Lithia Motors Q1 2024 earnings call:
Earnings Results:
• Revenue grew 23% YoY to $8.6 billion • Adjusted diluted EPS decreased 28% YoY to $6.11 • Same-store sales revenues down 2%, gross profits declined 7% • New vehicle GPU down $1,640 or 22% YoY • Used vehicle GPU down $153 YoY • F&I per unit declined $123 YoY to $2,080 • Aftersales revenue up 3%, gross profit up 7%
Future Guidance:
• Expect new vehicle GPUs to normalize between $4,300-$4,500 per unit • Targeting 50-60% of capital allocation to acquisitions, 15-25% to shareholder returns • Expect annual acquired revenues of $2-4 billion per year • Aiming for mid-50% SG&A as percentage of gross profit long-term with adjacencies • Financing operations expected to break even in 2024 • Pathway to $100 billion revenue generating $2 EPS per $1 billion revenue
Key Themes and Trends:
Lithia Motors delivered solid revenue growth in Q1 despite headwinds from declining new vehicle margins and below normal used margins early in the quarter. The company is focused on operational execution, growing adjacencies, and making strategic acquisitions to drive long-term performance.
The addition of UK-based Pendragon is impacting consolidated margins and SG&A in the near-term, but provides geographic expansion and diversification benefits. Management sees opportunities to optimize the UK business over time.
Adjacencies like Driveway Finance are maturing and approaching profitability, which will provide incremental earnings growth. Digital initiatives are gaining traction with 32% YoY growth in transactions.
While GPUs are normalizing, Lithia believes its unique and expansive mobility ecosystem across vehicle sales, financing, fleet management and digital channels positions it well to gain share, expand margins and generate strong free cash flows to fund growth and shareholder returns over the long-term. The company reiterated its targets of $100 billion in revenue generating $2 in EPS per $1 billion of revenue.
Notable Quotes:
“Our Lithia & Driveway teams remain focused on driving results and continuing on our journey to building a unique and highly profitable customer ecosystem.” - Bryan DeBoer, CEO
”We are positioned to deliver strong growth through reinventing our industry’s customer experiences and achieving a LAD profit equation of $2 of EPS for every $1 billion of revenue.” - Bryan DeBoer, CEO
”Our financing operations segment, primarily driven by DFC, continues to grow, and we see clear line of sight on how this adjacency is now providing incremental profitability and diversifying our business model as it matures.” - Tina Miller, CFO