Lithia Motors (LAD) 25 Oct 232023 Q3 Earnings call transcript

Good morning, and welcome to the Lithia & Driveway Third Quarter 2023 Conference Call. [Operator Instructions] I would now like to turn the call over to your host, Amit Marwaha, Director of Investor Relations.

You may now begin.

Thank you for joining us for our third quarter earnings call for 2023. With me today are Bryan DeBoer, President and CEO; Chris Holzshu, Executive Vice President and COO; Tina Miller, Senior Vice President and CFO; and Chuck Lietz, Senior Vice President of Driveway Finance. Today's discussion may include statements about future events, financial projections and expectations about the company's products, markets and growth. and results risks the to forward-looking could uncertainties statements are actual cause materially statements subject and to that made. Such differ from be with those in Commission. disclose risks uncertainties deem We and our Securities the to filings and Exchange we material carefully you disclosures these reliance to place and forward-looking statements. We to undue consider urge not on as date of this undertake to any update the We forward-looking statements, of no duty which are made release.

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

highlighting presentation President We DeBoer, third have updated I the an With also turn would Bryan to and results. posted CEO. on call investor our like over to website, investors.lithiadriveway.com quarter that, our

call. of momentum both sequentially, to everyone the diluted vehicles, progress F&I to Thanks, QX, today $X.XX. were share up & and month you sales We update towards us adjusted new the X%. down In margins Lithia $XXX line down Amit. resilient. Year-to-date, growth per come grew resulting XXXX, GPUs morning, approximately quarter units Driveway expectations revenues up improved and appreciate per used our or same-store led welcome over Good Sequentially, vehicle by joining initiatives opportunity and from in of our GPUs for with up in new earnings XXXX. our Overall end and to on XX% of X% revenues for new aftersales business, our remained the while vehicles have XX% strategies. from and QX billion, long-term earnings $X.X third

domestic to and meet supplied well customer brands demand vehicles are We the across new year-end. throughout parts with

operations, gains across and other both we profitability driving focus vehicle on are in continuous and while adjacencies. teams our growth efficiency DFC Our

the autonomy manufacturers. tools Our giving is adjust store market local and and diversified, to and dynamics with flexible teams our business model

vehicle with that a This for whenever best ownership experience of their varying needs provide to products a to the the and needs solutions and create that to wide to throughout fit they services delivers allows culture and us responsive wherever, however Our access goal desire. variety life customers is customers is and possible cycle.

our expectations in expectations grew currents billion. the Moving markets. and has shifting receivables operations. ABS been Corporation, in to QX with portfolio. and The steadily has loan growing line their managed provisions to financing prudently or with Driveway navigating results credit as DFC posted rates in $X.X DFC, of on team Finance line loan and The team methodically loss increasing the

towards on call. At expanding is will both of expand and Chuck late transparent. further the remains next move track Both originations. improving details on are as consumer the operations sharing liquidity strategy of heart the be convenient year gradually quality our later to profitability margins, vehicle in that pace and while solutions Our Chris manage plan and of financing results and we simple,

returns for on unconsolidated acquisitions to that complementary after-tax looking remain return Our accretive XX% and disciplined rate are will being a Life-to-date, in opportunities XX% to that We designed we organization. revenues an which memorable our development our more, strategy convenient can unreplicable. Acquisitions to XX% experiences, XXX allows is are meet of capital EBITDA. improve as acquisitions industry. network generate of have over we XX% Xx to returns thresholds or miles over for is that and time, normalized our yielded and target X our XX%. our more after-tax an impressions, and business. of core of returns better or We're success network design leverage and expect competency Over within physical us virtual to infrastructure. and this to more We our be a opportunistic look ecosystem consumers,

are expected $X.X approximately billion they X completed States. revenues. $XXX year-to-date, we acquired in quarter, annualized million third the to in revenues. And over During generate in Combined, United acquisitions we've the

design Pendragon Technologies. Pendragon step purchase executing I'm is impending announce transformative U.K. Motors, the a partnership the with Pinewood This In Fleet towards to PVM, transaction on Management pleased crucial addition, of with and business, strategic or with brings it our fleet a United footprint and grows our system, DMS a long-term CRM innovative profitable footprint further in highly partnership the strong Kingdom. into and finally, management expands retail and our

run future DMS expand are annual presence. billion addition excited partners expect worldwide like to revenue We to We'd $XX pillars, Management and family our of or global Lithia our X business. FMC, Company, to to with we as our new to and grow our and the approximately Fleet rate our fundamental welcome

As the a in billion per of $X $X reminder, we acquired year. target range annualized to billion revenues

our primary focus remains network and network building U.S. out strategies. our on complement Our

proud our beyond team's and are track We make record integrating billion and revenue. multiple executing as we towards in our transactions of of $XX way

adjacencies overall our of launch added in foundational billion $XX acquired to Since Moving the transaction the of and Pendragon on revenues have we will is execution long-term important strategy. once plan, completed. over our the

captive the In have and addition, finance progress our to profitability our contributions line full our and the Corporation, Driveway potential Finance top sight as future. division, of in steady make continues to partner finance to realizing

