Core Points - Lithia & Driveway announced the acquisition of Elk Grove Subaru, enhancing its presence in the Sacramento area and the Southwest region [1][2] - The acquisition is expected to generate annual revenue of $100 million, contributing to a total of $180 million in year-to-date annualized revenue acquired [3] - The acquisition was financed using existing on-balance sheet capacity [3] Share Repurchase Authorization - Lithia & Driveway's Board of Directors approved a $350 million increase to its share repurchase authorization, raising total available funds for future repurchases to approximately $748 million [4] - The company has invested over $71 million this year to repurchase over 197,500 shares at a weighted average price of $361 per share, representing 0.75% of outstanding shares [4] Company Overview - Lithia & Driveway is the largest global automotive retailer, offering a wide range of products and services throughout the vehicle ownership lifecycle [5] - The company emphasizes simple, convenient, and transparent experiences through its network of physical locations and e-commerce platforms [5] - Lithia & Driveway aims for consistent, profitable growth in a large and unconsolidated industry, leveraging its diversified and competitively differentiated design [5]

Acquisition and Growth Strategy - Lithia and Driveway acquired 146 stores in 2024, investing $1.1 billion, which is expected to generate nearly $5.9 billion in annualized revenues[28] - Lithia and Driveway's acquisition strategy targets an annual after-tax return of over 15%, with an average return exceeding 25% by the third year of ownership[26] - The company allocated 35% to 45% of its free cash flow to acquisitions, 25% to capital expenditures, and 30% to shareholder returns in 2024[29] Financial Performance and Liquidity - As of December 31, 2024, Lithia and Driveway had available liquidity of approximately $1.4 billion, including $225.1 million in unrestricted cash and $1.1 billion in credit facilities[29] - The company had $8.7 billion in variable rate debt with a weighted average interest rate of 5.8% per annum as of December 31, 2024[268] - A 10% increase in interest rates would raise annual interest expense by approximately $37.9 million, net of tax, based on amounts outstanding as of December 31, 2024[268] - The fair value of long-term fixed interest rate debt was approximately $4.1 billion as of December 31, 2024, with $4.6 billion outstanding[271] - A 10% devaluation in average exchange rates would have resulted in a $798.5 million decrease in revenues for the year ended December 31, 2024[273] Operational Efficiency - The company achieved a 32.5% reduction in cost per order and a 96.3% decrease in cost per acquisition through operational efficiencies in 2024[35] - Total advertising expenses in 2024 were $250.7 million, with over 89% allocated to digital and social media[37] - The Driveway e-commerce platform had a significant impact, allowing customers to access a vast inventory and facilitating home delivery options[35] Market Presence and Competition - The company operates 459 locations across the U.S., U.K., and Canada, representing 52 brands, enhancing its market presence[17] - The company faces competition from retailers with similar or greater financial resources in existing markets[45] Workforce and Diversity - The company employed approximately 30,000 persons on a full-time equivalent basis across 459 retail locations as of December 31, 2024[54] - The workforce comprised approximately 22% female team members and 41% minorities, with management consisting of 23% females and 28% minorities in leadership positions[54] Marketing and Customer Loyalty - Lithia and Driveway's marketing strategy focuses on creating lifelong customer loyalty through transparent and convenient retail experiences[30] Regulatory Environment - The company operates in a highly regulated industry, requiring various licenses for dealer, sales, finance, and insurance[46] Seasonal Trends - The company’s North American operations typically experience lower volumes in the first quarter due to consumer purchasing patterns[58] Human Capital Strategy - The company emphasizes professional success and well-being of team members as part of its human capital strategy[53] Market Trends - GreenCars.com experienced a 48% increase in unique visitors in 2024, reaching approximately 11.2 million, highlighting the growing interest in sustainable vehicles[36]

