Major Auto Earnings and Losses, Netflix Gets Trashed, Lincoln Goes Full Experiential

April 21, 2022
Today we dig into an array of earnings reports from public auto groups, automakers, and retailers. Namely, Lithia, Carvana, and Tesla. We also talk about consumer behaviors driving Netflix’s slide as well as Lincoln’s understanding of merging hospitality best practices with the automotive experience.
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Earnings and reports for top players:

  • Lithia
  • Q1 net income more than doubled, up 119%
  • Overall revenue up 54% to 6.7B, a Q1 record
  • New and used sales up 23%
  • Avg gross profit per unit on new vehicles more than doubled to $6,179
  • Avg F&I also increased
  • Avg cost of new $47,146 (+16%); used $30,323 (+32%) WAS 22,971

Carvana

  • Revenue up 56% YoY to 3.49B
  • Net loss of $506M. Last year was $82M (over 600% more loss)
  • “In a letter to shareholders, Carvana CEO Ernie Garcia and CFO Mark Jenkins called the quarter "challenging."
  • CEO Ernie Garcia (letter to shareholders) "Q1, I would say — it looked like the industry environment was deteriorating throughout," Garcia said during a Wednesday earnings call with investors and analysts. "Disentangling how much of that was affordability, how much of that was just general consumer confidence or interest rates, is very, very hard."
  • “In January 2022, in recognition of Carvana selling its 1 millionth vehicle in Q4, CEO Ernie Garcia committed to giving current employees 23 shares of his personal stock once they reach their two-year employment anniversary, a gift worth over $100 million at the announcement’s stock price.”

Tesla

  • The company reported a monster $16.8 billion in automotive revenues, up more than 87% YoY. The company reported $18.76 billion in total revenue, more than a billion over what analysts expected.
  • total profit of more than $5.46 billion, +132% YoY
  • total vehicle production was up 69% (lol, you can’t be serious.) 291,189 Model 3 and Model Y vehicles were built in the quarter
  • expects to reach volume production of a new 'robotaxi' vehicle without a steering wheel or pedals by 2024

Netflix loses over a third of its market value (35%) making it the worst performing stock of the year on Nasdaq 100 and S&P 500

  • Q1 net loss of subscribers when investors expected a gain -2M +)
  • 35% of Americans cut out a monthly subscription in the past six months

New Lincoln Star Concept goes full experiential mode

  • The mood settings include:
  • Coastal Morning uses gentle, oceanic sounds, a fragrance of sea mist and the soft, warm glow of the sun with dynamic lighting throughout to replicate a stroll on the beach at sunrise.
  • Mindful Vitality is meant to reenergize the senses, with invigorating, upbeat audio, dynamic abstract artwork, soft, glowing lighting and a flowery fragrance throughout.
  • Evening Chill mirrors dusk using a calming night soundtrack coordinated with night sky video and an evergreen fragrance.

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Paul Daly  1:06  

Okay, we'll start with that. Didn't expect me to come and they didn't really talk about that. They were going through some major earnings winners losers, Netflix getting trash and Linky goes full, experiential, get the bounce. Go, all right. How many times can you listen to this awesome track? Is a lot.

Kyle Mountsier  1:28  

A lot. It's a lot.

Paul Daly  1:29  

We talked about getting this artist to show up live at our next like, standalone live event and come in and perform this song live. I think it would be.

Kyle Mountsier  1:38  

It would be Yeah, that like, and especially live, I feel like that would bounce so hard. Everybody would like everybody in the room would be like, Wow, this is great.

Paul Daly  1:49  

All right, make sure everything is just going right the base the jumps, everything. Um, hey, you saw that video, we want to remind you is that asoto family reunion, remix is happening may 9, we open tickets up, make sure you grab your tickets. If your dealer autofire friends, they're gonna pay for every dealer tickets. So if your dealer just go make sure you register because it is a ticketed event, it probably will sell out the energy is starting to build, we always see this happen, right? a month out. It's right people start to go and then like three weeks in two weeks, and people are like, Oh crap, I better get my tickets. It's probably going to sell out, we're gonna have an awesome swag experience gonna be lots of great food, lots of great drinks, lots of great people. That's what I'm excited about. That's

Kyle Mountsier  2:27  

what I'm most excited about. It's like just being around people hanging out having conversations,

Paul Daly  2:32  

just any people, not just any people. Like, you got to look at the guest list of the people that are already special guests. And it just, it just keeps building from there.

