Lithia Motors (LAD) 26 Jul 232023 Q2 Earnings call transcript

Good morning. Welcome to Lithia & Driveway's Second Quarter 2023 Conference Call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question-and-answer session.

I would now like to turn the call over to Amit Marwaha, Director of Investor Relations. begin. Please

President joining me second President today Chris Executive for for earnings Vice and company's President Driveway President growth. products, for statements Miller, future Holzshu, With Tina markets XXXX. Finance. are Vice Vice us you quarter and our call projections include of events, may CEO; and senior and Thank COO; and Bryan financial Chuck discussion expectations Senior and about CFO; Lietz, Today's about the DeBoer,

place subject undue and actual on We Commission. to in forward-looking any we no date statements. We are update risks differ and reliance the cause duty you statements undertake release. this Such be We our uncertainties could Exchange that to the the statements, as consider of securities risks urge made results from to which these of material uncertainties are with deem to and materially forward-looking carefully forward-looking to and filings disclose statements not made. to disclosures and those

Our a today text release refer press Please of GAAP today's non-GAAP to for to results financial include to the comparable measures. discussed reconciliation measures. references

results. We website, investors.lithiadriveway.com, quarter posted on presentation our have our second an also highlighting update investor

to With to the that, Bryan turn I CEO. DeBoer, call would and over President like

of vehicles, our far our from F&I both and original little come expectations. remain profitability you across GPUs per diluted a & and our billion, up new in earnings on margins to efficiencies joining approximately vehicles update month, and new quarter were the in focused We remained to Driveway $X.X GPUs and XXXX, than business you, everyone gain Amit. stronger Sequentially, half Thank strategy, Good resulting adjusted grew morning further plan We businesses. on towards and call. Thus per $XX.XX. expected $XXX look of In for down growth progress to for we our have welcome XXXX XXXX, beyond. opportunity to stable. appreciate our for XX% and QX, used earnings share second revenues us and growth and today Lithia

demographics is a and manufacturing partners. model market of us model customers a dynamics. wherever, vehicle By our serve that our delivers allowing products and to the with allowing of they wide services, a however customers, our customers and whenever with best adaptive provides local adjust for variety channels set a across Our diversified, stores responsive variety and dynamic experience to offering to of consistently and interact fosters and culture customers, desire. This operations

year, the over continued up gain vehicle in Sustainable on and nearly used MUVs new XX% vehicles sales the almost representing quarter, XX% momentum channel our sales. GreenCars.com to prior and of our now overall consumers profit was in gross as vehicle XX%, for SG&A also continue their to which versus propensity QX, up to for purchase. options XX.X% was next reinforces sustainable of percentage a XX.X%. explore the

results for of cutting our flowing of of the impact a on strategy. operating adjacencies, business while was This effectiveness our Sequentially, core efforts as adjusted our in XX% still through to gross overall the profit quarter. the executing our cost they're approximately and our demonstrates SG&A percentage

Finance Our to with continued over Corporation, captive finance Driveway total $X.X receivables arm, steady or now billion. show growth, DFC,

managing our and on loss issuers year-end way with becoming our systematic line by to expectations. and in capitalized well ABS we're provisions We're loan

lending the liquidity originations capital costs. improving margins, pace of balancing and are with to while portfolio, net expand the our our profitability We prudently grow

set with throughout Acquisitions ultimately in the providing details Both financing call. of operations be Chris are further vehicle the enabling and results solutions our customers sharing Chuck the lifecycle. customer-centric both strategy, convenient a our to fundamental points and later of them with regular will and ownership touch on

to continue brand mix leverage to growing us our aims Western aligns place region, consumers, as of of to the our within national which us miles we also expansion network, allows in our with and while diversifying our omnichannel which network lessen our physical the XXX Our infrastructure presence.

our our the like plenty where expand and have Central, Our profitable we focus Southeast and on to most remains discipline of the peers. runway South regions relative country, targeted in to

our & and to that core are looking our be new are we acquisitions proactively competency opportunities Lithia of can to complementary Driveway business.

Our consistent our term the plan. the in remains for investment threshold near both XXXX of and balance

or aim three we acquire Specifically, of returns XX% of and after to seven normalized or more EBITDA XX% based earnings. times to on times target XX% tax to for revenues,

our yielding to XX% now are Like acquisitions date, a success rate.

and strategy, returns the We acquisition balancing potential valuations be cash continue with our generation. increasing disciplined for future flow to in

We pace development expectations. strategy the return network fit have decide and are that our we which acquire manage and patient importantly, at within the to most flexibility businesses to

