LAD - Earnings call transcript Q3 2024

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Operator

Greetings, and welcome to Lithia Motors Third Quarter 2024 Earnings Conference Call. [Operator Instructions]

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jardon Jaramillo. Thank you.

begin. may You

Jardon Jaramillo

Senior you Finance. earnings Thank President us our Vice Tina for CEO; finally, CFO; Good Lietz. Chuck With for me quarter Senior Miller, Officer; Operating call. Chamberlain, of DeBoer, President today third and Adam and Driveway morning. President Chief joining Vice are and Bryan

to could are about products, markets that and to Today's discussion future reliance statements. actual about as and We company's statements be cause this and subject you carefully events, Securities financial consider update risks the undertake no Such these and materially the release. of on forward-looking duty the not our statements forward-looking we to forward-looking made may include material undue projections and to and disclose are filings to deem statements, disclosures which with place of differ expectations made. urge statements results Exchange Commission. growth. any date We uncertainties and those uncertainties from risks We the in to

discussed today include text measures. the to release measures. results today's GAAP non-GAAP to press comparable refer a of Please for financial reconciliation references of Our

quarter on We an posted updated our investor website, have investors.lithiadriveway.com, highlighting presentation third also results. our

the that, CEO. Bryan With call to would I DeBoer, like turn to over President and

Bryan DeBoer

to Jardon. third you, and quarter welcome Good our Thank morning, earnings call.

advance as Our our and to ecosystem. Lithia continue & mobility the growth of we teams strong results deliver integrated profitable Driveway unique,

and demonstrated execution diluted as focus continued team per achieved our $X.XX. earnings exceptional quarter, of This adjusted driving we share improvement

future wherever, we positioning they whenever strategy industry reinforced serve to us growth. customers our desire, normalize, the and however momentum continues As well for gained and to

since business. significantly diversify we earnings XXXX, leveraged years, while and robust foundational we cost industry earnings management. tripled capabilities and industry effectively our differentiating expansion and capital execution, scale world-class consolidation, to continued Over disciplined nearly to and efficiencies. drive growth, have the building revenue past several and DFC, Through us These strategic Driveway adjacencies, unmatched GreenCars, provide margin assets fleet and technology our an have

operational loyalty, and remains focus of As we customer our deliver ahead, market our share to that efficiencies enhance look maximize the ecosystem. value capture

key increase billion, to of & QX to Lithia last quarter. $X.X XX% an a revenues on results the record from Driveway year. Now for third grew

sequential to make from efficiency, in in significant cost continue quarter. We to progress XX.X% with adjusted XX% improvements gross SG&A driving this QX profit of

the into cost $XXX in consistent million We cost plan from mostly XX-day coming The operations. achieved into personnel-related savings, our everyday embedding discipline annualized has now reductions. daily plan, evolved

possible improvements even more ongoing As we inventory and move productivity reductions, of savings, opportunities team. all focused XXXX, we execution see for into our made by the

continue We strength in expect are GPUs, but in including pleased GPUs coming F&I. quarters $X,XXX, the ongoing to to vehicle between to new normalize and $X,XXX by combined the

the their which strength this reflects business of our decisions Our to closest quarter, ownership our well and teams Aftersales making performed of customers.

Our that progressing investments profitability. the in sustainable strong operations trajectory and platform. demonstrating towards profitable Financing another of earnings adjacencies quarter, meaningful are delivered

efficiencies burn we e-commerce and and enhance operating of our bring nearly to omnichannel continue rates both GreenCars down advertising for new refine were part our as and XX% Additionally, as strategies, in customers Driveway strategy. year-over-year

in saw of also our the improving quarter realizing this structure, synergies investment, to presented on look we of This forward partnership. new strong operating effectiveness Wheels our demands the returns efficiently had and and on our a sequentially, and We by direct first cost the on as operate growth, focus continue basis meet ecosystem shown core strength customer acting by XXX to of the profitability which points of decreased delivering decisively to of we SG&A our percentage execution. unlocking our results

inventory the replicate the to demand network, footprint. and in industry's most people, unique supported strategy. our LAD The lies of talented to by physical high foundation strategy our dense Turning difficult store and vast

network, new aimed this and partnerships at expand our adjacencies to customer enhancing like portfolio. Wheels, and developing experiences We all diversifying forming locations, key Pinewood continue and Technologies strategic adding

of business remains retail every than and addressable across one stronger ever. in grow our operate the markets We largest globally our of to aspect ability profitably

addition is least also auto buyer being is As in in of the advantage. is competitive largest competitive a which being retail to consolidated, the most key reminder, a market, the the space why one

reach tightly Our than and fostering our businesses transparent greater customer's strategy integrated enabling convenient create while that consumers lasting and retention solutions a Driveway physical capture are consumers and significantly infectious provide. the our steadfast, brands to natural a ecosystem, to of loyalty. our delivering of wallet of simple, customer solutions share platforms, digital is our within These more core us our are XXx GreenCars extend like and with

show momentum positive million and LAD to to unique Driveway visitors, continued X ecosystem million continued contributing monthly year-over-year XX MUVs. GreenCars growth with The digital with

to continue digital to quarter. third MUV We in the see effectiveness translating strong XX,XXX units

towards continue exceptional teams deliver on way a focus to Our on profitability. share with customer our clear expanding market experiences

to Technologies about cash boosting our solutions the partnership significantly made within that to drives by a we place market of Pinewood stores within now of flows team powered We us enhancing people over to their and be operational on productivity, members strength customer ecosystem, enable us consumers our as these platforms, These has progress platform. responding discipline, experience in dynamics. our U.K. financial unified are local regenerative both growth a agile technology strengthening the with and resiliency. The effectively have our excited XX% enables Lithia operating free culture and

