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As one of the largest automotive retailers in the U.S., Lithia operates 180 stores in 18 states with a goal to be nationwide by 2025.

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Medford, Ore.-based Lithia operates auto dealerships in 18 U.S. states, making it the third largest automotive retailer in the nation. Shelter-in-place policies resulting from the novel coronavirus pandemic are expected to severely impact Lithia's business in 2020 as the company rethinks how consumers want to buy vehicles.

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Lithia Motors is an automotive retailer that sells new and used vehicles and parts, and provides vehicle repair and maintenance services in the U.S., the U.K., and Canada. Lithia also offers vehicle financing and insurance products, allowing customers to lease retail vehicles; it offers fleet management solutions as well. Lithia was founded in 1946 and is based out of Medford, Ore.

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Lithia Motors (LAD): Company Profile, Stock Price, News, Rankings

legacy

Lithia Motors

lithia motors

Greetings. Welcome to Lithia and Driveway's twenty twenty five Second Quarter Earnings Call. At this time, all participants are in listen only mode. A question and answer session will follow the formal presentation. Please note that today's conference is being recorded.

I'll now turn the conference over to Jardan Jardimio, Senior Director of Finance. Thank you. You may begin.

Good morning. Thank you for joining us for our second quarter earnings call. With me today are Brian DeBoer, President and CEO Tina Miller, Senior Vice President and CFO and Chuck Leitz, 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. 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've also posted an updated investor presentation on our website, investors.lithiadriveway.com, highlighting our second quarter results. With that, I'd like to turn the call over to Brian DeBoer, President and CEO.

Thank you, Jardan. Good morning, and welcome to our second quarter earnings call. The 2025 reaffirms the strength of our strategy with a 29% increase in EPS on a year over year basis, vastly outpacing the industry's profitability growth. Lithia and Driveway's strong earnings growth is enabled by an operational focus powered by our people and the profitability of our ecosystem and adjacencies. Our integrated physical and digital network services customers while scaling a platform designed to compound value and earnings power with a diverse and resilient ecosystem.

In the second quarter, we delivered record revenue of $9,600,000,000 and 4% year over year same store revenue increase, reflecting our continued ability to grow share and enhance the profitability of our platform. In addition, diluted earnings per share for the quarter was $9.87 and $10.24 on an adjusted basis, an increase of 2530% year over year respectively. We saw strength across the business with record profitability and financing operations, expanding aftersales margins and flat SG and A despite pressures from lower GPUs. We're encouraged by our adjacencies that are now contributing meaningfully to both earnings and consumer engagement. These businesses are not just supporting core operations, they are expanding unit economics, reinforcing loyalty and widening the profit gap between Lithia and the marketplace.

As we look to the second half of twenty twenty five and beyond, our focus remains on store performance, scaling high margin adjacencies, deepening customer relationships across the ecosystem and deploying capital in a way that is most valuable to our shareholders. Our combination of local execution, integrated technology and capital discipline positions us to grow profitably, take share and advance to our long term targets while continuing to lead the industry in innovation. We're pleased to see increasing momentum in our high margin business lines, including financing operations and aftersales, which expands our unit economics and adds consistency to our earnings profile. Our stores are adapting in real time to demand shifts supported by their understanding of customer needs and OEM dynamics. We continue to monitor and respond to the evolving tariff landscape and broader consumer trends.

We have diversified our earnings stream. And as a reminder, over 60% of our net profit comes from the aftersales operations. Our OEM partners have responded nicely, maintaining affordability and price stability. With a broad product mix, we are well positioned to serve customers across all segments and affordability levels, while continuing to build upon the customer life cycle with high margin adjacencies to further improve the profit equation. What differentiates us is how our components work together, a national footprint with local autonomy, integrated digital tools, high margin adjacencies that scale earnings across the ownership life cycle, while also being the preferred acquirer of businesses in the industry.