During quarter, in completed in second States, to are United billion revenues. we which the two generate $X.X expected the acquisitions annualized approximately

revenues. priority the the XX group billion annualized The we high-performing automotive in stores first $X.X purchase was in mid-Atlantic, and over where acquired

city acquisition, our regions States. Atlanta, enhancing position southeast in the lucrative United footprint of most expands of one and Our Ford the fastest-growing latest the Wade in in our

billion acquisition of acquired associates welcome our per Year-to-date, our last to acquired range the $X team Lithia nationwide to our to we activities. presence, upper the of We're growth rest I'm of revenues all billion the new on achieving throughout have of $X.X more year. target our expand and and nearly $X than to in way year's continue year. already our glad billion well the

as transactions United warrant but valuations Our may and acquiring the States, in priority other attractive stores opportunities exploring remains well. opportunistic

tenure completing transactions and revenue Selling as of by manner. make we track We're and decisions record towards of succession confidential proud a $XX Lithia's in integrating our multiple way successfully beyond. that monetization our and and timely are our in wish with executing partner planning, driven deals to long and billion sellers us of target

in finance launch, strategy initial of to midpoint Now, market the have are our will realize Driveway captive and its July make inroads profitability. the our we revenues. on on starting to Since Despite launching update our contribute objectives outlined steady in and billion the investment plan. achieve we our the just on $XX.X of division future our Corporation, headwinds finance We to Finance since potential as an top and plan XXXX. passed initial track DFC, massively the over we to partner. continues now acquired in

we the more a DFC over As its commissions. average is the at three reminder, lifetime times originate loan receive to profitable third-party from we fees relative

overall lowering our to diverse SG&A plan diversification. economics America and design international become through underway Finally, assortment the as the momentum EPS traditional traffic to an well changing by omnichannel our customer efficiency enhancements North billion for consumers the and omnichannel mobility of is revenue. across channels provider of grows presence to growth, for set abroad. continues amongst Key LAD gain a various and with consumers. offerings of produced of is every increasing of delink These $X being our automotive will retail margins $X to

by first $X.XX for every Our billion $X XXXX. is $X.XX to achieving step

home transparent Maturing attracting through efficient our factors returning to normalized growth revenue to optionality consumers driven flexibility through gross structure and for a expansion This GPU normalized key as first, our increased price in several through in consumer XXXX. Driveway.com improvements when your a first expand finally, or and optimizing SAAR manner; makes a and profitability one share in simple continuing is it our by experience new leverage dividends capital buybacks through network. and through follows: achieving directly market acquisitions, XX% environment; scale, and by to environment blended channel U.S. and cost profit value of adjacency and a more percentage XX% of in being driving X.X% DFC as a in a to same-store allocations sense. achieving shareholders more of SG&A share

We in of This with culture the EPS, future us capital billion an flows revenue in a created unconsolidated generates free industry. twice cash environment. built foundation positions $X a well higher engine and for steady flows have a generating where in growth and annually possessing cash significant unique earnings normalized state growth, amount a $X on in performance

Key physical of of buying our efficient our small, of reach factors through maximizing control businesses our omnichannel and Coast expanding locations. our gradually a portfolio on our infrastructure less and leverage future network by within West locations, our focusing as of high-performing lowering in underlying other maintaining optimizing business state mix platform, regions, divesting follows: and are with totally

save horizontals costs other XX% costs investment units associated path borrowing with continue an develop with lowering fleet, DFC including infrastructure, to from internally consumer competencies we and charging grade reserves. as other and towards will maturing up vendor verticals. and maturing the contributions headwinds new beyond management, credit Size insurance of to scale and CECL financing to pricing, Second, drive down lease rating,

normalized GPU our things or steady assumptions gross our will And SAAR we lifecycle SG&A state finally, profit These and finally, as customer above, lines. each to XX% our of including on design and are business based a structure cost for below. the a of percentage reduce to a and leverage

transportation manages a provides Lithia & closing, In various profitability. boosting experience, solutions that a and mobility Driveway creates great scale unique and revenues, customer platform

Our us improved helping efficiency normalizing cadence outrun strong are combined productivity to with and acquisition market conditions. the

and both and in billion in EPS, term. into equating is XXXX in The and the confidence $XX EPS shifting in in consumers our of ability our gives the DFC. diversified $X experienced of to translating to $XX our goal revenues us long network of and the by combination of online revenues achieve solutions the with plus team with is coupled vast, meeting foundation $X Our billion strategy solutions the durable with needs instore financing like

With I'll on we're the shareholders turn call delivering focused over value and to to our over that, Ultimately, returns time. Chris.

and offering drive Bryan the our a profitability, towards in teams returns We and remain omnichannel shareholders. Thank good efforts plan. XXXX and our to the that our with appreciate executing of forth experience an put delivering continued the on disciplined morning. We drives their on flow, operational growth, cash of best-in-class convenience customer-centric the half sustained strategic first you,

new our our business strength As service, several on optionality, structure. include sustained progressive pent-ups of in resilience to These it high-margin and operations cost better-than-expected and vehicles, better-than-expected fixed sales focus quarter, improvements and second consumer in led results. to and relates sustained used in in GPUs, interest factors a the our

new see rates to healthy as even prices as transportation investment rise vehicles We moderate continue needs related in resiliency in payments. and vehicle customer to continue monthly continued average increases demand and the for

rebuilding the will continue of availability gradual incentives relief to demand. which will in gradual continue to increases We're more progresses, to rate give all at and environment. year and also underway improve inventory OEMs consumers by as continue new seeing pent-up will support consumers inventories the selection The impacted higher give

markets our and We continued six. most South regions and five and Central or market four, to conditions in in saw outperform favorable Southeast regions Northeast,

