LAD - Earnings call transcript Q4 2024

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Operator

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

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jardon Jaramillo, Senior Director, Investor Relations. sir. you, Thank

begin. You may

Jardon Jaramillo

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

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

to investor discussed website, highlighting a financial GAAP results our We've comparable quarter reconciliation references an release the non-GAAP today's our include today to of measures. Please for posted also results. measures. presentation text of on Our updated refer press fourth investors.lithiadriveway.com,

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

Bryan DeBoer

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

results, of demonstrating Our people. Lithia integrated power talented strong strength scalable teams the and deliver Driveway the mobility our of and to continue and our ecosystem

beginning strategy seamlessly highly serve earnings and profitable leverage of the diluted grounded underscore fourth disciplined potential, share to quarter, remaining $X.XX. execution. per while channels, and design to power across to Though our our these its our the physical effectiveness generated results of customers adjusted ecosystem the adjacencies, reveal our digital earnings During we is just of

increasing potential in maintain align has Our market differentiated operational enabled processes to our ability our to driving unlocking us share efficiencies. by people, momentum and and platform

profitability Our trajectory. our now focus position. diversified in our drive Investments and strengthen loyalty earnings continues to to are customer on market our adjacencies building through contributing meaningfully business model our

omnichannel in [ customer sales improvements ] reinforcing unit further Labs driven effectiveness. ecosystem Our engagement has substantial and

ahead, firmly focus our disciplined recent the Through EPS on well execution and beyond, in our Looking XXXX ability strategic place path auto capture confident continue and billion and world's are unique potential we unlock to loyalty, With deliver retailer in achieving are momentum the as our our we remains and of our $X sustainable in growth. profitability market to our revenue. growth foundational build to continue in investments, $X and of to share our ecosystem. strengths largest positioned performance, per

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

savings which We and operating $XXX result X increase management in realization cost quarters. in are efforts, This disciplined gains our share our cost full a see pleased to million is targets. continued profit market first of drove our quarter annual of increase the year-over-year

we embedded decreases sequential quarters operations, Our SG&A. have of X delivered are daily in teams discipline consistent now consecutive absolute benefits our into have the we and as cost seeing

ecosystem. opportunities see full the for productivity adjacency of realize XXXX, we As potential begin we more improvements and we even unique as market profitability conquest, our

and a growth SAAR to to return saw stores fourth in sales levels, we new in historical well are the capitalize on Our positioned quarter. significant unit

customer. performance and which decisions team of near business ownership expectations. to stabilize our seeing now this improvements our our delivered dedication sales our a reflects are our making quarter, unit total long-term our We GPU used robust and in be saw continue focus sales and trends, vehicle We which closest key the to after

now are platform adjacencies for sustainable in integrated meaningful investments and as a profitability. Our

operations earnings strong trajectory profitability ahead. demonstrating for the year Financing delivered full the

customers our in we e-commerce bringing strategies, part as our of refine omnichannel continue strategy. to Additionally, new

presented This to quarter partnerships. also synergies forward delivered our strong returns on by our we and Wheels the realizing investments, look

to ecosystem create by our growth execution. on by In in continue acting unlocking core achieve our the the XXXX, loyalty, potential profitability focus customer our unlock on we delivering of to and ecosystem our decisively strength

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

and new and adding locations, experiences strategic enhancing continue expand of aimed our to the We adjacencies platform. all partnerships forming developing this customer network, key unlocking at potential

and the being one the largest as of consolidated and globally, the is advantage. to in business ever. our most retailer of is operate key now grow strategic every aspect than believe markets addressable buyer ability largest competitive of least the retail largest one our We market a retail We and stronger across profitability

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

control We ecosystem functions recently provide portal, offering customers launched to to and deliver shopping XXX-plus digital and visibility more momentum. servicing. The the while LAD continues positive MyDriveway

to responding and our exceptional tailwinds the be share. extending flows and clear and free on needs on Our teams carries customer growth a powered market capitalizing and industry reach into continue cash that to XXXX. expanding in the a enables financial discipline, inspires culture of to focus physical people, by agile us strength our deliver experiences regenerative The platforms, customer with digital

us cycle the across growth throughout to positioning profitability. loyalty, and the the MyDriveway strategic stores Our with life points touch equip tools rollout improve adjacencies consumer market ultimately portal allows of the our customer's and to our and share, increase

on our a We States. date, acquisitions XX%, minimum to an acquire your have not for is target normalized that our continue yielded and approach our revenues high-risk of Xx can rate disciplined and look demonstrating the LAD for over we network, Like United return that opportunities a of competency, core XX% after-tax of a EBITDA. remain to accretive Acquisitions return XX% roll-up focusing XX% over XX% after-tax typical or strategy. to success to and improve Xx

attractiveness we In and the buybacks. watching remaining acquisition near strong for as our share pricing look term, this are opportunities own with of balancing we while disciplined the

billion improving earnings the us be estimated range Our our year. flexibility to in and do revenues are $X capital billion $X that the and will generation annual of acquired expectation reiterating both allows future per to

industry focused view driver of growth continued on consolidation as and a long-term strong remain returns. We

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

We adjusted acquisitions own shares. balance capital our our equally, allocation are buybacks especially given and of maintaining values the relative to attractive

