Group 1 Automotive (GPI) 31 Jan 242023 Q4 Earnings call transcript

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's Fourth Quarter and Full Year 2023 Financial Results Conference Call. Please be advised, for 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.

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

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

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

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

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

McHenry, Financial Senior Executive Daryl now call the to Officer. Officer; hand to Vice Kenningham, President Participating and our President call Chief on and Daryl. today, with over the like I'd and Chief our Daniel me

revenues diluted Group of total XXXX, $XXX.X by Current $X.XX. Good history, supported of delivered adjusted business, year in billion. by quarterly income Automotive profit gross billion, company of total gross reported highest In the fourth $X the of from million were and EPS exceeded continuing and driven adjusted quarter of net X $XX.X and profit morning. all in billion parts lines service record, all-time $X.X operations an

with start U.S. Let’s operations. our

up the units up an vehicle sold We outpaced basis. same-store were and industry. on as-reported XX% basis a XX% on New

During path emphasis prior were performed inventories new the quarter. of down fourth quarter, our about of down sales sales return. as vehicle their resiliency on and the XX% on Gross unit volume. reflect strong in driving XX% glide profits continue and in as slow the our the These demand U.S. from presales, expected

used increasing performed In the cars, over in quarter, well with retail prior sales used GPUs year unit vehicle quarter the flat. remaining $XXX

ability valuations the We pleased and car margin. with process hold our speed pricing discipline and depth the this believe quarter, in that to used declined the with increase use fourth we're the during Given of testament technology. and volume is U.S. industry our our to

while off, Our attachment leveled basis. F&I only vehicle a used that of increasing minimally finance quarter on attachment unit again. same-store sequential finance is in cars new have $X,XXX profit It declined rates gross per appears now

pressure We on and finance for buyers. requirements expect due to continued tighter slightly some existing lender interest rates some penetration

as gross year full annual parts customer sales profit record service prior revenues after billion profits the quarter for achieved of nearly we and XXXX. $X the gross X%. of Our in fourth outperformed was excess and year And pay and up revenues

continue differentiate, part our that to for in after We business. we X Group of that will invest area to and continue an is believe sales to

to service using hours, through customers advisers improved management more reach and relevant of focus marketing increasing and work in customer our training more convenient flexible on customer Our technicians, the relationship specifically way. is technology sales after and a innovative journey, and of schedules, software retention our timely the service impact more data customer science

service rather it's vehicles return, some in them. trade that inventories may their customers As clear than

opportunities However, we drive sales significant business. still see after our to growth in

an using intelligence, they our and to meet us. in want to quarter booked to engage artificial As XX,XXX customers when over the helping business customer example, appointments and do with where we

on to Wrapping as XX%. up the Leveraging points to believe scale, to renewing pandemic. shift network. Despite we our in pre-COVID add national We're synergies SG&A. we in XX.X%, investing increased smart to costs we fact, actions this down this to our our and the considerably will inflationary engage XXX of to key let's environment can percentage standardization more through U.S. across local provide made cost controlling U.S., the do new focus gross around from structural to of SG&A adjusted a since basis value and shareholders. levels improvements unlock our

cost what the overshadow turning quarter, car a the used a control. stellar sales should underperformance a difficult in Now, year U.K. market, vehicle to due U.K., to underperformed of business. was U.K. for volume and in not the This fourth largely new our otherwise lack underperformance

by U.K. parts and believe of by service. delivered and Our and record profit revenues record lines We year new keeping vehicle pricing vehicle GPU remains is demand strong. gross constrained, vehicle full and driven all team new still driven resilient service availability vehicles, new

bank months new approximately As of vehicle units, of was X XX,XXX our backlog. December XX, nearly order

during predominantly is those As are of luxury, times customers business more resilient U.K. uncertainty. a our economic reminder, and

as X,XXX basis its XXX adjusted resulted points rebalancing of will fourth sequentially the per of that U.K. Our profit quarter channels. vehicle into of sold a operations first the a increased $X,XXX rebalancing our year-over-year. quarter percentage basis and used This continue began points inventory loss through XXXX. in vehicle gross U.K. during SG&A a wholesale

