LMP Automotive Holdings, Inc.
Q3 2020 Earnings Call Transcript
Published:
- Operator:
- Greetings. Welcome to the LMP Automotive Holdings Inc. Third Quarter 2020 Conference Call. As a reminder, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation . Please note, this conference is being recorded. I would now turn the conference over to host Sam Tawfik, President and Chief Executive Officer. You may begin.
- Sam Tawfik:
- Thank you, operator and thank you everybody for joining. Let me begin the call by saying these are the most exciting times ever in the company and we are seeing -- we anticipate a transformation of the company coming soon as all of you must have read the acquisition announcements that we've made, definitive agreements that we have in the near future, we anticipate closing these deals in sequential form, as well as placing that inventory, online integrating and into our systems and having thousands and thousands of cars available for consumers in order to execute our hybrid strategy, which we believe will be in the top three to five as far as online focused automotive companies, having thousands and thousands of vehicles on the Internet.
- Evan Bernstein:
- Thank you, Sam. Here are some of the results of our third quarter
- Richard Aldahan:
- Thank you, Evin. Hi everyone and thank you for joining the call. Let me start by saying that the entire LMP team and I are as energized and as enthusiastic as ever. Our company has never been in a better position than it is currently to execute upon our plan. We expect a complete transformation in the company's dynamics as we begin closing our contracted acquisitions and implementing our e-commerce hybrid offerings. We are seeing a continued and growing interest of dealerships that are seeking partnerships with us. The LMP management team is positioning our business for strong growth in 2021. We are aiming to close several of our contracted acquisitions that we previously announced this quarter, and expect to have the inventory integrated into our e-commerce platform app lmpmotors.com and lmpsubscriptions.com within weeks of closing, and to launch our hybrid e-commerce model of home delivery, site to store, ship from store. We expect upon close the acquisitions will be immediately accretive to our earnings. Incidentally, our contracted acquisitions are significantly outperforming their 2019 profits by approximately 30% on 2020 annualized basis.
- Sam Tawfik:
- Thank you, Richard. Let me hit a little bit on the e-commerce. We expect to launch our e-commerce sales app to be integrated with our subscriptions application in the Apple and Google stores. In December, we expect this to further enhance our customer experience as well as onboarding and processing of customer orders quicker, resulting in an increased future sales. This is a prelude to closing the acquisitions and then pouring that inventory on these applications. And we anticipate significant increase in sales as well as exposing all the acquisition targets inventory, as well as new inventory that we ordered, as Richard mentioned and onto these applications. If you think about it, we have 83% margins in our subscription lease programs. That alone can provide significant accretion moving forward in 2021 and we're positioning the company that way, as well as our back end technology systems. As far as acquisitions, we've received multiple attractively priced acceptable financing proposals to finance some of our contracted dealership acquisitions, and intend on selecting finance partners shortly. Among certain closing obligation contingencies, LMP must receive final written consent from each vehicle manufacturer or distributor. This is a usual and customary closing condition in all automobile dealerships. But I want to thank the team for their tireless efforts. We have been taking on a lot of work. And I believe all of us are executing beautifully throughout these times, and we've positioned the company for a significant growth going forward.
- Operator:
- And our first question is from Capital Management.
- Unidentified Analyst:
- Hi, Sam, nice to see the quarter perform as expected, if not better. I appreciate the details you have shared with us. I wanted to ask you a little bit more if you could elaborate on the $100 million number that you're expecting in revenue. Is that something that is a specific line item? Are you going to break that out in your revenue side, because I could imagine you have traditional dealership revenue that you're going to be generating and then you're going to have online revenue that’s going to have a different margin to it. So can you help us kind of just break that down and whether or not is $100 million revenue, the number that you're excepting for all 2021 or just I couldn’t didn't quite understand that part, if you could help me out.
- Sam Tawfik:
- I'll hand that over to Richard, our Chief Operating Officer.
- Richard Aldahan:
- Let me clarify that the $100 million order is for inventory subscription, for subscription inventory for 2021 that is not a revenue number.
- Sam Tawfik:
- And if could add, it's the initial order. So that doesn't include pre-owned subscription, doesn't include the second order. Subscriptions are typically the inventories leverage and we turn around and subscribers end users. So the company is also anticipating $50 million to $75 million finance line to finance those and that's an initial line as well. And as we build subscribers and leases, typically, we will upsize that line. So $100 million in inventory, it's new, it can translate to more than $100 million in subscription revenue, if that answers your question.
- Unidentified Analyst:
- And I think, I didn't see this release that it’s on the previous one your expected earnings per share for 2021. Is that possible you give us an update on that and what it looks like, if I remember around $4.50 on what you already currently acquired, or that it's currently closed not in your pipeline still, if you don't mind elaborating on that?
- Sam Tawfik:
- Well, we have not closed on any of the franchise dealership acquisitions that we've announced. It's subject to factory approval. And so those are not closed yet. We anticipate closing several of them next month and then the balance going into the following quarter. And yes, we expect about $4.50 in EPS for those acquisitions.
- Unidentified Analyst:
- And I'll leave you with this last question that obviously, I’m sure get this every minute of every day. But can you help elaborate on the financing your cash balance it’s $3 million. I'm assuming that a lot of folks are looking at that and asking a lot of questions. And maybe you could help us out and helping us understand, you're going to have a financial partner you're about to choose. And is that going to address your cash balance for growth capital alongside acquisition?
- Sam Tawfik:
- Thank you for that and you're correct, many don't understand capital stacks in financings. We tend not to want to keep cash in the bank, we invested in inventory. And our current assets are significantly higher than that if you look at our balance sheet. And we present the line item of shareholder equity for a reason, because most of that is our current assets. So we can use that. And I'll give an example, inventory. We can basically sell inventory fairly quickly, pre close and that's cash. So we're conserving that cash for closings and plan on liquidating, leveraging our balance sheet on the current asset side of things to supplement the closes of some of these acquisitions. Some of these acquisitions, we can close from our current balance sheet with no financing. But we intend to use financing because we get a better return on invested capital. So that's one element. The second element is, we have some very attractive proposals on our table. And I think in the next several business days to a week, we're going to choose a banking partner. And those are very large banks that will finance approximately 80% of the acquisition, of which 50% will be at the operating company level and approximately 30% will be at the public company level. So that then requires much less cash to close the deal, approximately 20%, of which we have $30 million -- over $30 million in equity on our balance sheet that we can leverage. So we believe we're in a very good position to finance and close these deals focused on selecting a partner soon and when we do, obviously, we’ll disclose that.
- Operator:
- And we have reached the end of the question and answer session. And I'll now turn the call over to Sam Tawfik for closing remarks.
- Sam Tawfik:
- Thank you, operator and thank you everybody for joining. And we look forward to speaking soon. Thanks again.
- Operator:
- This concludes conference and you may disconnect your lines at this time. Thank you for your participation.