Ladies and gentlemen, thank you for standing by. This is the conference operator. Welcome to the LMP Automotive Holdings, Inc.'s first quarter 2021 financial results conference call. All participants are in listen only mode, and the conference is being recorded. After a presentation by management, there will be an opportunity to ask questions. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements pertaining to future financial and/or operating results, along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management constitute forward-looking statements. Any statements that are not historical facts should also be considered forward-looking statements. Of course, forward-looking statements involve risks and uncertainties.
I would now like to turn the call over to Mr. Sam Tawfik, LMP Automotive Holdings Chairman and Chief Executive Officer. Mr. Tawfik, you go ahead.
Thank you, operator, good afternoon all, and thank you for joining our call today. Today's call participants, along with myself, will be Richard Aldahan, our Chief Operating Officer, along with Robert Bellaflores, our Senior Corporate Controller. I'm pleased to announce that our first quarter revenue and adjusted EBITDA was $33 million and $1.9 million respectively, or $0.19 a share. These results exceeded our outlook provided on our March earnings press release and earnings call of $29 million-$31 million in revenue and $1 million in adjusted EBITDA. For the second quarter, we expect revenue to be $147 million with adjusted EBITDA of $10.3 million or $1.03 per share, which also surpasses our internal outlook.
On an annualized basis in the second half of this year, we're expecting revenue to be approximately $610 million and adjusted EBITDA of $44 million or $4.38 per share, which represents a substantial increase of 14% in revenue and 83% in adjusted EBITDA respectively from our outlook provided in our March press release of $535 million in revenue and $24 million in adjusted EBITDA. We expect our New York contracted acquisitions previously announced to close in the coming months. Combined, we expect consolidated annualized revenue, adjusted EBITDA, and adjusted EBITDA per share run rate to be approximately $910 million, $53 million and $5.18 per share respectively. We believe we are well on our way to achieving our 2022 run rate goals of $13 to $15 per share and adjusted EBITDA. Now I'll pass the call to Richard Aldahan, our Chief Operating Officer.
Thank you, Sam, and thanks to everyone for joining this call. Before I get into the details, I would like to welcome and thank our dealer partners as well as their respective team members, now totaling over 450 associates. We are extremely pleased with the results of our unique partnership acquisition strategy. We are witnessing the enthusiasm, effort, and degree of care from our partners, which has translated into an impressive financial performance over the past several months. The talent in our combined organizations, along with the resilience and stability of our business model, makes us a stronger and a more diversified company. We look forward to achieving many more significant and transformative milestones in the future, and we believe that the best is yet to come. I would also like to provide some notable run rate metrics.
These metrics are in the upper 50 percentile ranking as compared to our public industry peers. Our e-commerce has achieved an increase of 85% in unique organic users and page views. Gross profit margin is at 18.1%. This translates to over $160 million on an annualized basis. Our adjusted EBITDA margin as a percentage of revenue is at 7.2%. Vehicle sales gross margin is at 9%. Believe me, the best is yet to come. Thanks again for joining the call. I will now open the call for questions and answer sessions. Operator?
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Our first question is from Stephanie Moore of Truist Securities. Please state your question.
Hi, this is Jesse Joe on for Stephanie. Good afternoon, Sam and Richard, congratulations on a good Q1 and what's looking like a good Q2 and 2H. I guess I'm going to keep my comments fairly high level. Looking at the M&A market, obviously there's been some interest across the stack of public dealers, certainly one in particular has been very active. I was wondering if you guys could talk about what you guys are seeing in the M&A market specifically, as you're going out and looking at building your portfolio, what brands and regions are what you're looking at in the next 12-18 months?
Hi, Jesse Joe, this is Sam. Thank you very much for joining. We're seeing record amounts of deal flow. We believe that's from last year's pent-up demand that didn't get to execute, as well as the tax environment that may be changing, as well as the normal, where you get several hundred transactions a year that just simply trade. LMP's focused in regions from Texas, Midwest, East to the East Coast, in the Northeast, Mid-Atlantic, and Southeast regions. We're focusing on the low multiple brands, the domestic brands, and the economy imports that traditionally trade at lower multiples. We believe this is a solid strategy given we don't see any headwinds in the next several years, and typically, those become more volatile than the luxury brands when you run into economic cyclicality.
Given the supply-demand scenario in the industry right now, we don't see the demand being absorbed for the next several years. We see stability in margins and demand, as well as obviating the volatility of the, call it Tier 2 dealerships. We're heavily focused on that and adding to that, the domestic brands. You see their product line has changed dramatically. I've been following the domestic brands from a Wall Street point of view for three decades, and it's the first time you see them making highs where they are. A lot of that has to do with their EV efforts as well as their cost reductions and supply chain management given the current environment. We're very comfortable going forward that this equation remains, and we're focused on the domestics and the lower cost imports in those regions that I mentioned.
