Lithia Motors Inc.

10/24/2025 | Press release | Distributed by Public on 10/24/2025 14:11

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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,"
"ensure," "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:
•The profitability of our strategy and growth
•Futuremarket conditions, including anticipated car and other sales levels and gross profit 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, including
evolving vehicle distribution models
•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&Aas 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 team member 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 2024Annual 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 the largest global automotive retailer 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, 2025, we operated 447locations representing 52brands in the
United States, the United Kingdom, and Canada.
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 aftersales automotive repair and maintenance services. 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.
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 provides 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 and online customer portal complement our in-store
experiences in the United States 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, team members and shareholders includes the following
elements:
Driving operational excellence, innovation and diversification
LADbuilds magnetic customer loyalty across our 447stores, our Driveway and GreenCars e-commerce platforms,
and our entire omnichannel ecosystem by focusing on convenient and transparent experiences supported by
proprietary data science. Our entrepreneurial model that emphasizes personal accountability for our team powers
efficient operations and allows dynamic responsiveness to each of our local markets. Our best-in-class performance
management reporting provides the foundation to enable high-performing teams to drive our platform's full potential.
Investments across our ecosystem built a framework that is responsive to evolving consumer preferences, providing
a foundation that supports our current business and our ongoing expansion. These investments, particularly in our
digital strategies, connect our experienced, knowledgeable team members with our expansive inventory and
physical network of stores to ensure we are agile and adaptable. Additionally, we systematically explore and invest
in transformative adjacencies that are synergistic and complementary to our existing business, such as our captive
auto finance and fleet management offerings.
These investments support the foundational elements of our strategy. We seek to create durable customer loyalty in
our stores and our digital platforms, such as our My Driveway customer portal. These experiences and offerings,
backed by our extensive physical network, broad geographic reach, and customized digital offerings, empower our
people to provide transparent, flexible, and simple retail experiences.
Our performance-based culture is geared toward an incentive-based compensation structure for a majority of our
personnel. We develop pay plans that measure factors such as customer satisfaction, profitability, and individual
performance metrics. These plans 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 centralize many administrative functions to drive efficiencies and streamline store-level operations. These
efficiencies allow our local managers to focus on serving customers 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 talent.
Growth through acquisition and network optimization
Our acquisition growth strategy has diversified our business and been financially and culturally successful. 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 United Kingdom. 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, easy access, and the ability to leverage national branding and advertising.
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 includes a target
allocationof 25% to 35% investment in acquisitions, 25% investment in capital expenditures, innovation, and
diversification and 40% to 50% in shareholder return in the form of dividends and share repurchases based on
current valuation trends in acquisitions relative to stock price performance. During the first ninemonths of 2025, we
utilized $257.7 millionfor capital expenditures investing in our existing business, paid $42.1 millionin dividends, and
$662.3 millionin share repurchases. As of September 30, 2025, we had available liquidity of approximately $1.9
billion, which was comprised of $206.5 millionin unrestricted cash, $54.9 millionin marketable securities, and $1.6
billionavailability on our credit facilities.
Financial Performance
We experienced growth ofrevenue in 2025compared to 2024, primarily driven by increases in volume related to
acquisitions. Total gross profit grewin 2025compared to 2024, primarily driven by acquisition growth and supported
by same store increases in aftersales and F&I. New vehicle retail gross profit decreasedcompared to 2024due to
continued normalization of margins. Net income grewin 2025compared to 2024, primarily as a result of our
increase in total gross profit and financing operations, while remaining diligent in managing SG&Acosts, reducing
our total SG&Aas a % of gross profit.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Vehicle Operations
Key performance metrics for revenue and gross profit were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
($ in millions, except per unit
values)
2025
2024
Change
2025
2024
Change
Revenues
New vehicle retail
$4,630.3
$4,430.0
4.5%
$13,508.9
$12,847.9
5.1%
Used vehicle retail
3,096.3
2,843.3
8.9
9,110.2
8,630.1
5.6
Finance and insurance
378.6
360.4
5.0
1,116.8
1,061.9
5.2
Aftersales
1,037.1
1,012.8
2.4
3,039.6
2,876.3
5.7
Total revenues
9,675.8
9,221.0
4.9
28,437.1
27,014.7
5.3
Gross profit
New vehicle retail
$276.7
$306.4
(9.7)%
$853.6
$922.5
(7.5)%
Used vehicle retail
193.4
188.9
2.4
591.6
567.2
4.3
Finance and insurance
378.6
360.4
5.0
1,116.7
1,061.9
5.2
Aftersales
604.5
559.8
8.0
1,756.3
1,591.2
10.4
Total gross profit
1,466.0
1,430.4
2.5
4,361.5
4,189.5
4.1
Gross profit margins
New vehicle retail
6.0%
6.9%
(90)bps
6.3%
7.2%
(90)bps
Used vehicle retail
6.2
6.6
(40)
6.5
6.6
(10)
Finance and insurance
100.0
100.0
-
100.0
100.0
-
Aftersales
58.3
55.3
57.8
55.3
Total gross profit margin
15.2
15.5
(30)
15.3
15.5
(20)
Retail units sold
New vehicles
96,639
94,964
1.8%
282,773
273,154
3.5%
Used vehicles
109,097
104,898
4.0
325,476
316,583
2.8
Average selling price per retail
unit
New vehicles
$47,913
$46,649
2.7%
$47,773
$47,035
1.6%
Used vehicles
28,381
27,105
4.7
27,990
27,260
2.7
Average gross profit per retail
unit
New vehicles
$2,864
$3,226
(11.2)%
$3,019
$3,377
(10.6)%
Used vehicles
1,773
1,801
(1.6)
1,818
1,792
1.5
Finance and insurance
1,840
1,803
2.1
1,836
1,801
1.9
Total vehicle 1
4,104
4,271
(3.9)
4,196
4,322
(2.9)
1Includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for
new and used retail.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Same Store Operating Data
We believe that same store comparisons are an important indicator of our financial performance. Same store
measures demonstrate our ability to grow revenues in our existing locations. As a result, same store measures have
been integrated into the discussion below.