XX% the preferred quarter, diverse over growing omnichannel set loan sales its may progress, to compared XX% commissions. Shifting making across relative the to XX,XXX third-party up platforms. on fees quarter, our MUVs units GreenCars, by up in Supported from products over digital services, originate and last XX% track grew new a international needs meeting up to while omnichannel we life online our We're cycle customers' the across to more from to year. education multiple steady the by you As LAD XX% the at vehicle recall, digital throughout sales for of third DFC transactions lifetime sustainable become in is remains receive accounted channels, of average provided provider 'XX. we Xx the profitable and adjacencies. of of ownership in QX the total vehicle

of optionality scale. home; to we integrating X-day opportunistic return by for now growth improvements privileges Combined, in through attracting with achieving disconnect through a us EPS higher a billion and up regions of the $X DMS in and located EPS. on XX% of billion $X follows: structure channel diversification Midwest, are gains $X well environment, $X will revenue growth diversify efforts ratio and will us lower margins the sets vehicles; XXXX. This can of achieving be growing significant our now and see these Our same-store expanding and shipping plans profitability third, GPU second, improve and through and underlying and with ultimately have of SG&A on Central optimizing directly our profitability maturity change and further cost scale stores a as positioned educating portfolio clearly and a a the path shareholders $X.XX additions, environment; in design transportation filling focusing and SG&A control and driving of normalized XX% fifth, transparent your and normalized to our larger for few revenue first share our acquiring the below every network; billion of efficiency, steady new both Driveway in profitability latter X-price and growth coming revenue to opportunities generate totally our continuing by underway, U.S., and the share of while of from a through every years. to normalized for gross In $X assumptions, leverage return factors optimizing our to in expansion, X.X% FMC electric levels and driven XXXX; of and environment omnichannel state now share revenue market mobility with market through our GreenCars, through seamless $X.XX achieving international in and platform a of U.S. growth our a acquisitions, namely: combined businesses blended Southeast key will profit of through SAAR in by our and where our customers percentage network other consumer to penetration Key of increased above DFC, continued sustainable of fourth, within capital dividends adjacency, the half future are South to our verticals. buybacks. The experience first, ongoing expand as continuing consumers combination finally,

Second, financing with maturing and reserves. the CECL with DFC of associated up headwinds units XX% beyond to

mobility internally Third, competencies life as costs through as a pricing, unreplicable the credit including Driveway reduce deliver and size scale, leveraging closing, rating. lower and cycle our profit and by structure percentage And a cycle from great to costs consumer borrowing ownership the provides management, vendor to maturing other finally, we life SG&A XX%. customer a experiences insurance. In will develop fleet below horizontals, save throughout contributions to & of Fourth, increase solutions transportation drive through scale. Lithia global unique our software, at customer share continue an charging improving a and infrastructure gross towards captive down investment-grade our that of wallet cost to to platform and path

consumers design like our teams vast and in-store of eclipse solutions ultimately needs a to term. and of revenue revenue experienced DFC. both us Our nimble gives of with meet combination with diversified, to coupled the is financing online durable, strategy solutions, and The $X ratio over for EPS in the long midterm confidence the produce billion $X $X.XX $X.XX in and every of $XX in ability of our billion to and

place, elements the of allowing design execute. to are to our that, to do do of and like what I'd securely completion all With With best us for, call the over are Chris. now in Pendragon we original and that's known transaction, turn

Thank you, Bryan.

that United unifying of to over with will early the like we be the Pendragon represent. brands & I'd what provide strongest Kingdom platforms welcome dealership the operations associates X,XXX off, an U.K. be to one our will with build market in in XX% to First at Lithia the share team Driveway

commitment opportunity we across bring our team growth Our solidifying to with of his Neil powered people have that by regional Atlantic. was With are the partnership, mission the strategic well this plan, Williamson, that our we on ensure the vision president, our of remain U.K. in performance. to local and underway the cultures journey. Since leadership United high inception achieve ensure market to at level empowered whether entrepreneurial States, the United have the centered to Canada Kingdom, the our that organization positioned would our or to

choice customer-centric experienced towards remain be whenever us the our retailer and future. positioned committed customers remain operational of to leaders drive regional seasoned wherever, desire. however a to the Our to or delivering experience We

Focusing and best-in-class ensure create returns provide shareholders. on always we our will that solutions to sustainable that our customer first provide growth

of demand it COVID-XX Now over consumer to XX supply OEM because we remains the the in million full despite opportunities at caused the North rate of high production. American relates sales the believe and strong from production environment units Overall, as We both vanished that constraints. stages of a vehicle are for quarter. late that service interest recovery and product pipeline

consumer average to needs APR price up monthly levels vehicles the While personal all incentives and points as continue remain XXX is continue accelerate. year-over-year, to the average invest consumers basis payments over transportation and financed stable in at

