LAD - Earnings call transcript Q4 2017

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Operator

Good morning, and welcome to the Lithia Motors Fourth Quarter 2017 Conference Call. Management may make statements about future events, including financial projections and expectations about the company's products, markets, and growth. Such statements are forward-looking and subject to risks and uncertainties that cause actual results to differ materially from the statements made. The company discloses material risks and uncertainties in its filings with the Securities and Exchange Commission. The company urges you to carefully consider these disclosures and do not to place undue reliance on forward-looking statements. to the forward-looking date duty made which no of as of undertakes update statements, any are Management this release. discuss also may non-GAAP measures. Management financial for GAAP Please reconciliation to the of earnings refer text of measures. release comparable the a Management for call open questions. prepared will remarks provide then the and now Bryan introduce will President and I CEO. DeBoer, Mr. begin. DeBoer, you may

Bryan DeBoer

joining Good for us morning, and thank today. you

of CFO. Vice $X.XX of fourth North, Senior John the with are me and marks adjusted which call share record reported Chris President per President; Earlier and our On quarter quarter we earnings Holzshu, our Executive consecutive today Vice XXth performance.

of despite have an and as XX% year. to excited continue are its market growth annual new billion increased our a Fueled by conditions. year We million. powdered digit adjusted revenues earnings growth of We exceeded low by this $XX added results XXth upward to our XX% mission, full organization poised vehicle people, revenue to over start quarterly we $XX.X trajectory XXXX regardless is our our sequentially

We moderation to of units. range XX million XXXX XX.X for expect in in million further a SAAR

years, hallmark last several to consumers. been making decisions the powered the of closest our has our high-performing For and success entrepreneurs

have the potential. a Despite our alone. the acquired revenues earnings size our than including and dilutive purchasing are performance company maintained strong we operating of strong to acquisitions These growth more have the past We historically margins. that $X their underperformed tripled annualized in in years billion of in four franchise SG&A effects, assets stores

X%. vehicle same-store In perspective over total sales sold X%. towards we X%, We from X%. year. and our per retail F&I certified sales decreased up strategy. XX and our the period challenge parts sales units and the X%, leaders increased progress new sell the make recent capture units used created earnings identify, basis, of XX From increased units were increased units sales XX at on month vehicles used store considerable to month up dry were grew acquisition. up acquisition store per to increased effect and that vehicle powder And service the X%, used mergers in We a our develop an X%, of operational the fewer incremental of Again continue while value-based quarter than core continue per comparable last our time offsetting units XX from X% auto goal units same-store acquisitions per value to

which body, business Los to We how Downtown grew continue compared to service, our traffic available that customers see $XXX customer in is on while on incremental followed XX% January. another XX% focus continues million resulting by to gain powder store revenue leaders strategies group service by we effectively existing more Online executive approximately Last attract marketing X% and to web X%. driven day reviewed over growth comment in areas capture via cost. our to our to last Chris where in negatively year increased which and new our our in parts base. managing continue Toyota modified and shortly. store one assembled of impacted fewer on as these some growth despite same-store will at operational in The dry team Angeles month efforts topline XXXX

Ford York Ram of our Crater Crater Oregon. hometown in convenient Albany, and in ways. entrepreneurial customers easy-to-use in omni-channel the marketing In their Jeep Lake with Lincoln and of markets websites our deploy representing spirit. stores emphasize and full We nature online of retail our we through XXXX, quarter the personalize service the connect of and hallmark Armory Chrysler engaging fourth completed Lake acquisition Medford, to tailored home of Our intuitive models delivery experiences, New continue variety and that offerings the Mazda a targeted Dodge to

We also Washington small store optimize portfolio. divested Eastern continuing to a our in

a also acquired a as opportunities. in $XXX We rate total million $X.X Ray believe revenue will of XXXX estimate XXXX the XXXX decrease total. and we both our in We of estimated be operations seen is environment is XX% revenues effective XXXX available gain York an billion. XX% our cumulative savings XX% cash to or approximately activity recent The NY Laks well with annual annualized vehicle Buffalo, tax robust we are in from to roughly exceed further $XX New existing million. acquired may plateauing start. incremental accelerating the and should new being anticipate acquisition of in and annual significant be Ray Positive off reform. new store disposed tax acquisitions from Honda, to seems beneficiary flows. Our In January, as sales number and

our we annual estimate rate, target we historically meant This XX% a our of U.S. disciplined acquisitions more tax the we lowers on the XX% in through our or dealerships in has Additionally, had as disadvantage equity structured pass apply in entities tax of meeting are return to hurdle most rate acquirers. which competing XX%. resulting to change deals tax to

on With accomplished through call gives line to earnings and and the factors a in seven we've John. in like of forward, can with few earnings massive more turn operational per John history and continue liquidity acquisition delivering available that, to in our share These confident XXXX coupled on the that updating leverage, also last significant improvement will I'd a are over a low most stores we see our outlook drive sector-leading us the stable growth In bottom amount we to years. for annual we unseasoned a summary, market. which the improvement. that robust $XX.XX environment, remained moments. upside elaborate double-digit Looking our We focus top

