Group 1 Automotive (GPI) 26 Jul 232023 Q2 Earnings call transcript

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's 2023 Second Quarter Financial Results Conference Call. Please be advised that this call is being recorded.

I would now like to turn the floor over to Mr. Pete DeLongchamps, Group 1's Senior Vice President of Manufacturer Relations, Financial Services and Public Affairs. Mr. ahead, go Please DeLongchamps.

adjusted Good been release and and we that for to slide Jamie. to will call. this to on a to Group The presentation call the related reconciliations earnings issued purposes include that morning, you, we welcome refer have everyone, comparison today's related results posted Thank this website. morning X's

information and make mentioned the statements management I'd made begin, statements harbor remarks Litigation brief the safe we Except call, some for the provisions that the like measures. during Private to Securities historical of Act conference made use of Reform XXXX. forward-looking Automotive Before non-GAAP Group are financial statements are of to about by pursuant X forward-looking of

risks unknown manufacturer additions company's increased due risks and in Securities risks developments Those limited of Those demand and Exchange known and other associated production uncertainties, actual may risks not pricing, the from both supply and involve periods include, volume, statements future to forecasted services. cause new and reduced results to, in customer economy with differ described demand and markets component the company's impacts for resulting related shortages, some the to global adverse used in materially and and results. filings vehicles are due with which are but Forward-looking the to levels and on inventory Commission.

rules on may In addition, discussed certain measures non-GAAP be financial SEC call. under defined this as

measures provides on website. GAAP the comparable of As most measures applicable required any such the by to non-GAAP financial rules, reconciliations SEC company this recently

Vice Officer, Chief our Kenningham, Financial Daryl Officer. and today, and call the on Chief me Daniel Senior McHenry, and with Executive President Participating President

over to turn the now Daryl. to like I'd call

revenues. and X service in -- everyone. by quarter total insurance In highs record led all-time adjusted finance Pete. Automotive quarterly new income the net and you, Group and parts vehicle, second Thank of and $XXX.X billion, revenues million reported $X.X in XXXX, and Good of morning, parts

and deliver quarters. record revenue for levels parts nine team Our service continued to consecutive

supported by growth million. We record also set record service all-time an all-time $XXX.X an total gross parts profit, and for quarterly of

continued with We highly acquire footprint brand. capital Masten desirable our an Texas in to quarter the stores, to outstanding the further strong Beck deploy strengthening & efficiently

shareholders during capital quarter. our $XX million in also We by returned repurchasing to the shares

cash strong which Our in Daniel will significant capital to leverage flexibility for minute, flow in will McHenry and the a XXXX. position, remainder allow cover of deployment continue

last quarter, which our Toyota domestic brands US and vehicles. tight of days at have with inventory supply Now to US sequentially our our Consistent is operations. our be Lexus, turning very import used quarter brands five-day Approximately, XX% remained starting days to quarter supply our continues ended XX of with comments very business second XX vehicles, new improved flat a combined results, the on slightly have with supply. constrained. We and of

Our over second revenues of XX% an quarter new vehicle increased last the impressive sequentially and XX% year.

year. XX% GPUs, quarter While over new vehicle level quarter the the over in US of down history, and in were of we highest moderation XX% sales second increase quarter. our sold XX% the the last reached a XX% a slight saw company the units in from in prior second first vehicle presales, new

vehicle quarter of from the entered lack were second on in supply. low the with used vehicles. vehicles more quarter Used sourcing challenged new the difficult We

part large vehicle as record low ground some up sales. picked the progressed, -- to record trade-ins we new from quarter However, thanks in

expect interest buyers. on rates for has and we insurance AcceleRide, including pressure drive slightly unit business continue organic driven some looking at to $X,XXX, this Despite existing penetration a by requirements inventory, remained acquisitions. Finance trades same-store through sourcing customer tighter used gross improvement. resiliency, profit quarter and Source with we strong, and rates on per sequential service efforts, focus acquisitions lender finance forward,

aftersales. to turning Now

grew ways performance intelligence. US to customer grew new by nearly customers were the to invest pay one-to-one reach Technician outstanding. our digits growth same-store we using up by in through and headcount marketing continue quarter, led was in of revenues strong technology XX%. same-store double over and Aftersales XX% X%, revenues second Our and artificial

continue We of aftersales parts will and in invest to through be strength the and a service rest believe XXXX.

