Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q2 2020 Earnings Presentation
25 slides from Lithia Motors's earnings presentation, Jul 22, 2020
Slide 1: Investor Presentation July 2020
driveway ite SO Ve INVESTOR J "ar \ PRESENTATIO JULY 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 stat in the meaning of the "Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Generally, you can identify fo
Slide 3: Largest Retail Industry
LARGEST RETAIL INDUSTRY Consolidating and modernizing a massive market INDUSTRY REVENUE New Vehicle ___ $650B (31%) ___. Service, Body & Parts SB00B (38%) Used Vehicle ___ $660B (31%) = $500B industry gross profit opportunity " Largest participant <1% market share INDUSTRY GROSS PROFIT New Vehicle $
Slide 4: Profitably Modernizing an Industry
PROFITABLY MODERNIZING AN INDUSTRY Creating an unreplicable omni-channel experience that customers crave wm =PEOPLE & Be EXPERTISE NATIONWIDE ef NETWORK SELECTION ~ OF PRODUCTS SOLUTIONS g & SERVICES “APTITUDE SO APPS (SLITHIA NYSE:LAD | JULY 2020 | 4
Slide 5: Lithia Motors
LITHIA MOTORS The pragmatic disruptor, 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. NYSE:LAD LITHIA te 500 kati od Diverse synergistic portfol
Slide 6: Five Year Plan
FIVE YEAR PLAN $50 billion in revenues, $50 EPS in 5 years OMNI-CHANNEL SOLUTIONS = Addresses 100% of $2 trillion market = Unreplicable design and execution FULFILLMENT NETWORK = Leveraging personnel and expertise = Synergistic business lines ; = Maximizing the lifetime value = Reaching 92% of consu
Slide 7: Plan Maximizes Addressable Market
PLAN MAXIMIZES ADDRESSABLE MARKET More things for more people REVENUE (in billions) (S@LITHIA NEW VEHICLE caRmax: =) CARVANA MOTORS, INC. DEALERS a 2,000 4 $8008 r 500 ‘uo Greater gross profit 1,750 4 ope . | soo opportunities allowing 1500 5 g for maximum flexibility as m5 eee ina competitive marke
Slide 8: Consumer's Needs Vary
CONSUMER’S NEEDS VARY Solutions to meet needs requires expertise and flexibi Do-it-Yourselfer Desires to transact online from their home 83% desire to start online Upside Down Owes more on vehicle than worth, lacks cash down, affects LTV 70% with *5,100 avg. negative equity Sources: Cox 2020 Reimagi
Slide 9: Introducing Driveway
INTRODUCING DRIVEWAY Intuitive Shop. Sell. Service. technologies driveway BRING IT HOME Valets to your Friendly driveway support team (SLITHIA NYSE:LAD JULY 2020 9
Slide 10: Driveway Digital Offerings
DRIVEWAY DIGITAL OFFERINGS Maximizing revenue throughout the customer lifecycle Shop = Negotiation-free pricing (y) Customer Portal Instant financing Home delivery anywhere in the nation Integrated vehicle trades 7-day, 400-mile moneyback guarantee 60-day, 3,000 mile warranty Nationwide lender netwo
Slide 11: Five Year Model
FIVE YEAR MODEL REVENUE EBITDA EPS KEY ASSUMPTIONS jLEAGR: 31% jLGAGR: 37% | 7 CAGR: 34% | DRIVEWAY: $50B ] $50.20 = Progressive product introduction over next three quarters = Scaled over 3 years to six regions $2.6B NETWORK EXPANSION: = Annual acquisitions of *3-5 billion in revenues = Investment
Slide 12: Proven Growth with Disciplined Returns
PROVEN GROWTH WITH DISCIPLINED RETURNS Decades of successfully acquiring strong brands and achieving strong returns ANNUAL REVENUES USES OF CAPITAL: ACQUIRED* ($MM) TARGET Internal Investment & $ aun ——~ Modernization 25% Actual 5-year average: 19% _— Share Repurchases 5% — Actual 5- -year average:
Slide 13: Profitably Modernizing an Industry
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: (SLITHIA
(SLITHIA NYSE:LAD
Slide 15: Recent Announcements
