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アメリカ合衆国証券取引委員会

ワシントンD.C. 20549

フォーム 10-Q

☒			証券取引法第13条または15(d)条に基づく四半期報告書

報告期間が終了した2023年6月30日をもって2024年9月30日

OR

☐			移行期間：             から             まで

コミッションファイル番号：001-08504001-14733

リシアモーターズ、インク

（会社設立時の指定名）

オレゴン州									93-0572810
（設立または組織の州または管轄区域）									（国税庁雇用者識別番号）
150 N. Bartlett Street			Medford,			オレゴン州			97501
(主要執行オフィスの住所)									（郵便番号）

(541) 776-6401

登録者の電話番号（市外局番を含む）

 

法律に基づき登録された有価証券:

各クラスの名称

取引シンボル

登録されている各取引所の名称

普通株式

LAD

ニューヨーク証券取引所

証券取引法第13条または15(d)条により前の12か月間（またはそれ以下の期間については、必要に応じて提出するよう義務付けられたレポートを全て提出した）に必要なすべての報告書を提出したかどうか、および過去90日間にわたってそのような提出要件を満たしていたかどうかについてチェックマークを付けてください。はい ☒✓印を付しませんでした場合、登録者の内部統制に関するマネジメント評価を報告するよう求められたことを意味します。☐

規則405に基づき、本章の§232.405に規定されている対話型データファイルを、過去12か月間（またはそのようなファイルを提出する義務があった期間の短い場合）に電子提出したかどうかをチェックマークで示してください。はい ☒✓印を付しませんでした場合、登録者の内部統制に関するマネジメント評価を報告するよう求められたことを意味します。☐

取引所法のルール1202における「大型の加速ファイラー」、「加速ファイラー」、「小規模報告会社」、および「新興成長企業」の定義を参照して、登録者が大幅な加速度ファイラー、加速度ファイラー、非加速ファイラー、小規模な報告会社、または新興成長企業であることをチェックマークで示してください。

大型加速ファイラー

非加速ファイラー

加速度ファイラー

小規模報告会社

新興成長企業

☒

☐

☐

☐

☐

新興成長企業の場合は、註記欄にチェックマークを付けてください。申請者は、証券取引法第13(a)条に基づく新しいまたは改訂された財務会計基準の遵守のために延長された移行期間を使用しないことを選択しましたか。 ☐

本登録者が取引所法12b-2条で定義されるシェル企業である場合、はい☐✓印を付しませんでした場合、登録者の内部統制に関するマネジメント評価を報告するよう求められたことを意味します。☒

2024年10月25日現在、 26,637,156登録者の普通株式の発行済み株式数は32,817,464株です。

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リシアモーターズ、インク。

第10-Q四半期報告書

目次

 

品目番号			項目			ページ
			用語集			1
第I部分			財務情報
項目1。						2
			連結貸借対照表（未監査） - 9月 2024年9月30日および2023年12月31日			2
			連結損益計算書（未監査） - 2024年9月30日および2023年			3
			連結包括利益計算書（未監査） – 2024年9月30日および2023年			4
			連結自己資本及び償還可能な非支配株主持分計算書（未監査） - 2024年9月30日および2023年			5
			連結キャッシュ・フロー計算書（未監査） - 2024年9月30日および2023年			6
			連結財務諸表概要注記（未監査）			8
アイテム 2.			経営陣による財務状況と業績に関する会話と分析			21
項目3。			市場リスクに関する数量的および質的な開示			41
項目4。			内部統制および手順			42
第2部			その他の情報
項目1。			法的措置			42
項目1A。			リスクファクター			42
アイテム 2.			未登録の株式の販売および手数料の利用			42
項目5。			その他の情報			42
項目6。			展示資料			43
			署名			44

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目次

定義集

このレポート内で使用される用語の略語と定義は以下の通りです:

利用規約						定義
AFS						有価証券売却用
(UNAUDITED)						会計基準コーディネーション
ASU						会計基準の更新
バンクオブアメリカ						バンクオブアメリカ
取締役会						取締役会
バンクオブノバスコシア						バンク・オブ・ノバ・スコシア
BPS						基点
カナダドル						Canadian Dollar ($)
CORRAは、カナダ銀行（またはその後継者管理者）が管理および公表するカナダのオーバーナイトリポ利回り平均を意味します。						Canadian Overnight Repo Rate Average
CPO						Certified pre-owned
DFC						Driveway Finance Corporation
EBITDA						利息、税金、減価償却費、償却前利益
EPS						一株当たり利益
FASB						米国公認会計士協会
米国会計原則						一般的に受け入れられている会計原則
gbp						Great Britain Pound (£)
jpモルガンチェース						jpモルガンチェース銀行株式会社
LAD						Lithia and Driveway
LMMH						Lithia Marubeni Mobility Holdings
長期介護（LTC）の稼働率 - 2023年第4四半期の平均稼働率は97.6％で、前年同期比で150ベーシスポイント（「bps」と呼ばれる）増加しました。						経営陣の検討と分析
みずほ						みずほ銀行株式会社
新華人寿保険						非支配株主持分
NM						意味不明
nyse						ニューヨーク証券取引所
PINE.L						Pinewood Technologies Group PLC
PPA						購入価格の割当
四半期						四半期累計
RSU						制限株式ユニット
SEC						証券取引委員会
SG＆A						販売、一般管理費用
「SOFR」						保証付きオーバーナイト金利
SONIA						Sterling Overnight Index Average
イギリス						イギリス
米国						アメリカ合衆国
usb-p						usバンク国民協会
usd						アメリカ合衆国のドル（$）
年初累計						年初来のパフォーマンス

用語集

1

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目次

(千ドル、株式および株式当たりのデータを除く)
(百万単位；未監査)			2024年9月30日						2023年12月31日
資産
流動資産:
現金、制限付き現金、および現金同等物			$	359.5					$	941.4
売掛金（当座勘定として評価されるもの、当たり外れ引当金を除く）3.1と $7.1			1,209.4						1,123.1
資産、純額			6,100.2						4,753.9
その他の流動資産			224.0						136.8
流動資産合計			7,893.1						6,955.2
物件及び設備 　累計減価償却額 $773.8と $646.7			4,664.0						3,981.4
運用リース契約に基づく資産			722.5						478.8
債権の純額、推定損失引当金を差し引いた額は$120.5と $106.4			3,765.5						3,242.3
のれん			2,126.2						1,930.6
フランチャイズ価値			2,575.3						2,402.2
その他の固定資産			1,514.9						642.0
総資産			$	23,261.5					$	19,632.5
負債と資本
流動負債：
床計画債務			$	2,602.9					$	1,347.0
受け取り不可の床面図の負債: その他			2,516.7						2,288.5
長期債務の流動部分			113.2						75.7
非連帯形式の支払い猶予が付いた当座債務			10.3						33.9
取引債務			301.3						288.0
未払費用			1,119.7						899.1
流動負債合計			6,664.1						4,932.2
流動部分を除く長期借入金			6,399.8						5,483.7
現在の未連帯形式の支払い猶予よりも少ない非連帯形式の支払い猶予			1,772.7						1,671.7
前払収益			400.5						264.1
繰延税金資産			455.8						349.3
非流動リース負債			636.1						427.9
その他の長期負債			304.3						220.7
負債合計			16,633.3						13,349.6
償還可能な非支配株主持分			—						44.0
株式資本:
优先股- 無面額株式; 承認済み 15.0 なし未行使			—						—
普通株式 - 名目金額なし； 株式数量: 125.0発行済み株数26.6 と 27.4			878.3						1,100.6
追加の資本金			94.3						79.9
累積その他の包括利益			75.4						20.1
留保利益			5,556.7						5,013.3
リシアモーターズの総株主資本			6,604.7						6,213.9
非支配株主持分			23.5						25.0
総資本			6,628.2						6,238.9
総負債、償還可能な非支配持分、および資本			$	23,261.5					$	19,632.5

連結財務諸表に添付の要約注釈を参照してください。

財務諸表

2

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目次

損益計算書
			9月30日までの3か月間												9月30日までの9ヶ月間
(百万単位、1株当たり金額を除く；未監査)			2024						2023						2024						2023
収益:
新車小売			$	4,430.0					$	3,885.8					$	12,847.9					$	11,179.5
中古車小売			2,843.3						2,620.2						8,630.1						7,302.8
中古車卸売			390.9						316.1						1,018.1						1,082.4
金融業及び保険業			360.4						349.4						1,061.9						1,005.6
アフターセールス			1,012.8						838.0						2,876.3						2,378.8
フリートおよびその他			183.6						267.5						580.4						418.9
収益合計			9,221.0						8,277.0						27,014.7						23,368.0
販売原価:
新車リテール			4,123.6						3,526.9						11,925.4						10,099.6
中古車リテール			2,654.4						2,431.2						8,062.9						6,735.4
中古車卸売			393.0						322.1						1,020.7						1,091.9
アフターセールス			453.0						375.2						1,285.1						1,077.7
フリートおよびその他			166.6						250.3						531.1						395.2
販売費及び一般管理費の総額			7,790.6						6,905.7						22,825.2						19,399.8
粗利益			1,430.4						1,371.3						4,189.5						3,968.2
財務運営収益（損失）			0.9						(4.4)						6.4						(43.8)
販売・一般管理費用			943.6						850.8						2,853.0						2,458.1
減価償却費および償却費			63.5						50.8						183.6						146.4
営業利益			424.2						465.3						1,159.3						1,319.9
フロアプランの利子負担			(76.6)						(40.2)						(214.0)						(102.6)
その他の利子負担、純			(64.5)						(58.5)						(189.3)						(141.5)
その他の収入（費用）、純			5.1						(5.3)						35.4						6.8
税引前当期純利益			288.2						361.3						791.4						1,082.6
事業税調整前当期純利益			(65.3)						(96.4)						(187.0)						(287.0)
当期純利益			222.9						264.9						604.4						795.6
非支配持分に帰属する当期純利益			(1.2)						(2.1)						(3.8)						(4.7)
引き換え可能な非支配株主に帰属する当期純利益			(12.6)						(1.3)						(14.8)						(3.6)
リシアモーターズに帰属する当期純利益			$	209.1					$	261.5					$	585.8					$	787.3
リシアモーターズに帰属する1株当たりの基本利益			$	7.82					$	9.49					$	21.57					$	28.60
基本1株当たりの計算に使用される株式数			26.7						27.6						27.2						27.5
リシアモーターズに帰属する1株当たりの希薄化後利益			$	7.80					$	9.46					$	21.54					$	28.54
株式希薄化後分母数			26.8						27.6						27.2						27.6
1株当たりに支払われる現金配当額			$	0.53					$	0.50					$	1.56					$	1.42

    

連結財務諸表の要約注記を参照してください。

財務諸表

3

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目次

包括利益に関する連結財務諸表
			9月30日までの3か月間												9月30日までの9ヶ月間
(百万単位；未監査)			2024						2023						2024						2023
当期純利益			$	222.9					$	264.9					$	604.4					$	795.6
その他の包括的（損失）利益税引前：
為替差損益			71.6						(25.9)						54.6						3.3
債券・債務証券の未実現利益、税引前の繰入額 $0.3), $0.0, $(0.2)と$0.0それぞれ			1.2						—						0.7						—
その他包括利益（損失）合計、税引後			72.8						(25.9)						55.3						3.3
包括的利益			295.7						239.0						659.7						798.9
非支配株主に帰属すべき包括的収益			(1.2)						(2.1)						(3.8)						(4.7)
償還可能な非支配株主に帰属する包括利益			(12.6)						(1.3)						(14.8)						(3.6)
リシアモーターズに帰属する包括利益			$	281.9					$	235.6					$	641.1					$	790.6

連結財務諸表の要約注記を参照してください。

財務諸表

4

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目次

普通株式の発行と従業員株式購入計画に関連する株式の発行
			9月30日までの3か月間												9月30日までの9ヶ月間
(百万単位；未監査)			2024						2023						2024						2023
総資本の期首残高			$	6,392.4					$	5,759.7					$	6,238.9					$	5,210.4
普通株式の期首残高			924.0						1,116.1						1,100.6						1,082.1
株式報酬認識支払い			1.5						2.5						29.7						36.1
従業員株式購入計画に関連する株式の発行			7.4						7.9						21.2						22.8
普通株式の買戻し（特別消費税を含む）			(54.6)						—						(273.2)						(14.5)
普通株式、期末残高			878.3						1,126.5						878.3						1,126.5
追加資本剰余金、期首残高			79.5						62.5						79.9						76.8
株式報酬認識支払い			14.8						8.6						14.4						(5.7)
追加資本剰余金、期末残高			94.3						71.1						94.3						71.1
その他包括利益（損失）、期首残高			2.6						11.2						20.1						(18.0)
為替差損益			71.6						(25.9)						54.6						3.3
債券・債務証券の未実現損益、税引後の純額で0.3), $0.0, $(0.2その他),$0.0それぞれ			1.2						—						0.7						—
累積その他包括利益（損失）、期末残高			75.4						(14.7)						75.4						(14.7)
留保利益、期首残高			5,361.8						4,565.8						5,013.3						4,065.3
リシアモーターズに帰属する当期純利益			209.1						261.5						585.8						787.3
配当支払い			(14.2)						(13.8)						(42.4)						(39.1)
留保利益、期末残高			5,556.7						4,813.5						5,556.7						4,813.5
非支配持分、期首残高			24.5						4.1						25.0						4.2
(分配）非支配株主持分の貢献			(2.2)						19.9						(5.3)						17.2
非支配持分に帰属する当期純利益			1.2						2.1						3.8						4.7
非支配株主、期末残高			23.5						26.1						23.5						26.1
総資本、期末残高			$	6,628.2					$	6,022.5					$	6,628.2					$	6,022.5
償還請求可能な非支配株主持分、期首残高			$	46.2					$	43.0					$	44.0					$	40.7
償還請求可能な非支配株主持分の分配			(0.1)						—						(0.1)						—
引き換え可能な非支配株主に帰属する当期純利益			12.6						1.3						14.8						3.6
償還請求可能な非支配株主持分の償還			(58.7)						—						(58.7)						—
償還可能な非支配株式、期末残高			$	—					$	44.3					$	—					$	44.3

See accompanying condensed notes to consolidated financial statements.

