UK Markets closed

Lithia Reports Record Third Quarter 2019 Results and Solid Same Store Growth in All Business Lines

MEDFORD, Ore.--(BUSINESS WIRE)--

Declares Dividend of $0.30 Per Share for Third Quarter

Lithia Motors, Inc. (LAD) today reported the highest third quarter revenue in company history.

Third quarter 2019 revenue increased 8% to a record $3.3 billion from $3.1 billion in the third quarter of 2018.

Third quarter 2019 net income per diluted share was $3.64, a 5% decrease over $3.84 per diluted share reported in the third quarter of 2018. Adjusted third quarter 2019 net income per diluted share was $3.39, a 20% increase compared to net income of $2.83 per diluted share in the same period of 2018. Third quarter 2019 net income was $85 million, a 8% decrease compared to net income of $93 million in the same period of 2018. Adjusted third quarter 2019 net income was $79 million, a 16% increase compared to net income of $69 million for the same period of 2018.

As shown in the attached non-GAAP reconciliation tables, the 2019 third quarter adjusted results exclude a $0.25 net non-core benefit related to gain on sale of stores, offset by weather related events and acquisition expenses. The 2018 third quarter adjusted results exclude a $1.01 net non-core benefit due to gain on sale of stores and a tax attribute.

Third Quarter-over-Quarter Operating Highlights:

  • Total adjusted net income per diluted share increased 19.8%
  • Total same store sales increased 7.6%
  • Same store new vehicle retail sales increased 4.6%
  • Same store used vehicle retail sales increased 14.0%
  • Same store F&I per unit increased 7.3% to $1,471
  • Same store service, body and parts sales increased 9.5%
  • Same store total gross profit per unit increased 3.1% to $3,631

"We achieved record results during the third quarter driven by strong growth in all business lines," said Bryan DeBoer, President and CEO. "Our stores' successful commitment to serve customers wherever, whenever, however they choose is evident in our results."

For the first nine months of 2019 revenues increased 6% to $9.4 billion, compared to $8.8 billion in 2018.

Net income for the first nine months of 2019 was $8.72 per diluted share, compared to $8.31 per diluted share in 2018, an increase of 5%. Adjusted net income per diluted share for the first nine months of 2019 increased 19% to $8.81 from $7.41 in 2018.

Corporate Development

Earlier this month, we acquired John Howard Subaru, Waterfront Jeep, and Urse Chrysler Dodge Ram Fiat in Morgantown, West Virginia. For the year, we have acquired seven stores and anticipated revenues of over $475 million.

"The acquisition market remains robust and we are well positioned to accelerate our growth strategy in the coming quarters," said DeBoer. "In addition to our expanding physical network, our phenomenal teams, and owned inventory of over 70,000 vehicles, our digital solutions broaden the foundation that allow us to be the leading provider of personal transportation solutions for consumers."

As announced last week, we activated proprietary technology in our Pittsburgh market allowing consumers to sell us vehicles within minutes from the comfort of their own home. These scalable, digital solutions will drive improvements and efficiencies across our entire network.

Balance Sheet Update

At the end of the third quarter, our leverage ratio, calculated as debt excluding floorplan financing to adjusted EBITDA, was less than 2.0, representing the low end of our targeted range. Our liquidity in cash, availability on our credit facility and unfinanced real estate, combined with our ability to access the debt and equity markets, position us for continued growth through acquisitions and investments in innovation.

Dividend Payment

Our Board of Directors approved a dividend of $0.30 per share related to third quarter 2019 financial results. We expect to pay the dividend on November 22, 2019 to shareholders of record on November 8, 2019.

Third Quarter Earnings Conference Call and Updated Presentation

The third quarter 2019 conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029. An updated presentation highlighting the third quarter 2019 results has been added to our investor relations website. To listen live on our website or for replay, visit www.lithiainvestorrelations.com and click on webcasts.

About Lithia

Lithia Motors, Inc. is one of the largest providers of personal transportation solutions in the United States and is among the fastest growing companies in the Fortune 500 (#265-2019). Lithia is a growth company powered by people and innovation. By purchasing and building strong businesses that have yet to realize their potential, Lithia generates significant cash flows while maintaining low leverage. Operational excellence is achieved by refocusing the business on the consumer experience and by utilizing proprietary performance measurements to increase market share and profitability. Lithia’s unique growth model invests to expand its nationwide network and to fund innovations that create personal transportation solutions wherever, whenever and however consumers desire.