I believe that's a solid strategy, and we're just getting the best ROI in that context. Hope that answers your question, Joe.
Yeah, that was great color. Maybe just quickly following up on M&A, Richard, you made a comment about the dealer partners and liking the structure of the deal. I was wondering if you could maybe talk to that point. What kind of conversations are you having with your dealer partners specifically as it relates to the sort of different mousetraps that you've sort of built to bring on the dealer partners?
We're seeing demand for several reasons, one being our dealer partner strategy. It's similar to the strategy of some very large private operators, and similar to a fund strategy where you're investing in portfolio companies. We see a lot of dealerships that want to stay in the game and remain partners, so they come to us to achieve that. From an operational point of view, it is 100% better in our view because when you have a partner operator that has skin in the game, they operate like their company. They're watching costs, you get the efforts, and you don't get the management churn that you typically see when businesses change hands. We're seeing a lot of flow because of our model, and we believe our model is superior to our peers.
Got it. That's helpful color. Then maybe just last, a high-level question. I was wondering what you guys are thinking about the dealer state as it relates to the OEM testing the direct-to-consumer model, at least for some of their popular flagship products, and maybe how you guys are thinking about the dealer network kind of in the long term.
Well, when you talk about mass distribution and the dealer network in any industry, you're going to have conflicting remarks based on the masses. Our view is, we support the manufacturers because they need the distribution, and when they do go direct-to-consumer, I am sure they're going to compensate the fulfillment center, for lack of a better term, the dealership operator, because you need fulfillment in order to sell product as well as service product. We look forward to that. We think it enhances dealership sales.
Great. That's everything for me. Thanks so much for the color.
Thank you, Joe, and have a great afternoon.
Our next question comes from J.D. Cohen, shareholder. Please state your question.
Hi, this is J.D. Cohen. I've been an investor since the beginning. Sam and the entire LMP Automotive Holdings team, congratulations on these figures. What a performance. My question specifically is regarding e-commerce presence. Are you and your team seeing any cross-pollinization between the local websites of the dealers that you're acquiring and the LMPmotors.com site?
Great question, J.D., and thank you for joining the call. We absolutely do. It's part of our strategy that is very low-hanging fruit. It's the fact that every dealer we acquire has their own regional presence and website presence and does their own e-commerce sales and fulfillment. What we do is we interconnect the systems and push all the inventory up to our main website, LMPmotors.com, and then there's an automated process that then forwards the leads to the appropriate dealership. There's absolute cross-pollinization. What that means is it's organic net user additions without advertising, simply because if you originate at the dealer's local site, you can then come to the main site if you don't see inventory you like and end up purchasing a car online that resides at another dealership, and vice versa.
It's a very dynamic scenario, and we're seeing the cross-pollinization, and it was actually intentional in strategy. We've done no advertising, and organic users nearly doubled since January. Great question, and that really matters in e-commerce, the organic elements of that. I hope that answers your question, J.D. Cohen.
It does. Thank you.
Thank you as well.
Our next question comes from Michael Samuel, shareholder. Please state your question.
Yeah, I was just wondering, with the shortage of vehicles today, how does this affect the service side of the business?
I'm going to pass that question to Richard Aldahan, our Chief Operating Officer.
You broke up there, Michael. Could you please ask the question again?
Yeah, my question was, because of the shortage that we're seeing now with chips and that in cars in general, how does that affect the service market for vehicles?
Actually, it improves the service market because as these vehicles age, there's more service work to be done. We're realizing that in every one of our dealerships, our service revenue is up significantly due to this shortage.
Now, are the margins decent on the service side?
I'm sorry, say that again.
I said, are your margins good on the service side?
Absolutely. The margins are the highest they've been. So is our volume. We've had an increase in volume in both parts and the service divisions.
Thank you very much.
My pleasure.
Our next question is from Matt Horn, shareholder. Please state your question.
Hey, Sam. First of all, I just want to say I've emailed you back and forth a couple of times, or I should say LMP, and was surprised that you were actually the person I was getting answers from. Thank you for that. It says a lot. Sometimes really early in the morning. It shows that you work a lot, and we appreciate that as shareholders. My question, the first one, is really about your subscription plan. I noticed that there's currently only 31 vehicles listed, and that was one of the big moving factors last year when so many people got involved and thought this was a cool idea. With only 31 vehicles, it kind of makes you scratch your head and go, what's going on? I think a lot of us are wondering, is that working out?
If so, when do you plan on rolling it out on a larger scale?