Central also experience to continued outperformed We tepid Southwest region, and the Two, recovery locations region and North largest regions, but and Northwest growth, or or the specific Three saw One the gained our some in market regions share. our

level market or our focus improving remains accustomed to delivering macro local the throughout the of on share dynamics, gains and profitability operating market Regardless are business who leadership, and leverage cycle.

our to X.X% vehicle local X.X%. we unit ability ASPs translating performance. which market volumes quickly Our quarter Same-store these up were increasing to X% the effectively, allows to team and adjust into for to dynamics new high continuously adapt due see rising revenues and

vehicle Consumers affordable are focused including and QX unit, $X,XXX at the a XXXX to time, anticipate headwind improve for used will from additional choose remain We $X,XXX QX have in elevated New this continue $X,XXX the new car over and supply on per from massive finding influx and related in XXXX. of F&I models. demand in vehicles ability to GPUs, vehicle to incentives support new down of new the market. will vehicles, grow of

XX.X%, volumes prices decline is pace a Shifting ASPs declining gradual by decreasing used and Same-store in XX.X% X.X%. to result of rates down new revenues driven used of and recent used were vehicle vehicle improving. inventory The vehicles. interest car higher unit

are park This the inventory. partner production used benefits have total we a it all our massive Currently, our million is provide years were pandemic, from scenario three make highlights vehicles a product our of to late for units of work which to vehicle of lost products to accessed as hardest U.S. find of COVID and over However, demand XX% funnel channels off car robust in car continue the inventory XX% which again used model supply approximately lease new trades their our during and of or X being a tailwinds core volume. customer and the inventory vehicles, improve will differentiator dealer represents sales. to OEMs up declines of top our vehicle the procurement seven-year-old to

of we including which QX F&I, June, XX again, support from inventories up and XXXX, end compared $X,XXX, days to to for X% year. of days At inventory prior year. were days prices, overall take days in XX rationalize. but last and vehicle XX $X,XXX new day down GPUs several compared GPUs and for years this the time expect will Overall, the continued used, supply to was low to XX

local to managing conservative margins. outlook inventory are remained We our for our balance in demands with our and

million our monthly of over XX% units XXX to spend convenience year with to from over offer XX an Combining the the we period In during in-home online they and sales Lithia same advertising instore averaged channels of locations were optionality channels, the quarter, retail e-commerce increase total footprint unique with down experience Driveway's visitors, XX%. our XX,XXX XX%. e-commerce quarter our or up and desire. last & customers the

shopping the track improve to remains as Our to we right and brand experience. recognition consumer on efforts driveway economics on continue focus the at improving our

before. reaches without us the we to ability average to miles consumers network had national XX% deliveries be touch to never continues our store distance the shopped the expand omnichannel more model giving those us Driveway's from continue investment of for fixed times location selling vast, XX as with with our with and overall Driveway. XXX the sales, to power over of customers Reinforcing incremental

We auto towards move facilitate experience. to we are related as leveraging delivering online and a transactions underutilized network profitable more our in-home

XX% parts while and business, sales, body service warranty in which period XXXX; XX%. rising up pay, quarter, from the of sales same was X.X% strong represents During X.X%, delivered sales up customer after were our same-store the

hard our to of rising, factory the the team the from massive vehicles customers. working technicians services average our new with on trained of are With for increasing age deliver certified of coupled vehicles, demand complexity

translating SG&A and SG&A and XXX thus at XX% consolidated improvements we overall we a percentage almost in of as adjacencies, XX.X% versus have we better rate by throughput continue far reported gross points, a a Excluding see of profit reduced on XXXX, basis basis. operating throughput. XX%. into to

cost are driving our reduction improvements within productivity operating and initiatives This implies in leverage sales force. our

continues to achieve delivering gross bar time. store the of all quartile realize XX%, to profit results, even greater expect locations top we setting what Our below our SG&A to for over of

We are cost out to annually $XXX confident necessary laid million we have changes the of implemented in realize the QX. savings

are we more improving new performance, locations, consumers integrating attracting offerings. and into on summarize, focused our To omnichannel our

to plan and XXXX are leaders half operating environment on expanding in the the and executing focus back Our sales current and we'll related and the optionality our services consumer navigating and in continue of service, beyond.

to turn to With Chuck. that, call I'd like over the

with finance division over Chris. years continued three market Thanks, its our conditions. DFC underwriting Since has captive refine ago, launching to current process to align

paper fallen economy Early on higher-quality front-end put into last have To from XXX.X% average to towards XXX year, a the year-over-year vehicle used pivoted portfolio to stress increased volatility mitigate basis, this the score we the potential LTVs to in and the weighted market. FICO from and underwriting nearly general XX.X%. XXX perspective, in

lenders, the our from X.X% yield lender as captive credit of improve on time. APR enabled to opportunity to DFC combined to time able business year-to-date average the Lithia It's strategy earn increasing traditional driveway. & outperform Lithia. data, this weighted Driveway portfolio return with is same us broader and for rose at proprietary was at omnichannel DFC customer-centric as remember important assets to our a us quality X.X% core while the the our complements for strategy the It over higher part to dealership a giving

captive Lithia as countercyclical that for moves business stream positioned rates. verticals increases with a LAD into well and further and growth retention we're finance customer mobility regions. Ultimately, and diversified Additionally, a attachment robust also earnings other provides

billion. of penetration portfolio loans, grew XX.X%. $XXX the in quarter rate originated over to the to $X.X equivalent We to Turning a million results.