In a fragmented sector, our ability to acquire, integrate and operate at scale remains a key focus and competitive advantage. This quarter, we added stores in targeted high return markets, continued optimizing our existing portfolio and embedded adjacencies more deeply into our daily operations. Our omnichannel platform is expanding both engagement and reach. Tools like the My Driveway portal are strengthening customer retention in digital brands like Driveway and Green Cars as they continue attracting new customers into the ecosystem, all while improving the customer experience and driving margin. In July, we completed a transaction to transfer our North American joint venture back to Pinewood AI, paving the way for Pinewood's full rollout of the industry's pinnacle cloud based solution across North America.

In addition to our high margin adjacencies, we have a set of operational levers that tighten costs and lift throughput at the store level. Today, My Driveway's customer portal reduces service costs and drives higher retention. Soon, the Pinewood AI will allow us to replace multiple legacy and third party solutions, allowing both customers and our team members to operate in the same environment. This will improve the sales experience, streamline workflows and further reduce our cost structure. Layer onto that scale driven advantageous pricing as we unlock meaningful SG and A leverage while freeing store teams to focus on selling and servicing vehicles.

Together, these abilities give Lithia a structural edge that supports sustained margin consistency and growth. This strategy is producing results and creates a foundation of tremendous potential and more resilient and rewarding earnings model. This enables us to grow through volatility, allocate capital with confidence and advance towards our long term targets with clarity. Strategic acquisitions remain a core pillar of our growth model and a proven differentiator of LAAD. Our history of sustainable high return and virtually risk free growth has grown our revenue from $13,000,000,000 in 2019 to become the largest global auto retailer quickly approaching $40,000,000,000 in revenue.

EPS has grown at a similar rate, and we remain excited to operate and grow in one of the most unconsolidated sectors in the country. Our scaled, diverse strategy and cash engine now have the flexibility to not only accelerate share buybacks, but also continue to grow both organically and through acquisitions. With a disciplined approach, we continue to target high quality assets in The U. S. That strengthen our network, especially in the Southeast and South Central, where population growth and operational profits are the highest.

We aim to acquire at 15% to 30% of revenue or three to six times normalized EBITDA with a 15% minimum after tax hurdle rate. Our track record reflects a 95% success rate of above target returns. Today, we are in a position of strength. Our growing capital engine and consistent free cash flow gives us the flexibility to allocate where returns are most attractive. While waiting for market valuations on acquisitions to reset, the relative value of our own shares supports a more aggressive buyback strategy, which Tina will be discussing further.

In the first half of the year, we repurchased 3% of our outstanding shares. Over the long term, we continue to target acquiring $2 to $4,000,000,000 in revenue annually, and we'll continue to deploy capital where it compounds value most effectively. We have clear line of sight to our long term revenue of EPS growth targets powered by five strategic levers: improving store level performance expanding our footprint and digital reach to grow U. S. Market share from 1.1% to 5% financing up to 20% of units through scaling DFC reducing costs through scale efficiencies and SG and A discipline and capital structure and finally, capturing growing contributions from omnichannel adjacencies like e commerce, fleet, software and insurance.

Let's turn to our key operating results and how the performance is being driven at the store and departmental level. This quarter marked another meaningful step forward in the consistency of our performance. We delivered year over year growth, particularly in aftersales and continue to see sequential improvements in used autos, especially in the value auto segment. While the June 2024 outage contributed to softer comps in the prior year, this quarter's results reflect operational progress, yielding organic revenue growth through each month of the quarter supported by disciplined SG and A control and strong execution across our stores. As we move through the rest of 2025, our focus remains on the fundamentals: expanding market share, improving throughput, maintaining cost efficiency to reach our potential.

Turning to same store sales performance. Total revenues and gross profit both increased by just over 4% due to sequential strength across all business lines that are partially offset by declining GPUs. Total vehicle gross profit of 4,003 and $18 was down $128 compared to the same period last year. New vehicle units increased 2% year over year with front end GPUs at 3,001 and $75 up slightly sequentially. Used vehicle units increased 4% year over year.

Our value auto sales continued to trend impressively with 50% same store sales improvement versus last year. Front end GPUs for used vehicles were flat year over year at 1,900. We saw a slight increase in new vehicle inventory days supply of 63 at quarter end. This compares to an unusually strong sales month in March with absolutely inventory increasing by only 5% sequentially. Used vehicle DSO increased slightly to forty eight days from forty five days in Q1.