Kyle Mountsier  2:41  

Everybody's going to be like Fireside Chat with Eric and Tiffany gonna be like, alright, so break it down for

Paul Daly  2:46  

us. He's gonna have a little entourage rolling around, rolling around. But yeah, certainly a lot of the videos you see from our live events, a lot more of them will be made at this event. So be there be a part of the videos, we're gonna do a lot of hosted live streams. Lots of content. Lots of selfies, lots of swag. Lots of fun. So go to asotu.com very top, there's a little banner he can click Get your tickets now. What else are we talking about announcements we've been saying we have to get through announcements fast.

Kyle Mountsier  3:12  

I know we got all things use cars tomorrow, we're running a remix of appraisals. It's nine Eastern so if you're not on clubhouse, get on clubhouse, all things use cars on clubhouse tomorrow morning, led by David Long, you're not gonna want to miss it. So just shout out to that for sure.

Paul Daly  3:27  

Yeah. And one of the most substantive conversations, I think that happens in automotive everyone that is in that room.

Kyle Mountsier  3:32  

We always we always say there's no reason why there shouldn't be 10,000 people sitting in that room listening across the industry, it is literally a goldmine for execution.

Paul Daly  3:41  

For sure. What else? One more thing before we get into the news, we have some fun news to talk about today.

Kyle Mountsier  3:46  

Yeah, no, I, you know, yesterday, we had a couple of conversations about with with some other partners, both people that were well, actually someone that we're looking to bring on, and, and bring onto the team, and then also another company within automotive. And what was really cool is, you know, the person that we're looking to bring on really gave us some insight into our business. And we were able to, like, reflect quickly, because, you know, our head is down so far, like, we're just running and going. And so it was like this little stopgap that said, Oh, wait, think about these things, you know, and so that was a really cool experience for us to, for us to have that for for our company. And then we're able to then pass that on, when we were on a call with someone else, you know, just an insight. It's like, Hey, we're not in the in the weeds every single day. And this is, you know, our perspective and what we can see and the feedback was really well received. And so just our encouragement is that as you have these conversations with people outside of your business, whether that be you encouraging them, or them encouraging you that collaborative approach and automotive, I think is really, really where we're going to find strength and not just feeling like you have to have a walled garden, or that you can't speak into someone else. And if we have that conversation with grace, and then with understanding and receive feedback, well what gonna happen is everybody's going to be elevated within that. So just an encouragement from kind of our experience yesterday, which is really no doubt

Paul Daly  5:06  

objectivity is a total gift do not undervalue objectivity. Alright, let's get into some do's like, when companies start releasing earnings, it's like a treasure trove, right? Because public companies especially they, they like really give you a peek under the hood because they have to because of regulations. So like you can learn so much. And Brian Cramer has actually taught me a ton about like, the value that is buried in an earnings report. He's like, telling you exactly what they're planning on doing. Right, exactly. Yeah. everybody's wondering like, well, they'll tell you exactly what they're going to do. So we're going to talk about three of them today. Two, we're gonna talk about three things. You have to money's, right. So we're gonna talk about Lithia Carvana. And then Tesla, so Lithia. Listen to this. And I want to make I want to point some attention to the big time diversity in the stories. They're very, very different. So Lithia comes out their quarter one net income more than doubled, more than doubled. So think about this. It's up 119% year over year. That's more I mean, that's, that's not like one Oh, 1% is one almost 120 their overall revenue is up 54%. Right, so it's a quarter one record to 6.7 billion. Both their new and used car sales are both up 23% average gross profit per unit on new vehicles more than doubled to 6179 $6,179. f&i f&i increased. And here's the thing to average cost of a new vehicle is up 16% of year over year, average cost of a used car is up to 30,003 23, which is a 32% increase, meaning I did the math, I did a calculation Kyle, I did calculate. That means last year, the average cost of a used vehicle was $22,971. And now it's 30,000. Man, that is $140 a month in payment right there. That's everything. That's that stack gas prices on top of that, and what does that do to an average budget? blows it up?