FINANCIAL STATEMENTS

5

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Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS
			Nine Months Ended September 30,
(In millions; Unaudited)			2024						2023
Cash flows from operating activities:
Net income			$	604.4					$	795.6
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			219.7						154.9
Stock-based compensation			44.1						30.4
Net loss on disposal of other assets			3.8						0.1
Net gain on disposal of stores			(0.3)						(31.4)
Unrealized investment gain, net			(27.6)						(0.1)
Deferred income taxes			86.9						47.2
Amortization of operating lease right-of-use assets			70.6						49.1
Decrease (increase) (net of acquisitions and dispositions):
Accounts receivable, net			44.7						(110.6)
Inventories			(324.3)						(498.2)
Finance receivables			(526.5)						(907.0)
Other assets			(114.7)						5.8
Increase (decrease) (net of acquisitions and dispositions):
Floor plan notes payable			325.0						292.0
Trade payables			(26.7)						(34.1)
Accrued liabilities			(6.2)						9.7
Other long-term liabilities and deferred revenue			(9.6)						19.4
Net cash provided by (used in) operating activities			363.3						(177.2)
Cash flows from investing activities:
Capital expenditures			(271.9)						(163.7)
Proceeds from sales of assets			5.3						3.1
Cash paid for other investments			(329.1)						(11.1)
Cash paid for acquisitions, net of cash acquired			(1,247.0)						(1,204.7)
Proceeds from sales of stores			21.9						136.1
Net cash used in investing activities			(1,820.8)						(1,240.3)
Cash flows from financing activities:
Borrowings on floor plan notes payable, net: non-trade			280.1						426.7
Borrowings on lines of credit			10,325.4						9,625.1
Repayments on lines of credit			(9,627.0)						(9,681.0)
Principal payments on long-term debt and finance lease liabilities, scheduled			(29.0)						(26.2)
Principal payments on long-term debt and finance lease liabilities, other			(48.2)						(3.4)
Proceeds from issuance of long-term debt			279.5						79.8
Principal payments on non-recourse notes payable			(661.6)						(404.0)
Proceeds from issuance of non-recourse notes payable			739.0						1,451.7
Payment of debt issuance costs			(7.6)						(14.3)
Proceeds from issuance of common stock			21.2						23.0
Repurchase of common stock			(273.2)						(14.5)
Dividends paid			(42.4)						(39.1)
Payment of contingent consideration related to acquisitions			(12.0)						(14.0)
Other financing activity			(64.0)						17.2
Net cash provided by financing activities			880.2						1,427.0
Effect of exchange rate changes on cash, restricted cash, and cash equivalents			3.9						5.7
(Decrease) increase in cash, restricted cash, and cash equivalents			(573.4)						15.2
Cash, restricted cash, and cash equivalents at beginning of year			972.0						271.5
Cash, restricted cash, and cash equivalents at end of period			$	398.6					$	286.7

See accompanying condensed notes to consolidated financial statements.

FINANCIAL STATEMENTS

6

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Table of Contents

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
			Nine Months Ended September 30,
(In millions)			2024						2023
Reconciliation of cash, restricted cash, and cash equivalents to the consolidated balance sheets
Cash and cash equivalents			$	209.8					$	146.9
Restricted cash from collections on auto loans receivable and customer deposits			149.7						109.3
Cash, restricted cash, and cash equivalents			359.5						256.2
Restricted cash on deposit in reserve accounts, included in other non-current assets			39.1						30.5
Total cash, restricted cash, and cash equivalents reported in the Consolidated Statements of Cash Flows			$	398.6					$	286.7
Supplemental cash flow information:
Cash paid during the period for interest			$	546.5					$	359.3
Cash paid during the period for income taxes, net			149.8						203.5
Debt paid in connection with store disposals			13.1						13.2
Non-cash activities:
Contingent consideration in connection with acquisitions			$	—					$	7.3
Debt assumed in connection with acquisitions			868.1						401.6
Acquisition of finance leases in connection with acquisitions			22.7						45.0
Right-of-use assets obtained in exchange for lease liabilities			310.7						139.1

See accompanying condensed notes to consolidated financial statements.

FINANCIAL STATEMENTS

7

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Table of Contents

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1. INTERIM FINANCIAL STATEMENTS

 

Basis of Presentation

These condensed Consolidated Financial Statements contain unaudited information as of September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023. The unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles generally accepted in the United States of America for annual financial statements are not included herein. In management’s opinion, these unaudited financial statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the information when read in conjunction with our 2023 audited Consolidated Financial Statements and the related notes thereto. The financial information as of December 31, 2023, is derived from our Annual Report on Form 10-K filed with the SEC on February 23, 2024. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

Reclassifications

Certain reclassifications of amounts previously reported have been made to the accompanying Consolidated Financial Statements to maintain consistency and comparability between periods presented. Within our financing operations income, we disaggregated our “lease income” out of our previously reported “interest, fee, and lease income” to be its own separately presented line item, as well as revised the related “lease depreciation and amortization” to now be reported as “lease costs,” reclassifying amounts previously reported net within “lease income.”

NOTE 2. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:

(in millions)			September 30, 2024						December 31, 2023
Contracts in transit			$	451.4					$	559.7
Trade receivables			190.2						153.3
Vehicle receivables			278.3						191.4
Manufacturer receivables			280.5						216.5
Other receivables, current			12.1						9.3
			1,212.5						1,130.2
Less: Allowance for doubtful accounts			(3.1)						(7.1)
Total accounts receivable, net			$	1,209.4					$	1,123.1

The long-term portion of accounts receivable was included as a component of other non-current assets in the Consolidated Balance Sheets.

NOTE 3. INVENTORIES AND FLOOR PLAN NOTES PAYABLE

The components of inventories, net, consisted of the following:

(in millions)			September 30, 2024						December 31, 2023
New vehicles			$	3,631.8					$	2,886.3
Used vehicles			2,188.0						1,637.5
Parts and accessories			280.4						230.1
Total inventories			$	6,100.2					$	4,753.9

Vehicle inventory costs are generally reduced by manufacturer holdbacks and incentives, while the related floor plan notes payable are reflective of the gross cost of the vehicle.

(in millions)			September 30, 2024						December 31, 2023
Floor plan notes payable			$	2,602.9					$	1,347.0
Floor plan notes payable: non-trade			2,516.7						2,288.5
Total floor plan debt			$	5,119.6					$	3,635.5

NOTES TO FINANCIAL STATEMENTS

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NOTE 4. FINANCE RECEIVABLES

Interest income on finance receivables is recognized based on the contractual terms of each receivable and is accrued until repayment, reaching non-accrual status, charge-off, or repossession. Direct costs associated with originations are capitalized and expensed as an offset to interest income when recognized on the receivables.

The balances of finance receivables are made up of loans and finance leases secured by the related vehicles. More than 98% of the portfolio is aged less than 60 days past due with less than 2% on non-accrual status.

Finance Receivables, net

(in millions)			September 30, 2024						December 31, 2023
Asset-backed term funding			$	2,267.8					$	2,146.5
Warehouse facilities			1,332.5						749.3
Other managed receivables			285.7						452.9
Total finance receivables			3,886.0						3,348.7
Less: Allowance for finance receivable losses			(120.5)						(106.4)
Finance receivables, net			$	3,765.5					$	3,242.3

Finance Receivables by FICO Score

			As of September 30, 2024
			Year of Origination
($ in millions)			2024						2023						2022						2021						2020																		Total
<599			$	44.4					$	45.3					$	26.1					$	11.9					$	1.6																	$	129.3
600-699			428.7						452.6						338.2						103.9						10.0																		1,333.4
700-774			434.4						444.4						317.9						44.8						3.8																		1,245.3
775+			418.9						364.0						197.4						10.4						1.6																		992.3
Total auto loan receivables			$	1,326.4					$	1,306.3					$	879.6					$	171.0					$	17.0																	3,700.3
Other finance receivables 1																																													185.7
Total finance receivables																																													$	3,886.0

									As of December 31, 2023
									Year of Origination
($ in millions)			2023						2022						2021						2020																								Total
<599			$	62.2					$	39.0					$	17.6					$	2.4																							$	121.2
600-699			586.6						463.6						152.7						16.1																								1,219.0
700-774			568.1						422.5						63.9						5.9																								1,060.4
775+			490.3						263.5						14.7						2.7																								771.2
Total auto loan receivables			$	1,707.2					$	1,188.6					$	248.9					$	27.1																							3,171.8
Other finance receivables 1																																													176.9
Total finance receivables																																													$	3,348.7

1Includes legacy portfolio, loans that are originated with no FICO score available, lease receivables, and deferred origination fees.

In accordance with ASC Topic 326, the allowance for finance receivable losses is estimated based on our historical write-off experience, current conditions and forecasts, as well as the value of any underlying assets securing these receivables. Consideration is given to recent delinquency trends and recovery rates. Account balances are charged against the allowance upon reaching 120 days past due status.

NOTES TO FINANCIAL STATEMENTS

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Rollforward of Allowance for Finance Receivable Losses

Our allowance for finance receivable losses represents the net credit losses expected over the remaining contractual life of our managed receivables. The allowances for credit losses related to finance receivables consisted of the following changes during the period:

			Nine Months Ended September 30,
(in millions)			2024						2023
Allowance at beginning of period			$	106.4					$	69.3
Charge-offs			(106.8)						(79.1)
Recoveries			44.2						35.5
Sold loans			(0.3)						—
Initial allowance for credit-deteriorated receivables			—						2.3
Provision expense			77.0						75.0
Allowance at end of period			$	120.5					$	103.0

Charge-off Activity by Year of Origination

			Nine Months Ended September 30,
(in millions)			2024						2023
2024			$	5.3					$	—
2023			45.4						5.0
2022			39.5						47.1
2021			13.6						23.0
2020			1.2						2.3
Other finance receivables 1			1.8						1.7
Total charge-offs			$	106.8					$	79.1

1Includes legacy portfolio, loans that are originated with no FICO score available, and finance lease receivables.

NOTE 5. GOODWILL AND FRANCHISE VALUE

The changes in the carrying amounts of goodwill are as follows:

(in millions)			Vehicle Operations						Financing Operations						Consolidated
Balance as of December 31, 2022			$	1,443.5					$	17.2					$	1,460.7
Additions through acquisitions 1			519.1						—						519.1
Reductions through disposals			(51.1)						—						(51.1)
Currency translation			1.5						0.4						1.9
Balance as of December 31, 2023			1,913.0						17.6						1,930.6
Adjustments to purchase price allocations2			47.6						—						47.6
Additions through acquisitions3			142.7						—						142.7
Reductions through disposals			(0.6)						—						(0.6)
Currency translation			6.3						(0.4)						5.9
Balance as of September 30, 2024			$	2,109.0					$	17.2					$	2,126.2

1Our purchase price allocation (PPA) for the 2022 acquisitions were finalized in 2023. As a result, we added $285.9 million of goodwill. Preliminary PPA for a portion of our 2023 acquisitions resulted in adding $233.2 million of goodwill. Our PPA for the remaining 2023 acquisitions are preliminary and goodwill is not yet allocated to our segments. These amounts are included in other non-current assets until we finalize our purchase accounting. See Note 13 – Acquisitions.

2Our PPA for a portion of the 2023 acquisitions recognized in 2023 was adjusted and finalized in 2024 upon the completion of our fair value adjustments for assumed contract liabilities, acquired loan portfolio, and contingent consideration, adding $47.6 million of goodwill.

3Our PPA for the remainder of the 2023 acquisitions were finalized in 2024. As a result, we added $142.7 million of goodwill. Our PPA for the 2024 acquisitions are preliminary and goodwill is not yet allocated to our segments. These amounts are included in other non-current assets until we finalize our purchase accounting. See Note 13 – Acquisitions.

NOTES TO FINANCIAL STATEMENTS

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The changes in the carrying amounts of franchise value are as follows:

(in millions)			Franchise Value
Balance as of December 31, 2022			$	1,856.2
Additions through acquisitions 1			556.5
Reductions through divestitures			(14.5)
Currency translation			4.0
Balance as of December 31, 2023			2,402.2
Additions through acquisitions 2			172.5
Reductions through divestitures			(5.3)
Currency translation			5.9
Balance as of September 30, 2024			$	2,575.3

1Our PPA for the 2022 acquisitions were finalized in 2023. As a result, we added $363.1 million of franchise value. Preliminary PPA for a portion of our 2023 acquisitions resulted in adding $193.4 million of franchise value. Our PPA for the remaining 2023 acquisitions is preliminary and franchise value is not yet allocated to our reporting units. These amounts are included in other non-current assets until we finalize our purchase accounting. See Note 13 – Acquisitions.

2Our PPA for the remainder of the 2023 acquisitions were finalized in 2024. As a result, we added $172.5 million of franchise value. Our PPA for the 2024 acquisitions are preliminary and franchise value is not yet allocated to our reporting units. These amounts are included in other non-current assets until we finalize our purchase accounting. See Note 13 – Acquisitions.

NOTE 6. INVESTMENTS

Marketable Securities

In 2024, our captive insurance subsidiary began investing cash in excess of current needs in marketable securities. The marketable securities are recorded within other current assets in the Consolidated Balance Sheets and consist of debt securities accounted for as available-for-sale (AFS) and equity securities measured at fair value. Changes in the fair value of equity securities are recognized as a component of other income (expense), net in the Consolidated Statements of Operations and unrealized gains (losses) on AFS debt securities are recorded as a component of other comprehensive income (loss), net of tax until the security is sold. See Note 12 – Fair Value Measurements.

As of September 30, 2024, equity securities recorded within other current assets in the Consolidated Balance Sheets were $2.2 million. Net unrealized gains recognized during the three and nine-months ended September 30, 2024 on equity securities held at the reporting date were $0.1 million and $0.3 million, respectively.

