Q1 2025 Lithia Motors Inc Earnings Call

April 23, 2025

Operator: Thank you for calling InComm Conferencing. The next available conference specialist will be with you momentarily. Conference center. May I have your name, please? Yes. David Brown. Calling in for Lithia? Yes. One moment.

Greetings and welcome to Lithia Motors first quarter 2025 earnings conference call. At this time, all participants are in a listen only mode.

Question and answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Speaker Change: As a reminder, this conference call is being recorded I would now like to turn the call. After your house because you are done Jo mill.

Thank you you may begin.

Bryan Deboer: Good morning, Thank you for joining us for our first quarter earnings call with me today are Bryan Deboer, President and CEO, Adam Chamberlain, Chief Operating Officer, Tina Miller, Senior Vice President and CFO and finally, Chuck Lietz Senior Vice Presidents have driveway finance today's.

Bryan Deboer: And may include statements about future events financial projections and expectations about the company's products markets and growth such statements are forward looking and subject to risks and uncertainties that could cause actual results to materially differ from the statements made.

Bryan Deboer: We disclose those risks and uncertainties, we deem to be material in our filings with the Securities and Exchange Commission. We urge you to carefully consider these disclosures and not to place undue reliance on forward looking statements. We undertake no duty to update any forward looking statements, which are made as of the date of this release.

Speaker Change: Our results discussed today include references to non-GAAP financial measures. Please refer to the text of today's press release for a reconciliation of comparable GAAP measures. We have also posted an updated investor presentation on our website investors thought lithia driveway dot com highlighting our first quarter results with that I would like to turn the call over to <unk>.

Speaker Change: Bryan Deboer, President and CEO.

Speaker Change: Thank you John Good morning, and welcome to our first quarter earnings call.

Speaker Change: Our lithium driveway teams delivered strong results and continued to charge towards the potential of our integrated ecosystem powered by the strength of our talented people.

During the first quarter, we generated diluted earnings per share of $7.94 of 34, 8% year over year increase in adjusted diluted earnings of 766, 25, 4% increase reflecting disciplined execution and growing contributions from our <unk>.

Speaker Change: High margin Adjacencies.

Speaker Change: We are pleased to see our first <unk>.

Speaker Change: <unk> year over year adjusted earnings increase since the fourth quarter of 2022.

Speaker Change: Notably we saw year over year increases each month in the first quarter demonstrating that these improvements were not just a result of tariffs.

Speaker Change: While the full earnings power of our design is still ahead.

Speaker Change: These results underscore the effectiveness of our strategy.

Speaker Change: Serving customers seamlessly across digital and physical channels, while building a more profitable diversified and scalable platform.

Speaker Change: Adjacencies are now contributing meaningfully to our earnings and delivering measurable gains in engagement and unit volume now exposing the distinct competitive differentiation of our design and our strategy.

Speaker Change: Our focus in 2025 is to continue to execute doubling down on our commitment to building customer loyalty potential and growth our LPG.

Speaker Change: We are confident in our unique ability to deliver sustainable performance.

Speaker Change: <unk> market share and accelerate the profitability of our ecosystem through the power of our people and regenerative cash flows.

Speaker Change: Our foundational strengths enabled us to continue our growth as the world's largest auto retailer as we built momentum and continue our pathway to achieving $2 in EPS per $1 billion in revenue.

Speaker Change: In the first quarter lithium driveway grew revenues to a record $9 2 billion.

Speaker Change: A 7% increase from Q1 of last year.

Speaker Change: This growth is a result of our continued focus on improving market share and operational effectiveness.

Speaker Change: The team's commitment to realizing our potential is also reflected in our same store performance and sequential improvements in gross margin.

Speaker Change: After a robust start to the year, we're encouraged by the growing opportunities to expand market share unlock greater profitability across our Adjacencies and drive further productivity as we continue to scale the full potential of our ecosystem.

Speaker Change: These results reflect the strength of our store leaders and their autonomy to drive performance by understanding customers and their own manufacturer supply and pricing dynamics to adapt quickly to local demand.

Speaker Change: We continue to closely monitor potential tariff impacts and broader shifts in our consumer sentiment. We are encouraged by our OEM partners response to the evolving tariff landscape, where brands are keeping customer affordability in mind as they work to stabilize pricing or.

Speaker Change: Our diversified omnichannel ecosystem spans retail digital and fleet channels across North America, and the United Kingdom.

Speaker Change: With offerings that range from new vehicles to 20 year old value autos were equipped to meet the customers at any affordability level and have adjusted our mix to be well diversified and perfectly aligned with market dynamics.

Speaker Change: Beyond retail units, our after sales business, which represents approximately 40% of our gross profit is well positioned to benefit from tariff driven market changes and our financing operations and fleet management businesses are designed to deliver consistent earnings growth despite retail flux.

Speaker Change: <unk>.

Speaker Change: This flexibility and core strength of our model and a key driver of our long term stability is creating a best in class industry profitability equation.

Speaker Change: These adjacencies continue to deliver meaningful contributions as part of our integrated ecosystem.

Speaker Change: Finance operations continued to deliver strong profitability in the first quarter supported by improving net margin and ongoing cost efficiencies. We also made further progress in refining our digital retail strategies with driveline green cars, continuing to bring new customers into our ecosystem.

Speaker Change: System and enhance overall engagement.

Speaker Change: Early returns on our Wills investment remains strong and we continue to build momentum around the synergies these partnerships unlock across our commercial and retail channels. As we look ahead, we are single minded in our goals.

Speaker Change: Locking the profitability of the lifecycle by creating customer loyalty, achieving our potential and unlocking the growth by delivering on our core strength execution.

Speaker Change: Now turning to our unique and difficult to replicate strategy.

Speaker Change: Foundation of the latter Omnichannel strategy continues to be our expansive network of stores that reaches customers across north American and United Kingdom strengthened by the powerful Adjacencies and high performing teams.

2025 is a year of acceleration of our strategy and in the fourth first quarter, we increased profitability added new stores and target markets, while optimizing our existing portfolio and integrated key adjacencies into our day to day operations.

Speaker Change: We operate within one of the largest and least consolidated industries, our ability to be the most competitive acquire and an efficient operator is a core strategic advantage one that positions us to grow profitably.

Speaker Change: Our model is built to flex and adapt meeting customer needs across the entire ownership lifecycle with transparency convenience trust and empowerment.

Speaker Change: Our omnichannel ecosystem continues to expand our reach and deepen our customer engagement with the my driveway portal, placing more control visibility and simplicity into the hands of our customers.

Speaker Change: Digital platform like driveway and Green cars remained key entry points into our ecosystem, drawing in new users and reinforcing lifetime value through retention.

Speaker Change: These capabilities combined with disciplined capital management and consistent free cash flow generation enables us to stay agile and forward looking as.

As we move through 2025, our ecosystem, we will continue to unlock performance across channels and geographies boosting loyalty expanding market share and supporting our long term target of sustainable profitable growth.

Speaker Change: Acquisitions remain a core competency and we continue our disciplined approach to look for accretive opportunities that can improve our network focusing primarily on the United States, we target a minimum after tax return of 15% and acquire for 15% to 30% of revenues or three to six times normalized.

Speaker Change: EBITDA.

Speaker Change: Our track record brings a 95% success rate of above target returns and demonstrates that labs growth strategy remains grounded and disciplined execution through strategic acquisition targeting.

Speaker Change: With our growing capital engine, we're able to deploy our free cash flows to generate the highest returns while remaining flexible to market conditions.

Speaker Change: We are maintaining an adjusted capital allocation to balance acquisitions and share buybacks equally, especially given the attractive relative valuation of our own shares in.

Speaker Change: In the near term, we remain disciplined as acquisition pricing returns from our historical highs and we continue to evaluate high quality opportunities.

Speaker Change: The relative values of our own shares supports balanced capital deployment approach and in the first quarter, we repurchased $146 million or nearly 2% of our outstanding shares at attractive valuations.

Speaker Change: We continue to evaluate acquisitions and share repurchases and we will focus our share buybacks in the near term given market pricing dynamics with strong cash generation and improving earnings we maintain the flexibility to pursue this balanced approach and we continue to target 200.

Speaker Change: The $4 billion in annualized acquired revenues in the coming years.

Speaker Change: Together these elements form a clear path towards our long term goal of generating $2 in EPS for every $1 billion in revenue in a normalized environment as outlined by our slide 14 of our investor presentation that.

Speaker Change: The drivers of that steady state performance are now fully within our control and include the following.

Speaker Change: First continue to improve our operational performance by realizing the massive potential in our existing stores.

Speaker Change: Second optimizing our network by acquiring and driving high performance in larger automotive retail stores and the stronger profitability regions of the southeast and South Central United States and leveraging our digital channels will bring U S market share to 5% today, we are a combined markets.

Speaker Change: Sure of a little over 1%.

Speaker Change: Third financing of up to 20% of units through Dfc.

Speaker Change: <unk>.

Speaker Change: Through scale, we are driving down vendor pricing with solutions like pinewood, leveraging corporate efficiencies and lowering borrowing costs as we path towards an investment grade credit rating.

Speaker Change: Combining these levers with increased market share, we see a pathway to achieving SG&A as a percentage of gross profit in the mid 50% range.

Speaker Change: Fifth maturing contributions and growing synergies from our Omnichannel Horizontals, including fleet management Fleet management, Dms software charging infrastructure and captive insurance and finally, delivering ongoing returns of capital to shareholders through increased share buybacks and dividends.

Speaker Change: We are uniquely positioned to scale, our mobility ecosystem and deliver more impactful customer experiences across the ownership journey.

Speaker Change: With the foundational elements of our strategy in place our focus is centered on operational execution, we're confident in our ability to elevate performance and continue setting the standard for the industry.

Speaker Change: Before I walk through our key financial highlights I want to take a moment to recognize Adam Chamberlain, who will be transitioning from his role as our chief operating officer to become CEO of Mercedes Benz USA.

Speaker Change: Adam has made a lasting impact on our organization strengthening the speed of our operations elevating our customer experience and driving performance. His next chapter reflects the strength of our partnership with Mercedes Benz and we're proud to see him step into this important role and we look forward to what will.

Speaker Change: <unk> achieved together.

Speaker Change: On a personal note I am excited to continue working closely with our operational leaders and execute at a high level advancing our mission growth powered by people. Thank you Adam we're really going to Miss you.

Speaker Change: Onto our operating results and how we're driving performance at the store and departmental levels.

Speaker Change: Our performance this quarter marked another meaningful step forward, we delivered year over year growth in new vehicles in after sales and experienced continued sequential improvements in used autos, particularly in the value auto segment.

Speaker Change: These improvements were all supported by continued strength in SG&A execution coming off the back of our 60 day plan.

Speaker Change: As we continue the year, we remain focused on our core drivers of profitability delivering customer optionality to grow market share and maintaining disciplined cost control our.

Speaker Change: Our operational success has guided and inspired by our Lithia partners group or LPG and for 2025 I'm happy to announce and include our store departmental leaders in this recognition as well again, congratulations to all of 2024 winners as well.

Speaker Change: Turning to our same store sales performance.

Speaker Change: Total revenues increased by two 5% and gross profit increased one 8% primarily due to sequential strength across all business lines that was partially offset by a normalization of Gpus total unit sales increased by one 5% year over year, while total gross profit per year.

Speaker Change: <unk> of <unk> 40, 301 was down $144 compared to the same period last year, new vehicle units increased three 6% year over year with continued strength in import manufacturers.

Speaker Change: Our front end Gpus were 3046 consistent sequentially.

Speaker Change: Used vehicles were down slightly at <unk>, 4% year over year with a considerable quarter over quarter sequential improvement.

Speaker Change: Value auto sales were particularly impressive with a 38, 8% improvement from last year quarters were down nine three where procurement remains a focus and certified units were up slightly at <unk> seven.

Speaker Change: Front end Gpus for used vehicles were stable year over year at $18 77.

Speaker Change: Used autos are foundational to our model and expect to see ongoing positive trends in the quarters ahead F&I growth was also particularly strong in the first quarter, we delivered three 4% year over year growth and same store gross profit and $881 on a per unit basis.

Speaker Change: As a reminder, this is the first quarter of Penn Dragons comparatively low F&I impacting sequential same store sales results.

Speaker Change: Despite this headwind this was a 35 dollar increase year over year and reflects the continued opportunity in this high throughput area.

Speaker Change: Our after sales performance was also a key driver of this quarter, where same store revenue up two 4% delivering and after sales gross profit increase of seven 5% adjust.

Speaker Change: Adjusting for sales days after sales revenue was actually up over 4%.

Speaker Change: Warranty work showed another strong quarter with gross profits, increasing 19, 7% year over year.

