Q1 2021 Lmp Automotive Holdings Inc Earnings Call
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Ladies and gentlemen, thank you for your patience the conference we'll begin in just a few minutes.
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Ladies and gentlemen, thank you for standing by this is the conference operator welcome to the L. M. P. Automotive Holdings, Inc. First quarter 'twenty 'twenty, 1 financial results Conference call. All participants are in listen only mode on the conference is being recorded.
After a presentation by management, there will be an opportunity to ask questions before we begin I'd like to remind everyone that this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Statements pertaining to future financial and operating results along with other statements about the future expectations beliefs goals plans or prospects expressly management constitute forward looking statements.
Any statements that are not historical fact should also be considered forward looking statements and of course forward looking statements involve risks and uncertainties.
Now I'd like to turn the call over to Mr. Stay on topic L. M. P automotive Holdings', Chairman and Chief Executive Officer. Mr. Topic. Please go ahead.
Thank you operator, and good afternoon, all and thank you for joining our call today.
Today's call participants along with myself will be Richard on the hand our.
Our Chief operating officer, along with Robert Bella Flores, our senior corporate controller.
I'm pleased to announce.
That our first quarter revenue on adjusted EBITDA was $33 million and $1.9 million, respectively, or <unk> 19 cents a share.
These results exceeded our outlook provided on our March earnings press release and earnings call of $29 million to $31 million in revenue and 1 billion net adjusted EBITDA.
For the second quarter, we expect revenue to be 147 million with adjusted EBITDA of $10.3 million or a dollar 3.
Per share, which also surpasses our internal outlook.
On an annualized basis in the second half of this year, we're expecting revenue to be approximately $610 million and adjusted EBITDA of $44 million.
Or <unk> 38 per share, which represents a substantial increase of 14% in revenue and 83% and adjusted EBITDA respectively.
From our outlook provided.
And our March press release.
535 million.
And revenue.
$24 million and adjusted EBITDA.
We expect our New York contracted acquisitions previously announced.
To close in the coming months combined we expect consolidated annualized revenue adjusted EBITDA and adjusted EBITDA per share run rate to be approximately $910 million.
$53 million and $5.18 per share respectively.
We believe we are well on our way to achieving our 'twenty 'twenty 2 run rate goals of 13 to $15 per share and adjusted EBITDA.
Now I'll pass the call to Richard L band, our Chief operating officer.
Thank you Sam and thanks to everyone for joining this call.
Before I get into the details I would like to welcome and thank our dealer partners as well as their respective team members now totaling over 450 associates.
We are extremely pleased with the results of our unique partnership acquisition strategy, where they seem to be enthusiasm effort and degree of careful my partners, which has translated into an impressive financial performance over the past several months.
The talent in our combined organizations, along with the resilience and stability of our business model makes us a stronger and more diversified company.
We look forward to achieving many more significant and transformative milestones in the future and.
And we believe that the best is yet to come.
I would also like to provide some notable run rate metrics. These metrics are in the upper 50 percentile rankings as compared to our public industry peers.
Our E Commerce has achieved an increase of 85 per cent and unique organic users and page views.
Gross profit margin is at 18.1 per se.
This translates to over $106 million on an annualized basis.
Our adjusted EBITDA margin as a percentage of revenue is up 7.2%.
Vehicle sales gross margins of 9%.
And believe me the best is yet to come thanks.
Thanks again for joining the call I will now open the call for questions and answer session operator.
Thank you at this time well be conducting a question and answer session. If he would like to ask a question. Please press star 1 on your telephone keypad, a confirmation tone will indicate your line is on the question queue. You May press star 2 if he would like to remove your question from the queue per participant.
Using speaker equipment, it may be necessary to pick up your handset before pressing the stacking.
1 on that please all be poll for question.
Okay.
Okay.
Our first question is from Stephanie more half truth Securities.
Please state your question.
Hi, This is actually Joe on for Stephanie Good afternoon, Sam and Richard and congratulations on a good 1 to you on what's looking like a good to queue into H I guess I was going to keep my comments fairly high level, but you know looking at the M&A market, obviously has different interest across the stack on public dealers certainly 1 of them.