While production channels. This related a having a rebound in used new the diverse highlighted procurement was pressure approach disciplined and X,XXX depressed production and on of the put to a trend specialists used and network over procuring has inventory vehicles vehicle multiple benefits availability. vehicle long-standing impacted, from

age of years up record ASPs car all strong due affordability of aftersales increasing the and have revenues for vehicle to levels X.X%. the levels tailwind increasing, with and to operation X.X% number unit Lastly, units X% come. Same-store the remain deliver rising volumes at were of parked customer-centric new we will in to the to

$X,XXX were F&I, including XXXX. QX year down in this $X,XXX of QX GPUs, of vehicle $X,XXX unit, in per and from New

in trend SAAR We U.K. vehicle new reduction U.S., and further in GPUs XX Canada the will the with return in in expect resulting outlook our in next to continue, line levels to historical that months. this in margins

to in unit volumes supply slow and to at been inventory that X%. of XX with particularly is vehicles. improving. reduction X% revenues ground. Shifting North used product, declines. unit were Despite strike the QX for network vehicle decreasing primary XX% and over New days decreasing inventory the our years the for unit imports old, are to of XX% to vehicles supply makes for make vehicle remains several vehicles OEM at X% vehicles days the trade-ins used vehicles or our XX driven is compared Same-store was X by value Core car vehicle the up of down days days Used price of which headlines DX XX years XXXX. lots our to XX reach in related these our year-end sales, on of and healthy ASPs America, amongst High new up auto, the availability procurement declines supply demand in days has later-model and channel X panels. across

of reinforces from enables it only put that regardless being of economic meet to conditions. competitive advantage procurement demand, this dealers. XX% customers new where top-of-funnel we The of franchise also to market significant dealers While the consumer competitive have provide to over the fits car purchases of advantage channels coming has us transportation to on vehicles are budgets pressure needs their available

low For are but including down GPUs $X,XXX, vehicles to overall F&I, and supporting due Overall, last is in used inventory year. vehicles, ASPs environment. GPUs this XX% were seeing when affordability for consumers from financing supply procurement pressure variability

normalizes, We used XX was expect vehicle days compared Vehicle as GPUs last XX this to interest rates inventory to inventory supply days settle. Shifting to fluctuate time days year. levels. supply

desire, vehicles and span create XXX the size and our customers experience whenever worldwide, soon give they optionality desire. that locations with over benefit and customers leverage however massive will scale network and we as service footprint sell ability combined which will and physical the shop, to wherever, of Our

spend As remains quarter, offerings. distance omnichannel continue represent third to million stores from the and online are & from work we cost Brand advertising and and XX% we that XX% are an an of as Driveway's channels meet in unique period Bryan of sales the average be miles, most on product e-commerce now of our now the and down customers a visitors, Driveway's last our retail year strategic services or Lithia before. The shopped of the innings still dedicated needs, same towards XX.X mentioned, track to have of early of towards deliver and XXX provider experience increase Total creating improving never opportunity. In vehicle XX%. us averaged we we growth refined consumer unrealized with diverse that consumer shop international this business. set products the with transactions. is a as structure recognition rightsizing serviced work to

more provides ability the customers connect expand fixed to our the as XXx with As the of reach physical footprint we the and each grows, investment location without power Driveway.

delivered sales, which points. and while our parts of was X%, During rising body increased aftersales service, gross XX%. strong the up Customer overall business, basis margin pay, and sales quarter, represents same-store profit up XX% XXX warranty were X%,

to and omnichannel a As the the age technicians new continues continues will certified and the vehicles asset will of only complexity our coveted average higher trend vehicles of to increase, continue factory-trained to our solutions. be that enhance

basis. We adjusted Excluding XX.X% in productivity, SG&A SG&A engines was drive will In profit be driver-related closing, of dynamic well our positioned term. technology, scale overall with focused growth close a with XX% consistent SG&A which personnel quarter on and omnichannel gross as model the at catalyst percentage consumers. of XX% most of our costs, the last overall the is down costs, to where build versus long remain to team improved to to needs on to meet size a operating reducing combined consolidated reducing one our

to on fully in we that on will $X our With in every we execution goal delivering and call continue I'd the EPS focused created, have that, in to yet have of scale capitalize exceeding to turn size stay for we revenue. over like Chuck. $X While results to the unprecedented billion

the quarter Chris. The segment a $XXX million Thanks, loans and quarter our the as another ago. competencies. weighted executed XXX core hit an over prior without points FICO weighted and now quarter XX X and points impact APR exceeds in on XXX. was average and DFC This to the We loans credit operations as the basis points portfolio quarterly quarter operating basis originated in XX%, to increased financing losses billion. from quality a our hit narrowed average our in quarter $X originated we year disciplined from milestone up had the prior achieved

prior weighted quarter average front-end XX.X%. LTV addition, In decreased the from slightly to