Marketable debt securities accounted for as AFS were as follows:

			As of September 30, 2024
																											Fair Value of Securities with Contractual Maturities
(in millions)			Amortized Cost						Total Gains1						Total Losses1						Fair Value						Within 1 Year																		After 1 Year through 5 Years						After 5 Years
U.S. Treasury			$	20.2					$	0.3					$	—					$	20.5					$	3.4																	$	13.9					$	3.2
Municipal securities			10.0						0.2						—						10.2						1.5																		3.8						4.9
Corporate debt			20.6						0.4						—						21.0						1.9																		14.1						5.0
Total			$	50.8					$	0.9					$	—					$	51.7					$	6.8																	$	31.8					$	13.1

1Represents total unrealized gains (losses) for securities with net gains (losses) in accumulated other comprehensive income as of September 30, 2024.

There were no sales of AFS securities during the three and nine-months ended September 30, 2024.

NOTES TO FINANCIAL STATEMENTS

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Equity Method Investments

Our investment in Pinewood Technologies, PLC (PINE.L), U.K. based automotive dealership management system provider, consists of 25.5% common stock voting interests accounted for as an equity method investment. The investment is measured at fair value based on quoted market prices, and all fair market value changes in the investment are recorded as unrealized gains as a component of other income (expense), net in the Consolidated Statements of Operations. The fair value of our investment was $105.4 million as of September 30, 2024. See Note 12 – Fair Value Measurements.

Our investment in Wheels, Inc., automotive fleet management provider, through LMMH consists of 26.5% common stock voting interests accounted for as an equity method investment. The investment is measured at cost plus or minus our share of equity method investee income or loss as a component of other non-current assets in the Consolidated Balance Sheets. The book value of our investment was $208.0 million as of September 30, 2024.

We reported unrealized gains on equity method investments of $0.7 million and $30.5 million for the three and nine months ended September 30, 2024, respectively. Comparatively, we recorded a loss of $0.7 million and gain of $0.1 million in the same periods of 2023, respectively.

NOTE 7. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases consists primarily of lease contracts for vehicles with individuals and business entities. Assets subject to operating leases are depreciated using the straight-line method over the term of the lease to reduce the asset to its estimated residual value. Estimated residual values are based on assumptions for used vehicle prices at lease termination and the number of vehicles that are expected to be returned.

Net investment in operating leases was as follows:

(in millions)			September 30, 2024						December 31, 2023
Vehicles, at cost 1			$	323.3					$	102.7
Accumulated depreciation 1			(20.2)						(11.2)
Net investment in operating leases			$	303.1					$	91.5

1Vehicles, at cost and accumulated depreciation are recorded in other non-current assets on the Consolidated Balance Sheets.

NOTE 8. COMMITMENTS AND CONTINGENCIES

Contract Liabilities

We are the obligor on our lifetime oil and at home valet contracts. Revenue is allocated to these performance obligations and is recognized over time as services are provided to the customer. The amount of revenue recognized is calculated, net of cancellations, using an input method, which most closely depicts performance of the contracts. Our contract liability balances were $402.3 million and $317.0 million as of September 30, 2024, and December 31, 2023, respectively; and we recognized $17.7 million and $54.2 million of revenue in the three and nine months ended September 30, 2024 related to our contract liability balance at December 31, 2023. Our contract liability balance is included in accrued liabilities and deferred revenue.

Litigation

We are party to numerous legal proceedings arising in the normal course of our business. Although we do not anticipate that the resolution of legal proceedings arising in the normal course of business will have a material adverse effect on our business, results of operations, financial condition, or cash flows, we cannot predict this with certainty.

NOTES TO FINANCIAL STATEMENTS

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NOTE 9. DEBT

Credit Facilities

US Bank Syndicated Credit Facility

On February 23, 2024, we amended our existing syndicated credit facility (USB credit facility), comprised of 21 financial institutions, including eight manufacturer-affiliated finance companies, maturing February 23, 2029. The amendment increased the total financing commitment and the amount to which the commitment could be further expanded.

This USB credit facility provides for a total financing commitment of $6.0 billion, which may be further expanded, subject to lender approval and the satisfaction of other conditions, up to a total of $6.5 billion. The allocation of the financing commitment is for up to $2.8 billion in new vehicle inventory floorplan financing, up to $900 million in used vehicle inventory floorplan financing, up to $100 million in service loaner vehicle floorplan financing, and up to $2.2 billion in revolving financing for general corporate purposes, including acquisitions and working capital. We have the option to reallocate the commitments under this USB credit facility, provided that the aggregate revolving loan commitment may not be more than 40% of the amount of the aggregate commitment, and the aggregate service loaner vehicle floorplan commitment may not be more than the 3% of the amount of the aggregate commitment. All borrowings from, and repayments to, our lending group are presented in the Consolidated Statements of Cash Flows as financing activities.

Our obligations under our USB credit facility are secured by a substantial amount of our assets, including our inventory (including new and used vehicles, parts and accessories), equipment, accounts receivable (and other rights to payment), real property, and our equity interests in certain of our subsidiaries. Under our USB credit facility, our obligations relating to new vehicle floor plan loans are secured only by collateral owned by Lithia and its dealerships borrowing under the new vehicle floor plan portion of the USB credit facility.

The interest rate on the USB credit facility varies based on the type of debt, with the rate of one-day SOFR plus a credit spread adjustment of 0.10% plus a margin of 1.10% for new vehicle floor plan financing, 1.40% for used vehicle floor plan financing, 1.20% for service loaner floor plan financing, and a variable interest rate on the revolving financing ranging from 1.00% to 2.00% depending on our leverage ratio. The annual interest rates associated with our floor plan commitments are as follows:

Commitment			Annual Interest Rate at September 30, 2024
New vehicle floor plan			6.16%
Used vehicle floor plan			6.46%
Service loaner floor plan			6.26%
Revolving line of credit			6.31%

JPM Warehouse Facility

On August 15, 2024, we amended our securitization facility for our auto loan portfolio (JPM warehouse facility) with JPMorgan Chase Bank, as administrative agent and account bank, providing initial commitments for borrowings of up to $1.0 billion. The JPM warehouse facility matures on November 16, 2026. The interest rate on the JPM warehouse facility varies based on the Daily Simple SOFR rate plus 1.00% to 1.70%.

Mizuho Warehouse Facility

On February 16, 2024, we amended our securitization facility for our auto loan portfolio (Mizuho warehouse facility), with Mizuho Bank Ltd. as administrative agent and account bank, providing initial commitments for borrowings of up to $750 million. The Mizuho warehouse facility matures on July 20, 2026. The interest rate on the Mizuho warehouse facility varies based on the Daily Simple SOFR rate plus 1.20%.

Bank of Nova Scotia Syndicated Credit Facility

On May 14, 2024, we amended our syndicated credit agreement with The Bank of Nova Scotia as agent (BNS credit facility), comprised of six financing institutions, including two manufacturer-affiliated finance companies, to extend the maturity date.

The BNS credit facility provides for a total financing commitment of approximately $1.1 billion CAD, including a working capital revolving credit facility of up to $100 million CAD, a wholesale flooring facility for new vehicles up to $500 million CAD, used vehicle flooring facility of up to $100 million CAD, wholesale leasing facility of up to $400 million CAD, and daily rental vehicle facility up to $25 million CAD.

NOTES TO FINANCIAL STATEMENTS

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The interest rate on the BNS credit facility varies based on the type of debt, with the daily compound rate of the Canadian Overnight Repo Rate Average (CORRA) plus a margin of 1.00-1.30%. The annual interest rates associated with our floor plan commitments are as follows:

Commitment			Annual Interest Rate at September 30, 2024
Wholesale flooring facility			5.30%
Used vehicle flooring facility			5.55%
Daily rental facility			5.50%
Wholesale leasing facility			5.60%
Working capital revolving facility			5.55%

All Canadian facilities other than the wholesale flooring facility, which is a demand facility, mature on March 18, 2027. The credit agreement includes various financial and other covenants typical of such agreements.

Bank of America UK Revolving Credit Facility

On July 9, 2024 we amended our revolving credit facility agreement with BOA. The amendment extended the maturity date to February 22, 2029 and increased the commitment to £100.0 million GBP. The interest rate on the working capital line of credit is measured based on the Sterling Overnight Index Average (SONIA) plus 1.45%.

Non-Recourse Notes Payable

In 2024, we issued $739.0 million in non-recourse notes payable related to asset-backed term funding transactions. Below is a summary of outstanding non-recourse notes payable issued:

($ in millions)

Balance as of September 30, 2024

Initial Principal Amount

Issuance Date

Interest Rate Range

Final Distribution Date

LAD Auto Receivables Trust 2021-1 Class A-D

$

56.5

$

344.4

11/24/21

1.94% to 3.99%

Various dates through Nov 2029

LAD Auto Receivables Trust 2022-1 Class A-C

96.4

298.1

08/17/22

5.21% to 6.85%

Various dates through Apr 2030

LAD Auto Receivables Trust 2023-1 Class A-D

208.9

479.7

02/14/23

5.48% to 7.30%

Various dates through Jun 2030

LAD Auto Receivables Trust 2023-2 Class A-D

283.3

556.7

05/24/23

5.42% to 6.30%

Various dates through Feb 2031

LAD Auto Receivables Trust 2023-3 Class A-D

251.8

415.4

08/23/23

5.95% to 6.92%

Various dates through Dec 2030

LAD Auto Receivables Trust 2023-4 Class A-D

281.4

421.2

11/15/23

6.10% to 7.37%

Various dates through Apr 2031

LAD Auto Receivables Trust 2024-1 Class A-D

248.4

329.4

02/14/24

5.17% to 6.15%

Various dates through Jun 2031

LAD Auto Receivables Trust 2024-2 Class A-D

356.3

$

409.6

06/20/24

5.46% to 6.37%

Various dates through Oct 2031

Total non-recourse notes payable

$

1,783.0

$

3,254.5

NOTE 10. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS

Company-Sponsored Defined Benefit Pension Plan

In 2024, we acquired Pendragon PLC’s Fleet Management and UK Motor Divisions in the United Kingdom, which included the assumption of its company-sponsored defined benefit plan applicable to a portion of the salaried present and past employees, closed to future accrual. At the time of acquisition, these balances increased our defined benefit obligations by $465.7 million and increased our fair value of plan assets by $466.4 million.

Net Periodic (Benefit) Cost

Interest cost represents the increase in the projected benefit obligation, which is a discounted amount, due to the passage of time. The expected return on plan assets reflects the computed amount of current-year earnings from the investment of plan assets using an estimated long-term rate of return.

NOTES TO FINANCIAL STATEMENTS

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($ in millions)			Three Months Ended September 30, 2024						Nine Months Ended September 30, 2024
Interest cost			$	7.8					$	21.5
Expected return on plan assets			(8.5)						(23.4)
Net periodic benefit			$	(0.7)					$	(1.9)

During the nine months ended September 30, 2024, funding of pension plans was $16.6 million. For the remainder of 2024, we estimate approximately $1.2 million of cash contributions.

NOTE 11. EQUITY AND REDEEMABLE NON-CONTROLLING INTEREST

Repurchases of Common Stock

Repurchases of our common stock occurred under a repurchase authorization granted by our Board and related to shares withheld as part of the vesting of RSUs.

On June 4, 2024, our Board approved an additional $350 million repurchase authorization of our common stock. This authorization is in addition to the amount previously authorized by the Board for repurchase. Share repurchases under our authorization were as follows:

			Repurchases Occurring in 2024												Cumulative Repurchases as of September 30, 2024
			Shares						Average Price1						Shares						Average Price
Share Repurchase Authorization			986,032						$	259.76					8,033,542						$	185.36

1Price excludes excise taxes imposed under the Inflation Reduction Act of $2.0 million for the nine months ended September 30, 2024.

As of September 30, 2024, we had $560.9 million available for repurchases pursuant to our share repurchase authorizations from our Board in 2024 and prior years.

In addition, during 2024, we repurchased 45,903 shares at an average price of $328.62 per share, for a total of $15.1 million, related to tax withholding associated with the vesting of RSUs. The repurchase of shares related to tax withholding associated with stock awards does not reduce the number of shares available for repurchase as approved by our Board.

Redeemable Non-Controlling Interest

In 2021, we expanded into Canada through a partnership with Toronto-based Pfaff Automotive Partners. As part of the partnership, we were granted the right to purchase (Call Option), and granted Pfaff Automotive a right to sell (Put Option), the remaining ownership interest in the partnership after a three-year period. As a result of this redemption feature, we recorded redeemable NCI that is classified as mezzanine equity in the accompanying Consolidated Balance Sheets.

In August 2024, we completed the acquisition of the remaining 10.1% interest in our redeemable non-controlling interest (NCI), resulting in us now owning 100% of our operations in Canada. Prior to this transaction, the acquired entities were fully consolidated in our financial statements due to our majority ownership; however, this acquisition eliminates the redeemable NCI. The transaction was executed for total consideration of $58.8 million, which included an additional premium of $11.6 million recognized as a component of “Net income attributable to redeemable non-controlling interest” in our Consolidated Statements of Operations.

NOTE 12. FAIR VALUE MEASUREMENTS

Factors used in determining the fair value of our financial assets and liabilities are summarized into three broad categories:

•Level 1 - quoted prices in active markets for identical securities;

•Level 2 - other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment spreads, credit risk; and

NOTES TO FINANCIAL STATEMENTS

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•Level 3 - significant unobservable inputs, including our own assumptions in determining fair value.

We determined the carrying value of cash equivalents, accounts receivable, trade payables, accrued liabilities, finance receivables, and short-term borrowings approximate their fair values because of the nature of their terms and current market rates of these instruments. We believe the carrying value of our variable rate debt approximates fair value. We have measured the carrying value of our equity method investments without a fair value election at cost plus or minus our proportionate share of earnings or losses in the investee.

We have investments consisting of equity securities, available for sale debt securities, and equity method investments with a fair value election. We calculated the estimated fair value of the equity securities, equity method investments, and U.S. Treasury debt securities using quoted market prices (Level 1). The fair value of corporate and municipal debt securities are measured using observable Level 2 market expectations at each measurement date. See Note 6 – Investments.

