LMP Automotive Q3 2021 Earnings Call Transcript

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November 14, 2021

There are 5 speakers on the call.

Operator

Greetings, and welcome to LMP Automotive Holdings, Inc. 3rd 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. As a reminder, this conference is being recorded.

Operator

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. 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, in other words, in terms of similar 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. Factors that could cause actual results to differ materially from those currently anticipated include our dependence on external sources

Speaker 1

for the financing of

Operator

our operations, our ability to effectively execute our business plan, 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. 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 Tausik, as Chief Executive Officer.

Operator

Please go ahead, sir.

Speaker 1

Thank you, operator, and good afternoon, everyone. Thanks for joining our Q3 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 Q3 results, which exceeded our internal outlook. Our revenue was $141,400,000 generating 27 $600,000 in gross profits or 19.5%.

Speaker 1

Gross profit margins increased 0.6 percent quarter over quarter. Our adjusted EBITDA was $11,900,000 for the quarter were $1.18 per share, a 7.2% increase quarter over quarter. We ended the quarter with $29,700,000 in cash $50,900,000 in adjusted shareholder equity. Our 3rd quarter annualized run rates, excluding the acquisition we closed this quarter, which we expect to be immediately accretive to income this quarter, are $565,000,000 in revenue and $47,600,000 in adjusted EBITDA. I am now going to open up the call for questions and answers.

Operator

Your first question comes from Mitchell Farr. Please go ahead.

Speaker 2

Hello, Sam.

Speaker 1

Can you hear me? I hear you. Hi, Mitch.

Speaker 2

Hey, how are you doing? I have a question relative to I understand. New sales in terms of car dealers, new sales is not the greatest lion's share of revenue, But it's more into 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 going to purchase cars, new cars as well as used cars locally That there are 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 because it could be in a different state, etcetera.

Speaker 2

So how is that working in terms of The revenue of maintenance, losing people but gaining people, If you understand.

Speaker 1

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 so far. We haven't seen a Shift into maintenance category as far as maintenance, I believe that's hitting the records as well.

Speaker 2

I see. So the why it kind of washes out, are you gaining new clients with acquisitions where you just may not be losing as many for Sales

Speaker 1

out of

Speaker 2

the state, we have to ship them out.

Speaker 1

That would be the case, yes.

Speaker 2

I see.

Speaker 1

Okay. Thank you. Thank you, Matt.

Operator

Next question comes from Stephanie Moore with Truist.

Speaker 3

Hi, good afternoon.

Speaker 1

Hi, Stephanie. Good afternoon.

Speaker 3

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 what the when the supply demand dynamics maybe normalize or if they ever

Speaker 1

Thank you, Stephanie. As far as the OEMs, they 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.

Speaker 1

As far as expectations for The supply fulfilling the current demand, when you see for the foreseeable future, is that Not being suppressed for the foreseeable future. So we see Being steady, but maybe choppy on a monthly basis, but on a quarterlysemiannual 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 makes sense, Stefan.

Speaker 3

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

Speaker 3

Thank you.

Speaker 1

Thank you. That's a great question. We see it As the pie being very large, we continue to get employees 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.

Speaker 1

Lower multiples. So it's just more work, but very Present 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. And it has not slowed down.

Speaker 3

Great. Thank you so much. I appreciate it.

Operator

Your next question comes from Chris Nuan. Please go ahead.

Speaker 4

Hi, good afternoon, Sam. I just have a question regarding how would the company attract

Speaker 1

It's a difficult one to answer, Chris. Let me Other analysts will 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, we'll continue to execute as you see And things will gravitate in the right direction.

Speaker 4

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

Speaker 1

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

Speaker 4

Awesome. All right. Thank you so much for your time. That's

Speaker 1

welcome. Thank you, Chris.

Operator

Next question, Josh Cohen.

Speaker 1

Hey, congratulations on a great quarter. Really excited to see profitability And 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? Hi, Josh, and thank you. Let me give you some color on that. We're currently in a recapitalization phase We're refinancing out our current term loan, which is excluding flooring, that's approximately only $96,000,000 By the way, of which we have $30,000,000 in cash as we stand practically.

Speaker 1

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, we're aiming to accommodate not only the future pipeline deals, existing deals, but also Less prohibited where we can 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 full, may be delayed into January, February 2nd quarter. Given the frequency of acquisitions in our sector, the burden in workload at Certain manufacturers and vendors along with the upcoming holidays.

Speaker 1

So we're aiming to close some This quarter, if that doesn't happen, it looks as though it will be in the 2nd quarter. Things are progressing well and with confidence in our strategy. Thank you. Congrats again. Really great numbers.

Operator

There are no further questions. I would like to turn the floor over to Sam for closing remarks.

Speaker 1

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.

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Earnings Conference Call
LMP Automotive Q3 2021
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