Speaker Change: Our team is focused on creating durable customer attention through personalized experiences and effectively managing the ongoing demand for this high margin work.

Speaker Change: Now turning to inventory, where we realized significant improvements towards our 60 day plans targeted inventories levels in the first quarter.

Speaker Change: New vehicle DSO decreased from 59 days in Q4 to 43 days at the end of this quarter, while used vehicle Dsos decreased from 53 days to 45 days.

Speaker Change: Absolute inventory balance decreased by $163 million and we are now encouraged by the savings we are seeing in our floor plan expense, which decreased 6% year over year.

Speaker Change: Our strong start to the year reflects the power of our ecosystem and the focus of our teams as we continue executing on our strategy. We are excited by the opportunity to drive unparalleled growth and long term value with that I'd like to turn the call over to Tina who will walk through our financial results.

Tina: <unk> in more detail. Thank you Brian.

Tina: Across our operations is creating a strong foundation to accelerate our value, particularly through our SG&A execution increasingly profitable financing operations disciplined capital allocation and continued focus on balance sheet strength.

Operator: Greetings, and welcome to Lithia Motors Q1 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Jardon Jaramillo. Thank you. You may begin.

Tina: We're encouraged by our SG&A performance to start the year building on the improvements we've promised and delivered as part of the 60 day plan in the second half of 2024, our adjusted SG&A as a percentage of gross profit was 68, 2% during the quarter and 120 basis point decline from the prior year and 67.

Tina: On a same store basis, a 150 basis decline.

Jardon Jaramillo: Good morning. Thank you for joining us for our First Quarter Earnings Call. With me today are Bryan DeBoer, President and CEO; Adam Chamberlain, Chief Operating Officer; Tina Miller, Senior Vice President and CFO; and finally, 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. Such statements are forward-looking and subject to risks and uncertainties that could cause actual results to materially differ from the statements made. We disclose those risks and uncertainties we deem to be material in our filings with the Securities and Exchange Commission. We urge you to carefully consider these disclosures and not to place undue reliance on forward-looking statements. We undertake no duty to update any forward-looking statements, which are made as of the date of this release.

Tina: While we are pleased to see continued progress we remain focused on disciplined cost management every day, we continue to see opportunities to enhance efficiencies across the business with targeted efforts underway in both North America and the UK as we move through the year. We believe we are on track to achieve same store SG&A in the range of 65.

Tina: <unk>, 5% to 67, 5% as we take continued steps to night, the full potential of our operating model.

Tina: Our team's relentless focus on delivering exceptional customer experiences and driving performance through people was on full display. This quarter. We are proud of the progress we've made to start 2025 with strong execution across operations and clear momentum in key areas of the business. As we look ahead, we remain focused on deepening customer loyalty unlock.

Jardon Jaramillo: Our results discussed today include references to non-GAAP financial measures. Please refer to the text of today's press release for reconciliation of comparable GAAP measures. We have also posted an updated investor presentation on our website, investors.lithiadriveway.com, highlighting our Q1 results. With that, I would like to turn the call over to Brian DeBoer, President and CEO.

Tina: <unk> store and departmental potential and scaling growth across our ecosystem.

Tina: Starting with our financing segment led by Dfc, we delivered another quarter of profitability with income of $12 5 million compared to a loss of $1 7 million in the same period last year. This performance reflects the continued maturity of our portfolio improved capital efficiency and continued maturing in our securitization.

Bryan DeBoer: Thank you, Jardon. Good morning, and welcome to our Q1 Earnings Call. Our Lithia and Driveway teams delivered strong results and continued to charge towards the potential of our integrated ecosystem, powered by the strength of our talented people. During Q1, we generated diluted earnings per share of $7.94, a 34.8% year-over-year increase, and adjusted diluted earnings of $7.66, a 25.4% increase, reflecting disciplined execution and growing contributions from our high-margin adjacencies. We are pleased to see our first quarterly year-over-year adjusted earnings increase since Q4 2022. Notably, we saw year-over-year increases each month in Q1, demonstrating that these improvements were not just a result of tariffs.

Tina: <unk> performance.

Tina: Following a full year of profitability in 2024, we expect a consistent earnings trajectory in 2025, as we balance yield growth and risk.

Tina: Originated $623 million in loans during the quarter at 24% sequential increase bringing the total portfolio balance to over $4 billion portfolio quality remained strong supported by disciplined underwriting and a focus on higher credit tier originations with new FICO score is expected to average 730 in 2020.

Tina: Five.

Tina: The net interest margin continued to be expanded increasing 117 basis points year over year, and seven basis points sequentially NIM expansion increases profitability and add flexibility to continue scaling the platform as we move toward our goal of 20% penetration.

Tina: These results demonstrate the strength of our financing platform and its growing contribution to our long term earnings potential.

Bryan DeBoer: While the full earnings power of our design is still ahead, these results underscore the effectiveness of our strategy, serving customers seamlessly across digital and physical channels while building a more profitable, diversified, and scalable platform. Adjacencies are now contributing meaningfully to our earnings and delivering measurable gains in engagement and unit volume, now exposing the distinct competitive differentiation of our design and our strategy. Our focus in 2025 is to continue to execute, doubling down on our commitment to building customer loyalty, potential, and growth, or LPG. We are confident in our unique ability to deliver sustainable performance, capture market share, and accelerate the profitability of our ecosystem through the full power of our people and regenerative cash flows.

Tina: Overall, our financing operations adjacency has delivered high performance growth and is a key element of our $2 of EPS for every $1 billion of revenue target as each loan originated by Dfc contribute up to three times more profitability than traditional indirect lending we remain confident in this segments long term earnings growth and.

Tina: Expect increasing profitability as we increase penetration and strengthen our track record.

Tina: Now moving on to our cash flow performance and balance sheet, we reported adjusted EBITDA of $402 1 million in the first quarter of $17, one increase year over year, driven by increased earnings and decreasing floorplan expense.

Tina: During the quarter, we generated free cash flow of $276 million, our capital deployment strategy focuses on the efficient allocation of our businesses regenerative cash flows preserving the quality of our balance sheet, while supporting our growth initiatives and allowing us to respond opportunistically to a complex environment. This.

Bryan DeBoer: Our foundational strengths enable us to continue our growth as the world's largest auto retailer as we built momentum and continued our pathway to achieving $2 in EPS per $1 billion in revenue. In the first quarter, Lithia & Driveway grew revenues to a record $9.2 billion, a 7% increase from Q1 of last year... This growth is a result of our continued focus on improving market share and operational effectiveness. The team's commitment to realizing our potential is also reflected in our same-store performance and sequential improvements in gross margin. After a robust start to the year, we're encouraged by the growing opportunities to expand market share, unlock greater profitability across our adjacencies, and drive further productivity as we continue to scale the full potential of our ecosystem.

Tina: This quarter, we completed a couple of acquisitions deploying $75 million for those transactions, but we are more heavily weighted to share buybacks to be opportunistic with the fluctuating market in the first quarter, we repurchased one 7% of our outstanding shares at a weighted average price of $329.

Tina: $687 million remains available under our share repurchase authorization.

Tina: Looking ahead, we will continue to remain agile and reallocating capital where it generates the highest returns we expect to allocate 30% to 40% of free cash flow to our share repurchases, while continuing a disciplined approach to M&A opportunities. Additionally, capital expenditures have moderated and are now primarily directed toward network.

Tina: <unk> and meeting OEM facility requirements.

Tina: We ended the quarter with a net leverage of two five times in line with our long term target of two to three times and well below our bank covenant requirement of 575 times. These metrics adjusted for the impact of floor plan debt collateralized by vehicle inventory, which is unique to our industry and integral to our operations.

Bryan DeBoer: These results reflect the strength of our store leaders and their autonomy to drive performance by understanding customers and their own manufacturer supply and pricing dynamics to adapt quickly to local demand. We continue to closely monitor potential tariff impacts and broader shifts in our consumer sentiment. We are encouraged by our OEM partners' response to the evolving tariff landscape, where brands are keeping customer affordability in mind as they work to stabilize pricing. Our diversified omni-channel ecosystem spans retail, digital, and fleet channels across North America and the United Kingdom. With offerings that range from new vehicles to 20-year-old value autos, we're equipped to meet the customers at any affordability level and have adjusted our mix to be well-diversified and perfectly aligned with market dynamics.

Tina: The industry treats the associated interest as an operating expense in EBITDA and excludes this debt from balance sheet leverage calculation. Similarly, we exited ABS warehouse lines and issuances to capitalize CFC from our leverage calculation, while we opportunistically allocated capital during the quarter, we maintain our long term focus financial.

Tina: Discipline to support our planned growth.

Tina: Our strategy remains focused on delivering strong consistent growth and top tier shareholder returns through the continued expansion of our omnichannel platform with the right team robust tools and a solid financial foundation, we are positioned to scale profitably across both our core operations and Adjacencies.

Tina: As we look ahead, our diverse and capable teams are united by a commitment to exceptional customer experiences and are well equipped to unlock the next phase of growth in 2025 and beyond.

Bryan DeBoer: Beyond retail units, our After-Sales business, which represents approximately 40% of our gross profit, is well-positioned to benefit from tariff-driven market changes, and our financing operations and fleet management businesses are designed to deliver consistent earnings growth despite retail fluctuations. This flexibility and core strength of our model, and a key driver of our long-term stability, is creating a best-in-class industry profitability equation. These adjacencies continue to deliver meaningful contributions as part of our integrated ecosystem. Finance operations continued to deliver strong profitability in Q1, supported by improving net margin and ongoing cost efficiencies. We also made further progress in refining our digital retail strategies, with Driveway and GreenCars continuing to bring new customers into our ecosystem and enhance overall engagement.

Tina: This concludes our prepared remarks with that I'll turn the call over to the operator for questions operator.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad a.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: Our first question comes from Ryan <unk> with Craig Hallum Group. Please proceed with your question.

Ryan: Hey, good morning, guys.

Ryan: I wanted to start just at a higher level kind of what youre seeing from a current tariff environment.

Ryan: If you want to talk monthly trends throughout the quarter and then into April that might be helpful. Both from a demand and GPU and then kind of second part to that how you view your higher inventory levels relative to some of your peers. How that's positioned to you in this environment again kind of more into April from that question standpoint.

Bryan DeBoer: Early returns on our Wheels investment remain strong, and we continue to build momentum around the synergies these partnerships unlock across our commercial and retail channels. As we look ahead, we are single-minded in our goals: unlocking the profitability of the life cycle by creating customer loyalty, achieving our potential, and unlocking the growth by delivering on our core strength execution. Now, turning to our unique and difficult-to-replicate strategy. The foundation of the LAD omni-channel strategy continues to be our expansive network of stores that reaches customers across North America and the United Kingdom, strengthened by the powerful adjacencies and high-performing teams. 2025 is a year of acceleration of our strategy, and in the first quarter, we increased profitability, added new stores in target markets while optimizing our existing portfolio, and integrated key adjacencies into our day-to-day operations. We operate within one of the largest and least consolidated industries.

Brian: Sure Ryan Good morning, this is Brian.

Speaker Change: I think we're very fortunate that with tariffs we sit quite nicely, we have over 45% of our inventory that that's going to be.

Speaker Change: The current tariffs are sitting obviously, we note that there is still a little bit in limbo, but where the curve current tariffs are sitting we are about 45% of our inventory that's not impacted.

Speaker Change: Which is I believe in most of the major retailers, that's probably the most diversified in the least impacted which we're pretty excited about that.

Speaker Change: More recently as we think about moving forward our inventories have come down a lot I mean, we dropped our inventory in both new and used almost 10 day supply.

Speaker Change: Over quarter, which is which is a good step forward and I think when we think about go forward, it's more about store leadership, staying dynamic and specifically focusing on their on their brand and their market, Okay, and we've been pretty successful that way, but you also had asked the question about what happened sequentially in the quarter.

Bryan DeBoer: Our ability to be the most competitive acquirer and an efficient operator is a core strategic advantage, one that positions us to grow profitably. Our model is built to flex and adapt, meeting customer needs across the entire ownership life cycle with transparency, convenience, trust, and empowerment. Our omni-channel ecosystem continues to expand our reach and deepen our customer engagement, with the MyDriveway portal placing more control, visibility, and simplicity into the hands of our customers. Digital platforms like Driveway and GreenCars remain key, key entry points into our ecosystem, drawing in new users and reinforcing lifetime value through retention. These capabilities, combined with disciplined capital management and consistent Free Cash Flow generation, enables us to stay agile and forward-looking.

Speaker Change: Okay. We were we were actually motivated by a strong January a strong February and then early March is when the tariff discussion start and it came out strong as well. So it was consistent throughout the quarter and we're pretty confident that you know that looking into Q2, we've got good for.