We have fixed rate debt primarily consisting of amounts outstanding under our senior notes, non-recourse notes payable, and real estate mortgages. We calculated the estimated fair value of the senior notes using quoted prices for the identical liability (Level 1). The fair value of non-recourse notes payable are measured using observable Level 2 market expectations at each measurement date. The calculated estimated fair values of the fixed rate real estate mortgages and finance lease liabilities use a discounted cash flow methodology with estimated current interest rates based on a similar risk profile and duration (Level 2). The fixed cash flows are discounted and summed to compute the fair value of the debt.

We have derivative instruments consisting of an offsetting set of interest rate caps. The fair value of derivative assets and liabilities are measured using observable Level 2 market expectations at each measurement date and is recorded as other current assets, current liabilities and other long-term liabilities in the Consolidated Balance Sheets.

Nonfinancial assets such as goodwill, franchise value, or other long-lived assets are measured and recorded at fair value during a business combination or when there is an indicator of impairment. We evaluate our goodwill and franchise value using a qualitative assessment process. If the qualitative factors determine that it is more likely than not that the carrying value exceeds the fair value, we would further evaluate for potential impairment using a quantitative assessment. The quantitative assessment estimates fair values using unobservable (Level 3) inputs by discounting expected future cash flows of the store for franchise value, or reporting unit for goodwill. The forecasted cash flows contain inherent uncertainties, including significant estimates and assumptions related to growth rates, margins, working capital requirements, and cost of capital, for which we utilize certain market participant-based assumptions we believe to be reasonable. We estimate the value of other long-lived assets that are recorded at fair value on a non-recurring basis on a market valuation approach. We use prices and other relevant information generated primarily by recent market transactions involving similar or comparable assets, as well as our historical experience in divestitures, acquisitions and real estate transactions. Additionally, we may use a cost valuation approach to value long-lived assets when a market valuation approach is unavailable. Under this approach, we determine the cost to replace the service capacity of an asset, adjusted for physical and economic obsolescence. When available, we use valuation inputs from independent valuation experts, such as real estate appraisers and brokers, to corroborate our estimates of fair value. Real estate appraisers’ and brokers’ valuations are typically developed using one or more valuation techniques including market, income and replacement cost approaches. Because these valuations contain unobservable inputs, we classified the measurement of fair value of long-lived assets as Level 3.

There were no changes to our valuation techniques during the nine-month period ended September 30, 2024.

NOTES TO FINANCIAL STATEMENTS

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Below are our assets and liabilities that are measured at fair value:

			As of September 30, 2024																								As of December 31, 2023
($ in millions)			Carrying Value						Level 1						Level 2						Level 3						Carrying Value						Level 1						Level 2						Level 3
Recorded at fair value
Marketable securities
Equity securities			$	2.2					$	2.2					$	—					$	—					$	—					$	—					$	—					$	—
U.S. Treasury			$	20.5					$	20.5					$	—					$	—					$	—					$	—					$	—					$	—
Municipal debt			10.2						—						10.2						—						—						—						—						—
Corporate debt			21.0						—						21.0						—						—						—						—						—
Total debt securities			$	51.7					$	20.5					$	31.2					$	—					$	—					$	—					$	—					$	—
Equity Method Investment
PINE.L			$	105.4					$	105.4					$	—					$	—					$	—					$	—					$	—					$	—
Derivatives
Derivative assets			$	5.6					$	—					$	5.6					$	—					$	12.3					$	—					$	12.3					$	—
Derivative liabilities			5.6						—						5.6						—						12.3						—						12.3						—
Recorded at historical value
Fixed rate debt 1
4.625% Senior notes due 2027			$	400.0					$	390.0					$	—					$	—					$	400.0					$	380.0					$	—					$	—
4.375% Senior notes due 2031			550.0						510.8						—						—						550.0						492.3						—						—
3.875% Senior notes due 2029			800.0						744.0						—						—						800.0						716.0						—						—
Non-recourse notes payable			1,783.0						—						1,801.9						—						1,705.6						—						1,705.1						—
Real estate mortgages and other debt			740.7						—						750.8						—						603.5						—						644.5						—

1Excluding unamortized debt issuance costs

NOTE 13. ACQUISITIONS

In the first nine months of 2024, we completed the following acquisitions:

•In January 2024, Pendragon PLC’s Fleet Management and UK Motor Divisions in the United Kingdom.

•In February 2024, Carousel Motor Group in Minnesota and Wisconsin.

•In May 2024, Pine View Hyundai Store in Ontario, Canada.

•In June 2024, Sunrise Chevrolet Buick GMC at Collierville and Sunrise Buick GMC at Wolfchase in Tennessee.

•In September 2024, Duval Honda, Duval Acura and Gainesville Subaru in Florida.

Revenue and operating income contributed by the 2024 acquisitions subsequent to the date of acquisition were as follows (in millions):

Nine Months Ended September 30,			2024
Revenue			$	3,863.7
Operating income			35.1

In the first nine months of 2023, we completed the following acquisitions:

•In February 2023, Thornhill Acura in Canada.

•In March 2023, Jardine Motors Group UK Limited in the United Kingdom.

•In June 2023, Priority Auto Group in Virginia.

•In June 2023, Wade Ford in Georgia.

•In July 2023, Hill Country Honda in Texas.

•In August 2023, Arden Auto Group in the United Kingdom.

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All acquisitions were accounted for as business combinations under the acquisition method of accounting. The results of operations of the acquired stores are included in our Consolidated Financial Statements from the date of acquisition.

The following tables summarize the consideration paid for the 2024 acquisitions and the PPA for identified assets acquired and liabilities assumed as of the acquisition date:

(in millions)			Consideration
Cash paid, net of cash acquired			$	1,247.0
Total consideration transferred			$	1,247.0

(in millions)			Assets Acquired and Liabilities Assumed
Accounts receivables, net			$	119.0
Inventories, net			1,016.3
Property and equipment			559.3
Operating lease right-of-use assets			289.8
Net investment in operating leases			181.5
Deferred taxes, net			20.5
Other assets			586.4
Floor plan notes payable assumed			(868.1)
Trade payables			(39.6)
Debt and finance lease obligations assumed			(22.7)
Operating lease liabilities			(283.9)
Other liabilities and deferred revenue			(311.5)
Total net assets acquired and liabilities assumed			$	1,247.0

The PPA for the 2024 acquisitions are preliminary, as we have not obtained and evaluated all of the detailed information necessary to finalize the opening balance sheet amounts in all respects. We recorded the PPA based upon information that is currently available and recorded unallocated items as a component of other non-current assets in the Consolidated Balance Sheets.

We expect all of the goodwill related to North American acquisitions completed in 2023 and 2024 to be deductible for US federal income tax purposes. Due to local country laws, we do not expect goodwill related to UK acquisitions completed in 2023 and 2024 to be deductible for UK income tax purposes.

In the three and nine-month periods ended September 30, 2024, we recorded $0.2 million and $9.7 million in acquisition-related expenses as a component of selling, general and administrative expense. Comparatively, we recorded $4.8 million and $10.5 million of acquisition-related expenses in the same periods of 2023.

 

The following unaudited pro forma summary presents consolidated information as if all acquisitions in the three and nine-month periods ended September 30, 2024 and 2023 had occurred on January 1, 2023:

			Three Months Ended September 30,												Nine Months Ended September 30,
(in millions, except per share amounts)			2024						2023						2024						2023
Revenue			$	9,263.1					$	9,775.6					$	27,723.4					$	27,625.3
Net income attributable to Lithia Motors, Inc.			223.8						286.3						617.3						860.9
Basic EPS attributable to Lithia Motors, Inc. common stockholders			8.37						10.39						22.73						31.27
Diluted EPS attributable to Lithia Motors, Inc. common stockholders			8.35						10.36						22.70						31.21

 

These amounts have been calculated by applying our accounting policies and estimates. The results of the acquired stores have been adjusted to reflect the following: depreciation on a straight-line basis over the expected lives for property and equipment, accounting for inventory on a specific identification method, and recognition of interest expense for real estate financing related to stores where we purchased the facility. No nonrecurring proforma adjustments directly attributable to the acquisitions are included in the reported proforma revenues and earnings.

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NOTE 14. EARNINGS PER SHARE

We calculate basic EPS by dividing net income attributable to Lithia Motors, Inc. by the weighted average number of common shares outstanding for the period, including vested RSU awards. Diluted EPS is calculated by dividing net income attributable to Lithia Motors, Inc. by the weighted average number of shares outstanding, adjusted for the dilutive effect of unvested RSU awards and employee stock purchases.

The following is a reconciliation of net income attributable to Lithia Motors, Inc. and weighted average shares used for our basic EPS and diluted EPS:

			Three Months Ended September 30,												Nine Months Ended September 30,
(in millions, except per share amounts)			2024						2023						2024						2023
Net income attributable to Lithia Motors, Inc.			$	209.1					$	261.5					$	585.8					$	787.3
Weighted average common shares outstanding – basic			26.7						27.6						27.2						27.5
Effect of employee stock purchases and restricted stock units on weighted average common shares outstanding			0.1						—						—						0.1
Weighted average common shares outstanding – diluted			26.8						27.6						27.2						27.6
Basic EPS attributable to Lithia Motors, Inc. common stockholders			$	7.82					$	9.49					$	21.57					$	28.60
Diluted EPS attributable to Lithia Motors, Inc. common stockholders			$	7.80					$	9.46					$	21.54					$	28.54

The effect of antidilutive securities on common stock was evaluated for the three and nine-month periods ended September 30, 2024 and 2023 and was determined to be immaterial.

NOTE 15. SEGMENTS

We operate in two reportable segments: Vehicle Operations and Financing Operations. Our Vehicle Operations consists of all aspects of our auto merchandising and aftersales operations, excluding financing provided by our Financing Operations. Our Financing Operations segment provides financing to customers buying and leasing retail vehicles from our Vehicle Operations, as well as leasing vehicles from our fleet management services provider.

All other remaining unallocated corporate overhead expenses and internal charges are reported under “Corporate and Other.” Asset information by segment is not utilized for purposes of assessing performance or allocating resources and, as a result, such information has not been presented.

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Certain financial information on a segment basis is as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
(in millions)			2024						2023						2024						2023
Vehicle operations revenue			$	9,221.0					$	8,277.0					$	27,014.7					$	23,368.0
Vehicle operations gross profit			1,430.4						1,371.3						4,189.5						3,968.2
Floor plan interest expense			(76.6)						(40.2)						(214.0)						(102.6)
Vehicle operations SG&A			(1,024.0)						(915.5)						(3,066.6)						(2,587.6)
Vehicle operations income			329.8						415.6						908.9						1,278.1
Financing operations interest margin:
Interest and fee income			91.1						67.5						252.2						176.2
Interest expense			(51.2)						(42.5)						(146.0)						(125.5)
Total interest margin			39.9						25.0						106.2						50.7
Lease income			25.6						4.9						61.2						14.1
Lease costs			(21.6)						(2.0)						(51.0)						(6.3)
Lease income, net			4.0						2.9						10.2						7.8
Financing operations SG&A			(11.2)						(9.2)						(33.0)						(27.3)
Provision expense			(31.8)						(23.1)						(77.0)						(75.0)
Financing operations income (loss)			0.9						(4.4)						6.4						(43.8)
Total segment income for reportable segments			330.7						411.2						915.3						1,234.2
Corporate and other			80.4						64.7						213.6						129.5
Depreciation and amortization			(63.5)						(50.8)						(183.6)						(146.4)
Other interest expense			(64.5)						(58.5)						(189.3)						(141.5)
Other income (expense), net			5.1						(5.3)						35.4						6.8
Income before income taxes			$	288.2					$	361.3					$	791.4					$	1,082.6

NOTE 16. RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023, the FASB issued ASU 2023-07 related to improvements to reportable segment disclosures. The amendments in this update require additional disclosure of significant expenses related to our reportable segments, additional segment disclosures on an interim basis, and qualitative disclosures regarding the decision making process for segment resources. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We have adopted this pronouncement and plan to make the necessary updates to our segment disclosures for the year ending December 31, 2024, and, aside from these disclosure changes, we do not expect the amendments to have a material effect on our financial statements.

In December 2023, the FASB issued ASU 2023-09 related to improvements to income tax disclosures. The amendments in this update require enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. We plan to adopt this pronouncement and make the necessary updates to our disclosures for the year ending December 31, 2025, and, aside from these disclosure changes, we do not expect the amendments to have a material effect on our financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements and Risk Factors

Certain statements under the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” and elsewhere in this Form 10-Q constitute forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Generally, you can identify forward-looking statements by terms such as “project,” “outlook,” “target,” “may,” “will,” “would,” “should,” “seek,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “likely,” “goal,” “strategy,” “future,” “maintain,” and “continue” or the negative of these terms or other comparable terms. Examples of forward-looking statements in this Form 10-Q include, among others, statements we make regarding:

•Future market conditions, including anticipated car and other sales levels and the supply of inventory

•Our business strategy and plans, including our achieving our long-term financial targets

•The growth, expansion, make-up and success of our network, including our finding accretive acquisitions that meet our target valuations and acquiring additional stores

•Annualized revenues from acquired stores or achieving target returns

•The growth and performance of our Driveway e-commerce home solution and DFC, their synergies and other impacts on our business and our ability to meet Driveway and DFC-related targets

•The impact of sustainable vehicles and other market and regulatory changes on our business

•Our capital allocations and uses and levels of capital expenditures in the future

•Expected operating results, such as improved store performance, continued improvement of SG&A as a percentage of gross profit and any projections

•Our anticipated financial condition and liquidity, including from our cash and the future availability of our credit facilities, unfinanced real estate and other financing sources

•Our continuing to purchase shares under our share repurchase program

•Our compliance with financial and restrictive covenants in our credit facilities and other debt agreements

•Our programs and initiatives for employee recruitment, training, and retention

•Our strategies and targets for customer retention, growth, market position, operations, financial results and risk management

 

The forward-looking statements contained in this Form 10-Q involve known and unknown risks, uncertainties and situations that may cause our actual results to materially differ from the results expressed or implied by these statements. Certain important factors that could cause actual results to differ from our expectations are discussed in the Risk Factors section of our 2023 Annual Report on Form 10-K, as supplemented and amended from time to time in Quarterly Reports on Form 10-Q and our other filings with the SEC.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events that depend on circumstances that may or may not occur in the future. You should not place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. We assume no obligation to update or revise any forward-looking statement.

