Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Investor Presentation (May 2014)
35 slides from Lithia Motors's investor presentation, May 28, 2014
Slide 1: Investor Presentation
INVESTOR PRESENTATION
Slide 2: Disclosure
DISCLOSURE Forward-Looking Statements ‘This presentation inudes Torwaréooking statements” kn the meaning ofthe “Safe-Harborprovslons ofthe Prvate Secures LrigationRetorm Act 1995, Forward loking statements inaude statements regarcing our geal, plans, pojstons and guidance regating our fhancalpestion
Slide 3: Lithia Motors Overview
LITHIA MOTORS OVERVIEW 99 Dealerships in the United States Domestic Import Luxury = Target exclusive franchises: domestic and import brands in mid-sized markets; luxury in metro markets = Brand mix matches national market share = Performance-based entrepreneurial culture 48% 1% 42% Honda Nissen ‘Oth
Slide 4: Cornerstones of Success
CORNERSTONES OF SUCCESS Path to $6.00 Earnings Per Share ACQUISITION OPPORTUNITIES Unconsolidated industry Target 20% after tax ROE per year FINANCAL, DISCIPLINE Balance investment and, shareholder return ‘Ample liquidity to deploy
Slide 5: Growth Milestones
GROWTH MILESTONES Delivers $6.00 Earnings Per Share = Achieved with organic growth and acquisitions = Completed first Milestone in 2013 = Target completing Milestones in 2-6 years ADJUSTED EARNINGS PER SHARE wo ey Hoo ORGANIC REVENUE GROWTH ($8) 600 eo slo Se ACQUISITION REVENUE GROWTH ($8) == J so
Slide 6: Operational Growth
OPERATIONAL Vy. GROWTH [op
Slide 7: Stable, Profitable Industry
STABLE, PROFITABLE INDUSTRY Four Separate Diversified Businesses PROFITABILITY AND SAAR = Recession-tested = Variable cost structure = Diverse and PROFITABILITY MIX complimentary * Service business vena = ~ consistent Service, body and parts 10% 30% Fl and otter a% 2
Slide 8: New Vehicle Market
NEW VEHICLE MARKET Opportunities Remain Despite Recovery = After recessionary periods, SAAR performed above the long-run average = Half of our markets still below 2006 registration levels HISTORICAL NEW VEHICLE SAAR PERFORMANCE LITHIA NEW VEHICLE MARKET POTENTIAL A oe Fs 20% 12% a 9% a mm oy sx 21%
Slide 9: Used Vehicle Market
USED VEHICLE MARKET Largest Future Opportunity USED MARKET SIZE USED MARKET SHARE = Used vehicle market 3x larger 2m Bae 32K BAK 2, ie than new a a : 2 - = Franchised dealers 37% of pm” min” am10 aot” me used vehicle soe wenmacamg 8 tis a aaa ne i market LITHIA USED WATERFALL 2013 New Vehicles 66,85
Slide 10: Used Vehicle Growth
USED VEHICLE GROWTH Target 75 Used Units Per Store Per Month 2013 SAME STORE USED UNITMIX 2013 USED MIX DETAILS. = Achieving 75 unit so0 Gm sn te goal increases — unit sales 48% con ve s 11% 2013 AVERAGE USED RETAIL UNITS SOLD PER MONTH = 81% of stores sell tt less than 75 unit me oe | la la 5175 oy
Slide 11: Vehicle Sales Growth
VEHICLE SALES GROWTH Opportunity Exists in F&l 2079 F&I PER UNIT F&I PENETRATION RATES = F&l per unit $89 coe one lower than peer sant average 7 t = F&l products — increase service | J retention nie cece terete 2013 VEHICLE SALES SAME STORE DETAILS. per unit of $3,581 New wx | we | 7m | sez | ss) up