in quarter X.X% second prior reduced only margins decrease XX.X%, see profit a and We down some sequentially US Our points increase pressure pre-pandemic costs. a and SG&A as from gross adjusted percentage do over of and of basis from an year was of XX% inflationary from XXXX. XXX

savings We expect will SG&A that our of permanent. be material a portion

continue customers where our Now to to vote yes. AcceleRide,

least we five increases engaged of customers the AcceleRide half vehicles our experienced significantly sold We of car in attachment Over trade-ins, process. applications, the on steps AcceleRide the significant through buying that saw credit quarter, year-over-year more in second engaged engagement and XX,XXX sales. AcceleRide. up year-over-year. was XX% in F&I quarter, in some their way and nearly customers our deeper During through at XX% of transaction

UK. the keeping to strong. vehicle availability demand still constrained, Vehicle and Turning GPU resilient remains is vehicle new

respectively. New and and by quarter the X.X% year used GPUs prior X% outpaced

production continue XX% new sold. units same-store as by signs vehicle of manufacturers in to improvement certain increase We see the demonstrated by

June of XX, increase the XX% was As approximately over new units, prior our XX,XXX bank order vehicle a quarter.

on are has is the and times revenues outstanding, luxury, aftersales XX.X%, our UK mix business during economic UK US, been the increase experiencing prior our reminder, And resilient same-store with and XX% a currency grow of customers profit predominantly the efforts approximate headcount, to gross respectively. more a technician uncertainty. year. in our we’ve growth increasing in worked As over an those basis Similar local and to XX.X%

improvements We contact have and our operations experience. customer to improving center, streamlining the invested UK customer in also

call turn Daniel? a liquidity provide our sheet over now McHenry, the balance to CFO, and overview. will to Daniel I

Daryl, and you, Thank morning, everyone. good

million hand in our million. As of bringing had liquidity of cash floorplan another total to June XX, $XX million we $XXX invested offset and on accounts, cash $XXX

had also available million. our acquisition $XXX to immediate line, total to million $XXX We available on borrow bringing liquidity

flow $XXX $XX out CapEx. of combination a million repurchases share generated through million of $XXX we adjusted XXXX, after operating free backing and of of was flow half deployed This and first the acquisitions, dividends. cash Through cash of capital million

$XX at we $XXX.XX. million, share quarter. approximately repurchase repurchasing The price an the quarter, spent During the of is count result in this reduction shares over XXX,XXX X% activity average current of over just current

down XX.X today count Our million. of share to is approximately as

Our ratio as syndicated by rent-adjusted X.X of was times defined leverage our end US the at credit facility June.

allow Our balance to will strong continue sheet capital deployment. balanced meaningful for and

well million, year, holdings. was accounts, offset managed on increase interest excess due our holding prior $X.X of Our million saved our which the floorplan inventory quarterly million floorplan from portfolio million an We floorplan us cash the the quarter. of interest rate expense year. expense as comparable million, versus higher expense interest $X.X from year entirely in to interest to to of our vehicle exposed by increased swaps, interest $XX.X Non-floorplan $XX.X of $X.X reducing the balance interest prior effectively as prior

swap However, the us million $X period. our versus portfolio rate mortgage comparable saved

As mortgage benchmark an rate, of XX% annual for debt impact our the of billion point $X.X and EPS is every in our floorplan or about approximately referred XXX was secured is in instruments. basis $X.XX fixed. SOFR, June XX, and only increase rate Therefore, overnight floorplan funding to which the other debt in

refer news as please For to on additional the financial as release condition, well investor information attached regarding the our posted our to of the detail additional presentation schedules website.

back now to Daryl. over I will call the turn

to our development Daniel. corporate in Related to capital opportunities Growing and efforts, top XXXX. growth a find UK expect you, US businesses allocation additional we Thank priority. our remains

of serious However, position which consideration allocation capital sheet, will flow addition leverage pursuing support balance include approach, to cash and flexible likely our generation to external in share a continue will and growth. efficient repurchases

turn now operator the the prepared to session. This Jamie? call I'll concludes over the our question-and-answer begin remarks. to

Ladies Incorporated. we Please question. Daniel comes Instructions] [Operator go session. from Stephens gentlemen, first will question-and-answer question ahead the with and today Imbro now begin from Our your

morning, good for our taking Hey, question. Thanks guys.

have start like, -- better, the used the house. I but units the GPU slightly On kind across of want the obviously industry. to vehicle side of, on been the is

seeing rates? financing do think it this how wanted coming And guys the supply lack what Is more you're what of that, that with of use you're you expand half it in market? late a kind because of Just issue on back model maybe back? year, out a given materializes of ground? Is you of demand-driven on a issue through the seeing kind of the

what Hi, any is at peak of it's return than the from Daryl. the the rest heard don't you've we're seeing we're of off-lease what kind COVID different Daniel, I There's -- think of industry. the trough.

