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Lithia Motors(LAD) - 2024 Q2 - Earnings Call Transcript
LADLithia Motors(LAD)2024-08-01 19:25
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Financial Data and Key Metrics Changes - Adjusted diluted earnings per share (EPS) reached 7.87,a307.87, a 30% sequential improvement despite the CDK outage, although it represents a 28% decrease from Q2 of the previous year [5][10] - Total revenues grew to 9.2 billion, up 14% from Q2 of last year [8] - Adjusted SG&A as a percentage of gross profit was 67.9%, reflecting the impact of the CDK event [24] Business Line Data and Key Metrics Changes - Vehicle operations faced headwinds due to the CDK outage, with same-store revenues down 6.4% and gross profits declining 12.5% [8] - Financing operations produced income of 7.2million,comparedtoalossof7.2 million, compared to a loss of 18.7 million in the same quarter last year, achieving profitability earlier than expected [23][24] - Aftersales business declined by 1.4%, primarily due to the CDK outage, which impacted aftersales by almost 40% during the outage period [9] Market Data and Key Metrics Changes - Total vehicle gross profit per unit remained stable at 47.62,down47.62, down 951 compared to the same period last year [9] - The company reported a 2% increase in total monthly unique visitors (MUVs) year-over-year, reaching 12millionpermonth,withGreenCarscontributingover900,000MUVs[11]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedongrowingmarketshareandoperationalefficienciesthroughauniquemobilityecosystem,leveragingstrategicpartnershipsandacquisitions[5][7]−AminoritystakewaspurchasedinWheels,afleetmanagementcompany,whichisexpectedtocreatetransformativesynergiesbetweenretailandfleetplatforms[7][11]−Thecompanyaimstoachieve12 million per month, with GreenCars contributing over 900,000 MUVs [11] Company Strategy and Development Direction - The company is focused on growing market share and operational efficiencies through a unique mobility ecosystem, leveraging strategic partnerships and acquisitions [5][7] - A minority stake was purchased in Wheels, a fleet management company, which is expected to create transformative synergies between retail and fleet platforms [7][11] - The company aims to achieve 2 of EPS for every 1billioninrevenue,withatargetof1 billion in revenue, with a target of 40 billion to 50billioninsalesinthemid−term(2to4years)[15][29]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceintheabilitytodoubletheanticipated50 billion in sales in the mid-term (2 to 4 years) [15][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to double the anticipated 150 million in annualized SG&A cost savings, primarily driven by inventory reductions [7] - The company remains optimistic about operational performance and expects to realize significant benefits from the 60-day plan initiated to improve profitability [31] - Management acknowledged the challenges posed by higher interest rates but indicated that the company is well-positioned to navigate these conditions [52] Other Important Information - The company reported free cash flows of 127million,impactedbydecliningEBITDAandincreasedcapitalexpenditures[26]−Thecompanyhasadjusteditscapitalallocationstrategytobalanceacquisitionsandsharebuybacks,repurchasing2.9127 million, impacted by declining EBITDA and increased capital expenditures [26] - The company has adjusted its capital allocation strategy to balance acquisitions and share buybacks, repurchasing 2.9% of outstanding shares during the quarter [15][26] Q&A Session Summary Question: Clarification on EPS increase - Management clarified that the 1.10 impact from the CDK outage adjusted the EPS tracking, indicating a nearly 50% increase in sequential EPS without the outage [29][30] Question: SG&A and cost reduction plan - Management indicated that SG&A as a percentage of gross profit would likely remain around current levels in Q3, with further reductions expected later in the year [33][35] Question: Parts and services run rate - Pre-CDK event, parts and services were tracking in the mid to low single digits on a same-store sales basis, with some recovery expected in July [36][38] Question: New car GPU outlook - Management discussed the potential for new car GPUs to normalize, indicating a glide path that includes both new and used vehicle profitability [39][41] Question: Fleet management synergies - Management explained that the partnership with Wheels would enhance service levels and create opportunities for selling new vehicles to fleet customers [47][49] Question: Interest rates impact - Management acknowledged that while higher interest rates have impacted consumer affordability, there is potential for benefits as rates decrease [52] Question: Share buyback strategy - Management emphasized a balanced approach to capital allocation, focusing on opportunistic purchases based on market conditions [54][56]