RECENT ANNOUNCEMENTS Il EARNINGS Hl PERSONNEL HH ACQUISITIONS HM MODERNIZATION (SLITHIA 10.2019 Lithia Motors launches Sell-From-Home Technology Sell.Baierl.com 03 2019 earnings record, revenue increased 8%, $3.3 billion 12.2019 Lithia completes $400 million in senior notes offering and increases re
Slide 16: Regional Reach & Density Map
REGIONAL REACH & DENSITY MAP Region 1" Northwest Region 3 North Central Region 5 Northeast Region 2 @ Southwest Region 4 > South Central IB 90% REACH, 100-MILE DENSITY IE 90% REACH, 300-MILE DENSITY (1) 90% REACH, 400-MILE DENSITY 90% REACH, 500-MILE DENSITY (SLITHIA NYSE:LAD JULY 2020 16
Slide 17: Resilient Business Model
RESILIENT BUSINESS MODEL Profitable business with diversified product mix and multiple earnings streams LITHIA BUSINESS MIX LITHIA NEW VEHICLE MIX Mi New Vehicles MM Used Vehicles Ml Parts & Service Mil F&I Segment ve Brand Unit Sales Toyota 14% 16% Honda 13% 18% IMPORT ih Subaru % 11% Hyundai 2% 2%
Slide 18: Valuation Benchmarks Yield Opportunity
VALUATION BENCHMARKS YIELD OPPORTUNITY 20x+ P/E opportiunity through existing business lines 2020E EV/Revenue io 12.9% 5x 46x 7 18x 20x 24x — i m7 2020E P/E" 30x 27.8x 20x 17.4x 16.7x 13.9x 121K 10x x NM High Growth REITs 5 ty Finance Specialty Retail Monster, Shake Shack, Monro Service, Boyd Choice
Slide 19: Acquire Strong Brands and Capture Opportunity
Acquire strong brands and capture opportunity 100 105% Units $1460 5% 90% <b5% 700 75% u 5 10% Units New Vehicle Used Vehicle F&I Service & SG&A Market Share Units Profit Parts Reduction ‘A67% improvement Nearly 200% increase Over 100% 150% improvement in Over 36% < 1 9, in OEM Market Share in used
Slide 20: Q2 '20 Income Statement Summary
Q2 ‘20 INCOME STATEMENT SUMMARY COMMENTARY Q2 2020 HIGHLIGHTS = Sequential monthly TOTAL GROSS PROFIT ADJUSTED SG&A ADJUSTED improvements led PER UNIT TO GROSS PROFIT EPS to record earnings ™ per share ® Increased earnings per share by 26% ® Increased total gross 022019 a2 2020 profit per unit by 13
Slide 21: Supplemental Information: 2020 Quarterly Income Statement
SUPPLEMENTAL INFORMATION 2020 Quarterly Income Statement $M Qs Q3 a2 ai YTD 2020 New Vehicle $1,367.8 $1,373.5 $2,741.3 Used Vehicle 922.2 874.4 1,796.5 Wholesale used vehicles 51.3 66.7 118.0 Finance and insurance 124.9 121.9 246.7 Service, body and parts 275.5 329.9 605.4 Fleet and other 16.9 37.4
Slide 22: Supplemental Information: 2020 Adjusted Non-GAAP Reconciliation
SUPPLEMENTAL INFORMATION 2020 Adjusted Non-GAAP Reconciliation YTD Gain on store Asset Insurance Tax Acquisition YTD 6/30/20 disposals Impairments Reserves Attribute Expenses 6/30/20 $M, except for per share amounts | As Reported Qi Q2 Q2 Qi Q2 Q2 Qi Q2 Adjusted Asset impairments $7.9 - - (7.9) - -
Slide 23: Supplemental Information: 2019 Quarterly Income Statement
SUPPLEMENTAL INFORMATION 2019 Quarterly Income Statement $M Qa Q3 a2 Qi 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 67.7 744 81.7 774 301.2 Finance and insurance 136.0 136.3 129.0 117.5 518.6 Service, body and
Slide 24: 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 amounts AsReported Q1 Q2 Q3 Q4 Qi Q4 Q2 Q3 Ql a2 Q3 G4 Adjusted Asset impairments $2.6 - - - - (0.5) | (
Slide 25: Supplemental Information: EBITDA and Adjusted EBITDA
SUPPLEMENTAL INFORMATION EBITDA and Adjusted EBITDA $M YTD 2020 FY 2019 FY 2018 Net income $123.9 $271.5 $265.7 Add: flooring interest expense 22.1 $72.8 $62.3 Add: other interest expense 33.8 60.6 56.0 Add: income taxes 48.6 103.9 71.8 Add: depreciation and amortization 44,3 82.4 75.4 EBITDA $272.7