8-K: Lithia & Driveway Reports Record Q4 Revenue, First Profitable Year for Finance Operations

Lithia & Driveway (LAD) announced record fourth-quarter revenue of $9.2 billion, a 20% increase year-over-year, and the first profitable year for its finance operations.

Summary

• Lithia & Driveway (LAD) reported a 20% increase in fourth-quarter revenue, reaching $9.2 billion compared to $7.7 billion in the same period of 2023.
• Diluted earnings per share attributable to LAD increased by 5% to $8.12, while adjusted diluted earnings per share decreased by 6% to $7.79.
• Net income remained flat at $217 million, while adjusted net income decreased by 10% to $209 million.
• Full-year revenue increased by 17% to a record $36.2 billion from $31.0 billion in 2023.
• Full-year diluted earnings per share decreased by 18% to $29.65, and adjusted diluted earnings per share decreased by 19% to $29.96.
• The company's financing operations achieved their first profitable year, with income of $15.4 million compared to a loss of $45.9 million in 2023.
• Driveway Finance Corporation (DFC) originated $501 million in loans during the quarter, with a portfolio of $3.9 billion in average managed receivables and a net interest margin of 4.7%.
• The Board of Directors approved a dividend of $0.53 per share for the fourth quarter, payable on March 21, 2025, to shareholders of record on March 7, 2025.
• During 2024, the company repurchased approximately 1,230,000 shares at a weighted average price of $283, and in 2025, they repurchased approximately 43,000 shares at a weighted average price of $345.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to record revenue and the first profitable year for finance operations, but tempered by decreased earnings per share and adjusted net income.

Positives

• Record fourth-quarter revenue of $9.2 billion, a 20% increase year-over-year.
• First profitable year for Driveway Finance operations, with $15.4 million in income.
• New retail units increased 7.4% on a same-store basis.
• Aftersales gross profit increased 4.5% on a same-store basis.
• Full-year revenue reached a record $36.2 billion, a 17% increase year-over-year.
• Share repurchases indicate management's confidence in the company's value.
• Acquisition of Stohlman Subaru store expected to add $80 million in annual revenue.

Negatives

• Adjusted diluted earnings per share for the fourth quarter decreased by 6% to $7.79.
• Adjusted fourth-quarter net income decreased by 10% to $209 million.
• Full-year diluted earnings per share decreased by 18% to $29.65.
• Full-year adjusted diluted earnings per share decreased by 19% to $29.96.
• Same-store total revenues decreased by 2.7% for the full year.
• Same-store total gross profit decreased by 7.7% for the full year.

Risks

• Future economic and financial conditions could impact car sales and gross profit levels.
• Changes in customer demand and the electric vehicle landscape could affect the business.
• Relationships with OEMs and suppliers, and vehicle delivery models, could change.
• Increased indebtedness could impact the ability to fund capital expenditures and pay dividends.
• Disruptions to the technology network and natural events could disrupt operations.
• Government regulations and legislation could impact the business.

Future Outlook

The company believes its omnichannel strategy and strong financial foundation will drive continued growth in 2025 and beyond.

Management Comments

• 2024 marks another milestone year for Lithia & Driveway, with record-breaking fourth-quarter revenues, the first profitable year for Driveway Finance, and the continued maturity of foundational elements to our strategy, said Bryan DeBoer, President and CEO.
• Our focus on providing experiences that enhance customer loyalty, unlocking the full potential of our platform, and accelerating the growth of our unique ecosystem, positions us to deliver sustainable performance and best-in-class returns.

Industry Context

Lithia & Driveway's focus on omnichannel experiences and expanding its ecosystem aligns with the broader industry trend of adapting to changing consumer preferences and leveraging digital technologies to enhance customer engagement and streamline the car buying process.

Comparison to Industry Standards

• Lithia's revenue growth of 17% for the year compares favorably to some of its peers, but the decrease in earnings per share is a concern.
• AutoNation, another major automotive retailer, has also been focusing on expanding its digital presence and service offerings.
• Penske Automotive Group has also reported strong revenue growth, driven by both new and used vehicle sales.
• Lithia's Driveway Finance Corporation's performance is comparable to captive finance arms of other major automotive groups, such as Toyota Financial Services or Ford Credit, in terms of portfolio size and net interest margin.

Stakeholder Impact

• Shareholders will receive a dividend of $0.53 per share.
• Employees may benefit from the company's continued growth and expansion.
• Customers will have access to a wider array of products and services through the company's network.
• Suppliers may see increased demand for their products and services.
• Creditors may benefit from the company's strong financial position.

Next Steps

• The company will continue to focus on providing experiences that enhance customer loyalty.
• The company will continue to unlock the full potential of its platform.
• The company will continue to accelerate the growth of its unique ecosystem.
• The company will continue to drive growth in 2025 and beyond.

Key Dates

Keywords

Lithia & Driveway, LAD, automotive retail, revenue, earnings, Driveway Finance Corporation, DFC, share repurchase, dividend, acquisition, financial results