We've been very active.
Wonder if you guys could talk about what you guys are seeing M&A market specifically.
Going out and looking at building your portfolio you know what.
Brands and regions or what or what you're looking at the next sort of 12 to 18 months.
Hi, Joe This is Sam Thank you very much from joining.
Uh huh.
We're seeing them.
Record amount.
Deal flow.
We believe that's from <unk>.
Last year's pent up demand that didn't get to execute as well as.
The tax environment that may be changing as well as the normal where you got several hundred transactions a year that just simply trade.
L M piece focused.
In regions.
From Texas.
Mid west.
East.
So the east coast and the northeast mid Atlantic and the.
Southeast regions, we're focusing on below multiple brands.
The domestic brands and the economy in parts that traditionally.
Trade at lower multiples. We believe this is a solid strategy given we don't see any headwind.
In the next several years and typically.
Those become more volatile than the luxury brands when you are.
I run into economic cyclicality.
Given the supply demand scenario.
And the industry right now.
We don't see.
The demand being absorbed.
For the next several years, so we see stability.
And margins and demand.
As well as Oh on the gating the volatility of the call.
Call it tier 2 dealerships.
Dealerships. So we're heavily focused on that and adding said that the domestic brands.
You see.
Their product line has a change.
Changed dramatically and in Denver.
And then following the domestic brands from a wall Street pint of beer for 3 decades.
The first time, you see them, making a size where they are and a lot of that has to do with their easy efforts as well as there are cost reductions.
Supply chain management give that parents environment. So we're very comfortable going forward that.
This equation remains and we're focused on the domestics on the low cost imports.
And those regions that I've mentioned.
I believe that's a solid strategy and we're just getting the best return on investment.
In that context.
Hope that answers your question Joe.
Yeah that was that was great color and then maybe just quickly on following up on M&A. Richard you made a comment about the other dealer partners and liking instructions on the deal and I was wondering if you could maybe talk to that point you know what kind of conversations are you having with these dealer partners.
Specifically as it relates to the sort of different mouse trap that you've sort of built to bring on new partners.
Yes, so we're seeing demand.
For several reasons, 1 being our dealer partner strategy.
Similar to the strategy of some very large private operators.
Uh huh.
And similar to.
Our funding strategy, where you are investing in portfolio companies.
What we.
We see a lot of dealerships that want to stay in the game.
And remain partners.
So they come to us.
To achieve that from an operational point of view.
It is 100% better in our view because when you have a partner operator.
That has skin in the game.
Uh huh.
They operate like their company they were watching costs you got the efforts and you don't get the management churn that you typically see when businesses change hands. So we're seeing a lot of flow because our model on the ability of our model is superior to our peers.
Yeah.
Got it that's helpful color and then maybe just last high level question. I was wondering what you guys are thinking about the dealer space as it relates to the OEM testing, we used direct to consumer model at least for some of their popular flagship products and maybe how you guys are thinking about the dealer.
On the dealer network kind of in the long term.
Well when you talk about mass distribution on the dealer network in any industry.
We're gonna have a conflicting remarks.
Based on.
The masses.
Our view is Oh, we support the fact, the manufacturers because they need the distribution.
And when they do.
Go direct to consumer, but I'm sure, they're going to compensate the fulfillment center for lack of a better term the dealership operator, because you need <unk>.
Sales in order to sell products.
As well as service product so we.
We look forward so that we think it enhances our dealerships S.
Great that's everything from me. Thanks, so much on the color.
Thank you, Jeff and have a great afternoon.
Yeah.
Our next question comes from D. J Cohen shareholder please state your question.
Hi, This is J D Cohen I've been an investor since the beginning Sam and the entire island P team. Congratulations on these figures what performance. My question specifically is regarding E. Commerce presence are you on your team seeing any cross colonization between the local websites at the dealers day, youre acquiring and yell on PMA.
Overstock Com site.
Great question, J J and thank you for joining the call.
We absolutely do its part of our strategy that is very low hanging fruit and it's the fact that every dealer we acquire has their own regional presidents and website presence and does their own e-commerce sales on fulfillment.
