Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q3 2022 Earnings Presentation
31 slides from Lithia Motors's earnings presentation, Oct 19, 2022
Slide 1: Investor Presentation
NYSE: LAD Investor Presentation OCTOBER 2022
Slide 2: Disclosure
NYSE: LAD Disclosure Forward-Looking Statements Non-GAAP Financial Measures Certain statements in this presentation, and at times made by our officers and representatives, constitute forward-looking This presentation contains non-GAAP financial measures such as adjusted net income and diluted earnin
Slide 3: Lithia & Driveway
NYSE: LAD ▪ Diverse synergistic portfolio of businesses ▪ Complete ownership lifecycle attachment ▪ 100% participation in $2 trillion+ market Lithia & Driveway Fortune 500 ▪ #158 in 2022 The pragmatic disrupter with a proven multifaceted ▪ #10 10-year revenue growth, 23% CAGR* success strategy, uniq
Slide 4: Strategy Overview
NYSE: LAD 1 2 3 Largest Retail Industry Plan Strategy Overview Growth & Scale in Early Innings of Consolidation and Building a diversified and highly adaptable model Disciplined M&A Generating Strong Returns Modernization to maximize addressable market and Convenient Consumer Accessibility Key Strat
Slide 5: Over $2 Trillion Revenue Industry
NYSE: LAD Over $2 Trillion Revenue Industry PUBLIC USED ONLY AUTO RETAILERS TRADITIONAL NEW FRANCHISE DEALERS Maximizing addressable ~$2.4T market in an unconsolidated ~$600B $2,400 $600 industry $140B $45B 32% $2,100 $400B $220B $1,800 55% $450 $400B GROSS PROFT REVENUE $1,500 (in billions) (in bil
Slide 6: LAD Strategy Overview
NYSE: LAD LAD Strategy Overview KEY VERTICALS - CONSUMER GROWTH (REV) HORIZONTALS - CONSUMER SYNERGIES (EPS) 6
Slide 7: 2025 Plan
NYSE: LAD 2025 PLAN ▪ Acquisition of network contributing 2025 & Beyond ▪ $20B+ in annualized revenue Expansion of Driveway and GreenCars generating $9B+ in revenues Leveraging our platforms with organic growth and adjacencies ▪ DFC penetration rate grows to 15% and CECL reserves drag on profitabili
Slide 8: Leveraging Growth & Scale
NYSE: LAD Leveraging Growth & Scale CONSUMER CONVENIENCE ▪ Expanding physical footprint Annualized revenue run-rate approaching $30 billion through M&A to reach 95% of US consumers within 100 miles ▪ Building network of 400 to 500 stores with a domestic, import and luxury franchise in each key marke
Slide 9: Consumer Optionality
NYSE: LAD Personnel Innovation Specialist with expertise in vehicles, financing Activating the national network through and repair proprietary digital solutions Inventory Transparency Top of funnel procurement and broadest selection Negotiation-free pricing and visibility Facilities Convenience Reac
Slide 10: Consumer Lifecycle and Adjacencies
NYSE: LAD Fintech, Fleet Management, Subscription Services, Leasing, Consumer Customer Insurance, International Expansion & Other Verticals Lifecycle Highly profitable Lithia channel Expanding physical network and overlaying adjacencies drives Increasing volume of customer interactions drives Design
Slide 11: Driveway Finance Corporation (DFC)
NYSE: LAD Driveway Finance Corporation (DFC) Deriving incremental profitability from the core business, diversifying SIZE OF OPPORTUNITY earnings from business cycle ▪ DFC loan contributes at least 3x the profitability of a third-party loan ▪ Penetrating 15 to 20% of retail units sold $20B $1B KEY P
Slide 12: Profitably Modernizing an Industry
NYSE: LAD Profitably Modernizing JOIN THE LITHIA & DRIVEWAY FAMILY THE LEADER WITH A PROVEN SUCCESS STRATEGY an Industry LAD is a growth company focused on profitably consolidating the largest retail sector in North America through providing personal transportation solutions wherever, whenever, and
Slide 13: Appendix
NYSE: LAD Appendix Inventory, Strategies, History, Future, & More 13
Slide 14: Used Vehicle Marketplace
NYSE: LAD Used Vehicle Financial Metrics2 Marketplace Average Selling Price ROI Addressing largest proportion of CPO $36,301 112% used vehicle TAM of any retailer CPO Core $29,308 83% 11% Value Autos $16,539 119% ▪ Inventory procurement and reconditioning are critical. Network growth supercharges ab
Slide 15: Driveway – Clear Pathway
NYSE: LAD SHOP ▪ Selection of ~42,000 vehicles Driveway – Clear Pathway ▪ Negotiation-free pricing, 7-day money-back guarantee, in-home delivery ▪ Nationwide network of 185+ lenders Targeting 42,000 SHOP and SELL transactions, $1 billion SELL/TRADE in revenue in 2022 ▪ Instant cash offer ▪ Home pick
Slide 16: Driveway – Clear Pathway
NYSE: LAD Driveway – Clear Pathway Shopping experience focused on transparency and convenience Fully proprietary new car shopping experience Real Time Payment Integrates applicable incentives and rebates for transparent First in market offering, pays consumers instantly when upfront pricing selling