Speaker Change: Our site into what our inventories and our costs are in most.

Speaker Change: Factors have stabilized pricing for some level at least through the 2025 model year.

And we'll see what happens beyond and hopefully there is some relief to the current situation given.

Speaker Change: Helpful staying on the tariff topic any way to put kind of guardrails and you did this.

Speaker Change: Several years ago.

Speaker Change: Kind of with the Saar just the levers you can pull and kind of the earnings power.

Speaker Change: <unk> from a leverage standpoint, but.

Bryan DeBoer: As we move through 2025, our ecosystem will continue to unlock performance across channels and geographies, boosting loyalty, expanding market share, and supporting our long-term target of sustainable, profitable growth. Acquisitions remain a core competency, and we continue our disciplined approach to look for accretive opportunities that can improve our network, focusing primarily on the United States. We target a minimum after-tax return of 15% and acquire for 15% to 30% of revenues or 3 to 6 times normalized EBITDA. Our track record brings a 95% success rate of above-target returns and demonstrate that Ladd's growth strategy remains grounded in disciplined execution through strategic acquisition targeting. With our growing capital engine, we're able to deploy our free cash flows to generate the highest returns while remaining flexible to market conditions.

Speaker Change: If ultimately kind of in the back half of this year and next year, we go to a 14 or 15 million Saar.

Speaker Change: Prices stay higher affordability et cetera, et cetera, I guess any way to help us kind of from an earnings power standpoint, and what that might mean for you guys.

Speaker Change: Ryan I think it's important to remember where where our product mix is in that we've designed our entire ecosystem around affordability. So having 20 year old cars and you saw that we had a 39% increase in our value auto sales year over year, that's that's a big increase and it shows the strength of the model that.

Speaker Change: We're a little less concerned about what the specific terraces, so long as they stay within the ecosystem, so create affordable products top and from top to bottom whether it's in after sales new cars or used cars and stay focused on what we can control because ultimately we do have a fairly adaptable model.

Speaker Change: Okay because of that affordability range and remember this I mean, the driveway dot com Green cars and Dfc help massively in terms of how we think about diversification and now the DSC is turning some pretty good profits that takes out some of the volatility as we look at things I would note.

Bryan DeBoer: We are maintaining an adjusted capital allocation to balance acquisitions and share buybacks equally, especially given the attractive relative valuation of our own shares. In the near term, we remain disciplined as acquisition pricing returns from historical highs, and we continue to evaluate high-quality opportunities. The relative values of our own shares supports balanced capital deployment approach, and in Q1, we repurchased $146 million, or nearly 2% of our outstanding shares at attractive valuations. We continue to evaluate acquisitions and share repurchases, and we will focus our share buybacks in the near term, given market pricing dynamics. With strong cash generation and improving earnings, we maintain the flexibility to pursue this balanced approach, and we continue to target $2 to 4 billion in annualized acquired revenues in the coming years.

Speaker Change: One other thing for everyone.

Speaker Change: It is important to note that the pinewood market valuation change was 27.

Speaker Change: So we were at $7 93.

Speaker Change: Which is which was considerably ahead of consensus.

Speaker Change: And that's something that to some extent is outside of our control.

Speaker Change: Helpful. Thanks, Brian estimates also want right over the last week or two.

Speaker Change: B <unk>. So thanks, good luck guys.

Speaker Change: Okay. Thanks.

Speaker Change: Yes.

Speaker Change: Our next question comes from John Murphy with Bank of America. Please proceed with your question.

John Murphy: Good morning, everybody.

Speaker Change: Hey, Brian.

Speaker Change: Brian just to stay on tariffs just for a second from two different prongs.

Speaker Change: First what kind of communication if you receive from your factory partners.

Bryan DeBoer: Together, these elements form a clear path towards our long-term goal of generating $2 in EPS for every $1 billion in revenue in a normalized environment, as outlined by our slide 14 of our investor presentation. The drivers of that steady state performance are now fully within our control and include the following: First, continue to improve our operational performance by realizing the massive potential in our existing stores. Second, optimizing our network by acquiring and driving high performance in larger automotive retail stores, in the stronger profitability regions of the Southeast and South Central United States, and leveraging our digital channels will bring US market share to 5%. Today, we have a combined market share of a little over 1%. Third, financing of up to 20% of units through DFC.

Speaker Change: And have you seen any impact to the M&A environment as a result of the uncertainty around tariffs.

Speaker Change: Maybe I'll start maybe I'll start with the latter we haven't seen a big impact in the M&A environment. However, it does it has appeared to be softening over the last I would say three to four months, but specific to the start of March we haven't seen any major.

Speaker Change: Changes in terms of communications from our manufacturers I might let Adam jump in on that real quickly Hey, John Good morning.

Adam Chamberlain: We've seen great as far as far as the manufacturers know exactly what they're dealing with because obviously it is an extremely volatile situation John.

Speaker Change: I think we've seen clear communication, we had some.

Speaker Change: Early early communications around guaranteeing holding prices through certainly for most Oems through end of May So that takes care of the 2025.

Speaker Change: Obviously in that context, we're also kind of bottom of the funnel right. So the Oems are going to deal with that support and help if we can but ultimately they're going to deal with.

Bryan DeBoer: Fourth, through scale, we are driving down vendor pricing with solutions like Pinewood, leveraging corporate efficiencies, and lowering borrowing costs as we path towards an investment-grade credit rating. Combining these levers with increased market share, we see a pathway to achieving SG&A as a percentage of gross profit in the mid-50% range. Fifth, maturing contributions and growing synergies from our omni-channel horizontals, including fleet management, DMS software, charging infrastructure, and captive insurance. And finally, delivering ongoing returns of capital to shareholders through increased share buybacks and dividends. We are uniquely positioned to scale our mobility ecosystem and deliver more impactful customer experiences across the ownership journey. With the foundational elements of our strategy in place, our focus is centered on operational execution. We're confident in our ability to elevate performance and continue setting the standard for the industry.

Speaker Change: Administration and thinking about how they allocate their resources.

Speaker Change: Divestments to manage tariff situations. So we sit we sit kind of always below that but we've had really good <unk>.

Speaker Change: Alrighty and leadership from the majority of it.

Bryan Deboer: As it relates to that I think I think the other point is our job as Brian said, it's just to be discipline moving forward. So our stores are being disciplined in terms of the way they manage their operations and I think we demonstrated last year. We can we can adapt and flex pretty good but we need to so that's how I think about it John Thank you.

Speaker Change: That's helpful. Bryan just a second question when we think about sort of the Adjacencies, particularly dfc.

Bryan Deboer: And then the benefits you get on SG&A over time.

Bryan Deboer: As you kind of a notion that you might lower your expectation for front end gross to take more market share overtime and kind of how do you balance that.

Bryan Deboer: Without getting <unk>.

Bryan Deboer: Is mission critical for parts and service. So just curious how are you.

Bryan Deboer: Thinking about that full circle equation does this allow you to take more market share and then feed the beast.

Speaker Change: Back in and grow earnings even stronger and just kind of how do you balance that all out great. Great question, John and I think that our original thesis on the design was that if we are able to create transparent simple experiences for our consumers than there is actually a price inflection upward not downward okay. We already.

Bryan DeBoer: Before I walk through our key financial highlights, I want to take a moment to recognize Adam Chamberlain, who will be transitioning from his role as our Chief Operating Officer to become CEO of Mercedes-Benz USA. Adam has made a lasting impact on our organization, strengthening the speed of our operations, elevating our customer experience, and driving performance. His next chapter reflects the strength of our partnership with Mercedes-Benz, and we're proud to see him step into this important role, and we look forward to what we'll achieve together. On a personal note, I'm excited to continue working closely with our operational leaders and execute at a high level, advancing our mission, growth powered by people. Thank you, Adam. We're really going to miss you. On to our operating results and how we're driving performance at the store and departmental levels. Our performance this quarter marked another meaningful step forward.

Speaker Change: <unk> cars and our cost of vehicles are at a cost advantage of about five to $700 over they use only retailers important to note, but we also give away that five to $700 in terms of price to market of what we sell cars floor, because we negotiate away that gross profit.

Speaker Change: In lieu of getting more customers financed okay. So I would say if anything today, we're looking at a 41% to 4300 dollar total vehicle gross profit. Okay. That's that's down a couple of hundred Bucks, primarily because of the mix change in pendragon that rolled in this quarter do you.

Speaker Change: Remember it was <unk> 43 to 4500 prior Okay. We also did elevate our new vehicle gross profit because our mix is so much better and has so much more luxury as well as southeast exposure, which has higher gross profits. So we raised our expectations internally to 26% to $800 on new vehicle gross.

Bryan DeBoer: We delivered year-over-year growth in new vehicles and After-Sales, and experienced continued sequential improvements in used autos, particularly in the Value Auto segments. These improvements were all supported by continued strength in SG&A execution coming off the back of our 60-Day Plan. As we continue the year, we remain focused on our core drivers of profitability, delivering customer optionality to grow market share, and maintaining disciplined cost control. Our operational success is guided and inspired by our Lithia Partners Group, or LPG, and for 2025, I'm happy to announce and include our store departmental leaders in this recognition as well. Again, congratulations to all 2024 winners as well. Turning to our Same-Store Sales performance.

Speaker Change: Profit so I would say if we're looking out four to five years I believe that there's opportunity to grow our used vehicle gross profit, which is the biggest impact of the driveway ecosystem or green cars sales and it's primarily because youre getting more eyeballs on each and every car in that price inflection point that today, we don't have all.

Speaker Change: Those eyeballs.

Speaker Change: Okay, if I can sneak in one last one.

Speaker Change: On the ABS.

Speaker Change: Your dealers are doing Dfc I'm, just curious what kind of receptivity you are seeing in the market what market conditions are currently like.

Speaker Change: And over time as the opportunity to do larger and larger.

Bryan DeBoer: Total revenues increased by 2.5%, and gross profit increased 1.8%, primarily due to sequential strength across all business lines that was partially offset by a normalization of GPUs. Total unit sales increased by 1.5% year-over-year, while total gross profit per unit of 4,301 was down $144 compared to the same period last year. New vehicle units increased 3.6% year-over-year, with continued strength in import manufacturers. Our front-end GPUs were 3,046, consistent sequentially. Used vehicles were down slightly at 0.4% year-over-year, with a considerable quarter-over-quarter sequential improvement. Value auto sales were particularly impressive, with a 38.8% improvement from last year.

Speaker Change: Deals as you get more seasoned in the market.

Speaker Change: Hey, John this is Chuck.

Speaker Change: Right now we had a very successful.

John Murphy: Yes issuance in the first quarter and that went really well with a number of our tranches oversubscribed right now, though the ABS term market is rather frothy and choppy and that's just a reflection of where the overall capital markets are going we do expect that to stabilize though going forward and we'll be very diligent.

John Murphy: On making sure that when we do launch our next issuance it'll be at a point in time that is optimal for our business. So we don't see any long term impact on our capital structure for Dfc.

John Murphy: But fair to say, there's plenty of room in the warehouse facility.

John Murphy: Oh, absolutely plenty of room on the warehouse facility to absorb that if there is choppiness in the term market.

Adam Chamberlain: Thanks, So much guys congrats Adam Thank you guys.

John Murphy: Thanks, John.

Bryan DeBoer: Cores were down 9.3, where procurement remains a focus, and certified units were up slightly at 0.7. Front-end GPUs for used vehicles were stable year-over-year at $1,877. Used autos are foundational to our model and expect to see ongoing positive trends in the quarters ahead. F&I growth was also particularly strong in Q1. We delivered 3.4% year-over-year growth in same-store gross profit and $1,881 on a per unit basis. As a reminder, this is Q1 of Pendragon's comparatively low F&I, impacting sequential same-store sales results. Despite this headwind, this was a $35 increase year-over-year and reflects the continued opportunity in this high throughput area.

Speaker Change: Our next question comes from Rajat Gupta with Jpmorgan. Please proceed with your question.

Rajat Gupta: Great. Thanks for taking the question just wanted to convey my congrats too Adam as well.

Speaker Change: Yes.

First question just on SG&A.

Speaker Change: The sequential pick up on my agenda growth was little higher than seasonality. If we if we exclude the U K.

Speaker Change: Curious if you could unpack for us a little bit because it looks like the SG&A dollars went up more than the gross profit dollars.

Speaker Change: Relative to the fourth quarter.

Speaker Change: Sure.

Speaker Change: Elaborate on that a little bit would be helpful.

Speaker Change: So just a clarification the pinewood 27.

Speaker Change: Charge.

Speaker Change: All of that was flowing to other income.