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

We and dynamics continue share acquisitions. and to near evaluate we'll acquisitions given share market on focus pricing repurchases the buybacks on term in

to the now combined our clear the increasing life pathway in have continue potential realizing massive our billion in through and to stores. The totally first, of of of This the to underlying for our our and operational and include future customer state control are a we wallet interactions, a illustrated elements environment see these achieve efficiencies steady $X XX Slide compelling of greater as $X generating a our cost EPS store's sustained mid-XX% business, investor pathway includes following: within in our improve own existing These and presentation. a in cycle market share. normalized productivity growing as new, key in share profit built factors Through in that our performance for each percentage used we revenue gains, aftersales every levers by range. gross SG&A

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

DFC beyond and headwinds maturing XX% Third, financing you associated the up with units can in of reserves, CECL to of as results. see our with

growth profitability meaningful in Our achieved XXXX profitability and here. full financing year from operations we expect

driving towards with leveraging costs lowering like we borrowing we solutions corporate and Pinewood, through an down pricing investment-grade path credit are our vendor Fourth, rating. as efficiencies scale,

Fifth, maturing and infrastructure management, charging DMS horizontals, fleet software, contributions insurance. from captive our including

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

meaningful We are ecosystem create unique well experiences complete throughout customer that cycle. mobility durable scale positioned and capabilities to leverages the life and frequent, ownership more grow to our

firmly and new new now we With place, our on levels our a ability foundational focused in of performance in element the execution our fully for standard industry. the establish and to drive to strategy confidence of are

are the potentials. key turn to performance overview operating and our igniting to department store like how and I'd Now over an for we Adam on call

Adam Chamberlain

our experiences, deliver to Thank you, Bryan. exceptional market discipline cost In quarter X, team demonstrated ability focus customer importantly, share. and grow on our

our leaders sales. are by we our right set for Our confident sequential to months having in of focused industry leaders the and particularly our the the I products areas, ahead. a new in resulted vehicle as trends, in stand improvement bar and used opportunity sales approach clear the ability I right in strengthen proudly

I'd revenue opportunities execution. drive SG&A like and to profitability; on trends X inventory growth, focus today to

all from with profit delivered continued by supported Bryan growth contributions strength SG&A in we As autos, operating mentioned, new aftersales execution. our quarters year-over-year value vehicles, first in and X in positive

are in on We our in growth confident XXXX. strategy continue delivering ability our to

of to strong declined performance, sales profit normalization where profits same with [indiscernible] sequential vehicles increased to down total orders. turn now consistent and quarter last compared new of in revenues primarily our prior year. due increased the sales $XXX same-store performance gross and was Let's while and to Total GPUs. saw the X.X% X.X% gross vehicle by Total X.X%, we value period was the unit year-over-year,

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

front-end at $XX.XX. Our sequentially GPUs resilient from $XX.XX, decreasing remain

core were We down Used to XX.X% and by improvement focus up value Used in improvement the our progress, of stable we're performance in for Front-end we GPUs year-over-year ahead. at which and whilst encouraged X.X% operations. autos used $XX.XX, see our vehicle declined by significant trends. vehicles were $XXX. are continue saw expect the and saw in we sequentially year-over-year, orders, certified strong year-over-year. unit units And to be quarters

XXXX. a up also Warranty In of revenues was year-over-year. XX.X% in remains growth quarter, in driver with be the gross to compared Aftersales a opportunity for prior year, gross work were delivering this An key will to increase profit X.X%, growth performance, core the XX.X% this and a margin. aftersales profit

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

where inventory, our on decrease saw an to inventory million overall turning balances $XXX Now we quarter from approximately of X.

[ increase XX balances and are further to opportunities for interest DSO second used DSO see for XX ] our new to and to we achieve the inventory quarter continue as We savings. balances targeting inventory flooring look in

plan The of realized X. execution cost million our $XXX was on in original quarter saving fully

of we and with despite savings cost the the consecutive XX.X% adjusted percentage as focus to SG&A are was dedicated cost Our gross due typically quarters continued disciplined higher quarter performance, Whilst strong experienced of we pleased as through SG&A XXXX. on XX.X% X basis on in quarter maintain we X remain a and move a same-store management to achieve seasonality. we during a profit SG&A

in cost our U.K. efforts on North a optimization achieve our through remains. potential SG&A Opportunities the basis where in XXXX with to of XX.X% network to and America improve same-store XX.X% continued to structure remain

achieving this confident progress in inspiring our our focus and I'm quarter to through proud team's forward delivering of in is igniting of Our outlook across customer look growth our and loyalty, ecosystem. customer performance on for impressive. team's XXXX experiences achieving exceptional potential the the relentless and and XXXX people stores

our call to highlights. walk now through will to I turn Tina over us the financial key

