LMP Automotive Q3 2021 Earnings Report

LMP Automotive EPS Results

• Actual EPS: $0.42
• Consensus EPS: -$0.37
• Beat/Miss: Beat by +$0.79
• One Year Ago EPS: N/A

LMP Automotive Revenue Results

• Actual Revenue: $141.40 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

LMP Automotive Announcement Details

• Quarter: Q3 2021
• Date: 11/15/2021
• Time: After Market Closes
• Conference Call Date: Sunday, November 14, 2021
• Conference Call Time: 7:00PM ET

LMP Automotive (OTCMKTS:LMPX), through its subsidiaries, buys, sells, rents and subscribes for, and obtains financing for automobiles online and in person in the United States. It primarily buys pre-owned automobiles primarily through auctions or directly from other automobile dealers, as well as new automobiles from manufacturers and distributors at fleet rates. The company was incorporated in 2017 and is headquartered in Fort Lauderdale, Florida.

LMP Automotive Q3 2021 Earnings Call Transcript

Key Takeaways

• Revenue of $141.4 million with $27.6 million in gross profit and a 19.5% gross margin (+0.6 pts QoQ), delivering $11.9 million in adjusted EBITDA ($1.18 per share, +7.2% QoQ).
• Ended Q3 with a strong balance sheet of $29.7 million cash and $50.9 million in adjusted shareholder equity.
• Excluding the latest acquisition, annualized run rates reached $565 million in revenue and $47.6 million in adjusted EBITDA, demonstrating scaled growth.
• Closed an acquisition this quarter expected to be immediately accretive, while maintaining a robust pipeline of small- and large-deal M&A opportunities at attractive multiples.
• Underway a refinancing of the ~$96 million term loan to support ongoing acquisitions and enable future share buybacks and dividends, targeting close from Q4 into early next year.

Presentation

[Operator]

Greetings, and welcome to LMP Automotive Holdings, Inc. third quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. This call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended. Such statements include, but are not limited to, any statements relating to our expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar matters that are not historical facts.

[Operator]

These statements may be preceded by, followed by, or include the words aim, anticipate, believe, estimate, expect, forecast, intend, likely, outlook, plan, potential, project, projection, seek, can, could, may, should, would, will, the negative thereof, and other words in terms of similar meanings. Forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could negatively affect our business, operating results, financial condition and stock value.

[Operator]

Factors that could cause actual results to differ materially from those currently anticipated include our dependence on external sources for the financing of our operations, our ability to effectively execute our business plan, our ability to maintain and grow our reputation and to achieve and maintain the market acceptance of our services and platform, our ability to manage the growth of our operations over time, our ability to maintain adequate protection of our intellectual property and to avoid violation of the intellectual property rights of others, our ability to maintain relationships with existing customers and automobile suppliers and develop relationships, and our ability to compete and succeed in a highly competitive and evolving industry, as well as other risks described in our SEC filings. There is no assurance that any forward-looking statements will materialize.

[Operator]

You are cautioned not to place undue reliance on forward-looking statements which reflect expectations only as of this date. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions, or circumstances on which any such statement is based, except as required by law. It is now my pleasure to introduce your host, Sam Tawfik as Chief Executive Officer. Please go ahead, sir.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Thank you, operator, and good afternoon, everyone. Thanks for joining our third quarter earnings call. With me on the call are Richard Aldahan, our Chief Operating Officer, and Robert Bellaflores, our Chief Financial Officer. I'm pleased to announce our record third quarter results, which exceeded our internal outlook. Our revenue was $141.4 million, generating $27.6 million in gross profits or 19.5%. Gross profit margins increased 0.6% quarter-over-quarter. Our adjusted EBITDA was $11.9 million for the quarter, or $1.18 per share, a 7.2% increase quarter-over-quarter. We ended the quarter with $29.7 million in cash and $50.9 million in adjusted shareholder equity.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Our third quarter annualized run rates, excluding the acquisition we closed this quarter, which we expect to be immediately accretive to income this quarter, are $565 million in revenue and $47.6 million in adjusted EBITDA. I am now gonna open up the call for questions and answers. Operator?

[Operator]

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from Mitchell Farr. Please go ahead.

[Mitchell Farr, Analyst at Unknown]

Hello, Sam. Can you hear me?

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

I hear you. Hi, Mitch.

[Mitchell Farr, Analyst at Unknown]

Hey, how are you doing? I have a question relative to, I understand your new sales in terms of car dealers, new sales is not the greatest lion's share of the revenue, but it's more into the used car sales versus new cars and then maintenance. I understand as you acquire new dealerships over the country, you're going to, or certain areas, acquire new clients that are gonna purchase cars, new cars as well as used cars locally at their dealers, which they're used to for years. But when people are purchasing cars online and they're shipped to a different location, you're losing the future maintenance business from that client 'cause it could be in a different state, etc. How is that working in terms of the revenue of maintenance, losing people, but gaining people? If you understand.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Thank you, Mitch. I think I know what you're asking. We haven't seen an effect of that. We see all segment groups growing and so far. We haven't seen a shift in the maintenance category as far as maintenance. I believe that's hitting the records as well. So.

[Mitchell Farr, Analyst at Unknown]

I see. The why kinda washes out, like you're gaining new clients with acquisitions, but you just may not be losing as many with sales out of the state, where you have to ship them out.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

That would be the case, yes.