realized we average basis in a increase full XX the be approximately sequentially. year, APR rates to XX%. weighted point the expect We penetration For

result the along Jardine. the is yield in of rate acquired quarter with reduction focus from through units primarily The previous penetration a the purchase of on the

As in $XX provision operating the which DFC rate. loss and originating interest not In an a an margin QX, the of provision we reminder, and was taken million, a reserves, our loans at included impact CECL UK. presently million increase expense are non-cash origination posted The the $XX.X in $XX of of million. net

of Delinquency in to receivables result due a points At our the as credit the we end X.X% of from to used as losses vehicle rates the by fell previous of a increased allowance our loan of prices. basis quality an XX percent coupled our for declining in operations. quarter, portfolio year enhancements our improvement with

a consistent basis larger On the a historical the to million plus for by this sequentially than now note, XX and XX-day full $XX rates was XXXX, $XX of points, million increased originally range expect DFC expected has in side incurred the forecasted incur to second trends. quarter, seasonal Halfway losses loss and through delinquency we with year. in but

sequentially of are earnings track even we and portfolio. on in expected losses fully of are the on over a time, $XXX XXXX to expected However, realized and break is confident the to business decrease mature state million future

believe right is We achieving closer period, to bring which our time now us to goals. future profitability invest startup DFC will this during in the state

DFC has should costs capital leverage, addition, materially Lithia's improve improve earnings revenues to In time which and Lithia's an share. operating relative ratio to over per of ability

like turn I'd that, to call over Tina. to With the

quarter the by DFC debt vehicle leverage, and $XXX service. free times. generated of million million and floor in to flows cash related during quarter, $XXX the net today. impact we and demand plan new offset with year. thank and across the down from you EBITDA for Thanks, X% of reported quarter, million, driven our In of Chuck This investments $XXX higher last joining was interest result we adjusted second flooring parts ended by the strength We adjacencies, the costs and excluding two at us everyone and year-to-date.

and and cash. paid cash have plus EBITDA flows in stock-based defined income reduced taxes free interest compensation as by We

strategy, acquisitions, and internal our toward they in expenditures, XX% on return cash to directed form repurchases XX% when the with and allocation line We're XX% capital capital and are shareholder appropriate flows dividends namely in investments including these track deploy share of to for opportunistic.

were reiterate flows acquisitions maintain rating over growth investment near and The facilities. We three second our through to in the an remain capital financial the funded while term. free a and quarter grade acquisitions achieving discipline leverage time in and cash working combination committed goal to completed our below times of with prioritizing

anticipated. Through than the trends more orderly declines first being inventory, of have we resulting originally in seen half GPU XXXX, around slower

Chuck positive and cost DFC While outlook trends ability by and to larger be the top-line continue this our to leverage the loss has offset slightly to expect earlier, profitability. mentioned drive structure we our

well positioned our to are the We focused balance remain earnings achieving $XX further plan. long plan on per high growth quality XXXX trajectory of sheet work while toward and as sufficient in of and performance shareholders. in value expansion XXXX our are profitability to culture achieve the term, for the have and and our reaching profitability liquidity part we adjacencies. we preserving by over maturing our generate We growth of share our our driven in as

With concludes for I'll questions. over call the turn to Operator? our prepared remarks. the that, This audience

you. Daniel from is Imbro proceed. with question Please Stephens. thank first Instructions] [Operator Our

good everybody. questions. morning, Hey. Thanks for taking our

Good morning, Daniel.

hung Bryan, feared maybe to you some business. your GPUs mentioned I better inventory new start in GPUs and than of the the even, despite on in held side Obviously, of the better peers. than build, want have

Any $XXX in any can month. now. notable quarter-to-date? how change it's have talk your And reduction into the updated inventories right about curious, mentioned of about Just then a OEM of trended July? thinking you here here mix pace been you any on

in Great. second. speak inventory a to I'll let Chris just

I or look a reduction, I cars. GPU fall will right pre-COVID normalize. out, still shorter supply still we forward rest that early GPUs think it's of we GPUs number terms number I say, terms term, about between and looking That like the I the levels. on will new half somewhere and of good and summer camp levels we eventually are $XXX is what would expected on reductions in in once feels probably throughout it the of the the like. what into demand, think of going, $XXX originally in of where $XXX above We believe in think see

again, Chris, want December state to I think to take once talk back get seasonality, normal us the start. about that think I $XXX at inventories? the hit you and to we we October, November, normalized I helps that closer spoke

This to and Yes. large is a the Good a on six-day look question that morning, supply when then hard on an answer supply, The supply inventory is only you import Chris. mainline a from on split average an goes Daniel. at XX-day because day domestic.

is affordable vehicles. that Ms the is, affordability are for all the we takes And piece vehicles are turning consumers an what is are lower do faster make is so the that and what But know priced and content between average. ground the heavy this that on that it given a more big of vehicles expensive the than

where sits our today. So that's inventory

are, even maybe where try more from Great. reductions. the really follow-up, want examples stores you are just normalized. Was about cost about or you if Bryan, That's headcount one as underwrite SG&A, just touch maybe sustainability? And you talk we structure to than efficiencies? other call the beat out, think in a about to offer that we or when you're this to think helpful. you improving Can capturing Tina GPUs anomalous quarter time, maybe on impressed, And or SG&A as numbers results then anything I the our there was

