Lithia Motors, Inc. Q1 FY2026 earnings call

In the first quarter, the company achieved record revenues and adjusted diluted EPS. Teams executed well despite challenges. Diversified earnings mix provided balance. Capital allocation remained active with share repurchases and strategic acquisitions. The UK team delivered strong results. Digital platforms and partnerships with Pinewood AI enhanced customer experience. Structural improvements were made to boost productivity. Driveway Finance Corporation saw high-quality growth with record originations and portfolio growth to $5 billion.

In the first quarter, Lithia Motors achieved record revenues of $9.3 billion. New vehicle revenue declined 7.1% with a 7.1% decline in units, affected by tariff avoidance pull forward in Q1 2025; new vehicle GPU was $27.22, down $227 year over year but only modestly down from $27.66 in the fourth quarter. Luxury, domestic, and import brand revenues declined year over year. Used vehicle revenue grew 4.6% on a same-store basis with unit growth of 0.6%; used GPU was 1680, down $115 year over year but up sequentially. After-sales revenues were up 3.8%, gross profit up 5.7%, and margins expanded to 58.7%. Driveway Finance Corporation had financing operations income of $21 million for the quarter, up 71% year over year, with record originations of $840 million, net interest margin increased to 4.8% (up 20 basis points), and North American penetration reached 18%.

The company will continue to deploy capital where it generates highest returns for shareholders, maintaining aggressive share repurchase pace while being disciplined in acquisitions. Focus on lifting store-level productivity, expanding footprint and digital reach, scaling DFC penetration, improving cost efficiencies, and growing omni-channel adjacencies. Long-term target is $2 of EPS for $1 billion of revenue.

Geopolitical environment may impact new vehicle market demand. Used vehicle supply changes like lease returns could affect二手车供需 and pricing. SG&A cost management faces challenges due to market fluctuations and store integration. Pinewood AI platform rollout may have uncertainties.

Michael Ward asked about SG&A cost management and Pinewood AI rollout timing. Brian Sigdahl inquired about SG&A quarterly performance and DFC penetration long-term target. Rajat Gupta questioned used car and after-sales profitability strategies and UK performance drivers. Alex Perry asked about UK performance drivers and geopolitical impact on new cars. Jeff Licht inquired about used car self-sourcing vs auction and lease return impact on used cars. John Sager asked about Pinewood rollout impact on costs and mid-term targets. Chris Battaglieri asked about $20 million contract buyout and Driveway platform update. John Babcock asked about M&A market and after-sales growth breakdown. Brett Jordan asked about negative equity impact on volumes and UK geopolitical consumer situation. Daniela Hagian asked about UK Chinese OEM store unit economics and US Chinese OEM prospects. Mark Jordan asked about certified used car average selling price decline reasons