Lithia Motors (LAD) 14 Feb 242023 Q4 Earnings call transcript

Greetings, and welcome to the Lithia Motors Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Amit Marwaha, Director, Investor Relations. Thank you, Amit.

You may begin.

us call. fourth joining year and for earnings XXXX you for quarter our full Thank today Bryan Miller, me President Chief Vice and With Customer are Chuck of President Holzshu, CEO; CFO; finally, and Executive Driveway Chris Officer. Finance; COO; Adam Senior Tina Lietz, Senior and President DeBoer, Vice Vice President Chamberlain, and

to subject uncertainties Today's include statements Such and could company's the our about release. and results you discussion differ about are on growth. projections forward-looking to place and those to deem in filings may this be from duty made. urge the products, statements. We Commission. are to and statements to undertake Securities material update which cause these and actual and the forward-looking statements, date expectations we no any uncertainties that We future events, consider forward-looking the risks of We not undue Exchange carefully risks markets materially to financial disclose statements made reliance with and of as disclosures

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

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

reached was revenues $XX year & of grew to of new generated expectations us new X%. quarter normalize, QX sequentially XXXX full a full strength Results same-store and and diluted was with Driveway driven call. $X.X XX% to fourth our by in over QX, we and for our per up you, adjusted offset Amit. Good total Lithia per XX% lower vehicles. revenues were and welcome record declining for share year in quarter in This as morning, GPUs Thank year approximately in earnings billion, vehicle $X.XX. continuing just month, last the sales revenues. In earnings from to line up units with by new continued aftersales year vehicle billion $XXX up

inventory our adjacencies of With lower continue expansion Our Corp, variety and support growth now rebates are across with GPUs With strategic Pendragon replenish GPUs what lows demand GreenCars, design all elements came were XXXX for positions and a into a cash F&I unchanged. best, acquisition near Used beyond perfectly place. subsidized and manufacturer our consumer models. Finance continued in decade to Technologies, our a incentives, partners brands to the do attentions manufacturer focus Vehicle us key to Driveway steady Driveway, rates both partnership in at and unprecedented and while essentially with on Management strategic Pinewood This execution. we pace.

opportunities. across challenges industry-leading business The performance. productivity, most achieve Our stores our people, teams also our increases leveraging the and many adjacencies profitability. by to delivering strategy acutely while store respond our our revenue built up This highest growth Expanding necessary life with throughout market customer's points to tools strategic with and equipping to touch and network to autonomy local store the nimbly operate ultimate improve cycle dynamics and on the remains profitability loyalty and our all our inventory on team LAD driven is network. dense foundation expansive the vast talented industry's a physical demand made culture is that network focused of

of importantly, X% drive This $X through total revenue adjacencies and target market however to EPS X.X% X:X. previously market addressable ratio solutions a The whenever customers for to share approximately today omnichannel of desire. are that from billion will and is LAD market stated they our wherever, expand our ecosystem us share designed and of and there of more towards

of another environment receivables navigating capital $X.X posted interest to demonstrated and The Finance rate smaller-than-expected loss grew the has Corporation, maturing through structure $X.X Driveway to strong with success operations. million on position. our DFC, while while or its fluid financing DFC a Moving billion. quarter team liquidity

We as manage to looks are the year breakeven financing liquidity the this this improving be Chuck of as later will operational quality further we details continue originations. later vehicle excited sharing it Chris while adjacency achieve to pace see of mature results to and and on and in Both both call.

our of customer expanding convenient transparent. strategy heart simple, is and the are solutions that At

easy solutions and designed the leveraging be our for value differentiated and being more diverse a within memorable customers. and better ecosystem to unique for Over solutions to this and is will miles an generate of network returns network delivery consumers XXX of attractive our more Our impressions, experiences, that our deep customers. omnichannel provide time, capital convenient with on provides

I'd family. and with We the partnership Pinewood billion This exercised the started XXX new over forms fourth U.K. of diversification adds our and a all presence business, $X.X a to of during in has bringing quarter, our beginning and profitable us an we highly stores transaction business associates chapter successful in discipline adjacencies, motors personally revenues $X month. annualized acquired new United transaction of Pinewood at This billion welcome round Lithia Partners XXXX. exciting and patience the the off out is and this in new the Kingdom our strategic fleet Pendragon with completion the in to Pendragon United also Technologies, across management strong like the with total both XXXX to growth revenue. Kingdom. as

we Acquisitions as and are business. remain of can accretive opportunistic LAD, look a disciplined and we for core that opportunities our competency improve

rate greater XX%. XX% return revenue normalized EBITDA. to of yielded Xx Xx target we [indiscernible] a or of over Life-to-date, have for and acquisitions over and a our acquire XX% As to XX% a after-tax returns of or XX% reminder, after-tax minimum

expect to well. As GPUs normalize realistic and as liquidity tightens, we become valuations more

acquisition in robust more in has creating markets opened Our for strategy us the verticals, new opportunities considerably mobility up future.