John North

All better same-store will detail results year. the than like I'd a point members X% increased Bryan. on on which in new quarter. increased decreased the the In from Thanks revenue from to our this X%, unit national prior the sales forward vehicle provide be basis. more quarter, results X%

X% fourth an revenues 'XX Gross the of $X,XXX XXXX. sales increase to $X,XXX was selling prices. unit price increased was of quarter X% fourth $XXX. average for of increased greater compared Our in which decrease used of vehicle by offset quarter vehicle Retail new profit to in a X% due retail compared X% to selling the

X.XX used-to-new Gross Our was compared unit of to profit $XXX. per year, ratio decrease X. last a was $X,XXX $X,XXX to

Our F&I last of to $XX. was compared increase $X,XXX per or vehicle $X,XXX year an

contracts in and the we vehicles in financing XX% on total in For life quarter, XX%, time total service oil the XX%. products we sold arranged

decreased oil points to per XXX overall rates per last an XX year, the contracts quarter, basis and financing, XX service increased our and funded In increase profit penetration was for Our $X,XXX fourth basis unit. increased points basis unit gross for lifetime $XXX contract. for $X,XXX of points

revenue increased parts the Customer work X%. over of increased Our increased X% and pay service our fourth warranty increased X%, body X% XXXX. increased volume quarter parts shops X%, and wholesale

a margin Our of points gross from the year. XX.X%, was last total decrease basis period same XX

As $XXX of December an $XXX an of of quarter, our we another inventories of day days the with as XX, had were XX, over consolidated well billion. December were of the Used we increase of million a could in covenants. XXXX, all XX, an unfinanced XX, estimated At $X.X At inventories at ago. for real new year in XX in were vehicle compliance total plus provide increase from as credit cash a approximately days. fourth vehicle debt one available to XX liquidity day million end that estate and XX of supply

of and Our million leverage EBITDA to 'XX for interest fourth the less find expenditures was was used quarter for EBITDA year. million $XX adjusted it's the and capital $XXX

presentation $XX and in free cash Our million million was was full of flow investor fourth year. we as quarter for the for our define the $XXX XXXX

which net X.X X Our our in to targeted and range times. EBITDA the debt sector within lowest among our to X.X times, is remains of

XX% anticipated We the local XX% to at to As Bryan topline billion updated our with revenues $XX.X and tax our and and to in target share state per a that approximately behaviors mentioned, and and deductibility interest it taxes. growth limitation to of billion share. coast $XX.XX. passed growth And per hand consumer over this east $XX for would Achieving changing I'll year adjust has earnings on outlook rate anticipate provide on the Chris. earnings XXXX increases been west due of recently previously legislation, earnings

Christopher Holzshu

culture structure. This cost John. on growth focused a you, remain in our cultivating our the powered of We opportunities generate our leveraging performing foundation to high Thank is lines, while business people. by core

leaders on continuous Bryan met XXX our operational month As across our mentioned locations focus opportunities relentless the we evaluate as our improvement. last continue to

match role results. specific achieve performance. higher at group performance continuously drive to observed between quarters year operational stores. of and is realign group leaders and with improvement inspire unit to to In individual powder our and improvements third in strong years their on stores assets that franchise to ownership. the profit made the tripling earnings potential. inspired the gradual. utilization stabilizing The low schedule XX underperformed acquire growth incremental historically SAAR last quadrupling analyzed capture to targeted improvement stores at more primary requiring the as second moderately strengths we teams with range are and each leaders managers, expected our occurring better department the and We some also of we incremental has the doubling best and two past three have achieve seasoned technology is plateauing of The the of our and million Our leadership,

XX significant for our new seasoned powder in stores by below these below seasoned As per seasoned performance performance each market investor our XX below specifically compared stores. acquired average stores vehicles, units dry expected More share sales business we per or used manufacturers, opportunity unit In the of in acquisitions and see XX% $XXXX. month $XXX vehicle we average our at line. cars to average XX% and our demonstrated store presentation, over F&I our

retention our stores higher nearly retention or acquired XX% is finally profit acquisition, of more XX% measure estimated than averaged XX% our and seasoned service a level. stores. below consumer seasoned gross than loyalty And in Our store

totaled capture to now opportunities powder more the like Operator? call All we the in that by to million stores This independent our remarks. our leaders than across questions. inspiring of entrepreneurial prepared open to these developing earnings are concludes organization. $XXX dry We'd

Operator

[Operator Steven question Instructions] with Craig-Hallum. Dyer Our of ahead. the first line from go comes Please