be there's but those selling vehicles back segments our people So coming into and on day continue a vehicles, down. lot there's supply tend cheaper inventory the not more Also, to of affordability, to and move for off-lease. those market lowest fastest pressure

couple down average thousand bucks over price moved Our -- a selling year-over-year. almost

it see we'll expect month of availability lower during more I we the saw expect the a improve we'll the And So improve progresses. that to bit We some month. I it's, of think, that levels. month of sequentially of over I quarter, saw year a continue inventory little as -- And see at that. function over

the what then, is was kind be higher think the penetration $XXX on level by It talk would sustainable how basis? US that product is up And you are of over and Is Finance it. probably a year-over-year. of sequential down. this to unit. I want Pete, up Got per follow on F&I I loan driven the sequentially. attachment? size maybe per Can drivers then unit to down could growth

overall feel of performance We the Sure, Daniel. Thanks. F&I. good about

year-over-year steady sequentially penetrations improved. product and Our held or either were up

So of vehicle in there's a think of result Used on seen been I new. the that's is improvement clearly. think a a pen, still focus we've finance And lot I an as rates. which headwind

Our rates points year-over-year. XXX about are up basis

had, the has we've on product. I major been focusing partnerships we're So lenders, helpful. think, good our And which really with

comes your Bank from question. with from America. of ahead Please Our question next Murphy go John

I on techs? XX% a and here quarter. getting four-day week I it's just using is continue think least seems you you if might pretty get flexible parts to time to grow all more there's degree, curious folks. mean and happening an just like of our all to quarter be that techs the work getting be that I is, -- to sauce some service is to I'm guys. expectations, this at very you some after Good just but morning, might guys outperform touch sustainable it's how you'll how the you're where other issue in over helping to wanted I and able -- is continue quarter and it mean, that adding these secret those impressive. know

and strength and you potential forward? can the just kind on of service So going expand parts the

quite the find invest and all almost new first do place underinvestment And that we John, of over bit the in that capacity, the acquired heavy we invest, quickly we years, it's part done couple Daryl. the given and possible -- this I And service. is we all is acquisitions. we we we've we've last acquired whether couple a of that's in service, always last the and and when We're the which dealerships, parts over training, parts of as acquisition of with stores years, staffing, think as puzzle. equipment, find

Another part technician the is the of puzzle recruiting.

week it. We the have and certainly underway significant four-day of is efforts there, part work

support sponsorships we training where that for our programs we a technicians. place programs in other mentoring and have do pathing We and and that tuitions career uniform and have

I And lot areas. things. on we tell number to of so I a try sauce. of think put It's secret there's we of there's you -- a a combination just whole focus a can't

an see think bright, And then is we done is will are of units, out older market And efforts I lot still game be again on And that vehicles. it’s I benefiting -- couple that. last that some turning has over opportunistic. think still been of believe I for parts still still there's and have Carpark right still throughput -- the a come is focus outlook aged. to that a here really the probably what of all the lot our is really see the an so towards from years, still is a be the lot we bright, And pricing service now there. repairs vehicles of -- There's older in demand and to in I to happening future. coming which and to end. And -- end really we're

just And AcceleRide. one on follow-up

if that can you many there in you through five mentioned of count saving that you steps you were the transaction? don't what kind are? You start over but steps transaction those reduce your with of five cost about how ultimately of How XX% that explain AcceleRide. are I this you And just maybe And wondering potential time? if helping or a savings you steps customers think headcount? can exactly going will that, when know quantify do I'm

saw see we sales improvements in attribute that improvements saw the with our saw we did teams year-over-year, didn’t to mention in productivity we productivity -- the we -- Well, and our but We them script, quarter. we AcceleRide.

do there's the customers as about engage -- through we also XX we in And AcceleRide. to We thing as is want AcceleRide. steps can much

a -- things few country. -- so six we're We on few are here where we're we've the AcceleRide in way then well. -- markets, new and and experience don't And also last closing a months how affects or we've how things it been testing that so things the some done the how we customer using around some determine in engagement, a trying affects as it affects rates, the focused few

of XXX% a can through XXX% our make I time and is. I we if So AcceleRide. I we're it AcceleRide still engage. to try the not and number see path, tell engage day where where of not don't don't we'll where of another so early feel choose like. days are customers we think We've in take customers you the to lockstep, make -- they don't they they that going to want designed -- We what can. it try can't a it

it's flexible. So

as I So long-winded answer still question, John, we your go. think learning to we're but

John, Daryl And has versus productivity it's That's to Daniel salesperson a just average to by what salesperson sell pre-pandemic. we that increased the increase. And here. see units XX%. would just says, into Daryl it to said. put continuing To -- add as of number perspective, has

with Whiston Our next Please your ahead from question question. David comes Morningstar. go from

Good morning. Thanks.

than week market? to the to have I'm two a curious year increase, else were work Just know headcount the I eager other any helped particularly technicians, dynamics work specific UK what just went like good share that some service UK the to initiatives may got four-day market or people can there? you you've more back Are that going out, the perhaps labor market Just but Thanks. they in ago?

