Lithia Motors(LAD) - 2025 Q2 - Quarterly Results

Executive Summary & Financial Highlights This section provides an overview of the company's financial and operational performance for Q2 and year-to-date 2025, highlighting key achievements Second Quarter 2025 Performance Lithia & Driveway reported record second quarter revenue and significant increases in diluted and adjusted diluted earnings per share, alongside a rise in net income, driven by strong core operations Second Quarter 2025 Financial Performance Highlights | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | Revenue | $9.6 billion | $9.2 billion | 4% | | Diluted EPS | $9.87 | $7.87 | 25% | | Adjusted Diluted EPS | $10.24 | $7.87 | 30% | | Net Income | $258 million | $217 million | 19.2% | | Adjusted Net Income | $268 million | $217 million | 24% | - Unrealized gains on investment in Pinewood Technologies Group PLC contributed $1.03 to diluted earnings per share for the quarter[4] - Adjusted results for Q2 2025 exclude a $0.37 per diluted share impact from non-core items including net loss on store disposal, insurance reserves, and acquisition expenses, partially offset by tax attributes[6] Year-to-Date 2025 Performance For the first six months of 2025, the company experienced robust growth in revenues and diluted earnings per share, reflecting continued operational strength Year-to-Date 2025 Financial Performance Highlights | Metric | YTD 2025 | YTD 2024 | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | | Revenues | $18.8 billion | $17.8 billion | 5% | | Diluted EPS | $17.80 | $13.75 | 29% | | Adjusted Diluted EPS | $17.88 | $13.97 | 28% | - Unrealized gains on investment in Pinewood Technologies Group PLC contributed $0.75 to diluted earnings per share for the year-to-date period[8] Key Operational Highlights Operational excellence across the business translated into robust growth, with significant increases in gross profits, aftersales, and financing operations profitability, alongside strategic share repurchases - Total gross profits increased 4.3% compared to Q2 2024[10] - Aftersales gross profit increased 11.5% compared to Q2 2024[10] - Financing operations generated profitability of $20 million, a 179% increase year-over-year[10] - Driveway Finance Corporation (DFC) originated $731 million in loans, with U.S. penetration increasing to 14.8% and net interest margin increasing to 4.6%[10] - Repurchased 1.5% of outstanding shares during the quarter[10] Corporate Developments This section details recent strategic acquisitions and their expected impact on the company's annualized revenue Acquisitions Lithia & Driveway continued its network expansion in the Southeast region through strategic acquisitions, adding significant annualized revenue - In June 2025, LAD acquired two Mercedes-Benz stores in Collierville, Tennessee, and Jackson, Mississippi, adding $220 million of expected annualized revenue[9] - Year-to-date, the company has acquired $400 million of expected annualized revenues[11] Capital Allocation This section outlines the company's financial position, including liquidity, dividend policy, and share repurchase activities Balance Sheet Overview The company maintained a strong liquidity position at the end of the second quarter - LAD ended the second quarter with approximately $1.3 billion in cash and cash equivalents, marketable securities, and availability on revolving lines of credit[12] Dividend and Share Repurchases The Board of Directors approved a quarterly dividend and the company continued its share repurchase program, reducing outstanding shares Second Quarter 2025 Dividend | Item | Value | | :----- | :---- | | Dividend per Share | $0.55 | | Payment Date | August 22, 2025 | | Record Date | August 8, 2025 | - During Q2 2025, approximately 387,000 shares were repurchased at a weighted average price of $306[14] - Year-to-date 2025, approximately 791,000 shares have been repurchased at a weighted average price of $316, with $568.8 million remaining under current authorization[14] Management Update This section provides an update on key personnel changes within the company's leadership team Chief People Officer Retirement The company announced the upcoming retirement of its Chief People Officer, with succession planning underway - Gary Glandon will retire from his role as Chief People Officer effective December 31, 