Tina Miller

million the see building clear The Adam quarter sheet year. operations driven has grow, financing efficiency segment, solid same accelerate in quarter value are strategy $X momentum a apparent profitability and benefits operations our DFC, market segment, and continue continues through in capital balance our operations. Starting The we to our primarily Adam. this creating in of on management. diversification our our as outlined enabled our with progress million and with our efficient us you, Thank the allocation securitization by to compared seasoned $X improves confidence of loss to of operations with financing disciplined to focus last portfolio our capital

was million point with the turning profitability for XXXX full year. the of $XX

portfolio and XXXX balance high-quality to in is financing loans this trajectory DFC the risk expect to disciplined loans We yields, continue on emphasis quarter. growth $X.X balance see during profitability with billion an as The in $XXX now underwriting. operations with and we million originating over

portfolio new in FICO in average increased points points scores XXX which sequentially. continues XXXX sustained origination interest and Our to basis to be expected basis strong XX margin, with improvements [indiscernible] net quality and year-over-year

by operations Overall, than confident for to financial every our this revenue traditional long-term originated is more remain continues targets of our segment's of ahead key element with deliver schedule. in profitability contributes to $X,XXX a expect loan adjacency We lending. $X milestones and as earnings of financing DFC portfolio. EPS up a each fully seasoned $X on growth billion The increasing profitability indirect our

plan offset of driven floor reported GPU Now cash sheet. by moving expense balance our the flat as unit and to income sales adjusted normalization million We EBITDA relatively flow interest higher net on and quarter, fourth year-over-year. performance continued $XXX in higher

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

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

continued to acquisitions even elevated we pricing as shares to on free of Prospectively, to repurchases. balancing closely allocate of share valuations. we return XX% This quarter, current cash flow look shareholder see on we acquisitions as to compared store normalize XX% margins our our focus

by pricing. And actively we transaction guided will acquisition is M&A as strategy allocation normalizes, capital pricing Our reassess.

long-term and our nearly outstanding optimization and rebalanced repurchased weighted remains trended this with in to ended now of X.XXx. $XXX at well our Xx the available Capital requirements. line are average target $XXX. OEM X% X.Xx, repurchase the quarter shares requirements under in of expenditures our share primarily down quarter, below our have related network leverage authorization. of of million net covenant price Under a focus we of and fourth We with bank

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

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

growth best-in-class Our strategy achieve consistent our is to strong, shareholder through platform. returns and omnichannel

We profitability our have to place business financial foundation and scale adjacencies. team, tools drive in in right the core and and

team diverse foundation beyond. talented experiences potential Our our the and exceptional loyalty have we XXXX customer to and grow and is as delivering to ignite to in we build committed

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

Operator

with Craig-Hallum. of comes first Sigdahl Ryan Instructions] line [Operator question the Our from

Ryan Sigdahl

to the environment. I in start want seeing current with what you're

end clearly, standpoint, great? seeing a the from a be just if update impact noise kind of kind current administration and despite towards improved. curious guys continued But QX, kind tail has SAARs various you some trends of any seems are the of new you how trend in January tariffs, would weather of sentiment impacts. have like in So of recently, improved, there's kind what but market view

Bryan DeBoer

This Thanks, is Ryan. Bryan.

year-end, million pretty the have volume not that finally pathway million we're whether coming seeing good. SAAR. ] year And be a future, over changes. think $XX at things are to there years driven the by definitely million excited that that we're year see change [ X XX those last believe I an back, We more ] knowing political the or or of units exiting [ entering about suppressed pretty economic we the could that million XX in been there's XX that even because by year likely the look sold tailwinds

X XX% up negotiations it estimate being I happening over of the issues, the with macro about the have or that to between up countries for sitting XX vehicles other nice end supply, could And tariffs an have able we that to saying being X things. by be countries at are or one if through days coming be tariffs looking our in of and XX% I'd that probably I'm a of do be or we've us, inventory most probably inventory XX-plus sitting The any never ends X work days we position should is impacted whatever tariffs thought But a sitting extra quite we at. I'd nicely in. got to glad are we're industry. if I Now countries larger think of tariffs we here be

all we not that quarter, sales I the see all there possibly it's as a the as on is used a used that opportunity, same-store So indication well okay? in market highly on good double-digit there okay? cars, new our that captured all, And did growth terms capture solid we a But performance in this did cars think in our that market the sign coming could for that in years, don't that's of believe that on as was the gives cars, well. I industry I believe new there, okay? And We of cars. we job likely okay, okay?

same pay service able At warranty we're ] customer to our still up, goes the filled servicing meaning again, when okay? of When sacrificed X%, walk gum got it to think comes departments. that be chew our up XX%, work. our in I [ time, and set to shop only were our pays our and because warranty up We've after business sales, customer it

all, that ecosystem on XXX% opportunity. fully and is for our opportunity So all focused of that lots capturing built us, grounded, knowing we're in

Ryan Sigdahl

view of your more some outlook, versus kind just at My follow-up of closer are needing normalization That's peers your guess I we little lot the that normal in conservative, is, you to new more dynamics? I that, however and And a question the a then the you looking is I that to of, from of of are conservatism? in the past? the new new that vehicle you new think of target question, standpoint? that Or GPU, to you've XXXX what it great. industry is a bottom it to said average guess, to normal, for it kind or expect year $X,XXX vehicle is seeing seems pessimistic than kind GPU want $X,XXX maybe the Is where seeing are which terms guidance go. the secondly that is

Bryan DeBoer

on about that Ryan, that I little the get we're we if years more think this that, GPUs GPUs. I We cost on bit the been think probably or has of structure. X for conservative control think X when think, their then don't we last theme out people do a

So that plans and with place, with in imperative we cost our XX-day rightsizing GPUs it's our match structure. plans our

we that . So a reason. of are because little conservative probably more

when $X,XXX a level we're some normalized really demand middle In is an upside that really starts when got you year. to that gets the seasonality us somewhere is that at believe to we've that to So But really take $X,XXX, of we're $X,XXX, and okay? winter, QX comes will the $X,XXX to believe come We believe to the lot I of the add $X,XXX QX, what $X,XXX it's that for where out. it today, terms another at hold. the looking and okay? of level if in to I is $X,XXX for is there in the okay, F&I

Ryan Sigdahl

Good Nice job luck. guys.