Speaker Change: If not if you could clarify that as well would be helpful. I have a quick follow up.

Bryan DeBoer: Our After-Sales performance was also a key driver this quarter, with same-store revenue up 2.4%, delivering an After-Sales gross profit increase of 7.5%. Adjusting for sales days, after-sales revenue was actually up over 4%. Warranty work showed another strong quarter, with gross profits increasing 19.7% year over year. Our team is focused on creating durable customer retention through personalized experiences and effectively managing the ongoing demand for this high-margin work. Now, turning to inventory, where we realized significant improvements towards our 60-Day Plan, targeted inventory levels in the first quarter. New vehicle DSO decreased from 59 days in Q4 to 43 days at the end of this quarter, while used vehicle DSOs decreased from 53 days to 45 days.

Speaker Change: Hi, Rajat. This is Tina just on your final question, yes, the impact of the fair market value adjustment on pilot does flow through others. You can capture that we'll see that in that line. It was a pretty decent impact when you adjust for that our overall EPS performance is really strong from an SG&A perspective, I think most of it is really driven by seasonality when you look.

Speaker Change: The year over year performance on SG&A I think we're really happy with that same store improved by 150 basis points on a consolidated 120 basis points.

Speaker Change: One of the first quarter, that's why we're seeing that decline in SG&A as a percentage of gross profit. So really the continued discipline from our 60 day execution last year and continued flow through of that disciplined by our stores that will be something that we continue to watch obviously performing throughout 2025.

Speaker Change: Yes.

Speaker Change: Got it and you think about the path from that 68%.

Speaker Change: Within your guidance range like I say at the midpoint.

Speaker Change: Is there like more cost reduction to come or is this just more about just leveraging the gross profit.

Bryan DeBoer: Absolute inventory balance decreased by $163 million, and we are now encouraged by the savings we are seeing in our floor plan expense, which decreased 6% year-over-year. Our strong start to the year reflects the power of our ecosystem and the focus of our teams. As we continue executing on our strategy, we are excited by the opportunity to drive unparalleled growth and long-term value. With that, I'd like to turn the call over to Tina, who'll walk through our financial results in more detail.

Speaker Change: Any areas within the gross profit bucket like Barton services or other areas that there is some opportunity.

Speaker Change: That should we should be making and obviously, we have the full year guidance ranges out there, but it just seems like a pretty decent size improvement baked in.

Speaker Change: For the remainder of the year to get to your <unk>.

Speaker Change: You get your SG&A guidance, especially with the new car GPU is expected to come down through the course of there. Thanks.

Speaker Change: Rajat. This is Bryan maybe I could elaborate a little bit as well I think when we think about the original 60 day plan. That's now part of the everyday plan or our field and our operational leaders. They understand that our goal is to drop about seven basis points out of the model each and every months starting in the second.

Tina Miller: Thank you, Brian. The momentum across our operations is creating a strong foundation to accelerate our value, particularly through our SG&A execution, increasingly profitable financing operations, disciplined capital allocation, and continued focus on balance sheet strength. We're encouraged by our SG&A performance to start the year, building on the improvements we promised and delivered as part of the 60-Day Plan in the second half of 2024. Our Adjusted SG&A as a percentage of gross profit was 68.2% during the quarter, a 120 basis point decline from the prior year, and 67% on a same-store basis, a 150-point basis decline. While we are pleased to see continued progress, we remain focused on disciplined cost management every day. We continue to see opportunities to enhance efficiencies across the business, with targeted efforts underway in both North America and the UK.

Speaker Change: Half of this year. So now that that's on our pathway to the 50 mid 50 SG&A range. Okay. So it is important to.

Speaker Change: Remember about how we think about things, but again this isn't going to happen overnight I mean, we get benefits all over the ecosystem, including the eventual transition into the Pinewood software system, which is a $30 million to $40 million savings.

Speaker Change: We took out another $30 million to $40 million out of our current tech stack with what George did and what the stores did with vendor pricing.

Speaker Change: And now we're starting to really impact our interest cost, which obviously isn't part of SG&A, but it's a big part of our cost structure and it's the third largest cost in our in our vehicle Department. So I think that that where we ended up with the quarter. We're comfortable with our Q1 and Q4 typically is at the higher end of the range in our Q2 and Q3.

Tina Miller: As we move through the year, we believe we're on track to achieve same-store SG&A in the range of 65.5% to 67.5%, as we take continued steps to ignite the full potential of our operating model. Our team's relentless focus on delivering exceptional customer experiences and driving performance through people was on full display this quarter. We are proud of the progress we've made to start 2025, with strong execution across operations and clear momentum in key areas of the business. As we look ahead, we remain focused on deepening customer loyalty, unlocking store and departmental potential, and scaling growth across our ecosystem. Starting with our financing ops segment, led by DFC, we delivered another quarter of profitability with income of $12.5 million, compared to a loss of $1.7 million in the same period last year.

Speaker Change: Three are typically in the lower ends at the end of the range. It's primarily based on the fact that we have a fair amount of our businesses in the snow belt. Okay. So hopefully that helps you Roger.

Speaker Change: Got it. Thank you I appreciate it I'll get back in queue.

Speaker Change: Likewise.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Kate Mcshane with Goldman Sachs. Please proceed with your question.

Speaker Change: Good morning, This is mark Jordan on for Kate Mcshane.

Mark Jordan: Just thinking about tariff on imported parts, how do you see that impacting your after sales business I guess with respect to margins and then.

Mark Jordan: Would you expect to see some level of deferred maintenance as customers avoid some non critical repairs.

Tina Miller: This performance reflects the continued maturity of our portfolio, improved capital efficiency, and continued maturing in our securitization performance. Following a full year of profitability in 2024, we expect a consistent earnings trajectory in 2025 as we balance yields, growth, and risk. DFC originated $623 million in loans during the quarter, a 24% sequential increase, bringing the total portfolio balance to over $4 billion. Portfolio quality remains strong, supported by disciplined underwriting and a focus on higher credit tier originations, with new FICO scores expected to average 730 in 2025. The net interest margin continued to be expanded, increasing 117 basis points year over year and 7 basis points sequentially. NIM expansion increases profitability and adds flexibility to continue scaling the platform as we move toward our goal of 20% penetration.

Mark Jordan: Mark Thanks for your questions I think we're really we've thought through the after sales.

Mark Jordan: Repercussions of higher tariffs, we're fortunate that most customers do need to repair their cars, whether it's maintenance or whether its hard line repair. That's a positive thing for us. So I think when you think about the parts versus labor equation. We did have a pretty good lift this quarter in terms of labor and we're up.

Mark Jordan: Over 57% margin, which was quite nice and little higher than what we typically expected in our forecast running at $55 to 56 over the last few quarters.

Speaker Change: I really believe there is no there is no big option to defer okay, especially when we in our after sales businesses deal with affordability. So we're at the same prices the jiffy lubes of the world and the auto zones of the world and we sell aftermarket parts and we sell OEM parts and as such we wanted to.

Tina Miller: These results demonstrate the strength of our financing platform and its growing contribution to our long-term earnings potential. Overall, our financing operations adjacency has delivered high-performance growth and is a key element of our $2 of EPS for every $1 billion of revenue target, as each loan originated by DFC contributes up to 3 times more profitability than traditional indirect lending. We remain confident in this segment's long-term earnings growth and expect increasing profitability as we increase penetration and strengthen our track record. Now, moving on to our cash flow performance and balance sheet. We reported Adjusted EBITDA of $402.1 million in the first quarter, a 17.1% increase year-over-year, driven by increased earnings and decreasing floor plan expense. During the quarter, we generated free cash flow of $276 million.

Speaker Change: Keep those customers in the ecosystem. So I think the impact in the after sales business from tariffs whatever they may end up being is pretty minimal.

Speaker Change: Great and then one last follow up.

Speaker Change: Just on capital allocation share repurchases, obviously, a bigger part of the mix in the quarter. It looks like it might be in the near term, but as we think about your acquired revenue targets is the $2 billion to $4 billion still in the cards for the year.

Bryan Deboer: Mark This is Bryan again, I think I think that we've specifically said, it's probably going to be closer to $2 billion. This year and you can see it in our share buybacks at a $150 million to $60 million about 2% of our float just in the quarter, that's a big amount of buybacks and obviously that brings it down.

Speaker Change: In the prepared remarks, I did mention that it's $2 billion to $4 billion going forward and then again, we're still looking for.

Tina Miller: Our capital deployment strategy focuses on the efficient allocation of our business's regenerative cash flows, preserving the quality of our balance sheet while supporting our growth initiatives and allowing us to respond opportunistically to a complex environment. This quarter, we completed a couple of acquisitions, deploying $75 million for those transactions, but we're more heavily weighted to share buybacks to be opportunistic with the fluctuating market. In Q1, we repurchased 1.7% of our outstanding shares at a weighted average price of $329. $687 million remains available under our share repurchase authorization. Looking ahead, we will continue to remain agile in reallocating capital where it generates the highest returns. We expect to allocate 30% to 40% of free cash flows toward share repurchases, while continuing a disciplined approach to M&A opportunities.

Bryan Deboer: More major meaningful acquisition at some point in our lives.

Speaker Change: I'll leave that.

Speaker Change: The industry can be consolidated and one plus one can truly equal III.

Speaker Change: Great. Thank you very much.

Mark Jordan: Thanks Mark.

Speaker Change: Our next question comes from Jeff <unk> with Stephens. Please proceed with your question.

Mark Jordan: Good morning, guys. Congrats on a nice Q1.

Speaker Change: Hey, Jeff I was wondering if you could drill down a little bit.

Speaker Change: Specifically the.

Speaker Change: Value us.

Speaker Change: Turning off with GPU at $17 69, which is below your guidance, whether theres some bit of gist.

Speaker Change: <unk> inventory I know Theres a lot of things you wanted to get right.

Speaker Change: If you could just talk about any of that especially as we get into the tariff world.

Tina Miller: Additionally, capital expenditures have moderated and are now primarily directed toward network optimization and meeting OEM facility requirements. We ended the quarter with a net leverage of 2.5 times, in line with our long-term target of 2 to 3 times, and well below our bank covenant requirement of 5.75 times. These metrics adjusted for the impact of floor plan debt collateralized by vehicle inventory, which is unique to our industry and integral to our operations. The industry treats the associated interest as an operating expense in EBITDA and excludes the debt from balance sheet leverage calculations. Similarly, we exclude ABS warehouse lines and issuances to capitalize DFC from our leverage calculations. While we opportunistically allocated capital during the quarter, we maintain our long-term focused financial discipline to support our planned growth.

Speaker Change: My perception is that your heritage of doing the value autos will will actually maybe benefited a little bit so any color there.

Speaker Change: Yeah, I don't think there's any there's any sub story to the 1700 69 I will say this it takes us typically about six months to gain initial traction on teaching, our new new partners or new stores to sell and keep off brand cars.

Speaker Change: As well as keep the older cars are these value auto car, so Adam and the teams in a presidential teams and vice President teams and field teams have done a darn nice job understanding that we don't wholesale cars. Okay. We keep everything it allows us to bring consumers into the ecosystem at a lower price point.

Tina Miller: Our strategy remains focused on delivering strong, consistent growth and top-tier shareholder returns through the continued expansion of our omni-channel platform. With the right team, robust tools, and a solid financial foundation, we're positioned to scale profitably across both our core operations and adjacencies. As we look ahead, our diverse and capable teams are united by a commitment to exceptional customer experiences and are well equipped to unlock the next phase of growth in 2025 and beyond. This concludes our prepared remarks. With that, I'll turn the call over to the operator for questions. Operator?

Speaker Change: Or possibly as a cash buyer because as we know value auto cars don't have a lot of financing, it's about 50% gas buyers and about 50% finance, which as certified cars about 90% finance and about 10% gas. Okay. So its not that youre looking for buyers that aren't able to get financer has poor credits. These are <unk>.

Speaker Change: Cash buyers that are very thrifty with very high demand cars that move quite quickly through the system and our stores are getting at okay.

Speaker Change: I'd send the challenge out to everyone that if youre not at 40%, okay or better in terms of value auto sales. It's the one bucket that does not have an impact from lower Sars, okay, lower Saar from previous years, Okay and core is now just starting to trickle in the 'twenty, one and 'twenty model years, which is having a little bit of.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please, while we poll for questions. Our first question comes from Ryan Sigdahl with Craig-Hallum Group. Please proceed with your question.

Speaker Change: Lori impacts on our on our <unk>.

Speaker Change: Three to nine year old vehicles. So important to remember that is important of who lithia is all affordability levels and most importantly, these value in core products or where we really shine.