Hi, Matt, thank you for the question. You are correct. We work long hours and long weeks. I appreciate the questions you've asked early in the morning. As far as the subscriptions, we've transformed our business, I'm sorry, significantly. Subscriptions, which is a flexible lease, has become a low single digits contributor to most metrics, especially income. We're actually pausing that at the moment for good reason. There's no real choice because the manufacturers are not supplying the fleet because of the shortages in any material way. They've cut the percentages down even to the top five operators in the industry, the rental companies as well. Secondly, we're seeing a huge tailwind in dealership operations, traditional franchise dealership operations, where the margins are better given the recent events, as well as the return on invested capital.
It really is a great trade to pause subscriptions and invest those dollars into buying additional dealerships. The returns are significantly greater, and when inventory normalizes. We believe that's not going to be anytime this year and potentially not next. If it does sooner, we will then roll out the subscriptions on a wider scale. Right now it's just, there's no real choice because of the supply constraints, and it's a better investment all around. We intend on freeing up about $15 million, just by not reissuing the subscription when we get a subscription return over the next 12 months. Those dollars invested in dealership assets just provide much greater returns. I hope that answers your question.
It does. I guess as long as we're not losing revenue and we've kind of switched gears away from that and we're still making revenue, that makes sense. I appreciate that. Another question real quick, if you don't mind. When you're doing these acquisitions, I understand the way that I see it, they're carrying the same name they already had. Do you ever have a plan to rebrand those locations to where they're all LMP Motors?
Not in the near future, Matt. Right now, the demand exceeds the supply, actually, as you can see by our second quarter 2021 outlook. Secondly, most of our peer group does not do that. It doesn't make sense, I understand now, why they don't do that. Because some of these dealerships that we're acquiring are rooted in the community for generations, and they buy cars from that name, to put it simply. It's not accretive. It may very well be dilutive to change the name. Given the same name and the same website, it cross-pollinates with our main website. We get an upside effect, but I don't believe it makes any sense having brand consistency for it, because some of these dealerships are there for 50 and 75 years.
In driving through the neighborhoods when we do due diligence and sitting in the showrooms, generations buy from that name. They don't go anywhere else. A significant part of sales are that. No plans, Matt. Thank you.
Fair. Fair enough. I appreciate that. I do have one last question for you. I guess it's kind of more of a statement, and I'm in a lot of groups online, and we converse about what's going on, and I tell you, a lot of us are very in the dark, and I know that you have to be careful what you share and what you don't share. We understand that. The one thing that I think we would probably appreciate a little bit more, if you could, is to give us just a little bit more idea of what's going on with the company, maybe suggesting a brand ambassador.
I'm sure you have big plans, and I know there's a lot of moving parts, but it would really make private investors feel a lot more comfortable to invest when they kind of know a little bit about more what's going on. I think it's been difficult for some of us, and I definitely speak for myself when I'm saying that.
Thank you, Matt. We believe we inform the public of what's going on. You see the press clips. Unfortunately, we can't appease everybody when they want. It's just the nature of investing in public companies. We are bound by guidelines, and we don't believe in presenting news that's immaterial or just because someone wants news at the moment. It just simply doesn't work like that. If you follow other stocks like the Fortune 100, Fortune 1,000, Dow 30, they do the same thing. No brand ambassador, Matt, and we release news in our 8-Ks and in our press releases.
Well, I appreciate your response, Sam. It's not really what I wanted to hear, but I do appreciate it. Thank you so much. I don't have any further questions. I do look forward to growing with the company, with you folks. Thank you.
Thank you very much, Matt.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for additional questions. Our next question is from Brett Rosen, shareholder. Please state your question.
Hi, Sam. Congratulations on a great quarter. I'm one of the original private investors. You actually answered a few of the questions I had of the shareholders, so keep up the good work. It just seems like obviously the supply chain pressures are going to last for some time. Do you see it in the next one year or two with the manufacturers overcoming the COVID manufacturing pressures?
Thank you, Brett. Good question. We believe it's a mathematical fact that these dynamics should remain in place for the next several years. For the simple reason, if you use an equation, say 50% of consumers put off their automobile purchases until the following year during the pandemic. That would be this year. So you have a 50% increase in demand in the largest consumer segment in the country. Automotive is over 20% of the nation's GDP. The manufacturing infrastructure does not, will not, and will not build the capacity to support a 50% increase in sales, multi-trillion dollar increase in sales in a year or two or three. It's just going to have to naturally dissipate, and that could take several years.
If you use any equation, if it's not 50%, even if it's 30% Brett, that deferred their purchases, there's that many more users looking for vehicles, and the infrastructure just can't support it and won't support it. It's not worth building a manufacturing plant just to have pent-up demand absorption, although they may build some, but we see this going on for several years out. Which is a great thing. We're fortunate to be in the right place at the right time.
Great. Thank you very much.
Thank you, Brett.
It appears we have no more questions at this time. We have reached the end of the question and answer session. I will now turn the call back over to Sam Tawfik for closing remarks.
Thank you, operator, and thank you, everybody, for joining the call. Looking forward to your participation on our next release. Have a great day.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great evening.