Operator

line Jordan comes from of Jefferies. Our next Bret question the with

Bret Jordan

versus of what about could significant profit you sort you I volume where talked parse cycle? used see there, the improvement used. think in GPU sort is And in you us out I guess

Unknown Executive

Yes.

cars, on I But think as we're as focus driving through value and of digit overall, remarks, XX% we decline on up to with can our the solid growth our cars we've on trading. through a with disappointed prepared basis we in in when we're year orders, And a be performance especially well. pleased obviously new XXXX, I have sourced at both with significant the full double used in are said used quarter share overall. got

So used, say should we there's different makes no that on logic if why sense. be trail to

as still of In XXXX. drive sense? GPUs terms saw upside there in be seen on that that of volatility of well. at slight in lot we If make cars, remains a norms, a cars, on to we as try historical and used we used pricing we but Does back look be think may kind volume

[indiscernible]

Bret Jordan

and an And I you you also remarks you improving efficiency in winning are update there? prepared the where give just Could guess, SG&A. us U.K. mentioned

Bryan DeBoer

is market This softer Bret. with We're U.K. quite a little conditions, Bryan in the Sure, again. to obviously relative pleased actually occurring it's what's market.

saw improved You as position our some peers from cost comes it probably have when But that management. to our of well. we

on around XX% over I XX% is targeting, organization. the positive at. okay? just part of a that those of gloomy and there, still percentage pretty are where were months winter think SG&A we're days that knowing which the rightsized as the we're we far through We've we're over the gross, United from going Kingdom But

So improvements. this into see that same-store okay? quarter, of you'll come to get you'll start see So those to some sales

But all with investment. all, pleased really the in we're

bit and idea what his what, of people. it the performance leadership got and the to getting through with a you and future teams, over with we're Neil it to holds. are ground great But reporting on We that feet comes there when we've and managing little comes our excited know people

up have say mess also cleaned we Lastly, entire that bought. I would we the that

that XX small If businesses was those too you to recall, operate. were there to XX

the end on been have pleased now we monetized where or get sit on we're all monetized So March, We've sold. and All of okay? that. the with they've of but them, of those X pretty been two, remaining by will shuttered

the that costs. We've the properties gone those did estate, got In leaders U.K. almost selling We're almost worked XX% equivalent a our job. through real XXX% those all terms nice of the [indiscernible] in leased terms the properties. of on in associated of

real that where on sit as pleased we're well. So we

Operator

of comes with from JPMorgan. Rajat Gupta line next Our the question

Rajat Gupta

the SG&A on curve. the first Just one

more areas versus be? in if a cited more you like here. you bit And I dive curious might Could Adam, have Just it follow-up. quick think, elaborate a I there's deeper little U.S.? could that Is the opportunities what you the there? U.K.

Adam Chamberlain

the I talked had realized if further our we Rajat, $XXX Yes, and to we the [indiscernible], measures We about if thanks last question. the think for kind you it look we identified fourth at through think we that out a the took quarter, I remember, -- late summer year. of you in in million in inventory.

was promising. that So

think million through I quarter we the course, still vehicle as $XX underlying in. believe jump of another kind good think we and shape. there's store add up to back in to in inventory into And leaders and million we're we $XX leaders just then X. or that clean move through the manage of quarter disciplined to cost we make premises, our the don't forward op I But sure remain

car should kind to buzzword But to specific discipline XX%. by we SG&A, talk now. inventories everyday of I a is question, think to be decline new about your So XX% another

I think probably positioned U.K., on comment Rajat. is to best Bryan

Bryan DeBoer

fact, recap on a bit in entire little You just me bet, organization. let the

remember, million cost interest savings to $XXX from you $XX finished we in $XX another inventory. If reduction. million There's in million coming cost we've

costs. $XX We well at of same-store coming okay, half in million million in to this see $XX functions, that almost the be the you'll personnel tech the realized that's aggregated as first in I sales also $XX found results in There's the U.K. total another will as another quarter. XXXX support an of for Those like But said, million almost million. $XXX costs

XX% you going to to SG&A That's us okay, into coming think the line. through top years, come down think we're about driving importantly, I reductions talking over most approximately drop when X.X% okay? mid X of that SG&A, range, growth about

and that do We help portal our the it, So it's customers their have do the the we're part pressure well. and efficient. productivity. cost same-store and team and department things imperative of in a our as that it's and it that can those XXX some If way able released of release associates our sales that and simple sales the and departments do announced work portal, then members in easier within functions grow That's empowered to gain growth of service the experiences Driveway transparent, that okay?

growth to Rajat. of So able the that top those X from reductions mid-XX% are SG&A it's get ecosystem to be a we're and Thanks, uniqueness of line elements, going coming disciplined cost. combination that to our that