Steven Dyer

seeing Wondering guess in behavior? necessarily two do change maybe you and put if have deduction I what I self you or anticipate seeing in together. comment, two elaborate what of you terms are wouldn’t guys could the But on

John North

talk guidance little We'll broadly bit overall. a our about more

market We’re reform coasts, And move we then even rate is our where interest like the or about interest about performance actually going X but is tax us the that for we this our million based I'd X% And of certainly a XXXX also to us interest accretive increases. be self the you there year, current bit in in to lot limitation going $X.XX. outlook to of X the on rates a conditions. through store pre-tax temporary is of as increases the $XX are for majority and are talking remind you on sales rate we're anticipate mentioned.

also at invest when in we taking a of many replacement We team our of didn't the members benefit Harvey. and demand some see utilize improve benefits. we're hurricane due And in current the employee as service peers of to the from to had it the market, lot tax appears our to look trends opportunity our savings

So all together, market appears we kind the put that of is it stable.

we're know to it's the I might increasing an think ultimate not Bryan impact be start as mentioned And certainly coast. what more any tell XXXX. about and in You on soon too the seeing

Steven Dyer

guess on down drilling baking concept are the just guess in what you buying less I I car a just generally? little softness. there down, relates trading it tax are overall Are more demand deductibility sort expecting cetera. you bit mean sort limitations people expecting as of you mean of I et expectations your - I

John North

acceleration at you cars the dramatically. quarter it's of pretty estimate lot quarter of more appears I to a middle think was of XX there. end hurricane real how a haven't But and We particularly the make part XXX,XXX lost were it was the that in ended, XXX,XXX mean replacement. seen concentrated up I which U.S that of around kind that at look saw we fourth if the

the As affected. performance, pretty we of things kind state and that steady might of those are locations in look at XX, fact income appears high we XX-million-unit range that function upper are be our that of think some tax low that's that a and coastal a

So that a shift. we've I say wouldn’t seen big

softer based pretty we QX, demand quarter. the indicated I think appears a on performance of that little replacements. But that saw more might it some in have underline it's it consistent that is than hurricane in

Steven Dyer

can that to acquisitions yesterday announcing say you - - anything about on question like then you And press okayed released look guys that? FTC you what some be acquisitions appear

Bryan DeBoer

annual Steve, that able our Hopefully, XX this announcements. for target. Bryan. We more feature achieve help XX, share be M&A forward to we'll

However, deals. stores groups completed until we or as actually don't we've our usual announce the

tuned. coming stay the Hopefully, in something So we'll periods. have

Operator

Bret I Our Please next with of Jefferies. question. Jordan question from comes line have your

Bret Jordan

a Was some that think away vehicle CPI the seeing of the used vehicles or On mix, up. demand? cars with value I was taking you said were or were a strategic younger shift you core incentives are while down newer something that car used new and that

Bryan DeBoer

This Bryan. is

started when fill we and I starting how think the certified its vehicle far year the almost sort see certified value, we pipeline. about of a was to back supply when for what pass drives to think we new core ago chain was

So that we were able to business. grow certified

that make vehicle fill which to Now a up the as average is product on. wonderful is that's because class deal similar well lower core we starting

a higher margin make vehicles those excited on which we’re about. So we

is, you in how our value is our through most on thing those we which other strategically get product. of because is lowest we cost on recall, highest margin core focus our attention is The outlook if vehicle core the trade-ins

Lastly, be new cannibalizing it's value which like likely uncertified you sell auto and can core less difficult. you a going be vehicles you're when that to do lot

preferential So core that we to for single reason. are always

Bret Jordan

trajectory of And anything service service maybe we we and and any in the X would whatever or is of guess parts part business, markets. with the of given are demand XX Can and some there loss improvement I that? extra early return day are in the day, what talk we're weather to see a of you you plus an us the seeing volatility northern have seeing

Bryan DeBoer

Our parts continue quarter. seeing up pay because with It's in services we're pleased and were grow. that customer the to X%

went dozen I a we remember warranty through, over in of you range. quarters believe the increases If double-digit

clientele but fear to it you're is on the always our to pay up that the to. strong And to not always we're the have seeing. our that new opportunity There's with excited to lot up demand continue there's customers build retaining replace that goes customers way going dry that those only powder the that break, back Chris attract so customers when said paid, X% to warranty fortunately about in when ourselves consumers. We And lifecycle. able away warranty reinvent also to obviously We're we we X%. So, to that be go as for throughout that beasts market our acquisitions. what was a customer mechanical that focus in of with tendencies

Operator

Our go one next Bottiglieri question Chris your comes of with ahead with Please Wolfe question. Research.

Chris Bottiglieri

was nature? that gross a to let or pretty well. else Two-part sustainable more went EBIT as up like think there on per is if last, is extent any the there question, exceptional there driven what performance unit you temporary something luxury power Wonder and connection maybe stair-steps your is new in though on say

John North

into look when you at and portion drill new Chris, do pretty this internally reallocate our think see is But our I when had out be really and fourth you that we can the John ounce this if and the you quarter We in pointing internal a our you I also the would margin of of was in performance some seen we've year. powerful certainly work reconditioning. readjust to reconditioning or and use.