Flooring interest savings were significant this quarter with a 28% decline year over year. F and I delivered 4.5% year over year growth in same store sales gross profit and $18.41 dollars on a per unit basis, a $25 year over year increase reflecting the continued steady growth of this high profitability area. Aftersales was once again a key earnings driver. Same store aftersales gross profit grew 8.5% year over year, helped by solid momentum in both customer pay and warranty work. Gross profit expanded even faster at 11.9% as the segment's gross profit margin widened to 57.8%, a 180 basis point increase from last year, reflecting stronger mix and operating efficiency.

Warranty remains a standout with gross profit of 21.9% on elevated OEM service activity and higher technician productivity. With aftersales now contributing more than 60% of the net income of our company, we see continued headroom to compound growth and earning stability in 2025 and beyond. With the foundation of our strategy now in place, Lithia and Driveway differentiated model is delivering results. Leveraging our national physical network throughout the customer life cycle with inventory and network scale advantages, industry leading digital customer solutions and deepening customer economics through captive finance and expanding aftersales, all underscore the consistency, resiliency, flexibility and potential of our model. Our leaders are executing across the network by driving towards store potential, integrating adjacencies and creating memorable customer engagements across the ownership journey.

Our integrated ecosystem is delivering tangible results, and we are confident in our ability to lead the industry in consistency, profitability, and long term value creation. Before turning things over to Tina, I would like to thank and congratulate Gary Glandin, our Chief People Officer, on his upcoming retirement. His leadership is leveraging LAAD's greatest strength, our people, and is a perfect exclamation point on an illustrious twenty five year career as head of people functions in his five years here at LAAD. We look forward to seeing our people and culture teams that Gary has built led by Katie Macadino continue to flourish and drive our mission of growth powered by people. With that, I'll turn the call over to Tina.

Thank you, Brian. Our momentum in the second quarter translates into improving financial leverage with continued year over year EPS improvement, the highest quarterly income to date for financing operations powered by strong fundamentals and a focus on identifying ways to generate SG and A efficiency and free cash flow generation that funded the repurchase of 1.5% of shares in the quarter. These results underscore how ongoing control actions, a maturing captive finance platform and balanced capital deployment are accelerating value creation. Adjusted SG and A as a percentage of gross profit was 67.7%, down from 67.9% a year ago. On a same store basis, SG and A ticked up to 67.4% from 66.4%, reflecting cost pressures as we navigate declining front end GPUs.

We're pushing levers to reclaim operating margin by increasing productivity through performance management and technology, optimizing our tech stack and retiring duplicate systems, renegotiating national vendor contracts, and automating back office workflows. These actions, combined with ongoing UK network rationalization, are designed to bend the SG and A curve lower again while giving store teams more time with customers. We expect the benefits to build each quarter, controlling SG and A even if front end GPUs continue to normalize. DFC continues to scale profitably, demonstrating the differentiation of our model. Financing op income more than doubled year over year from CAD7 million to $20,000,000 supported by a 50 basis point expansion in net interest margin to 4.6%.

Disciplined underwriting remains the cornerstone with second quarter originations of $731,000,000 carrying an average FICO score of seven forty seven. This was achieved while increasing U. S. Penetration to 15%, up two forty basis points versus last year. The optimization of risk and reward in recent vintages is driving improved performance, passing more of that spread through to earnings.

Our market position at the top of the consumer funnel and high quality originations keeps credit risk low and preserves balance sheet capacity for continued growth. With managed receivables now above $4,000,000,000 our mature portfolio can continue to deliver outsized profitability relative to indirect lending, reinforcing our earnings growth trajectory. Strong origination flow, improving margins and runway to increase retail penetration demonstrate a clear path to our long term profitability targets for GFC. Now moving on to our cash flow and balance sheet health. We reported adjusted EBITDA of $489,000,000 for the second quarter, a 20% increase year over year driven by increased earnings.