Hi, in Daniel. quarter. SG&A the is the in this no Bryan. There are anomalies

stores underway. got $XXX million $XX More had in that million we pretty the that the under services importantly, we've now earmarked We quarters in and three think that support ago well control. all about that are

regions. you remember call the we in getting western hard we Midwest pretty hit think and to thing bit the we I which region were see strength what little which the two was different last if was upper Two, better a than see. was did Southwest, quarter, our slightly what that And the nice We maybe in expected.

getting the Now, and the bit Upper a hit in Midwest we're only little Northwest.

signs. good that's So,

employ costs two forward, productivity structural are expenses. the does I what And I those think to other about what boils SG&A strategies think think business the you that going improving our and when driveway in variable I of we about think of our cost down changes the are and the the thirds can thinking personnel make it people.

in in is think know measure they on a best we success what have it personnel They're solely you're their high leverage And getting respond to to maybe the results, a we different those on customers. how and importantly, industry. do how you What and third they to our the talent and financial earn holds, really And that higher by that's best by at also on not able is then there focus efficient. cost And them the they I sure bottom little place. organization their to quarter. our reduce to seeing some the very marketplace. people performance of get redeploy other in of focused most focus associates aren't Whatever understand we're that maybe move making the but you level. to or future the the And we start that, trust there. when within the them that's on

Please with Gupta next question Rajat Our from is JPMorgan. proceed.

to some be think morning. of Thanks like ask taking that saw question, rebounded like for any to independent base, off that opportunity Good way Great. cars. follow-up. a sourcing GPUs the drive - versus on more get between at trades, active rebounded the I do volumes? the is to first of about lower there would But Any one the and we the thoughts but the used helpful. year? the And you well. more trajectory remainder peers As more of it GPUs obviously, lower to wanted as then volumes trade-off the on a have I any Daniel's question. to leases. for

Chris. morning. Good Rajat. It's question. Hey, Great

the back consumer. for now all idea the of right affordability and the really comes think this to I whole consumer

the of I example side. to that know, what is our seven-year-old point import down where back as new volumes, our you think look X%. of we're at comes the you and five, side see our kind car that When down which that XX% domestic and the we your you down volumes. we really on on is product, But consumers product, sales sales tells thing of car on are mean, up on at seeing are that the up same the to new, CPO six. sales XX% on kind I see XX%, core your used or procurement. on that they're three luxury

we are when but have a really, not with consumers of vehicles, think dealers, high those set they're also a So right equity, negative that the are bit of think time. the demand the huge car we a most specialists going new where that's that retailer, omnichannel only provide procurement standalone identify things a I right three to the they it's side. say figure time with that car us kind to out, bought a right where help was do little benefit the should that ago headwind And the to years can at at I It's finance one being taking vehicle customer vehicles used rates, for to an at we right competitive they years afford have are as the three when right you the new years interest car opportunity which with for that or dealers, four I how the right now lot the time? ago, in market on really X,XXX customer hot have trying where years on vehicles

of piece procurement And is this. a so big

inventory XX% off mentioned, we trade. used of of is our As in coming

we focus XX% is what of continue accelerate. to we channels that to go to and trade So, get need on the the outside have

that bit, better you procurement the think taking car for you Did forward? used initiatives got you Or tough do getting remain of you're into and going it. the account like comps it, Got like see to here a it's have? some going

Rajat, this is Bryan again.

said remember, we you a if difficult definitely, comps two used had shortage new When car of think cars. coming quarters in. that that had we we I ago

you selling used about which are think X if it well, the chain marketplace as from numbers. converted stores inflated that that to cars, aren't of All used. our got supply a vehicles those in we million

years them. two they've in than comes would can hold supply people to longer to on as more on back, cars trade that to year held typically So, they a

XX So, really that frees to. is that car to SAAR the thing inventories back was returns speaking to the Chris as up important that core product used realize million, and

Murphy question America. of with Please next John from Our is bank proceed.

Good morning, everybody.

success? XX% Just a you like very your the that rate. going it integration said very think but first acquisitions. when call Jardine, mentioned you going on the is - how X% And what's you can update considered question, you maybe externally, well, clearly What us curious success. progressing. or going with and about well everything an I'm that how And a looks of other may success of about you just is not be acquisition had going And interesting that of an measure pretty you what does something that's give mean? success the

Hi, John. is This Great. Bryan.

important call remember sold, Typically, we success out XX% after at what that of think underperforming the of rate. a XX stores. we've I a success. the were it's took three lot about XX% return what smaller always would We as established the we optimized tax network, over which years, our definition to meaning we running last stores

of our revenue size other than store currently was I average when a our $XXX think business our about two is about average million. revenue store in $XX million

Okay.

the underperforming. of So, that we rid got stores were

divested. the that stores we measure do that not our currently the network, are stores within we So,

there So, X% the is X% stores. of selling that to through another came those

considerably little mean, that those but all virtually But months in above we bit tax, almost are revenue returning Yes. XX% a six XX%. at businesses for to that eight may XX%. Texas. are Kia there's after or like number speaking, XX%, stores at paid today, stores do of earnings earnings the high. examples. still those transactions meaning we generally those And be sit of we of today have months of a I

that's when think success it of So, truly sitting is portfolio the we the rate, about there.