I as a think and that. you used shift a result between see new of

quarter. from a in of LIFO that boosted had small also the also the margin We earlier in recapture XXXX

in outlook. in on a estimate look rate, five year use of think, always think good the total as about changes at that's for really part you because based that the if say, normalize and use best the And think is I stores it and at high our run to think performance and to new I you’ll together, kind the had to business obviously in about. F&I mix going looking way So the and see I is pretty which valuation trade we're average full deal of well think forward, range the we that’s

when you consider to those all quarter at think fourth you the need I factors So, performance. look

Chris Bottiglieri

of a that, been and peers stuff it's but what of you in the lower think in some your off extent like lot it lower fall reconditioning quantified starting and other you GPU. terms have I like volume GPU, just take to

volume, Just want comment helpful? a maybe higher DSI, and to like sacrificing factors for market what's are drive if that anything be nature, there, factors that on the strategic driving what's sense back some get certain just this, you be to GPU you're could may to like this it's if seeing regional of driving

John North

and loners. within luxury biggest function of really The is decline segment appears a GPU that our service saw lot we that's of it a

manufacturers, aggressively. a a significant a and function that, actually but It of manage the supplier they're front But programs a in is been healthy, that. to as Our that programs to particularly on then pretty of similar front end move managing programs vehicles the new end pretty efficiently. through. stores GP needs OEMs amount in they it more certified cars less us what are those XXXX appears couple German They and saw side. obviously are What and work continue a they're they've we those our see taken vehicle GMs - a we to of the use do little pushing able through the on is very lot trigger of and have sold

So that's driver I biggest think that the seen. we've

And to well sales function concentrated as in a In how selling of terms I of market. of our attack really that's to fast bit, a the think that a kind lot of us trying aggressively into drilled group. day vehicle out division it environment for lesser figure of we've really supplier rate appears that that new the

our volume. of in trade part can the off business. bring they additional that's that have unit You vehicles know grow And from good if some have a to perspective to you

Operator

Please of comes your from question. with line question Stephens. proceed Rick with Our Nelson the next

Rick Nelson

region, Like how strength and commentary to be ask interested area be any you on which at relative helpful? particular, your performing to time downtown would about L.A. an in expectations of Group also that in Auto I'd DCH

Bryan DeBoer

Real Jersey up states especially X%. in and New seen balanced have was there no digit really quickly, you is Texas. when five really same It areas was store we've losses California we of up was York nice both Texas me double for positive pretty revenues, and us, was surprising It weren't like a flat, was just top New mix, the see give finally to X%, Texas up X%, or affected was were gains let in momentum the past. there the storm some Oregon

volumes to pleased southwest We New see late before. and they The country we're store EY driving and the rest the great. Downtown his are So they - been in XX are of taken never in which profitability really in we are that. I to our in stores see. wonderfully into to as the they'd really were If which wonderful is doing move the November. volumes those growing Toronto sales Mercedes believe is sales of hold Their at top and team the L.A., store. terms have moved

happening excited what's there. pretty we're down of So

you ROE okay spoke that last it like that plateaued us In X, X.X% recall about performance get of were to as a the the to able them excited we margins. to terms are, is they little they year, level were we it But targets. a are of what I bit over idea to and when has margin combined that to DCH people move about X% we quickly think and from and our X.X% X.X Chris gets pre-tax when into

the by now market find But themselves with to their sit So where reinvent to to stores ways very personnel pleased challenging to and today. have new we’re of many we go how how less their further out And do comfort control volume. zone, little some push a of growing more to to with to figure our out to while to get expenses, extent?

that many of we that you So them. don’t dealers but idea of value plan, if something sales in new vehicle always or conquest are auto most we most think acquisitions taken not if stores, about car at look used the sales okay. hold That's and DCH all the

all a just quick experience important and not and get a service As claim the ideas of part well takes center of one place. and stop but warranty to cost being that being low mix time into an is the as, service, it

break DCH occur in So we're to plateauing forward other step through that now to stories year as forward and can as three. looking that two well many or

Rick Nelson

of you're is out really up environment could come seeing what multiples heating seller and if expectations acquisition and The you the there? which,