So what we do is we interconnect.
Systems and push all the inventory up to our main website L. M P motor stuff.
And then there's an automated process that then forward sleeves to day appropriate.
Dealer ship, there's absolute cross pollination and what that means is it's organic.
Net user additions without advertising simply because if you originate at the dealers local site.
You can then.
So the main site, if you don't see inventory alike and end up.
Purchasing a car online that resides at another dealership and vice versa. So it's a very.
Dynamic scenario and we're seeing the cross pearland as they share and it was actually intentional on strategy, we've done no advertising and organic users nearly doubled since January.
Great question, and that's where that really matters in ecommerce the organic elements of that.
I hope that answers your question J D code on it.
Thank you.
Thank you as well.
Our next question comes from Michael Samuel share holder. Please state your question.
I was just wondering with the shortage of vehicles today.
Okay perfect.
It's a business.
I'm going to pass the question to Richard out the hand, Chief operating officer.
You you broke up there Michael could you. Please ask your question again.
Yes. My question was because of the shortage that we're seeing now with the chips on that in the cards in general how does that affect service market vehicles.
Actually improves the service market because as these vehicles age Theres more service work to be done and we're realizing that in every 1 of our dealerships a service revenue was up significantly due to this shortage.
Now are the or the margin.
Decent on the herbicide.
I'm, sorry say that again.
Are your margin good on the service side.
Absolutely the margins are the highest they've been on so as our volume we've had an increase in volume in both parts and service divisions.
Thank you very much.
My pleasure.
Okay.
Our next question is from Matt Horn shareholder. Please state your question.
Hey, Sam first of all I, just wanted to say I've emailed, you back and forth a couple of times or I should say L. M. P. And was surprised that you were actually the person I was getting interest from I. Thank you for that says a lot sometime.
Sometimes it's really really really early in the morning. So it just shows that you work a lot we appreciate that as shareholders.
My question. The first 1 is really about your subscription plan I noticed that there is currently only 31 vehicles.
<unk> and that was kind of like 1 of the big.
Moving factors last last year.
So many people got involved and thought this was a cool idea and with only 31 vehicles kind of makes you scratch your head to what's going on so I think on a lot of us from wondering.
Is that working out and if so why do you plan on rolling it out on a larger scale.
Hi, Matt and thank you for the question and you are correct, we work long hours and long weeks.
And I appreciate the questions you asked early on the morning.
As far as the subscriptions we've transformed the industry.
Our business I'm, sorry significantly and such.
Subscriptions, which is a flexible this has become a.
Low single digits contributor.
Most of the metrics.
Specially income so or actually.
Pausing or that at the moment.
For good reason.
There's no real choice because.
The manufacturers are not supplying that.
The fleet because of the shortages in any material.
Way they've.
Cut the percentage is down even further.
Top 5 operators in the industry of the rental companies.
Well and secondly, it's actually a better thing.
Huge tailwind.
On the dealership operations traditional franchise dealership operations, where the margins are better given the recent events as well as.
The return on invested capital.
So it really is oh.
Great trade to a pause subscriptions and invest those dollars into buying additional dealerships.
The returns are significantly greater.
And when inventory normalizes.
And we believe that's not gonna be anytime this year and potentially not next.
But if it does sooner.
We will then roll out the subscriptions on a wider scale, but right now it's just a there's no real choice because of the supply constraints.
And it's a better investments all around.
We intend on freeing up about $15 million.
Just by now.
Not reissuing a subscription when we get a subscription return over the next.
12 months.
Those dollars invested in a dealership assets just provide much greater returns.
I hope that answered your question.
Yes, it does as I guess as long as we're not losing revenue on and we've kind of switch gears away from that we're still making revenue that makes sense I appreciate that.
Other question real quick if you don't mind.
When you're doing these acquisitions I understand.
The way that I see it they're carrying the same name they already had or do you ever have a plan to rebrand those locations to where Theyre LNP motors.
Not in the near future Matt.
Well right now.
The demand exceeds the supply.
<unk> as a as you can see by our second quarter 2020.
'twenty, 1 outlook and secondly.
Uh huh.