During the quarter, we generated free cash flows of $269,000,000 Our business continues to convert operating momentum into healthy free cash flow, giving us flexibility to pursue a balanced strategy of buying back shares, funding accretive store acquisitions, and investing in the customer experience, all while preserving a strong balance sheet profile. This steady, self funded cash engine lets us stay nimble in challenging markets and deploy capital where it will compound shareholder value fastest. This quarter we continued our balanced approach to capital allocation. We deployed approximately one third of cash flows to share buybacks at an average price of $3.00 $6 representing 1.5% of outstanding shares. One third was allocated to acquisitions of high quality stores in targeted geographic regions with the remaining capital invested in store CapEx, the customer experience and opportunities to improve operating efficiency.

Our capital allocation philosophy is to act opportunistically and with leverage comfortably below our target and ample liquidity, we are accelerating our share repurchases to target up to 50% of free cash flows and capitalize on what we view as a meaningful disconnect between our stock price and intrinsic value. This stepped up buyback pace allows us to compound returns for shareholders while still serving capacity for high return strategic acquisitions. The Ladd strategy remains anchored in consistent, differentiated profitable growth powered by an omnichannel platform that now delivers tangible earnings at every step of ownership journey. Our passionate teams, differentiated digital and financial capabilities, and sound balance sheet provide the foundation to scale both core operations and high margin adjacencies, unlocking the next chapter of value creation in 2025 and beyond as we continue our progress to creating $2 of EPS per billion in revenue. This concludes our prepared remarks.

With that, I'll turn the call over to the operator for questions. Operator?

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad and a confirmation tone 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, Thank you. And our first question is from the line of Ryan Sigdahl with Craig Hallum. Please proceed with your question.

I want to start with SG and A to gross profit. So certainly making good progress on the adjacencies on the operating efficiencies. I hear you from an operational standpoint, but when I look at the numbers, I guess a little bit worse than we were expecting, from an SG and A to gross profit leverage despite better GPUs. So I guess, can you talk through kind of the operational improvements and then kind of the financial implications and maybe put some guardrails as to help The Street and myself kind of think about how this layers into the income statement of the model as it relates to the second half of this year and then 2026?

Ryan, this is Tina. I'll start with that question. I mean, I think when we think about SG and A, as we've talked about before, a lot of it is driven by volume on the top line and making sure we're really driving that growth or in terms of units and where that's happening in our stores. That continues to be the focus as we look at our leaders that we have in our stores, our department managers and making sure they're really driving to get that market share and that growth that's available in their market. And then looking at productivity and cost controls on that line, as we look at SG and A.

So I think it's a combined effort in both. We continue to pay a lot of attention to it and drive discipline through it and making sure we have the right leaders who are able to look at that. As we look at the rest of the year, we did increase the outlook slightly as we think about SG and A just sort of balancing what's already occurred in the first half with continued discipline in the second half. And as we've talked about that continued pace that we see it needs to be that glide path down to getting toward that long term target of 55% SG and A as a percentage of gross profit. But it's a diligence on it that we need to do every quarter.

Very good. I don't believe you commented on The UK specifically, I'll ask it here. But very challenging conditions from an industry standpoint, changing EV mandates, etcetera, etcetera. But how do you feel about The UK from an industry overall? And then where your business stands from whether it be cost or operational standpoint?

Thanks for the question, Ryan. I think The UK for us has been performing as expected. We were actually up profitability wise by about 3% year over year, which was a nice number relative to what's happening in the marketplace. Neil and his teams there understand that top line is most critical, and they're obviously growing their businesses and doing a nice job at cost management and so on. So we're pretty pleased with where we sit today.

And I think it took a year to get the network fairly well cleaned up. And they sit with a nice clean portfolio with a lot of really great people that understand the consumers and understand the competition and should continue to flourish in the future.

Great. I'll turn it over to the others. Thanks, Brian and Tina.

The next questions are from the line of Michael Ward with Citi Research. Please proceed with your questions.

Thanks very much. Good morning, Brian. Good morning, Tina. Maybe just following up on the SG and A side. With the addition of Pendragon, it kind of distorts some of the comps in 2Q in particular.

How does The U. S. Alone look on SG and A?