Rajat Gupta

[indiscernible] et some mid-single-digit us compares any warranty that cetera, acceleration? in one to are where would pretty gross [indiscernible] I growth X.X%, you accelerate how like technician good still easy XQ, -- Just give see mid-single do business you mean imagine the some on I that for X.X% parts XQ. just you a surprised higher I you be growth, the from and But CDK talked profit in to have than ads, can could services, more follow-up the that on color about. digits. had the year, growth. also as little it guidance curious in could give comfort there the you revenue was the full we initiatives

Bryan DeBoer

Sure, Rajat. This Bryan. is

mindset which I I peers, few from a months, and happy it turn hours not more quarters. there won't we've that okay, so to to a and multiple I for and service is, is we're thing we in grow think actually can issue, and can there's in there not can be exciting bolster established management okay? It's sales of okay, advisers meet okay? how they think didn't issue important. market, CP. reach okay? find X.X%, the with will that and It's a that turn in only the our tech efficiency, here It many But after The able got say, of organization they things grow Adam the the warranty we've believe that challenge higher, seeing after out our leaders

what call was That grow a something going at getting of We to okay? managers, Lithia and only, manager store announced our we to that's Group. level department to Partners Driveway that's directly market the we it. that now just release that departmental out and a level That's That to that performance for capture the and bar there's exercise, establishing is -- within pride a potential is stores. again need which should tied there, that's higher setting rolled our --

single look So We that able it. through marketplace we're within business. through I providing quarters. could to and I digits, the or service The the COVID portal X at and X there double digits, coming, market grow high is functions like say, share low we the should optionality would be be that really take to in-home were again pre

say, really any would differences I outrun, isn't big the longer. We've There differences regional growth, okay? in population

So a there's we digits. good and we're why at pushing not X.X% were single excuse for high others,

get pointing for Rajat. there, we'll that So out. Thanks

Operator

comes question line next Bottiglieri from Our Chris with BNP Paribas. of the

Christopher Bottiglieri

with reason for dropping Just Is that to I with have first up on Or service. is that good, just next rate that the on It looks the some customer margin gross anything 'XX for next been you've to [indiscernible]? like doing doing you on XX% why for one for pay? wheels year mix like wanted looks grosses you're XX%. the to XX%, really follow like guidance understand year? trying

Bryan DeBoer

labor inventory part. it's of part after the a the Yes, more sales of mix between the and

cars a complex, replace We as content. bigger more and parts. So labor there parts and rip on service than that is believe more become a content versus there's cars that

lean us happening slower just end the mix that may hedge mix, parts So got those. you're do parts that smaller side business. expect, we because of bigger the It's conservative reductions on And of towards mix. what we see than the to It's up of we more generally purely going margin it but because not the okay?

Christopher Bottiglieri

you. Got

the to GPU And two, kind Okay. a sense get I just then of for wanted guide.

guide, GPU the the wide on If slipping X,XXX base. the U.K. X,XXX have a at did pretty you but same-store a you to range, used comp side, you like look guide into

QX. exiting in X,XXX X,XXX in You're at QX,

midpoint, big pretty So it's a -- snapback at 'XX. big relative the a to

the seems view, drives F&I guide? to then the [indiscernible]. have in snapback snapback a visibility that bit your in 'XX? guess to And anything Just I into trying similarly get in Or like calling weren't underappreciated you in are were a kind headwinds like 'XX of -- out that write-downs? inventory I that gives mean, you sense, maybe to a 'XX 'XX little what recovery there Or

Bryan DeBoer

this again. Chris, Bryan is

considerably U.K., I is the think comes major it when factor because okay, they're the the to lower. obviously, GPUs,

U.K. F&I is The other well. as thing in is much lower the

has financing that as ASPs and to mean I there's number. higher, that well. that obviously, drives F&I higher we're F&I amounts do our believe on that as get implications get $X,XXX opportunity So that. And obviously, the I But grow profitability. targeting

I marketplace. again, that we And try believe with nice the see could what in do realize. we So realistic upside to we can there's some as current be also we that

Operator

line Jeff Stephens. Our Lick next comes question from the with of

Jeffrey Lick

it. guidance, then are regard? [indiscernible] any XXX your as kind press of and takes what just question, the recall talking were drove also don't stores you went you're release I There to closer would to that First aftersales wasn't to on that. what Could count why puts the those what really in store backwards like versus [indiscernible] closer and what highlighting And I you be the XXX. curious, about from was -- XX%? on elaborate to cause XX%

Bryan DeBoer

Sure.

to is stores that in year great were U.K. a count, of store a finalized, that is the on lot purely cleaner. got disclosed have So ago, the okay? closures that those divestiture which So and

In are of terms recalls of variance XX% okay. is it's biggest typically parts, on the much how the happens to and XX%, what

mix I term. to appropriate went for ago, probably near a is like that why do -- I the as parts believe I So through minutes XX% is XX% that few range. we a that give just

on XX%, you I margin sales So labor quickly can remember, profitability be XX% XX% to move labor. parts if And difference -- that happens you level shouldn't is I'd see in it RO things the XX%. service Because see that big -- parts, an pretty it change, have on purely mix -- shouldn't much wouldn't even versus So call is okay? you department, degradation, our call that okay? about they're

