Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q3 2020 Earnings Presentation
26 slides from Lithia Motors's earnings presentation, Oct 21, 2020
Slide 1: Driveway & Lithia Investor Presentation October 2020
driveway & INVESTOR PRESENTATIO OCTOBER 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 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 Motors
LITHIA § Diverse synergistic portfolio of businesses § Complete ownership lifecycle attachment § 100% participation in $2 trillion market MOTORS § #252 in 2020 The pragmatic disruptor, with a § #4 10-year Total Shareholder Return § #6 10-year EPS Growth proven multifaceted success strategy, uniquely
Slide 4: Profitably Modernizing an Industry
PROFITABLY MODERNIZING AN INDUSTRY $50 billion in revenues, $50 EPS in 5 years OMNI-CHANNEL SOLUTIONS § Addresses 100% of ~$2 trillion market FULFILLMENT NETWORK § Unreplicable design and execution INNOVATION § Leveraging personnel and expertise § Synergistic business lines § Activating the network
Slide 5: Key Strategic Highlights
KEY STRATEGIC HIGHLIGHTS Largest Retail Industry Customer-Centric Omni-channel Approach in Early Innings of Business Model with Solutions Combination of E-commerce Consolidation and Throughout the Consumer Home Solutions and Expansive Modernization Lifecycle Physical Network Proven M&A Track Record
Slide 6: Maximizes Addressable Market
MAXIMIZES ADDRESSABLE MARKET Fragmented $2 trillion revenue industry TRADITIONAL PUBLIC USED NEW FRANCHISE ONLY AUTO RETAILERS RETAILERS Greater gross profit opportunities allowing $2,000 ~$2.0T $400 for maximum ~$350B $1,750 $400B flexibility. GROSS PROFT (in billions) $1,500 $300 REVENUE (in billi
Slide 7: 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 8: Introducing Driveway
INTRODUCING DRIVEWAY Flexible, empowered, simple, and transparent Intuitive Negotiation-free Shop. Sell. Service. technologies Valets to your Friendly driveway support team 8 NYSE:LAD
Slide 9: Driveway E-Commerce Offerings
DRIVEWAY E-COMMERCE OFFERINGS Maximizing in-home convenience throughout the customer lifecycle SHOP SELL/TRADE SERVICE § Negotiation-free pricing § Instant cash offer § Home pickup & drop-off § Instant financing § Offer good for 7 days § Free loaner vehicles § Home delivery anywhere in the § Negotia
Slide 10: Leveraging Data to Create Lifetime Loyalty
LEVERAGING DATA TO CREATE LIFETIME LOYALTY A history of utilizing data to innovate products and services More Data 2.5 million+ COMPETITIVE ADVANTAGES Vehicles Sold in the More Past 10 Years 75 Years Customers of Relationships and Transaction Data Smarter MyDriveway Portal Algorithms Subscription Ta
Slide 11: Five Year Model
FIVE YEAR MODEL Our plan builds upon our strengths KEY ASSUMPTIONS REVENUE EBITDA EPS DRIVEWAY CAGR: 31% CAGR: 37% CAGR: 34% § Progressive product introduction through Q1 $50B $50.20 § In-home Service & F&I scaled over 3 years $9B $2.6B $10.60 NETWORK EXPANSION $0.4B § Annual acquisitions of $3-5 bi
Slide 12: Proven Growth with Disciplined Returns
PROVEN GROWTH WITH DISCIPLINED RETURNS Decades of successfully integrating acquisitions and achieving strong returns ANNUAL REVENUES ACQUIRED1 ($MM) TARGET USES OF CAPITAL $3,000 $2,715 $2,500 Internal Investment & Modernization 25% $2,000 Actual 5-year average: 21% $1,745 $1,545 $1,795 $1,500 $1,10
Slide 13: Profitably Modernizing an Industry: Invest in Lithia Motors
PROFITABLY MODERNIZING AN INDUSTRY We are a growth company powered by people and innovation with a five-year plan to profitably consolidate the largest retail sector in our country. By addressing the entire consumer vehicle ownership lifecycle with a wide array of services, we build magnetic brand l