Sites
www.lithia.com
www.shift.com

www.lithiainvestorrelations.com
www.lithiacareers.com

Lithia Motors on Facebook
http://www.facebook.com/LithiaMotors

Lithia Motors on Twitter
http://twitter.com/lithiamotors

Forward-Looking Statements

Certain statements in this presentation, and at times made by our officers and representatives, constitute forward-looking statements within the meaning of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Generally, you can identify forward-looking statements by terms such as "project", "outlook", "target", "may", "will", "would", "should", "seek", "expect", "plan", "intend", "forecast", "anticipate", "believe", "estimate", "predict", "potential", "likely", "goal", "strategy", "future", "maintain", and "continue" or the negative of these terms or other comparable terms. Examples of forward-looking statements in this presentation include, among others, statements regarding:

  • Future market conditions, including anticipated national new car sales levels;
  • Expected operating results, such as improved store performance; continued improvement of selling, general and administrative expenses ("SG&A") as a percentage of gross profit and all projections;
  • Anticipated integration, success and growth of acquired stores;
  • Anticipated ability to capture additional market share;
  • Anticipated ability to find accretive acquisitions;
  • Expected revenues from acquired stores;
  • Anticipated synergies, ability to monetize our investment in digital innovation;
  • Anticipated additions of dealership locations to our portfolio in the future;
  • Anticipated availability of liquidity from our unfinanced operating real estate;
  • Anticipated levels of capital expenditures in the future; and
  • Our strategies for customer retention, growth, market position, financial results and risk management.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements in this presentation. Therefore, you should not rely on any of these forward-looking statements. The risks and uncertainties that could cause actual results to differ materially from estimated or projected results include, without limitation:

  • future economic and financial conditions (both nationally and locally);
  • changes in customer demand, our relationship with, and the financial and operational stability of, vehicle manufacturers and other suppliers;
  • risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms);
  • the adequacy of our cash flow and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level;
  • disruptions to our technology network including computer systems and software, as well as natural events such as severe weather, fires, floods and earthquakes or man-made or other disruptions of our operating systems, structures, facilities or equipment; and
  • government regulations, legislation and others set forth throughout "Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" and in "Part I, Item 1A. Risk Factors" of our most recent Annual Report on Form 10-K, and from time to time in our other filings with the SEC.

Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Non-GAAP Financial Measures

This presentation contains non-GAAP financial measures such as adjusted net income and diluted earnings per share, adjusted SG&A as a percentage of revenue and gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, adjusted pre-tax margin, EBITDA, adjusted EBITDA, leveraged EBITDA and adjusted total debt. Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to similarly titled measures used by other companies. As a result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. We present cash flows from operations in the attached tables, adjusted to include the change in non-trade floor plan debt to improve the visibility of cash flows related to vehicle financing. As required by SEC rules, we have reconciled these measures to the most directly comparable GAAP measures in the attachments to this release. We believe the non-GAAP financial measures we present improve the transparency of our disclosures; provide a meaningful presentation of our results from core business operations, because they exclude items not related to core business operations and other non-cash items; and improve the period-to-period comparability of our results from core business operations. These presentations should not be considered an alternative to GAAP measures.

Lithia Motors, Inc.

Consolidated Statements of Operations (Unaudited)

(In millions except per share data)

 

 

Three months ended
September 30,

 

%

 

Nine months ended
September 30,

 

%

 

 

 

Increase

 

 

Increase

 

 

2019

 

2018

 

(Decrease)

 

2019

 

2018

 

(Decrease)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

$

1,824.8

 

 

$

1,733.0

 

 

5.3

%

 

$

4,993.3

 

 

$

4,914.5

 

 

1.6

%

Used vehicle retail

 

916.3

 

 

805.9

 

 

13.7

 

 

2,632.4

 

 

2,325.6

 

 

13.2

 

Used vehicle wholesale

 

74.4

 

 

92.0

 

 

(19.1

)

 

233.5

 

 

253.2

 

 

(7.8

)

Finance and insurance

 

136.3

 

 

121.1

 

 

12.6

 

 

382.7

 

 

342.1

 

 

11.9

 

Service, body and parts

 

340.5

 

 

311.3

 

 

9.4

 

 

993.3

 

 

908.4

 

 

9.3

 

Fleet and other

 

40.1

 

 

28.7

 

 

39.7

 

 

168.6

 

 

104.4

 

 

61.5

 

Total revenues

 

3,332.4

 

 

3,092.0

 

 

7.8

%

 

9,403.8

 

 

8,848.2

 

 

6.3

%

Cost of sales:

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

1,724.8

 

 

1,632.1

 

 

5.7

 

 

4,711.9

 

 

4,625.2

 

 

1.9

 

Used vehicle retail

 

816.6

 

 

719.6

 

 

13.5

 

 

2,355.0

 

 

2,078.5

 

 

13.3

 

Used vehicle wholesale

 

73.3

 

 

90.6

 

 

(19.1

)

 

229.7

 

 

249.0

 

 

(7.8

)

Service, body and parts

 

169.0

 

 

156.9

 

 

7.7

 

 

492.2

 