Core Viewpoint - Lithia Motors (LAD) reported a decline in adjusted earnings per share for Q4 2024, but revenues exceeded expectations due to strong performance in new vehicle retail and used vehicle wholesale segments [1] Financial Performance - Adjusted earnings per share for Q4 2024 were $7.79, down from $8.24 in the prior year but above the Zacks Consensus Estimate of $7.01 [1] - Total revenues reached $9.22 billion, a 20% increase year over year, surpassing the Zacks Consensus Estimate of $8.82 billion [1] Segmental Performance - New vehicle retail revenues increased by 18.4% year over year to $4.7 billion, exceeding the estimate of $4.25 billion, driven by a 20.1% rise in units sold to 96,760 [2] - Used vehicle retail revenues rose 16.4% year over year to $2.63 billion but fell short of the estimate of $2.69 billion due to lower-than-expected units sold [3] - Revenues from used vehicle wholesale increased by 40.3% to $340.9 million, exceeding the estimate of $301.8 million [4] - Finance and insurance revenues rose 7.3% to $355.8 million but missed the estimate of $387.9 million [4] Cost and Expenses - Cost of sales increased by 22.4% year over year in Q4 2024 [6] - SG&A expenses were $902.1 million, up 7.8% from $836.8 million in the prior year, representing 66.3% of gross profit [6] Shareholder Returns - The company declared a quarterly dividend of 53 cents, payable on March 21, 2025, to shareholders of record as of March 7, 2025 [7] - Lithia repurchased approximately 1,230,000 shares at an average price of $283 in 2024, with $454.3 million remaining under its buyback authorization [7] Cash and Debt Position - Cash, cash equivalents, and restricted cash totaled $402.2 million as of December 31, 2024, down from $941.4 million a year earlier [8] - Long-term debt increased to $6.1 billion as of December 31, 2024, up from $5.5 billion as of December 31, 2023 [8]

Financial Data and Key Metrics Changes - Lithia & Driveway reported record revenues of $9.2 billion for Q4 2024, a 20% increase from the same quarter last year [12] - Adjusted diluted earnings per share (EPS) for the quarter was $7.79, marking a significant improvement in profitability [8] - The company achieved its $200 million annual cost savings target, with two consecutive quarters of sequential decreases in SG&A [13][39] Business Line Data and Key Metrics Changes - New vehicle units increased by 7.4% year-over-year, while used vehicle units decreased by 4.3% [34] - Aftersales revenues grew by 3.4% year-over-year, with a gross profit margin of 55.8% [36] - Total gross vehicle profit (GPU) was $4,535, consistent with the prior quarter but down $444 compared to the same period last year [33] Market Data and Key Metrics Changes - The company is positioned to capitalize on a return to historical SAAR levels, with expectations of reaching 17 million SAAR by year-end [56] - Approximately 36% to 38% of vehicles are estimated to be impacted by tariffs, but the company maintains a strong inventory position [57] Company Strategy and Development Direction - The focus remains on customer loyalty, potential, and growth through disciplined execution and strategic investments [11] - The company aims to achieve $2 of EPS for every $1 billion in revenue, leveraging its integrated mobility ecosystem [11][24] - Acquisitions are a core competency, with a disciplined approach to seek accretive opportunities primarily in the U.S. [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about capturing market opportunities, particularly in used vehicle sales, with potential for double-digit same-store sales growth [58] - The company is focused on improving aftersales performance and believes there is significant growth potential in this area [36][90] - Management acknowledged the challenges in the U.K. market but remains positive about cost management improvements [72] Other Important Information - The Financing Operations segment achieved profitability of $9 million in Q4, compared to a loss of $2 million in the same quarter last year [41] - The company repurchased $93 million or 0.9% of its outstanding shares during the quarter [24] - The company ended the quarter with net leverage of 2.5x, in line with its long-term target of 3x [48] Q&A Session Summary Question: Current market environment and trends - Management noted improved sentiment and a pathway to 17 million SAAR by year-end, with a strong inventory position to handle potential tariffs [56][57] Question: 2025 new vehicle GPU outlook - Management indicated a conservative approach to GPU guidance, expecting $2,500 to $2,700 as the target for the year, with a normalized level around $2,300 to $2,500 [61][63] Question: Used vehicle performance and GPU - Management expressed disappointment in the decline of used vehicle performance but sees potential for improvement in 2025 [68][70] Question: U.K. efficiency and SG&A updates - Management reported improvements in cost management in the U.K., targeting a reduction in SG&A to 75% of gross profit [72][84] Question: SG&A opportunities - Management identified additional cost savings in inventory and personnel, aiming for a total of $320 million in reductions [82][84] Question: Aftersales revenue growth - Management acknowledged the need for improvement in aftersales growth and set a challenge for leaders to reach higher performance levels [89] Question: Acquisition pricing and market conditions - Management highlighted the current high acquisition multiples and the preference to repurchase shares instead of pursuing acquisitions at inflated prices [118][120]