dollars to of in automotive United M&A the we States. to our However, foreseeable focus future, for fine-tuning targets our are the XX%

find, adjacencies, size strategically we new a but are as drive to our free operate deployment fund necessary share that cash at will scale, we In balanced to now of repurchases we addition, and returns. acquisitions possible the flows buybacks, evaluate practices Past acquisitions. parity now current than to have and realized returning with more the scale to prioritized strongest beneficial

of patient to monitor assets for within valuations continue both, priced strong hurdle being We acquisition our rates.

some to expect now billion to to estimate We normalize billion Pendragon acquired the pricing excluding of a and take range time acquisition, the revenues, $X in $X year. annual

so in fashion within billion $XX possible. of our the most our is target and to doing near-term confident ability remains our sights, while team revenue achieve in prudent this in Our

remain returns as our we achieving acquisitions, strong is build team network. committed to Our experienced out integrating executing we in and and

now Moving to the over foundational our plan, our launch of we overall the on execution long-term in important and Since have added adjacencies revenue. billion $XX acquired strategy. of

realize In customer partnership adjacencies, strategic someday experience strategic and Technologies in modernize stack. our cost addition, with our allows Pinewood us the together technology the leverage savings stitch to to considerable technology

We Management in are U.K. the or Pinewood year. our operations with DMS, of Dealer excited to begin the the this System, journey implementation

experiences. experiences North and be Technologies, we grow Beyond to U.K. and aligned and the associate partnership Driveway the next customer own transparent to our continuing year, creating American simple, and customer are part Pinewood with excited of

our omnichannel to platform. Shifting

XX% Digital year. Our including per sustainability MUVs the reaching XX compared in last grew vehicle across month. education to up million leading Driveway, GreenCars, our digital to transactions, were XX%, continues quarter, channel, the XX,XXX nearly year. lead and channels million up last fourth from vehicle a the over XX% XXX% period grow sales new in same our X to channel last now up vehicles over for as generation in year. XX% up contributed MUVs, account Sustainable of QX,

Adam of customer to welcoming his track With our Officer. me create and experience, our to and expanding the combining continued experience and will profitability. customer call increasing him center transformation decades record our customers market of at of in deeper congratulating design, the elements our results proven as Chief Chamberlain and Customer share loyalty lead our driving the foundational role join on His

that newest growth, through all And our the fleet with attentions elements technology well margins a combination Now diversification and of improving a now partnership, of are scale. SG&A combined These position, efficiency, when in we of and turn our plan adjacencies are lowering strategic foundation underway. and our elements both relationship management in billion revenue, a holistic SAAR these further EPS. we more assuming well normalized now growth realizing $X $X and a profit cycle and of for can our ultimately together environment, elements GPU Weaving potential in to are and customers. life with pathway positioned clearly generating to the a see

by as aftersales steady store's the our realizing our control store Key first, share network below revenue life a market cost personnel productivity factors future cycle profit and a to structures, gross environment. stores achieve our our greater customer used, potential an of to and follows: increasing in of within existing as SG&A interactions, continuing state result our wallet within operations and profit new, our through improve normalized The underlying by considerable is now and totally share. growing leveraging GPU percentage that's XX% in each gains are

continue regions Second, automotive States. blended to Midwestern expect with Combined further X%. stores digital Central, in the channels, the acquiring in profitability reach on growth United of higher U.S. we larger focusing Southeast of and South a market our share

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

on latter a the As achieve of adjacency reminder, track first this remains to year. DFC our during half profitability

profit as borrowing corporate and discussed, continue of adjacencies insurance. as from gross Fifth, to down other and pass costs towards including we improvements store our we horizontals, pricing, captive a design with operational higher-margin fleet costs improve and management, drive ultimate Combining below SG&A investment-grade software, the rating. lower to efficiencies both save and maturing contributions XX%. DMS vendor advantages percentage fall Next, will charging size infrastructure through scale, an

return for refer through on to Please shareholders LAD and dividends the buybacks. investor and details opportunistic And ongoing presentation finally, to share further reconciliations. capital

As decade, deliver ecosystem frequent to the scale. at and and we throughout ready well middle ownership our customer the life of maximize the positioned that to global are unreplicable unique we experiences cycle more is richer approach mobility

industry. design place, over to and attentions now are turn of forward focused for the produce elements $X EPS. like our ratio our all combined I'd team an to call our ultimate original execution leverage strategy, we to on All and our our market complementary grow revenue to long-term in will and adjacencies that, scale With Chris. Our share, and of look profit experienced new securely continue of to our to establish size with expand of of performance levels to focusing

