LMP AUTOMOTIVE HOLDINGS, INC. FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements which are
made pursuant to the safe harbor provisions of Section 27A of the Securities Act
of 1933, as amended (the "Securities Act"), and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). These statements may be
identified by such forward-looking terminology as "may," "should," "expects,"
"intends," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue" or the negative of these terms or other comparable
terminology. Our forward-looking statements are based on a series of
expectations, assumptions, estimates and projections about our company, are not
guarantees of future results or performance and involve substantial risks and
uncertainty. We may not actually achieve the plans, intentions or expectations
disclosed in these forward-looking statements. Actual results or events could
differ materially from the plans, intentions and expectations disclosed in these
forward-looking statements. Our business and our forward-looking statements
involve substantial known and unknown risks and uncertainties. All of our
forward-looking statements are as of the date of this Quarterly Report on Form
10-Q only. In each case, actual results may differ materially from such
forward-looking information. We can give no assurance that such expectations or
forward-looking statements will prove to be correct. An occurrence of, or any
material adverse change in, one or more of the risk factors or risks and
uncertainties referred to in this Quarterly Report on Form 10-Q or included in
our other public disclosures or our other periodic reports or other documents or
filings filed with or furnished to the
Business Overview
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Through our subsidiaries, we currently offer our customers the opportunity to buy, sell, lease, and subscribe for, and obtain financing for automobiles both online and in person.
With the acquisition of majority ownership in eleven new vehicle franchises and an automobile leasing company, we have transformed our business model from our previous "Buy, Subscribe, Sell and Repeat" model and have expanded into a Franchised dealership model that includes our prior offerings plus all the offerings of franchised dealership operations including automobile sales, service, financing and warranty products.
Our platform is designed to streamline the automobile transaction value chain by digitizing a substantial part of the sales and transaction process. We believe this will enhance the consumer experience by creating operational efficiencies that are designed to improve our financial and business performance. We also intend to centralize sales, title, tag, finance, insurance, and logistics operations, to create additional financial and operational benefits, as well as a positive consumer experience. We believe that bringing more of the vehicle shopping and transaction experience online will provide consumers with a broader range of purchase, rental and subscription options while eliminating time spent in negotiation and haggling. Currently, we offer sales, leasing and subscriptions of pre-owned and new automobiles along with the associated financing and insurance products. In addition, we provide service and body shop work and sales of accessories and automotive parts.
Critical Accounting Estimates
Business Combinations
Under the acquisition method of accounting, we recognize tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. We record the excess of the fair value of the purchase consideration over the value of the net assets acquired as goodwill. The accounting for business combinations requires us to make significant estimates and assumptions, especially with respect to intangible assets. These estimates are based upon a number of factors, including historical experience, market conditions, and information obtained from the management of acquired companies. Critical estimates in valuing certain intangible assets include, but are not limited to:
? Forecasted revenue growth rates,
? Forecasted margin rates, and
? discount rates.
Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.
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Results of Operations
Third Quarter 2021 compared to Third Quarter 2020
Revenues
We generated revenues of approximately
Cost of Revenues
We incurred total cost of sales of approximately
Selling, General and Administrative Expenses
We incurred selling, general and administrative expenses of approximately
Depreciation and Amortization
We recognized depreciation and amortization of approximately
Net Income (Loss)
We had net income attributable to controlling interest of approximately
Non-GAAP Financial Measures
We have provided certain non-GAAP financial measures, including EBITDA, Adjusted
EBITDA and Vehicle Sales Margins, to supplement the financial results that are
prepared in accordance with
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EBITDA
We define EBITDA as net loss before interest expense, income tax expense, depreciation (including fleet vehicles and inventory impairment) and amortization.
The following table provides a reconciliation of EBITDA to net income, the most
directly comparable GAAP financial measure, on a historical basis and for each
of the periods indicated.
For the Three Months Ended
September 30,
EBITDA 2021 2020 Change
Net income (loss) $ 5,492,793 $ (752,087 ) $ 6,244,880
Interest expense (1) 1,134,751 97,903 1,036,848
Income tax provision 468,802 - 468,802
Depreciation and amortization 876,428 167,103 709,325
Fleet vehicle depreciation 331,144 134,209 196,935
EBITDA $ 8,303,918 $ (352,872 ) $ 8,656,790 (1) Excludes floorplan interest
Adjusted EBITDA
We define Adjusted EBITDA as EBITDA, employee bonuses stock compensation, adjustments to warrant liability, acquisition expenses, consulting, legal and auditing expenses incurred in connection with the acquisitions during the quarter, and equity based compensation.