to stores profitability. us and position the allows share, adjacency with market Our the life our to portal customer's touch of MyDriveway increase tools and equipped cycle across throughout points ultimate consumer improve expansion strategic loyalty and our

on yielded billion rate and to We approach $X billion is over of $X high-risk Xx typical annual return have that minimum of United can estimated be of future iterate look over XX% core of disciplined date, our our or for to the improve network, success expectation returns we Life LAD We that continue LAD range and Xx for revenues our in remains per target normalized XX% focusing will roll-up that to accretive XX% EBITDA. of your a after-tax strategy. acquiring a to demonstrating States. and revenues competency year. our opportunities XX% acquisitions not acquisition to the XX% Acquisition after-tax

welcomed Duval XXXX, annual to date, stores Motor in the have Lithia & I would acquired This just to revenues. we Driveway in welcome Florida Driveway. from members we To of quarter, billion & team X family. Lithia Company personally new in Northern shy to like all our $X

pleased focused to strong of on that driver continued We through safe returns. and are U.S. long-term Southeast remain growth our teams minimal a as stores came our we impact. Additionally, storms consolidation view with and and are report the industry

engines able cash deploy returns, were remaining capital we market built, our highest generate the With the we conditions. to free to flows to flexible

allocations our adjusted buybacks especially outlined and quarter, given As have to equally balance the attractive relative last shares. share own we acquisitions our valuation capital of

$XX or shares. we our the During of repurchased X.X% million outstanding quarter,

of acquisitions as share cash evaluate $X a pathway XX% illustrated our combined XX believe flows continue in $X deployed every These buybacks. for repurchases will term revenue billion presentation. near investor be to We for a share that in of our to generating in of environment the in to clear and compelling Slide normalized and EPS elements free to XX% and

totally our state are our and steady following. now the include key control The factors within future underlying

wallet customer This of Through potential cost improve we cycle that First, greater profit includes our existing as to efficiencies continue share in stores. each SG&A and in share. we achieve used interactions, of see gross new, our aftersales to the have operational pathway and gains, built percentage our realizing a growing productivity through store's sustained increasing market our massive mid-XX% performance in life these business, the range. levers by a

have our South larger of our Central profitability retail driving digital United used Second, vehicle market Southeast and will our combined a and to new Today, network X%. U.S. performance stores high of by the market States. automotive This, in optimizing stronger channels the bring acquiring share share X.X%. and blended regions in alongside we

to financing Corporation, associated beyond and CECL headwinds of reserves. DFC, Third, Financial the units up maturing with XX% with Driveway

have operations our and down in towards from vendor DMS captive software, Pinewood, solutions as in expected credit Fourth, efficiencies are horizontals, QX with is contributions rating. pricing fleet through continued we solutions driving Fifth, an insurance. leveraging investment-grade including Our profitability charging costs profitability borrowing lowering going financing management, we forward. scale, infrastructure and maturing and to corporate consistent like path

and And finally, delivering ongoing through buybacks shareholders dividends. return share on increased capital to

entire continuing scale our journey well are complete to are build capabilities and cycle. frequent, the life mobility meaningful We unique more ownership ecosystem and customer our throughout a to experiences deliver leverage and durable to positioned

drive standard foundational industry. design focused on execution elements we ability firmly we With the our in of of performance strategy to the confident and in are new levels for place, the where fully are now to set our

an for Adam results. Now to performance I'd over key store to turn and operating call the of like overview

Adam Chamberlain

Thank you, Bryan.

areas: operating this SG&A quarter responded and and to today excellence, I'd X trends. our team like Our key inventory gross focus execution revenue and decisively profit, improve to on

As new sustained strength. new we revenue vehicle quarter total GPU and supported contributions by after record Bryan mentioned, from this vehicles, achieved positive autos with value company all sales

delivering our growth strategy We are confident on the ahead. months ability our in to continue in

of focused ignite we're focused opportunities, to the in Our agile address ahead. to cost in By foundation and area particularly approach months to our positioning provided vehicle potential has and management a inventory the sales. our strong staying ourselves

to a strong autos vehicles sales GPUs as we new to Let's to saw return same-store year-over-year value historical levels. turn now continue our performance, where performance and in

Total prior $X,XXX year. unit cost same $XXX by last profit total profits of Total quarter X%, strong X% revenues with reductions. which vehicle period sequential decreased in the and declined X% and mostly sales the declined to was through we quarter, down gross while focus consistent compared gross the was outrun in

year-over-year in New vehicle increased manufacturers. strength X% particular import with units

vehicle were decreasing units focused X.X% GPUs units, down on XX.X%. XX.X% down $X,XXX. certified declines sequentially down are at units from resilient front-end remain which Used Our were year-over-year. and These $X,XXX, core

be a decreases vehicle our to there the While of opportunity used a are due large in availability, and vehicles, is will know focus in some we months a in this ahead. primary decrease

value at by vehicles appear year-over-year. to We GPUs for and autos, Front-end our $X,XXX, sequentially stable flat used up stabilized. in really encouraged are year-over-year were XX% which have performance were

customer a driver gross and Our to key of delivered revenues with work a momentum aftersales up warranty XX% performance in sales year. X.X% compared this and growth pay margin. quarter, after seen prior profit We've solid was the

well us technician exceptional providing also customer positioned maintaining efficiencies in to ability and a operational focus aftersales meet head to manage has on our strong while Our experiences demand ongoing drive departments. count

strong on the were mentioned, execution our cost and everyday efficiency plan Bryan savings efforts in quarter X. As

on as percentage point basis, adjusted XX% Our XX% during the a quarter and same-store a a decline profit SG&A was from quarter X. XXX same-store of basis gross

additional an of continued North America. cost million million improve in XXXX. reaching million eclipsed and $XXX we potential to see original This emulate annualized our quarter, We $XXX to our $XXX target by savings cost opportunity throughout structure