We're experimenting with four-day David. work week there,

not it the the it's in -- nearly as at work UK as US. ingrained there retail. are schedules We The are different is in

level is to it make the So week certainly our work things is compensation different to four-day we're value But do competitive ensure aftersales the at to there level trying US. kind us also of and we're focus significantly technician in recruiting. choice for emphasis a at that are the of some our a sure is and more which some the We've UK, resources a team working of team. try our helped the that added corporate than on workplace significant in we're in has put

smarter down? as curious I'm you but cutting they Thanks. struggle coming used, delta everybody, on to seem And the not -- now you prices decline remember metrics, And right obviously, didn't procuring prices seeing are a a dealers. some other large as just the I maybe past? or of me, hard there as quite in Or the didn't are are inventory for at of as it's year-over-year your just just than

help be that would I our pricing. think partners, us And from smarter. ago we're say The helping we where one I want lead new that's some say days technology quite year us us kind to I away believe helping really we're disciplined. more love a their technology get old car to a the it's implemented with inventory, disciplined price about helping our of we're I'd manager that of bit. a will We to and us trying go Well, used because is trying stay and that. on of to

I some do some that, believe we about dividends. that's so a us to And things ago help paying year implemented and

question. with from question go next Our Rajat Gupta comes Please your JPMorgan. ahead from

the question how in taking that's consumer. new think in expected we to impacting -- do than news of ask seen so general, better held But and year-to-date. the of impact about just terms a health interest the tied is on talked just is you like question. far volumes have And your for year? And be might of play like your out have Curious can Thanks. driving of context you maybe much consumer, to course wanted the persist us think in that that, Thanks the financing. into car how I the give what to and GPUs of in through I Great. rate you picture in third a in rate follow-up. car quarter a environment? new you terms and Obviously, range broader the it there pricing how the what of the the fourth? might into And can sense

just the looking the mean in healthy, to consumer, consumer. a pretty presales Rajat, we order the us, banks the consumers see the in I strong in looking that of UK, US. at at indicates terms

a the it's so seeing consumer mean pressure just I at a will there. a of good a don't aftersales pull-through, we it's perspective, F&I, change. I We're Looking that little if honestly, but I evidence mean consumer. in bit, strong we -- from see see pretty things little $XXX. And know

profit you have than new will the quarters, of terms don't of decline trends there it's anything on it's quarters from but over don't In asked see where cars, at gradual see out cliffs where we any I we seen believe the all. what been, different a three last couple about we gross

kind the is That’ll are? activity and How Thanks. comments are pipeline? the how all. half? in into multiples just the for the deals Buyback around last a willingness the just you're That's you been in lighter has this did to little a what And allocation thinking on couple it. year how more the years. Got you've M&A of close? any spent that be of capital relative on about Maybe balancing environment, maybe little here. what helpful. second to M&A deals flowing priorities. Obviously, like, Curious Just

we're efficiently. that's six right if really you And to the kind We look deals. deploy believe last indicative Austin In five purchases in at want in Texas. for. our of We Masten Toyota, South buy Chevy here & capital the deals, deal our of the and or in Houston of -- we big we the and want did kind Beck down looking and Florida to North acquisition

the buybacks, want for are looking And those, example saw capital can't that bought find then towards you a we are big stock deploy acquisitions back. we in will we quite we if of where are a we to we those great those type markets. do. So kind the year -- of company And last growth which a --

grow opportunity. an to still that's the us. and for that believe we that's priority But we want So a company,

any but So not at that comes cost. first

from ahead Our question question. Stanley. comes your Morgan Daniela Haigian Instructions] next [Operator from Please go with

Thank you all.

rising wanted I levels about any year Do for sense inventory demand have EVs to start now? commentary of of to just ask So in around recent overall? EV Any comments inventory. in demand change the Or any on you weeks? from incremental the rising

EV XX so a supply higher. little small is And it's Our days. days us. -- for a It's universe

those We XXX those stock. EVs. have are roughly XX,XXX of -- in units XXX of

little conclusions And that So them. -- brands, some on EV our few to hard concentrated it's brands. at levels in And of a bit ICE number. this and sell general a -- in it's in of small other But and But about brands, point. there's difference there's a more to just based the of that's the a have draw our for trends the sales support we struggle. between a inventory

Thank you.

call. thank ladies well presentation. will conference gentlemen, today's everyone as joining that, And question-and-answer be with and We today's today's session ending we for as

lines. You now your may disconnect