Overview

Lithia and Driveway (NYSE: LAD) is one of the largest global automotive retailers providing an array of products and services throughout the vehicle ownership lifecycle. Simple, convenient and transparent experiences are offered through our comprehensive network of physical locations, e-commerce platforms, captive finance solutions, fleet management offerings, and other synergistic adjacencies. We have delivered consistent profitable growth in a massive and unconsolidated industry. Our highly diversified and competitively differentiated design provides us the flexibility and scale to pursue our vision to modernize personal transportation solutions wherever, whenever and however consumers desire. As of September 30, 2024, we operated 467 locations representing 52 brands in the U.S., the U.K., and Canada.

We offer a wide array of products and services fulfilling the entire vehicle ownership lifecycle including new and used vehicles, financing and insurance products and automotive repair and maintenance aftersales. We strive for diversification in our products, services, brands and geographic locations to reduce dependence on any one manufacturer, reduce susceptibility to changing consumer preferences, manage market risk and maintain profitability. Our diversification, along with our operating structure, provides a resilient and nimble business model.

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We seek to provide customers with a seamless, blended online and physical retail experience, broad selection and access to specialized expertise and knowledge. Our comprehensive network enables us to provide convenient touch points for customers and provides services throughout the vehicle life cycle. We seek to increase market share and optimize profitability by focusing on the consumer experience and applying proprietary performance measurement systems fueled by data science. Our Driveway and GreenCars brands complement our in-store experiences in the U.S. and provide convenient, simple and transparent platforms that serve as our e-commerce home solutions and allow us to deliver differentiated, proprietary digital experiences. Enhancing our business, our captive auto financing division allows us to provide financing solutions for customers and diversify our business model with adjacent products.

Our long-term strategy to create value for our customers, employees and shareholders includes the following elements:

Driving operational excellence, innovation and diversification

LAD builds magnetic brand loyalty in our 467 stores and with Driveway, our e-commerce home delivery experience, and GreenCars, our electric vehicle learning resource and marketplace. Operational excellence is achieved by focusing the business on convenient and transparent consumer experiences supported by proprietary data science to improve market share, consumer loyalty, and profitability. By promoting an entrepreneurial model with our in-store experiences, we build strong businesses responsive to each of our local markets. Utilizing performance-based action plans, we develop high-performing teams and foster manufacturer relationships.

In response to evolving consumer preferences, we invest in modernization that supports and expands our core business. These digital strategies combine our experienced, knowledgeable workforce with our owned inventory and physical network of stores, enabling us to be agile and adapt to consumer preferences and market specific conditions. Additionally, we systematically explore transformative adjacencies, which are identified to be synergistic and complementary to our existing business, such as our captive auto finance division and our fleet funding and management division.

Our investments in modernization are well under way and are taking hold with our teams as they provide digital shopping experiences including finance, contactless test drives and home delivery or curbside pickup for vehicle purchases. Our people and these solutions power our national brands, overlaying our physical footprint in a way that we believe attracts a larger population of digital consumers seeking transparent, empowered, flexible and simple buying and servicing experiences.

Our performance-based culture is geared toward an incentive-based compensation structure for a majority of our personnel. We develop pay plans that are measured based upon various factors such as customer satisfaction, profitability and individual performance metrics. These plans serve to reward team members for creating customer loyalty, achieving store potential, developing high-performing talent, meeting and exceeding manufacturer requirements and living our core values.

We have centralized many administrative functions to drive efficiencies and streamline store-level operations. The reduction of administrative functions at our stores allows our local managers to focus on customer-facing opportunities to increase revenues and gross profit. Our operations are supported by regional and corporate management, as well as dedicated training and personnel development programs which allow us to share best practices across our network and develop management talent.

Growth through acquisition and network optimization

Our acquisition growth strategy has been successful both financially and culturally. Our disciplined approach focuses on acquiring new vehicle franchises, which operate in markets ranging from mid-sized regional markets to metropolitan markets. Acquisition of these businesses increases our proximity to consumers throughout North America and the U.K. While we target annual after tax return of more than 15% for our acquisitions, we have averaged over a 25% return by the third year of ownership due to a disciplined approach focusing on accretive, cash flow positive targets at reasonable valuations. In addition to being financially accretive, acquisitions aim to drive network growth that improves our ability to serve customers through vast selection, greater density and access to customers and ability to leverage national branding and advertising.

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As we focus on expanding our physical network of stores, one of the criteria we evaluate is a valuation multiple between 3x to 6x of investment in intangibles to estimated annualized adjusted EBITDA, with various factors including location, ability to expand our network and talent considered in determining value. We also target an investment in intangibles as a percentage of annualized revenues in the range of 15% to 30%.

We regularly optimize and balance our network through strategic divestitures to ensure continued high performance. We believe our disciplined approach provides us with attractive acquisition opportunities and expanded coast-to-coast coverage.

Thoughtful capital allocation

We manage our liquidity and available cash to support our long-term plan focused on growth through acquisitions and investments in our existing business, technology and adjacencies that expand and diversify our business model. In the current market of elevated acquisition pricing, we have adjusted our free cash flow deployment strategy. Under current conditions, including recent trends in our stock price, we may consider repurchases as a more attractive use of funds than acquisitions. Our current free cash flow deployment strategy has shifted to an allocation of 50% to 60% investment in acquisitions, 25% investment in capital expenditures, innovation, and diversification and 15% to 25% in shareholder return in the form of dividends and share repurchases. During the first nine months of 2024, we utilized $271.9 million for capital expenditures investing in our existing business and paid $42.4 million in dividends and $273.2 million in share repurchases. As of September 30, 2024, we had available liquidity of approximately $1.1 billion, which was comprised of $209.8 million in unrestricted cash, $53.9 million in marketable securities, and $863.2 million availability on our credit facilities. In addition, our unfinanced real estate could provide additional liquidity of approximately $353.0 million.

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Financial Performance

We experienced growth of revenue in 2024 compared to 2023, primarily driven by increases in volume related to acquisitions. Total gross profit grew in 2024 compared to 2023, primarily driven by acquisition growth and supported by same store increases in aftersales. New and used vehicle retail gross profit declined compared to 2023 due to continued normalization of margins. Net income decline was primarily driven by this margin normalization, increased interest expense, and increased SG&A as a percentage of gross profit.

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Vehicle Operations

Key performance metrics for revenue and gross profit were as follows:

			Three Months Ended September 30,																		Nine Months Ended September 30,
($ in millions, except per unit values)			2024						2023						Change						2024						2023						Change
Revenues
New vehicle retail			$	4,430.0					$	3,885.8					14.0		%				$	12,847.9					$	11,179.5					14.9		%
Used vehicle retail			2,843.3						2,620.2						8.5						8,630.1						7,302.8						18.2
Finance and insurance			360.4						349.4						3.1						1,061.9						1,005.6						5.6
Aftersales			1,012.8						838.0						20.9						2,876.3						2,378.8						20.9
Total revenues			9,221.0						8,277.0						11.4						27,014.7						23,368.0						15.6
Gross profit
New vehicle retail			$	306.4					$	358.9					(14.6)		%				$	922.5					$	1,079.9					(14.6)		%
Used vehicle retail			188.9						189.0						(0.1)						567.2						567.4						—
Finance and insurance			360.4						349.4						3.1						1,061.9						1,005.6						5.6
Aftersales			559.8						462.8						21.0						1,591.2						1,301.1						22.3
Total gross profit			1,430.4						1,371.3						4.3						4,189.5						3,968.2						5.6
Gross profit margins
New vehicle retail			6.9		%				9.2		%				(230)		bps				7.2		%				9.7		%				(250)		bps
Used vehicle retail			6.6						7.2						(60)						6.6						7.8						(120)
Finance and insurance			100.0						100.0						—						100.0						100.0						—
Aftersales			55.3						55.2						10						55.3						54.7						60
Total gross profit margin			15.5						16.6						(110)						15.5						17.0						(150)
Retail units sold
New vehicles			94,964						82,188						15.5		%				273,154						233,521						17.0		%
Used vehicles			104,898						88,625						18.4						316,583						247,340						28.0
Average selling price per retail unit
New vehicles			$	46,649					$	47,279					(1.3)		%				$	47,035					$	47,874					(1.8)		%
Used vehicles			27,105						29,565						(8.3)						27,260						29,525						(7.7)
Average gross profit per retail unit
New vehicles			$	3,226					$	4,367					(26.1)		%				$	3,377					$	4,624					(27.0)		%
Used vehicles			1,801						2,132						(15.5)						1,792						2,294						(21.9)
Finance and insurance			1,803						2,045						(11.8)						1,801						2,091						(13.9)
Total vehicle 1			4,271						5,218						(18.1)						4,322						5,497						(21.4)

1Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail.

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Same Store Operating Data

We believe that same store comparisons are an important indicator of our financial performance. Same store measures demonstrate our ability to grow revenues in our existing locations. As a result, same store measures have been integrated into the discussion below.

 

Same store measures reflect results for stores that were operating in each comparison period and only include the months when operations occurred in both periods. For example, a store acquired in August 2023 would be included in same store operating data beginning in September 2024, after its first complete comparable month of operation. The third quarter operating results for the same store comparisons would include results for that store in only the month of September for both comparable periods.

			Three Months Ended September 30,																		Nine Months Ended September 30,
($ in millions, except per unit values)			2024						2023						Change						2024						2023						Change
Revenues
New vehicle retail			$	3,900.9					$	3,851.6					1.3		%				$	10,946.7					$	10,959.3					(0.1)		%
Used vehicle retail			2,213.1						2,592.5						(14.6)						6,488.8						7,135.6						(9.1)
Finance and insurance			322.0						345.1						(6.7)						931.6						986.6						(5.6)
Aftersales			871.6						829.3						5.1						2,382.0						2,327.2						2.4
Total revenues			7,690.6						8,199.1						(6.2)						21,754.2						22,881.9						(4.9)
Gross profit
New vehicle retail			$	265.2					$	356.9					(25.7)		%				$	764.5					$	1,058.7					(27.8)		%
Used vehicle retail			169.4						187.2						(9.5)						491.4						554.9						(11.4)
Finance and insurance			322.0						345.1						(6.7)						931.6						986.6						(5.6)
Aftersales			487.8						458.9						6.3						1,332.5						1,276.6						4.4
Total gross profit			1,250.3						1,359.4						(8.0)						3,532.3						3,891.1						(9.2)
Gross profit margins
New vehicle retail			6.8		%				9.3		%				(250)		bps				7.0		%				9.7		%				(270)		bps
Used vehicle retail			7.7						7.2						50						7.6						7.8						(20)
Finance and insurance			100.0						100.0						—						100.0						100.0						—
Aftersales			56.0						55.3						70						55.9						54.9						100
Total gross profit margin			16.3						16.6						(30)						16.2						17.0						(80)
Retail units sold
New vehicles			83,177						81,520						2.0		%				229,520						229,145						0.2		%
Used vehicles			79,297						87,672						(9.6)						231,665						242,017						(4.3)
Average selling price per retail unit
New vehicles			$	46,898					$	47,248					(0.7)		%				$	47,694					$	47,827					(0.3)		%
Used vehicles			27,909						29,571						(5.6)						28,009						29,484						(5.0)
Average gross profit per retail unit
New vehicles			$	3,188					$	4,377					(27.2)		%				$	3,331					$	4,620					(27.9)		%
Used vehicles			2,136						2,135						—						2,121						2,293						(7.5)
Finance and insurance			1,982						2,040						(2.8)						2,020						2,094						(3.5)
Total vehicle 1			4,631						5,221						(11.3)						4,719						5,499						(14.2)

1Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail.

New Retail Vehicles

We believe that our new vehicle retail sales create incremental profit opportunities through certain manufacturer incentive programs, arranging of third-party financing, vehicle service and insurance contracts, future resale of used vehicles acquired through trade-in, and aftersales. Our leaders in each market continue to adapt to changing conditions, respond to customer needs and manage inventory availability and selection.

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Q3 2024 vs. Q3 2023

New vehicles revenue for the three months ended September 30, 2024 increased 14.0% compared to the same period of 2023, driven by acquisition activity. Same store new vehicle revenue increased 1.3% primarily due to an increase in unit volume of 2.0%, partially offset by a decrease in average selling prices of 0.7%.

Same store new vehicle gross profit per unit decreased 27.2%, driven by a decrease in new vehicle gross profit margins of 250 bps. Total same store new vehicle gross profit per unit, which includes the finance and insurance revenue generated from the sales of new vehicles, decreased $1,261 to $5,385.

YTD 2024 vs. YTD 2023

New vehicle retail revenue for the nine months ended September 30, 2024 increased 14.9% compared to the same period of 2023 primarily due to acquisition activity. Same store new vehicle retail revenue decreased 0.1% due to a decrease in average selling prices of 0.3%, partially offset by an increase in unit volume of 0.2%.

Same store new vehicle retail gross profit per unit decreased 27.9%, driven by a decrease in new vehicle retail gross profit margins of 270 bps. Total same store new vehicle retail gross profit per unit, which includes the finance and insurance revenue generated from the sales of new retail vehicles, decreased $1,375 to $5,565.

Used Retail Vehicles

Used vehicle retail sales are a strategic focus for organic growth. We offer three categories of used vehicles: manufacturer certified pre-owned (CPO) vehicles; core vehicles, or late-model vehicles with lower mileage; and value autos, or vehicles with over 80,000 miles. We continue to focus on procuring vehicles across the full spectrum of the addressable used vehicle market to provide customers with a wide selection meeting all levels of affordability, driving increased used vehicle unit volumes. Our used vehicle operations provide an opportunity to generate sales to customers unable or unwilling to purchase a new vehicle, sell brands other than the store’s new vehicle franchise(s) and increase sales from finance and insurance and aftersales.

