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Lithia Motors(LAD) - 2024 Q4 - Earnings Call Transcript
LADLithia Motors(LAD)2025-02-12 19:34
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Financial Data and Key Metrics Changes - Lithia & Driveway reported record revenues of 9.2billionforQ42024,a209.2 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 444comparedtothesameperiodlastyear[33]MarketDataandKeyMetricsChanges−ThecompanyispositionedtocapitalizeonareturntohistoricalSAARlevels,withexpectationsofreaching17millionSAARbyyear−end[56]−Approximately36444 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 1billioninrevenue,leveragingitsintegratedmobilityecosystem[11][24]−Acquisitionsareacorecompetency,withadisciplinedapproachtoseekaccretiveopportunitiesprimarilyintheU.S.[21]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutcapturingmarketopportunities,particularlyinusedvehiclesales,withpotentialfordouble−digitsame−storesalesgrowth[58]−Thecompanyisfocusedonimprovingaftersalesperformanceandbelievesthereissignificantgrowthpotentialinthisarea[36][90]−ManagementacknowledgedthechallengesintheU.K.marketbutremainspositiveaboutcostmanagementimprovements[72]OtherImportantInformation−TheFinancingOperationssegmentachievedprofitabilityof1 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 2millioninthesamequarterlastyear[41]−Thecompanyrepurchased2 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 2,500to2,500 to 2,700 as the target for the year, with a normalized level around 2,300to2,300 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]