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Lithia Motors(LAD) - 2024 Q3 - Earnings Call Transcript
LADLithia Motors(LAD)2024-10-23 17:59
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Financial Data and Key Metrics Changes - Lithia Motors achieved record revenues of 9.2billioninQ32024,an119.2 billion in Q3 2024, an 11% increase from Q3 2023 [6] - Adjusted diluted earnings per share reached 8.21, reflecting strong operational execution [5] - Adjusted SG&A as a percentage of gross profit improved from 67.9% in Q2 to 66% in Q3 [6][22] - Annualized cost savings reached 200million,exceedinginitialtargets[7][38]BusinessLineDataandKeyMetricsChanges−Newvehicleunitsincreasedby2200 million, exceeding initial targets [7][38] Business Line Data and Key Metrics Changes - New vehicle units increased by 2% year-over-year, while used vehicle units decreased by 9.6% [20] - Aftersales revenues grew by 5.1% compared to the prior year, with a gross profit margin of 56% [21] - Front-end GPUs for used vehicles remained stable at 2,136, while new vehicle GPUs normalized to 4,631[20][21]MarketDataandKeyMetricsChanges−Thedigitalecosystemsawgrowthto12millionmonthlyuniquevisitors,withDrivewayandGreenCarscontributing3million[11]−Thecompanyoperatesinoneofthelargestaddressableretailmarketsglobally,withafocusoncapturingmarketshare[10]CompanyStrategyandDevelopmentDirection−Thecompanyaimstoenhanceoperationalefficiencies,customerloyalty,andmarketsharethroughdisciplinedexecutionandstrategicpartnerships[6][9]−Acquisitionremainsacorecompetency,targetingaminimumafter−taxreturnof154,631 [20][21] Market Data and Key Metrics Changes - The digital ecosystem saw growth to 12 million monthly unique visitors, with Driveway and GreenCars contributing 3 million [11] - The company operates in one of the largest addressable retail markets globally, with a focus on capturing market share [10] Company Strategy and Development Direction - The company aims to enhance operational efficiencies, customer loyalty, and market share through disciplined execution and strategic partnerships [6][9] - Acquisition remains a core competency, targeting a minimum after-tax return of 15% [12] - The company is focused on building a complete mobility ecosystem and leveraging its scale for growth [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate market dynamics and achieve profitability through operational improvements [12][29] - The company anticipates continued strength in aftersales and a gradual normalization of vehicle GPUs [7][60] - Management highlighted the importance of adapting to local market conditions and maintaining financial discipline [28] Other Important Information - The financing operations segment reported profitability of 1 million, a significant improvement from a loss of 4millioninthesamequarterlastyear[24]−Thecompanyrepurchased4 million in the same quarter last year [24] - The company repurchased 54 million of its outstanding shares during the quarter, representing 0.7% of total shares [14][27] Q&A Session Summary Question: Used inventory trends and strategy - Management acknowledged challenges in sourcing core models and emphasized a focus on improving used inventory performance moving forward [30][31] Question: DFC operating income and provision concerns - Management noted signs of stress primarily in the subprime segment but expressed confidence in the overall portfolio's health [33][34] Question: Cost-cutting targets and future expectations - Management exceeded initial cost-saving targets and indicated potential for further reductions, with a focus on operational efficiencies [38][39] Question: Impact of Stellantis incentives on sales - Management reported mixed results with Stellantis, noting a need for pricing adjustments to improve market share [40][41] Question: SG&A improvements and future modeling - Management provided insights on expected SG&A trends, factoring in seasonality and potential further reductions [45][46] Question: Share repurchase flexibility and M&A pipeline - Management indicated a balanced approach to capital allocation, with flexibility to adjust share repurchases based on M&A opportunities [47][48] Question: Wholesale revenue and inventory management - Management attributed revenue jumps to normal seasonality rather than specific fallout from CDK [54] Question: Future GPU expectations and industry dynamics - Management expressed optimism about stabilizing GPUs and anticipated a return to normalized levels as supply improves [56][62]