Same store measures reflect results for stores that were operating in each comparison period and only include the
months when operations occurred in both periods. For example, a store acquired in August 2024would be included
in same store operating data beginning in September 2025, after its first complete comparable month of operation.
The thirdquarter operating results for the same store comparisons would include results for that store in only the
month of Septemberfor both comparable periods.
Three Months Ended September 30,
Nine Months Ended September 30,
($ in millions, except per unit
values)
2025
2024
Change
2025
2024
Change
Revenues
New vehicle retail
$4,521.3
$4,284.6
5.5%
$12,942.5
$12,400.3
4.4%
Used vehicle retail
3,024.4
2,705.6
11.8
8,621.0
8,156.4
5.7
Finance and insurance
371.5
351.6
5.7
1,076.8
1,031.4
4.4
Aftersales
1,009.9
971.9
3.9
2,892.8
2,758.7
4.9
Total revenues
9,453.4
8,781.1
7.7
27,100.8
25,869.8
4.8
Gross profit
New vehicle retail
$270.9
$296.4
(8.6)%
$819.2
$889.5
(7.9)%
Used vehicle retail
188.4
186.2
1.2
568.7
559.1
1.7
Finance and insurance
371.5
351.6
5.7
1,076.8
1,031.4
4.4
Aftersales
589.9
540.9
9.1
1,680.3
1,534.6
9.5
Total gross profit
1,433.5
1,389.1
3.2
4,185.6
4,059.7
3.1
Gross profit margins
New vehicle retail
6.0%
6.9%
(90)bps
6.3%
7.2%
(90)bps
Used vehicle retail
6.2
6.9
(70)
6.6
6.9
(30)
Finance and insurance
100.0
100.0
-
100.0
100.0
-
Aftersales
58.4
55.6
58.1
55.6
Total gross profit margin
15.2
15.8
(60)
15.4
15.7
(30)
Retail units sold
New vehicles
94,480
92,204
2.5%
271,512
264,685
2.6%
Used vehicles
106,637
100,280
6.3
308,333
298,661
3.2
Average selling price per retail
unit
New vehicles
$47,855
$46,469
3.0%
$47,668
$46,849
1.7%
Used vehicles
28,362
26,981
5.1
27,960
27,310
2.4
Average gross profit per retail
unit
New vehicles
$2,867
$3,215
(10.8)%
$3,017
$3,361
(10.2)%
Used vehicles
1,767
1,857
(4.8)
1,844
1,872
(1.5)
Finance and insurance
1,847
1,827
1.1
1,857
1,831
1.4
Total vehicle 1
4,109
4,325
(5.0)
4,235
4,400
(3.8)
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Q3 2025vs. Q3 2024
New vehicle revenue for the three months ended September 30, 2025 increased 4.5%compared to the same
period of 2024, driven by same store performance and supported by acquisition activity. Same store new vehicle
revenue increased 5.5%due to an increasein average selling prices of 3.0%and an increasein unit volume of
2.5%.
Same store new vehicle gross profit per unit decreased 10.8%, driven by a decreasein new vehicle gross profit
margins of 90 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 $372to $4,916.
YTD 2025vs. YTD 2024
New vehicle retail revenue for the nine months ended September 30, 2025 increased 5.1%compared to the same
period of 2024, primarily due to same store performance and supported by acquisition activity. Same store new
vehicle retail revenue increased 4.4%due to an increasein unit volume of 2.6%and an increasein average selling
prices of 1.7%.
Same store new vehicle retail gross profit per unit decreased 10.2%, driven by a decreasein new vehicle retail
gross profit margins of 90 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 $324to $5,122.
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 2025vs. Q3 2024
Used vehicle revenue for the three months ended September 30, 2025 increased 8.9%compared to the same
period of 2024driven by same store performance and supported by acquisition activity. On a same store basis,
used vehicle revenue increased 11.8%due to an increasein unit volume of 6.3%and an increasein average selling
prices of 5.1%.
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 $22to $3,435.
YTD 2025vs. YTD 2024
Used vehicle retail revenue for the nine months ended September 30, 2025 increased 5.6%compared to the same
period of 2024driven by same store performance and supported by acquisition activity. On a same store basis,
used vehicle retail sales increased 5.7%due to an increasein unit volume of 3.2%and an increasein average
selling prices of 2.4%. 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, increased $6to $3,483.
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 promotes continued engagement with the consumer throughout the
ownership lifecycle.
Q3 2025vs. Q3 2024
Total finance and insurance income increased 5.0%in the three months ended September 30, 2025compared to
the same period of 2024, driven by same store performance and supported by acquisition activity. Same store
finance and insurance revenues increased 5.7%. On a same store basis, our finance and insurance revenue per
retail unit increased $20to $1,847.