jardine, was In trough I see terms I of is neat the second the think think it's question, that that to recovering. SAAR

see. We occurring is in have that's nice Kingdom, the a which big tailwind United to

better getting can Mercedes Kingdom, and manufacturer experiences look I entire in with a lifecycle on customer some supply efforts the think in how learnings together there's early issues. terms our reads and a what for some like work which create of is United agency retailer consumers. could the We're to great

was It's Kingdom in I great. the Chris and United Three it? ago? what actually were weeks over

Yes.

had president or then hang And that United leadership fun we really Neil perfect stage invited he CEO organization wonderful that a our a but is us organization. got Neil, to song we the out his dance a with with a our do for leadership and conference team, bought in fit And and Kingdom, culturally to. on

family of people combination forward the brought UK. there, Western really customer growth Redding, the end he we really he going be fact, and half Kingdom and California, and to In for weeks development of go actually what Redding, was next over really so. because to in able good has look and decade anyway, his or continued to - base over but his up United Europe excited to the Neil didn't two

move clear a coming in mentioned side. in pressure squeeze can I September. it to the Stellantis in in if curious if high Chrysler just that of is seeing incentives is follow-up, potential help And that of like one front UAW you it to or or sort that pricing inventory I'm you buffer strike inventory or stock any this on sounds you're is

the longer. strike on could all, It why thing I $XXX a think it which I do help John, big manufacturers, get If do may a way. certain the with to in for thing right nice. Chris, nice stabilize of be we is UAW to I mind all that quite have there, little anything help that GPUs in of declines. But are the part mean, could reason path on? our margins, those a little keep stabilize bit to you may it be hedge that bit strike, add they

say didn't Stellantis. actually No, I

mix on think good it that really is one. I incentives. and about inventory And guess So,

a As continue pre-COVID. seeing but we recover, to incentives they of what XX% are they of still are recovery, kind the general a were down

of side So, see seeing as and rebuild. I fleet it. other come you That's supply you're back, the think kind of

consumers, gets see each which consumers. try to our answer to cycle incentives continue that back of supporting to back I for a to specialists think fleet lot the finance the As going filled, our goes you're question affordability come to more

Thanks, John.

question Our Fargo. from is proceed. Please Langan next Colin Wells with

up and of margins pre-COVID domestic to are import for levels close new to normal, margins? domestics elevated are the just Thanks on is follow inventory on back color mean, Great. pretty imports, and trending? are questions. back GPUs any my the to for kind on Maybe, taking I where luxury how keeping to if that, the

I think, again, look mean, you mixed Chrysler down when us. on, happening this I bag. let's say, is chris, X% for versus a it's at XX sales what's General Motors up sales

demand. that general And the on supply the and trends so seeing you're kind of based GPUs follow

means said, Like kind and it watching I shift differential more six so a we're days between discounting import a and of days out. inventory And generally of an day on supply a there's XX on more domestic.

this you finally kind of sales basics of May, gross some X%. domestic Honda starting we in gross give profit. month think, This up strong in supply, GPU. the so were is out to falls in and GPUs. quite Imports in pretty were on this were great. Domestics And down get XX% meaning is is are We of good Oh, profit. can between Toyota not everything I amount a June. sales there.

as their are But nice is about lot just import a to loosen the quite and our is same was supply recovery little luxury XX%. down up A things imports. of GPUs the So, that down having bit too.

you if about from big that OEMs, have push now our and the turned. we Yes. right it's think

building they're turn more expected we're as to So, it. inventory,

you way to as soon is earn as So, your order ground system your competition. in them works vehicles have the than on the to faster the are move allocation,

equation of for affordability lot incentive to a there's now consumers. right So, that meet

$XX Thanks Maybe, loss, $XX million guidance to last million Got for the I it. talk it's now a if that was $XX could about million. color. DFC, you think

I think already. $XX you're close to million

and in we should that of that does improvements So, positive? QX turning mean actually already it think any seeing we as when color kind of start

is Chuck. Colin, this Thanks, Yes.

that some indices; numbers wholesale is which majority million. moved the million the of up just by are on if driving And some which of trends, recovery primary loss effects now, about around Last used first Your to and we're sort decline XX% guidance. really you $XX that of is car values. that that really profit car guidance three seeing giving $XX million, $XX of quoted look are definitely caused we correct. the were issues, moving the year-over-year, down to you being car used we've our of That's quarter, and of in of the off values the at used

In end next it'll our to terms us of million DFC. when $XXX this goal will achieving way And and turn well we a point around, then to be confirmed start on puts we comments. when our confident of really year see state that still still the feel in for that breakeven that very we

Thanks, Colin.