U.K. both half deeply Managing last automotive XXXX, we appointed retail a U.K. the Director are new the during a reminder, of in a experienced business. whom As CFO, and new of

to During the performance. number implement actions started address corrective our of a to quarter, we

operations to our focus and car launching We on our used retail are and valuation revamping approach, sourcing, marketing digital initiative, more new proactive spend pricing. a restructuring

contact consolidating center In headcount by addition, we our overall XX%. reducing customer and are our

produce actions We these the months expect ahead. improvement in to material

and balances capital return shareholders Now, turning of the a capital quarterly allocation, management strategy return-focused and capital to we buybacks. to dividends allocation deploy share portfolio through that

acquired the of We X.X% million. revenues million we of shares. dividends annual common spent During We $XXX $X.X paid our repurchase of to year, expected $XX billion. outstanding

We continue explore ways in to clusters. and to holdings profitable, scalable consolidate dealerships our dealership highly

example, in dealerships $XXX an dealerships As an of revenue XX with X we revenue acquired $XX disposed million, an million. XXXX, we and average of of with average

believe business We quickly. of the capital, use demonstrated successfully acquisitions we integrate have best very dealership and to our ability is the

capture smaller and leverages underperforming a also divesting stores part critical a continue optimizes growth to well. company manner. explore We our brands of integration is opportunities incremental and meaningful and we immediate this to acquisition, scale strategy in proven believe our growth critical as performance, which our the capabilities, through is our roof-top and story, to approach and believe grows We

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

Thank good everyone. you, and Daryl, morning,

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

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

repurchases deployed million we acquisitions, flow XXXX, $XXX year of the and a of backing of share dividends. and free out cash In through capital after $XXX million combination generated CapEx. operating cash of flow was full $XXX million This

XXXX, in repurchasing $XX average we XXX,XXX of in quarter reduction quarter. a fourth spent the In million shares of count over approximately $XXX.XX, price the an resulting at X.X% share

in at resulting average X.X% a For XXX,XXX share repurchased price in of the $XXX.XX, the shares full year an of count over XXXX, we reduction year.

at approximately stands Our today XX.X ] share count of million. [ as

Our repurchases pursuing support position opportunities. flexible in sheet, addition consideration to will generation growth cash continue capital to share balance a approach, us allocation and of including flow leverage allow to

ratio at our end facility defined Our syndicated U.S. as leverage was credit rent-adjusted December. the of by X.Xx

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

$XX.X interest quarterly plan plan was We million interest of and interest an expense rate comparable vehicle million. well the an year increase interest $XX.X the $XX.X million our of as year as million quarter through million the prior floor nonfloor accounts, million $XX.X prior interest to and effectively $XX.X us interest nonfloor floor of $XX.X our of expense rate expense plan the floor managed interest year million prior versus of plan balance million excess million from plan to reducing holding higher of versus $X.X million. swaps, Quarterly year in expense $X.X floor the increase our $X saved holdings. of which Current Our increased by comparable portfolio increased interest offset of current due year. was plan cash exposed prior inventory from $XX.X year

comparable the versus swap mortgage $X.X the plan, versus million current current rate us floor quarter $XX.X comparable the interest our our million to period. period Similar year the portfolio, in in saved and swaps,

other XX, Therefore, instruments. is plan As rate floor our and the SOFR, of approximately of or in debt funding increase EPS which every $X.XX impact XXX secured rate, debt December plan XX% only and for benchmark was floor points is billion basis fixed. the in about $X.X overnight referenced our mortgage annual in

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

we Thank accretive M&A business. you, are aggressively expect XXXX, to our In opportunities that to pursue Daniel.

that our significant we more growth balance sheet us of in well-positioned XXXX. Our aggressive for source strength strategy is a believe runway provides

sheet balance of we're strength, opportunities with our initial record extracting proven to integrators economics. beyond track value addition additional the In M&A from a

remarks. you to to question-and-answer throughout over XXXX. prepared our we and the Jamie? your I'll time operator This to you with today, concludes turn begin now Thank the speaking call for session. the forward look

from question-and-answer now question will first Murphy comes Our Instructions] from [Operator America. the Bank John We of session. begin today

