Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q3 2021 Earnings Presentation
29 slides from Lithia Motors's earnings presentation, Oct 20, 2021
Slide 1: Investor Presentation October 2021
INVESTOR PRESENTATION OCTOBER 2021 1 NYSE:LAD
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 & Driveway
LITHIA & ▪ Diverse synergistic portfolio of businesses ▪ Complete ownership lifecycle attachment ▪ 100% participation in $2 trillion market DRIVEWAY The pragmatic disruptor, with a ▪ #231 in 2021 proven multifaceted success strategy, ▪ #12 10-year revenue growth, 20% CAGR* ▪ #3 10-year Total Shareho
Slide 4: Key Strategic Highlights
KEY STRATEGIC HIGHLIGHTS 2025 Plan: $50 Billion in Revenues & $50 EPS Largest Retail Industry Omni-channel Approach Data and Innovation in Early Innings of Combination of E-commerce Creates Unique Opportunities to Consolidation and Home Solutions and Expansive Capitalize on Innovation of New Moderni
Slide 5: Fragmented $2 Trillion Revenue Industry
FRAGMENTED $2 TRILLION REVENUE INDUSTRY Maximizes Addressable Market TRADITIONAL PUBLIC USED NEW FRANCHISE ONLY AUTO RETAILERS RETAILERS* Greater gross profit opportunities allowing $2,000 ~$2.0T $400 for maximum $1,750 ~$350B $400B flexibility. GROSS PROFT (in billions) $1,500 $300 REVENUE (in bill
Slide 6: Profitably Modernizing an Industry
PROFITABLY MODERNIZING AN INDUSTRY $50 billion in revenues, $50 EPS by 2025 ▪ Addresses 100% of ~$2 trillion market ▪ Synergistic products and services ▪ Inventory – top of funnel throughout the customer lifecycle ▪ Innovation – activating the network procurement and broadest selection through propr
Slide 7: Consumers' Needs Vary and Selection Matters
CONSUMERS’ NEEDS VARY AND SELECTION MATTERS Solutions to meet needs requires expertise and flexibility Do-it-Yourselfer Building Credit Relationship Builder Selection Driven Desires to transact online Re-establishing or little credit Values lifetime personal relationship Influenced by selection not
Slide 8: Driveway
DRIVEWAY Flexible, empowered, convenient, and transparent SHOP ✓ Selection of ~26,000 new and used vehicles ✓ Negotiation-free pricing, 7-day money-back guarantee, in-home delivery ✓ Nationwide lender network of 180+ Intuitive technologies SELL/TRADE ✓ Instant cash offer ✓ Home pickup Nation-wide va
Slide 9: Future Synergistic Adjacencies
FUTURE SYNERGISTIC ADJACENCIES Exploring adjacencies to further provide customer convenience 75 Years 7 million of Relationships and Paying Customer Transaction Data Transactions Per Year Fleet Shop Fintech Through 4 Business Lines Management 2.5 million+ 15x Maintenance Vehicles Sold in the Greater
Slide 10: Proven M&A Strategy Driving Growth
PROVEN M&A STRATEGY DRIVING GROWTH Decades of successfully integrating acquisitions ESTIMATED ANNUALIZED REVENUES ACQUIRED1 ($B) CAPITAL ENGINE ▪ Available funds of $1.7B representing ability to purchase $6.8B in annualized revenues $7,000 $6,200 ▪ Annual free cash flow2 generation of $725M $6,000 f
Slide 11: 2025 Plan: $50 Billion in Revenues & $50 EPS
2025 PLAN: $50 BILLION IN REVENUES & $50 EPS Building upon our strengths TTM ACHIEVEMENTS REVENUE EBITDA EPS CAGR: 31% CAGR: 37% CAGR: 34% Generated adjusted EBITDA of $1.5 billion and EPS of $31.411 $50B $50.20 Acquired 48% of $9B $2.6B $10.40 targeted $20 billion in revenues; expected to $0.4B con
Slide 12: Profitably Modernizing an Industry
PROFITABLY MODERNIZING AN INDUSTRY LAD is a growth company powered by people and innovation with a plan to profitably consolidate the largest retail sector in North America. By providing a wide array of products and services for the entire vehicle ownership lifecycle through various consumer channel
Slide 13: Appendix
APPENDIX 13 NYSE:LAD
Slide 14: Fun Facts
FUN FACTS Lithia consumers and performance INVENTORY DAYS SUPPLY 1,000 80%+ ACQUISITION USED 24 48 NEW SUCCESS RATE PROCUREMENT PERSONNEL INVENTORY SCARCITY - LAD 180 VALUE 4 CORE 20% 63% 17% LENDERS CPO INVENTORY SCARCITY - MARKET 2 AVERAGE VALUE CORE 9% 29% 62% BUSINESS CPO LINES ANNUAL New, Used,
Slide 15: Lithia E-Commerce
LITHIA E-COMMERCE Aligning our offerings with changing consumer preferences U.S. CONSUMER PROFILE 11.5 million Q3’21 Unique Visitors ▪ Increased openness to buying online - E- Organic traffic growth between Q4 +140% 2020 and Q1 2021 Commerce sales increased 3x as fast from 2019 to 2020 as in the pre