Our next Sigdahl question Craig-Hallum Please Ryan is Group. Capital with from proceed.

for and put industry. trends you we've to that in that point versus look on Good want of peers here more divergent one I contrary lot guys any the mean, at when you, very morning, guys. you know reported can with talked side. them I nice sequential GPU your guys, what about on it. I we're this quarter, improvement but on ask the I the I kind a guess, just seeing to finer have outperformance you used

they all for and reach to importantly, their which it stores we continue expand they'll in is bar most is optionality Ryan, their about well, their e-commerce though think, I cars. as and helping new customers, meaning that even markets driveway consumers, new our their offerings set XX% in our a how think does business local grow to them deliver

is four to of is strategy. that the reach, total ago, allows than which people's different intent vehicle I our X% think of which years original the to which population we us it delivered was expand homes,

And It's up bring an future, are we it's That's Driveway is and neat unwavering I used. it an commitment do about & things our And you Lithia it's to our Ryan as filled opportunities that other because iterating as determination. think with importantly, think both and most what there to strategy. massive about. all

think I sounded We're part at are that maybe about XXXX, Lithia's it things The today, back talked importantly, execution most today. okay? we are though phase complex. strategy, the in of Chuck who

a going a for and ultimately, to on is model on industry to ultimately, difficult builds effect to the take all are strategy strategy, see allows a in of that plan to and and what more a strategy, that hold good become builds XX%-XX% us additional acquisitions, greater Lithia goes to totally developed and be & time we've consumers the and great our will on lifecycle now competitors is strategies fully going Driveway a the the provide Okay, that about, which as right and profitable, which strategy an bring unconsolidated, are eventually different service competitive as begin be profit, through it's executing an and that's more flywheel consumer. that's safe that

into I'd in our he used procurement. we Bryan. operationally. a was kind humble Bryan's every locations of all as more the one that really big this, car leadership on Hey, used in just was pretty organization add to side and car of Bryan kind us of to that but had on in D&A tactical role dealer, transitioned the his the focus

single And now the used that the have in operationally UK we meeting Canada, of part with now organization have D&A the big a North that we is that idea with the across part then America in a so every the cars of big store, and Neil. and focus every it's single into

for focus as it's So, well. area us a I big think,

So, thanks Bryan. that, for

Thanks, Ryan.

with Kate McShane from Goldman Please proceed. is question next Our Sachs.

questions. getting taking buyers current current were Hi. seeing or more Good wondering We the seeing if issues Thanks in at morning. for were approved cash any customers financing rates with you just if for environment. our prospective you're

on average only average that the payment on about a the consumer and financing this overall the cash to Kate, in Hey, tends more be a can seeing segment major vehicle And is really monthly that. credit stressed. segment, usually, $XX. that terms shift quality an we're perspective, a prime versus increase our in I Chuck. $XX,XXX is cash is loan, mid-tier not buyers. From financed buyers flow is a But of reality mean, still

big to are percentage shift affordable vehicles, we get to back that more have haven't little a about vehicle the to consumers they what Chris are about bit really vehicles. move of earlier a cash initially on, shift shift more our affordable we able off but higher has seeing of seen towards that more financing, they a goes So, where might onto really Most started talked vehicle. the of to buyers. And

trend in big don't Thanks we the though your for So, really question. financing a mix. see

is proceed. Jordan Please question with next Our from Jefferies. Bret

guys. morning, good Hey.

Hey, Bret.

Hey, Bret.

inventory Are lease lease cars? trends you're you could origination as back? an you talk on comes push what about of OE to more seeing seeing

penetrations absolutely, Chris have Yes. from a I we lost again. OEMs really to big mean, this environment. to that focus kind is that right of that COVID in to get we I of leasing our really try think now back is that all

is board, sales the you stay big attached across yes, leasing higher so, and future leasing. you loyalty, definitely customer a lifecycle focused idea propensity and to that as consumer a to transition regenerate and into And gives of on focus, whole everybody's this leasing because

There's combat rate, able LAVs another incentives is that's interesting direct not on sell stabilize effects the consumer nuance giving on the on the a to really that working product. is to interest is the consumer truck. way product about to as on to $X,XXX be lease put get Are it's it thing multiple hood of just little equivalent the we're for less a focused you a which pricing. By as conspicuous it experience an and that to try the is So, to of the create following the manufacturers help or all important me? focused maybe, margins negotiations, really and which on factors, a more to

XX% totally sustainable they I faster I any that special. as take with at as do thought possibly how vehicles, partners actually can on our of our can happen. think sales us negotiation as on on, products which And than we're the now it away manufacturer greater as that to more focus to close because company align much think industry quite and it's new to we we that commented are building, are price a Okay. could and the an is And we vehicle XX% manufacturers as

centered rates penetration higher has which the West fairly obviously Coast, well. we're Now, as in

is Our Please from next question Morgan proceed. Jonas with Adam Stanley.

and everybody fools. It the to on like It comes making total Thanks, you naturally skeptics Bryan. me. to for look comes team Bryan. Hey, me, congrats and naturally the

Thanks, Adam.

questions. Two Yes.

