Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q1 2022 Earnings Presentation
31 slides from Lithia Motors's earnings presentation, Apr 20, 2022
Slide 1: Investor Presentation
NY SE: LAD Investor Presentation APRIL 2022
Slide 2: Disclosure
NY SE: 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 earni
Slide 3: Lithia & Driveway
NY SE: LAD ▪ Diverse synergistic portfolio of businesses ▪ Complete ownership lifecycle attachment ▪ 100% participation in $2 trillion+ market Lithia & Driveway Fortune 500 The pragmatic disrupter with a proven multifaceted ▪ #231 in 2021 ▪ #12 10-year revenue growth, 20% CAGR* success strategy, uni
Slide 4: Key Strategic Highlights
NY SE: 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 Stra
Slide 5: Over $2 Trillion Revenue Industry
NY SE: 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 bi
Slide 6: LAD Strategy Overview
NY SE: LAD LAD Strategy Overview KEY VERTICALS - CONSUMER GROW TH (REV) HORIZONTA LS - CONS UME R S Y NE RGIE S (E P S ) 6
Slide 7: 2025 & Beyond
NY SE: 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 profitabil
Slide 8: Leveraging Growth & Scale
NY SE: 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 mark
Slide 9: Consumer Optionality
NY SE: 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 Rea
Slide 10: Consumer Lifecycle Design
NY SE: LAD Fintech, Fleet Management, Subscription Services, Leasing, Consumer Consumer Insurance, International Expansion & Other Verticals Lifecycle Highly profitable Lithia channel Expanding physical netw ork and overlaying adjacencies drives Increasing volume of customer interactions drives Desi
Slide 11: Driveway Finance Corporation (DFC)
NY SE: 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
Slide 12: Profitably Modernizing an Industry
NY SE: 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
NY SE: LAD Appendix Inventory, Strategies, History, Future, & More 13
Slide 14: Used Vehicle Marketplace
NY SE: LAD Used Vehicle Financial Metrics2 Marketplace Average Selling Price ROI Addressing largest proportion of CPO $36,553 106% used vehicle TAM of any retailer CPO Core $31,840 102% 11% Value Autos $18,618 151% ▪ Inventory procurement and reconditioning are critical. Network growth supercharges
Slide 15: Driveway – Clear Pathway
NY SE: LAD SHOP ▪ Selection of ~25,000 new and used vehicles Driveway – Clear Pathway ▪ Negotiation-free pricing, 7-day money-back guarantee, in-home delivery ▪ Nationw ide netw ork of 180+ lenders Targeting 40,000 SHOP and SELL transactions, $1 billion SELL/TRADE in revenue in 2022 ▪ Instant cash o
Slide 16: Driveway – Clear Pathway
NY SE: 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
NY SE: LAD Educating on Sustainability Leading with education the journey to a sustainable future Comparison Grid GreenCars Score evaluating performance, affordability and environmental impact of EVs, PHEVs and HEVs EV Catalog Search and learn about the newest sustainable models Ownership Resources
Slide 18: Electrification – Nimbly Responding to Change
NY SE: 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 repa
Slide 19: LAD's History & Path Forward
NY SE: LAD LAD’s History & Path Forward 2020 2021 2022 2025 2030 2035 Announces 5-Year Plan to Launches national brand, $1 billion in Driveway Completes build out of US OEMs expect that 40 to 50% LAD continues to evolve as profitably consolidate the Driveway, providing proprietary revenue and comple
Slide 20: Competitive Advantages
NY SE: LAD Competitive Advantages Lower cost network with higher margin businesses TRADITIONAL NEW FRANCHISE RETAILERS Revenue ($mm) $22,832 $12,814 $31,900 $17,423 Net Income (Loss) ($mm) $1,063 $(287) $1,151 $799 Netw ork Cost ($mm) 1 $3,449 $1,929 $3,746 $2,965 As a % of gross profit 81.0% 100.0%
Slide 21: Capital Deployment
NY SE: 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, focused on attaining Investment Grade credit rating Target Uses of ▪ C
Slide 22: Valuation Opportunities
NY SE: LAD TTM EV/Revenue – Average 2x TTM P/E – Average 22x Valuation Opportunities Equivalent stock price at average multiples LAD <1x 7x EV/Revenue - $1,700 P/E - $1.000 AUTO REPAIR 2x 55x USED ONLY 13x Undervalued by 3-5x RETAIL <1x USED ONLY E-COMMERCE 1x ∞ AUTO PARTS 2x 21x AUTO FINANCE 2x 10x
Slide 23: Q1's Income Statement Summary
NY SE: LAD KEY Q1’s Income Statement Summary Q1 2021 Q1 2022 Q1 2022 HIGHLIGHTS TOTAL GROSS PROFIT PER UNIT ADJUSTED SG&A TO GROSS PROFIT ADJUSTED EPS $6,825 62.6% $11.96 $5.89 $4,392 57.1% COMMENTARY SAME STORE QUARTER-OVER-QUARTER COMPARISON VS. Q1 2021 ▪ Increased total revenue and gross profit b
Slide 24: Resilient Business Model
NY SE: 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 Q1 2022 Segm ent Segm ent % Brand Brand Revenue Brand Unit Sales Toyota 14% 16% 10% 1
Slide 25: Acquired Business Earnings Opportunities
NY SE: 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: Supplemental Information: 2022 Quarterly Income Statement
NY SE: LAD Supplemental Information 2022 Quarterly Income Statement $M Q4 Q3 Q2 Q1 2022 New Vehicle $3,061.8 $3,061.8 Used Vehicle 2,234.5 2,234.5 Wholesale Used Vehicles 385.8 385.8 Finance and Insurance 313.2 313.2 Service Body and Parts 627.8 627.8 Fleet and Other 82.2 82.2 Total Revenues $6,705.
Slide 27: Supplemental Information: 2022 Adjusted non-GAAP Income Statement
NY SE: LAD Supplemental Information 2022 Adjusted non-GAAP Income Statement YTD Net disposal gain on Acquisition YTD Investment loss 3/31/22 sale of stores expenses 3/31/22 $M, except for per share am ounts As Reported Q1 Q1 Q1 Adjusted $726.1 10.0 – (6.6) $729.5 Selling, general and administrative
Slide 28: Supplemental Information: 2021 Quarterly Income Statement
NY SE: 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: Supplemental Information: 2021 Adjusted non-GAAP Income Statement
NY SE: 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 im pairments 12/31/21 senior notes $M, except for As per share Q1 Q2 Q4 Q
Slide 30: EBITDA, Adjusted EBITDA, and Net Debt
NY SE: LAD Supplemental Information EBITDA, Adjusted EBITDA, and Net Debt $M YTD’2022 FY’2021 FY’2020 FY’2019 Net Income attributable to LAD 342.2 $1,060.1 $470.3 $271.5 Add: Net Income attributable to non-controlling interests 1.4 2.6 – – Add: Flooring Interest Expense 4.9 22.3 34.4 72.8 Add: Other
Slide 31: Thank You
NY SE: LAD Thank You