2025, with a successor to be announced prior to his retirement[15] Investor Information This section offers details for investor engagement and provides an overview of Lithia & Driveway's business model and strategic objectives Conference Call Details Details for accessing the second quarter 2025 earnings conference call and related presentation were provided - The second quarter 2025 conference call was scheduled for 10:00 a.m. ET on July 29, 2025, accessible via telephone or the investor relations website[16] About Lithia & Driveway Lithia & Driveway is described as the largest global automotive retailer, offering a comprehensive range of products and services throughout the vehicle ownership lifecycle - Lithia & Driveway (NYSE: LAD) is the largest global automotive retailer, providing products and services through physical locations, e-commerce platforms, captive finance, and fleet management[17] - The company aims to deliver consistent, profitable growth in the unconsolidated automotive industry by modernizing personal transportation solutions[17] Legal & Financial Disclosures This section clarifies the nature of forward-looking statements and the use of non-GAAP financial measures in the report Forward-Looking Statements This section outlines the nature of forward-looking statements, inherent uncertainties, risks, and the company's policy on updating such statements - Forward-looking statements are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and may cause actual results to differ materially[20] - Examples of forward-looking statements include projections regarding profitability acceleration, market conditions, business strategy, network growth, Driveway and DFC performance, capital allocations, and future economic conditions[21] - The company undertakes no obligation to publicly update any forward-looking statement, except as required by law[22] Non-GAAP Financial Measures The company provides an explanation of its use of non-GAAP financial measures, their definitions, and their purpose in improving transparency and comparability of core business operations - Non-GAAP financial measures, such as adjusted net income and adjusted diluted EPS, are presented to improve transparency and provide a meaningful presentation of results from core business operations by excluding non-core and non-cash items[23] - These measures do not have definitions under GAAP, may differ from those used by other companies, and should not be considered an alternative to GAAP measures[23] - Reconciliations to the most directly comparable GAAP measures are provided in the attachments to the release[23] Financial Statements & Supplementary Data This section presents detailed unaudited financial statements and key performance metrics for the reported periods Consolidated Statements of Operations (Unaudited) This section presents the company's consolidated revenues, cost of sales, gross profit, and net income for the three and six months ended June 30, 2025, and 2024, highlighting key changes Consolidated Statements of Operations Summary | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Q2 YoY Change (%) | YTD 2025 (Millions) | YTD 2024 (Millions) | YTD YoY Change (%) | | :-------------------------- | :----------------- | :----------------- | :---------------- | :------------------ | :------------------ | :----------------- | | Total Revenues | $9,583.0 | $9,231.8 | 3.8% | $18,761.2 | $17,793.6 | 5.4% | | Gross Profit | $1,485.1 | $1,423.9 | 4.3% | $2,895.4 | $2,759.1 | 4.9% | | Finance operations income | $20.1 | $7.2 | 179.2% | $32.6 | $5.4 | 503.7% | | Income from operations | $425.3 | $393.6 | 8.1% | $831.6 | $735.0 | 13.1% | | Net income attributable to LAD | $256.1 | $214.2 | 19.6% | $465.6 | $376.7 | 23.6% | | Diluted EPS attributable to LAD | $9.87 | $7.87 | 25.4% | $17.80 | $13.75 | 29.5% | Key Performance Metrics (Unaudited) This section details key operational and financial performance indicators, including gross margins, unit sales, average selling prices, and gross profit per unit across various segments, along with SG&A efficiency Key Performance Metrics - Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------- | :------ | :------ | :----- | | New vehicle retail gross margin | 6.7% | 7.3% | (60)bps | | Used vehicle retail gross margin | 6.7% | 6.5% | 20bps | | Aftersales gross margin | 57.7% | 55.7% | 