LMP Automotive Holdings, Inc. (LMPX) on Q3 2021 Results - Earnings Call Transcript
Operator: Greetings and welcome to our 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. As a remainder 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. 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 negatives thereof and other words and terms of similar meanings. Forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could negatively impact 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 upon external sources for the financing of our operations; our ability to effectively executive 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 Tawfik, Chief Executive Officer. Please go ahead, Sir.
Sam Tawfik: Thank you, operator, and good afternoon everybody. Thanks for joining our third quarter earning 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 exceed 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. 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 going to open up the call for questions and answers. Operator?
Operator: Thank you. We will now be conducting a question-and-answer session. Your first question comes from Mitchell . Please go ahead.
Unidentified Analyst: Hello, Sam. Can you hear me?
Sam Tawfik: I hear you. Hi Mitch.
Unidentified Analyst: Hey, how you doing? I have a question relative to I understand understanding of new sales in terms of car dealers, new sales is not the greatest blind 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 going to purchase cars, new cars as well as used cars locally at their dealers with 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 can be in a different state, et cetera. So how was that working in terms of the revenue of maintenance, losing people but gaining people if you understand?
Sam Tawfik: Thank you, Mitch. I think I know what you're asking. We haven't seen an effect of that. We see all segments 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.
Unidentified Analyst: I see. So the why kind of washes out and you 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: That wouldn't be the case. Yes,
Unidentified Analyst: I see, okay. Thank you.
Sam Tawfik: Thank you, Mitch.
Operator: Next question comes from Stephanie Moore with Truist.
Stephanie Moore: Hi, good afternoon.
Sam Tawfik: Hi Stephanie. Good afternoon.
Stephanie Moore: 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 had 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: Thank you, Stephanie. As far as the OEMs 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 expectations for the supply for filling the current demand we see for the foreseeable future is that not being suppressed for the foreseeable future. So we see the steady, but maybe choppy on a monthly basis, but on a quarterly slash 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 makes sense, Stephanie?
Stephanie Moore: Absolutely. I appreciate it. I guess, and then touching a little bit on the M&A opportunity going forward, are you finding it? There's been a – I feel like certainly an increase in deals this year versus years, which makes sense going the environment, and obviously a large opportunity. Do you find that it's being – it's more competitive to go after 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 before? Thank you.
Sam Tawfik: Thank you. That's a great question. We see it as the pie being very large. We continue to get inquiries in 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 the small and medium size acquisitions and aggregating them as we have gives us a great cost basis from a multiple point of view, nonetheless the larger deals that easier, but we see both existing, it's very busy out there and it has not slowed down.
Stephanie Moore: Great. Thank you so much. I appreciate it.
Sam Tawfik: Thank you, Stephanie.
Operator: Your next question comes from Chris Newman. Please go ahead.
Unidentified Analyst: Hey, good afternoon, Sam. I just have a question regarding how would the company attract new investors so that we could be moving the stock price up?
Sam Tawfik: 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 they'll 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.
Unidentified Analyst: So I don't know how the analysts come about, but you guys have like a plan in place to contact these analysts or how would they come about?
Sam Tawfik: Yes, we do contact analysts and there are not many in the sector. We're not a very large sector where our peers are all in the Fortune 500. So I believe when we reached the certain thresholds, which we're approaching, if we close all these deals, then it's likely to pick up the coverage.
Unidentified Analyst: Awesome. Thank you so much for your time. That's all from me.
Sam Tawfik: Thank you, Chris.
Operator: Next question, Josh Cohen.
Unidentified Analyst: 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?
Sam Tawfik: Hi, Josh and thank you. Let me give you some color on that. We're currently in a recapitalization phase where or refinancing out our current term loan, which is excluding flooring as approximately only $96 million, 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 we're aiming to accommodate not only the future pipeline deals, existing deals, but also less prohibitive where we can – where the company can buy back stock and issued dividends as our peer groups do, because that attracts sensitive institutional investors and creates shareholder values 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, maybe delayed into January of February or the second quarter. Given the frequency of acquisitions in our sector, the burdening workload that certain manufacturers and vendors along with the upcoming holidays. So we're aiming to close some this quarter, if that doesn't happen it looks as though would be in the second quarter, but things are progressing well and with confidence in our strategy.
Unidentified Analyst: 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.
Sam Tawfik: Thank you operator, and thank you everybody for joining us. Have a great afternoon.
Operator: This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