In our streamlining U.K. network, closing optimization merging and stores. operations or divesting, including targeted continues,

This with quarter significant quarter, remained days inventory we saw inventory, X improvement X. quarter XX DSO improving of our to at vehicle Used new at days days. XX consistent XX in from

are interest expense quarter flooring with make We vehicle the new savings. in pleased compared reduction progress as we to achieving last on inventory

pursuing a by We used significant as inventory continue million, reducing and new $XXX side an additional on the target well. see of opportunity vehicle

customer to I'm exceptional and quarter. key confident delivering over the through really remainder our outlook of the proud business I'm this our will efficiently and highlights. now call our financial XXXX to in us team's of beyond. executing across our I walk focus for on relentless Tina turn experiences

Tina Miller

operations by capital supported financing Thank we sheet Adam been Adam. will have operating you, to continued next. momentum where focused turn and in The efficiencies management, and mentioned balance

$X operations quarter with the this million our in same we by driven quarter million compared year. with to solid to segment, continue of profitability Starting a financing progress of DFC, loss $X primarily last see

securitizations. with As CECL this clearly beyond strategy improved benefits matures, diversification headwinds seasoning of and we in our efficiency our reserve portfolio of growth, element the see

overall point and and growth has profitability loans operate growth XXXX to and year full disciplined We risk continued XXXX. balance been with an emphasis the on trajectory expected high-quality for the underwriting. a yields, turning in with

quarter band. Originations quarter. portfolio $XXX quality grown to over has consistent originating balance this the billion, operations DFC prime credit in million financing during The $X.X were the now with

X.X%, our significantly confidence and we in million track $XXX of launched are This pleased performance programmatic and growing collateralization securitization ninth market's operations. our offering October, with of a a demonstrating and weighted average issuer. In was interest as our the in we collateralized debt pricing servicing oversubscribed record rate at X.XX%, over

remain confident profitability a more seasoned originated portfolio. traditional indirect lending. on for a deliver continues as earnings financing Xx is our the of financing well ahead key to schedule. by This business Overall, billion with scaled contributes of long-term in of up revenue each growth operations compared loan to and perform financial every $X DFC We our $X element to target and of fully adjacency milestones operations EPS

Now performance new year-over-year. quarter, reported adjusted as improved flow moving efficiencies on interest expense $XXX in supply vehicle We million and lower sheet. the third by to EBITDA and normalized our cash balance offset by higher of SG&A GPUs driven

the floor million. prior acquired were quarter, increased $XXX expenditures compared plan we Free related of with During higher generated year, mainly cash cash capital to declining to impacted EBITDA at free meet construction to flows and by decreasing requirements expense the margins due interest recently to manufacturer locations. flows

respond on while efficient balance regenerative supporting a growth businesses' our allocation to the cash us the and flows Our our preserving sheet opportunistically our capital allocation environment. of quality strategy complex allowing initiatives to focuses of

acquisitions return. balancing with continued quarter, This closely on we shareholder our focus

normalized our flow to of valuations. as elevated free repurchases. As share we to to acquisitions we margins Prospectively, store allocate look to compared XX% current cash pricing see shares on XX%

result we outstanding a the price weighted in third X.X% As of of the repurchased average at shares rebalanced focus a of $XXX. quarter, our

Capital million available remains included allocation this authorization. under repurchase quarter our purchase million in $XXX Wheels the and our stores, of investment Duval the for $XXX share also

with with line of requirement quarter our long-term target our in net below X.Xx, X.XXx. the well of Xx ended We of leverage bank and covenant

to by industry vehicle QX, financial and to debt, While financing financing target for planned of to support metrics plan inventory. operations we the to maintain Xx. relate is long-term growth This discipline leverage during we focused of collateralized our these is capital impact which floor These the opportunistically allocated and our integral our unique and adjust assets. below our

Similarly, The also our debt operating and calculation. warehouse EBITDA, capitalize are have as an interest from calculations. we excludes DFC, lines industry excluded from treats and ABS the issuances associated expense which and sheet to this balance leverage leverage

our team achieve tools business to returns, place strong best-in-class in we and drive and in have core is and right both and strategy revenues adjacencies. and to Our shareholder growth the margins

talented to of exceptional rest XXXX our the and delivering beyond. and experiences, diverse we have potential Our team customer the ignite is foundation to and committed for

This concludes questions. operator for over turn I'll our to prepared remarks. that, Operator? call the the With

Operator

first Sigdahl Our Group. question Craig-Hallum comes Instructions] Capital with [Operator Ryan from

Ryan Sigdahl

used to start want inventory. I with

on supply underperformance some supply. industry used and standpoint? the the progress bringing you better So days' unit increased detail side, are on sequentially any the curious, the side new on given sales inventory on, But and strategy what further on days' actually guys the down comp given working versus

I to are And the question what inventory? going working didn't right So refresh you that that and guys guess forward is What where go is, quarter? on? reduce in focus the

Adam Chamberlain

think position. it's Yes, our saying a XX% inventory right, derive we because the Ryan, still us by which funnel Adam. top placed of a of about retailer, in trade-ins, I we're first, strong start question relatively I'll through

that's on sourcing It's slightly. is we up used industry Nonetheless, we the cars. our cars. models. inventory challenge to value shift new been basis, weren't our in XX down the core to think the about probably Actually, about million has The missing manner able million that XX biggest same alongside SAAR I a X,XXX. actually down with did it's unit And

million If and about XXs, pre-COVID you look for the a about average right, the we've been now touching XXs back at the last around X years. XX

missing those we're cars sure. So for trade-in

of year, XX% would was XX.X% our to I drop. value of quarter by XX% is that auto the only and to our about now up What holding it grew where in say core is you last mix, course

the Certified real from flat to XX%. remains area, that's dropped focus So XX% around core XX%.