Speaker Change: Okay, and Jeff I think you notice the Gpus are somewhat similar okay important to remember, but the really important thing to remember is our average ASP.

Ryan Sigdahl: Hey, good morning, guys. I want to start just at a higher level, kind of what you're seeing from a current tariff environment. If you want to talk monthly trends throughout the quarter and then into April, that might be helpful, both from a demand and GPU, and then kind of second part to that, how you view your higher inventory levels relative to some of your peers, how that's positioned you in this environment, again, kind of more into April from that question standpoint.

Speaker Change: On a on a value auto car is about $14 $5000, okay versus the certified Thats pushing 30, okay. So you've got that and on top of this the value out of car terms at two to four times faster than a certified car. So when youre looking at utilization of capital Youre talking about eight times better return.

Speaker Change: And an annual basis, so really important part of the model and I think most people are starting to figure figure that out and we're fortunate that we're so far up final that we're able to continue to get those great cars and deciding now not to wholesale them.

Bryan DeBoer: Sure, Ryan. Good morning. This is Brian. I think we're very fortunate that with tariffs, we sit quite nicely. We have over 45% of our inventory that's going to be where the current tariffs are sitting. Obviously, we know that they're still a little bit in limbo, but where the current tariffs are sitting, we have about 45% of our inventory that's not impacted, okay? Which is, I believe in most of the major retailers, that's probably the most diversified and the least impacted, which we're pretty excited about that. I think more recently, as we think about moving forward, our inventories have come down a lot. I mean, we dropped our inventory in both new and used, almost 10-day supply quarter-over-quarter, which is a good step forward.

Speaker Change: And just a quick follow up on your comment about it taking six months to get initial traction I'm just curious is that.

Speaker Change: C stores, you've acquired say over the last four or five years that really have just gotten up to speed on that.

Speaker Change: The Lithia heritage or were there some greater clarity.

Speaker Change: We're adding some of the lift in rate care for clarification. So if you recall in our previous calls we bought so much bulk and the lift of Gpus made everyone think that we were doing wonderful. So it's really hard to convince people that they should do more so I really believe that it was about three to five.

Bryan DeBoer: I think when we think about go forward, it's more about store leadership, staying dynamic and specifically focusing on their, on their brand and their market, okay? We've been pretty successful that way. You also had asked a question about what happened sequentially in the quarter. Okay, we were actually motivated by a strong January, a strong February, and then early March is when the tariff discussion started, and it came out strong as well. So it was consistent throughout the quarter, and we're pretty confident that, you know, that looking into Q2, we've got good foresight into what our inventories and our costs are. Most manufacturers have stabilized pricing for some level, at least through the 2025 model year, and we'll see what happens beyond, and hopefully there's some relief to the current situation given.

Speaker Change: Five quarters ago, where people started to listen and go Wow Theres opportunities here and it is mostly new cars and new businesses that are finally, gaining the traction that we're really excited that we moved from a what a minus 5% used car same store sales last quarter to basically flat okay.

Speaker Change: Those days of of mid to high single digits are in our future and we're really looking at a 5% more longer term.

Speaker Change: Number or better in terms of used cars sales, especially when you've got green cars and drive waves that are bringing in 97% new customers and is truly limitless and who we can touch and find.

Speaker Change: Awesome.

Speaker Change: Congrats again and look forward to talk to you next quarter. Thanks, Jeff.

Speaker Change: Our next question comes from Douglas <unk> with Evercore. Please proceed with your question.

Ryan Sigdahl: Helpful. Staying on the tariff topic, any way to put kind of guardrails, and you did this several years ago, kind of with the SAR, just the levers you can pull and kind of the earnings power and, up, down from a leverage standpoint. But, if ultimately kind of in the back half of this year, next year, we go to a 14 or 15 million SAR, prices stay higher, affordability, et cetera, et cetera. I guess, any way to help us kind of from an earnings power standpoint and, and what that might mean for you guys?

Douglas: Good morning, everyone.

Douglas: Just going down the value chain here with USR at nearly 18 million units on an annualized basis over March and now into April how are your dealers in your general managers dealing with with the pre buying from consumers.

Douglas: Is there going to need to prepare for a potential hangover if the tariff situation extends into June or July or August.

Douglas: Whats the guidance there on some of the Lumpiness that we might see after the sugar rush here.

Douglas: Yes, yes.

Bryan DeBoer: Ryan, I think it's important to remember where our product mix is, and that we've designed our entire ecosystem around affordability. So having 20-year-old cars, and you saw that we had a 39% increase in our Value Autos... sales year-over-year. That's a big increase, and it shows the strength of the model that, you know, we're a little less concerned about what the specific tariff is, so long as they stay within the ecosystem. So create affordable products, top and, you know, from top to bottom, whether it's an After-Sales, new cars or used cars, and stay focused on what we can control. Because ultimately, we do have a fairly adaptable model, okay? Because of that affordability range. And remember this, I mean, Driveway.com, GreenCars, and DFC help massively in terms of how we think about diversification.

Douglas: To be fair I mean, remember, we had a 17 million Saar for months ago too so.

Douglas: A little extra lift is not a massive amount of I believe that we will have 18 million Sars consistently and if I believe.

I believe I said that last quarter on this call that we could see a year, where we have an $18 million sorry, now I do agree that if the terrorists stickit, where theyre sticking we could see some lumpiness, okay, but I think it's more of a lumpiness in.

In fall not really Lumpiness as we go through the summer season I would also remind you. This okay. We have 50% of our cars that arent affected by tariffs. Okay. Now if you're a European heavy you may have a bigger problem, okay. Because Europeans don't have the same competitive pressures across.

Douglas: Their product line most of their specific products or are pretty high demand, whether it's a M class or an AMG or GTS and Porsche their high demand are you. Following me so I think that they've got price flexibility.

Bryan DeBoer: Now that DFC is turning some pretty good profits, you know, that takes out some of the volatility as we look at things. I would note one other thing for everyone. It's important to note that the Pinewood market valuation change was $0.27, so we were at $7.93, which is- which was considerably ahead of, of, of consensus, okay? And that's something that, to some extent, is outside of our control.

Douglas: But their main product lines are what's going to be impacted the most the important manufacturers from Asia I believe are hyper competitive and theyre talking about how to freeze pricing or how to D content cars, but I believe affordability will be there. So I believe whatever pull forward. There may have been in the second half of March it's light.

Chuck Lietz: Helpful. Thanks, Brian. Estimates also walked-

Ryan Sigdahl: Helpful. Thanks, Brian. Estimates also walked-

Bryan DeBoer: Thanks, Brian

Chuck Lietz: higher over the last week or two. You would beat stale ones. So thanks. Good luck, guys.

Bryan DeBoer: Thanks, Brian

Ryan Sigdahl: higher over the last week or two. You would beat stale ones. So thanks. Good luck, guys.

Douglas: Okay, and shouldn't impact the future going forward on any relative scale.

Bryan DeBoer: Okay, thanks.

Douglas: Awesome. Thank you and then just a quick follow up here on your thoughts around incentives and the discipline there.

Operator: Our next question comes from John Murphy with Bank of America. Please proceed with your question.

Douglas: Is there may be been an opportunity to take some of those dollars off the hood.

John Murphy: Good morning, everybody.

Douglas: On your sales to move where you were previously had them in there to move the metal.

Bryan DeBoer: Hey, John.

John Murphy: Hey, this is Brian. Just to stay on tariffs just for a second from two different prongs. You know, first, you know, what kind of communication have you received from your factory partners? And have you seen any impact to the M&A environment as a result of the uncertainty around tariffs?

Douglas: Just given the fact that there was this sort of sudden surge of demand.

Douglas: Can you speak to that a little bit.

Douglas: Sure sure. We did we did see a little bit of a profit increase in March in terms of GPU, but that is also pretty typical because we have quarter end money. So it was a couple of hundred bucks higher than what we would've expected.

Bryan DeBoer: Maybe I'll start with the latter. We haven't seen a big impact in the M&A environment. However, it has appeared to be softening over the last, I would say, 3 to 4 months. But specific to the start of March, we haven't seen any major changes. In terms of communications from our manufacturers, I might let Adam jump in on that real quickly.

Douglas: In terms of incentives as a dealer we just sell for net price and sell for payments. So it's not big impact to us I would say this that incentives are still quite low. So the manufacturers have a lot of ability to absorb some of those cost increases if they choose to and we are seeing strengthening of.

Adam Chamberlain: Hey, John, good morning. I think we've seen great as far as the manufacturers know exactly what they're dealing with, 'cause obviously, it's an extremely volatile situation, John. I think we've seen clear communication. We had some early communications around guaranteeing holding prices through... certainly for most OEMs, it's through end of May, so that really takes care of the 2025 model years. And obviously, you know, in that context, we're also kind of bottom of the funnel, right? So the OEMs have got to deal with, we're there to support and help if we can. But ultimately, they've got to deal with the administration and thinking about how they allocate their resources and their investments to manage the tariff situation.

Douglas: That especially when it comes to leasing I think we're pushing almost 20% leasing again, which.

Douglas: On a pre Covid number we were we were in the low 20 percentile. So nice nice gains and then it was $17 five or something but it was up a couple of percentage points from last year, which is good indications of strength of incentives, which come in the form of lease in values or lease multiple factors, which is the equivalent interest rate on leases.

Douglas: Thanks, Dan.

Speaker Change: Thanks. Our next question comes from Ron <unk> with Guggenheim. Please proceed with your question.

Adam Chamberlain: So we sit kind of a ways below that, but we've had really good clarity and leadership from the majority of our OEM partners as it relates to that. I think the other point is, our job, as Brian said, is just to be disciplined moving forward. So our stores are being disciplined in terms of the way they manage their operations. And I think we demonstrated last year we can adapt and flex pretty good when we need to. So that's how I think about it, John. Thank you.

Ron: Good morning, and thanks for taking my questions.

Speaker Change: Hi, Rob.

Rob: Hi, Brian.

Speaker Change: Maybe following up on on Rashad SG&A question, you mentioned in the back half you expect to drive seven basis points of monthly savings I guess first is that all in SG&A and interest and then.

John Murphy: Good. That's helpful. And Brian, just a second question. When we think about sort of the adjacencies, particularly DFC, and then the benefits you'll get on SG&A over time, you know, is there kind of a notion that you might lower your expectation for front-end growth to take more market share over time? And kinda how do you balance that out? I mean, you know, getting UIOs, you know, is mission-critical for parts and service. So just curious, you know, how you think about that full circle equation. Does this allow you to take more market share and then feed the beast at the back end and grow earnings even stronger? And just kinda how do you balance that all out?

Speaker Change: It is like some of the low hanging fruit or maybe it's not that low hanging, but what are you pushing your managers on really to drive those improvements.

Speaker Change: So yes. It includes the interest.

Speaker Change: And the primary areas that we're pushing our operational leaders is on personnel costs. Okay.

Speaker Change: And our model when we look out five years, we're basically asking for a 10% to 15% total percentage reduction in terms of personnel cost today. It sits at about just under 40%. So we're looking at somewhere around a six.

Bryan DeBoer: Great, great question, John, and I think that our original thesis on the design was that if we're able to create transparent, simple experiences for our consumers, then there's actually a price inflection upward, not downward, okay? We already buy cars, and our cost of vehicles are at a cost advantage of about $500 to 700 over the used-only retailers. Important to note, but we also give away that $500 to 700 in terms of price to market of what we sell cars for, because we negotiate away that gross profit in lieu of getting more customers financed. Okay, so I would say, if anything, and today we're looking at a $4,100 to 4,300 total vehicle gross profit, okay? That's down $200, primarily because of the mix change in Pendragon that rolled in this quarter.

Speaker Change: 4% to 6% reduction over the next five years, Okay. We don't want to make it a heart attack. We don't believe that we could do it today because there is technology productivity increases customer self service and many other things that need to come into play to be able to activate that amount of change okay, but we do.

Speaker Change: No that they believe it's it's it's it's in bite size amounts that theyre not fearful of it and as such we believe in the second half of the year. We can drive that start begin to drive that that down okay.

Speaker Change: That makes up about 50% of the improvement the other 50% is truly leveraging our corporate costs as we don't need another teen and we don't need another mi at this stage right. Okay, but that's you gained some scale on those type of things and obviously there is some vendor contracts that we believe.

Bryan DeBoer: Do you remember it was $4,300 to $4,500 prior, okay? We also did elevate our new vehicle gross profit because our mix is so much better and has so much more luxury, as well as Southeast exposure, which is higher gross profits. So we raised our expectations internally to $2,600 to $2,800 on new vehicle gross profit. So I would say if we're looking out 4 to 5 years, I believe that there's opportunity to grow our used vehicle gross profit, which is the biggest impact of the Driveway ecosystem or Green Cars sales. And it's primarily because you're getting more eyeballs on each and every car in that price inflection point, that today we don't have all those eyeballs.