Thank you, better Group levels our with share, their like strategic and leaders known LPG. congratulating peers exceptional Driveway & Bryan. the achieved as outsized teams XXXX and These to XXXX best-in-class execution. their innovation internally market by Lithia class performance service, I'd of highest customer in Partners winners, begin among

all North operational continue profitability we attainment the as is group at replicate and each from location. retail of LPG of to learn Star for and to our Our deliver locations excellence potential

meaning over we of store leaders partners, LPG coveted look achieving to this XXX forward attained XX% of status, We and future. in teams our LPG have status now eligible have all the our

vision at automotive high-performance deliver culture committed by to or countries best-in-class services build the a underway. world of English-speaking in strategy leadership vast by teams of success. Executing has continues to keys Empowering and decade. our We their X mission our largest desire a on our a differentiator across wherever, been ecosystem which whenever level, the they is market and to over however a our People Powered serve remain in to Growth local be our well out for the customers led entrepreneurial to

the on quarter to fourth results. Moving

lockstep new the of see and of they used in was We vehicle vehicles in scarcity vehicle a ASPs. volumes credit new OEM auto as incentives, changes increasing basis, with consumer continue and by retail the were to nominal in recovery the inventory, driven in new needs availability, later-model On as XX% resilience up their revenues aftersales pivot used vehicle vehicles unit to age. continues bar and demand the This same-store for XX%. buying car

or per total $X,XXX, $X,XXX our in downward at is $X,XXX eventually to XXXX. GPUs levels. New this we expected trend year-over-year near F&I resulting as We XX% GPUs, discussed were F&I, anticipate continue in including the GPUs and historic vehicle including throughout unit, which XXXX, down through

by driven million XX%, eventually XX% XX normalize, and new units back positively leaves expected main and up United domestic in improved which SAAR on XXXX behind near SAAR highlighted large levels, which by over Same-store Canada recovery, volumes X%. continuing are XXXX We're GPU to import the to end were also in the U.S. expected just respectively. XX% vehicle which The is the driver in brands, improvements trend normalizing domestic is volumes getting and Kingdom while to constructive in

of New the vehicle end at rose QX, inventory XX QX XX to compared at days end supplies day to and XX days days XXXX. of the

vehicles XX% and prior X% the down in pricing Moving the versus in supply line year. vehicles. which vehicle than Revenue were is with to vehicles. $XX,XXX accounts vehicle our on moderate Used units core was segment, continued as certified of down working nearly impact down used new Sales of through of our up vehicle decline, chain. to production continues used was supply X%, constraints to $XX,XXX down COVID recovering the X%. ASPs more while to the were sales, XX% for half of

As in production to were million vehicles due issues. and COVID-impacted in lost to a XX factory reminder, chain around shutdowns XXXX supply XXXX

Value were are down over higher-mileage generally autos, X which old, vehicles and X%. years

year F&I, advantage were status omnichannel us well and inventory X% selling average. to will to arm, significantly years which and than historic vehicle a gives down to used-only Our last access dealers, our for Driveway top-of-funnel OEM our Used from more coupled $X,XXX, new come. be including continue significant below car GPUs, with

are massive rebound vehicle to supply. car new inventory to add reacting continues used a in the car to teams Our volatile in that response marketplace new

vehicle APR as the loan monthly for and almost payments. a As outlook tailwind the average consumers and vehicle loan is lower used in eventually will their serve borrowing XX.X%, rates relief consumer for

day supply rose days XX compared and days days to XX Used vehicle year. the in XX quarter last prior inventory to

of Our which XX% in park warranty technology accounts the by for levels. business up business, up our XX%. were offerings is XX% of The higher profit and up for aftersales of while expect greater for sales, was the advancement cost aftersales gross XX% X%, which margins we the by pay, Customer rose with X% consumers, age which vehicle And can product business the made and X%. size rose and makes repairs. complexity and record at average car gross of

this call We home. continue attract confidently to our while demand professional by facilities to for finding offering high-margin talent innovative and meet state-of-the-art to ways technicians their grow

a Driveway's as percentage XX.X% prior of to was SG&A on XX.X% cost, excluding similar a the profit, basis, adjusted year. was Finally, consolidated gross versus which

have we extract nearly years, basis XXX XX past points total the Over our from managed to SG&A.

additional truly we ability and gain to work network best-in-class a from globe, As high-performance to leverage the we look across on confident that and to are locations leverage. in our XXX-plus benefits to is omnichannel future ways create the find our operating

has our massive started, to set is group the for of what simple we our non-LPG and, on LPG As impact expected moving performance organization has bar in our levels LPG terms, a profitability.

or X $XX today's XXX is unlocking leverage million profitability in add stores to in incremental basis This additional non-LPG to key $X model. $X Bryan the EPS and points Specifically, up to will on that moving equate of segment of in approximately discussed. revenue would in the performance a XXX has to performance every billion million $XXX to $X $XXX in EPS for

consumers' that that international In underway of needs mobility of plan however an ecosystem set they summary, whenever our well desire. in transportation variety to personal and wherever, is provides products services build a a and broad meet

operating best-in-class achieve high-performing to up over is set Our returns like execute the to deliver results turn tenured that, to model shareholders. that to our in continuing I'd With call Chuck. plan experienced to will team while and our a lean

towards operations to $X.X Thanks, continued Chris. quarterly million, last at $X.X financing ended year The quarter to narrowing profitability, while from segment operating over our just loss $X.X the portfolio our billion. million down move

origination in underwriting, sequential yields increasing our As risk managing we decline volume saw a we million. $XXX through prioritize and to

operating up loans our points XX originated average from to the prior increased quarter year metrics. on ago. XXX from Shifting basis a points weighted basis XX.X%, The and APR to