moving X. and really store, got at looking So quarter the quarter ops team, performance real leadership focused on store our opportunities focus X to with by

Bryan DeBoer

on we customers. wanted we were at add XX.X% total is I from were about acquisitions from up vehicles X% We came on there our of just sold customers. that to to Ryan,

as So private Driveway XX% on being an party cars on vehicles. trade-in a and then well one-sided percentages additional as and through transaction off-lease buying

Ryan Sigdahl

I the revision, a over Switching assumptions believe, to a receivables, guess, vintages for But seems particularly any seeing and percent the to managed there. it Despite, good about there? provision higher certainly, consecutive little from positive of what like DFC, concerned see a Helpful. but higher through as talk income dollar you're went I quarter operating well, you maybe a you're there. second can

Charles Lietz

is Ryan, Yes. Chuck. this

by really general, And definitely derisk primarily portfolio up but in to our that's staying the lender it's in prime only X% market subprime regards some think in the moving consistent I stress, portfolio have obviously, try segments with of a segment. of seen signs our and approximately really has delinquencies. we of captive and taken the advantage because true to being

expense, the are and itself still temper regards start with prime the to of we delinquency and for that portfolio, the that, in stress of think the part, seasonal in remainder I in the some increase hopefully go seeing it's see forward signs we provision to year. as most we should but

we the have provisioned confident impact an well provision, profitability forward. on and the feel going So that portfolio is should not

Ryan Sigdahl

guys on it operational Nice pass others. the improvements. to the on I'll job

Operator

Our with is America. Murphy of Bank John question from next

John Murphy

cost cutting the your a going $XXX and of run sort do Adam, mentioning Just exceeding around $XXX on next you're targets, question rating million that million that of kind to the year. of target the fact of first you're sort million. versus you're $XXX another current Then

there the around I'm let's about? SG&A million And model you are think Maybe then number be and other quickly? this sort XX.X% to you out with out year that How next in $XXX full But or takes targets of just comfortable would and I you've more. for $XXX finished that mean, next take and and year million? XXs mid puts your there's take say model you would we Or gross. the puts also year, of this, that there why Tina, then exceeded so maybe lot year? could as a curious be we takes

Bryan DeBoer

$XXX question the I found of joining looking today. Bryan. the in today for And more, think and the from we've terms that well And it's reduction. the the responded office organization mentioned, infectious all is million $XXX excess John, million, Thanks that the they're cost believe an it's like upside for $XXX SG&A, the with about remaining do personnel, What like $XXX with out that from us increases as is is impact this originally into X/X million contracts, reductions okay? further almost which is operations of now. quickly that on quite $XXX million team it will We okay? some home productivity level of like in in we way say of I'd Adam now done and set marketing, of coming minimum We -- to vendor million. cost

do going actually meaning coming, approximately most more you've for us to still a does a see because snow the amount as we exposure, probably interest belt mentioned, remaining is XX%, day that little ways those Ryan do little it, on go. ability The to our supplies and seasonality quarters. got seasonality flooring, impact bring the you're bit And if softer us before remaining and still We okay? impact are a a creates of as We've long costs whole. other the modeling to have stores QX into what technologies line. got to are AI our able million, We're primarily money help That's should efficient $XX something of curb a that. to typically fair QX guide to bottom of at. more be and we it's take But that late still getting using the which sector and QX higher

John Murphy

helpful. quickly, And demand Ram with brand like seems question, just are the a there and the That's a surge for Ram there. of second lot the consumers. a almost and fairly seems It dealers and the or lot responding incentives there offers of of pickups Stellantis is Okay. out like a

it's and but you're how sort what environment Stellantis. as curious is RAM, think promotional to just broader stores? trying And more just also, you pricing isolated then Chrysler to the across Jeep, seeing of a like understand industry? may about in on seem the be there It board, a this, I'm your this impact doesn't created

Bryan DeBoer

car John. Great, on the with and let provide what's question, happening I environment answer insights Maybe Adam general I'll this new some Stellantis incentives. you

one been For us, terms in of year-over-year Stellantis more difficult manufacturers that sales. of the has

basically X For months were were the the the quarter, we first we where for year. of

other that were relative it's a at good similar were down. decline So domestics the pretty actually actually to X up, we very

we Stellantis. okay? curved, that September, good The down see digits that decline is, sign half with a news So did only we're in mid-single of that's good

So We vehicles. products better. building the the We that that with a think sustainability little for is think bit Stellantis. demand they're good right the

So be we they've products did pricing that affordability that is to what and outpaced able think to share. it's in got the make adjust their their could difference of just a to command -- truly market

want about you do bit General the Adam, little market? to a add

Adam Chamberlain

more bit little color. a just John,

think incentives is I have other challenge Stellantis at short have we the incredibly that the been term.

vehicles to and coupons So then environment. seen we've retail get into some strong wholesale the

your So that's wholesale sense appetite cars, to on that depending to makes if more been you. for mixed

have point the -- up to quarter X.X% whole MSRP the quarter was that is end if dropped pre-COVID, of the Overall, John, The X.X% I'd That X. context about through information at remember, it about say industry running that the to at percentage XX.X% of of latest you X of of incentives. you It X XX%, about in down at MSRP to end ticked X. quarter was running I X.X% COVID. in about X%

So we return. incentives are seeing

pretty move just them incredibly are of a spectrum to broad kind it's lot think I short-term and of a cars. tactical

on the particularly the seeing example, the some on offers BEVs, import you're incredible BEVs. So for --

sure. Does So answer your that a I moving incentivized to think that for more question? environment we are back

John Murphy

it balancing like Absolutely. that light fair net holding sort seems of a But MSRP of right? of -- and incentives. purchase... a Is ASPs or up it that, in I statement? it's of seems So are on like a mean, reasonable those basis kind

Bryan DeBoer

fair statement, John. a That's

sequentially, ASPs selling on amount in fair price. which quarter-over-quarter still were all up $XXX, on is all $XXX down average think new, a I

Operator

Gupta Our with next Rajat from JPMorgan. question comes

Rajat Gupta

Great.