Speaker Change: Or beneficial I mentioned, the Pinewood thing in the future and then ultimately as we bring vendors together adds more preferred vendors, where we have two or three vendors of each product rather than 20 or 30 were able to negotiate.

Speaker Change: Volume discounts and other benefits as well.

Speaker Change: But that's where it comes from we've got it all lined out to achieve the $2. We're pretty excited about that app operational part, which makes up 50% to the the dollar plus lift that needs to occur remember the other 50% lift is coming from the ecosystem. Good capital allocation that tina's spoke to a little bit of Emma.

John Murphy: Okay, let me sneak in one last one. That's helpful. Tina, on the ABS, your deals you're doing with DFC, I'm just curious what kind of receptivity you're seeing in the market, what market conditions are currently like, and over time, is there opportunity to do larger and larger deals as you get more seasoned in the market?

Speaker Change: And some great adjacencies that are really starting to shine.

Speaker Change: Yes, that's super helpful color and maybe just following up on one of those kind of ecosystem items.

Speaker Change: Pretty big step up in Dfc originations this quarter.

Speaker Change: Anything that specifically changed because obviously your sales volumes werent once sequentially stronger than the fourth quarter, which is always seasonally strong. So just trying to get a sense of.

Chuck Lietz: Hey, John, this is Chuck. You know, right now we had a very successful ABS issuance in Q1, and that went really well with a number of our tranches oversubscribed. Right now, though, the ABS term market is rather frothy and choppy, and that's just a reflection of where the overall capital markets are going. We do expect that to stabilize, though, going forward, and we'll be very diligent on making sure that when we do launch our next issuance, it'll be at a point in time that is optimal for our business, so we don't see any long-term impact on our capital structure for DFC.

Speaker Change: What drove the pretty material step up in originations.

Speaker Change: Now Ron this is Brian again, and I, probably should just let Chuck handle this but I listen really good to check and Dinah, Okay, and they've taught me well enough to know this our nims are increasing so nicely.

Speaker Change: It allows us the flexibility to scale, our penetration rates without sacrificing credit quality. Okay. In simple terms, we were at 13, 7% for the quarter, we even had a 14 plus or in there which was great to see April is looking pretty good as well so it's really <unk>.

John Murphy: But fair to say there's plenty of room in the warehouse facility?

Bryan DeBoer: ... Oh, absolutely. Plenty of room on the warehouse facility to absorb that if there is choppiness in the term market.

Chuck Lietz: ... Oh, absolutely. Plenty of room on the warehouse facility to absorb that if there is choppiness in the term market.

Speaker Change: Having that middle of the 400 to 600 basis points of NIM to have the flexibility to scale when the credit opportunities are there with an ultimate end of end of year target exit rate of around 15% and an ultimate target of 20%.

Mark David Jordan: Thanks so much, guys. Congrats, Adam. Thank you, guys.

Chuck Lietz: Thanks so much, guys. Congrats, Adam. Thank you, guys.

Bryan DeBoer: Thanks, John.

Operator: Thanks, John.

Chuck Lietz: Thanks, John.

Operator: Our next question comes from Rajat Gupta with J.P. Morgan. Please proceed with your question.

Rajat Gupta: Great, thanks for taking the question, and just wanted to, you know, convey my congrats to Adam as well. You know, I had a first question just on SG&A. You know, the sequential pickup on SG&A gross was a little higher than seasonality, you know, if we, you know, exclude the UK. Curious if you could unpack that for us a little bit, because it looks like the SG&A dollars went up more than the gross profit dollars, relative to the fourth quarter. If you could just, you know, elaborate on that a little bit would be helpful. And also just a clarification, you know, the Pinewood, $0.27 charge, that, all of that was flowing to other income, am I right?

Speaker Change: Okay got it that's super helpful. Thanks for taking my questions.

Our next question comes from Dan Daniela Hagan with Morgan Stanley. Please proceed with your question.

Speaker Change: Thanks, Brian just to squeeze one in on parts and service and after sales you spoke to a room for uplift with relatively inelastic demand.

Speaker Change: Capacity and check availability, there look like and how does that continue to grow in the segment.

Speaker Change: Daniela Thanks for the question and congratulations on <unk>.

Speaker Change: Taking us over now which is which is great. We look forward to talking a little more deeply in terms of.

Rajat Gupta: If not, you know, if you could clarify that as well, would be helpful. I have a quick follow-up.

Speaker Change: After sales demand, we're quite fortunate that that even though there's not a lot of units in operation out there, we do price our products within within all ranges of the marketplace. So our affordability is is is quite cheap. So when we think about our after sale.

Tina Miller: Hi, Rajat, this is Tina. Just on your Pinewood question, yes, the impact of the fair market value adjustment on Pinewood does flow through others, so you can capture that and see that in that line. It was a pretty decent impact, so when you adjust for that, our overall EPS performance was really strong. From an SG&A perspective, you know, I think most of it is really driven by seasonality. When you look at the year-over-year performance on SG&A, I think we're really happy with it. Same-store improved by 150 basis points on a consolidated 120 basis points. You know, one of the first quarters where we're seeing that decline in SG&A as a percentage of gross profit.

Speaker Change: <unk> business, it's truly about providing individual experiences that create optionality for each and every customer and I think as an organization that has been able to do things. The same way. Okay. We are now starting to think about individuality why I'm talking about that is because when you think about what's coming into.

Tina Miller: So really, the continued discipline from our 60-day execution last year, and continued flow through of that discipline by our stores. It'll be something that we continue to watch, obviously, and perform in throughout 2025.

Speaker Change: Our shop, we can if we can have a lot more.

Speaker Change: Our consumers coming in today are stall utilization is somewhere south of about 50%, meaning in theory, we could double our capacity by opening extended hours or moving to double shifts or triple shifts, which many of our stores have moved to okay. If we think about our staffing levels of our technician.

Rajat Gupta: Got it. And you think about the path from that 68%, you know, within your guidance range, like, say, the midpoint, is, is there, like, more cost reduction to come, or is this just more about just leveraging the gross profit? You know, any areas within the gross profit bucket, you know, like parts and services or, or other areas that we should be baking in? Obviously, we have the full year guidance ranges out there, but it just seems like a pretty decent size improvement baked in, for the remainder of the year to get to your, to get to your SG&A guidance, and especially with the new car GPUs, you know, expected to come down through the course of the year. Thanks.

Speaker Change: <unk>, we're sitting really nicely in terms of that as well we grow our own technicians most of the time.

Speaker Change: And today I think the biggest mindset is we're filling our shops with warranty work and we should be filling it with warranty and customer pay work. Okay. So there is a mindset and our shops that build their production plans and their production plan calls for 1200 hours and they've got an extra 100 hours, it's coming from more.

Speaker Change: R&D and they take it out of customer pay we can't do that okay. We need our after sales leaders motivated to take the work and improve the productivity of their technicians.

Bryan DeBoer: Rajat, this is Brian. Maybe I could elaborate a little bit as well. I think when we think about the original 60-Day Plan that's now part of the everyday plan, our field and our operational leaders, they understand that our goal is to drop about 7 basis points out of the model each and every month, starting in the second half of this year. So now that's on our pathway to the 50, the mid-50 SG&A range, okay? So it's important to remember about how we think about things. But again, this isn't gonna happen overnight. I mean, we get benefits all over the ecosystem, including the eventual transition into the Pinewood software system, which is a $30 to 40 million savings.

Adam Chamberlain: It's there today that productivity level as theyre today with people ready to turn wrenches, we just got to open up the funnel, okay, and it's starting to matriculate through and Adam and our teams have been working on that and I'll continue on that pathway over the over the coming quarters.

Speaker Change: Thanks, Brian.

Speaker Change: Thanks Daniela.

Speaker Change: Our next question is from Bret Jordan with Jefferies. Please proceed with your question.

Bret Jordan: Good morning.

Speaker Change: Hey, Brian question on the tariffs when you think about customer pay obviously and you've got the 25% auto bucket, but then you've got the metals and the reciprocals could you help us with the expected growth rate and the customer pay business, just tied to inflation and parts pricing.

Bryan DeBoer: You know, we took out another $30 to 40 million out of our current tech stack with what George did and what the stores did with vendor pricing. And now we're starting to really impact our interest costs, which obviously isn't part of SG&A, but it's a big part of our cost structure, and it's the third largest cost in our vehicle department. So I think that where we ended up with the quarter, we're comfortable with. Our Q1 and Q4 typically is at the higher end of the range, and our Q2 and Q3 are typically in the lower end of the range. It's primarily based on the fact that we have a fair amount of our businesses in the Snow Belt. Okay, so hopefully that helps you, Rajat.

Speaker Change: I think this is Brian I would I would indicate that we believe that customer pace should be able to grow at low to mid single digits in the short and midterm.

Speaker Change: And long term it should be able to grow mid to high single digits. Okay. That's where we were pre COVID-19 and it's really just a matter of inspiring our our after sales leaders to be able to do that I don't know if you recall, but we havent. The LPG that was expanded into the departmental leaders and they are fighting hard.

Rajat Gupta: Got it. No, thank you. I appreciate it. I'll get back in the queue.

Bryan DeBoer: Likewise.

Speaker Change: To be able to grow there there are there are oh, count as well as their our account to be able to win.

Operator: Our next question comes from Kate McShane with Goldman Sachs. Please proceed with your question.

Speaker Change: When the LPG Award, which is our Lithia partners group, which instills loyalty potential and growth so.

Mark David Jordan: Good morning. This is Mark Jordan, on for Kate McShane. Just thinking about the tariff on imported parts, you know, how do you see that impacting your after-sales business, I guess, with respect to margins? And then, you know, would you expect to see some level of deferred maintenance as customers avoid some non-critical repairs?

Mark Jordan: Good morning. This is Mark Jordan, on for Kate McShane. Just thinking about the tariff on imported parts, you know, how do you see that impacting your after-sales business, I guess, with respect to margins? And then, you know, would you expect to see some level of deferred maintenance as customers avoid some non-critical repairs?

Speaker Change: With that outside that we've got to be more competitive than what our.

And then what our peers are and ultimately providing that optionality and that individualistic experience to our consumers will get us there right just the price of the part gets you to a low to mid single digit growth.

Bryan DeBoer: Mark, thanks for your questions. I think we're really. We've thought through the after-sales repercussions of higher tariffs. We're fortunate that most customers do need to repair their cars, and whether it's maintenance or whether it's hard line repair, that's a positive thing for us. So I think when you think about the parts versus labor equation, we did have a pretty good lift this quarter in terms of labor, and we're up over 57% margin, which was quite nice and a little higher than what we typically expected in our forecast, running at 55% to 56% over the last few quarters. But I really believe there is no big option to defer, okay? Especially when we, in our after-sales businesses, deal with affordability.

Speaker Change: Chassis parts are in the autopart bucket. So thats 25 points of tariff wouldn't wouldn't just the price of the tariff alone gives you growth versus I guess is the question what access growth, we get possibly possibly but again I mean, we're assuming that the content of the car that 50% of it is domestic we made so that's not going to be impacted by it.

Speaker Change: Tariffs, but yes, there could be two or 3%, maybe we will look a little deeper into that I think being downstream, we just try to respond to the environment and be proactive with our with our specific manufacturers or region. Okay. And then I guess the region as you'd called out the south central and southeastern region as being more profitable for a while now.

Speaker Change: Could you give us a feeling sort of what's a regional EBIT of the high profit region versus maybe a low profit region was the spreads.

Bryan DeBoer: So we're the same price as the Jiffy Lubes of the world and the AutoZones of the world, and we sell aftermarket parts, and we sell OEM parts, and as such, we wanna keep those customers in the ecosystem. So I think the impact in the after-sales business from tariffs, whatever they may end up being, is pretty minimal.

Speaker Change: Sure.

Speaker Change: And I think it's interesting that we're when we look at the regional performance today.

Speaker Change: We are encouraged that the gross profit in the northwest and southwest which were the two weakest regions over the last two years are now the two strongest regions. Okay. So.

Mark David Jordan: Great. Then one last follow-up. Just on capital allocation, share repurchase is obviously a bigger part of the mix in the quarter. It looks like it might be in the near term. As we think about your acquired revenue targets, is the $2 to 4 billion still in the cards for the year?

Mark Jordan: Great. Then one last follow-up. Just on capital allocation, share repurchase is obviously a bigger part of the mix in the quarter. It looks like it might be in the near term. As we think about your acquired revenue targets, is the $2 to 4 billion still in the cards for the year?

Speaker Change: We are quite fortunate when we look at that on a same store basis.