Revenue Performance - Fourth quarter 2024 revenue reached a record $9.2 billion, a 20% increase from $7.7 billion in the fourth quarter of 2023[3]. - Full year 2024 revenue increased 17% to a record $36.2 billion from $31.0 billion in 2023[7]. - Total revenues for Q4 2024 reached $9,222.1 million, a 20.2% increase from $7,674.5 million in Q4 2023[23]. - Total revenues for the three months ended December 31, 2024, increased by 3.1% to $7,854.3 million compared to $7,615.4 million in 2023[25]. Earnings and Profitability - Fourth quarter 2024 diluted earnings per share attributable to Lithia & Driveway was $8.12, a 5% increase from $7.74 per share in the same period of 2023[4]. - The company reported a flat net income of $217 million for the fourth quarter 2024, compared to $216 million in the same period of 2023[5]. - Net income attributable to LAD for Q4 2024 was $216.2 million, a 1.3% increase compared to $213.4 million in Q4 2023[23]. - Net income for the twelve months ended December 31, 2024, was $821.6 million, down from $1,011.7 million in 2023[29]. - The company’s net income attributable to LAD for the twelve months ended December 31, 2024, was $802.0 million, down from $1,000.8 million in 2023, a decline of 20%[32]. Expenses and Margins - SG&A expenses as a percentage of revenue decreased to 9.9% in Q4 2024 from 10.7% in Q4 2023[24]. - Total selling, general and administrative expenses for the twelve months ended December 31, 2024, were $3,755.2 million, an increase from $3,294.8 million in 2023, reflecting a growth of 13.9%[32]. - The gross profit margin for new vehicle retail dropped by 240 basis points to 6.8% for the twelve months ended December 31, 2024[25]. Vehicle Sales - New vehicle retail unit sales increased by 20.1% to 96,760 units in Q4 2024, compared to 80,596 units in Q4 2023[24]. - New vehicle retail revenues increased by 18.4% to $4,705.9 million, while used vehicle retail revenues rose by 16.4% to $2,638.5 million[23]. - New vehicle retail revenues rose by 6.3% to $4,200.5 million, while used vehicle retail revenues decreased by 5.8% to $2,119.0 million for the same period[25]. Financing and Debt - Driveway Finance Corporation originated $501 million in loans, with a portfolio of $3.9 billion in average managed receivables and a net interest margin of 4.7%[9]. - Total debt increased by 21.7% to $13,265.7 million from $10,900.5 million[34]. - Net debt rose by 28.7% to $4,142.2 million compared to $3,219.1 million[34]. - Floor plan notes payable increased by 34.9% to $4,903.1 million from $3,635.5 million[34]. Cash and Liquidity - The company ended the fourth quarter with approximately $1.4 billion in cash and cash equivalents, plus $0.3 billion in unfinanced real estate liquidity[12]. - Cash, restricted cash, and cash equivalents at the end of the period decreased to $445.8 million from $972.0 million in 2023[29]. - Unrestricted cash and cash equivalents decreased by 72.7% to $225.1 million from $825.0 million[34]. Shareholder Returns - The Board of Directors approved a dividend of $0.53 per share for the fourth quarter 2024, payable on March 21, 2025[13]. - Lithia & Driveway repurchased approximately 1,230,000 shares in 2024, representing 4.6% of shares outstanding[17]. Other Financial Metrics - The financing operations achieved their first profitable year with an income of $15.4 million, compared to a loss of $45.9 million in 2023[17]. - Adjusted EBITDA for the three months ended December 31, 2024, was $419.0 million, representing a 5.4% increase from $397.6 million in the same period of 2023[33]. - The average gross profit per unit for new vehicle retail decreased by 26.4% to $3,263 for the twelve months ended December 31, 2024[25].