Jeffrey Lick

you each weren't And mentioned then think with XX% to XX% implying were of just of a clarifications referring don't the couple Adam, was, come -- quick new for statistic I your follow-up to that you the you -- of because new Adam. XX% was used that of source? One to deals trade

Adam Chamberlain

-- of cars. our source the of question, Jeff. yes, It's It's a used a it's source -- it's great the

So sell. customer a from and trade XX% try new car People are we and sourced trade-ins. bought have [indiscernible]

Bryan DeBoer

from rental dealers, -- consumers, private drive, for the wholesalers, lease, rest other loaners, is X% X% comes Here's them breakdown from Driveway X% off . that of through okay? party service the companies our XX% dealer and total X% and trade-in, a The buying auctions. XX% service

Jeffrey Lick

And that When fully you realized. were Adam, mentioned, last then benefits one quick one. SG&A the

just were this to referring You quarter.

You still have a going you're to where couple more quarters to go XX-plus be running group?

Adam Chamberlain

Yes. Great question.

about Bryan talked that. think I

talked we $XX an and top And $XX said, coming as sequentially years. see in million, inventory decrease then the revenue line about we the as across as For growth, million. Bryan opportunity, realized floor grow we see quarter, opportunity the still to I plan

Jeffrey Lick

Awesome. Congrats give and on my quarter best a [indiscernible]. to great

Operator

line Our next Murphy from the America. Bank comes question John of of with

John Murphy

but the of currently in making you statement your -- a are but few last market. that Without now fair a attractive have on I stock think that little a biggest that the high make it's in guys the statement little me, bit is the the the of big in or think it's that -- bit statement the exact pretty one for and to been years, front And I multiples data side more you're entire the a market. is acquirer

over EBITDA. do how So it Bryan, is mean I of what X And curious Do just how think or sales you you think -- high the means? market to XX% quarters? normalized, XX% coming I market right you to you too the gets rich the was Xx now? think mentioned hopefully, do

Bryan DeBoer

John. question, Great

that you're different buying And a a that in little softening some voice bit sitting when -- And confidence probably on we're little bit you some about things I talking paid we ] in a transactions. Xx add ago another there. happening, days start sense my perspective call high back been here multiples make heard think is the get low levels cash earnings it got normalized and out lot XXx into high the to just a because [ many And should look then on that digits doesn't the returns X us for another to XX us. I still multiple, thought John, there's to for guess you mid-single there's of I earnings double XX factors places you country X still multiples in were is the manufacturers, with you've prices we're pricing. of to pretty a at in Xx seeing, of say, there are what though to that XX, that X-year on difficulty I'm depending

it's and built. that we any just to double sense $XX somewhere We we know going is know million at that for million $XX is a that And know long term, to in that low we digits, sit a that forward-looking the DFC multiple million it at ecosystem single rate. do $XX doesn't around penetration when XX% million digits, $XXX be our and when made to make us trade we year, this high of

So these potential. own in are things our that realizing earnings we're not even

that. would we we're not back. nice our that our And generating capital can then where that's position to that the attentions wise, why acquisition So just a of turn we buy are actually market we back in lots shares when turns

a few probably it's quarters away. still believe do I

we potential those to normalized to we're Xx opportunities for haven't that XX% again, going to it. really of to and can really going stores where the okay? earnings, probably that States, hit pick in to But for and is X able we're that's $X profit United -- we year, I realized of the which in total that think the But choose have be billion revenue find okay? sitting. be

may lot for had. a few tell something years because And have that that's them. they So, it people another we typically it what money try more to made to truly take than normalize

pay when are money normalized. your twice that got already You not earnings going something for we're to

trajectory the hands and and they can hold to and that them to typically look still we try their through then monetize. financial for so do months So explain ask it statements few for last at the

about X The Lithia, So have as X has the buyer X, of single half are companies, XX are industry. that transactions the Typically, important XX. done about of out remember public that that our over X of other out there decades okay? last we over get every once those transactions we've thing X.X That's that sitting by okay? that fell of in than committed, we transactions the only XXX not contractually typical of fall out done almost of is decades to had have one completed okay? a been closed transactions, meaning they transactions apart, even purchasing, And

John Murphy

of the on That's comments follow-up made. one helpful. And you other just one

as Does stores the get those well Or X% are eventually You divestiture? that rate, said fixed? expected. mean don't success into XX% which indicates out work that stores or closed falling as that

Bryan DeBoer

target it X underperforming And not we that have and really in Typically, In on it. nailed then divest our X did X%. X size. just makes had it's a months. the us acquisition. stores if haven't close to XX%, trying X% us the were stores makes U.K., the up doesn't of in thresholds, up what to it. we it. It's meet X in You typically it a may an for then just buying or to we a that matter they U.S., group is microscopic what because But in missing so had And

John Murphy

in one downside last When pretty some question comfortable outlook. used the other you're And it But mentioned you about on kind the you're like there front-end might talking then of new just being growth -- X a F&I. quick in GPU. it. Got be the the with components [indiscernible] of sounds there

about business Do working because or I X,XXX the mean going mean, -- As number that those which to that's because there we gross we going closer that's the forward, important run most on. plus in ] out of really number deal. you think to think I front-end the is you [ X a minus? settle you're

is in that the upside the on range what's downside think you normal? So

Bryan DeBoer

doubled that rest the So small of our than okay? and that country. higher not we about lot Southeast didn't had luxury luxury, I purchased GPUs $X,XXX have lot to generate its of stores because remember percentage of imperative also in a a stores to John, a a we stores only and an from of GPU, the in purchased this lot mix and question. the states South pre-COVID industry of standpoint, standpoint Yes. think I'm a it's that's going Western and Lithia great Lithia And answer not from business Central that Driveway the