Daryl, first little is going of in of quarter the exactly closer used too tight the see there question in normalized? the and the and guess a is What bigger get the vehicle on this general used biggest inventory turn-to-earn I team problematic we'll and or on? by over Just that out first in strategies, business to there. work I thing is of business And mean, is, and did is U.K. something extended the quarter there? more bit sort you kind else weren't second we’re and on

I think, Daryl, QX. behind Yes, last will we the -- way. and it’s in John to QX in is first, improvement us your by answer then hopefully this see question

that wasn't since quarter. market, totally centralized and And that pricing, to to candid valuation process and we've of to changed U.K. market a the the car of issues the retailers warnings challenging. are We the few in saw in a things from there during dynamic was I of conducive be process in in used had that just very gone I drove which used with place, a we quarter. U.K. think car think The really some the a the the more couple really you.

centralized we've with accountable and that So, experts more immediate benefits. and transparency better of decision-making, team visibility that show we a and believe and will

were -- those my what cars. the take So are on issues that's on used

play discussions? U.S. your curious. maybe And mean, I just or your in GMs, the is into of the stories, I'm what negatively, just In back discussion for then of positively Sort online I here, one tenor demand AcceleRide? what's And Okay. of in showrooms, mean, cross-currents of hopping what's dealerships on on us follow-up, there's those and with the consumer. mood U.S. to the take and this and walking your year? lots just state your of

industry. counts really Inventories, the especially And in returning, day with encouraged. growth the are supply manageable. our good. Traffic vehicle. they're XX% same-store mood’s is the growth quarter, while We were we were new in outpaced pleased The good.

good soaking the with days we the really see. And some demand to up especially mean, that December.,I really that additional of just were last record ecstatic is really production. days few were So

portends things XXXX. me, to good that so And for

changes and The they margins bit. expect where about is and looks a And I But would it's $XXX what month, to of good. between a trend. we see as down you some -- demand predicted, continue that's generally, come say kind have franchises about at

Our next Adam comes question from Stanley. Jonas Morgan from

they, to positioned strong And in and are Daniel, hybrids. hybrids you really guys super Japanese exposure very OEMs. the Daryl, well plug-in turn, for have

add like on commentary of you color the I mean, be I high that your really, be hybrid tight levels year. up, really to So, supply. seem those XX%, market. XX%, I vehicles still sales shoot, didn't in was wanted this part if know if you of But for inventory mean, on that curious to I I some saw shocked wouldn't

on latest hearing for the have guys. then want I anything where And the vehicle your It you on indicator without do you seems demand’s electric dealers consumers? like what's slowing, floor from ground but to from offerings, sentiment assume didn't

your answer use encourage as well. I'll chime and fabulous. as Daryl, Daniel an is in I on example. hybrids, question And To are This to hybrids Toyota

hottest dealerships coming and it the is or an have anywhere power we minivan we've plant new is. with the that is coming of the not, our to being hottest got. in which all-hybrid General Toyota the a One yesterday, I out It's new soon. announced one Camry an Motors vehicles vehicles Sienna. believe. of powertrain, think country indication I believe what of is The hybrids announced They all-hybrid plug-in it

the demand we and good hybrid across brands what we is really that So that's see. have,

demand EVs. we especially us softening fourth quarter the in new issues car on do London levels. some production see a We drove that's was December moderation U.K. the softening, we EV, And do EV. some much see U.K. in But the and the for definitely in in see what around softer of

I'm that see but a hybrids you know don't softening. the margins gross give vehicles on or have pressure already going we ICE in on that to certainly don't that you on U.S., And it, I perspective in on EVs We the see any don't definitely U.S.

Daniel it's Adam, here.