Speaker Change: Despite despite that the southeast and the south central are both quite strong, but it's not showing through in gross profit. So I don't know if that debt that reads through to the marketplace. When we think about profitability through net profitability again in the southeast and sell.

Bryan DeBoer: Mark, this is Brian again. I think that we've specifically said that it's probably going to be closer to $2 billion this year, and you can see it in our share buybacks at $150 to 160 million, about 2% of our float just in the quarter. That's a big amount of buybacks, and obviously, that brings it down. In the prepared remarks, I did mention that it's $2 to 4 billion going forward. Then again, we're still looking for, you know, that more major, meaningful acquisition at some point in our lives and believe that the industry can be consolidated, and one plus one can truly equal three.

Speaker Change: Central are running at approximately double the net profit per rep to revenue of what our southwest himself and and northwest regions are.

Speaker Change: And that is not a lithia anomaly that is a fact of life, okay, and it's primarily because of the regulatory environment and the fact that in the Red States, you're able to have dock fees that are excessive that have no cost really attached to them other than the general manager, Okay, which is an automatic 500.

Mark Jordan: Great. Thank you very much.

Bryan DeBoer: Thanks, Mark.

Speaker Change: We do a $1000 additional profit that drops to the bottom line.

Operator: Our next question comes from Jeff Lick with Stephens. Please proceed with your question.

Speaker Change: Creating that delta.

Speaker Change: Okay great.

Speaker Change: Great.

Speaker Change: Thanks, Brett I appreciate it.

Jeffrey Francis Lick: Good morning, guys. Congrats on a nice Q1.

Jeff Lick: Good morning, guys. Congrats on a nice Q1.

Speaker Change: Our next question is from Colin Langan with Wells Fargo. Please proceed with your question.

Bryan DeBoer: Hi, Jeff.

Jeffrey Francis Lick: I was wondering if you could, we could drill down a little bit on, on used, specifically the, you know, value used. You know, just starting off with, you know, the GPU at $1,769, which is below your guidance. Was there some bit of just, you know, purging inventory? I know there was a lot of things you wanted to get right. If you could just talk about any of that, especially as we get into the tariff world. You know, my perception is that your heritage of doing the value autos will, will actually maybe benefit a little bit. So any color there?

Jeff Lick: I was wondering if you could, we could drill down a little bit on, on used, specifically the, you know, value used. You know, just starting off with, you know, the GPU at $1,769, which is below your guidance. Was there some bit of just, you know, purging inventory? I know there was a lot of things you wanted to get right. If you could just talk about any of that, especially as we get into the tariff world. You know, my perception is that your heritage of doing the value autos will, will actually maybe benefit a little bit. So any color there?

Speaker Change: Yes.

Speaker Change: Thanks for taking my question.

Speaker Change: Just to clarify the guidance still is for.

Speaker Change: Mid single growth in new vehicle.

Speaker Change: Is that incorporating any tax it doesn't sound like it I mean is that assuming that the sorry the tariffs.

Speaker Change: That assumed tariff sort of moderate as we get into the second half of the year.

Speaker Change: And if they don't.

Speaker Change: Outside risk should we be thinking about.

Speaker Change: We're pretty comfortable with that.

Bryan DeBoer: Yeah. I don't think there's any sub-story to the 1,769. I will say this: it takes us typically about six months to gain initial traction on teaching our new partners or new stores to sell and keep off-brand cars, as well as keep the older cars or these value auto cars. So Adam and the teams, and our presidential teams, and vice president teams, and field teams have done a darn nice job understanding that we don't wholesale cars, okay? We keep everything. It allows us to bring consumers into the ecosystem at a lower price point or possibly as a cash buyer, because as we know, value auto cars don't have a lot of financing.

Speaker Change: Low to mid single digits as our target throughout the year.

Speaker Change: And we believe that because of our exposure, we should sit pretty nicely in returns and in terms of what happens with tariffs I mean, no matter. What happens you still have a competitive market that has to deal with affordability and has to deal with their production schedules. So with that we bill.

Speaker Change: Earlier that we're sitting quite nicely in terms of being able to respond to the market and continue to grow our new car business.

Speaker Change: And that would be based on iPhone.

Speaker Change: Saar for the market would be in the 14 15 range if tariffs stay all year and you would just do significantly outperform that market is that what you're getting at.

Bryan DeBoer: It's about 50% cash buyers and about 50% finance, which as a certified car, is about 90% finance and about 10% cash. Okay, so it's not that you're looking for buyers that aren't able to get finance or have poor credit. These are cash buyers that are very thrifty, with very high demand cars that move quite quickly through the system, and our stores are getting it, okay? And I, I, I'd send the challenge out to everyone that if you're not at 40%, okay, or better in terms of Value Auto sales, it's the one bucket that does not have an impact from lower SAARs. Okay, lower SAAR from previous years.

Speaker Change: I don't believe that we will I don't believe it'll be in the 14 to 15 range I believe it'll be in the 16 to 17 range.

Speaker Change: We're in that range or high fifteens.

Speaker Change: That's that's probably the low end of the marketplace.

Speaker Change: Just saw an 18, so youre going to end up with a year. If you get a couple of months of 17 to 18 million Sars, even if you had 14 or 15 in there you are.

Speaker Change: Going to end up in the 16% to $16 5 million range.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: And then if I look in the sales performance in the quarter I think the same stores was $3 six on new I believe U S sales around five and I think retail is even a little better than that is that geographic mix, that's driving the slight underperformance versus the market.

Bryan DeBoer: Okay, and core is now just starting to trickle in the 21 and 20 model years, which is having a little bit of inventory impacts on our, on our 3 to 9-year-old vehicles. So important to remember, that is important of who Lithia is, all affordability levels, and most importantly, these value and core products are where we really shine, okay? And Jeff, I think you know this, the GPUs are somewhat similar, okay? Important to remember, but the really important thing to remember is our average ASP on a value auto car is about $14,500, okay? Versus a certified, that's pushing $30,000. Okay, so you've got that, and on top of this, the value auto car turns 2 to 4 times faster than a certified car.

Speaker Change: It is it is as I mentioned.

Speaker Change: This out the southwest and northwest.

Speaker Change: We're on the lower end of the revenue.

Speaker Change: Same store sales growth, but it was also the strongest gross profit area. So.

Speaker Change: Thats effect, that's being affected by the fact that it's lower same store revenue. Okay. I mean, we were up let's see here I'll give you some color blend these northwest southwest was around 8% and revenue growth. Okay. It was on a same store basis.

Speaker Change: It was at 3% gross profit growth.

Bryan DeBoer: So when you're looking at utilization of capital, you're talking about an 8 times better return in an annual basis. So really important part of the model, and I think most people are starting to figure that out, and it's, we're fortunate that we're so far up funnel that we're able to continue to get those great cars and deciding now not to wholesale them.

Speaker Change: Hey.

Speaker Change: In comparison in contrast, the southeast sell Central's was about a 14% to 15% revenue top line growth.

Speaker Change: Whereas.

Get this southeast one too.

Speaker Change: Tony.

Speaker Change: On a gross profit it was down 10%.

Jeffrey Francis Lick: Just a quick follow-up on your comment about it taking six months to get initial traction. I'm just curious, is that the stores you've acquired, say, over the last four or five years, that really haven't just gotten up to speed on the, you know, Lithia heritage? Or were there some of your traditional-

Jeff Lick: Just a quick follow-up on your comment about it taking six months to get initial traction. I'm just curious, is that the stores you've acquired, say, over the last four or five years, that really haven't just gotten up to speed on the, you know, Lithia heritage? Or were there some of your traditional-

Speaker Change: And same store gross profit in the South East South central Okay. So some different dynamics happening I don't know if it's because we have a higher propensity of one brand, but it is a good sign that things are starting to balance out in the <unk>.

Bryan DeBoer: Great clarification.

Jeffrey Francis Lick: Where some of the Lithia stores.

Jeff Lick: Where some of the Lithia stores.

Speaker Change: In the country and that our western exposure that was a little weaker is now starting to strengthen.

Bryan DeBoer: Great clarification. So if you recall in our previous calls, we bought so much bulk, and the lift of GPUs made everyone think that we were doing wonderful, so it's really hard to convince people that they should do more. So I really believe that it was about three to five quarters ago, where people started to listen and go, "Wow, there's opportunities here." And it is mostly new cars and new businesses that are finally gaining the traction that we're really excited that we moved from a -5% used car same store sales last quarter to basically flat, okay? And those days of, you know, of mid to high single digits are in our future.

Speaker Change: Alright, thanks for taking my questions.

Speaker Change: You bet. Thanks Colin.

Speaker Change: We have reached the end of the question and answer session I'd now like to turn the call back over to Bryan Deboer for closing comments.

Speaker Change: Thanks, Rob and thank you everyone for joining us today, and we look forward to seeing you all on the lithium driveway second quarter call in July.

Speaker Change: Have a great spring mobile.

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

Bryan DeBoer: And, I mean, we're really looking at a 5% more longer term number or better in terms of used cars sales, especially when you've got GreenCars in Driveway that are bringing in 97% new customers, and it's truly limitless in who we can touch and find.

Jeffrey Francis Lick: Awesome. Congrats again, and look forward to talking to you in next quarter.

Jeff Lick: Awesome. Congrats again, and look forward to talking to you in next quarter.

Bryan DeBoer: Thanks, Jeff.

Operator: Our next question comes from Douglas Dutton with Evercore. Please proceed with your question.

Mark Jordan: Good morning, everyone. Maybe just going down the value chain here. With USR at nearly 18 million, you know, units on an annualized basis over March and now into April, how are your dealers and, you know, your general managers dealing with the pre-buying from consumers? You know, as they're going to need to prepare for a potential hangover if the tariff situation extends into June or July or August. You know, what's the guidance there on some of the lumpiness that we might see after the sugar rush here?

Douglas Dutton: Good morning, everyone. Maybe just going down the value chain here. With USR at nearly 18 million, you know, units on an annualized basis over March and now into April, how are your dealers and, you know, your general managers dealing with the pre-buying from consumers? You know, as they're going to need to prepare for a potential hangover if the tariff situation extends into June or July or August. You know, what's the guidance there on some of the lumpiness that we might see after the sugar rush here?

Bryan DeBoer: ... Yeah, yeah. To be fair, I mean, remember, we had a 17 million SAAR four months ago, too, so a little extra lift is not a massive amount. I believe that we will have 18 million SAARs consistently, and I believe I said that last quarter on this call, that we could see a year where we have an 18 million SAAR. Now, I do agree that if the tariffs stick at where they're sticking, we could see some lumpiness, okay? But I think it's more of lumpiness in fall, not really lumpiness as we go through the summer season. I would also remind you this, okay? We have 50% of our cars that aren't affected by tariffs, okay? Now, if you're European heavy, you may have a bigger problem, okay?

Bryan DeBoer: Because Europeans don't have the same competitive pressures across their product line. Most of their specific products are pretty high demand, whether it's a M-Class or an AMG or GTS and Porsche, they're high demand. Are you following me? So I think that they've got price flexibility, but their main product lines are what's gonna be impacted the most. The import manufacturers from Asia, I believe, are hypercompetitive, and they're talking about how to freeze pricing or how to de-content cars, but I believe affordability will be there. So I believe whatever pull forward there may have been in the second half of March, it's light, okay, and shouldn't impact the future going forward on any relative scale.

Douglas William Dutton: Awesome. Thank you. And then just a quick follow-up here on your thoughts around incentives and the discipline there. You know, has there maybe been an opportunity to take some of those dollars off the hood, on your sales to move where you were previously had them in there to move the metal, just given the fact that, that there was this sort of sudden surge of demand? You know, can you speak to that a little bit?

Douglas Dutton: Awesome. Thank you. And then just a quick follow-up here on your thoughts around incentives and the discipline there. You know, has there maybe been an opportunity to take some of those dollars off the hood, on your sales to move where you were previously had them in there to move the metal, just given the fact that, that there was this sort of sudden surge of demand? You know, can you speak to that a little bit?

Bryan DeBoer: Sure, sure, Doug. We did, we did see a little bit of a profit increase in, in, March in terms of GPU, but that is also pretty typical because we have quarter-end money, so it was a couple hundred bucks higher than what we would have expected. In terms of incentives, as a dealer, we just sell for net price and sell for payment, so it's not big impacts to us. I would say this, that incentives are still quite low, so the manufacturers have a lot of ability to absorb some of those, those cost increases if they choose to. And we are seeing strengthening of that, especially when it comes to leasing. I think we're pushing almost 20% leasing again, which, you know, on a pre-COVID number, we were, we were in the low 20 percentile, so nice, nice gains.