So is what the is. different industry's our lift in GPUs than lift

what doing $X,XXX, to $X,XXX at we industry looking looking not the what at doing. we're we're We're So is when okay? say

still We profit on that come modeling, come vehicle think we to variation then, because obviously, a that because used, GPU as of $XXX only higher, from. reductions we've in of at offset F&I mix, on couple our in about of another there's should the $XXXX to $XXX $XXX some front-end used back hundred in new does we're $XXXX. an on get vehicles there's the that okay? where improvement of time, dollars to we're lift And used back of and add our gross $XXX are okay? already upside We believe sitting troughed So higher of Now the in that over sitting industry. will about vehicles assuming $X,XXX and you the lot to

John Murphy

-- And over that's target that time? the probably you how you think the range" for "normalized market see the We'll [indiscernible]?

Bryan DeBoer

okay? footprint, we $XXX It's in had too, are about F&I X almost typically you and Remember, growing main $XX apply our $XX. footprint it. and that's level why our on that $X,XXX, Based the footprint pre-COVID to $XXX from to new years, F&I $XXX, okay, been the grown mix to was the So okay? which we move can reasons higher, to

And okay, and still to always strong, we're all return soft, lift it's how little able It's think gear better at are obviously, there to we people got is that here. the a picture is in may point know F&I store mindset be department that red of idea upside to we've and goal vehicle through big I not of quite not leaders, through their SAAR especially performance. be okay? performance believes leaders store So our GPUs paint leaders, find I the going the help commanded better because they next think area. that and to a the -- market our are change be our our that as truly there's is for this And still captured we do a to people to in used with this be and

John Murphy

were million our years because for thanks XX what And of way at and mindset. That's I'm too certainly couple great. But units are forecast is saying the in things that's we're high. same the next

there I 'XX... think we're to get 'XX, in going

Bryan DeBoer

right. All

hit that X okay. it's happens, We have Hopefully, next to when X quarters. or the within

John Murphy

[indiscernible]. We'll

Bryan DeBoer

Take John. easy. it All right,

Operator

of comes line Langan the Colin next Wells question Fargo. Our from with

Colin Langan

Just U.K. your wanted Is explanation help seasonal others commentary, relative factor been seeing reported missed why that I sure different? Any that -- a I'm this that some have to GPUs were down new have seen? Or up. being flat in the sort if Others have that not performance not of sequentially. of just of that? driving

Bryan DeBoer

that's might it, our out mix to somehow Adam robust, soft It but what, the quite it. market we've know differences could be is got when think it mind and get upside just is figure and will the opportunities, us, market year So manufacturers. you the largest a exceed. GPU, peers, little Colin, okay? that retailer of to that we can There's going if it I be But inspire you bit that change that of to the them I'll own we're of okay? after and own out next mindset reflecting to the us It's in we the as I and people can world gives able be know on what, find of something our the think

it's than else, -- probably forward capture I to So and say want that's let's and anything move reason, but I that. don't really would that us own and assign a that, more

Colin Langan

just wanted Right. follow a I to up on And question. prior then Okay.

And in base, at about I ] to I that consolidated, [ the going guidance think to why prior outlook like is million be used same-store $XX it the down, the X,XXX at XXXX [ in sort which ], to improves. the imply answer unused QX was you're look $XX million I would it is mean if but and be F&I. of asked guide explain sounded on would

be rate looking sure QX better. trying midpoint just at would is because make used at least So that what driving it the What currently? is at driving even the understand is F&I I F&I better, on in to that we're

Bryan DeBoer

of on comes car vehicles performance used on people the to it on it's the truly okay? Colin, the GPUs. over do all it's volatile new the of demand few managing off used vehicles. know, quickly in And inventory seasonality of really performance, demand last supply market, we When have It's or as been So the we F&I, that quite of people. have been driven lack years

AI our we've believe to believe lot to be really and vehicles normalized [ And used lie. that, grow coming, able We've that opportunity and to And to to scarce why QX, ] effectively appropriate got be our basis. tools X,XXX internally opportunities to look a where a find I price of performance. and cost we and market of strengthening And cars. usually our market reporting that's able to going got normalize. believe So at which level on use means to that's really an isn't improve QX our I

now the X, to drive we've the the . I command And think that almost, let should out that's opportunity find for more GreenCars. And a and Driveway and respect money to depressed see through the and that's cars X to that's price more they those help country, market level up. XXx in customers world and troughed those got what, time still quarters. there okay? scarcest capture it's

Operator

Our next Ron line question Citi. with comes the from of Josey

Ronald Josey

some you the approach know we about little Bryan, back 'XX. have. I a wanted more all bit I to ask just online pulled that in

thinking importance online would with channel of 'XX 'XX? be then in in Or you here can you're And trade beyond? think of the perspective, get vision particularly profitability is a how to growing any we'll just more helpful here after a given grow, on service. as of So the used and used with do from insights that a online terms