MANAGEMENT'S DISCUSSION AND ANALYSIS
YTD 2025vs. YTD 2024
Total finance and insurance income increased 5.2%in the nine months ended September 30, 2025compared to the
same period of 2024, driven by same store performance and supported by acquisition activity. Same store finance
and insurance revenues increased 4.4%. On a same store basis, our finance and insurance revenue per retail unit
increased $26to $1,857.
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 2025vs. Q3 2024
Our aftersales revenue increased 2.4%in the three months ended September 30, 2025compared to the same
period of 2024, driven by same store performance and supported by acquisition activity.
We focus on retaining customers by offering competitively-priced routine maintenance and through our marketing
efforts. Customer pay revenue accounted for the largest share of our same-store aftersales revenue, representing
56.7%of the total.
Same store aftersales gross profit increased 9.1%. This increasewas primarily due to increased volumes of
customer pay and warranty transactions. Overall same store aftersales gross margins increased 280 bps, primarily
as a result of increasedcustomer pay gross margin of 240 bpsand increasedwarranty gross margin of 120 bps.
YTD 2025vs. YTD 2024
Our aftersales revenue increased 5.7%in the nine months ended September 30, 2025compared to the same
period of 2024, driven by same store performance and supported by acquisition activity. Same store warranty
revenues saw a 15.7%increase compared to the prior year.
Same store aftersales gross profit increased 9.5%. This increasewas primarily due to increased volumes of
warranty transactions. Overall same store aftersales gross margins increased 250 bps, primarily as a result of
increasedcustomer pay margins of 290 bpsand increasedwarranty gross margins of 120 bps.
Financing Operations
In the United States, 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 United Kingdom, 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Selected Financing Operations Financial Information
Three Months Ended September 30,
Nine Months Ended September 30,
($ in millions)
2025
% (1)
2024
% (1)
2025
% 1
2024
% 1
Interest and fee income
$104.9
9.2
$88.8
9.2
$298.0
9.2
$249.9
9.2
Interest expense
(52.1)
(4.6)
(51.2)
(5.3)
(150.0)
(4.6)
(146.0)
(5.4)
Total interest margin
52.8
4.6
37.6
3.9
148.0
4.6
103.9
3.8
Lease income
23.4
25.6
67.7
61.2
Lease costs
(18.6)
(21.6)
(54.0)
(51.0)
Lease income, net
4.8
4.0
13.7
10.2
Provision expense
(25.8)
(2.3)
(31.8)
(3.3)
(72.5)
(2.2)
(77.0)
(2.8)
Other financing operations expenses
(12.7)
(1.1)
(11.2)
(1.2)
(37.5)
(1.2)
(33.0)
(1.2)
Finance operations income (loss)
$19.1
$(1.4)
$51.7
$4.1
Total average managed finance receivables
$4,541.8
$3,813.0
$4,316.3
$3,617.5
1Annualized percentage of total average managed finance receivables.
DFCPortfolio Information1
Three Months Ended September 30,
Nine Months Ended September 30,
($ in millions)
2025
2024
2025
2024
Loan origination information
Net loans originated
$731.6
$518.1
$2,085.0
$1,572.4
Vehicle units financed
23,546
17,755
67,971
54,005
Total penetration rate 2
14.5%
11.6%
14.3%
11.9%
Weighted average contract rate
8.6%
9.8%
8.8%
10.0%
Weighted average credit score 3
Weighted average FE LTV 4
95.0%
95.6%
95.0%
95.5%
Weighted average term (in months)
Loan performance information
Allowance for loan losses as a percentage of ending managed
receivables
3.1%
3.2%
3.1%
3.2%
Net credit losses on managed receivables
$20.6
$27.0
$54.1
$61.4
Annualized net credit losses as a percentage of total average
managed receivables
1.9%
3.0%
1.8%
2.4%
Past due accounts as a percentage of ending managed
receivables 5
4.1%
5.1%
4.1%
5.1%
Average recovery rate 6
46.5%
45.9%
45.8%
45.3%
1Excludes Canadian and U.K.portfolios
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.
Q3 2025vs. Q3 2024
Financing operations recorded higher income in the three months ended September 30, 2025compared to the
same period of 2024, primarily due to the increased interest income resulting from the growth of the portfolio and a
decreased cost of funds, which collectively expanded total interest margin to 4.6%.
Loan originations increased in the three months ended September 30, 2025compared to the same period of 2024,
and our penetration rate increased due to increased engagement with our stores. The weighted average contract
rate of loans originated in the three months ended September 30, 2025decreased to 8.6%, compared with 9.8%in
the same period of 2024, primarily due to our maintaining competitive pricing following Federal Reserve rate cuts.
The decrease in annualized net charge-offs of past due accounts as a percentage of ending managed receivables
MANAGEMENT'S DISCUSSION AND ANALYSIS
compared to the prior year reflects the increased credit quality of the portfolio as well as improved execution of our
collateral management team.
YTD 2025vs. YTD 2024
Financing operations recorded higher income in the nine months ended September 30, 2025compared to the same
period of 2024, primarily due to increased interest income resulting from the growth of the portfolio and a decreased
cost of funds, resulting in an expansion of total interest margin to 4.6%.