Q3 2024 vs. Q3 2023

Used vehicle revenue for the three months ended September 30, 2024 increased 8.5% compared to the same period of 2023 driven by acquisition activity. On a same store basis, used vehicle revenue decreased 14.6% due to a decrease in unit volume of 9.6% and a decrease in average selling prices of 5.6%.

Total same store used vehicle gross profit per unit, which includes the finance and insurance revenue generated from the sales of retail used vehicles, decreased $68 to $3,894.

YTD 2024 vs. YTD 2023

Used vehicle retail revenue for the nine months ended September 30, 2024 increased 18.2% compared to the same period of 2023 driven by acquisition activity. On a same store basis, used vehicle retail sales decreased 9.1% due to a decrease in average selling prices of 5.0% and a decrease in unit volume of 4.3%. Total same store used vehicle retail gross profit per unit, which includes the finance and insurance revenue generated from the sales of used retail vehicles, decreased $244 to $3,929.

Finance and Insurance

We believe that arranging vehicle financing is an important part of our ability to sell vehicles, and we attempt to arrange financing for every vehicle we sell. We also offer related products such as extended warranties, insurance contracts and vehicle and theft protection which drive continued engagement with the consumer throughout the ownership lifecycle.

Q3 2024 vs. Q3 2023

Total finance and insurance income increased 3.1% in the three months ended September 30, 2024 compared to the same period of 2023, driven by acquisition activity. Same store finance and insurance revenues decreased 6.7%, driven by a decline in service contract penetration rates. On a same store basis, our finance and insurance revenue per retail unit decreased $58 to $1,982.

YTD 2024 vs. YTD 2023

Total finance and insurance income increased 5.6% in the nine months ended September 30, 2024 compared to the same period of 2023, driven by acquisition activity. Same store finance and insurance revenues decreased 5.6%,

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driven by a decline in service contract penetration rates. On a same store basis, our finance and insurance revenue per retail unit decreased $74 to $2,020.

Aftersales

We provide automotive repair and maintenance services for customers for the new vehicle brands sold by our stores, as well as service and repairs for most other makes and models. These aftersales services are an integral part of our customer retention and the largest contributor to our overall profitability. Earnings from aftersales continue to prove to be more resilient during economic downturns, when owners tend to repair their existing vehicles rather than buy new vehicles. We believe the increased number of units in operation will continue to benefit our aftersales revenue in the coming years as more late-model vehicles age, necessitating repairs and maintenance.

Q3 2024 vs. Q3 2023

Our aftersales revenue increased 20.9% in the three months ended September 30, 2024 compared to the same period of 2023, driven by acquisitions, as well as an increase in customer pay and warranty revenues.

We focus on retaining customers by offering competitively-priced routine maintenance and through our marketing efforts. The largest contribution to our aftersales revenue was same store customer pay revenue of $488.4 million.

Same store aftersales gross profit increased 6.3%. This increase was primarily due to increased volumes of customer pay and warranty transactions. Overall same store aftersales gross margins increased 70 bps, primarily as a result of increased customer pay gross margin of 80 bps.

YTD 2024 vs. YTD 2023

Our aftersales revenue increased 20.9% in the nine months ended September 30, 2024 compared to the same period of 2023, driven by acquisitions, as well as an increase in same store warranty and customer pay revenues. Same store customer pay revenues was the largest contribution to our aftersales revenue at $1.3 billion.

Same store aftersales gross profit increased 4.4%. This increase was primarily due to increased volumes of warranty transactions. Overall same store aftersales gross margins increased 100 bps, primarily as a result of increased warranty gross margin. Same store customer pay gross margin decreased 20 bps.

Financing Operations

In the U.S., Financing Operations is a captive lender, originating loans only from our stores and Driveway. In Canada, Financing Operations originates loans and leases from both our Canadian stores and third-party dealerships. In the U.K., Financing Operations is related to our fleet funding and management division. These product offerings add diversity to the business model and provide an opportunity to capture additional profits, cash flows, and sales while managing our reliance on third-party finance sources.

Financing Operations income reflects the interest and fee income generated by the portfolio of auto loan and finance lease receivables, plus the lease income generated by our net investment in operating leases, less the interest expense associated with the debt utilized to fund the lending, including internal capital, a provision for estimated loan and lease losses, depreciation on vehicles leased via operating leases, and directly-related expenses.

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Selected Financing Operations Financial Information

			Three Months Ended September 30,																								Nine Months Ended September 30,
($ in millions)			2024						% (1)						2023						% (1)						2024						% 1						2023						% 1
Interest margin:
Interest and fee income			$	91.1					9.5						$	67.5					8.7						$	252.2					9.3						$	176.2					8.6
Interest expense			(51.2)						(5.3)						(42.5)						(5.4)						(146.0)						(5.4)						(125.5)						(6.1)
Total interest margin			39.9						4.1						25.0						3.2						106.2						3.9						50.7						2.5
Lease income			25.6												4.9												61.2												14.1
Lease costs			(21.6)												(2.0)												(51.0)												(6.3)
Lease income, net			4.0												2.9												10.2												7.8
Selling, general and administrative			(11.2)												(9.2)												(33.0)												(27.3)
Provision expense			(31.8)						(3.3)						(23.1)						(3.0)						(77.0)						(2.8)						(75.0)						(3.7)
Finance operations income (loss)			$	0.9											$	(4.4)											$	6.4											$	(43.8)
Total average managed finance receivables			$	3,812.8											$	3,092.4											$	3,617.4											$	2,731.0

1Annualized percentage of total average managed finance receivables.

DFC Portfolio Information1

			Three Months Ended September 30,												Nine Months Ended September 30,
($ in millions)			2024						2023						2024						2023
Loan origination information
Net loans originated			$	518.1					$	502.4					$	1,572.4					$	1,689.9
Vehicle units financed			17,755						16,784						54,005						55,679
Total penetration rate 2			11.6		%				9.7		%				11.9		%				11.5		%
Weighted average contract rate			9.8		%				10.0		%				10.0		%				9.5		%
Weighted average credit score 3			737						732						737						731
Weighted average FE LTV 4			95.6		%				95.1		%				95.5		%				95.6		%
Weighted average term (in months)			73						72						73						72
Loan performance information
Allowance for loan losses as a percentage of ending managed receivables			3.2		%				3.2		%				3.2		%				3.2		%
Net credit losses on managed receivables			$	27.0					$	16.5					$	61.4					$	43.0
Annualized net credit losses as a percentage of total average managed receivables			3.0		%				2.3		%				2.4		%				2.2		%
Past due accounts as a percentage of ending managed receivables 5			5.1		%				4.1		%				5.1		%				4.1		%
Average recovery rate 6			45.3		%				47.8		%				45.3		%				52.2		%

1Excludes Canadian portfolio

2Units financed as a percentage of total U.S. new and used vehicle retail units sold.

3The credit scores represent FICO scores and reflect only receivables with obligors that have a FICO score at the time of application. For receivables with co-borrowers, the FICO score is the primary borrower’s. FICO scores are not a significant factor in our proprietary credit model, which relies on information from credit bureaus and other application information.

4Front-end loan-to-value represents the ratio of the amount financed to the total collateral value, which is measured as the vehicle selling price plus applicable taxes, title and fees.

5Past due means loans at least 3 months old that are 30 or more days delinquent

6The average recovery rate represents the average percentage of the outstanding principal balance we receive when a vehicle is repossessed and liquidated, generally at wholesale auctions, on a trailing twelve month basis.

Q3 2024 vs. Q3 2023

Financing operations recorded income in the three months ended September 30, 2024 compared to a loss in the same period of 2023, primarily due to the increased interest income resulting from the growth of the portfolio and increase in portfolio-wide weighted average contract rate charged to customers which collectively expanded total interest margin to 4.1%, offset by increased provision expense.

Loan originations increased slightly in the three months ended September 30, 2024 compared to the same period of 2023, and our penetration rate decreased due to acquisition growth as we maintained underwriting standards and focused on originating loans with the highest risk-adjusted returns. The weighted average contract rate of loans

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originated in the three months ended September 30, 2024 decreased to 9.8%, compared with 10.0% in the same period of 2023, primarily due to our maintaining competitive pricing. The increase in annualized net charge-offs of past due accounts as a percentage of ending managed receivables compared to the prior year reflects increasing financial stress on borrowers and an uncertain macroeconomic environment.

YTD 2024 vs. YTD 2023

Financing operations recorded income in the nine months ended September 30, 2024 compared to a loss in the same period of 2023 primarily due to increased contract rates to borrowers and decreasing cost of funds, resulting in an expansion of total interest margin to 3.9%, both of which outpaced the growth in SG&A and provision expense, and the addition of the U.K. Financing Operations business.

The weighted average contract rate on loans originated in the nine months ended September 30, 2024 increased to 10.0%, compared with 9.5% in the same period of 2023. The decrease in provision expense as a percentage of receivables compared to the prior year reflected the increased credit quality of the portfolio. The decrease in selling, general and administrative expenses as a percentage of receivables compared to the prior year reflected improved operational performance and economies of scale.

Operating Expenses

Selling, General and Administrative Expense

SG&A includes salaries and related personnel expenses, advertising (net of manufacturer cooperative advertising credits), rent, facility costs, and other general corporate expenses.

Q3 2024 vs. Q3 2023

			Three Months Ended September 30,												Increase (Decrease)						% Increase (Decrease)
(in millions)			2024						2023
Personnel			$	602.3					$	563.9					$	38.4					6.8		%
Advertising			61.5						63.1						(1.6)						(2.5)
Rent			36.2						23.8						12.4						52.1
Facility costs1			61.4						47.4						14.0						29.5
Loss (gain) on sale of assets			2.0						(23.1)						25.1						NM
Other			180.2						175.7						4.5						2.6
Total SG&A			$	943.6					$	850.8					$	92.8					10.9		%

1Includes variable lease costs related to the reimbursement of actual costs incurred by our lessors for common area maintenance, property taxes and insurance on leased property.

			Three Months Ended September 30,												Increase (Decrease)
As a % of gross profit			2024						2023
Personnel			42.1		%				41.1		%				100		bps
Advertising			4.3						4.6						(30)
Rent			2.5						1.7						80
Facility costs			4.3						3.5						80
Loss (gain) on sale of assets			0.1						(1.7)						180
Other			12.7						12.8						(10)
Total SG&A			66.0		%				62.0		%				400		bps

SG&A as a percentage of gross profit was 66.0% for the three months ended September 30, 2024 compared to 62.0% for the same period of 2023. SG&A expense increased 10.9%, driven by increases in all areas except advertising, primarily as a result of our growth in the U.K.

On a same store basis and excluding non-core charges, SG&A as a percentage of gross profit was 64.0% compared to 62.2% for the same period of 2023. The increase was primarily related to the decrease in gross profit exceeding the decrease in same store SG&A costs.

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YTD 2024 vs. YTD 2023

			Nine Months Ended September 30,												Increase						% Increase
($ in millions)			2024						2023
Personnel			$	1,828.2					$	1,629.2					$	199.0					12.2		%
Advertising			187.6						185.0						2.6						1.4
Rent			99.5						64.5						35.0						54.3
Facility costs 1			180.9						133.9						47.0						35.1
Loss (gain) on sale of assets			3.5						(31.2)						34.7						NM
Other			553.3						476.7						76.6						16.1
Total SG&A			$	2,853.0					$	2,458.1					$	394.9					16.1		%

1Includes variable lease costs related to the reimbursement of actual costs incurred by our lessors for common area maintenance, property taxes and insurance on leased property.

			Nine Months Ended September 30,												Increase (Decrease)
As a % of gross profit			2024						2023
Personnel			43.6		%				41.1		%				250		bps
Advertising			4.5						4.7						(20)
Rent			2.4						1.6						80
Facility costs			4.3						3.4						90
Loss (gain) on sale of assets			0.1						(0.8)						90
Other			13.2						11.9						130
Total SG&A			68.1		%				61.9		%				620		bps

 

SG&A as a percentage of gross profit was 68.1% for the nine months ended September 30, 2024 compared to 61.9% for the same period of 2023. Total SG&A expense increased 16.1%, driven by increases in all areas, primarily as a result of our growth in the U.K.

On a same store basis and excluding non-core charges, SG&A as a percentage of gross profit was 65.7% compared to 61.5% for the same period of 2023. The increase was primarily related to the decrease in gross profit exceeding the decrease in same store SG&A costs.

SG&A expense adjusted for non-core charges was as follows:

Q3 2024 vs. Q3 2023

			Three Months Ended September 30,												Increase (Decrease)						% Increase (Decrease)
(in millions)			2024						2023
Personnel			$	602.3					$	563.9					$	38.4					6.8		%
Advertising			61.5						63.1						(1.6)						(2.5)
Rent			36.2						23.8						12.4						52.1
Facility costs1			61.4						47.4						14.0						29.5
Adjusted loss on sale of assets			2.3						—						2.3						NM
Adjusted other			180.0						162.1						17.9						11.0
Adjusted total SG&A			$	943.7					$	860.3					$	83.4					9.7		%

1Includes variable lease costs related to the reimbursement of actual costs incurred by our lessors for common area maintenance, property taxes and insurance on leased property.

			Three Months Ended September 30,												Increase (Decrease)
As a % of gross profit			2024						2023
Personnel			42.1		%				41.1		%				100		bps
Advertising			4.3						4.6						(30)
Rent			2.5						1.7						80
Facility costs			4.3						3.5						80
Adjusted loss on sale of assets			0.2						—						20
Adjusted other			12.6						11.8						80
Adjusted total SG&A			66.0		%				62.7		%				330		bps

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Adjusted SG&A for the three months ended September 30, 2024 excludes $0.2 million in acquisition-related expenses, offset by a $0.3 million net gain on store disposals.