For the move of Lithia rates monitor to and we a overall lenders and being the ecosystem, increasing the our by taking We underwriting quarter, also ] yield impacted vehicle and in due from by with standards from had on to. Penetration DFC's are the to with we top-tier [ new & Driveway's extensive that rate structures declining rates benchmark auto quarter, in OEM the captive to our XX% consistent network. focus rates quarter. down penetration line competitors was second our mix increasing primarily in lenders, lending offered X.X

As have such, practices volumes. DFC's lending not LAD impacted sales

volatile net end warehouse issuances the amendments Net decreased average quarter interest capital of $XX.X quarter originations stayed via maturation The funds loans receivable the to quality and have impact from structure. to million, million of Third in quarter. prior ago, increasing quarter funded and our rates provision and portfolio as increased the of our along $XX.X from loan margin Cost losses current of from weighted to percentage originations of volumes the macroeconomic of our XX% as outweighed were moved for the improved We flat portfolio flat our as the a at facilities the from for term credit of a X.X%. year higher. our X.X% X.X% origination reflecting environment. XX-day now facilities decreased at the down warehouse credit quality. allowance benefited recent ABS expense of delinquency have with APR prior

early by for recent operating financing more the pricing. of million decline vintages performance at that to year-to-date. the negative in XXXX most million an expect from headwinds exposed and vintages the of resulting the segment Overall, We vehicle offset loss XXXX losses will XXXX, that operations are quarter used early $XX.X the and $X.X had sit the

will latter the start-up still year. in are profitability to a we phase. that and to We break our and exiting profitable on next in monthly tracking half the basis of path towards confident be remain We XXXX even are

earnings portfolio mature million this fully future With base. LAD in DFC call to state LAD to a turn We Tina. billion are from and I'd revenue that will realize the confident a $XX of like that, $XXX over

gross Thanks, In a joining in offset plan ended associated over the floor we of returning adjacencies. debt the everyone, a with and for third with second to quarter, quarter new Xx, higher quarter. million the leverage, the excluding net of and trailing little Chuck, interest and supply, by new and $XXX and driven us today. XX-month plan at costs EBITDA result impact by adjusted X/X vehicle related for profits floor strength period. was This the of thank service We and our declining parts, vehicle up with $X.X you, reported billion DFC, turn from investments demand

During flows the quarter, we million $XXX million of free $XXX cash and generated year-to-date.

We continue growth disciplined our a balance cash as generation to maintain plans. execute sheet strong flow we and

Our XX% shareholder repurchases XX% the investments, and return they're and of strategy capital form XX% for expenditures, toward share when acquisitions, to and internal dividends appropriate capital allocation targets directed including in opportunistic.

and Our even in to during with quarter. We're discipline ability financial cash We capital investment-grade and using through expected achieve our completed through targets an our the were fourth acquisitions operations below flows to leverage with rating Pendragon funded occur of over working in purchase quarter the the from facilities. confident maintain free our Xx, time.

However, our near and strategy. prioritizing in to drive are the long-term we growth term, acquisitions

strong, is strategy Our investment sheet structure. fund they while maintaining a adjacencies to as and disciplined goal in mature the balance growth

annual expand markets our in cash day significant invest consumer-centric unique flow operate the the growth for cycle. acquisitions are ownership strategy existing in build deploying that our the out We our we provide the business vehicle of and generation life as X. in of resilient and adjacencies capital accretive synergies our network, on solutions towards full we of to cash ensure One see ability flow elements is our

to revenue the expansion LAD's revenue $X.XX EPS in in $X in every towards $X Our per term, for team have in and earnings is producing share headed revenue our per to generating and longer billion $X.XX to margin achieving earnings ratio goals share.

to our necessary achievements coupled create call of concludes our to the over talents I'll This questions. give few With the for achieve over tools audience by of our demonstrated years, culture and us shareholders. that, our plan the and remarks. for value prepared turn our the high performance, our past As the teams, growth Operator? with

comes question [Operator Instructions] from Our Imbro with Stephens. Daniel first

stepping closed? quarter. to to least slides you still or I a close rule yes, to the Bryan, to keep upcoming What bit. a in asset. guess to there's accretion, important I'll back different pieces? of question path system, for there's of the said the from What but you you X lot opportunity follow then excites about you keep near-term in in on focus Can maybe try on there's the the the rationale? it you X Pendragon assets you the forward of pieces are topic, to most? most or mind? And technology, the things strategic near-term view the see There's just do of Pendragon? just growing fleet. it fourth What provide I are obviously at What maybe more strategically dates the you the expect the Can to getting Pinewood deal detail longer-term all financial and as talk accretion wanted kind how the

think which which of XX% they of Absolutely. is vote a rate, United a XX% about got hours proxy saw, there was Well, of the We -- the exceptional. results X approved was I approval were There that of and is it voted, in were shares as battle a actually shareholders battle circular outstanding the instead call final wonderful. Kingdom. you at it ago,

really I ultimately of future answer sees think the the deal. software-as-a-service and exclusively approved company everyone So our right is that