Core Insights - Lithia Motors (LAD) reported quarterly earnings of $7.79 per share, exceeding the Zacks Consensus Estimate of $7.01 per share, but down from $8.24 per share a year ago, representing an earnings surprise of 11.13% [1] - The company achieved revenues of $9.22 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 4.62% and up from $7.67 billion year-over-year [2] - Lithia Motors has outperformed consensus EPS estimates three times in the last four quarters and has also topped revenue estimates three times during the same period [2] Earnings Outlook - The immediate price movement of Lithia Motors' stock will largely depend on management's commentary during the earnings call and future earnings expectations [3] - The current consensus EPS estimate for the upcoming quarter is $8.05 on revenues of $8.98 billion, while for the current fiscal year, the estimate is $34.65 on revenues of $38.53 billion [7] Industry Context - The Automotive - Retail and Whole Sales industry, to which Lithia Motors belongs, is currently ranked in the top 29% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Core Viewpoint - Lithia Motors (LAD) is anticipated to report a year-over-year decline in earnings despite an increase in revenues for the quarter ended December 2024, with the actual results being crucial for its near-term stock price movement [1][2]. Earnings Expectations - The consensus estimate for Lithia Motors' quarterly earnings is $7.01 per share, reflecting a year-over-year decrease of 14.9%, while revenues are projected to be $8.81 billion, an increase of 14.9% from the previous year [3]. - The earnings report is expected to be released on February 12, and the stock may rise if the actual numbers exceed expectations, whereas a miss could lead to a decline [2]. Estimate Revisions - Over the last 30 days, the consensus EPS estimate has been revised 0.5% higher, indicating a reassessment by analysts regarding the company's earnings prospects [4]. - The Most Accurate Estimate for Lithia Motors is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +2.79%, suggesting a likelihood of beating the consensus EPS estimate [10][11]. Earnings Surprise History - In the last reported quarter, Lithia Motors was expected to post earnings of $7.59 per share but actually delivered $8.21, resulting in a positive surprise of +8.17% [12]. - Over the past four quarters, the company has surpassed consensus EPS estimates three times [13]. Industry Comparison - AutoNation (AN), another player in the automotive retail industry, is expected to report earnings of $4.26 per share for the same quarter, indicating a year-over-year decline of 15.1%, with revenues projected at $6.64 billion, down 1.8% from the previous year [17]. - AutoNation's consensus EPS estimate has been revised 1.5% higher in the last 30 days, resulting in an Earnings ESP of 2.11%, suggesting a likelihood of beating the consensus EPS estimate [18].

Acquisition and Expansion - Lithia & Driveway (LAD) has acquired Stohlman Subaru in Sterling, Virginia, enhancing its presence in the Mid-Atlantic region [1] - The acquisition is expected to add $80 million in annualized revenue and was financed using existing on-balance sheet capacity [2] Capital Allocation Update - Since the end of Q3, LAD has repurchased $107 million worth of shares at an average price of $372 [3] - Approximately $454 million remains available under the current share repurchase authorization [3] Company Overview - Lithia & Driveway (LAD) is one of the largest global automotive retailers, offering a wide range of products and services throughout the vehicle ownership lifecycle [4] - The company provides convenient and hassle-free experiences through a comprehensive network of physical locations, ecommerce platforms, captive finance solutions, and other synergistic adjacencies [4] - LAD aims to modernize personal transportation solutions, delivering consistent, low-risk, and profitable growth in a massive and unconsolidated industry [4]

Core Viewpoint - Lithia Motors (LAD) is well-positioned to continue its earnings-beat streak in the upcoming report, having surpassed earnings estimates consistently in recent quarters [1][3]. Earnings Performance - For the last reported quarter, Lithia Motors achieved earnings of $8.21 per share, exceeding the Zacks Consensus Estimate of $7.59 per share by 8.17% [2]. - In the previous quarter, the company reported earnings of $7.87 per share against an expected $7.09 per share, resulting in a surprise of 11% [2]. Earnings Estimates - There has been a favorable change in earnings estimates for Lithia Motors, with a positive Earnings ESP (Expected Surprise Prediction) indicating strong potential for an earnings beat [3][6]. - The current Earnings ESP for Lithia Motors is +1.83%, suggesting that analysts have recently become more optimistic about the company's earnings prospects [6]. Predictive Metrics - Stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [4]. - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [5].

Core Insights - Lithia & Driveway (NYSE: LAD) will release its fourth quarter 2024 earnings on February 12, 2025, before the market opens [1] - A conference call to discuss the earnings results is scheduled for the same day at 10:00 a.m. Eastern Time [1] Company Overview - Lithia & Driveway is one of the largest global automotive retailers, offering a wide array of products and services throughout the vehicle ownership lifecycle [3] - The company provides convenient and hassle-free experiences through a comprehensive network of physical locations, ecommerce platforms, and captive finance solutions [3] - Lithia & Driveway aims to deliver consistent, low-risk, and profitable growth in a massive and unconsolidated industry [3] - The company's diversified and competitively differentiated design allows for flexibility and scale in modernizing personal transportation solutions [3]