The weighted average contract rate on loans originated in the nine months ended September 30, 2025decreased
to 8.8%, compared with 10.0%in the same period of 2024as we decreased rates to maintain competitiveness
following Federal Reserve rate cuts. The decrease in provision expense as a percentage of receivables compared
to the prior year reflected the increased credit quality of the portfolio as well as a decrease in the percentage of
ending managed receivables constituted by the allowance for loan losses. Other financing operations expenses as
a percentage of average managed receivables was flat with the same period of 2024 despite significant portfolio
growth, reflecting improved operational performance and economies of scale.
Operating Expenses
Selling, General and Administrative Expense
SG&Aincludes salaries and related personnel expenses, advertising (net of manufacturer cooperative advertising
credits), rent, facility costs, and other general corporate expenses.
Q3 2025vs. Q3 2024
Three Months Ended September 30,
Increase
% Increase
($ in millions)
2025
2024
Personnel
$619.6
$602.3
$17.3
2.9%
Rent and facility costs
107.6
97.6
10.0
10.2
Advertising
64.9
61.5
3.4
5.5
Other
205.9
182.2
23.7
13.0
Total SG&A
$998.0
$943.6
$54.4
5.8%
Three Months Ended September 30,
Increase
As a % of gross profit
2025
2024
Personnel
42.3%
42.1%
20bps
Rent and facility costs
7.3
6.8
Advertising
4.4
4.3
Other
14.1
12.8
Total SG&A
68.1%
66.0%
210bps
SG&Aas a percentage of gross profit was 68.1%for the three months ended September 30, 2025compared to
66.0%for the same period of 2024. SG&Aexpense increased 5.8%, driven by increases in all areas due to
acquisition activity.
On a same store basis and excluding non-core charges, SG&Aas a percentage of gross profit was 67.1%
compared to 65.1%for the same period of 2024. The increasewas primarily related to SG&Agrowth outpacing
gross profit growth in the period.
YTD 2025vs. YTD 2024
Nine Months Ended September 30,
Increase
% Increase
($ in millions)
2025
2024
Personnel
$1,868.0
$1,828.2
$39.8
2.2%
Rent and facility costs
306.2
280.4
25.8
9.2
Advertising
190.2
187.6
2.6
1.4
Other
600.9
556.8
44.1
7.9
Total SG&A
$2,965.3
$2,853.0
$112.3
3.9%
MANAGEMENT'S DISCUSSION AND ANALYSIS
Nine Months Ended September 30,
Increase
(Decrease)
As a % of gross profit
2025
2024
Personnel
42.8%
43.6%
(80)bps
Rent and facility costs
7.0
6.7
Advertising
4.4
4.5
(10)
Other
13.8
13.3
Total SG&A
68.0%
68.1%
(10)bps
SG&Aas a percentage of gross profit was 68.0%for the nine months ended September 30, 2025compared to
68.1%for the same period of 2024, driven by improvements in personnel and advertising costs relative to gross
profit. Total SG&Aexpense increased 3.9%, driven by increases in all areas excluding advertising, primarily as a
result of our acquisition activity.
On a same store basis and excluding non-core charges, SG&Aas a percentage of gross profit was 67.2%
compared to 66.6%for the same period of 2024. The increase was related to SG&Agrowth outpacing gross profit
growth in the period.
SG&Aexpense adjusted for non-core charges was as follows:
Q3 2025vs. Q3 2024
Three Months Ended September 30,
Increase
% Increase
($ in millions)
2025
2024
Personnel
$619.6
$602.3
$17.3
2.9%
Rent and facility costs
107.6
97.6
10.0
10.2
Advertising
64.9
61.5
3.4
5.5
Adjusted other
202.9
182.3
20.6
11.3
Adjusted total SG&A
$995.0
$943.7
$51.3
5.4%
Three Months Ended September 30,
Increase
As a % of gross profit
2025
2024
Personnel
42.3%
42.1%
20bps
Rent and facility costs
7.3
6.8
Advertising
4.4
4.3
Adjusted other
13.9
12.8
Adjusted total SG&A
67.9%
66.0%
190bps
Adjusted SG&Afor the three months ended September 30, 2025excludes a $15.4 millionnet gain on store
disposals, $2.5 millionin storm insurance charges,and $15.9 millionin acquisition-related expenses.
Adjusted SG&Afor the three months ended September 30, 2024excludes a $0.3 millionnet gain on store disposals
and $0.2 millionin acquisition-related expenses.
YTD 2025vs. YTD 2024
Nine Months Ended September 30,
Increase
% Increase
($ in millions)
2025
2024
Personnel
$1,868.0
$1,828.2
$39.8
2.2%
Rent and facility costs
306.2
280.4
25.8
9.2%
Advertising
190.2
187.6
2.6
1.4%
Adjusted other
597.1
541.4
55.7
10.3%
Adjusted total SG&A
$2,961.5
$2,837.6
$123.9
4.4%
MANAGEMENT'S DISCUSSION AND ANALYSIS
Nine Months Ended September 30,
Increase
(Decrease)
As a % of gross profit
2025
2024
Personnel
42.8%
43.6%
(80)bps
Rent and facility costs
7.0
6.7
Advertising
4.4
4.5
(10)
Adjusted other
13.7
12.9
Adjusted total SG&A
67.9%
67.7%
20bps
Adjusted SG&Afor the nine months ended September 30, 2025excludes $16.1 millionin acquisition-related
expenses and $5.4 millionin storm insurance charges,partially offset by a $17.7 millionnet gain on store disposals.