Bryan DeBoer: I think it was 17.5 or something, but it was up a couple percentage points from last year, which is good indications of strength of incentives which come in the form of lease-end values or lease multiple factors, which is the equivalent interest rate on leases.

Douglas William Dutton: Thanks, Dan.

Douglas Dutton: Thanks, Dan.

Bryan DeBoer: Thanks, Doug.

Operator: Our next question comes from Ron Jewsikow with Guggenheim. Please proceed with your question.

Ronald John Jewsikow: Yeah. Good, good morning, and, and thanks for taking my questions.

Ron Jewsikow: Yeah. Good, good morning, and, and thanks for taking my questions.

Bryan DeBoer: Hi, Ron.

Ronald John Jewsikow: Hi, Brian. Maybe following up on Rajat's SG&A question. You mentioned in the back half, you expect to drive seven basis points of monthly savings. I guess, first, is that all in SG&A and interest? And then what is like some of the low-hanging fruit, or maybe it's not that low-hanging, but what are you pushing your managers on really, to drive those improvements?

Ron Jewsikow: Hi, Brian. Maybe following up on Rajat's SG&A question. You mentioned in the back half, you expect to drive seven basis points of monthly savings. I guess, first, is that all in SG&A and interest? And then what is like some of the low-hanging fruit, or maybe it's not that low-hanging, but what are you pushing your managers on really, to drive those improvements?

Bryan DeBoer: Yes, it includes the interest, and the primary areas that we're pushing our operational leaders is on personnel costs, okay? In our model, when we look out 5 years, we're basically asking for a 10% to 15% total percentage reduction in terms of personnel costs. Today, it sits at about just under 40%, so we're looking at somewhere around a 4% to 6% reduction over the next 5 years. Okay, we don't want to make it a heart attack. We don't believe that we could do it today because there's technology, productivity increases, customer self-service, and many other things that need to come into play to be able to activate that amount of change, okay? But we do know that they believe.

Bryan DeBoer: It's in bite-size amounts that they're not fearful of it, and as such, we believe in the second half of the year, we can drive that, begin to drive that down. Okay, that makes up about 50% of the improvement. The other 50% is truly leveraging our corporate costs, as we don't need another Tina, we don't need another me at this stage, right? Okay, but that's, you know, you gain some scale on those type of things. And obviously, there are some vendor contracts that we believe are beneficial. I mentioned the Pinewood thing in the future. And then ultimately, as we bring vendors together as more preferred vendors, where we have 2 or 3 vendors of each product rather than 20 or 30, we're able to negotiate volume discounts and other benefits as well.

Bryan DeBoer: But that's where it comes from. We've got it all lined out to achieve the $2. We're pretty excited about that app operational part, which makes up 50% of the $1+ lift that needs to occur. Remember, the other 50% lift is coming from the ecosystem, good capital allocation that Tina spoke to, a little bit of M&A, and some great adjacencies that are really starting to shine.

Ronald John Jewsikow: Yeah, no, that's super helpful color. And maybe just following up on one of those kind of ecosystem items. Pretty big step up in DFC originations this quarter. Anything that specifically changed? Because obviously your sales volumes weren't sequentially stronger than the fourth quarter, which was always seasonally strong. So just trying to get a sense of what drove the pretty material step up in originations.

Ron Jewsikow: Yeah, no, that's super helpful color. And maybe just following up on one of those kind of ecosystem items. Pretty big step up in DFC originations this quarter. Anything that specifically changed? Because obviously your sales volumes weren't sequentially stronger than the fourth quarter, which was always seasonally strong. So just trying to get a sense of what drove the pretty material step up in originations.

Bryan DeBoer: Now, Ron, this is Brian again, and I probably should just let Chuck handle this, but I listened really good to Chuck and Dina, okay? And they've taught me well enough to know this: our NIMs are increasing so nicely that it allows us the flexibility to scale our penetration rates without sacrificing credit quality, okay? In simple terms, we were at 13.7% for the quarter. We even had a, a 14+ in there, which was great to see. April's looking pretty good as well. So it's really having that middle of the 400 to 600 basis points of NIM, to have the flexibility to scale when the credit opportunities are there, with an ultimate end of end of year target exit rate of around 15% and an ultimate target of 20%.

Ronald John Jewsikow: Okay. No, that, that's super helpful. Thanks for taking my questions.

Ron Jewsikow: Okay. No, that, that's super helpful. Thanks for taking my questions.

Operator: Our next question comes from Daniella Haigian with Morgan Stanley. Please proceed with your question.

Daniela Marina Haigian: Thanks. Brian, just to squeeze one in on parts and service and after sales, you spoke to room for uplift with relatively inelastic demand. What does capacity and tech availability there look like, and how does that continue to grow in the segment? Thanks.

Daniela Haigian: Thanks. Brian, just to squeeze one in on parts and service and after sales, you spoke to room for uplift with relatively inelastic demand. What does capacity and tech availability there look like, and how does that continue to grow in the segment? Thanks.

Bryan DeBoer: Daniella, thanks for the question, and congratulations on taking us over now, which is great. We look forward to talking a little more deeply. In terms of after sales demand, we're quite fortunate that even though there's not a lot of units in operation out there, we do price our products within all ranges of the marketplace. So our affordability is quite cheap. So when we think about our after sales business, it's truly about providing individual experiences that create optionality for each and every customer. And I think as an organization that has been able to do things the same way, okay, we are now starting to think about individuality.

Bryan DeBoer: Why I'm talking about that is because when you think about what's coming into our shop, we can have a lot more consumers coming in. Today, our stall utilization is somewhere south of about 50 percent, meaning in theory, we could double our capacity by opening extended hours or moving to double shifts or triple shifts, which many of our stores have moved to. Okay, if we think about our staffing levels of our technicians, we're sitting really nicely in terms of that as well. We grow our own technicians most of the time, okay? Today, I think the biggest mindset is we're filling our shops with warranty work, and we should be filling it with warranty and customer pay work, okay?

Bryan DeBoer: So there is a mindset in our shops that build their production plans, and their production plan calls for 1,200 hours, and they got an extra 100 hours that's coming from warranty, and they take it out of customer pay. We can't do that, okay? We need our After-Sales leaders motivated to take the work and improve the productivity of their technicians, okay? It's there today. That productivity level is there today with people ready to turn wrenches. We just got to open up the funnel, okay? And it's, it's starting to percolate through, and Adam and our teams have been working on that, and I'll continue on that pathway over the, over the coming quarters.

Daniela Marina Haigian: Thanks, Brian.

Daniela Haigian: Thanks, Brian.

Bryan DeBoer: Thanks, Daniella.

Operator: Our next question is from Brett Jordan with Jefferies. Please proceed with your question.

Bret Jordan: Hey, good morning.

Bryan DeBoer: Hi, Brett.

Bret Jordan: A math question on the tariffs. When you think about customer pay, obviously, and you've got the 25% auto bucket, but then you've got the metals and the reciprocals, could you help us with the expected growth rate in the customer pay business just tied to inflation and parts pricing?

Bryan DeBoer: I think... This is Brian. I would indicate that we believe that customer pay should be able to grow at low to mid-single digits in the short and midterm, and long term, it should be able to grow mid to high single digits, okay? That's where we were pre-COVID, and it's really just a matter of inspiring our after-sales leaders to be able to do that. I don't know if you recall, but we have the LPG that was expanded into the departmental leaders, and they're fighting hard to be able to grow their RO count as well as their hour count, to be able to, you know, win the LPG award, which is our Lithia Partners Group, which instills loyalty, potential, and growth.

Bryan DeBoer: So, with that, outside that, we've got to be more competitive than what our, you know, than what our peers are, and ultimately, providing that optionality and that individualistic experience to our consumers will get us there.

Bret Jordan: Right. Wouldn't just the price of the part get you to a low to mid-single-digit growth if, say, chassis parts are in the auto part bucket, so that's 25 points of tariff? Wouldn't just the price of the tariff alone get you growth? Is, I guess, the question. What excess growth do we get out of price?

Bryan DeBoer: Possibly. Possibly, but again, I mean, we're assuming that the content of the car, that 50% of it is domestically made, so that's not gonna be impacted by tariffs. But yeah, there could be 2 or 3%. Maybe we'll look a little deeper into that. I think being downstream, we just try to respond to the environment and be proactive with our, with our specific manufacturers or region.

Bret Jordan: Okay.

Bryan DeBoer: Let me take on that.

Bret Jordan: Then I guess on regions, you, you'd called out the South Central and Southeast region as being more profitable for a while now. Could you give us a feeling, sort of what's a regional EBIT of the high-profit region versus maybe a low-profit region? What's the spread?

Bryan DeBoer: ... Sure. And I think it's interesting that when we look at the regional performance today, we're encouraged that the gross profit in the Northwest and Southwest, which were the two weakest regions over the last two years, are now the two strongest regions. Okay? So, you know, we're quite fortunate when we look at that. On a same-store basis, though, despite that, the Southeast and the South Central are both quite strong, but it's not showing through in gross profit. So I don't know if that reads through to the marketplace. When we think about profitability, true net profitability, again, the Southeast and South Central are running at approximately double the net profit per revenue of what our Southwest and Northwest regions are. Okay? And that is not a Lithia anomaly.

Bryan DeBoer: That is a fact of life, okay? And it's primarily because of the regulatory environment and the fact that in the red states, you're able to have doc fees that are excessive, that have no cost really attached to them other than the general manager, okay? Which is an automatic $500 to 1,000 dollars additional profit that drops to the bottom line, okay, creating that delta.

Jeffrey Francis Lick: Okay.

Bret Jordan: Okay.

Bryan DeBoer: Okay?

Jeffrey Francis Lick: Thank you.

Bret Jordan: Thank you.

Bryan DeBoer: Great. Thanks, Brett. Appreciate it.

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

Colin Langan: Oh, thanks for taking my question. Just to clarify, I mean, the guidance still is for mid-single growth in new vehicle. Is that incorporating any tax? It doesn't sound like it. I mean, is that assuming that the tariffs is? And does that assume tariffs sort of moderate as we get into the second half of the year? And if they don't, what kind of downside risk should we be thinking about?

Bryan DeBoer: We're pretty comfortable with the low to mid-single digits as our target throughout the year. And we believe that because of our exposure, we should sit pretty nicely in returns in terms of what happens with tariffs. I mean, no matter what happens, you still have a competitive market that has to deal with affordability and has to deal with their production schedule. So with that, we believe that we're sitting quite nicely in terms of being able to respond to the market and continue to grow our new car business.

Colin Langan: That would be based on, like, a SAAR for the market would be in the 14, 15 range if tariffs stay all year, and you would just do significantly outperform that market? Is that what you're getting at?

Bryan DeBoer: I don't believe that we'll see... I don't believe it'll be in the 14 to 15 range. I believe it'll be in the 16 to 17 range, somewhere in that range, or high 15s. You know, that's probably the low end of the marketplace. I mean, we just saw an 18, so you're gonna end up with a year if you get a couple of months of 17, 18 million SAARs, even if you had a 14 or 15 in there, you're gonna end up in the 16 to 16.5 million range.

Colin Langan: Okay. Then if I look at the sales performance in the quarter, I think same stores was 3.6 on new. I believe US sales are around 5, and I think retail was even a little better than that. Is that geographic mix that's driving the slight underperformance versus the market?

Bryan DeBoer: It is. It is. As I mentioned, the Southwest and Northwest were on the lower end of the revenue same-store sales growth, but it was also the strongest gross profit area, so, you know, and that's being affected by the fact that it's lower same-store revenue. Okay? I mean, we were up. Let's see here. I'll give you some color. I'll blend these. Northwest, Southwest was around 8% in revenue growth, okay? It was on a same-store basis, it was a 3% gross profit growth, okay? In comparison, in contrast, the Southeast, South Central's was about a 14% to 15% revenue top-line growth, whereas. Let me look at this. Southeast, 12, 40-20.

Bryan DeBoer: The on a gross profit, it was down 10%, in same-store gross profit in the Southeast, South Central. Okay? So some different dynamics happening. I don't know if it's because we have a higher propensity of one brand, but it's a good sign that things are starting to balance out in the, in, in the country, and that our Western exposure that was a little weaker is now starting to strengthen.

Colin Langan: Got it. All right, thanks for taking my questions.

Bryan DeBoer: You bet. Thanks, Colin.

Operator: We have reached the end of the question and answer session. I'd now like to turn the call back over to Brian DeBoer for closing comments.

Bryan DeBoer: Thanks, Rob, and thank you everyone for joining us today. Hey, we look forward to seeing you all on the Lithia and Driveway second quarter call in July. Have a great spring. Bye-bye, all.

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

Q1 2025 Lithia Motors Inc Earnings Call

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