This is Tina. I mean our U. S. Business continues to be strong on the SG and A side. And as you know, the SG and A footprint in The UK is just higher.

And so when we look at our blended number, I think both of the teams on both sides, I would say continue to focus on SG and A and it's an area that we see long term continued opportunity to drive that down over time. But our U. S. Business continues to do well on the SG and A front.

Mike, I think it's also important. It's easy to get caught up in one number or another, but there's a lot of factors that go into how you think about your business and how you grow your business. It's easy to get caught up of what's happening quarter over quarter or year over year or so on. But Lithia and Driveway has built an organization that is focused on multiple assets of the customer lifecycle to expand the wallet share of a consumer and staying in our ecosystem for a longer period of time. And it's shocking the microscopic views that the market is taking on what we're doing when we've grown our organization threefold in revenue and threefold in earnings and have all of the levers and the dry powder in our adjacencies to continue to do the same thing.

Let alone in our M and A strategies of how we attack the marketplace, we don't have blips in terms of how we buy and how we operate because we didn't pay based off COVID level earnings. We don't have write offs as two of our peers just had. But for some reason, everyone keeps discounting those type of things. Lithia And and Driveway, as it continues to plot along as the largest now auto retailer in the country and continuing to separate ourselves in terms of scale and size, that we get into these microscopic views of SG and A was 0.5 higher than it should have been. Same store sales might have been a little worse when our same store sales revenue growth in used cars was the best in the sector so far, okay, last quarter and the quarter before it wasn't.

So the gaps that we're realizing because of the ecosystem are quite there. And it's Tina and the teams are working diligently on SG and A, and we're going to be able to deliver the performance. And this quarter, we felt that we picked up some of the gaps in where we stand. And there's no question that we have a greater portion of our business that's sitting in blue states where population growth is not as exorbitant or robust as what it is in the Southeast and South Central. We've been very fortunate to be able to change our mix to be able to expand where we sit.

And as such, we're more excited than ever about what we've built and the potential of what we have. So Mike, thanks for letting me get on my soapbox for a few minutes. But it's sure frustrating as a management team that you build something, and all you do is get the penalties of it. And then when there's one number out of 17 that seems to jump out, people forget of what we've accomplished as a management team, and more importantly, what the foundational elements of what we built have the capacity to do in the future.

Well, my point was is it was better than it looks because The UK kind of distorts. So the the performance is actually better than it was.

To to that end, it it looks like your driveway finance has turned the corner. Is 20,000,030 million dollars the new run rate per quarter?

Is that what we're looking at? So $100,000,000 plus contribution like 26,000,000 Hey,

Mike, this is Chuck. DFC is on a very specific growth trajectory. Yes, we feel as you've said, DFC has definitely got out of the startup phase and continues to execute our strategy of being top of funnel and getting preferential loan selection. And we see just that continued growth rate trend continuing for the next foreseeable quarters going forward. So yes, definitely expect to see that level of run rate going forward.

Chuck's being very humble, Because I think the $20,000,000 that we did was three times what we did in the previous year. The spreads are there. Our delinquency rates continued to strengthen and become better, which is great. And I think easy to forget that we made $20,000,000 in the quarter, and I think we're targeting 60,000,000 or something, dollars million for the year. Ultimately, at the current revenue base where we finance vehicles, which is in The US, we're about $32,000,000,000 in revenue, which is about $320,000,000 in profitability at scale, at just that revenue base.

And we've continued to say that at a $50,000,000,000 domestic revenue base, we're going make half a billion dollars. That's real money that our competitors at this stage don't have. And it's important to clarify that we're not getting valued on that. And in fact, for the last two years we've been penalized for it. Okay?

And I think there's a lot of confusion out there that it takes a lot of capital and a lot of courage and bold planning to be able to execute on the things that we're executing on to be able to bring you what is now a company that has the ability to compete in acquisitions, in consolidation, and then the bottom line profitability in ways others can't.

It's a marathon, not a sprint. But my son was still cheering for you, Brian.

The next questions are from the line of Rajat Gupta with JPMorgan. Please proceed with your questions.