in can in boosting between you in First, looking of of affordability used, the choice would like and curious at it would but the I interested of bit volume prices. the be team market know seems margin strike the if terms prioritizes I where what do your you nice some a forward versus a sacrificing just due sacrificing gave going some the toggle, GPU to GPU on I buyer to you be protect so. leaning. while higher to

think, make way of we I affordability model the our designed that have covered. Adam, is levels we all to that sure

we if a the up they don't So, category business, the way to like XX buy product, talked afford we're they the not business. all goes that new If which core years a certified then don't get buy in get product right. they car, they old. that Chris move a can't core to to. we value If car, move don't They to auto,

affordability and payment range, at unit the if of if a retailer, are on a don't averaging think, of mean, much the because as a broadband So I affordability. about retailer a we, got I differing we that such unit leased end worry they're you and a financed. range as they're do BEVs about as top cycles, offer a about the basis $XXX $XXX

able which seven abilities as be customers go that they're lot about you all over with $XXX the to to way product we portfolios, then greenCars to bucket, quite down their eight-year-old don't than average an maybe payment. manufacturer to as and cycles deal maintain A retailer does out. driveway Lithia, a years the when much the So, where have of less a thinking is different of within as

with Ron Our from is Citi. proceed. next Please Josey question

Hi, underutilized All thanks. Ron. an right. has network. He

phone well. not very We're is cutting hearing your you out. Ron,

I'm Is better? sorry. it now

Yes.

Oh, great.

Sorry, just little made was to the just broader just wondering a more talk you online if network about can bit I improvements the for chris, you've [indiscernible]

of part a Okay. we that. heard

I about think you is Bryan, were this asking - our network. the underutilized question

design our were same did this, of thing this our utilizing in part We eight, twice we A ago, the design XX% is I just, of only remember gain online, a inventories, our meaning as a meaning think a of we could third about with nine more when to we're capacity a went years the cars about our that company, part service going customer expanding we could most conquest lot sell total utilizing greenCars. driveway our lot cars storage on of more infrastructure. capacity through why side, our of levels okay? why by service pre-COVID or original in-home and importantly, a many recondition and consumers. of were to we or we quarter part reach a is business

we And sit really I think that's today. where

that. of terms in think outside I of network the

of hear tried profitable to basis, the in little country our away and have on from attentions Southeast saying. in diversify really our South a our regions the domestically XX% west, normalized okay, out of which working to bit Central, focus were the and tried you the number of businesses least well. and the one didn't what in a more is We I purchasing that's

is Maybe, Otherwise, this just if asking. you better. can hear me now, maybe I'm

Yes.

Great.

Sorry about the connectivity.

if have I greater spend, Just I a seeing it was never transition given awareness think the overall, this of comment shopped I heard I XX% growth [ph]. XX% was e-commerce in just units, more advertising and result think was to wondering national the

would in you, Thank on any So, that e-commerce growth XX% be units guys. insights helpful.

you. is Thank this Yes. Yes. Chris.

leverage how whole our consumers. be the for we omnichannel the experience continues think on focus I do big to

a channel, our lot and of advertising. that greenCars and direct-to-consumer and both lot And a advertising were channels store was also so e-commerce that do our business the driveway XX% we referring of our channel, to online

Bryan right be customers our time, as We leverage of our kind figure wherever, however. point was facilities we and out at whole so can to And what want idea where any way in continue of most said be us effective way the do possible. to in the to exactly that whenever

continued for And us. push be that'll a so

we're it's get I Lithia trend think the for see a more platform going transactions we'll time. over as & entire e-commerce Driveway continued that to

Ron. Thanks,

with question final from Whiston David Our proceed. is Morningstar. Please

to David. I group, And for everyone. GM Hey, call lithia about Question how store be they leadership? Lithia all that think if it the in just GM and you of Partners your about the what amount talk on large Hey, that. monetary? a stock, Bryan. you If Hi, are gets for recently I'm what that award, senior incentives sock Is just Is a qualify want store bit. a Thanks. prestige the could it that? beyond to with main curious,

as You our is the what they is about monetary bet, our light get stock, which are ownership twice though for David. guiding you special. stores. they much key Most factor in importantly, all said,

to They get they big They new trip, when once visits, get deal go a So, to the comes get to they to it a set year. mentor consumer on or like policy people. do optionality. which get to is a it instore comes tone to

is help to growing, that them our part the to they go basically with meaning anything or and store. and to okay, they assistant Campbell's they get be an choose of or get XXs own a GM act behave dealer part costs. the manufacturers, do look of They guide are They neat they're to like which or involved Nada their can us future. Nicholas now be members many also reduce multi-store something to groups. with to underneath them LPG like The now have that our helping leaders, is ultimate We

of then XX% and our for achieve by Group with people, stores. qualified that and goes that, our to personal is the autonomy oversee you okay. of and people at value our about to of actually be two, of of qualify, epitomize powered every three So year with them full award that. to also at. because take stock value that And to that stores, ownership, have Partners that to they're the they XXX% we stores before our of now, that businesses that mission growth a goal maintain us lithia to or There a And give recruiters we're back level. Today, our you be distribute leveraging the additional group member have starting able comes once you of to win or partners them. that level are LPG you or years three, their reside great once we're currently cost costs you're four partner, member five

for for look forward you us and your opportunity. We So joining in again, thanks, question, to talking fun October. today. everyone really, Thanks David to

comment. a to I Amit turn back the over would conference closing to for like

forward Thank stole guess look my Bryan us to soon. you I for everybody, joining speaking to words. and you, we

Thanks all.

day. good Bye-bye. a Have

you. conference. will This today's Thank conclude

You may at participation. for lines this your and time disconnect you your thank