10-0.15 Fleet Management SG&A % GP: <50% $0.05-0.10 Adjacencies Diversified. Dynamic. Profitable. $100B Op Margin: 7+% $200 We’re leveraging our platform for $0.20-0.30 Financi
Slide 15: LAD Over the Years
NYSE: LAD LAD Over the Years The pragmatic disrupter with a proven multifaceted success strategy, uniquely and competitively leading the modernization of personal transportation by providing consumers solutions wherever, whenever, and however they desire. 1946 2012 2021-2022 Near-Term Walt DeBoer fo
Slide 16: Appendix
NYSE: LAD Appendix Inventory, Strategies, History, Future, & More 16
Slide 17: Resilient Business Model
NYSE: LAD Resilient Business Model Profitable business with diversified brand mix, geographic mix and multiple earnings streams Business Mix New New Vehicle Mix New and Used Revenue / Gross Profit includes F&I Used Parts & Service Segment Segment % Brand Brand Revenue Brand Unit Sales Toyota 14% 17%
Slide 18: SAAR and Market Share
NYSE: LAD SAAR and Market Share US Light Vehicle New & Used SAAR1 LAD US Market Share2 4.0% 45 .0 40 .0 35 .0 3.0% 30 .0 Units (in millions) 25 .0 2.0% 20 .0 15 .0 1.0% 10 .0 5.0 0.0 0.0% 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24e 20 19 20 20 20 21 20 22 20 23 Unit grow
Slide 19: Used Vehicle Marketplace
NYSE: LAD Used Vehicle Marketplace Q4 2023 Same Store Metrics2 Addressing largest proportion of used vehicle TAM of any retailer Average Selling % Mix ROI Price CPO 10% CPO $32,407 15% 59% Core 4 $29,630 64% 36% § Inventory procurement and reconditioning are Value Autos $15,790 20% 129% critical. Ne
Slide 20: Omnichannel Solutions
NYSE: LAD Omnichannel Solutions Fully Proprietary New Car Real Time Payment Shopping Experience with Driveway First in market offering, pays Integrates applicable incentives and consumers instantly when selling a rebates for transparent upfront pricing. car to Driveway, no more waiting for the check
Slide 21: GreenCars | everything in one place
NYSE: LAD GreenCars | everything in one place Accelerate the adoption of Marketplace more sustainable vehicles, while capturing growth Powered by Driveway, the marketplace accelerates a net-zero world with the largest selection Learning Center Business Proposition Everything you need to learn and En
Slide 22: Driving Positive Change
NYSE: LAD ESG AT LITHIA & DRIVEWAY Driving Positive Change GOAL 1 GOAL 6 Public Education Employee Health & Well-Being Engage the public on the benefits of Provide avenues for employee health and electric vehicles and hybrids well-being GOAL 2 GOAL 7 EV Charging Network Training & Professional Devel
Slide 23: Q4's Income Statement Summary
NYSE: LAD 2023 HIGHLIGHTS KEY Q4’s Income Statement Summary Q4 2022 Q4 2023 TOTAL REVENUES GROSS PROFIT ADJUSTED EBITDA ADJUSTED EPS 10.5% 4.3% (5.0)% (8.7)% $7,674.4 M $1,260.8 M $420.5 M $9.04 $6,946.6 M $1,209.2 M $399.5 M $8.24 SAME STORE YEAR-OVER-YEAR COMPARISON VS. Q4 2022 REVENUE GROSS PROFI
Slide 24: Revenues, Profitability - Through the Cycle
NYSE: LAD Revenues, Profitability - Through the Cycle Current expectations near cycle lows, margin of safety in implied outlook Same Store Gross Margins Quarterly Same Store Gross Profit 1 $6,550 $3,482 $2,251 55.3% 10 0% 55.2% 10-YR HIGH § We expect Margins to continue normalizing as New and Used 1
Slide 25: Valuation Framework
NYSE: LAD Valuation Framework Implied Valuation Inputs 12x 11x 24% 10-year average 10-year average 10-year average • Shares trading at a discount on relative and TTM P/E1 TTM EV/EBITDA1 TTM ROE1 absolute multiples ~8x Current ~9x Current ~18% 2023 ROE • High visibility in cash flow outlook provides
Slide 26: Supplemental Information: 2023 Quarterly Income Statement
NYSE: LAD Supplemental Information 2023 Quarterly Income Statement $M Q4 Q3 Q2 Q1 FY2023 New vehicle retail $3,974.8 $3,885.8 $4,014.7 $3,278.9 $15,154.2 Used vehicle retail 2,267.5 2,620.2 2,455.1 2,227.5 9,570.2 Used vehicle wholesale 242.9 316.1 403.9 362.4 1,325.3 Finance and insurance 331.5 349
Slide 27: Supplemental Information: 2022 Quarterly Income Statement
NYSE: LAD Supplemental Information 2022 Quarterly Income Statement $M Q4 Q3 Q2 Q1 FY’2022 New vehicle retail $3,275.1 $3,306.9 $3,250.7 $3,061.8 $12,894.5 Used vehicle retail 2,228.1 2,465.8 2,496.7 2,234.5 9,425.0 Used vehicle wholesale 293.7 363.2 382.4 385.8 1,425.2 Finance and insurance 308.4 33
Slide 28: 2023 Adjusted non-GAAP Income Statement
NYSE: LAD Supplemental Information 2023 Adjusted non-GAAP Income Statement YTD Net disposal loss (gain) on Insurance Contract YTD Investment loss (gain) Acquisition expenses 2023 sale of stores Reserves Buyouts 2023 $M, except for per share As Reported Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 29: 2022 Adjusted non-GAAP Income Statement
NYSE: LAD Supplemental Information 2022 Adjusted non-GAAP Income Statement YTD Net disposal loss (gain) on Insurance YTD Investment loss (gain) Acquisition expenses 12/31/22 sale of stores Reserves 12/31/22 $M, except for per share amounts As Reported Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Adjusted
Slide 30: EBITDA, Adjusted EBITDA, and Net Debt
NYSE: LAD Supplemental Information EBITDA, Adjusted EBITDA, and Net Debt $M FY’2023 FY’2022 FY’2021 FY’2020 FY’2019 Net Income attributable to LAD 1,011.7 1,261.6 1,062.7 470.3 271.5 Add: Flooring interest expense 150.9 38.8 22.3 34.4 72.8 Add: Other interest expense 201.2 129.1 103.4 71.6 58.8 Add:
Slide 31: Thank You
NYSE: LAD Thank You