Great. Thanks for taking the questions. And I'm sorry, I have to apologize in advance. I want to follow-up on Mike's question and your response. I mean, looks like, I mean, Brian, like you've obviously done a lot of acquisitions since the pandemic.

You have grown your company threefold, as you've said, but I think it's been a couple of years since you've had those under the hood. And I think it's been ten quarters now since the same store metrics have underperformed your peer group. I don't know if one and a half year is enough time or we need to see more time before that starts to recover. So could you give us some visibility on when we should see your organic performance? I understand the adjacencies.

I think DFC is great. But just the store performance metrics, when should we see that recoupling or doing better than peers? And I have a quick follow-up. Thanks.

Raja, I think if you look back three quarters, our performance has bridged a lot of that gap. Like I said, in used cars, we were number one in revenue growth. Okay, number one. And in service, we were the middle of the pack. And remember that service is based off of smaller units in operation growth than what others are.

We believe it's somewhere between 33.5% difference just from units in operation. We were about 1.5% to 2% below what the peer group was. When it comes to new car sales, you know what, Stellantis is still struggling a little bit, and we still got a fairly large portion of that like AutoNation does, and the rest is is yet to be seen. So if if you wanna view the world as that, go ahead. It's one part of who we are, okay, as an organization, and the ecosystem is beginning to perform.

And the same store sales growth is starting to bridge the gaps that are there. I can't change overnight where our footprint is. If you remember, we were 80% West Coast based before acquisition of DCH. At the same time, we were almost 75% domestic manufacturers. Today, we sit at less than 30% of our mix being domestic.

We sit with over 40 of our mix being in the Southeast and South Central. That automatically yields over double the operating margins of what the Western two regions perform at. Okay? So if you want to just compare apples to apples, then you need to do deeper dives into what the marketplace is doing, where population growth is, and how operational profits and doc fees impact those operating profits.

Understood. And I mean, you do have a line of sight and all of these gaps narrowing and getting better over the next few years, Could we see a more aggressive pivot to and also given the fact that you're at a significant discount to your peer group, could we see a more aggressive pivot to stock buyback the at least in the interim before the market can give you credit?

Sure, Raj. I mean, good insight. I mean, I think when we're trading at a 20% to 30% discount to the peer group and we've got somewhere between 2040% upside just from our adjacencies that are not fully realizing their potential and the trajectory is there. Absolutely. I mean, as Tina mentioned, we're now allocating 50% of our capital to buybacks, Okay?

I'm imagining we're in the market today buying, and we're going to continue to buy back until the world understands that what we built is something special. And that the performance on each of these side metrics that I get that there's metrics. Okay? But you still have to look at the totality of what is being accomplished and not lose sight of that this is about TSR. Okay?

It's about shareholder return and the ability to grow a company, both top and bottom line. We'll be rewarded for it. We're confident of that. But as a management team, it's easy to get frustrated that the boldness that we took and the steps that we took to reinvent basically the industry and our sector, we've been pretty much penalized for the last two and a half years. And this is a hell of a buying opportunity, because at those kind of discounts, we're going to back up the truck and continue to buy shares back.

Understood. Thanks for the answers, and good luck.

Thank you. Next questions are from the line of Daniella Tanigan with Morgan Stanley. Please proceed with your question.

Hi, Brian. Just a quick one. Hi. On used car availability and growth, what's the mix or strength coming from across CPO, core, and value autos? You cited 70% self sufficiency, which is really strong.

In this fragmented used car market, how do you view competition from the likes of the online pure play retailers? And is there greater opportunity to grow and consolidate here?

Great question, Danielle. And I think as we think about our mix, what we're seeing and part of the reason for the outperformance in used vehicles on same store is because we're growing our over nine year old bucket quite nicely. It was up 50% year over year, okay? That obviously means that the other buckets didn't grow quite as fast, but that's because the supply in those buckets really aren't there. We are purchasing over two thirds of our vehicles directly from consumers.