For the Three Months
September 30,
Adjusted EBITDA 2021 2020 Change
EBITDA $ 8,303,918 $ (352,872 ) $ 8,656,790
Employee Bonuses & Stock Compensation 1,442,231 - 1,442,231
Adjustment in warrant liability (1,180,157 ) - (1,180,157 )
Acquisition expenses 1,206,583 - 1,206,583
Consulting, legal and auditing 1,919,018 - 1,919,018
Equity based compensation 191,104 - 191,104
Legal settlement - 113,752 (113,752 )
Adjusted EBITDA $ 11,882,697 $ (239,120 ) $ 12,121,817
Vehicle Sales Margins
We calculate vehicle sales margins by deducting vehicle sales cost of revenues from vehicle sales revenue.
The following table provides a reconciliation of vehicle sales margins to vehicle sales revenue, the most directly comparable GAAP financial measure, on a historical basis and for each of the periods indicated.
For the
Three Months Ended
September 30,
Vehicle Sales Margin 2021 2020 Change
Vehicle sales $ 126,294,429 $ 7,732,648 $ 118,561,781
Cost of vehicle sales 108,090,440 7,552,672 100,537,768
Gross profit $ 18,203,989 $ 179,976 $ 18,024,013
Sales margin 14.4 % 2.3 % 12.1 %
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First Nine Months 2021 compared to First Nine Months 2020
Revenues
We generated revenues of approximately
Cost of Revenues
We incurred total cost of sales of approximately
Selling, General and Administrative Expenses
We incurred selling, general and administrative expenses of approximately
Depreciation and Amortization
We recognized depreciation and amortization of approximately
Net Income (Loss)
We had net income attributable to controlling interest of approximately
Non-GAAP Financial Measures
We have provided certain non-GAAP financial measures, including EBITDA, Adjusted
EBITDA and Vehicle Sales Margins, to supplement the financial results that are
prepared in accordance with
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EBITDA
We define EBITDA as net loss before interest expense, income tax expense, depreciation (including fleet vehicles and inventory impairment) and amortization.
The following table provides a reconciliation of EBITDA to net income, the most
directly comparable GAAP financial measure, on a historical basis and for each
of the periods indicated.
For the
Nine Months Ended
September 30,
EBITDA 2021 2020 Change
Net income (loss) $ 2,636,645 $ (2,256,173 ) $ 4,892,818
Interest expense (1) 2,532,423 212,226 2,320,197
Income tax provision 1,098,003 - 1,098,003
Depreciation and amortization 1,422,934 388,631 1,034,303
Fleet vehicle depreciation 834,806 362,972 471,834
Vehicle impairment - 91,742 (91,742 )
EBITDA $ 8,524,811 $ (1,200,602 ) $ 9,725,413 (1) Excludes floorplan interest
Adjusted EBITDA
We define Adjusted EBITDA as EBITDA, employee bonuses stock compensation, adjustments to warrant liability, acquisition expenses, consulting, legal and auditing expenses incurred in connection with the acquisitions during the quarter, and equity based compensation.
For the Nine Months
September 30,
Adjusted EBITDA 2021 2020 Change
EBITDA $ 8,524,811 $ (1,200,602 ) $ 9,725,413
Employee Bonuses & Stock Compensation 10,553,421 - 10,553,421
Adjustment in warrant liability (1,188,772 ) - (1,188,772 )
Acquisition expenses 2,789,164 - 2,789,164
Consulting, legal and auditing 3,736,267 - 3,736,267
Equity based compensation 462,413 - 462,413
Legal settlement 3,000 113,752 (110,752 )
Adjusted EBITDA $ 24,880,304 $ (1,086,850 ) $ 25,967,154
Vehicle Sales Margins
We calculate vehicle sales margins by deducting vehicle sales cost of revenues from vehicle sales revenue.
The following table provides a reconciliation of vehicle sales margins to vehicle sales revenue, the most directly comparable GAAP financial measure, on a historical basis and for each of the periods indicated.
For the
Nine Months Ended
September 30,
Vehicle Sales Margin 2021 2020 Change
Vehicle sales $ 275,350,701 $ 10,955,759 $ 264,394,942
Cost of vehicle sales 239,792,900 10,828,576 228,964,324
Gross profit $ 35,557,801 $ 127,183 $ 35,430,618
Sales margin 12.9 % 1.2 % 11.8 %
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Liquidity and Capital Resources
Cash Flow Activities
As of
Operating Activities
Net cash provided by operating activities was approximately
Investing Activities
Net cash used in investing activities was approximately
Financing Activities
Net cash provided by financing activities was approximately
Use of Cash and Cash Requirements
During the first quarter of 2021, the Company financed the acquisition of a
controlling interest in ten new vehicle franchises and an automotive leasing
company totaling approximately
During the second quarter of 2021 the Company financed the acquisition of a
controlling interest in one new vehicle franchise totaling approximately
During the third quarter of 2021 there were no new financings or dealership franchise acquisitions.
The Company intends to finance acquisitions with a mixture of debt and equity offerings, including private seller debt.
Sources of Capital
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4).
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