XQ you on to Just improvements some meaningful sequentially. first SG&A., from one saw total XQ, down obviously dollars

about, trying here would $XXX point? of another you to the what that quarter you growth the kind down million first And just more in $XX million expected of you've see around the remaining in we I'm of framework quarter normal year? perspective? SG&A understand or talked outside XXXX see next step just fourth then implementation, Any would recently the a here. the as quarter this of from that there fourth at seasonality well for finished the Given cadence to is

Bryan DeBoer

This Sure, is Bryan. Rajat.

I the think do that exposure. made comment about I some we have snowbelt

So apply I think the drop, seasonality in should some XXX QX you still basic QX. basis that, assuming point and occurs

We a most ended the QX, that that what, total okay? the and company the I basis. XXX on seeing So of basis same-store a call. drop mentioned benefits and at on XX% quarter in the at $XXX XX% in was the call I in that mentioned realized would sequential say initial of basis you're million Adam point the

Whether be to we more not, determined. still get or that's can

portion selling will SG&A because a SG&A seasonality think talking on you're percentage drops basis, of that our about in I $XX basis million. And say, a of, states I growth. of XX an small snowbelt as slightly. probably lower about volume So would That's increase points in the a SG&A

right if for QX. Okay. it's the XX% that Meaning number probably probably QX, today, XX.X% is to XX.X% it's

Rajat Gupta

And be from perspective like a go anything Understood. there still lot would that around the the Understood. elaborate that gives can $X find XX% higher? And the near If the a term. you helpful. that on XX% M&A the how the That's an to just confidence Could pretty, to billion you in that's comment it pipeline pretty buyback, helpful. on just you explicit follow-up curious, clear. in a right XX% billion. deal, XX%? I'm didn't flexible $X around to Is is

Bryan DeBoer

So XX% leverage Florida of able Pendragon little total in which the quarter and it out, quarter important before. it's set buy think XX% our $XXX million what mid-upper a month, in number of why a started capital. that be around able level now somewhere flow only a was are that cash to to purchased to think kind rebuilding But be over the be should leverage at cash a be of when I we flow. million Rajat, we to We brought million pretty we every to $XX $XX the good okay, dollar now Sure. transactions, constructive. up we to here million last That's okay? to purchased Wheels, $XXX of our and basically comes is range we produced

Now how with seeing M&A a A do today, to lot up. of may sold M&A? that take that starting okay? we also few we're The it more market is loosen But we for is pricings. quarters, balance things believe, what exorbitant

Driveway in will Lithia are the you of exorbitant X if asking But or to of their still turns of your earnings on that of is the hopefully, why you're to as buying And a pricings of now earnings be a look years you already equivalent is it to buyers off to need true messaging for over years Now ask to realized earnings. actual are a & seller, X approach the you starting anything multiple sell, earnings, now multiple, of last rather going inflated you're normalized to normalized. they purchased. last want which earnings, a couple that are what soften than marketplace it didn't quarter the at pay there on where X the starting

time still some think back. which a We it's buy to gives able away, be few shares us quarters to

say believe we I okay, So a so there's And we'll that long then also goes term down. buy short XX longer acquisitions the greater of a shares pricing term in it's been, the likelihood likely price then be than share buy able XX% greater remains prefer to the portion and in would of to back to depressed like as when shares back. to hyper

those ability you sector world and do, XX and map to if prepared we Lithia Meaning, consolidate & okay? what to us that a Driveway out I could be competitor profitability by that the produce our having can space XX% more be the I space. has figures killer to basically point, some ROIs would in the that mentioned allows same we But comments. aggregator this that than to could most more pay in achieve at on continue designed more in acquisitions mousetrap, in XX% is believe can buy us And the XX% to can and the on theory and the preferred provider largest think space done the acquisitions, that this what world for unconsolidated theory, XX% in the a look average which in XX, my the Page in making the retail Page acquisitions. efficient our be space

Operator

question next Bottiglieri BNP. from with comes Our Chris

Christopher Bottiglieri

slightly, CDK wanted just tell is that wholesale? the this reflection clean Just can volatile, the and know jumped like fallout? that inventories, is it it about you quarter. Or ask I looks is it to a try could of, like really that? be up revenue but of only The about What were just up wholesale. kind us you as but losses

Bryan DeBoer

it's normal believe to It's seasonality. with Did see do something think don't anything -- CDK. you there, it's Adam? not I Chris, I

Adam Chamberlain

No.

Bryan DeBoer

Okay.