quarter in of our rate flat X DFC XX%. at XXX operates FICO If weighted XX%. retail the originated the penetration in lender impacting U.S., front-end quarter units DFC's sitting of prior due score only only primarily achieve the to at currently without LTV essentially higher sold increases funnel, was on negative during to growth while units average to able quarter loans market impact the the was was captive X%, overseas. rate were we in points LAD's than in, quality. on consider penetration credit top the a we As the The this the retail

will market, look is yield expect the and as scale. aligned Now with in that XXXX we we our to beyond penetration increase

and relatively warehouse later and ABS term flat our closed have growth has supporting and and possibilities, funding exploring our funded are closing portfolio In and the XX% facilities, launching $XX.X APR well future new we a term as we including today, costs. LAD's we net quarter, increased mobility verticals. seventh vehicle driven as endless ABS to In expansion of through QX, geographies into million, sixth ABS very Our offering. offering, product successful issuance interest other leasing fourth a by portfolio increasing margin now

provision Net basis stayed for fourth quarter. higher losses allowance million overall quarter $XX.X with receivables XX slightly expectations charge-offs XX-day as servicing of seasonal prior quality. a and from in down percentage X.X%. basis prior quarter points loans portfolio to from well credit we our to delinquency seasonally increasing at expense our saw increased as rates flat team as the strong reflects XX points performance increased as The This the from loan year-over-year. the X.X%, consistent

prepare to has XXXX. from DFC's Driveway. Lithia of DFC we path we DFC adjacency benefits the of start-up will May the this financial this contribution full to am a proud of clear initiative accomplished As & quickly all transition very the as of prove as to I start to well since launched in period, realizing show scope

and with vehicle support profitability, throughout long-term cycle. sales LAD's how to entire we stand-alone ownership consumer DFC vehicle and can their the see make life connections experience the ownership Beyond objectives mature reimagine a meaningful

to We volatility. achieving remain our to goals been scaled conditions over built that, long-term seasoned of confident in portfolio. With financial range in the successful I'd fully be turn a to end-state call the like full and has Tina. and to growth ability with short-term earnings DFC's to DFC deliver regardless market LAD of

Thanks, of new nearly strength Chuck, aftersales, floor continued million plan XXXX. interest reported returning those EBITDA and $X.X and offset In lower joining higher with Results quarter quarter, supply the today. billion expense. were and us $XXX in by full thank the driven GPUs you we all year and for new sales adjusted in fourth vehicle the for by vehicle

our Our adjacencies profitability at improved focus DFC. Driveway maturing on in and resulted

see Although early, to contributions positioned well are this year. we positive

relatively leverage, quarter. approximately prior We flat with excluding to DFC, the and debt net quarter the X.Xx, from floor ended tied plan of

We continue even target planned Xx. growth leverage to below maintain and our financial discipline with

cash of free taxes, million, of $XXX generated in CapEx increase quarter, compared We back During the flows cash, income dividends. and less define interest, previous the we EBITDA flows compensation an free adding items XX% stock-based paid the following year. to as cash

generate can capital managed growth quality preserve and we consistent of cash We currents year another navigating cross to supporting sheet our flows today's in allocation, of strong while our various environment. balance with and initiatives balanced the

acquisitions, toward Our toward allocation capital unchanged. of the XX% return capital XX% of toward XX% investments, balance internal includes strategy expenditures shareholder which relatively and remains

with we to making billion nearly are XXXX, However, be shifts tactical since responsive some in market environment. the completed to $XX acquisitions

will outlined to share Bryan valuation opportunistic our repurchases. balance M&A the being we and trends continue near-term assess our earlier, As but in in expectations

quarter, for repurchased fourth a price $XXX per share. weighted we average shares the In of XXX,XXX nearly

look deploy We available capital remain current million in $XXX under approximately returns. have authorization. drive We strong to and ways that nimble our will

billion revenues revenue per over business, $X growth measured few cash completed consistent unchanged, the investments generation tools our in divesting the necessary to coupled and is remains on in of focused the target long-term execution infrastructure to vehicle toward The past are margins with through with our and on Our $X synergies has in achieving we've EPS flexible strategy and and drive years. acquisitions adjacencies. acquisitive and team our flow vision and the deliver operations ability of

the grow deliver of our Our turn remarks. value members culture Coupled achieve consistent driving this us our the This with designed our and to to business I'll call team, and prepared shareholders. plan diverse for is for gives necessary that, strong With performance. concludes audience to foundation over the and questions. our Operator? continue to talented and the

Murphy Bank John first Our America. with is from of question Instructions] [Operator

on want We're transitioning Tekion. folks Pinewood. Bryan, I to lot a first to just hearing ask question of a