Kyle Mountsier  7:16  

Well, okay. Alright, let's potentially, but yeah, because there's equity positions and cash down and trade equity and all that type of stuff. So new buyers, that could be balanced for sure. But ya know, it's it's, it's, it's really a, it's an interesting, it's an interesting change in to see Lithia just totally blow things up. And obviously, they've had a lot of acquisitions in q4 q1. So that was part of it. But also, just the the net increase in total sales was was

Paul Daly  7:45  

average gross profit. Right? I mean, this is the company on fire right now. Like in a good way, right? This is not and this is this is following like, a lot of quarters and a lot of years. And like, hey, this was the best year ever. This was the best year ever. Right? Um, it's just another hockey stick level curve of a company leaning in executing a strategy and just we were talking about it, I don't know, it was like a month or two ago rocketing, not even rocketing up the list, but like taking that top three very seriously. And a very steady march to number one. Let's contrast that with Carvana.

Kyle Mountsier  8:18  

So interesting.

Paul Daly  8:20  

Right, you would think that they would kind of follow suit because like, everyone's talking about what you can't lose in this environment? Well,

Kyle Mountsier  8:30  

they, they posted a net loss. This is this is what's crazy to me. And I get they're still like in startup mode. But there was this whole thing that came out when you get out of startup mode officially. Yeah, I know. Right? There's this whole thing that came out about this whole Ponzi scheme idea. And you know, you've had conversations with Ernie Garcia. And I think that they're really like, I don't know if that's exactly what's happening, but the revenue being up 56% year over year, yet, the net loss of the company being up over 600%, meaning the company lost $506 million, let's just

Paul Daly  9:08  

call it half a billion. just round it off to half a billion.

Kyle Mountsier  9:14  

It's it's just it's wild, because everything else in the retail automotive sector is saying gross profit and net profit. Everything is at an all time high. And Ernie Garcia is having to explain to shareholders like why there's still a massive net loss on the books.

Paul Daly  9:34  

So yeah, so last year, there was a net loss but in the meantime, right they they post started posting profits and everyone's like, Oh, this is the point where it turns the corner. Last quarter or year or year q1 Last year, they posted an $82 million dollar lost this year again half a billion in a letter shareholders earning Garcia the CEO and Mark Jenkins, the CFO called the quarter quote unquote challenging. Got a little more detail And Ernie says, calm Ernie I guess now, q1, I would say it looked like the industry environment was deteriorating throughout Garcia said during a Wednesday earnings call with investors and analysts disentangling how much of that was affordability, how much was just general consumer confidence or interest rates is very hard. So you read that comment, you're like, yeah, there are a lot of factors at play. But it is very hard, I think, to separate that from what the retail automotive dealer network is doing.

Kyle Mountsier  10:28  

Right? Yeah, no, because

Paul Daly  10:29  

those two stories are very different.

Kyle Mountsier  10:32  

They're very, very different. And this is what's interesting to me about mass media and public companies that are that are, you know, looked at by mass media very, very, in a scrutinizing way, is they they have to make excuses, sometimes based on perceived market trends. Yet, what we find at the ground level is that those proceed market trends are actually not impacting consumer behavior. And so I Yeah, it's a very mixed message for me, and I'm still struggling to kind of unpack it, honestly. Yeah,

Paul Daly  11:08  

no, it's I mean, like going through him this morning building the show is like, well, this is an interesting story. Right? So we're talking about it. Hopefully, we get some more insights on it. Actually, I want to see what kramer thinks about this. Let's let's move to Tesla for a second because Tesla had a whopper of an of a shareholder meeting, the company reported 16 point 8 billion in automotive revenue up more than 87% year over year. So it's almost getting close to double. They record it reported 18.7 6 billion in total revenue, more than a billion dollars over what analysts expected. total profit is up 132%. Year over year, total vehicle production was up 69%. Year over year. So

Kyle Mountsier  11:49  

that's the differentiator Period, end of story. supply chain managment. they won.