200bps | | Total gross profit margin | 15.5% | 15.4% | 10bps | | New vehicle retail unit sales | 94,144 | 92,508 | 1.8% | | Used vehicle retail unit sales | 109,053 | 109,249 | (0.2)% | | New vehicle retail avg selling price | $47,782 | $47,603 | 0.4% | | Used vehicle retail avg selling price | $28,379 | $27,332 | 3.8% | | New vehicle retail avg gross profit per unit | $3,181 | $3,467 | (8.2)% | | Used vehicle retail avg gross profit per unit | $1,911 | $1,790 | 6.8% | | Finance and insurance avg gross profit per unit | $1,840 | $1,789 | 2.9% | | SG&A as a % of revenue (Adjusted) | 10.5% | 10.5% | — | | SG&A as a % of gross profit (Adjusted) | 67.7% | 67.9% | (20)bps | Same Store Operating Highlights (Unaudited) This section provides a detailed breakdown of performance for same-store operations, including revenues, gross profit, gross margin, unit sales, average selling price, and average gross profit per unit for Q2 and YTD Same Store Operating Highlights - Q2 2025 vs Q2 2024 | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Q2 YoY Change (%) | | :-------------------------- | :----------------- | :----------------- | :---------------- | | Total revenues | $9,345.2 | $8,974.1 | 4.1% | | Total gross profit | $1,451.6 | $1,389.8 | 4.4% | | New vehicle retail gross margin | 6.7% | 7.2% | (50)bps | | Used vehicle retail gross margin | 6.7% | 6.9% | (20)bps | | Aftersales gross margin | 57.8% | 56.0% | 180bps | | New vehicle retail unit sales | 91,947 | 90,179 | 2.0% | | Used vehicle retail unit sales | 106,894 | 102,875 | 3.9% | | New vehicle retail avg gross profit per unit | $3,175 | $3,455 | (8.1)% | | Used vehicle retail avg gross profit per unit | $1,900 | $1,897 | 0.2% | Other Operating Highlights (Unaudited) This section provides insights into the geographical distribution of revenue and gross profit, as well as inventory days' supply for new and used vehicles Key Performance by Country (Q2 2025) | Country | Total Revenue | Total Gross Profit | | :------------ | :------------ | :----------------- | | United States | 78.1% | 83.7% | | United Kingdom | 18.3% | 13.3% | | Canada | 3.6% | 3.0% | Days' Supply in Inventory (June 30, 2025) | Inventory Type | Days' Supply | | :--------------- | :----------- | | New vehicle | 63 | | Used vehicle | 48 | Selected Financing Operations Financial Information This section details the financial performance of the company's financing operations, including interest and fee income, interest expense, total interest margin, and lease income Financing Operations Financial Information - Q2 2025 vs Q2 2024 (Millions) | Metric | Q2 2025 | Q2 2024 | Q2 YoY Change (%) | | :-------------------------- | :------ | :------ | :---------------- | | Interest and fee income | $98.8 | $83.8 | 17.9% | | Interest expense | $(49.8) | $(47.0) | 6.0% | | Total interest margin | $49.0 | $36.8 | 33.2% | | Lease income, net | $5.1 | $1.7 | 200.0% | | Finance operations income | $20.1 | $7.2 | 179.2% | | Total average managed finance receivables | $4,287.6 | $3,632.0 | 18.0% | Condensed Consolidated Balance Sheets (Unaudited) This section presents a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, compared to December 31, 2024 Condensed Consolidated Balance Sheet Highlights (Millions) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total current assets | $7,941.8 | $7,773.9 | | Total assets | $24,161.0 | $23,122.6 | | Total current liabilities | $6,513.5 | $6,551.1 | | Total liabilities | $17,150.0 | $16,448.5 | | Equity | $7,011.0 | $6,674.1 | Condensed Consolidated Statements of Cash Flows (Unaudited) This section outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Cash Flows Highlights (Millions) | Activity | YTD 2025 | YTD 2024 | | :-------------------------------- | :------- | :------- | | Net cash provided by operating activities | $331.4 | $144.0 | | Net cash used in investing activities | $(315.5) | $(1,515.1) | | Net cash (used in) provided by financing activities | $(13.5) | $1,117.6 | | Change in cash, restricted cash, and cash equivalents | $9.8 | $(256.6) | | Cash, restricted cash, and cash equivalents at end of period | $455.6 | $715.4 | Reconciliation of Non-GAAP Cash Flow from Operations (Unaudited) This section reconciles the reported net cash provided by operating activities to an adjusted non-GAAP measure, incorporating adjustments related to floor plan notes payable