preliminary should we that expect called of work, sailing. worst a closing, late upon what's of we So the is but clear from left it's sometime QX, be transaction. dependent expect, case FCA But FCA part this point has approve really QX, and approval, would the all we've done all to in overall forward, that's our part early

will obviously, releases, quite to quickly Berman. software-as-a-service saw and Technologies, company, Now may the led marketing grow the company going America. But globally in outside is He's the multiple our of point, have components. of that North to driving and get grow push Bill press that And you software by once Pinewood big growth. there's be we as some for

in have that with to as That joining well the XX groups phase the be growing across Plus Western have forces Kingdom major the Europe. top company will gets us as X that we'll of the United likely the be We X verbally well. join most us of now. as committed software X platform other

million the a JV, related we're year able curb there's stack X live costs going to lot to approach of before tech our different probably And there. attack our monetized. our how about attach out a lot It's before fair, American out development of to North we what companies basically and $XXX of of which it and today plan the than together be is is something costs to to more and, ever glue that. or be truly that data terms In get strategy it's a pathway to those importantly, are and a a some all stack, fundamentals most

So X service called a to and business, this. and and retail business the for on through a had think we fleet future company, when to we us X built high parts so management why transaction again, of Vehicle synergies X we Pendragon then which real the key our divestiture our look at own Obviously, And initial into that pillars the it the or why it's well is which our profitability future, software vehicle get PVM, a to are as Pendragon established. vehicle or to as of an procurement and high cost Management, pathway allows really important leverage automotive and secondarily X structures component such that. is, is profitability massive that

market billion high-line brands presence of the along rounds Now came revenues. mainstream nice as dealerships that in it XX% That's United with really with a out built well high-line we'll that our lot on $X.X within as Kingdom dealerships almost have. share some

our our So our is we with our to our holistic okay, network in $XX I America that we're for the in long-winded, United was lower really North true of look which adjacencies that, BYD, network the and as would is VW, Daniel. $XX that's have platform billion, maybe build Kingdom customers America, about and North Kingdom that continuing say, grow again, I follow-up. will build we X/X and of know billion in Toyota, a Hopefully, to in maybe the have the which country springboard and of reach now United has. Outside Pendragon the probably really cycle. that already growth what optimized looking that covered out to focus, to life in part a limited there to, quick for at

did cover I just then follow-up, quick if on It it, just yes. And maybe U.S. a business. the could,

strike, of October? We've With here availability What and seen you into have heard progressing decent domestic have exposure. the ongoing maybe you down. slowing parts anecdotes works guys issues inventory discounting as

Just how look in here for and you the puts that are rest What planning guys are the you as of at from the quarter? takes fourth the year the strike? ongoing

Great, is again. Bryan Daniel. This

supply at consistent. in the not, sits still those are ground, still inventory or And transit, of before on above sitting the we Both were amount it X believe same numbers days okay? our XX strike. ago the importantly, most think DX I weeks we're

the we a year So and look to find try ground. pretty that into we going we'd middle strong encourage

got we've sitting inventory will So there. I some this. QX, say in in future, out the

the of If only one Lithia sits Lithia international let's remember have and unit XX.X% go X at at as sales, now as was expansion time over with and you luxury And back, sales. well And with flipped X/X type ground. import okay? Today, X domestic its domestic as some on it for And head. the now domestically, again, used units nicely we to. weeks. we as expansion next to don't the right we pretty sit So reconciliation hope on unit the exposure we've much

for your in on availability change been And side, parts parts the progress? has any there service

on Chris, parts? you have insights

Yes, we've the of level highest seen inventory it's have last Chris. we in Daniel, the Yes, X months. parts so that

that ground, think, the production of kind line look the training to the is lot of can ramp-up of parts we in I make a right preparing what on as done on and now us many coming like, I sure going understand So of on for that in kind overall stores into our expected No possible. to there's what parts the of decline parts sight has as kind those going that's given coming quarters. keep of

more I we have that XX%. really when of seeing that you're too right strained. the think kind related up early overall kind warranty But the being judge parts, on parts is to fast-moving supplies special parts, impact on are now that pressure special of warranty

Our next John from question America. Bank with Murphy of comes

follow losing sales DX, I stand? because tight to up not many inventory in that of inventory fulfilling of or do the question. your does just Outside how wanted U.S.? the on kind you And of you're inventory how that think

Yes.