Slide 12: Service Market
SERVICE MARKET Tailwind as Units in Operation Expand = Service growth correlated with SAAR growth = Increasing service work as installed units grow TRAILING SAARISERVICE GROWTH 5.0% rey an 4 a a ‘oes som $907 1590 1983 1596 t992 7007 2006 BOR 2011 LITHIA MARKET UIO OPPORTUNITY. m0” 200” Hw ME ONE st
Slide 13: Service Growth
SERVICE GROWTH Improving Retention Increases Service Revenue = Average 47% new and 28% used retention in service = Across all vehicles sold, cumulative service GP per unit is $636 = Ex defections, cumulative GP per unit is $1,653 % OF VEHICLES SOLD RETURNING FOR SERVICE 65% now s% vonele 4655 46% 30
Slide 14: Service Growth
SERVICE GROWTH Retaining Customers Longer SAME STORE SALES YEAR-OVER-YEAR COMPARISON, *Senicerevenue FP Ea increasing due to [some Pay eax | son | ax | cox | sam | eon more units in foray cam | wom | wax | ere | nos | raw fnmanrare | om | oom | oon | arm | ram | mm operation aa ‘ean | can | wox | ve
Slide 15: Leveraging Cost Structure
LEVERAGING COST STRUCTURE Target Throughput of 50% on a Same Store Basis = Throughput is incremental % of gross profit to operating income after SG&A expenses = Throughput 33% or higher lowers SG8A as a % of gross profit ADJUSTED SG&AAS A % OF GROSS PROFIT SAME STORE THROUGHPUT eae, ADJUSTED SG8A DE
Slide 16: Acquisition Opportunities
ACQUISITION OPPORTUNITIES
Slide 17: Unconsolidated Industry
UNCONSOLIDATED INDUSTRY Abundant Acquisition Opportunities DEALERSHIPS IN THE US = Over 17,800 aie aaet dealerships in the a neor ines 17.767 17851 17808 country aera ae 00 aaa HIGHLY FRAGMENTED MARKET Top 10 = 10 largest dealers Lad own 1,100 stores
Slide 18: Acquisition Growth
ACQUISITION GROWTH Targeting 20% After Tax Return On Equity = Improve performance through common systems and measurements INVESTMENT METRICS = 75-100% 5-year after tax ROE = 3x-5x EV/EBITDA = 10%-20% of annual revenues INTEGRATION RESULTS 2010 Acquisition Performance 2011 Acquisition Performance - A
Slide 19: Financial Discipline
ry) | \, FINANCIAL DISCIPLINE y
Slide 20: Financial Discipline
FINANCIAL DISCIPLINE Positioned for Continued Growth BALANCE SHEET LEVERAGE = Deleveraging for potential expansion = Ample liquidity FUNDS FOR GROWTH FUTURE MORTGAGE MATURITIES levels with no unt [rao] we near term debt (cash and Cash Equivalents | 522 maturities Javaabity ontine ot Great | 199 “4 \
Slide 21: Financial Discipline
FINANCIAL DISCIPLINE Balance Investment and Shareholder Return CAPITAL EXPENDITURES FREE CASH FLOW AND ACQUISITIONS hea mew 2 | 9 | se | sa Frctiestororenror |e [ [se feos Bs-outs - | 2» | 7 | 2 isms reanymeer [or [vee = sf} 7 [etn DIVIDENDS PAID ‘Fon Cash Flow eheuatonEnorpe Vte $90 SHARE REPURCHAS
Slide 22: < a) a > + bw =) N Qi
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Slide 23: Q1'14 Financial Results
Q1714 FINANCIAL RESULTS Income Statement Summary = March was the best month in Lithia’s history for units, revenue and pre-tax profits = Grew all four business lines Qt 2014 HIGHLIGHTS Revenue ($MM) Adjusted Diluted Adjusted Net Profit 19% EPS Margin 7 23% 10 bps il orm aro orm arrow orm atmo ‘SAME