Slide 16: Driveway – Clear Pathway
DRIVEWAY – CLEAR PATHWAY On target to achieve a run-rate of 15,000 Driveway shop and sell transactions by year-end EARLY LEARNINGS QTD increase in Monthly Unique +68% Visitors ▪ 96% of Driveway customers during Q3 2021 were Organic traffic growth between Q4 +140% 2020 and Q1 2021 incremental and had
Slide 17: Driveway
DRIVEWAY Enhanced shopping experience focused on affordability and logistics ▪ Shop by payment - ▪ Budget and payment ▪ AI-based feedback - ▪ Shop by location - Empowers consumers to calculator – allows for Guides consumers to deal Informs consumers of shop by payment and transparent exploration str
Slide 18: Network Cost to Revenue Comparison
NETWORK COST TO REVENUE COMPARISON Lower cost network with higher margin businesses Year ended 12/31/2020 Year ended 12/31/2020 Year ended 2/28/2021 Source: Lithia management and company filings 18 NYSE:LAD
Slide 19: Lithia's Trajectory and Roadmap
LITHIA’S TRAJECTORY AND ROADMAP 2017 2019 2020 Adds $500mm in revenues with Acquires $1B in revenues and 2021 Launches national brand, Acquires $6.2B in revenues Baierl acquisition and enters enters Southeast; nationwide Driveway, providing Pennsylvania reach to 92% of the population and adds massiv
Slide 20: Regional Reach & Density Map
REGIONAL REACH & DENSITY MAP Currently reaching 90% of consumers within 225 miles 20 NYSE:LAD
Slide 21: Q3'21 Income Statement Summary
Q3’21 INCOME STATEMENT SUMMARY Q3 2021 HIGHLIGHTS TOTAL GROSS PROFIT ADJUSTED SG&A ADJUSTED ▪ Increased total revenue and PER UNIT TO GROSS PROFIT EPS gross profit by 70% and 83%, respectively ▪ Increased adjusted earnings $6,175 59.6% $11.21 per share by 63% $6.89 $4,655 55.8% ▪ Improved adjusted S
Slide 22: Strong Balance Sheet
STRONG BALANCE SHEET Allows Us to Capitalize on Opportunities in an Evolving Environment HISTORICAL NET LEVERAGE1 TARGET USES OF CAPITAL Proven Ability to Delever Maximizing shareholder value Internal Investment & Target leverage range: 2-3x Modernization 25% Actual 5-year average: 17% 2.2x 2.0x Sha
Slide 23: Resilient Business Model
RESILIENT BUSINESS MODEL Profitable business with diversified brand mix, geographic mix and multiple earnings streams LITHIA NEW VEHICLE MIX BUSINESS MIX Segment Segment % Brand Brand Revenue % Brand Unit Sales New and Used Gross Profit includes F&I Toyota 17% 19% Honda 13% 18% Subaru 7% 9% FY 2015
Slide 24: Earnings Opportunities
EARNINGS OPPORTUNITIES Acquire strong brands and grow profits PRE-ACQUISITION TARGET 24 NYSE:LAD
Slide 25: Supplemental Information: 2021 Quarterly Income Statement
SUPPLEMENTAL INFORMATION 2021 Quarterly Income statement $M Q4 Q3 Q2 Q1 2021 New Vehicle $2,898.2 $3,146.2 $2,193.2 $8,237.7 Used Vehicle 2,079.5 1,804.9 1,352.2 5,236.6 Wholesale Used Vehicles 260.9 217.4 135.2 613.5 Finance and Insurance 297.0 269.6 198.4 765.0 Service Body and Parts 578.3 521.0 4
Slide 26: Supplemental Information: 2021 Adjusted Non-GAAP Reconciliation
SUPPLEMENTAL INFORMATION 2021 Adjusted non-GAAP reconciliation Loss on YTD Net disposal loss on Asset Insurance Acquisition YTD Investment loss (gain) redemption of 9/30/21 sale of stores impairments reserves expenses 9/30/21 senior notes $M, except for per As Reported Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1
Slide 27: Supplemental Information: 2020 Quarterly Income Statement
SUPPLEMENTAL INFORMATION 2020 Quarterly Income statement $M Q4 Q3 Q2 Q1 2020 New Vehicle $2,149.4 $1,883.3 $1,367.8 $1,373.5 $6,773.9 Used Vehicle 1,108.7 1,093.2 922.2 874.4 3,998.4 Wholesale Used Vehicles 91.8 98.8 51.3 66.7 308.7 Finance and Insurance 172.6 160.5 124.9 121.9 579.8 Service Body an
Slide 28: Supplemental Information: 2020 Adjusted Non-GAAP Reconciliation
SUPPLEMENTAL INFORMATION 2020 Adjusted non-GAAP reconciliation YTD Net disposal gain on Asset Investment Insurance Tax Acquisition YTD 12/31/20 sale of stores impairments gains reserves attribute expenses 12/31/20 $M, except for per As Q1 Q2 Q4 Q2 Q4 Q1 Q2 Q3 Q2 Q1 Q2 Q3 Q4 Adjusted share amounts Re
Slide 29: EBITDA, Adjusted EBITDA, and Net Debt
SUPPLEMENTAL INFORMATION EBITDA, Adjusted EBITDA, and Net Debt $M YTD’2021 TTM 2021 FY’2020 FY’2019 FY’2018 Net Income attributable to LAD $769.0 $956.6 $470.3 $271.5 $265.7 Add: Net Income attributable to non-controlling interests 1.1 1.1 Add : Flooring Interest Expense 16.9 23.0 34.4 72.8 62.3 Add