Adjusted SG&Afor the nine months ended September 30, 2024excludes $9.7 millionin acquisition-related
expenses, $6.0 millionin storm insurance charges, and a $0.3 millionnet gain on store disposals.
Adjusted SG&Ais a non-GAAPmeasure. See Non-GAAPReconciliations for more details.
Floor Plan Interest Expense and Floor Plan Assistance
Floor plan assistance is provided by manufacturers to support store financing of vehicle inventory and is recorded
as a component of vehicle gross profit when the specific vehicle is sold. However, because manufacturers provide
this assistance to offset inventory carrying costs, we believe a comparison of floor plan interest expense to floor
plan assistance is a useful measure of the efficiency of our vehicle sales relative to stocking levels.
Shown below are the details for carrying costs for vehicles net of floor plan assistance earned:
Q3 2025vs. Q3 2024
Three Months Ended September 30,
%
($ in millions)
2025
2024
Change
Change
Floor plan interest expense
$57.8
$76.6
$(18.8)
(24.5)%
Floor plan assistance (included as an offset to cost of sales)
(43.5)
(44.0)
0.5
1.1
Net vehicle carrying costs
$14.3
$32.6
$(18.3)
(56.1)
Floor plan interest expense decreased $18.8 millionin the three months ended September 30, 2025compared to
the same period of 2024due to a decrease in interest rates and average new inventory levels.
YTD 2025vs. YTD 2024
Nine Months Ended September 30,
%
($ in millions)
2025
2024
Change
Change
Floor plan interest expense
$169.8
$214.0
$(44.2)
(20.7)%
Floor plan assistance (included as an offset to cost of sales)
(126.0)
(127.2)
1.2
0.9
Net vehicle carrying costs
$43.8
$86.8
$(43.0)
(49.5)
Floor plan interest expense decreased $44.2 millionin the nine months ended September 30, 2025compared to the
same period of 2024due to a decrease in interest rates and average new inventory levels.
Depreciation and Amortization
Depreciation and amortization is comprised of depreciation expense related to buildings, significant remodels or
improvements, furniture, tools, equipment, signage, and amortization of certain intangible assets, including
customer lists.
Q3 2025vs. Q3 2024
Three Months Ended September 30,
Increase
% Increase
($ in millions)
2025
2024
Depreciation and amortization
$65.5
$63.5
$2.0
3.1%
MANAGEMENT'S DISCUSSION AND ANALYSIS
YTD 2025vs. YTD 2024
Nine Months Ended September 30,
Increase
% Increase
($ in millions)
2025
2024
Depreciation and amortization
$194.6
$183.6
$11.0
6.0%
Acquisition activity contributed to the increases in depreciation and amortization in 2025compared to 2024. We
acquired $55.1 millionof depreciable property as part of our acquisition activity over the trailing twelve-months
ended September 30, 2025. For the nine months ended September 30, 2025, we invested $257.7 millionin capital
expenditures. These investments increased the amount of depreciation expense in the nine months ended
September 30, 2025. See the discussion under Liquidity and Capital Resources for additional information.
Operating Income
Operating income as a percentage of revenue, or operating margin, was as follows:
Q3 2025vs. Q3 2024
Three Months Ended September 30,
2025
2024
Operating margin
4.4%
4.6%
Operating margin adjusted for non-core charges 1
4.4%
4.6%
1See Non-GAAPReconciliations for more details.
Operating margin decreased 20bps in the three months ended September 30, 2025compared to the same period
in 2024, primarily due to increased SG&Aof 5.8%, partially offset by increased gross profit of 2.5%and improved
profitability of our Financing Operations.
YTD 2025vs. YTD 2024
Nine Months Ended September 30,
2025
2024
Operating margin
4.4%
4.3%
Operating margin adjusted for non-core charges 1
4.4%
4.3%
1See Non-GAAPReconciliations for more details.
Operating margin increased 10bps in the nine months ended September 30, 2025compared to the same period in
2024, primarily due to increased gross profit of 4.1%and improved profitability of our Financing Operations, partially
offset by increased SG&Aof 3.9%.
Non-Operating Expenses
Other Interest Expense
Other interest expense includes interest on senior notes, debt incurred related to acquisitions, real estate
mortgages, used and service loaner vehicle inventory financing commitments, and revolving lines of credit.
Q3 2025vs. Q3 2024
Three Months Ended September 30,
Increase
% Increase
($ in millions)
2025
2024
Senior notes interest
$21.0
$19.0
$2.0
10.5%
Mortgage interest
14.9
12.9
2.0
15.5
Other interest
34.7
34.0
0.7
2.1
Capitalized interest
(2.3)
(1.4)
0.9
NM
Total other interest expense
$68.3
$64.5
$3.8
5.9%
Other interest expense for the three months ended September 30, 2025 increased $3.8 millionrelated to increased
borrowings on our warehouse facilities compared to the same period of 2024, and our September 2025 issuance of
senior notes due 2030.
MANAGEMENT'S DISCUSSION AND ANALYSIS
YTD 2025vs. YTD 2024
Nine Months Ended September 30,
Increase
% Increase
($ in millions)
2025
2024
Senior notes interest
$59.1
$57.1
$2.0
3.5%
Mortgage interest
43.4
36.4
7.0
19.2
Other interest
104.6
99.4
5.2
5.2
Capitalized interest
(6.6)
(3.6)
3.0
NM
Total other interest expense
$200.5
$189.3
$11.2
5.9%
Other interest expense for the nine months ended September 30, 2025 increased $11.2 millionrelated to increased
borrowings on our warehouse facilities compared to the same period of 2024, and our September 2025 issuance of
senior notes due 2030.