Bryan DeBoer

at continues Well, a you stated of more that that heating by our it's typical line expectations. is pace with up question and that followed that's come no up there's into to it's pricing, what heating

gain our by we'll if would most say to to take full to all So and pick to amount. we're able opportunities fair are well what that, to and pretty XXXX. advantage, able able exceed closely of I be similar likely and choose a it And goes be revenues levels maybe

that the used commented structure We competitive a I also now tax doesn't our in on where to it be. but prepared disadvantage remarks, idea at us the we put

that's are you at So earnings, which XX% to about able look think turn discipline a almost that Lithia theory be to pay we in ROEs able the still while maintaining always that create future deals. you actually enjoyed same to has when about more full if

leave would this. I you with So

able rapid the XX liquidity dry if purchase rate. of XX% that be capital, the able a that of price the somewhere to calculate add we pay and have all goodwill store. $X model for you we more We to gets have billion have of powder people, Plus, end to to million a and utilized to be at we our you billion revenue buy to typically working $X.X about $XXX

positioned really to that to think to we're as able the be as continue grow nicely stabilizes. we far market So

Rick Nelson

that acquisitions does that? accretive would be include to estimate And that guidance just on not to clear the be $XX.XX future

Bryan DeBoer

again by transformative the $XX.XX. we is XX.XX, Acquisitions stores in that Rick. not achieve need so may to that that on This are included Bryan are the

or DCH Now a a like acquisition we transformative readjusting would larger, things. obviously be

Operator

line of with Edge. James Please from next go comes Our ahead. Albertine question Consumer

James Albertine

are how you've or done the past change made, then acquisitions just that you point last in always that are not is in is to that that transformative on case, been guidance? included the a Bryan

Bryan DeBoer

our staple last included forecast. So called typical we quarter as it, we announced that our acquisitions diet annual in acquisitions, be will

So moved negative, it we can we from to can growth. that internal knew annual we either acquisitions. market come could we other and when come we is we could one all or that and little decision ahead, the bit be knowing forecasting, growth hope that always or made get that we from in acquisitions the to it a the a external to from it were if little flat a more up reserved in make short, little then it's approach how we And

James Albertine

So announced to and you today, both they the January in in two be December release clear XXXX? in the December are one

John North

Yes.

James Albertine

you and parts about of a we driven down quickly there service, Can I were think else year-over-year. with you is cut through sort that pressure I little year-over-year, a think on there's said that of help modeling you if how bit know and Really and or what going something kind lost for us day, XXXX? margins mix

John North

have up recall, we you X% and would in we service part around X%, in extra So revenue X% shop work. as day. about it were that body if all had been And our

So look I relative think always at. to that's

and new a is terms business XX%, in. the a XX% mix which service is only typically mix the a whereas business XX% between typically - and used where part's margins, comes In is it the that's of margin

any type have would any behavior. of a part seeing rather that become of aren't than mix of more the those We departments. bigger degradation other within parts margin It's

James Albertine

underperformed you it, a strategic your If as just see very is very you we net-net question. more me or for today used SAAR new -would broadly, it outperformed one stands your expect expectations, think outperform high your if the Last expectations it vehicle sales level and guidance would vehicles to underperform? would sales about

John North

I think I it service our vehicles. used would on so business margins similar. a vehicle longer Because also are a has tail closer The has to it than new be neutral. somewhat it believe that

out balance it to but in-service think more new I I it robust. beneficial being the in attach tail more better, think So term long of short would be because for the of and term maybe parts used

James Albertine

that would the helps degree outperforming line low I from because think And long right those hanging that the on more service, loss you're term then to to follow thought offset deals? of to M&A, of fruits that there's

John North

performing the That’s value they're three to a and get profit I we quarter based level. half years a five the a accurate. to And and potential. are at typically that to somewhere between stores seasoned buy XXX% investors mean take we them typically

of stable. come those that we store months number later, and how when obviously start then keep which factors our into XX at all play So sales looking into to helps same we're roll numbers operate to and buying they pretty

Operator

from Our next question comes [indiscernible] the Please of with your line question. with KeyBanc. go ahead

Unidentified Analyst

for Question be not does revenue pre-tax to appear your outlook much before changed guidance your around but you appears about lower than have income to X%.

front you about personal SG&A perhaps or the make price If you service impact, you margin exclude for profit the would anticipate a bit areas of the gross little perhaps weakness end higher interest rate can you a leverage. talk it

headwinds You're today ago. seeing three, that weren't four you seeing months

little around more just color these If a could you offer there? specifics

John North

to a of know start thought you the a look kind and with you that modeling gate disconnect tax have apportionment our California. one, guys that of think at taking We’ve higher our map function obviously have I you were of put rate of as we together is things the was, you out full the that year

mid kind XX%, of had XX concentration of XX% anticipating that So there. just rate were as and we something XX%, using north were you given the we

every you below more $X.XX just Like something XX.XX, at like I the rates think on the of were was with I do in math increase gate, new rather I where that. significantly a flooring. if we like XX.XX, So were car you said, more

mentioned anticipating we of we're performance. increases we're to something than our We're they're of that little And with been thought I the are on think it more and maybe going as is important than lot benefit month, in on employee CPI tax and bit we we which which I more cut. X.XX% part that we robust appear the perspective, this So was days morning bit exited from recently. QX then terms severe XX, similar up a how interest at little reinvesting earlier, rate of looking in tempering it's know members. had a pretty call seeing XX almost increases the be to again team ago

that moderation the So Clearly Bryan seeing degradation, with that biggest to going make the but we're and trend can the same really we it's I current deliver sure think just it's taking are DCH, we're safety. not those mentioned think to reach just that we warmer some as drivers.