X to X.X%, to Daryl Just today. and our X.X% add it's said, in units, quarter a was percentage terms total of of in inventory EV still what

haven't of percentage increase total inventory of terms EV. in seen a as any So we particular

a Maybe blended, I plan that. moderated can a and on fall. moved. it one I bit guys. interest kind edge, didn't might had My I know kind of more and But in you rates. the be appreciate floor following leading maybe bit, If Daniel, I to of is could interest, a what on the if know have that where squeeze a might scary it down that, put floor coming maybe just on number the was wanted it's view your if blended market -- just today check a in looking on suggests you plan

it you in hasn't our much of as have of terms increased inventory, supply, terms well In days may as expected.

by our fairly increase We it's low. have in that effectively. on will some going XX% [indiscernible] that seen seen in And moderation constant about term. but exactly increase total units by plan It's a floor We've continue to basis. interest,

comes JPMorgan. Our from from Gupta Rajat question next

versus on like slow growth both much able us? first on curious I’m quite and and slowdown did dissect revenue did if of services. same-store [ had parts days? if traffic for much yes, I a little U.K. bit break in Or just apart know question would at fourth had was, ticket? from there quarter, if in It like, was impact could, days, the helpful. all? don't a you're that to a days down like, look How I the the U.S. but be that the that just for bit basis selling the How work full] a lower I selling more you you the that just selling know week, us, have an days

which was fourth up to important up about us, really I up customer were One lapping – things year, which we on X%, quarters. pay, that's not for increases. We're normally Year that's we've of X heavily double-digit focus right, that, you're XX%. good normally Last think we XX%. were we before the think is, Rajat,

And as so are something customer and growing aren't we that much, focused our on counts now. seeing we're that's

the focus and industry. know, and And departments rest Saturday what didn't our trying attention a fairly in open as come After on all quickly really have day we're COVID, really is to unique our which the are of lot that service you business. COVID, one back we business, put as Saturday, more -- the after seen trend we Saturday our business saw is

don't dealerships. a of that in You see lot

the Saturdays, we'll later a emphasis our with more that that I'm customers. year, putting see to through lot that then expect on through increase we started quarter I in focus really sorry. the -- And volume which so And on quarter, and we're the continue see

Got any it. in the quarter? that there you was impact at all And strike experienced the from

delays strike wish we than the but for Not I I don't something didn't that material a that, parts we I honestly, could few on was other us, things few parts discern. any see here. could There a blame impact but -- itself,

David from comes question from Whiston next Our Morningstar.

back go to want the I U.K. to

As QX, just I'm worse, vehicle curious. the has a soft while point or you sure everybody you been In piling has did it just get things I'm up for know, decided U.K. I'm to changed reductions? severely to just used have really headcount lot a market for guys been out do to figure where QX. finally a we in negatively trying if anything now.

of I'll first Daniel the that take part question. here. it's David,

terms we used much out In of U.K. traditionally inventory, is big the September in of September inventory. month too probably the registration came with

specifically. lot a seen U.K. December, that and was the over trades X was those of that month get the in into drop auction XX% November in prices months. Rolling the over You October, in

period So, I hadn't a was think that been seen in that that historically. change seen there was that

So, I happened that in would a a was or that effectively say the correction market U.K. onetime hit

pick I'll up headcount on costs. reductions let Daryl and the

we're necessarily to last David, U.S. and than our it year, we areas, in on the felt in headcount U.K. comfortable that with. in other we crept beyond better the used right general have years, was cars. couple overall given the That in resource challenge the Yes, got because the had used a that over in some and the related thing do. quarter like head just discipline specifically fourth so the of We've the it last were we allocation. to wasn't U.K, it up And count, addressing honestly, actually, vehicles level the And

a you? getting life And talked too franchise interested switching their cycle in I'm others start-ups the wanting early any for and and they are guys gears now. about just you franchise? if in to Or curious are some here to have EV [indiscernible] of

It's to really of a the get years. couple last couple pencil-in. to at hard over them looked of them We've

is the getting math I harder. think

Daniel next from our question Inc. And comes from Stephens Imbro

to Any size-up XX% want you actually. annual Is quick it reduction. on Like, could X clarifiers. $XX-plus savings? side, the SG&A start any Is that? way One, $XX the the to million? I mentioned guess million? $XX it cost on million I headcount sizing you cost

or then how in profitability a lowering think you're yourself the in the the about U.K. And here industry normalize? SG&A in there you the to U.S. as Is position Or find year you the maybe same in do as risk continues a base cost normalizes? X