Slide 14: Appendix
APPENDIX 14 NYSE:LAD
Slide 15: Fun Facts
FUN FACTS Lithia consumers and performance 11% 18% 80% $5,000 AVERAGE CONSUMER NEW VEHICLE MARGINS USED VEHICLE MARGINS ACQUISITION DISEQUITY Gross margins including F&I Gross margins including F&I SUCCESS $2,000 AVERAGE 153 60% 23% 13% 4% 80%+ LENDERS INVENTORY PROCUREMENT SOURCES Trade-in Auction
Slide 16: Network Cost to Revenue Comparison
NETWORK COST TO REVENUE COMPARISON Lower cost network with higher margin businesses DOLLAR AMOUNTS IN MILLIONS Revenue $12,673 $3,940 $20,320 Gross Profit $1,954 $506 $2,722 Net Income $272 $(365) $888 Network Cost* $1,708 $541 $4,043 % of Rev 13.5% 13.7% 19.9% % of GP 87.4% 106.9% 148.5% Utilizatio
Slide 17: Lithia's Trajectory and Roadmap
LITHIA’S TRAJECTORY AND ROADMAP 2014 2016 2018 2020 Acquires DCH $2.7B in Acquires $1.1B in revenues; Adds $1.3B in revenues with Acquires $1.75B in revenues revenues – Largest Expanding presence in acquisition of Day automotive retail Northeast Automotive and Prestige Launches national brand, acqui
Slide 18: Regional Reach & Density Map
REGIONAL REACH & DENSITY MAP 90% Reach, 100-mile Density 90% Reach, 100-mile Density 90% Reach, 100-mile Density 90% Reach, 100-mile Density 18 NYSE:LAD
Slide 19: 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 Toyota 16% 22% 10% Honda 15% 17% 30% Subaru 8% 10%
Slide 20: Earnings Opportunities
EARNINGS OPPORTUNITIES Acquire strong brands and grow profits PRE-ACQUISITION TARGET 20 NYSE:LAD
Slide 21: Q3'20 Income Statement Summary
Q3’20 INCOME STATEMENT SUMMARY Q3 2020 HIGHLIGHTS TOTAL GROSS PROFIT ADJUSTED SG&A ADJUSTED § Increased total revenue by PER UNIT TO GROSS PROFIT EPS 9% over last year § Increased adjusted earnings $4,690 68.8% $6.89 per share by 103% $3,663 59.6% $3.39 § Improved Adjusted SG&A to Q3 2019 Q3 2020 Q3
Slide 22: Supplemental Information: 2020 Quarterly Income Statement
SUPPLEMENTAL INFORMATION 2020 Quarterly Income statement $M Q3 Q2 Q1 YTD 2020 New Vehicle $1,883.3 $1,367.8 $1,373.5 $4,624.6 Used Vehicle 1,093.2 922.2 874.4 2,889.7 Wholesale Used Vehicles 98.8 51.3 66.7 216.8 Finance and Insurance 160.5 124.9 121.9 407.2 Service Body and Parts 359.5 275.5 329.9 9
Slide 23: Supplemental Information: 2020 Adjusted Non-GAAP Reconciliation
SUPPLEMENTAL INFORMATION 2020 Adjusted non-GAAP reconciliation YTD Gain on store Asset Insurance Tax Acquisition YTD 9/30/20 disposals Impairments Reserves Attribute Expenses 9/30/20 $M, except for per As Q1 Q2 Q2 Q1 Q2 Q3 Q2 Q1 Q2 Q3 Adjusted share amounts Reported Asset Impairments $7.9 – – $(7.9)
Slide 24: Supplemental Information: 2019 Quarterly Income Statement
SUPPLEMENTAL INFORMATION 2019 Quarterly income statement $M Q4 Q3 Q2 Q1 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 74.4 81.7 77.4 301.2 Finance and Insurance 136.0 136.3 129.0 117.5 518.6 Service Body an
Slide 25: 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 As Q1 Q2 Q3 Q4 Q1 Q4 Q2 Q3 Q1 Q2 Q3 Q4 Adjusted Amounts Reported Asset Impairments $2.6 – – – – (0.5) (2
Slide 26: Supplemental Information: EBITDA, Adjusted EBITDA, and Net Debt
SUPPLEMENTAL INFORMATION EBITDA, Adjusted EBITDA, and Net Debt $M YTD 2020 YTD 2019 TTM FY 2019 FY2018 Net Income $282.7 $203.5 $350.7 $271.5 $265.7 Add : Flooring Interest Expense 28.3 55.5 45.6 72.8 62.3 Add : Other Interest Expense 50.4 45.0 66.0 60.6 56.0 Add : Income Taxes 108.9 77.2 135.6 103.