Other (Expense) Income, net
Q3 2025vs. Q3 2024
Three Months Ended September 30,
Increase
(Decrease)
% Increase
($ in millions)
2025
2024
Pinewood Investment
$(19.6)
$0.7
$(20.3)
NM
Foreign currency remeasurement
(2.1)
3.0
(5.1)
NM
Net pension benefit
2.4
0.6
1.8
300.0
Miscellaneous
6.0
0.8
5.2
650.0
Other (expense) income, net
$(13.3)
$5.1
$(18.4)
NM
Other (expense) income, net in the three months ended September 30, 2025 decreased $18.4 millioncompared to
the same period of 2024, primarily as a result of fair market value changes in our investment in Pinewood
Technologies Group PLC and foreign currency remeasurements.
YTD 2025vs. YTD 2024
Nine Months Ended September 30,
Increase
(Decrease)
% Increase
(Decrease)
($ in millions)
2025
2024
Pinewood Investment
$11.3
$30.5
(19.2)
(63.0)
Foreign currency remeasurement
3.0
(4.5)
7.5
NM
Net pension benefit
7.1
1.8
5.3
294.4
Miscellaneous
14.5
7.6
6.9
90.8
Other income, net
$35.9
$35.4
$0.5
1.4%
Other income, net in the nine months ended September 30, 2025 increased $0.5 millioncompared to the same
period of 2024, primarily as a result of fair market value changes in our investment in Pinewood Technologies Group
PLC, foreign currency remeasurements, and an increase in net pension benefit.
Income Tax Provision
Our effective income tax rate was as follows:
Nine Months Ended September 30,
2025
2024
Effective income tax rate
25.1%
23.6%
Effective income tax rate excluding non-core items 1
24.6%
24.4%
1See Non-GAAPReconciliations for more details.
Our effective income tax rate for the nine months ended September 30, 2025compared to last year was negatively
affected by a decrease in general business credits and tax basis differences on divested assets, offset by a
decrease in valuation allowance. Excluding non-core charges and acquired general business credits, we estimate
our annual effective income tax rate to be 25.1%.
MANAGEMENT'S DISCUSSION AND ANALYSIS
On July 4, 2025, the One Big Beautiful Bill Act ("OB3 Act") was enacted into U.S.law. The effect of this legislation
has been included in our income tax provision for the nine-month period ended September 30, 2025. As a result of
the OB3 Act, we expect to realize cash tax savings in 2025, primarily driven by enhanced bonus depreciation
provisions and modifications to the business interest expense limitation rules. The OB3 Act does not have a material
impact on our effective tax rate.
Non-GAAPReconciliations
Non-GAAPmeasures do not have definitions under GAAPand may be defined differently by and not comparable to
similarly titled measures used by other companies. As a result, we review any non-GAAPfinancial 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-GAAPmeasures, but also to consider them with the most
directly comparable GAAPmeasures. We believe each of the non-GAAPfinancial 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 GAAPfinancial measures to assess our business, including our compliance with
covenants in our credit facility and in communications with our Boardconcerning financial performance. These
measures should not be considered an alternative to GAAPmeasures.
The following tables reconcile certain reported non-GAAPmeasures, which we refer to as "adjusted," to the most
comparable GAAPmeasure from our Consolidated Statements of Operations.
Three Months Ended September 30, 2025
($ in millions, except per share
amounts)
As reported
Net gain on
disposal of
stores
Investment
loss(1)
Insurance
reserves
Acquisition
expenses
Tax attribute
Adjusted
Selling, general and administrative
$998.0
$15.4
$-
$(2.5)
$(15.9)
$-
$995.0
Operating income
421.6
(15.4)
-
2.5
15.9
-
424.6
Other (expense) income, net
(13.3)
-
22.7
-
-
-
9.4
Income (loss) before income taxes
$282.2
$(15.4)
$22.7
$2.5
$15.9
$-
$307.9
Income tax (provision) benefit
(63.6)
7.2
(6.0)
(0.5)
(0.6)
(3.5)
(67.0)
Net income (loss)
218.6
(8.2)
16.7
2.0
15.3
(3.5)
240.9
Net income attributable to NCI
(1.5)
-
-
-
-
-
(1.5)
Net income (loss) attributable to
Lithia Motors, Inc.
$217.1
$(8.2)
$16.7
$2.0
$15.3
$(3.5)
$239.4
Diluted earnings (loss) per share
attributable to Lithia Motors, Inc.
$8.61
$(0.32)
$0.66
$0.08
$0.61
$(0.14)
$9.50
Diluted share count
25.2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Three Months Ended September 30, 2024
($ in millions, except per share
amounts)
As reported
Net gain on
disposal of
stores
Investment
loss(1)
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)
421.9
(0.3)
-
0.2
-
-
421.8
Other income, net
5.1
-
0.4
-
-
-
5.5
Income (loss) before income taxes
$285.9
$(0.3)
$0.4
$0.2
$-
$-
$286.2
Income tax (provision) benefit
(64.8)
0.1
(0.4)
(0.1)
-
(0.5)
(65.7)
Net income (loss)
221.1
(0.2)
-
0.1
-
(0.5)
220.5
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.