Slide 24: Q1'14 Financial Results
Q1714 FINANCIAL RESULTS Peer Comparisons SAME STORE GROSS PROFIT GROWTH ADJUSTED NET PROFIT MARGIN 11.0% 87% 25% 93% 2% 52% 4.9% ] i ] r] oes 09% Bhaee DEEDES ‘SAME STORE SALES GROWTH ADJUSTED SG8AAS A % OF GROSS PROFIT ‘Astuny “AsDNaton” Gout m5)
Slide 25: 2014 Guidance
2014 GUIDANCE PROJECTED EARNINGS RANGE": = Q2'14: $1.18 - $1.20 = FY 2014: $4.57 - $4.65 ASSUMPTIONS: = Total revenues of $4.6 to $4.7 billion New vehicle same store sales increasing 8.0% New vehicle gross margin of 6.5% to 6.7% Used vehicle same store sales increasing 9.5% Used vehicle gross margin
Slide 26: Appendix
= z > APPENDIX ® 5
Slide 27: Supplemental Information
SUPPLEMENTAL INFORMATION n Balance Sheet * [Sh [S| ash and cash equivalents 22340 2 = jar aa sti core] es — =r few acess amd ae Jpropeny and equipment, et 499,171 481219 obi, esa cent atures 260 248.471 | a | ft wedi om sie] a — oe TEN aed sel
Slide 28: Supplemental Information
SUPPLEMENTAL INFORMATION 2014 Income Statement iw von $5795 $579; [sed vehicle 301s 901.88 [Wnolesae used veces a2 a2 Finance and insurance 39.631 30651 [Bervioe, body and parts 704.64 04.64 eet and other Now vehicle 30.2 oi) Lsedvenet 20,09) 20706 Wholesale used vehicles EE) 4.331) Finance and irsu
Slide 29: Supplemental Information
SUPPLEMENTAL INFORMATION 2013 Income Statement * iw von $509; $208. Ssegaer|___suesass] $2256 [sed vehicle 26515 200 2303 4 [holes used veces 31 43.309 3168 Err 8 Finance ana surance Ex Ear 34.218) 3186129007 [Benice ody and pars 6075 or essed aeaasd eet and other 7 4 ‘Rew vehicle 39,097 EY. 38,788)
Slide 30: Supplemental Information
SUPPLEMENTAL INFORMATION 2012 Income Statement % ane $soser] 94, sessed S502000 S17 ‘Used vehicle 208,367| 227,157| 207,341 190.616 Kote used vans EM 3500 35 S336] ss00 ‘Finance and insurance EY "30,920, EAI 412,239, ‘Bervice, body and parts. 89,668 29,038) 85.456, 835 “37,703, et and aoe 7, Ere 200
Slide 31: Supplemental Information
SUPPLEMENTAL INFORMATION Quarterly Same Store Revenue Changes vehicle 70 sa04 sed venice 18: 193 wnotesaie used vehies ‘47d aa) France and insurance Fax] 1824 Bervice, body and parts_ 9.4%) 9.4%) eat an oor 08x] ioe vehi 10. 189%] 220%) 164% sed venice 162 18.7% 2 182% [noleste used venice 2.0% 16%
Slide 32: Supplemental Information
SUPPLEMENTAL INFORMATION Quarterly Gross Margins
Slide 33: Supplemental Information
SUPPLEMENTAL INFORMATION 2014 Adjusted Income Statement Details ato sone ia sszvea} cao] _sisrae] Fics reap sara] am] sed rom ran cemmire que totnam ue] eared aso] seul = es as Fuscearinn parser tom cnt epoators | soa] oof eval a id en “aaa 2 [umn | a SLITHIA
Slide 34: Supplemental Information
SUPPLEMENTAL INFORMATION 2013 Adjusted Income Statement Details tatoos] or | az | | ce | 0 | ot _| mans ato sone aie sro} 2] oa] eau sear) Fics reap suse] eso] aor] aa ser jometancumreqaaioateie rom me] ware as] an an wea pucsconnpsparsawtonconnungoreaios [ sof cos] oo] on! ord asf asf _—_—sn| —— to
Slide 35: Supplemental Information
SUPPLEMENTAL INFORMATION 2012 Adjusted Income Statement Details ‘AsRepored| at at at a ot | Aste eer rr | we =< cre aT rm