Christopher Bottiglieri

picture your a just pre-COVID, up some sitting of last Like then And still right. All gone longer-term or unit independent peers used about GPU. on was relative lot question have GPUs below certainly $XXX to only the and yours a X are the seeing used year pre-COVID. over

to what What happen the this want in Lithia of next where goes X about in do specifically industry to needs get years? you the or Just to like you there? you for think for hear kind need -- do you X think to

Bryan DeBoer

Yes.

and think company. important finance, accounting Chris, GPUs it's are okay, including that everyone's I importantly, some different, income finance Most from okay? a to message, is

begins okay? believe of driven core into stabilized now return XX push news car environment, what it's I level. below. that We and normalized product, we is that supply the over in that, return still million are ours are the good off about then a vehicle, next So of used to the at years what, is couple that is to The purely $XXX see as just starts XX the should to to GPUs. million that not inventory units when

We F&I believe and Again, the of that from is and strength our that the dollars higher & hundred and stores used Southeast produces is normalized GPU a stores it Central Lithia Driveway's on coming the South produces of the change West grosses. grosses snowbelt higher from and mix than higher vehicle normally. into couple Coast

carrying almost our GPUs bit cars we what presence well, generate And of -- little the even doubled our you typically though in luxury if than We as mix. they are. a can from also, again, be higher cost those higher remember, those move

Operator

Jeff from with comes Stephens. question next Our Lick

Jeffrey Lick

stop CDK may you was kind have the going quarter can maybe XQ the conditions than maybe cadence end, more typical XQ I of effect a the we So if through. you're volatile beginning, maybe sales it's in all get in Stellantis mean, into into the early the if as disproportionate then and there'd about Stellantis OEM XQ variable circumstance exit was terms a sales, QX into and any little BMW a whether be at issues just in more of curious looking in talk I'm that and and GPU XXXX. way

Bryan DeBoer

Great again. question Bryan Jeff. This is

think of and towards sound into a of recalls in to it's bites of the fair QX, of are these easy positive they're end there. revenues have And we and quarter-over-quarter, things. think to But profits I deferred or still I the type the did even inventory stop urge deferred would get the are or vehicle the sales event. problems is everyone is, this a amount stop as though quarter, sales. gross Ultimately, reason of because very

orders, generated up, that, get stop type they're things. more importantly massive, the sold to They're and are aftersales them. recalls But going profitability that of okay? pent You're from than those is sales

replaced. product notified entirely of engine an Koreans one needs We engine that just mid-QX in single last has the every were the that replaced, to of X years platform entire of be

parts out ahead. different those mix. months replace be for could could a product got are years we engines It and all the before that in So of quarters engines X of year we've sitting of backlogged country

X had they a that Japanese on main recalls same the few the few their years. engine of us have a recall. Full those of import probably products also again, backlog not sell going one if to for which, quarters, One products, is

many Just ago like years had issue. that the when we airbags did

gross after and a sales So it's primarily almost we X%. know, our growth because profit as think over you this after idea in basis I little on X% sales, up dealers, new sales. positive it's a of catalyst to a stop car were thing the And was same-store for

especially stop of a sales after that as of we're and change propulsion car even sound negative. though So to number the we years, reap new different products able sitting can rewards and dealers little sales the good a sales of systems, bites evolve see begin being sound nicely as bit business, to really the

Jeffrey Lick

into signaling a month new this the I we from Most just more was on $XXX GPUs surprised far $XXX that then to down think, good. again. I'm actually And got pretty going people were, your quick one's asked sequentially it follow-up, about and and QX no the call it. than be is thoughts a But

might just think kind is overshoot. of why? guess and anymore. back My think curious of historically, had said, you you go you I'm a be thought don't there that you couple And an could once quarters, things level where

just be experience given any pontification your great, of in kind the So industry. would

Bryan DeBoer

company think at only that's today, luxury, which that we $XXX an the levels a to only as we still $XXX, South somewhere we $XXX that that normalized a sit above and as normal dollars, more the believe, above I above a state. sit statement $XXX to hundred industry. because Jeff, Central at of stabilize and that fair think We change Southeast between in at we a sit from mix they of few

think there is I'm really few positive. a stabilized at see at nice of is a mean, that time, $XXX quarters, next that the year. the that because month thought margins it's we we're which I one a landing over reduced the and per to around Then a pleased we month, okay? I over $XXX almost to -- last $XX rescind soft unit unit at sitting would per per unit possibility

partners, pleased have incentives we're least back said, as X%. at that increased manufacturer our So Adam to real

because XX%, can landing retailers make we little back to XX% better. a hopefully, the the ultimately, even Now bit soft helps that for get

Operator

Dutton with Evercore. next question Douglas from comes Our

Douglas Dutton

Congrats on the nice quarter here.

Just profitability still was early the the Was quarter curious experiencing CDK in on of $XXX reason element while to sequentially, velocity downtime? to sales the there down some new follow step the was the for for vehicle the trading up last GPUs, the question.

Bryan DeBoer

Doug, this is Bryan.

I we try individual think results store, if you an to marketplace. think about the scale individual drive in by brand of organization, an and individual the

So marketplace and of a really I GPU to That's competition and consorted that effort level gain be or decision store say would the determine. for no some degradation. there's volume the above

I So that. no think is answer on the

have a this better next the will it think and of of week some that week I peers later when to begin indication also and normalize, we'll report.

Douglas Dutton

year, around a Okay. of the but $XXX maybe 'XX, to Sure taken probably on there thing. the And then be horse -- hit million this Is for If math. not just million in to comprehended little dead beat or that end conservatively, is little XX% that's signal sort bit full a greater. $XXX should low repo target? to that the of year more as XX% of target a see that little somewhere a that here, we elevated QX a repo

Tina Miller

you're I want think repurchases. about talking just clarify... I to

Douglas Dutton

Yes. Correct. Correct.