Christopher Holzshu

Chris. is This

the our north high know like at history, included largest doing in basis our remains to outperforming John is you what low the as is X to over stores that remainder the person XX%. acquisition But look acquired performance at to may we look I stores of our talked the was powder, doing you where for in that year. to SG&A years we dry about seasoned the $XXX billion acquisitions of in which means we we internally about gross have on its XXs. leverage current one be going seasoned the XXXX as adding that at XXs, last at are Just opportunities there same kind know which store philosophy revenue translate in about whereas from the net talking And not at cohort have as of we DCH is in in the set just it which are to they're far a years was and over did seasoned XX%, earnings all well, Bryan which as expectations are we of stores in metric million on doing get ‘XX to us which the as things we that to the a something four look XX%, is had which that think of

about closer So the what teams to energy on I we the of in looking want our that upside start ‘XX XXXX, for year. stores spending our on and -- of have integration look seasoned and getting potential you outer time acquisition levels them think to behind and the definitely talk going without a be with and there's we're lot outlook you about when of our we based level acquisitions

you in future. that the hope I that our guidance so have the you in balance outlook And in

Unidentified Analyst

giving exposure other of declines maybe in other bit question your hurricane, and outlook are the better can potential Texas anticipate seeing you talk at stabilization for excluding And easy impacted that Texas a markets comps of as you a you least about Are are you mentioned conditions in Harvey the we recovery, bit little around some then of overall little as as not energy demand? or over Texas your Texas, region? a should one replacement over, the

Bryan DeBoer

is Bryan. This

it said, our makes So was about was up up as I've about XX% in Texas And it XX%, X% of revenue. revenue.

were losses get in didn't We It few Christi total have We we hours the in stores have within get days. back of Corpus brunt didn't on damage, bit but little a cars. which did business a wind rather of the floods. than

didn't see big we basin majority the is of our in in oil Permian So we business is which that spikes there. country. The Texas own

are We finally. seeing is exciting there which stabilization

we've he think in were revenues, in to in way. last able Texas. more flat they well-rounded that were new maturity used quarters the capture a them parts profitability profit profitability. We a that only where in though X% be vehicles. more of were but better in also much and job fact revenue. to Our not leadership rounded up in consumer's in They've in it's become meet are few business doing centric stores effective capturing into to service seasoning but customer And allowing become market XX% in vehicle still net gains was expanding we that in and is our of demands which over up because approach over seen Texas And making business market, the and their very I in there stores our a t entities,

Operator

of question from Please America. our ahead John with the And line Murphy next comes with Bank of your question. go

John Murphy

prices. then or if First I'm acquisitions the acquisitions you the any curious talked tax you’re that sort more know why are little that out just makes that that's bit your willing that you know sounds of question mean are a are the reasonable it sort pipeline you have of… also there more market? horizon are deals And for thinking you to transformative any on there in there on or understand on accept occurring attractive, slightly sellers like acquisitions, are willing bit a I more in little I rate but and

Bryan DeBoer

had firms there. flows. fundamental have certain business a competing do and I biggest able Let drivers us the not was a for type in but supply different were I think few which They're and to the start well those in bought creating dynamics exit, We buyers of VC are that changed the over in most They they been tax that their really believe the guide second a codes as the I very pricing or the it's for range now future. And time is that cycle. can billion the be were greater they question, it the me be And that our the some year market of okay three little now to there those happen What of flooding seven have far been new creating believe right typically only market who don't immediate key and exiting is deals with certain the a have of stake for I bit. these last years prevalent. groups $XXX of things at lot is are - of which your between. think times, are even future. are in buyers as think in typically transformative there's lot appears, when million which fortunately, on We to out we cash is cases may believe with. competitor the firms. now VC somewhere finding we're years them life four or the dollars believe And we quarters And stores, to less of

assets would bought high the Typically they assets were call, Whereas some bought strong a primary they toxic lot as three level. what well line we at buy assets. the times, we main franchises also six a as the that performing them to bought typically us of, they very So assets which ROEs. attractive at strong while at majors allows only very in franchises, or buy strong luxuries that okay, underperform,

we historic three want bit to really outlook full attract a partners we that is I that believe market as decline our pipeline look full We there, started, with and ripe. be join little that a are greater some competition can is pretty at that the team. now lot that to flattening it with as we of starting out And our become earnings more years believe even of and to those to able new sellers

