Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q2 2021 Earnings Presentation
28 slides from Lithia Motors's earnings presentation, Jul 21, 2021
Slide 1: Investor Presentation July 2021
INVESTOR PRESENTATION JULY 2021 1 NYSE:LAD
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 statements within the meaning of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Generally, you can i
Slide 3: Lithia & Driveway
LITHIA & ▪ Diverse synergistic portfolio of businesses ▪ Complete ownership lifecycle attachment ▪ 100% participation in $2 trillion market DRIVEWAY The pragmatic disruptor, with a ▪ #231 in 2021 proven multifaceted success strategy, ▪ #12 10-year revenue growth, 20% CAGR* ▪ #3 10-year Total Shareho
Slide 4: Key Strategic Highlights
KEY STRATEGIC HIGHLIGHTS $50 billion in revenues, $50 EPS in 5 years Largest Retail Industry Omni-channel Approach Data and Innovation in Early Innings of Combination of E-commerce Creates Unique Opportunities to Consolidation and Home Solutions and Expansive Capitalize on Innovation of New Moderniz
Slide 5: Fragmented $2 Trillion Revenue Industry
FRAGMENTED $2 TRILLION REVENUE INDUSTRY Maximizes Addressable Market TRADITIONAL PUBLIC USED NEW FRANCHISE ONLY AUTO RETAILERS RETAILERS Greater gross profit opportunities allowing $2,000 ~$2.0T $400 for maximum $1,750 ~$350B $400B flexibility. GROSS PROFT (in billions) $1,500 $300 REVENUE (in billi
Slide 6: Profitably Modernizing an Industry
PROFITABLY MODERNIZING AN INDUSTRY $50 billion in revenues, $50 EPS in 5 years LAD ▪ Addresses 100% of ~$2 trillion market LITHIA DRIVEWAY ▪ Products and services throughout the ▪ Inventory – top of funnel customer lifecycle ▪ Innovation – activating the network procurement and broadest selection, t
Slide 7: Leveraging Data to Create Lifetime Loyalty
LEVERAGING DATA TO CREATE LIFETIME LOYALTY A history of utilizing data to innovate products and services 75 Years of Relationships and Transaction Data Subscription Tailored 2.5 million+ Services Financing Vehicles Sold in the Past 10 Years VEHICLE OWNERSHIP DATA DATA LOYALTY LIFECYCLE 7 million Pay
Slide 8: Consumers' Needs Vary and Selection Matters
CONSUMERS’ NEEDS VARY AND SELECTION MATTERS Solutions to meet needs requires expertise and flexibility Do-it-Yourselfer Building Credit Relationship Builder Selection Driven Desires to transact online Re-establishing or little credit Values lifetime personal relationship Influenced by selection not
Slide 9: Driveway
DRIVEWAY Flexible, empowered, convenient, and transparent SHOP ✓ Selection of ~30,000 new and used vehicles ✓ Negotiation-free pricing, 7-day money-back guarantee, in-home delivery ✓ Nationwide lender network of 180+ Intuitive technologies SELL/TRADE ✓ Instant cash offer ✓ Home pickup Nation-wide va
Slide 10: Proven M&A Strategy Driving Growth
PROVEN M&A STRATEGY DRIVING GROWTH Decades of successfully integrating acquisitions ESTIMATED ANNUALIZED REVENUES ACQUIRED 1 ($B) CAPITAL ENGINE ▪ Available funds of $3.0B representing ability to purchase $12.0B in annualized revenues $5,000 $4,500 $4,465 ▪ Annual free cash flow2 generation of $700M
Slide 11: Five Year Model
FIVE YEAR MODEL Our plan builds upon our strengths YEAR 1 ACHIEVEMENTS REVENUE EBITDA EPS CAGR: 31% CAGR: 37% CAGR: 34% Generated adjusted EBITDA of $1.3 billion and EPS of $25.791 $50B $50.20 Acquired 40% of $9B $2.6B $10.40 targeted $20 billion in revenues; expected to $0.4B contribute $315 millio
Slide 12: Profitably Modernizing an Industry: Invest in Lithia & Driveway
PROFITABLY MODERNIZING AN INDUSTRY We are a growth company powered by people and innovation with a 5-Year Plan to profitably consolidate the largest retail sector in the country. By providing a wide array of products and services for the entire vehicle ownership lifecycle through various consumer ch
Slide 13: Appendix
APPENDIX 13 NYSE:LAD
Slide 14: Fun Facts
FUN FACTS Lithia consumers and performance INVENTORY DAYS SUPPLY 80%+ ACQUISITION USED 23 58 900 NEW PROCUREMENT PERSONNEL SUCCESS RATE INVENTORY SCARCITY - LAD IN 13% 4 HOME VALUE 17% CORE 21% 62% CPO SERVICE 37 locations INVENTORY SCARCITY - MARKET VALUE 62% BUSINESS 2AVERAGE ANNUAL CORE 9% 29% CP
Slide 15: Clear Pathway for Driveway