So think I around is to used. high is really right it affordability. Demand kind now of it comes it, is really happening for What really for down demand Demand news. high is high. is when

And you payment still really is FICO we're going score about price we the staying of have consumers XXX. rates less managing so is majority -- point up, have think average because our when -- payments interest a overall than What flat.

of I we And XX.X straight X vehicles the continues getting pre going decontented product COVID pipeline. to mentioned production XX overall in But back which as other bit, putting packages, up million to the of a continue SAAR is so those that drop XX you're on the seeing with, see maybe kind vehicles late-model million, production, level as in of payment pandemic. little market. push to saw side the a coming in for think trim units that that And that down lost a is ASP years, now of on by kind million but to new kind dynamic we their you we're the are used prepared through is lot the that going I remarks, into strain of manage the have dealing that customers

really to car on in where are come because higher a being so of fill dealer, spots from options not is XX% that where those least massive us being vehicles it fill And our advantage top-of-funnel allows we paid not gross. be believe but new buying trade at a the vehicles prices to

new going have used whether benefit quarter continue of those are is we that continue some And kind fill to will side, on consumers go to which car volume, the recon gross, and of used move prices so pressure it it because just just probably saw purchases out into the F&I does us as on car to balance holes on and cars. this between benefits you or where

some as well. you if taking so to Can slowly you that could SG&A rate think On attach or SG&A sneak as new sales about SG&A us come And how incredibly lower I down, on specific attach comp attach actions remind of without you rate natural GPUs here? on GPU, X there's rate or GPUs follow-up. fade any execute kind SG&A to

Yes, John, it's Chris again.

this whole on we in focus expect there big that the is throughput. of is line. fall up, idea times when bottom expect we Our throughput And gross good going to really to XX%

are thing declining to going apply Now a the in when we market. same should

associates aged, we variable about GPU, we And quarter. think that's a maybe I in the still run into our $XX million year-over-year lost to is like. as $XXX unused, inventory so sales expenses The overall in that put you pay were specifically of we as on about XX%. gross not down move pressure profitable when million, opportunity lot you

does And moving. that disconnect a on so we're certain short-term it products sometimes provide

we're and focused in it's year. on. next is pay above-average QX that I And continue we're technology above-average into using on. -- mean, to to to And some to productivity focused push we we're have opportunities that going pay, so performance to what continue there something drive higher through

from comes question Gupta JPMorgan. with Rajat next Our

had a question performance Driveway I in the just quarter. on

$XX to Driveway in the million the million. the remarks from that would dissect the to be more SG&A gross, helpful. the like mean, to flat mentioned were we sequentially. that like Any progressed headwind? coming Was assumed that through it You $XX color curious prepared Driveway, an down, how excluding quarter. losses to Previously, stayed performance I had on incremental that million SG&A monthly maybe $X

This Raj. Sure, is Bryan.

I rate is similar continue importantly, came bit. make think down on the most used burn progress we levels in profit primarily cars because a gross Driveway. little to The

a a curb We able big greater okay, in become really consumers, points, I have for which mean, is to Ultimately, over a been be to and portal to and little expenses a ton. to we our equation XX going Driveway able touch -- create change our move. by that's intend XX%, Driveway about

become finance cars the achieve able probably they unruly month million source, not unique it that. We We're through financeability are actually to like traffic a achieving today, really -- amount And empowerment needs than experienced X an visitors over we source it's that traffic because buying handle. can it's people and which through of more almost are there. for Driveway a getting is site, that getting the of because the we're and they to more we're that on them but the that convenience, simplicity

is a other of to marketing extreme producing happening got between it's shopping those a little Lithia only and our And There's cars $XXX,XXX at the to those stores. but and all neat we've and cars learning that, work unique do country. what's the XXX,XXX unique be of Driveway. One used about on a can $XXX,XXX, special we on pretty extrapolate they're greencars.com it's month, in doing on GreenCars you now say, things. numbers little called in month and themselves and buying new X% okay? other and note side visitors. on GreenCars at spend are So educating incubator over attribution X,XXX cars this visitors and some little and some there is Lithia We rate about sells very If see

more on times could be units side working transportation. XX,XXX whatever process move level we're So educational begin of X,XXX, extent to okay? let's GreenCars just take that to some more able and to you to sustainable that month attributions consumers that sell, some XX also monetize the to as GreenCars So a get to to have

way just ask change availability DFC year customer in other or for guidance the flexibility your then widening guidance XXXX base? Benchmark fourth to financing some have We've that Does Got around helpful. in on way Or in seen up. spreads near DFC also the any it. term? ABS rates And thinking your some penetration in gone DFC. That's market. hurting perhaps as is, the you full guidance quarter the well as without manage for your how have to much do to

question. This is Great Chuck.

achieving more material your the maintaining and maintaining cited, like penetration of of between to focus important that our the on we we've end our you than, our discipline making second is fourth also next So increasing season, supporting right come change on days, I sort focused customers the the of of to fairly XX prepared rate if and we quarter. as terms both first, and there XX quarter. to yields, rate. Relative our don't reasons see now your a specific in say, And discipline down our for our to stores penetration that's in maintain making up should other standards in saying letting of for we be our can now portfolio we're X.X forward. sure And our impact value sure remarks, ] underwriting our it is just then question, be feel real think our year. comfortable Obviously, in we to come continue we that to been in that proposition But credit subject to really to guidance stores. factors terms I [ part this any of able the macroeconomic our that path many the did my

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

XX Slide of I if core question value. CPO versus look Specific versus and the mix at

ago this ROI are those ROIs actually for down year back core. to from tied at the Looking up a as It's expect, and autos. expectations CPO you'd for one, value

the broader on used are the market guess competitive improved overall? value more seeing around you is, I my narrative despite GPU So kind question of autos