 

461.9

 

 

6.6

 

Fleet and other

 

37.8

 

 

26.6

 

 

42.1

 

 

159.8

 

 

98.5

 

 

62.2

 

Total cost of sales

 

2,821.5

 

 

2,625.8

 

 

7.5

 

 

7,948.6

 

 

7,513.1

 

 

5.8

 

Gross profit

 

510.9

 

 

466.2

 

 

9.6

%

 

1,455.2

 

 

1,335.1

 

 

9.0

%

Asset impairments

 

 

 

 

 

NM

 

 

0.5

 

 

 

 

NM

 

SG&A expense

 

343.2

 

 

309.0

 

 

11.1

 

 

1,021.5

 

 

939.9

 

 

8.7

 

Depreciation and amortization

 

20.9

 

 

19.6

 

 

6.6

 

 

60.9

 

 

55.3

 

 

10.1

 

Income from operations

 

146.8

 

 

137.6

 

 

6.7

%

 

372.3

 

 

339.9

 

 

9.5

%

Floor plan interest expense

 

(17.9

)

 

(16.0

)

 

11.9

 

 

(55.5

)

 

(45.1

)

 

23.1

 

Other interest expense

 

(14.8

)

 

(15.0

)

 

(1.3

)

 

(45.0

)

 

(40.7

)

 

10.6

 

Other income, net

 

3.3

 

 

2.4

 

 

NM

 

 

8.9

 

 

5.4

 

 

NM

 

Income before income taxes

 

117.4

 

 

109.0

 

 

7.7

%

 

280.7

 

 

259.5

 

 

8.2

%

Income tax expense

 

(32.2

)

 

(15.9

)

 

102.5

 

 

(77.2

)

 

(53.7

)

 

43.8

 

Income tax rate

 

27.4

%

 

14.6

%

 

 

 

27.5

%

 

20.7

%

 

 

Net income

 

$

85.2

 

 

$

93.1

 

 

(8.5

)%

 

$

203.5

 

 

$

205.8

 

 

(1.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share

 

$

3.64

 

 

$

3.84

 

 

(5.2

) %

 

$

8.72

 

 

$

8.31

 

 

4.9

%

 

Diluted shares outstanding

23.4

24.3

(3.7

)%

23.3

24.8

(6.0

)%

NM - not meaningful

Lithia Motors, Inc.

Key Performance Metrics (Unaudited)

 

 

Three months ended
September 30,

 

%

 

Nine months ended
September 30,

 

%

 

 

 

Increase

 

 

Increase

 

 

2019

 

2018

 

(Decrease)

 

2019

 

2018

 

(Decrease)

Gross margin

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

5.5

%

 

5.8

%

 

(30

)bps

 

5.6

%

 

5.9

%

 

(30

)bps

Used vehicle retail

 

10.9

 

 

10.7

 

 

20

 

 

10.5

 

 

10.6

 

 

(10

)

Finance and insurance

 

100.0

 

 

100.0

 

 

 

 

100.0

 

 

100.0

 

 

 

Service, body and parts

 

50.4

 

 

49.6

 

 

80

 

 

50.4

 

 

49.2

 

 

120

 

Gross profit margin

 

15.3

 

 

15.1

 

 

20

 

 

15.5

 

 

15.1

 

 

40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit sales

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

48,508

 

 

48,790

 

 

(0.6

) %

 

134,090

 

 

139,314

 

 

(3.7

) %

Used vehicle retail

 

44,143

 

 

39,751

 

 

11.0

 

 

127,683

 

 

114,961

 

 

11.1

 

Total retail units sold

 

92,651

 

 

88,541

 

 

4.6

 

 

261,773

 

 

254,275

 

 

2.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average selling price

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

$

37,618

 

 

$

35,519

 

 

5.9

%

 

$

37,238

 

 

$

35,276

 

 

5.6

%

Used vehicle retail

 

20,756

 

 

20,274

 

 

2.4

 

 

20,617

 

 

20,229

 

 

1.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average gross profit per unit

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

$

2,061

 

 

$

2,068

 

 

(0.3

)%

 

$

2,098

 

 

$

2,077

 

 

1.0

%

Used vehicle retail

 

2,258

 

 

2,172

 

 

4.0

 

 

2,173

 

 

2,149

 

 

1.1

 

Finance and insurance

 

1,471

 

 

1,367

 

 

7.6

 

 

1,462

 

 

1,345

 

 

8.7

 

Total vehicle(1)

 

3,638

 

 

3,498

 

 

4.0

 

 

3,611

 

 

3,471

 

 

4.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue mix

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

54.8

%

 

56.0

%

 

 

 

53.1

%

 

55.5

%

 

 

Used vehicle retail

 

27.5

 

 

26.1

 

 

 

 

28.0

 

 