You're talking revolution this It about finally in or we're like maybe the industry. seems getting DMS Pinewood. evolution across

this is Pinewood addition lifetime more to that and and throughout platform, think entire get you sort you into this adjacencies I'm is focus to implementation just of and the this system help As leverage is streams is of efficiency going. Or change? your trying these about a the in this going where revenue cost cost-cutting? of kind to understand

the global the see system functionality would today. DMS Bryan. the in John, above is systems, this is here United of top we the its Thanks question with heap consider that I'd is Pinewood we that in States. what start far and what for

today, point And uses same think also as imperative America. to market into additional Pinewood's it's move to largest they develop which before I North the base and in okay? out user begin the is that the that's is Tekion world, size

a we parent, So a business. First that's that the look elements, This Pinewood's ready in okay? at it X partner to mind. It's key primed just we're business foremost, in so and grow. and is savvy as keep

So at look look user that outside as North the they ability at same. obviously to of priority their we America base and #X, grow

as because additional knowing the our type that that's want we there's more and ability major it crucial environment do Secondarily, ecosystem well. we multiple of the behind pretty that we're to where of into and associates themselves. X allows that are customers the So really, truly base that us, consumers functionality, productivity the that fit, us see stuff coming work way okay? where for develop, as United okay, coexist adjacencies big to them in typically glue an X with our advantages. But opens the players scenes up States looking look States reduce do to associates for together for the to it user begins One United is and idea the at the

XX%. a to XX% it today, save XX% stack on Pinewood and we trying okay, glue our inflation about to about So yes per our currently user the apply data that if tech in we cost on ecosystem. stack, assume charges lastly, together And the then

system. So functionality large the meaningful it is #X while still us. strategically so the savings is was adding Pendragon targeted a priority by acquisition cost so it to And greater and why of

And this know the bit performance SG&A you sneak little in a time I of million over a hard been billion. of then gross has has SG&A profit if I In could was quarter, up up second though good. little and about given just just was a question. even a shy $XX $XX

it a in So SG&A the growth outstripping dynamic of is similar gross was kind profit growth and for the year.

As should incremental seems it's time, the gross we about to sort SG&A about Because think incrementally? over of is. how flow-through growing we gross of like than think gross it faster

So we time. I down slow want think obviously that's over to something

Yes, Johnny, it's Chris.

have X- the it's now, is X-year-old core gross think those impact below that as car with is significantly and cars. being is now top-of-funnel trying to really get have product a dealing vehicles creates have lower right we're that our right new pressure our selling our channel, in operators lot profit vehicles car now that customer we of vehicles, in of on are consumers, need, I on still firefight. we our procure gross is compensate levels. XX% a historic we contribution. to coming pipeline now and we mean, I are gross, trades just with biggest that of to used are fill we outside kind which used of but right which car right a The from teams dealer And that benefit used the

operations can of getting to And us. an with we in and of that do believe getting move near-term, stores and go execution work to leverage an where but normalize structure outlook midterm, accomplish XX%, right that's a back really when now that's somewhere team things tier we've SG&A I XX% our for have kind that the maintain aren't is closer kind of continue slide you and So SG&A lower to of we to gross, have, what able to opportunity now we bucket represents got think to that the kind we our of the kind of that to overall that up. top

is Daniel question Stephens Inc. from next with Our Imbro

it XXXX in removed thinking? And is In what your targets. for How like Daniel. we Enderlin This your Joe looks should the timeframe now? timeframe the you on be about from changed thinking slides, here the

not EPS with the achieve customer would But guidance idea of for solidly it's that touch the out our not more start is target would be foundation okay? So something and produce billion has from an $X of with -- of consumer every less ourselves company established a it, to be I in now billion specific of ecosystem isn't that built, the unreplicable, now to create build 'XX, in typical maybe start trying we of is goals about guidance. revenue. terms to can $X the the revenue than we're moved that experiences and $XX to really practices ecosystem importantly of target. throughout cycle to The obviously, than that for more we've inferring what it's provide ultimate points the life year so and are that,

and billion more sights. where pricing can with are $XX we're acquisitions buy costly stock the And our today is is unfortunately, market the the acquisitions where we So own in trading, back. than obviously our

versus probably heard selling billion I the seeing there like chase, the for one the not bit in that from mid-$XX lookback lookback, in to you going multiples much And normalized that's massive marketplace of these that we're looks if billion a something is as which bringing $X today's $X the are we're XXx the just at the revenue the billion earnings. and get we're as our prepared earnings as we're remarks, assuming elevated groups range years When what XXx softens in in smaller 'XX. at GPUs. So that even past annually, will We up a probably and single-point parity. And -- X-year can revising into to M&A to X looking -- think get little okay? these is 'XX, buybacks environment, stores at in post such, you M&A targets are Pendragon what into

Got super That's helpful. it.