Ryan, this Bryan. is

that you're is up. what the is going think turn on chart rate seeing that I mostly

that of core, to our you as million have purchasing that the through thing go or rate consumers, whether talking to from bubble know, core going be that I going in that more it's you're When that to from going and And supply continues moves almost up. through it's trade mean, to same or our lack we efficient. whether see to pressured, Chris it's X/X thing We're happen we're was So see off-lease, XX procure be consumers of into do is units about. on the whether directly same as going in. the bubble in to directly turn vehicles moves through

Great. Then question. my follow-up

if them in here. XXXX about and an deck know of curious you're reiterating But Just impact. DFC that We target? XXXX rates that the targets, the puts X ability slide is much and the achieve bigger interest is rising impact and and core kind business the et does think M&A, focus and And as are keep between Driveway how your assumptions EPS higher you how much But now going the cetera. profitability? net rates. takes of probably on what a that income I to guess, the

again. may follow costs. it I is Tina up this with interest Bryan Ryan, let the on

now all XXXX. plan most we that have the our we think I originally importantly, into designed back in foundation

$X the revenue. the achieve today, whether that buy $X everything in need have in adjacency over So to the we or do ability $X.X we're to expand to ultimately costs to whether billion XXXX change capital, But and or and calculus things design. our achieve in billion the to when in businesses shares $X.X whether back we the on buy EPS place the for do billion, targets, producing every impact interest on

Now that's a steady-state basis.

the we that [ looks, where achieving in that. in market behind about the remember get lot of terms the remarks, you the today. prepared ability But the the biggest talked ] If then and really driver is a driving XX forces acquisitions to execute of

assuming million Now that also midterm clear short that. We've part we're a a always a But that's XX environment, very been that's game and really okay? the ultimately, SAAR of it's today. about remember normalized to

can we'll And to as your minds growth. between what when Our now, for in billion performance now below that focused area the on as It's it's SG&A the connect ecosystem design we earmarked isn't Driveway we've DMS, so $X ] Chuck's every XX on a sure percentage plus got get fleet of and have the revenue, Anything things how to the of any EPS many that on let Finance maximize to on really [ ours ecosystem dots large do. management, as you an that that other figuring out of $X about interest the rate? XX% that wander Corporation, make longer. focused on

Tina. is this And Ryan, Yes.

looking And when similar. When of that. rates return capital, are. to interest what add our think hurdle Just our remained about we have deployment at factoring to metrics the in are we we're rates

profit think looking sort that is are and longer and higher factoring accretion at looking So tone at, we're rates if for capital there. the the you and acquisitions out of that about the we're that the where today

that's about So capital approach we into for baked our think well. how deployment as

Our Josey next is from question with Citi. Ron

wanted few to a follow-ups maybe ask Driveway specifically. I on

prepared just talk that you -- awareness the to more than remarks and Bryan, Driveway Driveway brand the on you that then traffic recognition? is we end, cuff I us expected. I think to just heard mentioned is Can is getting off a probably had think handle I awareness recognition for or And track. more bit in brand that little about can

and Just think provide upside, little you in traffic. how a downside more detail just that about of maybe terms there servicing

Sure.

haven't last done experiences think business terms Lithia. And in on XX% the our by Over again, the these the are accepted decades. with awareness, of I consumers. of consumers Driveway quite are consumers in of new X.X us

we're is now to repeat X in business on still even yet activity. pushing referral store acute getting years awareness of So the an typical greater the and within not and is activate post focus need sell lot because we really like. geofencing. shop into our just a what and create network and have almost relative their Driveway growing looks within the issue The That's aftersales expand models. we're that sale. And of network We to the and a need brand. lot life the to We them attachment it cycle ownership done experience built to we've to though

processes it our it's does with the imperative we, our traditional don't a to young well, And to retailers pollute as time keep as it of customers' terms pure I that traffic, In let on focus your retailer, sales centers needs. think digital build that and think I as take consumers. the

Our rates are consumer high. acceptance quite

little more about in coating or that can more physical, little where ecosystem to we the just playing the in from at consumer's ago do to And store or in Driveway, is we the we up we're business. repeat think bit going Scores, where that and a a I year is able a on else that actually focus bit in I much that's were have could care stores if the in our and way I traffic referral overly are centers learning missed? that that's best strong, house customers it more X.X believe create X.X But in at it's X.X the this traffic same the X.X. be Google we are which ultimately, to stores. there's when on still anything was be and Chris, there. the there take which like

sell I have Bryan, parts. service and that think then just shop you No, you you and have nailed

of You your making kind the and have RV with connection the Finance Driveway have. businesses products. we And motorcycle then that eventually,

that a have just think focused to we experience. said, to the there And opportunities that as the tactical I execution but have sky improve continue time. limit, we Bryan kind is at X to some stay on of