John Murphy

automakers get view the approvals future the GMs or were because must because going their that on allowing get wouldn't they approvals VCs they to these do mean, think I operators you own. them are in have had mean, I owner these to

a - all I more and are of skeptical exactly do in that even automakers that out don’t might guys not of trading a you coming essentially all So the is be of which think mean, they dealers sudden that and want. sudden, these what almost these

Bryan DeBoer

think assessment would a fair any that's they view I of or how VCs consolidator.

being the them company. they exit stores to add to think, to the far relationship exiting cash know to fair, flows so a owner where than And and wonderful a ours really we that There's some they made manufacturer's to able We're cash ourselves they really many them. them generalize VCs buyers revenues, better proof the stores as and are perspective point or have quite sought of many those manufacturer of But companies. place I the to when buy they despite that probably think don't perpetuity. And sale that store totally pay you also about because be be portions greenfield the typically, I the as with look extent taken in lot I there as good the for be of those they're of then talk type they for some for value as hasn't won't be I similar bought think trying operators when exit. get model of when flows, of to want companies them ever assets. they of from not those marketability of is And at because many of different. did VC. to it in an to future look looking so engine We're strategy mean us much the to and those we'll again, But I have when after. buy do growth

outlook how from that see regarding out. it's assumptions plays to have somewhat we'll the But manufacturers, So your I probably think valid.

John Murphy

the basis, seeing a you a this impact of lot are customers And or don't than to have is reform, this. this very are showroom were companies but non-SAAR in on And than SAAR a to your tax traffic question states? your on Are higher we paying be seems like occur bit rate SAAR you as have second far also a on purchases? SAAR actually I the states little space rate then And anything higher around I your you [SAAR]. mean, in which we question, an delay tax know dealership does expecting? maybe in tax the in - sort of as basic your that a desire aggregate

John North

you on question we're and tax trends of color the the seeing. let Bryan kind give take I'll maybe the

a have have drag. the income in our concentration to most revenue that portion of have higher coastal areas revenue based high do We tax on a in state. tend We state

so buy with up many coast. spread we will those to likely And that's rate in across. X% our we the the because came stuff XX% how skew more are states to It's they in see And seeing continue even are XX%. its of you'll around going rate

revenue particular state. So changed. more tax driving the that's kind just behavior It's tax not much how about there. really in of the has And what's regime

Bryan DeBoer

spoke and the to the John, additionally over is as of California which John business in XX% highest are rates tax of Oregon, country. in some our

but now. into of goes that of consumer the in So not so terms that seeing the we're impact apportionment, that behaviors, far

-- the until XX pay until away -- this it's probably say estimated, and their if because tax will to I what it's have bill, Now have hasn't taken they months they away impact to estimated. months they two pay hold pay

April. So think take to color I starts give able are some we those to should and hold more when in realization be you

John Murphy

how and is curious And of can your the was improvement focus at store. I of much performing per we is and average So of XX what's sold there sort understanding this an what just what just store or the worst? used? then used potential of the cars the of sort best the point like just doing on median on kind target on

John Murphy

anytime don't this cars. I you it. need question I mind love answering used

So, stores, buy units, okay. XX average when we they

now same than our XX% on XX right about brand So or higher that. units store is

or which consider Our XX% total season stores, today. XX our about seasoned of our store stores we of base about

car car vehicle be many again only used was of so one can but to other believe which store under units you what a which just and their used generates you happen. value because it business, and company, XXX X,XXX driver to which also their business Founders is turn used are competitive more sold. about XXX new at, cars, things out not you your lots stores, units reconditioning our Idaho wonderful when in a Boise Jim the month, plus of able I our in number and best or winner on credit service So our units Cup

California. have to that another think fair of XXX also out stores opportunities are Jersey those see be I units they our realities. of per and around in month starting are to fictitious. many And not New two We That in sell that those are stores

month, XXX X,XXX We has used in Salem, in a Hansaker, Partners Oregon And sold I J. have become XX J. think year. a Lithium car this last Groups only she Volkswagen new year. a sells gentleman partner that sold cars.

it's in So conquest like in Paramus not your not to new Honda that if to ratio, Boise stock just all X.X out at Ford models they or look Sterk not people Barbie just store a Volkswagen or you store Jim used Honda. believing X about like can

is than that upside is expand limit their Okay, our and reach no there seasoned XX really units, do what the why can and they that's stores that that. to it's more

it our of each half year in opportunities we great growing the are XX buy XX learning about to department. from the we So because and the moved we are people four ago and location in and believe realistic a are that's and assets that strong know

John Murphy

very also helpful. That's

mix and total a made only was press part one sort but one last but on understand Just mean basis On was quick. the I of XX.X, service gross margin XX. same store and parts real I the and services, bit, little a

season of So real kind the seems there part a and the mean in I margin. in factor acquire stores on you sort the be? versus in the service I revenue. real out stands some am acquired acquisition, like there could of it curious improve didn’t stores their acquired that's and about stinkers anything benefit you stores is one could just talk are be there what where relative

