Lithia Motors, Inc. Q3 FY2025 earnings call

• Execution at speed led to improved same-store revenue across all business lines, cost control, and integration of adjacencies.
• Quarterly revenue was $9.7 billion, up 4.9% year over year, and adjusted diluted EPS was $9.50, up 17%.
• Strong top-line growth across all business lines, with used vehicle and aftersales segments showing accelerated growth.
• Focus on high ROI used vehicles, F&I growth, and aftersales attachment to enhance customer experiences.
• SG&A control with North America adjusted SG&A flat sequentially at 64.8%, and actions in The UK to manage costs through productivity and technology.
• Capital strategy focused on share repurchases, bond issuance, and selective acquisitions to create shareholder value.

New Vehicles: New retail revenue grew 5.5% with units up 2.5%. New GPU was $2,867, down $348 sequentially. Used Vehicles: Used retail revenue increased 11.8% over last year, driven by 6.3% unit growth and higher average selling prices. Value segments had a 22.3% unit increase year over year. Used front-end GPU was $1,767, declining by $90 sequentially. Aftersales: Aftersales revenue increased 3.9% while gross profit rose 9.1%, with margins expanding to 58.4%, up 280 basis points year over year. DFC: Driveway Finance reached 15% penetration rate milestone, with healthy spreads and disciplined underwriting.

• Targeted $2 billion of acquisition revenue for 2025, expecting a strong finish with complementary acquisitions by year-end.
• Aiming for $2 to $4 billion of acquired revenue annually, deploying capital where it compounds value per share fastest.
• Prioritizing share repurchases when the stock trading discount is wide, and funding selective acquisitions when returns are clear and affordable.

• Market uncertainties affecting new and used vehicle sales.
• Regulatory labor cost challenges in The UK impacting margins.
• Potential impact of subprime market on credit portfolio and provisioning.

Q: Ryan Sigdahl asked about EVs sales, GPU impact, and The UK market conditions.

A: Bryan DeBoer responded on EV mix, manufacturer incentives, and The UK's response to market shifts including Chinese brand expansion.

Q: Federico Merendi inquired about used market dynamics and EVs in The UK.

A: Bryan DeBoer discussed used vehicle sourcing, margins, and The UK's EV market trends, while Chuck Lietz spoke on DFC's portfolio performance.

Q: Michael Ward asked about EV profitability, acquisitions, and US vs UK performance.

A: Bryan DeBoer and Tina Miller commented on EV profitability, acquisition opportunities, and North America's outperformance in used and aftersales.

Q: Rajat Gupta asked about acquisitions and share buybacks.

A: Bryan DeBoer discussed acquisition targets, share repurchase implications, and market share growth.

Q: Glenn Chin asked about used vehicle performance and inflection points.

A: Bryan DeBoer highlighted used vehicle focus, market share potential, and ecosystem benefits.

Q: Christopher Bottiglieri asked about used vehicle sourcing and DFC's allowance for losses.

A: Bryan DeBoer and Chuck Lietz spoke on used vehicle sourcing, DFC's credit discipline, and provisioning.

Q: Jeffrey Lick asked about new vehicle GPUs, aftersales margin growth, and tariffs.

A: Bryan DeBoer and Tina Miller commented on new vehicle GPU trends, aftersales margin drivers, and tariff impacts.

Q: Bret Jordan asked about Chinese brand economics in The UK and aftersales growth drivers.

A: Bryan DeBoer discussed Chinese brand margins, aftersales growth from price and volume, and customer retention.

Q: Daniela Haigian asked about forward demand and new vehicle pricing.

A: Bryan DeBoer clarified used vehicle volume tracking and tariff impact on new vehicle pricing.

Q: Michael Albanese asked about value auto demand and customer lifecycle.

A: Bryan DeBoer explained value auto's stable demand, sourcing, and customer lifecycle benefits.

Q: Mark Jordan asked about M&A value creation drivers.

A: Bryan DeBoer discussed M&A synergies, used vehicle conquest sales, and service/warranty profit drivers.

Q: Colin Langan asked about SG&A seasonality and longer-term outlook.

A: Bryan DeBoer commented on SG&A focus on EPS targets and business management for long-term value creation