the market? results any maybe Are softer used into further Pendragon. there market U.K. in come quarters? U.K. acquisition in pushed on our some have guys market seeing the you and market follow-up, trended you in thoughts current headwinds you have the the a of recent previous expectations. Peer As that has provide how Could with or than

opportunity. a recovery used going Yes, U.S. of Yes, the in of U.S. we rapidly new I kind getting Used that adjusting I mean, that in quarter lots the to think the segments after cars about pretty to fourth we think thing normalized just I there, issues you're of And car are And down. in lot you're auto has and going that's kind the is And the for think, think that last Joe, coming see U.K. my Chris. different a there size U.S. we built inventory and the network think figuring But and I think value brand. I contemplating been there's U.K. impacting was out also seeing SAAR typically, in market product with what back vehicles and also larger U.K. are mentioned the across synergies it's get what we've in to the how I with is the car that of of difficult, that are the do stores number way the a recovery. than I a because of prepared remarks, the chasing synergies the the

the market our as think and good to side locations as optimize Kingdom. able store ended to that our within Halshaw, generals. it's those to for pretty that, good key note, to we is market. every on XXX walking And surprising ability as there that clear we Gary, Neil, well, United very used his people grasp a I motivate of network as have grow spent the the and the incremental XX, were they vehicle of days Joe, well And Pendragon a It's and Pendragon especially group, leader, retain up out how the each and that ago as that piece a have of with there. And in out time Jardine, both week, what, Chris Evans leader a well and reach operational strategy XX within be now. as one their higher through I information.

So our is our acquisition would with of it pretty close with accomplished, automotive, to the obviously, in now going market turn I XX% our well say back is luxury, or that to nice. X% States of And quite share mergers the positioned be something pretty and United growth with the most in Kingdom a United Lastly, that. which nicely being we're and to United okay? Kingdom will attentions dollars

with Our next is Rajat JPMorgan. from question Gupta

I just had couple. a

next there. couple to years, strategy buybacks similar how buyback much we looking versus X.Xx In take on the relative on sheet can versus thoughts over your you on curious a you more ended event the are doing a M&A when you adjusted of the to Firstly, that Just you today? that Is shift. be different will at And leverage think have should doing you or I benchmark at amounts were M&A? the balance follow-up.

Sure, Rajat. This is again. Bryan

mean M&A. and we and believe Motors to at to I definitively or buybacks find we we are able know think able will dictate and always parity that And those. because core both M&A it's market is we'll we put that doesn't of competency that of be a just believe Lithia Driveway that acquisitions. important we The do buybacks and M&A define to

year hopper in though are make with be in the acquisition, nicely, As have in such, that we we going highly areas there. have domestic that will we've quite out the targeted are the round Pendragon States deals our that other even deals that United attractive to franchises growth the

buybacks, we price than share we it's do we what last more back money believe reason valuable would is our our that that we be because ultimately, when with buying want about trading only it at. because is think still to thing the the Now is

buy as So can or give acquisitions Xx, our we'll act, primarily in shares to so will back, we at are But because today, you try that and where noticed, it. color shares you back balancing to we're the quarter, okay? So $XX million today. we the market shares we ultimately back dictate buy going to at bought XXx when if sit of our

I And with domestic $X to is key, to think stick okay? to for U.S. $X we're So probably that billion automotive how of should ideas our diagnose, billion going growth in falls of that then can XX% us balance our okay, probably XX% into and allocation capital M&A, about to the buyback you XX% get pool. difference to that is out to the

can leverage where Got go balance as do the think you the as then you X.Xx? to it. take Xx? on on the you Could sheet And from leverage, high

this I target mean, Rajat, the is we financial levered, is Tina. Yes. which being below Xx we've had. discipline always

continue keep M&A disciplined we buyback, us that space or it's sheet. want balance to will hold to gives to but whether It that constructive think do true. I work, some

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

on Driveway. Two

you do what but the the profit in willing investment to or pull be lean into quarters, And that past dollars, digital in KPIs acquisition watching XXX it, marketing to SG&A or or do bps, primary back in XXXX? impact first, how if Driveway in there? and secondly, gross say, whether think So the quantified customer either then And of, you're given ratio QX. you've and it curious you're about spend

Ryan. Sure,

ended together that for If important you with channel it that up just us. is noticed in the truly we script, is because that blending vehicle another operations

-- to becomes We burn manageable. are it's that rate the that's something important us

center rate year-over-year XX%, the But believe to & XX% down burn of is the an another the that XX%, with does by ecosystem we it Lithia universe. year. of Our about XX% the Driveway end is create expected

ownership okay? that XX% that's the of okay? customer cycle, fingertips well points it's about put we with the talk life at different in XX in points, store the about XXX Now touch just when coexist to our ecosystem things functions exist there out that perspective. today, at And we sit We're other and and value-adds. -- traditional And monetizable as Driveway our as truly cycle that their need is build The to portal. customer to as they different is able life that those can we from with touch that looking throughout it deep. About they value-adds both during X/X the with be Driveway are are consumers, deep people's base the intend

see build and delivery to able to on. channel, access and the to be and XXX so different pay see the the website really in all add the a selling we'll in solution to that as Lithia Pinewood their you'll that a are and convenient an integrate think about and it's home But it's I week be additional know separate help and times couple us schedule X that longer-term their and as be provide within going company or and the those that someday transparent or there functions able what used Driveway, finance So their that functionality solutions to vice ecosystem vision, to you're once valuations is years. of that's to one customer-facing X are. And the within a price Driveway also and wants and is with ecosystem every infectious things trade-ins payments and we service customers so believe users Driveway a subscribe than of rather think versa to & to to

from Our next Langan question Colin with Fargo. Wells is

of quarters you you Should to any your over to sequentially, -- I of precrisis step thoughts year? on I think trending look comments think about If we as said through get that next the think the or of should this GPU. bigger eventually that down be pace it you levels. noted that was go new a of that? expect in kind How we sort couple

