Lithia Motors, Inc. · NYSE:LAD
Lithia Motors — Q4 2021 Earnings Presentation
30 slides from Lithia Motors's earnings presentation, Feb 9, 2022
Slide 1: Investor Presentation
Investor Presentation FEBRUARY 2022
Slide 2: Disclosure
NYSE: 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 earnin
Slide 3: Lithia & Driveway
NYSE: LAD ▪ Diverse synergistic portfolio of businesses ▪ Complete ownership lifecycle attachment ▪ 100% participation in $2 trillion+ market Lithia & Driveway Fortune 500 ▪ #231 in 2021 The pragmatic disrupter with a proven multifaceted ▪ #12 10-year revenue growth, 20% CAGR* success strategy, uniq
Slide 4: Key Strategic Highlights
NYSE: LAD 1 2 3 Largest Retail Industry Consumer Optionality Omni-Channel in Early Innings of Consolidation and Offerings for All Aspects of Vehicle Ownership and Combination of E-commerce Home Modernization the Entire Lifecycle Solutions Leveraging Expansive Physical Network Key Strategic Highlight
Slide 5: Maximizing addressable market in an unconsolidated industry
NYSE: 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 bil
Slide 6: Consumer Optionality
NYSE: 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 Reac
Slide 7: Leveraging Growth & Scale
NYSE: LAD Leveraging Growth & Scale CONSUMER CONVENIENCE ▪ Expanding physical footprint Consumer optionality through digital activation of physical network 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 i
Slide 8: Adjacencies
NYSE: LAD Fintech, Fleet Management, Subscription Services, Leasing, Consumer Consumer Insurance, International Expansion & Other Verticals Lifecycle Highly profitable Lithia channel Expanding physical network and overlaying adjacencies drives Increasing volume of customer interactions drives Design
Slide 9: Driveway Finance Corporation (DFC)
NYSE: LAD Driveway Finance Corporation (DFC) Deriving incremental profitability from the core business, diversifying SIZE OF OPPORTUNITY earnings from business cycle ▪ A loan originated with Driveway Finance (DFC) contributes 3x the profitability of a loan arranged with a third party $30B 30% KEY ▪
Slide 10: 2025 & Beyond
NYSE: 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 profitabili
Slide 11: Profitably Modernizing an Industry
NYSE: 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 12: Appendix
NYSE: LAD Appendix Inventory, Strategies, History, Future, & More 12
Slide 13: Used Vehicle Marketplace
NYSE: LAD Used Vehicle Financial Metrics2 Marketplace Average Selling Price ROI Addressing largest proportion of CPO $37,057 156% used vehicle TAM of any retailer CPO Core $30,724 123% 10% Value Autos $18,651 181% ▪ Inventory procurement and reconditioning are critical. Network growth supercharges a
Slide 14: Driveway – Clear Pathway
NYSE: LAD SHOP ▪ Selection of ~35,000 new and used vehicles Driveway – Clear Pathway ▪ Negotiation-free pricing, 7-day money-back guarantee, in-home delivery ▪ Nationwide network of 180+ lenders Exceeded 15,000 SHOP and SELL annual transaction run SELL/TRADE rate in December, targeting $1 billion in
Slide 15: Driveway – Clear Pathway
NYSE: LAD Driveway – Clear Pathway Enhanced shopping experience focused on financeability Pre-Qualification Budget and payment calculator Empowers consumers to shop with confidence without Allows for transparent exploration of cost and payment impacting their credit score options 15
Slide 16: Educating on Sustainability
NYSE: 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 P
Slide 17: Electrification – Nimbly Responding to Change
NYSE: 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 repai
Slide 18: LAD's History & Path Forward
NYSE: LAD LAD’s History & Path Forward 2020 2021 2022 2025 2030 2035 Announces 5-Year Plan to Launches national brand, $1 billion in Driveway Completes build out of US OEMs expect that 40 to 50% LAD continues to evolve as profitably consolidate the Driveway, providing proprietary revenue and complet
Slide 19: Competitive Advantages
NYSE: LAD Competitive Advantages Lower cost network with higher margin businesses TRADITIONAL NEW FRANCHISE RETAILERS Revenue ($mm) $13,124 $5,587 $18,950 $13,717 Net Income (Loss) ($mm) $470 $(462) $747 $381 Network Cost ($mm)1 $2,461 $1,064 $3,487 $2,576 As a % of gross profit 110.6% 134.1% 146.6%
Slide 20: Capital Deployment
NYSE: 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 ▪ Cu
Slide 21: Valuation Opportunities
NYSE: LAD TTM EV/Revenue – Average 2x TTM P/E – Average 24x Valuation Opportunities Equivalent stock price at average multiples LAD <1x 7x EV/Revenue - $1,550 P/E - $960 AUTO REPAIR 2x 48x USED ONLY Undervalued by 3-5x RETAIL <1x 15x USED ONLY E-COMMERCE 2x ∞ AUTO PARTS 2x 22x AUTO FINANCE 2x 10x FL
Slide 22: Q4's Income Statement Summary
NYSE: LAD KEY Q4’s Income Statement Summary Q4 2020 Q4 2021 Q4 2021 HIGHLIGHTS TOTAL GROSS PROFIT PER UNIT ADJUSTED SG&A TO GROSS PROFIT ADJUSTED EPS $6,882 62.0% $11.39 $5.46 $4,371 56.8% COMMENTARY SAME STORE QUARTER-OVER-QUARTER COMPARISON VS. Q4 2020 ▪ Increased total revenue and gross profit by
Slide 23: Resilient Business Model
NYSE: 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 Q4 2021 Segment Segment % Brand Brand Revenue Brand Unit Sales Toyota 14% 16% 10% 10%
Slide 24: Acquired Business Earnings Opportunities
NYSE: 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 25: 2021 Quarterly Income Statement
NYSE: 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 26: 2021 Adjusted non-GAAP Income Statement
NYSE: 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 impairments 12/31/21 senior notes $M, except for As per share Q1 Q2 Q4 Q3
Slide 27: 2020 Quarterly Income Statement
NYSE: LAD 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 Servi
Slide 28: 2020 Adjusted non-GAAP Income Statement
NYSE: LAD Supplemental Information 2020 Adjusted non-GAAP Income Statement 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 shar
Slide 29: EBITDA, Adjusted EBITDA, and Net Debt
NYSE: LAD Supplemental Information EBITDA, Adjusted EBITDA, and Net Debt $M FY’2021 FY’2020 FY’2019 Net Income attributable to LAD $1,060.1 $470.3 $271.5 Add: Net Income attributable to non-controlling interests 2.6 – – Add : Flooring Interest Expense 22.3 34.4 72.8 Add : Other Interest Expense 108.
Slide 30: Thank You
Thank You