$207.3
$(0.2)
$-
$0.1
$11.6
$(0.5)
$218.3
Diluted earnings (loss) per share
attributable to Lithia Motors, Inc.
$7.73
$(0.01)
$-
$-
0.43
$(0.01)
$8.14
Diluted share count
26.8
Nine Months Ended September 30, 2025
($ in millions, except per share
amounts)
As reported
Net gain on
disposal of
stores
Investment
gain(1)
Insurance
reserves
Acquisition
expenses
Tax
attribute
Adjusted
Selling, general and administrative
$2,965.3
$17.7
$-
$(5.4)
$(16.1)
$-
$2,961.5
Operating income (loss)
1,253.3
(17.7)
-
5.4
16.1
-
1,257.1
Other income (expense), net
35.9
-
(4.1)
-
-
-
31.8
Income (loss) before income taxes
$918.9
$(17.7)
$(4.1)
$5.4
$16.1
$-
$918.6
Income tax (provision) benefit
(230.9)
11.6
1.0
(1.4)
(0.6)
(5.7)
(226.0)
Net income (loss)
688.0
(6.1)
(3.1)
4.0
15.5
(5.7)
692.6
Net income attributable to NCI
(5.3)
-
-
-
-
-
(5.3)
Net income (loss) attributable to
Lithia Motors, Inc.
$682.7
$(6.1)
$(3.1)
$4.0
$15.5
$(5.7)
$687.3
Diluted earnings (loss) per share
attributable to Lithia Motors, Inc.
$26.42
$(0.24)
$(0.12)
$0.16
$0.60
$(0.22)
$26.60
Diluted share count
25.8
MANAGEMENT'S DISCUSSION AND ANALYSIS
Nine Months Ended September 30, 2024
($ in millions, except
per share amounts)
As reported
Net gain on
disposal of
stores
Investment
gain(1)
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)
1,157.0
(0.3)
-
6.0
9.7
-
-
1,172.4
Income (loss) before
income taxes
$789.1
$(0.3)
$(29.1)
$6.0
$9.7
$-
$-
$775.4
Income tax (provision)
benefit
(186.5)
0.1
7.1
(1.5)
(0.5)
-
(8.0)
(189.3)
Net income (loss)
602.6
(0.2)
(22.0)
4.5
9.2
-
(8.0)
586.1
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.
$584.0
$(0.2)
$(22.0)
$4.5
$9.2
$11.6
$(8.0)
$579.1
Diluted earnings per
share attributable to
Lithia Motors, Inc.
$21.47
$(0.01)
$(0.81)
$0.17
$0.34
$0.43
$(0.3)
$21.29
Diluted share count
27.2
(1)Investment losses (gains) retrospectively included in adjusted non-GAAPfinancial measures presented
Liquidity and Capital Resources
We manage our liquidity and capital resources in the context of our overall business strategy, continually forecasting
and managing our cash, working capital balances and capital structure in a way that we believe will meet the short-
term and long-term obligations of our business while maintaining liquidity and financial flexibility. Our current free
cash flow deployment strategy includes a target allocation of 25% to 35% investment in acquisitions, 25%
investment in capital expenditures, innovation, and diversification and 40% to 50% in shareholder return in the form
of dividends and share repurchases based on current valuation trends in acquisitions relative to stock price
performance.
We believe we have sufficient sources of funding to meet our business requirements for the next 12 months and in
the longer term. Cash flows from operations and borrowings under our credit facilities are our main sources for
liquidity. In addition to the above sources of liquidity, potential sources to fund our business strategy include
financing of real estate and proceeds from debt or equity offerings. We evaluate all of these options and may select
one or more of them depending on overall capital needs and the availability and cost of capital, although no
assurances can be provided that these capital sources will be available in sufficient amounts or with terms
acceptable to us.
Available Sources
Below is a summary of our immediately available funds:
($ in millions)
September 30, 2025
December 31, 2024
Change
% Change
Cash and cash equivalents
$206.5
$225.1
$(18.6)
(8.3)%
Marketable securities
54.9
53.4
1.5
2.8
Available credit on credit facilities
1,639.8
1,075.3
564.5
52.5
Total current available funds
$1,901.2
$1,353.8
$547.4
40.4%
Information about our cash flows, by category, is presented in our Consolidated Statements of Cash Flows. The
following table summarizes our cash flows:
MANAGEMENT'S DISCUSSION AND ANALYSIS
Nine Months Ended September 30,
Change
(In millions)
2025
2024
in Cash Flow
Net cash provided by operating activities
$233.0
$363.3
$(130.3)
Net cash used in investing activities
(479.4)
(1,820.8)
1,341.4
Net cash provided by financing activities
264.5
880.2
(615.7)
Operating Activities
Cash provided by operating activities for the nine months ended September 30, 2025 decreased $130.3 million
compared to the same period of 2024, primarily related to changes in floor plan notes payable, other assets, and
finance receivables, partially offset by changes in inventories, net income, and other long-term liabilities and
deferred revenuecompared to the same period of 2024.