Slide 17: Educating on Sustainability
NYSE: LAD Educating on Sustainability Leading with education the journey to a sustainable future Buyer’s Guide GreenCars Score evaluating performance, affordability and environmental impact of electric cars Ownership Resources Personalized EV incentives, charging stations, blog, and educational guid
Slide 18: Electrification – Nimbly Responding to Change
NYSE: LAD ▪ Electrification – Early indications are that BEVs have lower initial repair and maintenance costs than ICE vehicles, however impact of battery replacement is not known at this time Nimbly Responding to Change ▪ Longer warranty periods and dealer access to proprietary diagnostic and repai
Slide 19: LAD's History & Path Forward
NYSE: LAD LAD’s History & Path Forward 2020 2021 2022 2025 2030 2035 Announces 5-Year Plan to Launches national brand, $1 billion in Driveway Completes build out of US OEMs expect that 40 to 50% LAD continues to evolve as profitably consolidate the Driveway, providing proprietary revenue and complet
Slide 20: Competitive Advantages
NYSE: LAD Competitive Advantages Lower cost network with higher margin businesses TRADITIONAL NEW FRANCHISE RETAILERS Revenue ($mm)2 $22,832 $13,676 $31,900 $17,423 Net Income (Loss) ($mm)2 $1,063 $(435) $1,151 $799 Network Cost ($mm)1, 2 $3,449 $3,141 $3,746 $2,965 As a % of gross profit2 81.0% 142
Slide 21: Capital Deployment
NYSE: LAD Capital Deployment Flexibly allocating capital to maximize shareholder return INTERNAL INVESTMENT & MODERNIZATION 25% Actual 3-year average1: 34% ▪ Balancing capital allocation while staying within 2-3x leverage ratio, Investment Grade credit rating will reduce cost of Target capital over
Slide 22: Valuation Opportunities
NYSE: LAD TTM EV/Revenue – Average 1.7x TTM P/E – Average 19.4x Valuation Opportunities Equivalent stock price at average multiples LAD <1x 4.6x EV/Revenue - $1,850 P/E - $900 AUTO REPAIR 1.6x 45.5x USED ONLY Material valuation gap versus comparables RETAIL <1x 13x USED ONLY E-COMMERCE <1x ∞ AUTO PA
Slide 23: Q3's Income Statement Summary
NYSE: LAD KEY Q3’s Income Statement Summary Q3 2021 Q3 2022 Q3 2022 HIGHLIGHTS TOTAL REVENUES ADJUSTED EBITDA ADJUSTED EPS $7,295 BN $529 MM $11.21 $6,169 BN $510 MM $11.09 COMMENTARY SAME STORE QUARTER-OVER-QUARTER COMPARISON VS. Q3 2021 ▪ Increased total revenue and gross profit by 18% REVENUE GRO
Slide 24: Resilient Business Model
NYSE: LAD Resilient Business Model Profitable business with diversified brand mix, geographic mix and multiple earnings streams Business Mix New and Used Gross profit includes F&I New Vehicle Mix FY 2015 – FY 2019 Q3 2022 Segment Segment % Brand Brand Revenue Brand Unit Sales Toyota 14% 16% 10% 10%
Slide 25: Acquired Business Earnings Opportunities
NYSE: LAD Acquired Business Earnings 100 Units $1,450+ 25% 90% 125% Opportunities 80 Units 75% Acquiring strong brands and 90% $1,200 20% grow profits 65% 35 75% Units $700 10% FUTURE STATE PRE-TAX PROFIT MARGIN >3% New Vehicle Used Vehicle F&I per Unit Service & SG&A Market Share Units Significant
Slide 26: 2022 Quarterly Income Statement
NYSE: LAD Supplemental Information 2022 Quarterly Income Statement $M Q4 Q3 Q2 Q1 2022 New Vehicle $3,306.9 $3,250.7 $3,061.8 $9,619.4 Used Vehicle 2,465.8 2,509.9 2,234.5 7,197.0 Wholesale Used Vehicles 363.2 369.2 385.8 1,131.5 Finance and Insurance 333.3 330.4 313.2 977.0 Service Body and Parts 7
Slide 27: 2022 Adjusted non-GAAP Income Statement
NYSE: LAD Supplemental Information 2022 Adjusted non-GAAP Income Statement YTD Net disposal gain on Acquisition YTD Investment loss 9/30/22 sale of stores expenses 9/30/22 $M, except for per share amounts As Reported Q3 Q3 Q3 Adjusted $2,256.8 49.6 – (10.1) $2,296.3 Selling, general and administrati
Slide 28: 2021 Quarterly Income Statement
NYSE: LAD Supplemental Information 2021 Quarterly Income Statement $M Q4 Q3 Q2 Q1 2021 New Vehicle $2,960.0 $2,898.2 $3,146.2 $2,193.2 $11,191.7 Used Vehicle 2,018.7 2,079.5 1,804.9 1,352.2 7,255.3 Wholesale Used Vehicles 343.6 260.9 217.4 135.2 957.1 Finance and Insurance 286.3 297.0 269.6 198.4 1,
Slide 29: 2021 Adjusted non-GAAP Income Statement
NYSE: LAD Supplemental Information 2021 Adjusted non-GAAP Income Statement Loss on YTD Net disposal loss (gain) on Asset YTD Investment loss (gain) Insurance reserves Acquisition expenses redemption of 12/31/21 sale of stores impairments 12/31/21 senior notes $M, except for As per share Q1 Q2 Q4 Q3
Slide 30: EBITDA, Adjusted EBITDA, and Net Debt
NYSE: LAD Supplemental Information EBITDA, Adjusted EBITDA, and Net Debt $M YTD’2022 FY’2021 FY’2020 FY’2019 Net Income attributable to LAD $1,011.7 $1,060.1 $470.3 $271.5 Add: Net Income attributable to non-controlling interests – 2.6 – – Add: Flooring Interest Expense 19.4 22.3 34.4 72.8 Add: Othe
Slide 31: Thank You
NYSE: LAD Thank You