Paul Daly  11:56  

Yep. But think about it. It's like supply chain management. It's like, there was a year ago, the supply chain wasn't as big a deal or what your bed time just as been in a vacuum. Like where were we last?

Kyle Mountsier  12:08  

No, no, I think the variance is not like q1 to q1, there was not supply chain issues didn't hit till q2 When the initial chip fire and things like that happen. Right. But I think the difference is that the downturn in supply chain management from other manufacturers that might have acquired or kept those customers? Yeah, like they overcame. And so they saw the increase instead, and really probably took market share away from those that couldn't manage the supply chain as

Paul Daly  12:38  

Yeah. Oh, that makes sense. So it's a little market share game, because they had the vehicles to produce either either way, like they're getting it done from the manufacturing standpoint, I was thinking about like, they really don't have a partner business. Right. I'm like, what other revenue stream for the OEMs? Right, it's like well part. Like, not really a parts business. I don't know where the other revenue comes from. I don't know flame throwers, and electric powered four wheelers, I guess. There are also another little introduced interesting announcement that we'll talk about at another time, but I just want to mention it. They talked about a new robo taxi production. They've been working on it talking about it for a while, but they're start starting to say like they're going to enter in like mass production to this by 2024. And so no steering wheel.

Kyle Mountsier  13:23  

That's like, it's gonna be so weird. Yeah, I saw actually there's there was a Cadillac, I think Cadillac had like a concept car. And it's essentially like this really strange, like, bionic car thing and you sit in it, and it's like a lounge chair. And there's actually like a widescreen IMAX theater TV in it. And like a little sliver lets you see out type of thing. It's very iRobot. very, like, futuristic. But that I mean, that's the same kind of thing. You're like, well, if you don't have a steering wheel, now you got more space to put people in the car. Oh, heck yeah, go or anything like that. Right? Just think about

Paul Daly  13:58  

how much stuff you're gonna buy on Amazon when you're in a car. No, but I'm not getting in the car next year. Well, for a while because I've been in a Tesla in autopilot mode. And I'm really glad I had the steering wheel. Let's just put it there. Right, like, yeah, really glad because I don't trust that thing. That's what that's when the robots take over Kyle. All right. So that's kind of the automotive purview that we wanted to give you.Let's talk about some other earnings and some it's hitting back. We talked about Netflix last week. It was early this week. Last week earlier this week, their report came out and it was just like a jaw dropping moment for investors and their stock plunged by over a third 35% Netflix. It's the worst performing stock and the s&p 500 or the NASDAQ 100. Literally they want lost a third of their value on the announcement of a net loss of subscribers. I'm one of them. There you

Kyle Mountsier  14:53  

go. I think it's like 54 million or something like that was the net loss in a day. I I think I read Oh, yeah, I mean, it was an absolute an absolute ridiculous number.

Paul Daly  15:07  

Now they lost 2 million net loss over the quarter. So I don't know if they like had a big loss. I mean, they're they're doing a bunch of sorry, fit 54 billion

Kyle Mountsier  15:15  

of market value they go,

Paul Daly  15:17  

that's what it is. That's a billion in market value gone. Lost over 2 million subscribers. And they're trying to figure out what to do about it. Right. I told you why I left. Right. I just got mad that I had to pay more for higher resolution. Yeah. Now now they're starting to crack down on people that share passwords, right? Like, oh, like we have one Netflix account and like me, and for my friends share it the cracking down on that. What do you think? So I saw

Kyle Mountsier  15:43  

a couple articles that kind of related this to the peloton issue, right? That they saw such miraculous gains in early Oh, good times. And what people are doing is going wait a second. That's not actually what I want to. That's not actually how I want to, like engage with my daily life. Like I don't there's other stuff to do I have that. There's other stuff to do now. I'm busy, especially business is booming for. For a lot of people. Yeah, so it's little, Brian Ortega. Just got

Paul Daly  16:15  

my Netflix back. Thanks. It's the other one with a capital P.