Daniel, that terms here. headcount, in out of million. the take somewhere regarding and would absolute we between $XX It’s Daniel of to I'll dollar that part take $X expect first So, question. number that's the million

thing other The that valuation fleet, because We fleet, clearly laser-focused at the drops see big we're saving. loaner around a car is moment. our that being somewhere on million in $X they're demonstrator taking

A little a down U.S. bit, down basis, on XXXX headcount a the same-store still X%. versus we're headcount, on on more quite in the

XXXX So, We U.K. in U.K., were on same-store. the we were in heavier relative a versus the basis not.

we done on the we the who that U.K. Well, had ever in business opportunity than business. have better a mean U.S? it the We've So knows? in Would job what the in conditions hit in business managing our I headcount do. U.K. us U.S. depends

Helpful. And then maybe, on the U.K., another follow-up.

results in the I you growing market This us of guess units was that expectation that can reconcile last would months keep you level help the think, that decline same-store backlog. XX,XXX with and there help you Can backlog. mentioned the still you morning, mentioned backlog slowing. insulate of almost quarter, units? an I despite X% in X

how play didn't So, by we any should growth about think forward on why and just color out going you maybe can backlog? provide that

built robust we U.K. up our throughput on and in to we That's driving have inventory a have actions traffic? even bank. so in the in right in car thing. on at we and the we've metric, side, our fourth overperformed car U.K. exactly our inventory. how while the exactly taken though we we're we hard the with of in the better fairly look And new of that with of that's that vehicles we're the And keep order brands? on do reasons right new job that that a didn't a focused U.S. taking industry we Are the underperformed we the Are we marketing. because, still the honestly, one quarter U.K., Well, the right part on the

around have store. our we more some demand to driving customer work do So, to

Our Capital next question Ward comes from from Markets. Freedom Mike

were U.S., On customer the X%. do? did pay warranty the and service or think or how the wholesale that -- the was you collision parts in I side mentioned up What

down was X.X%. was a tick, up Collision X.X%. CP

the you As mentioned, over X%. was warranty little a up

was so weak Okay, the in spot collision.

just it So, a was that regional, or comp? is tough

collision small for business profit XX% our X I it's part I tough It's, real is think million of not XX much. mean, less collision us. a than -- Also, at basically. business. X or last X% seen We've a a years our No, over XX%, gross -- month It's the something. comp. of it's $X like, in grow

you side, And in sounds some on that inventory almost right bit on too long. on Is the It that of to the used some vehicle adjustment read? nature. U.K. was onetime liquidated little it holding like like a sounds were you the

Yes.

something like that was I you said, the And units, Okay. think that? X,XXX

$X,XXX per unit.

Oh, unit? $X,XXX Okay. a

QX? to That then big indications on March XX,XXX And go last have What just one is Okay. U.K. the the that month. as we another on into expect or you backlog? part thing March, registration we for contributed of orders could is Any it.

part of it's the Well, backlog.

for March haven't is the The information. which is we it to this grow expected SAAR about XX% down [indiscernible] We in U.K. year. get broken can that

we And encouraging. so, have. going to inventory March, nice that's into have to us, And is which

of we'll be Mike. it, able hopefully, advantage take to So,

next question from our follow-up JPMorgan. a from Rajat Gupta And is

I had new PRUs. on a question

I mentioned, dissect is them those moderation quarter continue you to could us also well? points. you One domestic, in want sequential to a you And X mean, the consistent $XXX was just like luxury? month I across first had -- clarify the import, something brands, with expected. was here of expect different like, that the what as you help

brand. PRUs different since that year-over-year stood just Rajat. going I side. that on way out one come we’re But the we new other $X,XXX of is yes, We to as guess trend And out all car every the that answer continue we've saw has seemed in really nothing completely -- down a saw COVID. brand than to was there of

generally And so board that, bad. on hopefully, across us so But that X% on are hurt heavy obviously. mix too there's inventory in a the there, seeing pressure we're It's still With only brands. we won't the Stellantis, so that. little Stellantis, of we're

helpful. That’s

And ladies today's presentation. gentlemen, be as and Have great today's with joining. we'll day. thank session that, question-and-answer concluding as everyone for We well a

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