Lithia Motors NYSE: LAD reported first-quarter results marked by record revenue and what executives described as continued progress in diversifying earnings across new and used vehicle sales, after-sales, and its captive finance platform.
During the earnings call, President and CEO Bryan DeBoer said the company generated record revenue of $9.3 billion and adjusted diluted EPS of $7.34, citing “the power of our differentiated and diversified model and the operational resilience that has defined our business across all cycles.” DeBoer added that the quarter included weather challenges and a “dynamic macro backdrop,” but said the company still delivered “solid revenue growth year-over-year.”
Mixed same-store trends as used and after-sales offset new-vehicle pressure
DeBoer said same-store revenue declined 1.7% and total gross profit declined 2.3%, which he attributed in part to a difficult comparison against a “strong first quarter of 2025.” He noted total vehicle gross profit per unit (GPU) was $3,928, essentially flat sequentially versus $3,946 in the fourth quarter.
On the sales mix, management pointed to strength in used vehicles and after-sales:
- Used vehicle revenue rose 4.6% on a same-store basis, with used unit growth of 0.6%.
- After-sales revenue increased 3.8%, while after-sales gross profit rose 5.7%; after-sales margin expanded to 58.7%.
- F&I per retail unit was $1,813, which DeBoer said was “essentially flat year-over-year.”
By contrast, new vehicle results reflected what DeBoer described as a pull-forward effect tied to tariff avoidance in the prior year. New vehicle revenue declined 7.1% on a 7.1% decline in units. New vehicle GPU was $2,722, down $227 year-over-year and modestly lower than $2,766 in the fourth quarter. DeBoer said luxury brand revenue fell 10.2%, domestic was down 8.7%, and imports declined 5.4%.
Inventory levels improved during the quarter, with new vehicle day supply at 49 days versus 54 days at the end of the fourth quarter. Used inventory was 47 days, compared with 48 days in the prior quarter.
Used vehicle pricing and sourcing highlighted as a key lever
Executives spent significant time discussing used vehicle profitability and pricing discipline. DeBoer said used GPU was $1,680, down $115 year-over-year, but up sequentially from $1,575 in the fourth quarter. He attributed the sequential improvement to more dynamic pricing and “finding higher demand vehicles,” adding that the company’s broader digital reach via Driveway and GreenCars can expand a store’s effective market beyond a typical 30- to 50-mile radius.
In response to questions on sourcing, DeBoer contrasted profitability on customer-sourced units versus auction-sourced vehicles. He said customer-acquired units generated about $2,483 per unit, while vehicles acquired outside customer channels were around $700 to $800, calling the trade-in channel “hyper important.”
DeBoer also argued the company has room to improve used pricing, stating Lithia’s pricing was about 95% of comparable one-price used car retailers for the same vehicles. He said the shortfall is concentrated in ValueAuto vehicles and in vehicles with unusually low mileage for their age, where he said the company can underprice by 8% to 9%. “Velocity can hurt your gross profit in used cars,” he said, adding that the “ideal time to sell a used car is between 15 and 40 days.”
After-sales growth and UK improvements
In after-sales, DeBoer said growth was consistent across categories. He cited customer pay gross profit growth of 6.5% and warranty gross profit growth of 5%. In the Q&A, management clarified that revenue growth was “five and four” for customer and warranty, respectively, while the 7% and 5% figures referenced gross profit growth.
The company also highlighted strong performance in the U.K. DeBoer said U.K. gross profit rose 12.5%, and SG&A as a percentage of gross profit improved 440 basis points year-over-year. Adjusted pre-tax income in the U.K. grew 78% for the quarter. DeBoer attributed the improvement to network optimization, brand changes, and leadership execution, including adding Chinese OEM brands and removing underperforming stores.
Discussing Chinese OEMs, DeBoer said Chinese manufacturers have gained about 12% market share in the U.K., driven more by ICE and hybrids than battery-electric vehicles. He cautioned against applying European dynamics directly to Canada or the U.S., adding that the margins on Chinese-brand vehicles in the U.K. are “very similar to our mainstream margins” there.
Driveway Finance expands with record originations and higher penetration
Driveway Finance Corporation (DFC) posted what management called another quarter of high-quality growth. DeBoer said financing operation income was $21 million, up 71% year-over-year, driven by record originations and improving loss provisions. CFO Tina Miller said DFC originated a record $840 million of loans, increased net interest margin to 4.8% (up 20 basis points), and reached North American penetration of 18% for the quarter.
Miller also cited credit metrics, including an annualized provision rate of 3%, average origination FICO score of 750, and 95% loan-to-value in the first quarter. She said the portfolio reached $5 billion, supported by “increasingly efficient securitizations.”
Asked whether DFC’s penetration target could exceed its “20%+” goal, Driveway Finance SVP Chuck Lietz said the company sees opportunity for “positive upsides of 20% plus,” particularly as Lithia leans further into used vehicles, where he said penetration rates tend to be better than for new vehicles.
Cost initiatives, Pinewood.AI rollout, and capital returns
On expenses, adjusted SG&A as a percentage of gross profit was 71.5% in the quarter, compared to 68.2% a year ago. Both DeBoer and Miller emphasized sequential stability and ongoing cost actions, including tighter variable compensation, staffing alignment, vendor consolidation, retiring legacy systems, and automation, including the use of AI tools such as chatbots and customer service automation.
Management also discussed its partnership with Pinewood.AI. Miller said the company is tracking toward piloting “a couple of the stores” on Pinewood’s dealer management system in the U.S. “towards the end of this year.” DeBoer said the company is rolling Pinewood out by manufacturer, and cited the U.K. experience, where he said it took about two quarters to complete rollout across 150 businesses without additional costs. In the Q&A, DeBoer said Pinewood is expected to help move SG&A from the “mid-60s to mid-50s,” while other initiatives and market volume are expected to drive progress before full deployment.
Capital allocation remained focused on repurchases. DeBoer said the company repurchased $259 million of stock in the quarter, retiring about 4% of shares outstanding. Miller said the company allocated “nearly $300 million” to repurchases at an average price of $275. She also reported adjusted EBITDA of $374.6 million, down 9% year-over-year, and said adjusted cash flow from operations was $381 million after adjusting for a one-time $1.1 billion benefit related to converting to a VIN-specific used vehicle floor plan line.
On acquisitions, DeBoer said the company added import and luxury franchises in U.S. markets and continued diversifying the U.K. portfolio with emerging Chinese OEM brands. He reiterated underwriting discipline, saying Lithia targets purchase prices of 15% to 30% of revenue or 3x to 6x normalized EBITDA, and described the M&A market as “still quite frothy.”
Looking ahead, DeBoer said the company felt “pretty good about the start of Q2,” while noting geopolitical uncertainty and the need for tariff clarity. He also referenced industry demand of 15.8 SAAR and said the company believes volumes could “start trickling up again towards that 17 million units a year number” if affordability improves.
About Lithia Motors NYSE: LAD
Lithia Motors, Inc is an American automotive retailer headquartered in Medford, Oregon. Founded in 1946 as a small auto body and glass shop, the company has grown through organic expansion and strategic acquisitions to become one of the largest automotive retail networks in North America. Lithia operates dealerships across the United States and Canada, offering a broad portfolio of new and pre-owned vehicles from more than 40 different manufacturers.
The company's core business activities include vehicle sales, financing, insurance, parts and service.
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