Tina Miller

Yes.

perspective, when QX a So from we a mean, what as have at did in year spent I we in the significant as amount repurchase you well look in both QX.

million repurchasing our So a swag. we've was which outstanding invested $XXX year-to-date, of big shares, X.X%

annualized And can we so look an on more basis. it at

what very but as for earlier, our we'll try Bryan well cash to capital, is balance continue avenues spoke returns to pipeline deploy is, other our to we'll be focused our leverage And shareholders. for on what we'll as that the as generation

Operator

with Capital. Our next Freedom Ward Michael question comes from

Michael Ward

wonder floor interest across could the rates lower plan, the consumer organization, if you DFC. of the I talk about implications

Bryan DeBoer

basis. of sensitivities. sensitive, on somewhere is XXX have This $X.XX. quarterly Sure. of improvements, a basis that our is is portion On again, basis, around interest our rate debt Mike. rate Bryan about And a unfixed, for that is every quarterly rate -- interest We've that's which a good a points we now rethought

to organization. we Obviously, So to less it's an impact and us so. capital, it's big as a pretty continue as grow produce

to make into increases turn are for think can I So the us quite difference. a tailwinds headwinds of quickly and going rate interest

Michael Ward

you bit the about can talk little a one, of Pendragon. second integration The

with you great operating had Do acquisition. efficiencies, opportunity? success You've and Pendragon in gaining a similar is past a big such the have

Bryan DeBoer

Bryan. Mike, have for opportunities. typically is that they M&A that do was I to they is motivate are there with They good this quarter and right month, similar personnel September big what to we expected, teams sits in the in idea a they to importantly, solid do the to do. can't we That Kingdom scale what a as difference, looking more you see. Maybe the through reach a there's How can attentions exited which March all job. get it they now We turned they potential? something Yes, really do of mindsets the The are their the think synergies full United make of were States. to biggest United better doing they're actually team month. Even performed though they believe starting great believe their You than do okay? into changing something changing optimization. network and believe next the

XXX going of combining has to to been combine assets closing. XX between or that approximately XX or now selling recall, that Most sell you now If we were we or We're up assets the purchased. completed. and divest, that of we're XX

should stores be Everything of November. end completed are available X have else the on We the sale. or by for that and and market still either sold closed

good. So quite we look

nice F&I quarter. to their We speaks moved believe they exposure do don't little quarter. also a great from the improvement. saw that the That's they $XXX things That's year-to-date indicative start, can. F&I in in think that to Britain. other teams in XX-point of a Some helping And it's They have Great a an our key I and more move. X that $XXX highlights that what nice peers

Michael Ward

So to closer the the you it to an U.S.? see sounds opportunity performance get of like what there's in Pendragon

Bryan DeBoer

It we hard really margins lower that of segment I And five getting quarters to X%, achieve to maybe some really X.X% or looking a say us that, that I we're take to think handle, that reporting always the to at be achievable. believe, to will peers, them if to it's slightly to the I able from which that. half our be margins. of years operating believe where you at the is U.S. look is But could get that Mike, and think it's idea I going even

the other the that differentiation that in in big on Central, in talk also Southwest sense I'd that, thing profitability It's can you regulated biggest there look the drops peers automatic as U.S. is that's the we opportunity negative have and when high differential Kingdom. United the in create fees Same items, and to differentiation. highly bottom And and again see massive that about throughput the of Remember directly biggest that that the South the profitability and of the again, line. dock we Kingdom, fact United is the that F&I okay? reiterate occurs the even Southeast regulation, I that Southeast at the in

Operator

Bret with comes question Jefferies. Jordan next from Our

Bret Jordan

but outperforming I more you've talked guess, profitable, mean looking on of at markets front-end Northwest F&I and I what magnitude? and but underperforming regional the the like and Central you is are? talk and about Southeast sort It Could underperforming side. or bit is, more maybe South about the or dispersion a brand being some GPUs, brands sounds Stellantis

Adam Chamberlain

more. Northeast kind the that. I the with we Southwest, Bret. we Bret, -- we've reported, a it's Southeast getting strong mean in with South confused, performance think, the struggling But those start see as little I consistent I'll probably apologies and of Adam. regions Northwest a see this Central, was and year, fairly maybe I bit the real

resilience as said, but a X real We've we've all, we've most as manufacturers, digits mid-double down domestics to resilient. we've But seen, relates from Bryan seen for the Stellantis us, fairly other it and the seen seen imports. we've of seen,

year-on-year. are imports quarter-on-quarter our about and X% up about X% up So

seen of same at luxury real the is there. strength we've level. So the And kind

Bryan DeBoer

across I'd were single-digit is the now one their worst-performing that has not between the other year, Western all and and those about differentiation the it's remember, sales, percentage regions. in between our bad including changed, only things, Adam. one not differently. differences the the their talking of negative where has sales idea become embellish years now much great, X double-digit point. South again, things same-store was South Central Northwest different the points, North okay? of We're okay? few as and Central differentiation performing But at country the regions, in okay? were the you X The have The X.X That regions domestically massive differentiation same-store anymore, ago, the regions flattened, GPU, behaving profitability, declines If a

Bret Jordan

you service counts price a then customer between on And breakout the pay, business. comp? about could quick car that the and Okay. side talk question In the of and

Bryan DeBoer

after you sales have stuff? Do

Adam Chamberlain

for yes, sure. Yes,

maintain saw, pay customer stop about importantly, up Pleasingly, XX%, revenue. has right? up customer the level. And important -- quarter-to-quarter, about total customer and was warranty it's that the back because keeps on a always the up business to the sale report pay So on as same our was customer recurring, X.X%, on and up year-to-date coming focus that concurrently you pay it's our on pleased the bit a and significant But about the our because pay X.X. talked Bryan is that's and I'm little that revenue to impact a

grown we've So pay both the customer the business. warranty and

Bret Jordan

that well? there counts customer traffic? is in what's more price Are versus up as car And price pay, Or comp?