Colin, this is Bryan.

will quarter, about -- is under to dropped okay, state. that end. front the assume blended, total we deal to new a that's originally way at that about that I we year. little think on is that at throughout back balancing from we talk accelerated what Today, it, $XXX and were bit by average and month new think would the and in. unused, is We just believe almost around about $X,XXX okay? a last on come now that we about we the end, back $X,XXX used, $X,XXX which about So and above We last looking steady sit below state easiest achieved So rate $X,XXX, think back be let's and where on sit the act $XXX about we over We the normalized normalized.

terms thing seasonally of the are weakest in other the tougher mind quarters, In GPU. little in fact, a and is QX usually typically to QX is QX keep Now that okay? bit

have some seasonality So side. we our do on

X, been should seasonally country behaving type of by second of be to the slow back some performance, So whereas next manufacturer couple okay? left see be another drop happening managing I to a been will over through Because Chris be because would of so be be just we to so be But year, $XXX to I normalized year-end, should is in we say say normalize able period, half into level. And as get month. sure within think performance about would think able by level, whatever tricky that franchises I I to truly by region. which the will go it that to the and truly what's at if in mentioned, would that see it GPU's could be little it's once able different year, nice areas effectively manage different of we we years fall past differently a quarter of over the or per the next

was That it. clear, very very Got helpful.

mention back inventory realigned? side, were the you that did How Does should the get through that? of sort of sort you a as to or those it drag lows. about On sort long-term short-term the is think this of going sort that is of bounce Or used issue? rest or on of year we

be the interesting more, there because mode margins. I my then I chasing seasonality I months, margins winter and which out you the want through up cost that panic it's And is stable. think of which think shortage Colin, of affecting ultimate selling don't everyone is inventory, you'd price supply, when line with typically But you driving months is be in would quite the hit into typical when the season. go go inventories that to the -- spring that

of don't would hope in February, market see that. and has weeks. we the March, the car the know used start color of that start next end if And see to on by to couple So typically, I any recovery of Chris Adam additional or in

No, well said, Bryan.

Okay.

is from Goldman [Operator Kate Instructions] with McShane Our Sachs. next question

and same-store mid-single-digit both about expect and that the growth out should your new for the you deck, Jordan pricing Kate notes Can to for In we is range break This McShane. it think in sales that you used? low how in us slide for units and Mark on near-term.

continue we're with of saw imports with an vehicle as across new the is quarters, that, of supply that terms I hit from will and been to a as that been this And I we in relatively the high. as we quarter, coming volume, somewhat perspective, vehicle, last market. a used normalize of brands by tougher think they've the like the perspective, have. From in growth in terms good we've terms ASP seeing a tailwinds, that's of that pricing, continues different in we fourth growth in back couple strong Tina, way, think the mentioned

modeling And Bryan, so thinking we've out. pretty additional those commentary? sequentially, about seen those you some did as you're flat be have

the bit looking in we On okay, at okay? to mid- I that single-digit year-over-year, used, we're but should we're right minus new be coming think little lap with as recover we're below comps. now short-term, X%, flat, able the high range. we be at those think selling we to looking a the season, Now to

Bottiglieri Chris Paribas. with BNP Our next question is from

in midpoint. question picture the the It that. changing operating least SG&A question for is X following then margins looks the the and operating cut a you kept near-term quick gross, clerical the reiterated bigger $XX but the the up the at to at first deck. plan cut like on to and the -- slide But One $XX --

So giving you're the to the higher just why just EPS end targeting trying change or range understand a mathematically? if you're didn't still or

that's those last in the and your the take important the its we we're And believe with how profitability Where of crosswalk new looking yes, we're billion in how that achieve and which achieve the purchased better as of is of and at of penetration normalize you of up that everything CECL market able later the driving $X.XX year, share achieve quite $X focus position through markets the able in years, model help stores, most always what every deck should we be can this the okay? EPS. short-term, achieve until be Chris, go our is well And the back the EPS existing is portfolio, GPUs, store X offline, and weave as $X rate, So that we between to be So to that. I the the most sleeves Slide and XX. X.X, the to seasoning markets, $XX billion them XX% is our like $X every performance that improving that being don't execute coming okay? at know $X Chris at what we is steady-state for That's meaning X produce we base years, the this. to would over to why to happens to on think It's being for in to and to and to $X.XX billion referencing and an to revenue, reconciles slide But of revenue. it able on another and $X, okay, share in a reduce mind. and DFC, ecosystem like to keep $X.XX incentivize because okay? of less be of the we get stores through It's our grow going highest so to to I South of well our slide today, important Central the regulated normalized grow Southeast rolling way per $X.XX results. get together to the is another to importantly, people, costs, from beneficial. okay? Alongside pains