Bryan DeBoer

stink do stinker's funny because even how wonderful. they we those I store, love And the comments their at look how now it's initially. is in teams stinker that that were

it takes to get this. bit So just a little while

And able companies. to lower on may only to and the be attract where the be and other price items Boys charging Jiffy Pep and rate higher compete some Lubes the with is labor that are we're of rates price labor the pretty but offer that we can increase So when there things because price something have vehicles? process on to metric that We that How we way you how do pricing two typically look at we service at service much we at. level their their they our pricing which margins, in or the they to where competitive maintenance look work work? early One introduced margins. is it services - the only labor price quick as a call the have to a price do we adjust, technology so to

if The it see So business, because that get parts to biggest we base. expensive the are we the margin have and the and XXs. what huge do when you and the the would grow we of large service small things parts. it's have margin pricing and have And are to relationship is on because not grid in higher thing still moves our parts high service low parts on. into and That's those they at will move XXs. high call has and I have customer they're parts that of after typically so a you expansion But commodities. handle - that so typical cost into a a we store lower point we're And able biggest time with of service blend similar And move. period the a think look

I integrate or we going with dealership, they're So broken value. not cars. homes into experience, into call the the their we do tires, sell sell go the can we the more that we comes provide service, what coming fix warranty whether we provide would sell and in not other us it's batteries, sell wipers, service the along getting things our that We experience service greater customer world-class vehicles whether with that just all facilities or

say XX%, Chris highest is important can retention when you and margin how stores, the that XX% it's on and than said, parts, isn't manufacturer. of number buy within is that. the a in as service What's grow XX% is about whether would consumers business, worse miss So or I we is what it. And margin focus we your average

Our plan get growth, XX% to us drives to expenses It's XX% easy blended XX% and easy is season what profitability stores able manage your to and about the service stabled. average. generate or to what's net parts to topline improvement predict, your just service expenses in to parts are be to XX% margins growth XX% better those have than profit. peer it's That's with XX% and because

year over a to case, achieve. do units So period that operations and X in X

Operator

your ahead Whiston comes question. question with the from with of Please next David Our Morningstar. go line

David Whiston

all vehicle back performance good areas wasn't of because the on clear business, want go guess to drove really I a I three new the I GPU, that totally on get John, Wanted to side. but to what you look question the at do new

John North

think pretty quarter margin bit typically improvement skew the in the was a bit to to look little a fourth to a is performance it more tend of at luxury. consistent. We way cars I in new have you because the

I X.X I margin came forward. to pretty us you've The full think and those month the XX going basis at good year in I seen of think uptick. X.X, back outlook kind a if historically, you look on think for that's

David Whiston

in took great a with Really couple And it Detroit of they exposure, very the other brands chatter your truck the head curious up got really ramp knocks at seems head show. the given three go they'll lot a about to of that FCA segment. new

So just this the the their hands you guys on ramp dealers curious, they are I'm your and truck? are account get what customers talking talking they if too, and on Are about? dealer what are really,

Bryan DeBoer

yet because look the miss too But truck by the with pretty the does showrooms. about truck back it of shows the really any that coming most that's have changeover. around in data on and ground excited different product We hit our don't that in pretty the and like are hasn't there's deposits a We typical It demand were we from but the received consumers. was everything well country.

So give pipelines and in then we'll on to once be follow able you good in probably our some ramps. April those we again July hopefully that color have

David Whiston

cost was between those markets. don't there one estate have areas? presents just into to a is curious And the smaller expanding you two you're any related question forward Geographically, different and and more southeast real acquisition. in the northeast big in I just

John North

We a in you're So don't have southeast. right. the to looking We're footprint southeast. expand the into

when want local and a able initiatives some we round nation about But area out someday. think innovations we go of talked footprint our and like I be new the to take national always our we've people. into across

right to I So fit group take us can the into the think it's right going that air. midsize the be with smaller

benefits the costs a real the like performance area that you New of topline if I looks metropolitan fixed think have the greatly real the I in that at in advantage stores been southeast, able attractive. do once in the costs outside outweighs to worst distinct are cast on that look estate northeast extremely we've We York the expenses. that estate seen we've are the think the you about it think get the

exclusive know think our is I something model traditional benefit. you that of typically Okay. that that's market And gets the

can to So we Southeast and differences be between country. and parts the as continue other provide the be hopefully of we'll will Northeast we able delineate the to information able

Operator

concludes We’d comments. the back Thank question-and-answer turn you. to like this the floor Ladies to management session. and closing for gentlemen

Bryan DeBoer

April. joining us talking for everyone again today. look to to forward Thank you in We you

Operator

Thank concludes conference. today's you. This

lines You time participation. your for thank at your may and this you disconnect

Lithia Motors (LAD) 14 Feb 182017 Q4 Earnings call transcript