and finance receivables Reconciliation of Non-GAAP Cash Flow from Operations (Millions) | Metric | YTD 2025 | YTD 2024 | | :---------------------------------------------------------------- | :------- | :------- | | Net cash provided by operating activities (As reported) | $331.4 | $144.0 | | Floor plan notes payable, non-trade, net | $(141.2) | $444.5 | | Adjust: finance receivables activity | $432.1 | $386.9 | | Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory | $(45.6) | $(22.7) | | Adjusted Net cash provided by operating activities | $576.7 | $952.7 | Reconciliation of Certain Non-GAAP Financial Measures (Unaudited) - Three Months Ended June 30 This section provides a detailed reconciliation of GAAP financial measures to adjusted non-GAAP measures for the three months ended June 30, 2025, and 2024, by excluding specific non-core items Q2 2025 Non-GAAP Reconciliation (Millions, except per share data) | Metric | As reported | Net loss on disposal of stores | Insurance reserves | Acquisition expenses | Tax attribute | Adjusted | | :-------------------------------- | :---------- | :----------------------------- | :----------------- | :----------------- | :------------ | :--------- | | Selling, general and administrative | $1,014.7 | $(7.2) | $(2.4) | $(0.1) | $— | $1,005.0 | | Net income attributable to LAD | $256.1 | $9.0 | $1.8 | $0.1 | $(1.3) | $265.7 | | Diluted earnings per share attributable to LAD | $9.87 | $0.35 | $0.07 | $— | $(0.05) | $10.24 | Q2 2024 Non-GAAP Reconciliation (Millions, except per share data) | Metric | As reported | Insurance reserves | Acquisition expenses | Tax attribute | Adjusted | | :-------------------------------- | :---------- | :----------------- | :----------------- | :------------ | :--------- | | Selling, general and administrative | $975.2 | $(6.1) | $(1.8) | $— | $967.3 | | Net income attributable to LAD | $214.2 | $4.5 | $3.1 | $(7.6) | $214.2 | | Diluted earnings per share attributable to LAD | $7.87 | $0.17 | $0.11 | $(0.28) | $7.87 | Reconciliation of Certain Non-GAAP Financial Measures (Unaudited) - Six Months Ended June 30 This section provides a detailed reconciliation of GAAP financial measures to adjusted non-GAAP measures for the six months ended June 30, 2025, and 2024, by excluding specific non-core items YTD 2025 Non-GAAP Reconciliation (Millions, except per share data) | Metric | As reported | Net gain on disposal of stores | Insurance reserves | Acquisition expenses | Tax attribute | Adjusted | | :-------------------------------- | :---------- | :----------------------------- | :----------------- | :----------------- | :------------ | :--------- | | Selling, general and administrative | $1,967.4 | $2.2 | $(2.8) | $(0.3) | $— | $1,966.5 | | Net income attributable to LAD | $465.6 | $2.1 | $2.1 | $0.2 | $(2.3) | $467.7 | | Diluted earnings per share attributable to LAD | $17.80 | $0.08 | $0.08 | $0.01 | $(0.09) | $17.88 | YTD 2024 Non-GAAP Reconciliation (Millions, except per share data) | Metric | As reported | Insurance reserves | Acquisition expenses | Tax attribute | Adjusted | | :-------------------------------- | :---------- | :----------------- | :----------------- | :------------ | :--------- | | Selling, general and administrative | $1,909.5 | $(6.1) | $(9.5) | $— | $1,893.9 | | Net income attributable to LAD | $376.7 | $4.5 | $9.2 | $(7.6) | $382.8 | | Diluted earnings per share attributable to LAD | $13.75 | $0.17 | $0.33 | $(0.28) | $13.97 | Adjusted EBITDA and Net Debt to Adjusted EBITDA (Unaudited) This section provides the calculation of EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2025, and 2024, along with the Net Debt to Adjusted EBITDA ratio EBITDA and Adjusted EBITDA Highlights (Millions) | Metric | Q2 2025 | Q2 2024 | Q2 YoY Change (%) | YTD 2025 | YTD 2024 | YTD YoY Change (%) | | :-------------- | :------ | :------ | :---------------- | :------- | :------- | :---------------- | | EBITDA | $588.8 | $529.9 | 11.1% | $1,107.8 | $980.2 | 13.0% | | Adjusted EBITDA | $489.3 | $408.2 | 19.9% | $891.3 | $751.6 | 18.6% | Net Debt to Adjusted EBITDA | Metric | June 30, 2025 | June 30, 2024 | Change (%) | | :---------------------- | :------------ | :------------ | :--------- | | Net Debt | $4,223.1 | $3,848.4 | 9.7% | | TTM Adjusted EBITDA | $1,698.0 | $1,601.8 | 6.0% | | Net Debt to Adjusted EBITDA | 2.49 x | 2.40 x | — |