with Colin Wells comes question next Langan from Fargo. Our

Because follow-up a $XXX -- Pendragon. Just I you or on that since think spending Does the you'd opportunity? bit million mentioned do on you be you're DMS into you DMS. a get Can reduced dive you work? be sort of that Do stake venture of And the getting actually how the through from have growth? that. sourcing on sort you'd does probably -- stronger equity U.S. interest joint Pinewood, in

is Colin. again. Sure, Bryan This

service used systems is tech And systems on DMS it CRMs your So we have your like stuff car XX% today. of of $XXX about that. a million system which your stack, you and add and then and

of how between you and XX% to then JV. That's as eventually, we're Pinewood. of progression, which North And somewhere it extrapolate with own American XX% American where if XX%, on we're the then monetize our because going XX% the out the the think well. own JV, intend to the we XX% In focus to and ownership partners other not about it North the so terms parent we we of is, XX% add about to XX% of okay, company,

our what today. solution than it's We not a of Lithia ecosystem it We're that. to a better longer-term in looking that & develop at to really at way how attach customers to pathway a Driveway looking are controlling we do

move APIs North and venture. tech the extrapolate in okay, to full Pinewood Pinewood it's get put ready say where manufacturers, think a if the couple your We've needs be we codes yet, country. just able today, stack, to. Pinewood about a a So $XX and codes a It vision that run savings, profitability, I was like APIs do numbers there. But isn't what a the about okay? state X- if that -- be to ready that at base million America, a that's will charge would Lithia's each to tech we're years tax longer-term X-year That's to take to some to basically fair, to America. to okay? in when into when to agencies and their DMV needs it we to And be moves Don't of of to of because into stack get estimates different onto were that not you put

that? a glue to able influence adjacencies deemphasize to other and adaptable, I most top think the is is to such, it's in the ultimately able Colin, to okay? And have within grow you our have a midterm we believe in be our company of question what importantly, be that partners do functional bring Pinewood a is company as that our X on cloud-based but world, software-as-a-service that is to someday to X system pathway quite together, in you different systems follow-up from. create more

related just not that, to Well, follow-up overall. quick a

X%. up were sales unit same-store Your

mix market? color or that I XX%. underperformance up issue Why versus think a any there? was retail Is SAAR the geographical the

Yes.

Our same-store right. over X% a new you're was but up little absolutely

have state that we Chris bit bit or but little you numbers, more some some state, the we think different depressed It's footprint. by little have of region areas of a can I the a give do still footprint. in

Yes.

Just said. flat of last example. were above they West up you both for about SAAR we region regions, number of and double rates were the the quarters, Southwest up on growth kind think, both kind different and that, about, in about to is were the the follow we're region seeing then regions, digits, like in even several that think about -- Southwest Northeast I more up the in we Southwest, the we've of than talked Northwest then seeing kind

of kind of is lot our is franchises it a are. what So what and mix our

As luxuries up Bryan mentioned those import about XX%, down earlier, your whereas XX%. XX% domestic, and are are units

think lot So the with But do that a mix to in a with network all has point diverse what's to our each have ride kind regions in a on in do those lot markets, tide. depending of of is has that. geography we'll to and happening that economy and I

with from comes Morningstar. question next David Whiston Our

Wanted DMS eventually the to go back just when were to the we discussion comes in having on JV North here. Pinewood it America

very too. America are you convince it share how a hoping of because big And superior? going to in switch? pricing you is Reynolds know, that to you Just do North system your As win is and can more be dealers you make Or just CDK basically are discussion?

is this David, again. Bryan

a It's database. that the and Reynolds transactional think a not most and I Reynolds and it's think more importantly, a really generator. you've been dealership ever into of if if you about experience relationship CDK provide,

our intend time, partners been as one but with to the interact process really starting think Pinewood in our not And the as So embellish would systems envision intents that's when you for to all. Pinewood, -- just interacting foundation technology associates don't our with about or, with systems help rental with ecosystem, a of the we of just always of that and know at CDK for rentals around still it their like that matter, that a amount built a and conducive mean, well. I all they a it's it. both experience, the and I system from associates with we've In they're CDK think we interact the are digital consumers, are system, our that presence. can or of our the physical largest DMS consumers customer fair I our good experience, that

be to point I be there in at there provide to believe even some CDK associates that and and form market even conquest We bring a private may ultimate we extent with are to be all as be forces join really or systems opening that other our able today. And So you to in equity consumer consumers. other on possibly technology technology. would to think clunky went new which just out able share. And there CDK X other possibly add opportunity to private, an to means money some experience really isn't or is retailers, know, an goal companies multiple world-class that multiple manufacturers for it's

end for would I to reached the to back over closing question-and-answer of call have the We the session. Marwaha like now Amit turn remarks.

everyone, forward weeks. to to today. quarter. Look Thank Thank to you you over seeing speaking joining of the you, for you. next forward We couple look us next

Bye, all.

This concludes today's participation. your may lines thank and your conference. disconnect at we you for Y this time,