Canada profitable, a on those put as but rates, can Management XX%. management kind, Technologies highly organization. and and that. Other management is like slide add to PVM on believe are a added We're The Pinewood have just And business. We our able okay? at they're to just in believe under the see in looking So pathway be Pinewood lift this of little to we're all XX,XXX adjacencies, they're deck, listed do not quarters We Vehicle to to in highly fingers to $X.XX rid long-term, is burn we that XX,XXX looking bringing fleet the in company units for their profitable well those our you how be We haven't company. fleet is the It's and additional another of okay? and managing, X back into adjacencies. that in may highly that what or X% coming a fleet burn can profitable, rates another get of $X.XX those okay? will and with though Detroit, more contract upside been there we're any they're management a years. X selling we in Even just also real

as be get they to how IG from that remaining and it, buybacks, about $X, comes points okay? Those the in XX to do to So our if Lastly, advantages the while someday, they XX% of that's $XX needs the of the XX rating savings soon possibility system where to that as as capital, the even okay, Cost cost really type Pinewood or to focused, can. executive mind, move in but to I we're costs, able moving to we the basis to to so focusing possibly scale things as get on saving overall keep think believe the as on think i.e., of that is Chris, interest or driver okay? are team $XX $XX well though teams operational okay? don't we

Jefferies. with Jordan Bret from is question next Our

Can have health. you're maybe side your how as in obviously I those on seeing recovery the bigger winding bit in FICO really delinquencies guess, And down, improved portfolio. seeing what repo out. them mean, are but I I your the a we you're sell be think also what then up business, seeing a and the talk -- maybe you're more volumes you what underlying repos, loss in consumer scores loan and credit may about reserves? year-over-year from

is question. Yes, Bret, great This Chuck.

sort really captive us So But for think really top-of-funnel first else right in or strategy same power goes the being some noise impacts our a of and weighted I quarter, credit business. And real things that of delinquency everybody we're sees, dramatically over of in consumers points just under either some which levels see have are the delinquency. of sort XXXX overview, that first XX-day DFC's pre-pandemic market of sort and to X this some general that we of to withstanding stress, and to sort stead the XX rates sort above slightly back quality, of degree of is relative got that's of the FICO years economy. average we And that seeing were good negative a to back standing finance from then able ago. increase of of

by issuance performing the are in the that very big recovery well repo by last of repos, well being industry the that's our go And which received should to of a of very the question, and is lack our how of rates marketplace. would the the XX recovery and off portfolio. To a part had quarter limited that, distance stressed recent to probably of with repo we was agents feel So and go XX your well. our months experience contributor managing market portfolio the which ABS very we vehicles. the answer some to second were recover this they is We

the recovery and line still very rates It's but comfortable our eye the rates slightly market. that recovery market that We above an have or are with overcome we feel we rate. either our and something in closely are at watch on, keep

Ward next from is question Freedom with Michael Capital. Our

What think I higher are DCF? that? SG&A we of moving used ramp-up about components gross some higher. Bryan, below you you that down vehicle get And going of growth that Does saw a XX%. SG&A have assume for guys a there percentage other at there's What talked as looking you I comments in think I there? mentioned your that there? from DCF. expense already are as the of profitability that you costs folded the in normalizing, in Is assume

It does.

operationally within operations. is to get vehicle core our businesses, XX% which we So

So that stores, and all Lithia GreenCars the okay? core includes Driveway,

stores And that you have correct? at today, level

and again realize rest scale that in good stores advantages what higher-margin to a back at guiding we to our really years. the normalized DFC lots last, mid-XX% performance built been of normal, And performance. the almost operate okay? profitability the world-class -- our of the stores today results. as businesses X okay? such of to network then share, X, And management well that's is SPS, really achieve obviously cost were and built that expect had stores, some and coming management, in sauce times. execute stores range stores other we fleet the which Lithia over to X/X to secret okay, the been times, XX%, the drive that's that our about And XX%, and that The believe Lots, quality adjacencies of as able market like the from in stores okay? the were as document with how able that of achieve will performance what XX%. So to years have few that's for XX normalized it's be we like we where both ability We our okay? that in SG&A X%-plus level has above remember, as and what, always the typically And We systems utilize believe loyalty on that management. And purged of higher that well is do do we call our core has of once coming is

with next is Our David Whiston question Morningstar. from

think back on be opinion you your to penetration when close give just will you towards Could XX%? leasing

participation control, clear or factor that think year, they the line dynamic the and of to COVID be inventory I it's on the that in else, to Yes, everything been driving the continue. that because David, this it provide, leasing obvious of it's in especially whether in. in years that the buildup to throughout us that incentives hard pricing with side support couple the in are I we're little to with environment our it's of highlight half mind, we've last and the that think going domestic don't of of But continue the sight everybody's base the is we the getting that. And other is with the on that it's David, but cash finance back with. a dealing outside market contributions, control or mean, we when we'll even that of ranks, incentive which kind manufacturers is Chris. think execute expect I I I but think, And a residuals of in

back closing There for Amit are the any would like I over questions comments. to Marwaha this time. to no hand at further floor

today. speaking weeks. and to a us want everybody look We coming care. I joining forward in good day. thank to the for Have days Take

This concludes today's conference.

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