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-GAAPmeasure, is
presented below:
Nine Months Ended September 30,
Change
(In millions)
2025
2024
in Cash Flow
Net cash provided by operating activities - as reported
$233.0
$363.3
$(130.3)
Adjust: Net borrowings on floor plan notes payable, non-trade
73.3
280.1
(206.8)
Less: Borrowings on floor plan notes payable, non-trade associated with acquired
new vehicle inventory
(62.9)
(105.5)
42.6
Adjust: Financing receivables activity
671.3
524.2
147.1
Net cash provided by operating activities - adjusted
$914.7
$1,062.1
$(147.4)
Investing Activities
Net cash used in investing activities totaled $0.5 billionand $1.8 billion, respectively, for the nine months ended
September 30, 2025and 2024.
Below are highlights of significant activity related to our cash flows from investing activities:
Nine Months Ended September 30,
Change
(In millions)
2025
2024
in Cash Flow
Capital expenditures
$(257.7)
$(271.9)
$14.2
Cash paid for acquisitions, net of cash acquired
(417.6)
(1,247.0)
829.4
Net cash for other investments
(12.7)
(329.1)
316.4
Proceeds from sales of stores
178.1
21.9
156.2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Capital Expenditures
Below is a summary of our capital expenditure activities ($ 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.
Capital expenditures for the nine months ended September 30, 2025, compared to the same period of 2024were
lower for existing facility purchases, maintenance, new operations purchases and improvements, and information
technology, and higher in 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-GAAPmeasure, as well as certain other acquisition-related
information is presented below:
Nine Months Ended September 30,
($ in millions)
2025
2024
Number of locations acquired
Cash paid for acquisitions, net of cash acquired
$(417.6)
$(1,247.0)
Add: Borrowings on floor plan notes payable: non-trade associated with acquired new vehicle inventory
62.9
105.5
Cash paid for acquisitions, net of cash acquired - adjusted
$(354.7)
$(1,141.5)
MANAGEMENT'S DISCUSSION AND ANALYSIS
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-GAAPmeasure, 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)
2025
2024
in Cash Flow
Cash provided by financing activities, as reported
$264.5
$880.2
$(615.7)
Less: Net borrowings on floor plan notes payable: non-trade
(73.3)
(280.1)
206.8
Less: Net borrowings on non-recourse notes payable
(136.3)
(77.4)
(58.9)
Cash provided by financing activities, as adjusted
$54.9
$522.7
$(467.8)
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)
2025
2024
in Cash Flow
Net borrowings on lines of credit
$132.0
$698.4
$(566.4)
Principal payments on long-term debt and finance lease liabilities, scheduled
(29.6)
(29.0)
(0.6)
Principal payments on long-term debt and finance lease liabilities, other
(15.7)
(48.2)
32.5
Proceeds from issuance of long-term debt
741.0
279.5
461.5
Principal payments on non-recourse notes payable
(959.0)
(661.6)
(297.4)
Proceeds from the issuance of non-recourse notes payable
1,095.3
739.0
356.3
Payment of debt issuance costs
(11.7)
(7.6)
(4.1)
Proceeds from issuance of common stock
21.0
21.2
(0.2)
Repurchase of common stock
(662.3)
(273.2)
(389.1)
Dividends paid
(42.1)
(42.4)
0.3
Payment of contingent consideration related to acquisitions
(9.4)
(12.0)
2.6
Other financing activity
(68.3)
(64.0)
(4.3)
Equity Transactions
In August 2025, our Boardapproved an additional $750 million repurchase authorization of our common stock. This
authorization was in addition to previous authorizations over the last several years, now totaling a combined
repurchase authorization of up to $3.2 billionof our common stock. We repurchased a total of 2,139,114shares of
our common stock at an average price of $314.16in the first ninemonths of 2025, consisting of 36,590related to
tax withholding on vesting RSUs, and 2,102,524related to our repurchase authorizations. As of September 30,
2025, we had $910.1 millionremaining available for repurchases and the authorizations do not have expiration
dates.
In the first ninemonths of 2025, we declared and paid dividends on our common stock as follows:
Dividend paid:
Dividend
amount
per share
Total amount of
dividend
(in millions)
March 2025
$0.53
$13.9
May 2025
$0.55
$14.3
August 2025
$0.55
$13.9
We evaluate performance and make a recommendation to the Boardon dividend payments on a quarterly basis.
MANAGEMENT'S DISCUSSION AND ANALYSIS
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, 2025
(In millions)
Outstanding
Remaining
Available
Floor plan note payable: non-trade
$2,904.8
$-
Floor plan notes payable
1,964.1
-
Used and service loaner vehicle inventory financing commitments
1,020.8
18.8
Revolving lines of credit
1,310.6
1,591.3
2, 3
Warehouse facilities
1,252.0
29.7
Non-recourse notes payable
2,245.7
-
4.625% Senior notes due 2027
400.0
-
4.375% Senior notes due 2031
550.0
-
3.875% Senior notes due 2029
800.0
-
5.500% Senior notes due 2030
600.0
-
Real estate mortgages, finance lease obligations, and other debt
1,117.3
-
Unamortized debt issuance costs
(26.8)
-
Total debt, net
$14,138.5
$1,639.8
1As of September 30, 2025, we had a $3.0 billionnew vehicle floor plan commitment as part of our US Bank syndicated
credit facility, and a $500 million CADwholesale 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, 2025. This amount is reduced by $7.6
millionfor 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 15 - Recent Accounting Pronouncementsfor 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 2024
Annual Report on Form 10-K filed with the SECon February 24, 2025.
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 United Kingdom. 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.
Lithia Motors Inc. published this content on October 24, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 24, 2025 at 20:11 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]