Adjusted SG&A for the three months ended September 30, 2023 excludes a $23.1 million net gain on store disposals, partially offset by $4.8 million in acquisition-related expenses, $4.6 million in storm insurance charges, and $4.2 million in one-time contract buyouts.

YTD 2024 vs. YTD 2023

			Nine Months Ended September 30,												Increase						% Increase
($ in millions)			2024						2023
Personnel			$	1,828.2					$	1,629.2					$	199.0					12.2		%
Advertising			187.6						185.0						2.6						1.4		%
Rent			99.5						64.5						35.0						54.3		%
Facility costs1			180.9						133.9						47.0						35.1		%
Adjusted loss on sale of assets			3.7						0.1						3.6						NM
Adjusted other			537.7						444.8						92.9						20.9		%
Adjusted total SG&A			$	2,837.6					$	2,457.5					$	380.1					15.5		%

1Includes variable lease costs related to the reimbursement of actual costs incurred by our lessors for common area maintenance, property taxes and insurance on leased property.

NM - not meaningful

			Nine Months Ended September 30,												Increase (Decrease)
As a % of gross profit			2024						2023
Personnel			43.6		%				41.1		%				250		bps
Advertising			4.5						4.7						(20)
Rent			2.4						1.6						80
Facility costs			4.3						3.4						90
Adjusted loss on sale of assets			0.1						—						10
Adjusted other			12.8						11.1						170
Adjusted total SG&A			67.7		%				61.9		%				580		bps

Adjusted SG&A for the nine months ended September 30, 2024 excludes $9.7 million in acquisition-related expenses, $6.0 million in storm insurance charges and a $0.3 million net gain on store disposals.

Adjusted SG&A for the nine months ended September 30, 2023 excludes $14.4 million in one-time contract buyouts, $10.5 million in acquisition-related expenses and $7.1 million in storm insurance charges, offset by a $31.4 million net gain on store disposals.

Adjusted SG&A is a non-GAAP measure. See “Non-GAAP Reconciliations” for more details.

Floor Plan Interest Expense and Floor Plan Assistance

Floor plan assistance is provided by manufacturers to support store financing of vehicle inventory and is recorded as a component of vehicle gross profit when the specific vehicle is sold. However, because manufacturers provide this assistance to offset inventory carrying costs, we believe a comparison of floor plan interest expense to floor plan assistance is a useful measure of the efficiency of our vehicle sales relative to stocking levels.

Shown below are the details for carrying costs for vehicles net of floor plan assistance earned:

Q3 2024 vs. Q3 2023

			Three Months Ended September 30,																		%
(in millions)			2024						2023						Change						Change
Floor plan interest expense			$	76.6					$	40.2					$	36.4					90.5		%
Floor plan assistance (included as an offset to cost of sales)			(44.0)						(41.4)						(2.6)						(6.3)
Net vehicle carrying costs (benefit)			$	32.6					$	(1.2)					$	33.8					NM

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Floor plan interest expense increased $36.4 million in the three months ended September 30, 2024 compared to the same period of 2023 due to rising interest rates and increased inventory levels.

YTD 2024 vs. YTD 2023

			Nine Months Ended September 30,																		%
($ in millions)			2024						2023						Change						Change
Floor plan interest expense			$	214.0					$	102.6					$	111.4					108.6		%
Floor plan assistance (included as an offset to cost of sales)			(127.2)						(117.5)						(9.7)						(8.3)
Net vehicle carrying costs (benefit)			$	86.8					$	(14.9)					$	101.7					NM

Floor plan interest expense increased $111.4 million in the nine months ended September 30, 2024 compared to the same period of 2023 due to rising interest rates and increased inventory levels.

Depreciation and Amortization

Depreciation and amortization is comprised of depreciation expense related to buildings, significant remodels or improvements, furniture, tools, equipment, signage, and amortization of certain intangible assets, including customer lists.

Q3 2024 vs. Q3 2023

			Three Months Ended September 30,												Increase						% Increase
(in millions)			2024						2023
Depreciation and amortization			$	63.5					$	50.8					$	12.7					25.0		%

YTD 2024 vs. YTD 2023

			Nine Months Ended September 30,												Increase						% Increase
($ in millions)			2024						2023
Depreciation and amortization			$	183.6					$	146.4					$	37.2					25.4		%

Acquisition activity contributed to the increase in depreciation and amortization in 2024 compared to 2023. We acquired $651 million of depreciable property as part of our acquisition activity over the trailing twelve-months ended September 30, 2024. For the nine months ended September 30, 2024, we invested $271.9 million in capital expenditures. These investments increased the amount of depreciation expense in the nine months ended September 30, 2024. See the discussion under “Liquidity and Capital Resources” for additional information.

Operating Income

Operating income as a percentage of revenue, or operating margin, was as follows:

Q3 2024 vs. Q3 2023

			Three Months Ended September 30,
			2024						2023
Operating margin			4.6		%				5.6		%
Operating margin adjusted for non-core charges 1			4.6		%				5.5		%

1See “Non-GAAP Reconciliations” for more details.

Operating margin decreased 100 bps in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to increased SG&A of 10.9%, partially offset by increased gross profit of 4.3% and improved profitability of our Financing Operations.

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YTD 2024 vs. YTD 2023

			Nine Months Ended September 30,
			2024						2023
Operating margin			4.3		%				5.6		%
Operating margin adjusted for non-core charges 1			4.3		%				5.7		%

1See “Non-GAAP Reconciliations” for more details.

Operating margin decreased 130 bps in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to increased SG&A of 16.1%, partially offset by increased gross profit of 5.6% and improved profitability of our Financing Operations.

Non-Operating Expenses

Other Interest Expense

Other interest expense includes interest on senior notes, debt incurred related to acquisitions, real estate mortgages, used and service loaner vehicle inventory financing commitments, and revolving lines of credit.

Q3 2024 vs. Q3 2023

			Three Months Ended September 30,												Increase						% Increase
(in millions)			2024						2023
Mortgage interest			$	12.9					$	9.5					$	3.4					35.8
Other interest			53.0						49.5						3.5						7.1
Capitalized interest			(1.4)						(0.5)						0.9						NM
Total other interest expense			$	64.5					$	58.5					$	6.0					10.3		%

Other interest expense for the three months ended September 30, 2024 increased $6.0 million related to increased borrowings and interest rates compared to the same period of 2023.

YTD 2024 vs. YTD 2023

			Nine Months Ended September 30,												Increase						% Increase
($ in millions)			2024						2023
Mortgage interest			$	36.4					$	25.8					$	10.6					41.1		%
Other interest			156.5						117.4						39.1						33.3
Capitalized interest			(3.6)						(1.7)						1.9						NM
Total other interest expense			$	189.3					$	141.5					47.8						33.8

Other interest expense for the nine months ended September 30, 2024 increased $47.8 million related to increased borrowings and interest rates compared to the same period of 2023.

Other Income (Expense), net

Q3 2024 vs. Q3 2023

			Three Months Ended September 30,												Decrease						% Increase
(Dollars in millions)			2024						2023
Other income (expense), net			$	5.1					$	(5.3)					$	10.4					NM

Other income (expense), net in the three months ended September 30, 2024 included $0.9 million in unrealized investment gain, primarily associated with our equity-method investments, as well as a $3.0 million unrealized gain due to foreign currency exchange. This compares to a $7.7 million unrealized loss due to foreign currency exchange and a $0.7 million unrealized investment loss associated with our equity-method investments in the three months ended September 30, 2023.

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YTD 2024 vs. YTD 2023

			Nine Months Ended September 30,												Decrease						% Decrease
($ in millions)			2024						2023
Other income, net			$	35.4					$	6.8					$	28.6					420.6		%

Other income, net in the nine months ended September 30, 2024 included $30.8 million in unrealized investment gain, primarily associated with our equity-method investments, and $6.7 million of interest income offset by a $4.5 million loss due to foreign currency exchange. This compares to a $2.6 million unrealized loss due to foreign currency exchange and a $0.2 million unrealized investment gain associated with our equity-method investments in the nine months ended September 30, 2023.

Income Tax Provision

Our effective income tax rate was as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Effective income tax rate			22.6		%				26.7		%				23.6		%				26.5		%
Effective income tax rate excluding non-core items 1			22.8		%				26.5		%				24.4		%				26.4		%

1See “Non-GAAP Reconciliations” for more details.

 

Our effective income tax rate for the nine months ended September 30, 2024 compared to last year was positively affected by a reduction in the current and deferred state tax rate due to the impact of global network expansion on worldwide combined reporting states, filing elections, and statutory rate changes. Our rate was also positively affected by an increase in general business credits and a reduction in the valuation allowance. Excluding non-core charges and acquired general business credits, we estimate our annual effective income tax rate to be 25.5%.

Non-GAAP Reconciliations

Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to similarly titled measures used by other companies. As a result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. We believe each of the non-GAAP financial measures below improves the transparency of our disclosures, provides a meaningful presentation of our results from the core business operations because they exclude items not related to our ongoing core business operations and other non-cash items, and improves the period-to-period comparability of our results from the core business operations. We use these measures in conjunction with GAAP financial measures to assess our business, including our compliance with covenants in our credit facility and in communications with our Board concerning financial performance. These measures should not be considered an alternative to GAAP measures.

The following tables reconcile certain reported non-GAAP measures, which we refer to as “adjusted,” to the most comparable GAAP measure from our Consolidated Statements of Operations.

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			Three Months Ended September 30, 2024
(in millions, except per share amounts)			As reported						Net gain on disposal of stores																								Acquisition expenses						Premium on redeemable NCI buyout						Tax attribute						Adjusted
Selling, general and administrative			$	943.6					$	0.3																							$	(0.2)					$	—					$	—					$	943.7
Operating income (loss)			424.2						(0.3)																								0.2						—						—						424.1
Income (loss) before income taxes			$	288.2					$	(0.3)																							$	0.2					$	—					$	—					$	288.1
Income tax (provision) benefit			(65.3)						0.1																								(0.1)						—						(0.5)						(65.8)
Net income (loss)			222.9						(0.2)																								0.1						—						(0.5)						222.3
Net income attributable to NCI			(1.2)						—																								—						—						—						(1.2)
Net income attributable to redeemable NCI			(12.6)						—																								—						11.6						—						(1.0)
Net income (loss) attributable to Lithia Motors, Inc.			$	209.1					$	(0.2)																							$	0.1					$	11.6					$	(0.5)					$	220.1
Diluted earnings (loss) per share attributable to Lithia Motors, Inc.			$	7.80					$	(0.01)																							$	—					$	0.43					$	(0.01)					$	8.21
Diluted share count			26.8

			Three Months Ended September 30, 2023
(in millions, except per share amounts)			As reported						Net gain on disposal of stores																		Insurance reserves						Acquisition expenses						Contract buyouts												Adjusted
Selling, general and administrative			$	850.8					$	23.1																	$	(4.6)					$	(4.8)					$	(4.2)											$	860.3
Operating income (loss)			465.3						(23.1)																		4.6						4.8						4.2												455.8
Income (loss) before income taxes			$	361.3					$	(23.1)																	$	4.6					$	4.8					$	4.2											$	351.8
Income tax (provision) benefit			(96.4)						6.1																		(1.2)						(0.8)						(1.1)												(93.4)
Net income (loss)			264.9						(17.0)																		3.4						4.0						3.1												258.4
Net loss attributable to NCI			(2.1)						—																		—						—						—												(2.1)
Net income attributable to redeemable NCI			(1.3)						—																		—						—						—												(1.3)
Net income (loss) attributable to Lithia Motors, Inc.			$	261.5					$	(17.0)																	$	3.4					$	4.0					$	3.1											$	255.0
Diluted earnings (loss) per share attributable to Lithia Motors, Inc.			$	9.46					$	(0.62)																	$	0.12					$	0.15					0.11												$	9.22
Diluted share count			27.6

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			Nine Months Ended September 30, 2024
(in millions, except per share amounts)			As reported						Net gain on disposal of stores																		Insurance reserves						Acquisition expenses						Premium on redeemable NCI buyout						Tax attribute						Adjusted
Selling, general and administrative			$	2,853.0					$	0.3																	$	(6.0)					$	(9.7)					$	—					$	—					$	2,837.6
Operating income (loss)			1,159.3						(0.3)																		6.0						9.7						—						—						1,174.7
Income (loss) before income taxes			$	791.4					$	(0.3)																	$	6.0					$	9.7					$	—					$	—					$	806.8
Income tax (provision) benefit			(187.0)						0.1																		(1.5)						(0.5)						—						(8.0)						(196.9)
Net income (loss)			604.4						(0.2)																		4.5						9.2						—						(8.0)						609.9
Net income attributable to NCI			(3.8)						—																		—						—						—						—						(3.8)
Net income attributable to redeemable NCI			(14.8)						—																		—						—						11.6						—						(3.2)
Net income (loss) attributable to Lithia Motors, Inc.			$	585.8					$	(0.2)																	$	4.5					$	9.2					$	11.6					$	(8.0)					$	602.9
Diluted earnings (loss) per share attributable to Lithia Motors, Inc.			$	21.54					$	(0.01)																	$	0.17					$	0.34					$	0.43					$	(0.30)					$	22.17
Diluted share count			27.2

			Nine Months Ended September 30, 2023
(in millions, except per share amounts)			As reported						Net gain on disposal of stores																		Insurance reserves						Acquisition expenses						Contract buyouts												Adjusted
Selling, general and administrative			$	2,458.1					$	31.4																	$	(7.1)					$	(10.5)					$	(14.4)											$	2,457.5
Operating income (loss)			1,319.9						(31.4)																		7.1						10.5						14.4												1,320.5
Income (loss) before income taxes			$	1,082.6					$	(31.4)																	$	7.1					$	10.5					$	14.4											$	1,083.2
Income tax (provision) benefit			(287.0)						8.5																		(1.9)						(1.5)						(3.9)												(285.8)
Net income (loss)			795.6						(22.9)																		5.2						9.0						10.5												797.4
Net income attributable to NCI			(4.7)						—																		—						—						—												(4.7)
Net income attributable to redeemable NCI			(3.6)						—																		—						—						—												(3.6)
Net income (loss) attributable to Lithia Motors, Inc.			$	787.3					$	(22.9)																	$	5.2					$	9.0					$	10.5											$	789.1
Diluted earnings (loss) per share attributable to Lithia Motors, Inc.			$	28.54					$	(0.83)																	$	0.19					$	0.33					$	0.38											$	28.61
Diluted share count			27.6

Liquidity and Capital Resources

We manage our liquidity and capital resources in the context of our overall business strategy, continually forecasting and managing our cash, working capital balances and capital structure in a way that we believe will meet the short-term and long-term obligations of our business while maintaining liquidity and financial flexibility. In the current market of elevated acquisition pricing, we have adjusted our free cash flow deployment strategy. Under current conditions, including recent trends in our stock price, we may consider repurchases as a more attractive use of funds than acquisitions. Our current free cash flow deployment strategy has shifted to allocation of 50% to 60% investment in acquisitions, 25% investment in capital expenditures, Driveway and DFC and 15% to 25% in shareholder return in the form of dividends and share repurchases.

