• Diluted Earnings Per Share (EPS): $7.94, a 34.8% year-over-year increase.
• Adjusted Diluted EPS: $7.66, a 25.4% increase year-over-year.
• Revenue: $9.2 billion, a 7% increase from Q1 of last year.
• Same-Store Sales Revenue Increase: 2.5% year-over-year.
• Same-Store Gross Profit Increase: 1.8% year-over-year.
• Total Unit Sales Increase: 1.5% year-over-year.
• New Vehicle Units Increase: 3.6% year-over-year.
• Value Auto Sales Increase: 38.8% year-over-year.
• Adjusted SG&A as a Percentage of Gross Profit: 68.2%, a 120 basis point decline from the prior year.
• Free Cash Flow: $276 million generated in the first quarter.
• Share Repurchases: $146 million, nearly 2% of outstanding shares repurchased.
• Adjusted EBITDA: $402.1 million, a 17.1% increase year-over-year.
• Net Leverage: 2.5 times, in line with long-term target.
• DFC Loan Originations: $623 million during the quarter, a 24% sequential increase.

• Warning! GuruFocus has detected 6 Warning Signs with LAD.

Release Date: April 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lithia Motors Inc (NYSE:LAD) reported a 34.8% year-over-year increase in diluted earnings per share, reaching $7.94.
• The company achieved record revenues of $9.2 billion in the first quarter, marking a 7% increase from the previous year.
• Lithia Motors Inc (NYSE:LAD) experienced significant growth in its value auto sales, with a 38.8% improvement year-over-year.
• The company's financing operations, led by Driveway Finance Corporation (DFC), delivered strong profitability with a net interest margin expansion of 117 basis points year-over-year.
• Lithia Motors Inc (NYSE:LAD) repurchased nearly 2% of its outstanding shares in the first quarter, reflecting a balanced capital allocation strategy.

Negative Points

• The company faced challenges with tariffs, although it managed to mitigate some impacts due to its diversified inventory.
• Same-store gross profit per unit decreased by $144 compared to the same period last year.
• Used vehicle sales were down slightly by 0.4% year-over-year, indicating some challenges in this segment.
• The company anticipates potential lumpiness in sales due to tariff impacts, particularly in the fall.
• Lithia Motors Inc (NYSE:LAD) noted that the ABS term market is currently frothy and choppy, which could impact future financing operations.

Q & A Highlights

Q: Can you provide insights into the current tariff environment and its impact on demand and inventory levels? A: Bryan DeBoer, President and CEO, explained that Lithia Motors is well-positioned with 45% of its inventory unaffected by current tariffs. The company has reduced inventory levels by nearly 10 days quarter-over-quarter, and the focus remains on dynamic store leadership to adapt to brand and market demands. The quarter saw consistent performance, and the company is optimistic about Q2, with manufacturers stabilizing pricing through the 2025 model year.

Q: How do tariffs affect your earnings power and market share strategy? A: Bryan DeBoer emphasized that Lithia Motors' ecosystem is designed around affordability, offering a range of vehicles from new to 20-year-old cars. The company is less concerned about specific tariffs due to its adaptable model. Driveway.com, GreenCars, and DFC contribute to diversification and profitability, reducing volatility. The company remains focused on maintaining a competitive edge and capturing market share.

Q: What impact have tariffs had on the M&A environment and communications with factory partners? A: Bryan DeBoer noted no significant impact on the M&A environment, although it has softened slightly. Adam Chamberlain, COO, added that OEM partners have provided clear communication, with many guaranteeing prices through the end of May for the 2025 model year. Lithia Motors remains disciplined and adaptable in its operations.

Q: How do you balance SG&A improvements with market share growth and profitability? A: Bryan DeBoer explained that the company's strategy focuses on creating transparent and simple experiences for consumers, which can lead to price inflection upward. Lithia Motors aims to improve used vehicle gross profit through increased customer engagement via Driveway and GreenCars. The company is targeting a mid-50% SG&A as a percentage of gross profit over the next five years.

Q: What are the growth expectations for the aftersales business amid tariff impacts? A: Bryan DeBoer stated that the aftersales business is expected to grow at low to mid-single digits in the short to mid-term and mid to high-single digits long-term. The company focuses on affordability and individual customer experiences, with a strong emphasis on maintaining competitive pricing and capturing customer loyalty.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.