26.3

 

 

 

Used vehicle wholesale

 

2.2

 

 

3.0

 

 

 

 

2.5

 

 

2.9

 

 

 

Finance and insurance, net

 

4.1

 

 

3.9

 

 

 

 

4.1

 

 

3.9

 

 

 

Service, body and parts

 

10.2

 

 

10.1

 

 

 

 

10.6

 

 

10.3

 

 

 

Fleet and other

 

1.2

 

 

0.9

 

 

 

 

1.7

 

 

1.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit Mix

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

19.6

%

 

21.6

%

 

 

 

19.3

%

 

21.7

%

 

 

Used vehicle retail

 

19.5

 

 

18.5

 

 

 

 

19.1

 

 

18.5

 

 

 

Used vehicle wholesale

 

0.2

 

 

0.3

 

 

 

 

0.3

 

 

0.3

 

 

 

Finance and insurance, net

 

26.7

 

 

26.0

 

 

 

 

26.3

 

 

25.6

 

 

 

Service, body and parts

 

33.5

 

 

33.2

 

 

 

 

34.4

 

 

33.5

 

 

 

Fleet and other

 

0.5

 

 

0.4

 

 

 

 

0.6

 

 

0.4

 

 

 

 

 

Adjusted

 

As reported

 

Adjusted

 

As reported

 

 

Three months ended
September 30,

 

Three months ended
September 30,

 

Nine months ended
September 30,

 

Nine months ended
September 30,

Other metrics

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

SG&A as a % of revenue

 

10.5

%

 

10.5

%

 

10.3

%

 

10.0

%

 

10.8

%

 

10.7

%

 

10.9

%

 

10.6

%

SG&A as a % of gross profit

 

68.8

 

 

69.6

 

 

67.2

 

 

66.3

 

 

70.0

 

 

71.2

 

 

70.2

 

 

70.4

 

Operating profit as a % of revenue

 

4.2

 

 

3.9

 

 

4.4

 

 

4.4

 

 

4.0

 

 

3.7

 

 

4.0

 

 

3.8

 

Operating profit as a % of gross profit

 

27.1

 

 

26.1

 

 

28.7

 

 

29.5

 

 

25.8

 

 

24.6

 

 

25.6

 

 

25.5

 

Pretax margin

 

3.3

 

 

3.0

 

 

3.5

 

 

3.5

 

 

3.0

 

 

2.8

 

 

3.0

 

 

2.9

 

Net profit margin

 

2.4

 

 

2.2

 

 

2.6

 

 

3.0

 

 

2.2

 

 

2.1

 

 

2.2

 

 

2.3

 

(1)

Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail

null

Lithia Motors, Inc.

Same Store Operating Highlights (Unaudited)

 

 

Three months ended
September 30,

 

%

 

Nine months ended
September 30,

 

%

 

 

 

Increase

 

 

Increase

 

 

2019

 

2018

 

(Decrease)

 

2019

 

2018

 

(Decrease)

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

$

1,772.9

 

 

$

1,695.7

 

 

4.6

%

 

$

4,801.1

 

 

$

4,765.7

 

 

0.7

%

Used vehicle retail

 

898.8

 

 

788.2

 

 

14.0

 

 

2,543.2

 

 

2,257.9

 

 

12.6

 

Finance and insurance

 

133.0

 

 

118.3

 

 

12.4

 

 

371.3

 

 

331.9

 

 

11.9

 

Service, body and parts

 

332.0

 

 

303.2

 

 

9.5

 

 

955.3

 

 

879.0

 

 

8.7

 

Total revenues

 

3,249.7

 

 

3,018.8

 

 

7.6

 

 

9,060.1

 

 

8,573.3

 

 

5.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

$

96.6

 

 

$

98.6

 

 

(2.0

) %

 

$

269.5

 

 

$

280.0

 

 

(3.8

)%

Used vehicle retail

 

97.7

 

 

85.4

 

 

14.4

 

 

269.9

 

 

241.7

 

 

11.7

 

Finance and insurance

 

133.0

 

 

118.3

 

 

12.4

 

 

371.3

 

 

331.9

 

 

11.9

 

Service, body and parts

 

167.6

 

 

150.9

 

 

11.1

 

 

483.0

 

 

433.4

 

 

11.4

 

Total gross profit

 

498.5

 

 

456.8

 

 

9.1

 

 

1,405.9

 

 

1,296.9

 

 

8.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle retail

 

5.4

%

 

5.8

%

 

(40

)bps

 

5.6

%

 

5.9

%

 

(30

)bps

Used vehicle retail

 

10.9

 

 

10.8

 

 

10

 

 

10.6

 

 

10.7

 

 

(10

)

Finance and insurance

 

100.0

 

 

100.0

 

 

 

 

100.0

 

 

100.0