Those are yielding almost a $1,700 price difference between those vehicles purchased from auctions or on the street, okay? And that's a massive competitive advantage over used only retailers that are not up funneled quite as much. One of the other notes that I think is important to understand is that in our ecosystem, Driveway actually purchased over double the amount of vehicles through our AI valuations and those purchasing metrics. So quite a difference year over year, and that's starting to impact our ability to find the vehicles to be able to meet our consumers' demand at the right affordability levels.

Got it. Thank you. And then can you just comment on the M and A environment? I know you have the target for 2,000,000,000 to $4,000,000,000 in annual acquired revenues per year. Does the policy uncertainty change that more or less dealers to the table this year, next year, etcetera? Any comments around that?

Sure. We've done just over $05,000,000,000 so far this year. We have a considerable amount under contract. But again, I would state this, we don't flex on pricing. Okay?

We watch the market come to us. We act when there's opportunities that make a good ROI sense. And I I said in my prepared remarks that we're 95% successful on acquisitions. We're actually 99% successful now that we purged some of the smaller stores that were in groups, which created that extra 4%. So this is a pretty easy roll up strategy, and we believe the market will come back to us as profits begin to normalize, which they've done nicely.

But we need that to happen for a couple of years because that's what determines pricing. Okay. So we are there is an advantage to having a discounted stock price that in the event that M and A is a little pricier, then we can buy our shares back. So I think, Danielle, to summarize, we should be able to achieve the low end of that 2,000,000,000 to $4,000,000,000 range by year end and have a fair amount of stuff that have come into play over the last few months.

The next questions are from the line of Mark Jordan with Goldman Sachs. Please proceed with your question.

Hey, thanks for taking my question. For the aftersales segment, how much of the stronger same store sales growth can you attribute to lapping last year's CDK issues? And is there any additional color you can provide regarding how the different channels performed?

Really, really good question. I would say that the lapsing of performance in same store sales was driven by a little better than 50% by the easy lapse of comp. Okay. I don't know what the other peers had communicated that with the rest coming from outperformance, where a lot of it's being driven by customer pay and some by warranty.

Okay, perfect. And then did you benefit in after sales from any tariff related inflation pass through during the quarter? And is that factored into your full year outlook for a mid single digit comp for the segment?

So Mark, we don't I would say that there's slight impacts from tariffs, but most manufacturers have controlled their pricing on parts as well. Okay. Now going forward, there may be implications there. But we didn't see impact from tariffs at any scale. And you can see that we were up 1.5% in margin in after sales, which usually is indicative that there was a higher mix of labor, which is a 60%, 65% margin business rather than a 30% to 35% margin business, which is parts.

So without having the specific tariff related data, I would say that it had minimal impact.

The next question is from the line of Ron Joriceko with Guggenheim Securities. Please proceed with your questions.

Yeah. Good morning, team, and thanks for taking my Hey, Brian. Wanted to start with kind of the DFC growth this quarter and then especially after another strong quarter for DFC. I guess the back half guide does imply a a pretty meaningful step down versus what you did this quarter. Trying to understand what's informing that because NIMs and credit performance both still look strong.

So I don't know if this is just a lean towards conservatism. It looks like you still want to grow the book pretty aggressively, but it's tough for us to bridge to certainly the low end of the range at least.

Yes, Perron, this is Chuck. Great question. First, I think you actually hit on some of it in that, again, one of the great things about DFC is we've grown our penetration rates. We're getting very close to hitting that consistently that 15% penetration rate. And then hopefully, we can build on that to 20%.

And as you know, as we continue to ramp up those originations that can have a drag on some of our near term profitability when we have to take that CECL reserve upfront. And then secondarily, there is some seasonality in our numbers. The summer months generally are those months that consumers don't necessarily pay their auto loans. So if you look at some of the published reports, are seeing delinquency rates tick up. But once you kind of get past the summer months, we hope that those start to tick down a little bit and don't start weighing us down with actual charge offs.

So somewhat of it is due to the growth rates. The other part would be seasonality. Our 3.1% loss ratio includes and assumes that seasonality, but it does change the profit equation. So if you

look at the first quarter, you can't just take it times four and say what they're doing.

Lithia Motors (LAD) Q2 2025 Earnings Call Transcript

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