CLEAR PATHWAY FOR DRIVEWAY On target to achieve a run-rate of 15,000 Driveway shop and sell transactions by year-end EARLY LEARNINGS QTD increase in Monthly Unique +190% Visitors ▪ 550 transactions in the month of June Organic traffic growth between Q4 +140% 2020 and Q1 2021 ▪ 97.5% of Driveway cust
Slide 16: Network Cost to Revenue Comparison
NETWORK COST TO REVENUE COMPARISON Lower cost network with higher margin businesses Year ended 12/31/2020 Year ended 12/31/2020 Year ended 2/28/2021 Source: Lithia management and company filings 16 NYSE:LAD
Slide 17: Driveway
DRIVEWAY Enhanced shopping experience with affordability and AI financing guidance features ▪ Shop by payment - Empowers consumers to shop by payment and addresses their concerns about affordability ▪ Budget and payment calculator – empowers customers to transparently explore cost and payment option
Slide 18: Lithia's Trajectory and Roadmap
LITHIA’S TRAJECTORY AND ROADMAP 2017 2019 2020 Adds $500mm in revenues with Acquires $1B in revenues and 2021 Launches national brand, Acquires $4.5B in revenues Baierl acquisition and enters enters Southeast; nationwide Driveway, providing and adds massive platform Pennsylvania reach to 92% of the
Slide 19: Regional Reach & Density Map
REGIONAL REACH & DENSITY MAP 90% Reach, 100-mile Density 90% Reach, 300-mile Density 90% Reach, 400-mile Density 19 NYSE:LAD
Slide 20: Q2'21 Income Statement Summary
Q2’21 INCOME STATEMENT SUMMARY Q2 2021 HIGHLIGHTS TOTAL GROSS PROFIT ADJUSTED SG&A ADJUSTED ▪ Increased total revenue and PER UNIT TO GROSS PROFIT EPS gross profit by 26% and 53%, respectively, over 2019 ▪ Increased adjusted earnings $5,723 71.3% $11.12 per share by 277% $2.95 $5,050 55.7% ▪ Improve
Slide 21: Strong Balance Sheet
STRONG BALANCE SHEET Allows Us to Capitalize on Opportunities in an Evolving Environment HISTORICAL NET LEVERAGE1 TARGET USES OF CAPITAL Proven Ability to Delever Maximizing shareholder value Internal Investment & Target leverage range: 2-3x Modernization 25% Actual 5-year average: 17% 2.2x 2.0x Sha
Slide 22: Supplemental Information: 2021 Quarterly Income Statement
SUPPLEMENTAL INFORMATION 2021 Quarterly Income statement $M Q4 Q3 Q2 Q1 2021 New Vehicle $3,146.2 $2,193.2 $5,339.5 Used Vehicle 1,804.9 1,352.2 3,157.0 Wholesale Used Vehicles 217.4 135.2 352.6 Finance and Insurance 269.6 198.4 467.9 Service Body and Parts 521.0 404.0 925.0 Fleet and Other 50.3 60.
Slide 23: Resilient Business Model
RESILIENT BUSINESS MODEL Profitable business with diversified brand mix, geographic mix and multiple earnings streams BUSINESS MIX LITHIA NEW VEHICLE MIX New and Used Gross Profit includes F&I Segment Segment % Brand Brand Revenue % Brand Unit Sales Toy ota 15% 18% 9% Honda 15% 21% 25% Subaru 6% 9%
Slide 24: Earnings Opportunities
EARNINGS OPPORTUNITIES Acquire strong brands and grow profits PRE-ACQUISITION TARGET 24 NYSE:LAD
Slide 25: Supplemental Information: 2021 Adjusted Non-GAAP Reconciliation
SUPPLEMENTAL INFORMATION 2021 Adjusted non-GAAP reconciliation YTD Net Disposal Loss on Investment Loss Insurance Acquisition YTD 6/30/21 Sale of Stores (Gain) Reserves Expenses 6/30/21 $M, except for per share amounts As Reported Q1 Q2 Q1 Q2 Q1 Q2 Q1 Q2 Adjusted $1,084.2 $(0.7) $(4.5) $– $(0.8) $(0
Slide 26: Supplemental Information: 2020 Quarterly Income Statement
SUPPLEMENTAL INFORMATION 2020 Quarterly Income statement $M Q4 Q3 Q2 Q1 2020 New Vehicle $2,149.4 $1,883.3 $1,367.8 $1,373.5 $6,773.9 Used Vehicle 1,108.7 1,093.2 922.2 874.4 3,998.4 Wholesale Used Vehicles 91.8 98.8 51.3 66.7 308.7 Finance and Insurance 172.6 160.5 124.9 121.9 579.8 Service Body an
Slide 27: Supplemental Information: 2020 Adjusted Non-GAAP Reconciliation
SUPPLEMENTAL INFORMATION 2020 Adjusted non-GAAP reconciliation YTD Net Disposal Gain on Asset Investment Insurance Tax Acquisition YTD 12/31/20 Sale of Stores Impairments Gains Reserves Attribute Expenses 12/31/20 $M, except for per As Q1 Q2 Q4 Q2 Q4 Q1 Q2 Q3 Q2 Q1 Q2 Q3 Q4 Adjusted share amounts Re
Slide 28: Supplemental Information: EBITDA, Adjusted EBITDA, and Net Debt
SUPPLEMENTAL INFORMATION EBITDA, Adjusted EBITDA, and Net Debt $M YTD’2021 TTM 2021 FY’2020 FY’2019 FY’2018 Net Income $461.1 $807.5 $470.3 $271.5 $265.7 Add : Flooring Interest Expense 13.3 25.6 34.4 72.8 62.3 Add : Other Interest Expense 51.6 90.9 73.1 60.6 56.0 Add : Income Taxes 169.8 299.3 178.