Adam Chamberlain

flat. about that's Probably

price in little absolutely. account, is bit that a up So

Operator

from with Wells Colin comes question next Fargo. Our Langan

Colin Langan

After sale XX%, margins high. are quite been they've

Slide XX%. think to I I is XX% targets, think XX long-term the

kind back driving So what it term? how fade strong it? there? And Is margins? near color are should midterm And we sustainable just think any of about the they we or maybe thinking is

Bryan DeBoer

it, higher okay, of business, call where labor a believe that reason as mix repair because XX% inventory-based or And question that The parts. between sustainable okay? thanks margin vehicles for just we business us margins your business, will we and is the down portion Whereas Good that which we and an becomes come become replace and today. XX% it's more believe lessened. colin parts, prevalent, a margin truly there's becomes a that is joining more parts as approximate there's has

As would to margins the drop believe XX% we to XX%. that such,

on average when repair of positive a propulsion the engine. Colin, what those the substantially systems, cost note, a break, new it is on higher Now is the cars ICE than

grow the okay, as your and okay? couple So overall a even may drop profit your though well, should margins of gross points, should overall grow sales same-store

at different believing are and us We least their be we'll longer. on plug-ins no on, business, everyone's and think that all decade the days BEVs but I of running the implications think is got the sharing we've headwinds information of than and hybrids these propulsion systems of attractive think we blow numbers aftersales a more they And on that plug-in and there through making battery will and car numbers be BEVs it dealer. much replacements for the be dealers, larger or point until when new car could carry battery all that replacements, quite need new the then or to up tailwinds, need what us hybrids, a

Colin Langan

I now. below Slide to it. -- just Got GPU That's XX, That's think $XXX your clarification. Can I targeting $X,XXX that color. to where go new you're about right GPUs normalized $X,XXX. If one is of helpful I same

$XXX just -- about Or think $XXX about there different is I said talking you Is kind -- there that things? decline. slightly earlier further rounding? are to is you of

Bryan DeBoer

new $X,XXX No, is aggregated and the $X,XXX to used.

will that $XXX So math. $XXX the the used $XXX, come in back to your difference offset at will the of least $XXX

Colin Langan

Okay.

So side? think the to $XXX-ish another new it's you're fair on thinking maybe

Bryan DeBoer

Yes. Yes.

Operator

Our comes Ron next question with from Josey Citi.

Jamesmichael Sherman-Lewis

This is Jamesmichael Ron. on for

with I'll strategy? all, the online monthly accelerate XX%? or efficiency you're in down changes of the how are platform particularly plans rates seeing to of follow-up quarter-over-quarter, sales First any flat advertising ask. that have units quick a online broader context you your I burn evolving And reinvestment omnichannel with And channel,

Bryan DeBoer

Great, James.

constructively got Driveway down now skinny again. the GreenCars that seen appropriate and at have to corner importantly, remember to e-commerce remarks, scale able our we've prepared be the expenses Most our the nice point growth point at turned business. we're really you overall to some that we've our levels in If a

X.XX, for golden the actually that, one what, what okay, of something out of Our like lots is of XXX, still every buys buys We're customer within we a car. call car, ratio, funnel growth. is effectiveness every which actually has means X.XX opportunity which a at about

a out is is positive. news X customers us good X-star that which giving rating, almost The XX every is hyper of

customers So more is share, available. we XXx than think touch that that now to market what capture stores our readily ability our more

them great going starting other from or it I customers cars buying also and let replace or either that dealers. support the sell GreenCars through the by wholesalers auctions from trade-ins, to it, We from now the that it have get find stores can and and Driveway through to through infrastructure or car, they're the buying going

is what platform, has or knowing sold Driveway that's of by were the So that stores no meaning right I anything about our rate that attributed or not and XX% to pleased seeing will that burn in pedal say we're We that, gas in the decide to anything quite on. we're e-commerce in time. rate. to sold burn sell still down We've Driveway burn GreenCars step just with there sales, also by got bought attributed is that that by is then anything this, okay? rate, stores the

to quite We actually those on do all the you think It's your that can unit, some math okay? sales, it's large. GreenCars directly burn not okay? on numbers units what rate. real want that may profit a do a just if X,XXX have and you month, And attribute get It's you of But quickly $X,XXX really attribute almost Driveway to to nice you that. gross a

Jamesmichael Sherman-Lewis

Got it.

retail offline or online used from question. high-level competitive any seeing Driveway Lastly, across in either changes the a Are you and GreenCars competitors? landscape

Bryan DeBoer

Good James. follow-up,

that situation of today, it's importantly, of see fits we downpayment cars most car that, think a you most remember, I we used if see okay? don't doing finding match retailers online what is selling the from their car their to Where or people right current Driveway. directly and that the impact the impacts new because our finance we're to disequity with equation dealers equity dealers and

about when out customers' think customers, of with financeability the So really inventory. our do find how we matching right we it's car picking

been steer that's okay? perfect algorithms those to years, are customers to and trying our into few really areas, So able last we've really what over the

because shop competition. But car told they disequity comes needs. getting credit happen their be be too from and finally really, that a multiple meets may that really shopping and happen at XX person physically It website locations okay, to the car situation, being that, vehicles to and XX, pick no high a a tired of finally demand happen for our to able to their on match that they

Operator

for like question-and-answer Bryan the end reached of now closing turn the have DeBoer session. to call back I'd the comments. to over We

Bryan DeBoer

you today, Driveway Bye-bye. call quarter, another forward and joining & for February. on I which to we all in the is See you believe Lithia you soon. seeing Thank us look fourth

Operator

conference. This concludes today's

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

Lithia Motors (LAD) 23 Oct 242024 Q3 Earnings call transcript