Just a bioware.
Peer group does not do that.
And it doesn't make sense I understand now.
Why they don't do that because some of these dealerships that.
We're acquiring.
Are rooted in the community.
Sure.
Generations.
And they buy cars from that name to put it simply so it really does not it's not accretive it may very well be diluted to change the name, but given the.
The same day and at the same website at cross Pollinate Swiss.
Our main main websites so.
When we get an upside effect, but I don't believe it makes any sense having <unk>.
<unk> consistency call it because some of these dealerships are there for 50 and 75 years.
And then driving through the neighborhoods when we did due diligence and sitting on the showrooms.
Generations 5 from that name they don't.
Hmm go anywhere else. So a significant part of sales of that so no plans map.
Thank you.
Fair enough I appreciate that and I do have 1 last question for you.
And this is really coming I guess, it's it's kind of more of a statement and I you know I'm in a lot of groups online, we conversed about what's going on and I tell you a lot of us are very on the dark and I know that you have to be careful.
What's your share and what you don't share what we understand that the 1 thing that I think we would probably appreciate a little bit more if you could give us.
Just a little bit more idea of what's going on with the company, maybe maybe suggesting a brand ambassador I am sure you have big plans and I know theres a lot of moving parts, but it would really make a private investors feel a lot more comfortable to invest when they kind of know a little bit about what's going on I think it's been difficult for some of us and I definitely speak for myself, when I'm, saying that.
Yes.
Thank you Matt.
Okay.
We believe we inform the public of what's going on do you see the press clips. Unfortunately, we can't appease everybody when they want it it's just the nature of investing on public companies.
We are bound by guidelines and we don't believe it.
Presenting a news that.
Immaterial for us.
Yes.
Just because someone wants news at the moment.
It just simply doesn't work like that.
And as you follow or stuff like that.
A fortune 100 Fortune 1000 that authority may do the same thing.
So no Brandenburg are met and.
We released news flow and our rate case and in our press.
For leases.
Yeah.
Well I appreciate your response here, it's not really what I wanted to hear but I do appreciate it. Thank you. So much I don't have any further questions I do look forward to growing with the company with you folks. Thank you.
Thank you very much Matt.
As a reminder, if you would like to ask a question. Please press star 1 on your telephone keypad confirmation tone will indicate your line is no question Kim share participants using speaker equipment. It may be necessary to pick up your handset before pressing on Stankey 1.
1 moment, please Holly Paul for additional question.
Okay.
Our next question is from Brett resin share holder. Please state your question.
Hi, Tim Congratulations on a great quarter and the original private investors you actually answered.
A few of the questions head on to shareholders.
Keep up the good work it.
It seems like obviously the supply chain pressures are going to last for some time.
Do you see in the next year or 2 with the manufactures overcoming the COVID-19 on manufacturing.
Okay.
Thank you Brett.
Good question.
We believe it's a mathematical sac.
That.
This should remain these dynamics should remain.
In place for the next several years.
Simple reason F yet used in that equation.
Say, 50% of consumers put us their automobile purchases.
The following year during a pandemic that would be this year.
Uh huh.
So you have a 50% increase in demands in the largest consumer segment in the country. The automotive is over.
Over 20% of the nation's GDP.
The manufacturing infrastructure.
Does not will not and will not build the capacity.
To support a 50% increase in sales multi trillion dollar increase in sales in a year or 2 or 3 so it's just going to ask the naturally dissipate.
And that could take several years and if you use any equation, that's not 50%, even if it's 30% Brett.
Deferred their purchases.
There's that many more users looking for vehicles.
And.
On the infrastructure, just can't support it and won't support it.
It's not worth building a manufacturing plant just to.
Have pent up demand absorption.
Although they may build some but we see this going on for several years out.
Which is a great thing we're fortunate to be on the right place at the right time.
Great. Thank you very much.
Thank you Brett.
It appears we have no more questions at this time.
We have reached the end of our question and answer session I will now turn the call back over to Sam Pollock for closing remarks.
Thank you operator, and thank you everybody for joining the call looking forward to.
Your participation on our next release.
Have a great day.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great evening.