We believe we have sufficient sources of funding to meet our business requirements for the next 12 months and in the longer term. Cash flows from operations and borrowings under our credit facilities are our main sources for liquidity. In addition to the above sources of liquidity, potential sources to fund our business strategy include financing of real estate and proceeds from debt or equity offerings. We evaluate all of these options and may select one or more of them depending on overall capital needs and the availability and cost of capital, although no assurances can be provided that these capital sources will be available in sufficient amounts or with terms acceptable to us.

 

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Available Sources

Below is a summary of our immediately available funds:

($ in millions)			September 30, 2024						December 31, 2023						Change						% Change
Cash and cash equivalents			$	209.8					$	825.0					$	(615.2)					(74.6)		%
Marketable securities			53.9						—						53.9						—
Available credit on credit facilities			863.2						870.4						(7.2)						(0.8)
Total current available funds			$	1,126.9					$	1,695.4					$	(568.5)					(33.5)		%

Information about our cash flows, by category, is presented in our Consolidated Statements of Cash Flows. The following table summarizes our cash flows:

			Nine Months Ended September 30,												Change
(in millions)			2024						2023						in Cash Flow
Net cash provided by (used in) operating activities			$	363.3					$	(177.2)					$	540.5
Net cash used in investing activities			(1,820.8)						(1,240.3)						(580.5)
Net cash provided by financing activities			880.2						1,427.0						(546.8)

Operating Activities

Cash provided by operating activities for the nine months ended September 30, 2024 increased $540.5 million compared to the same period of 2023, primarily related to smaller increases in inventory and finance receivables activity in the current period compared to the prior period, partially offset by lower net income and other asset activity compared to the same period of 2023.

 

Borrowings from and repayments to our syndicated credit facilities related to our new vehicle inventory floor plan financing are presented as financing activities. To better understand the impact of changes in inventory, other assets, and the associated financing, we also consider our adjusted net cash provided by operating activities to include borrowings or repayments associated with our new vehicle floor plan commitment and exclude the impact of our financing receivables activity. Adjusted net cash provided by operating activities, a non-GAAP measure, is presented below:

			Nine Months Ended September 30,												Change
(in millions)			2024						2023						in Cash Flow
Net cash provided by (used in) operating activities – as reported			$	363.3					$	(177.2)					$	540.5
Adjust: Net borrowings on floor plan notes payable, non-trade			280.1						426.7						(146.6)
Less: Borrowings on floor plan notes payable, non-trade associated with acquired new vehicle inventory			(105.5)						(110.6)						5.1
Adjust: Financing receivables activity			526.5						907.0						(380.5)
Net cash provided by operating activities – adjusted			$	1,064.4					$	1,045.9					$	18.5

Investing Activities

Net cash used in investing activities totaled $1.8 billion and $1.2 billion, respectively, for the nine months ended September 30, 2024 and 2023.

 

Below are highlights of significant activity related to our cash flows from investing activities:

			Nine Months Ended September 30,												Change
(in millions)			2024						2023						in Cash Flow
Capital expenditures			$	(271.9)					$	(163.7)					$	(108.2)
Cash paid for acquisitions, net of cash acquired			(1,247.0)						(1,204.7)						(42.3)
Cash paid for other investments			(329.1)						(11.1)						(318.0)
Proceeds from sales of stores			21.9						136.1						(114.2)

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Capital Expenditures

Below is a summary of our capital expenditure activities ($ in millions):

Many manufacturers provide assistance in the form of additional incentives or assistance if facilities meet specified standards and requirements. We expect that certain facility upgrades and remodels will generate additional manufacturer incentive payments. Also, tax laws allowing accelerated deductions for capital expenditures reduce the overall investment needed and encourage accelerated project timelines.

We expect to use a portion of our future capital expenditures to upgrade facilities that we recently acquired. This additional capital investment is contemplated in our initial evaluation of the investment return metrics applied to each acquisition and is usually associated with manufacturer standards and requirements.

The increase in capital expenditures for the nine months ended September 30, 2024, compared to the same period of 2023 was higher across nearly all categories, driven by higher existing operations improvements.

If we undertake a significant capital commitment in the future, we expect to pay for the commitment out of existing cash balances, construction financing and borrowings on our credit facility. Upon completion of the projects, we believe we would have the ability to secure long-term financing and general borrowings from third party lenders for 70% to 90% of the amounts expended, although no assurances can be provided that these financings will be available to us in sufficient amounts or on terms acceptable to us.

Acquisitions

We focus on acquiring stores at attractive purchase prices that meet our return thresholds and strategic objectives. We look for acquisitions that diversify our brand and geographic mix as we continue to evaluate our portfolio to minimize exposure to any one manufacturer and achieve financial returns.

 

We are able to subsequently floor new vehicle inventory acquired as part of an acquisition; however, the cash generated by this transaction is recorded as borrowings on floor plan notes payable, non-trade.

Adjusted net cash paid for acquisitions, a non-GAAP measure, as well as certain other acquisition-related information is presented below:

			Nine Months Ended September 30,
			2024						2023
Number of locations acquired			145						56
(in millions)
Cash paid for acquisitions, net of cash acquired			$	(1,247.0)					$	(1,204.7)
Add: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory			105.5						110.6
Cash paid for acquisitions, net of cash acquired – adjusted			$	(1,141.5)					$	(1,094.1)

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We evaluate potential capital investments primarily based on targeted rates of return on assets and return on our net equity investment.

Financing Activities

Adjusted net cash provided by financing activities, a non-GAAP measure, which is adjusted for borrowings and repayments on floor plan facilities: non-trade and borrowings and repayments associated with our Financing Operations segment was as follows:

			Nine Months Ended September 30,												Change
(in millions)			2024						2023						in Cash Flow
Cash provided by financing activities, as reported			$	880.2					$	1,427.0					$	(546.8)
Less: Net borrowings on floor plan notes payable: non-trade			(280.1)						(426.7)						146.6
Less: Net borrowings on non-recourse notes payable			(77.4)						(1,047.7)						970.3
Cash provided by (used in) financing activities, as adjusted			$	522.7					$	(47.4)					$	570.1

Below are highlights of significant activity related to our cash flows from financing activities, excluding borrowings and repayments on floor plan notes payable: non-trade, which are discussed above:

			Nine Months Ended September 30,												Change
(in millions)			2024						2023						in Cash Flow
Net borrowings on lines of credit			$	698.4					$	(55.9)					$	754.3
Principal payments on long-term debt and finance lease liabilities, other			(48.2)						(3.4)						(44.8)
Proceeds from issuance of long-term debt			279.5						79.8						199.7
Principal payments on non-recourse notes payable			(661.6)						(404.0)						(257.6)
Proceeds from the issuance of non-recourse notes payable			739.0						1,451.7						(712.7)
Proceeds from issuance of common stock			21.2						23.0						(1.8)
Repurchase of common stock, excluding excise tax imposed under the Inflation Reduction Act			(273.2)						(14.5)						(258.7)
Dividends paid			(42.4)						(39.1)						(3.3)

Equity Transactions

Over the last several years, our Board has authorized the repurchase of up to $2.1 billion of our Common Stock. We repurchased a total of 1,031,935 shares of our Common Stock at an average price of $262.82 in the first nine months of 2024, consisting of 45,903 related to tax withholding on vesting RSUs, and 986,032 related to our repurchase authorizations. As of September 30, 2024, we had $560.9 million remaining available for repurchases and the authorizations do not have expiration dates.

In the first nine months of 2024, we declared and paid dividends on our Common Stock as follows:

Dividend paid:			Dividend amount per share						Total amount of dividend (in millions)
March 2024			$	0.50					$	13.8
May 2024			$	0.53					$	14.4
August 2024			$	0.53					$	14.2

 

We evaluate performance and make a recommendation to the Board on dividend payments on a quarterly basis.

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Summary of Outstanding Balances on Credit Facilities and Long-Term Debt

Below is a summary of our outstanding balances on credit facilities and long-term debt:

			As of September 30, 2024
(in millions)			Outstanding						Remaining Available
Floor plan note payable: non-trade			$	2,516.7					$	—					1
Floor plan notes payable			2,602.9						—
Used and service loaner vehicle inventory financing commitments			925.7						9.8						2
Revolving lines of credit			1,848.2						829.9						2, 3
Warehouse facilities			1,035.0						23.5
Non-recourse notes payable			1,783.0						—
4.625% Senior notes due 2027			400.0						—
4.375% Senior notes due 2031			550.0						—
3.875% Senior notes due 2029			800.0						—
Real estate mortgages, finance lease obligations, and other debt			980.5						—
Unamortized debt issuance costs			(26.4)						—						4
Total debt, net			$	13,415.6					$	863.2

1As of September 30, 2024, we had a $2.8 billion new vehicle floor plan commitment as part of our US Bank syndicated credit facility, and a $500 million CAD wholesale floorplan commitment as part of our Bank of Nova Scotia syndicated credit facility.

2The amount available on these credit facilities are limited based on borrowing base calculations and fluctuates monthly.

3Available credit is based on the borrowing base amount effective as of August 31, 2024. This amount is reduced by $37.0 million for outstanding letters of credit.

4Debt issuance costs are presented on the balance sheet as a reduction from the carrying amount of the related debt liability.

Financial Covenants

Our credit facilities, non-recourse notes payable, and senior notes contain customary representations and warranties, conditions and covenants for transactions of these types.

Recent Accounting Pronouncements

See Note 16 – Recent Accounting Pronouncements for discussion.

 

Critical Accounting Policies and Use of Estimates

There have been no material changes in the critical accounting policies and use of estimates described in our 2023 Annual Report on Form 10-K filed with the SEC on February 23, 2024.

Seasonality and Quarterly Fluctuations

Our North American operations generally experience lower volumes in the first quarter of each year due to consumer purchasing patterns and inclement weather in certain of our markets. As a result, financial performance is expected to be lower during the first quarter than during the second, third and fourth quarters of each fiscal year. Our U.K. operations generally experience higher volumes in the first and third quarters of each year, due primarily to new vehicle registration practices in the U.K. We believe that interest rates, levels of consumer debt, consumer confidence and manufacturer sales incentives, as well as general economic conditions, also contribute to fluctuations in sales and operating results.

 

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

There have been no material changes in our reported market risks or risk management policies since the filing of our 2023 Annual Report on Form 10-K, which was filed with the SEC on February 23, 2024.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

We evaluated, with the participation and under the supervision of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

 

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

We are party to numerous legal proceedings arising in the normal course of our business. Although we do not anticipate that the resolution of legal proceedings arising in the normal course of business will have a material adverse effect on our business, results of operations, financial condition, or cash flows, we cannot predict this with certainty.

Item 1A. Risk Factors

The information in this Form 10-Q should be read in conjunction with the risk factors and information disclosed in our 2023 Annual Report on Form 10-K, which was filed with the SEC on February 23, 2024. We have described in our 2023 Annual Report on Form 10-K, under “Risk Factors” in Item 1A, the primary risks related to our business and securities.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

We repurchased the following shares of our common stock during the third quarter of 2024:

For the full calendar month of			Total number of shares purchased2						Average price paid per share						Total number of shares purchased as part of publicly announced plans1						Maximum dollar value of shares that may yet be purchased under publicly announced plans (in thousands)1
July			4,524						$	245.03					4,524						$	613,814
August			68,554						283.79						68,468						594,384
September			124,471						269.27						124,471						560,867
Total			197,549						273.75						197,463

1On June 4, 2024, our Board approved an additional $350 million repurchase authorization of our common stock. This authorization was in addition to the amount previously authorized by the Board for repurchase. There are no expiration dates for the share repurchase authorizations.

2Of the shares repurchased in the third quarter of 2024, 86 shares were related to tax withholding upon the vesting of RSUs.

Item 5. Other Information

No director or officer adopted or terminated any Rule 10b5-1 plan or any non-Rule 10b5-1 trading arrangement during the third quarter of 2024.

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Item 6. Exhibits

The following exhibits are filed herewith and this list is intended to constitute the exhibit index.

Incorporated by Reference

Filed or Furnished Herewith

Exhibit Number

Exhibit Description

Form

File Number

Exhibit

Filing Date

3.1

Restated Articles of Incorporation of Lithia Motors, Inc.

10-Q

001-14733

3.1

07/28/21

3.2

Bylaws of Lithia Motors, Inc. as of July 25, 2024

8-K

001-14733

3.1

07/30/24

10.1

Amendment #10 to Amended and Restated Loan Agreement, dated August 15, 2024, among SCFC Business Services LLC, Driveway Finance Corporation, the lenders from time to time parties hereto, the agents from time to time parties hereto, and JPMorgan Chase Bank, N.A.

X

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

X

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

X

32.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

X

32.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

X

101

Inline XBRL Document Set for the consolidated financial statements and accompanying notes to consolidated financial statements

X

104

Cover page formatted as Inline XBRL and contained in Exhibit 101.

X

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: October 25, 2024			LITHIA MOTORS, INC.
			Registrant
			By:			/s/ Tina Miller
						Tina Miller
						Chief Financial Officer, Senior Vice President, and Principal Accounting Officer

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