[Mitchell Farr, Analyst at Unknown]

I see. Okay. Thank you.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Thank you, Mitch.

[Operator]

Next question comes from Stephanie Moore with Truist.

[Stephanie Moore, Equity Research Associate at Truist]

Hi, good afternoon.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Hi, Stephanie. Good afternoon.

[Stephanie Moore, Equity Research Associate at Truist]

Great. I was hoping you could talk a little bit about your thoughts, maybe some conversations you're having with the OEMs or others about when you think that you'll start to see when the some of the supply demand dynamics maybe normalize, or if they ever normalize, and how you're kind of baking in those assumptions in your M&A targets and expectations going forward.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Thank you, Stephanie. As far as the OEMs, we haven't been given any indications on steady supply. It's sporadic. We read it in the news. It's public information, nonetheless, hard to predict. As far as the expectations for the supply fulfilling the current demand, we see for the foreseeable future is that, not being suppressed for the foreseeable future. We see being steady but maybe choppy on a monthly basis, but on a quarterly/semi-annual basis, just the demand outstripping the supply for the foreseeable future, which would entail same if not better financial results for the foreseeable future. That make sense, Stephanie?

[Stephanie Moore, Equity Research Associate at Truist]

Absolutely. I appreciate it. I guess touching a little bit on the M&A opportunity going forward, are you finding it? I feel like there's been certainly an increase in deals this year versus prior years, which makes sense given the environment and obviously the large opportunity. Do you find that it's more competitive to go after, you know, select opportunities or select groups? Or do you feel that the pie still remains pretty large, that it's really just as attractive as it was, you know, before? Thank you.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Thank you. That's a great question. We see it as the pipe being very large. We continue to get inquiries, and our pipeline is growing. The beauty of what we're doing, although the larger deals are easier to do than the smaller ones, but the smaller ones we capture for better prices, i.e., lower multiples, so it's just more work but very accretive, and that's what we've been doing so far. So, basically, tucking in small and medium-sized acquisitions and aggregating them as we have gives us a great cost basis from a multiple point of view. Nonetheless, the larger deals are easier, but we see both existing. It's very busy out there. It has not slowed down.

[Stephanie Moore, Equity Research Associate at Truist]

Great. Thank you so much. I appreciate it.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Thank you, Stephanie.

[Operator]

Once again, if you want to ask question. Please press star one on your telephone keypad. Your next question comes from Chris Nguyen. Please go ahead.

[Chris Nguyen, Analyst at Unknown]

Hey, good afternoon, Sam. I just have a question regarding how would the company attract new investors so that, you know, we could be moving the stock prices?

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

That's a difficult one to answer, Chris. We see as we execute our business plan and grow to scale, we're expecting other analysts to pick up coverage given the size in the sector. There are not too many analysts in this sector. Unfortunately, it's a very lucrative sector, so hopefully, just continue to execute as you see, and things will gravitate in the right direction.

[Chris Nguyen, Analyst at Unknown]

I don't know how the analysts come about, but do you guys have, like, a plan in place to, you know, contact these analysts, or how would they come about?

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Yes, we do contact analysts, and there are not many in this sector. We're in a very large sector, where our peers are all in the Fortune 500. So, I believe when we reach the certain thresholds, which we're approaching, if we close all these deals, then it's likely they'll get that coverage.

[Chris Nguyen, Analyst at Unknown]

Awesome. All right, thank you so much for your time. That's all for me.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Thank you, Chris.

[Operator]

Next question, Josh Cohen.

[Josh Cohen, VP of Sales at SpringServe]

Hey, congratulations on a great quarter. Really excited to see profitability. Wanted to get a sense of how things are shaping up with the refinancing and whether dividend and buyback are still on the table, and what kind of timing expectation, if any, can be communicated at this point.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Hi, Josh, and thank you. Let me give you some color on that. We're currently in a recapitalization phase where we're refinancing out our current term loan, which is excluding flooring, is approximately only $96 million dollars, by the way, of which we have $30 million in cash as we stand practically. That said, we're looking for a flexible structure to accommodate not only the deals under contract but our future pipeline deals. As we just mentioned, the pipeline is increasing. It's very exciting. And that structure aiming to accommodate not only the future pipeline deals, existing deals, but also less prohibitive where we can.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Where the company can buy back stock and issue dividends as our peer groups do, because that attracts institutional investors and creates shareholder value and liquidity. As far as timing is concerned, we're aiming to close some of the acquisitions this quarter. It may be tough, and some, if not all, may be delayed into January, February or the second quarter, given the frequency of acquisitions in our sector, the burden and workload of certain manufacturers and vendors along with the upcoming holidays. So, while we're aiming to close some this quarter, if that doesn't happen, it looks as though it'll be in the second quarter. Things are progressing well and we're confident in our strategy.

[Josh Cohen, VP of Sales at SpringServe]

Thank you. Congrats again. Really great numbers today.

[Operator]

There are no further questions, so I'd like to turn the floor over to Sam for closing remarks.

[Sam Tawfik, CEO at LMP Automotive Holdings, Inc.]

Thank you, operator, and thank you everybody for joining. Have a great afternoon.

[Operator]

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

Participants

Executives

• Sam Tawfik, CEO

Analysts

• Chris Nguyen, Analyst at Unknown
• Josh Cohen, VP of Sales at SpringServe
• Mitchell Farr, Analyst at Unknown
• Stephanie Moore, Equity Research Associate at Truist