Kyle Mountsier  16:21  

Yeah. Right. That's what everybody else kind of drew at was this, this kind of, I think it's Central American play toward testing the waters on Password sharing. And a lot of people being like, yeah, if you're going to crack down like that, we're not abusing this. But if you're going to be like that company, where Yeah, yeah, they

Paul Daly  16:40  

should, they should like, have like, you want an ad like an additional license kind of thing. Oh, you want you want two more passwords? Great. It's $5 a month for the passwords,

Kyle Mountsier  16:51  

right? That's what they were doing. So it was a core core cost and then plus $2 per password. So

Paul Daly  16:56  

there you go. We just stopped on Netflix's problems, broader, broader. STEM 35% of Americans cut a monthly subscription in the past six months. So that is just continuation of what we were talking about. People were like, no, no, no, yes, I'll

keep that I'll get rid of that. And Netflix is just on the downside. And we'll see if they can keep up with a lot of times they got out

Kyle Mountsier  17:15  

for their $140 a month more car payment because the car is more important than the monthly subscription. Is that how inflation works? Oh, okay, madam.

Paul Daly  17:27  

Oh, the last thing we're gonna talk about today, sorry, Isaac, our producer we were like we're gonna try to keep it tight today. We didn't we just didn't keep it tight. But this stuff is too good to keep tight. So we'll get through this one quickly. We have a picture this one to put up on the screen. The Lincoln

Kyle Mountsier  17:42  

Lincoln star concept there it is.

Paul Daly  17:45  

Oh, full experiential mode. Look at that thing. Look at look at the frunk the front trunk that thing is beautiful. And they go full experiential mode like this is just the concept car which you know like we'll see if it actually looks any better if this ever

Kyle Mountsier  17:59  

comes to market like it right. I think we're gonna get closer and closer to this as we go look at the front of that car. It looks like if you can't see this, it looks like the refrigerator right the freezer thing where you like open one lid and then you pull out the drawer underneath that there's a drawer underneath Yeah,

Paul Daly  18:14  

for the people on the podcast. So all the doors are open suicide style. So the front door opens for the back door actually opens backward. Giving you a big entrance, the front the front because it's an EV of course right the lid is like elevated off the top of the trunk so you can get in luggage. And Lincoln has gone full like experiential mode. Listen to this they have multiple mood settings. Coastal mood uses gentle organic sounds a fragrance of sea mist and the soft warm glow of the sun. So they're incorporating light scent and sound mindful vitality that has upbeat audio abstract artwork projected glowing light and a flowery fragrance and evening chill mirrors dusk with a common night soundtrack.

I think it's Lo Fi beats actually coordinated with night sky video and evergreen fragrance. Tell me that doesn't sound freaking awesome.

Kyle Mountsier  19:03  

It does sound cool like think about your okay what does it feel like to go to work and be energized for work? What does it feel like to come home from work and feel rejuvenated before you see your family and your car brings you an experiential nature to be able to do that? That's thinking outside the box

Paul Daly  19:21  

I love it and the Lincoln brand is kind of like that so I have I drive a Lincoln and like when I download my app which is included Kia in the purpose of the vehicle release letting you remember that but I also got a free a free comm app subscription with it. Because they're like hey, we're about we're about you like finding sanctuary and all of your life so very cool concept car. A love for the gun.

Kyle Mountsier  19:43  

Hey, speak over it. Is that what happened?

Unknown Speaker  19:47  

Yes. Hey,

Paul Daly  19:48  

just relax. I wish I could do it better. But there you go. That's how we That's how we're rolling on Thursdays a lot more coming. Make sure you sign up For the newsletter or go to a show.com click on the banner. Join us at the family reunion. Until then, get a little objectivity into your business and like let's make a dent.

Unknown Speaker  20:08  

Move on

Transcribed by https://otter.ai