Bryan DeBoer

part our of ecosystem you the it's idea about of have Ron, of Thanks, potential customers. a we and that thought XXx big more and that the design how

into integrated we've they're and model approaches behind are is now metrics GreenCars an Driveway. able see MyDriveway okay, stores. I our going to be get external easily of fully If some some in the don't okay? fall is business loyalty and effectiveness. It think that We actively we portal, are to now relaxed quite happening functionality. it, our we've now done involved. to on call because new ecosystem the and to It to the and our customers reporting to includes pushing this idea includes includes services. what's excited online It online service. integrated what We're physical some they in what that internal developed network access is sales our going online our growing, It

we're be March, And we portal, the but dumping almost MyDriveway didn't are talk our DSC customers to into lot a portal going about XX,XXX customer base. all that which of come

all through payments it's get there. have service valuations really there. to there. themselves stores. there. making through can appointments, cars going different any their functional, book payoffs empowering. They to they all through They It's through to they're be So Customers can and doing attach can different can attached already going to be They're store quite

experiences customers effect So occur those we more will portal the believe really together will make seamless. help snowball MyDriveway that to the that everything integrate from

are starting able to through good through lift the to year again, we're We in lift, to efficiencies some And out year and be managing the targeting and tune early pretty that just see the Driveway people of figuring okay? this XX% really to of about in GreenCars performance part improve.

leaders on leaders top align plans potential things into coming do are compensation We've make next and with and new that it our We're as working motivate ideas the more they we'll that also with cost growth, and stores years, do to be sure changed those align e-commerce loyalty, at within over come growth line that with with through we SG&A as improvements. the to store departmental compensation new how to And follows less, the organization of well people also okay? plans businesses our okay? help looking

little online pretty point this So reaching hopefully, of the ecosystem is of built. that sit a you we're color, gives where we where on approach, bit the Ron, but on excited

it's a leveraging of Now matter it.

Operator

Morningstar. question with line next from Our of the Whiston comes David

David Whiston

customer do this pay Bryan, you you actual couple be mindset as little such you crowding about out as Like happen items -- take what a underperform, change of pay more needed and by what see action customer specific can having you've want being to that? have warranty a to place? mean a change to like times talked

Bryan DeBoer

And when stores. and with there's starts a okay? is Star, in through bars think operations potential, it North in those of potential and lot believing I low We December. there's a exercise your November established being which went units in

actions and So building and with our plans that that's it's our change, and to managers -- managers opportunities It's what how in when is market where take are from departmental retail store RVPs, I that car taking it's percentage optionality. and I'm group sitting they're Driveway back service driveway. our automotive presidents fixing as with fundamentally diagnosing I'm in talk about smaller a involved meaning to someone's driveway, things lie mindset the because share. pickup, in down and vehicles not it of Or capture an those picking meaning, not general as not the my to leaders after things, regional they're repair, Driveway with If repairing there's up the today involved car someone's the it. I'm sales

it ability to okay? that today, the And seeing things something departments to leaders that visits. that have David, call that things to starts there's key of see engage XX need probably done, not we with be each in We store but they're

again Underpinning mean that to or sit when too that that coming exit position if management quickly, change of The change the second-tier departmental if pointing way that, service stores, You leadership isn't our above of that days they position. and And performance on foundation strategy, of to was go the that get looking they not to It in details means lays the know never okay? to to those mantra, get that performance Adam RPs that [indiscernible] X okay? it within which RVPs again. again, getting from the been the performance the there's XX or way way is their got -- can ago. XX visits days need is our mindset these store company, a into to don't believe but it's going look that may I that. role there's what need down, another them believe, obviously that way for that in X our and leaders be that find like. that high changed in role, then to doing we scorecards to to are from just XX all movement out in-store XX It's years store and mind that's that is changed. they've That person soft we reports the about execute towards of new know store

to leaders helping things is about to understand their that And own. our shifting mindset. and gives they It's about towards on looking that need can't find people on store them gear the a change see next management It's that that gear in helping our gear top of organization. them continuously then insights, improve Hopefully, that able next you to and be that David. some into see

the that you we'll key level talk can and departmental working to it about to what offline, If want are we a drivers take you on. at it sure be

David Whiston

you it appreciate fleshing really helpful. I That's out.

not be to tax really Just short then, service and short clear base? you're

Bryan DeBoer

not it. in see do that help just believe They it can't No. the have less, less. don't are the I of they with to some outside Yes, spots in and mean can okay? some grow We've -- but a effect, okay? them do locations, maybe ability is of a have truly soft tech because not internally. got people the with [indiscernible], the more that's is that It's more still. symptom there more can, we stores that, shortages and the mindset tech reason. that's It we But to they

Operator

I'd time. closing for no comments. at further DeBoer, Mr. over you floor this back turn questions to to have we like the

Bryan DeBoer

We everyone, joining you, Thank Lithia in for quarter the seeing Driveway us. April us look on in Christine. to forward Thanks, thanks, everyone, best. today. first All for you Well, the joining call April. --

Operator

Ladies and gentlemen, this does conclude today's teleconference.

disconnect this your lines Thank at wonderful time. have you participation, may day. for and a You your

Lithia Motors (LAD) 12 Feb 252024 Q4 Earnings call transcript