Earnings call transcript Q4 2022

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Operator

Good morning, ladies and gentlemen. And welcome to Group 1 Automotive's 2022 Fourth Quarter and Full Year Financial Results Conference Call. Please be advised today's conference call is being recorded.

At this time, I'd like to turn the conference call over to Mr. Pete DeLongchamps, Group 1's Senior Vice President of Manufacturer Relations, Financial Services and Public Affairs. Mr. ahead, go Please DeLongchamps.

Peter DeLongchamps

the And been earnings everyone, morning release presentation for related related Jamie. to will today's this to on and welcome Group call. slide call to reconciliations include The we purposes that results good you, we and refer have morning, comparison to a adjusted posted Thank issued website. this 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 and in and known uncertainties, actual may the from both involve periods statements future forecasted cause results differ company's to materially results. which Forward-looking

Securities to, to but inventory levels and include, due not supply are adverse global on conditions to in developments risks reduced new and Exchange the vehicles used and increased due demand services. volume, Those associated the with economy impacts Those demand and component markets of customer filings the risks limited company's Commission. with related are and and pricing, the other described production shortages, manufacturing risks for in and resulting

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

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

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

over call the hand now Daryl. I'll to

Daryl Kenningham

to by record aftersales Group all-time record XXXX expense $XXX Adjusted an our everyone. operation profitability grew growth, Adjusted and grew X was EPS million. strong Good Automotive, Pete. year you, XX% to all-time income Thank for net of a control. XX% UK high a disciplined in $XX.XX. margins, morning, outstanding driven record

the billion $X Group billion growth also over nearly We and have now past XXXX months. XXXX acquired X. of acquired of year another revenues revenue external XX strong $X over for in was in

our million repurchasing $XXX We returned shares meaningful the capital to year. also during shareholders calendar by in

XX we've the of XX% shares. Over now repurchased months, company's the past over outstanding

cash strong flexibility in moment, will XXXX. to allow a capital continue will which position, significant cover leverage Daniel for flow in Our and allocation

our to pleased Turning fourth $XXX to that, from continuing adjusted results. of quarter income Group fourth the X an report quarter over million diluted quarter, per I'm or increase the net for last XX% in of $XX.XX EPS, operations share generated year.

of which $X.X adjusted resulted million Our from primarily totaling losses, the tax of pending franchise exclude non-core points. results after items disposition two US

with Starting our operations. US

XX-day primarily was XX, from be days' import As very remained tight vehicles up X in in September. X,XXX representing days a of US of Lexus, XX% a continues business is constrained. very December supply. at our brands This new Toyota and we brands our supply, inventory, inventory combined domestic had X which as increase to

our above expect expect settle to a over levels. XXXX vehicle vehicle do, in however, the continues of gradual inventory as new to pre-pandemic margins margins course recover. normalized We new decline We eventually

vehicle was decline continued $XXX of sequential was One roughly the margin used a used in Partially quarter to store of sales. faced $X,XXX. challenges in unit vehicle decline vehicle in the in offsetting results used which X% a pricing, we this increase same industry an

continued within public target which of a on of XX is our acquisition XX,XXX over to through reliance auctions. from discipline Our inventory, sourcing organic efforts, AcceleRide day used We our with maintained our minimize XX vehicles days. of supply individuals including the

sequential the decline. only per business remained showing And $X,XXX F&I has unit, strong minimal at a

finance headwinds modest do due we penetration to on forward, pressure rates. Looking some expect

comps a our double-digits store high same generating was revenue teen ago. aftersales, growth, Turning following US once again, growth to performance outstanding year

growth. store increased same parts Our Collision customer warranty generated X% XX%, X%. wholesale and business XX% pay

our after X. technician store for be We continuing headcount recruiting XX% by a our to Through in foresee and XXXX. XXXX same course increased sales Group of retention we strength technician efforts, over the

maintain used discipline, new vehicle despite to in the and We decline markets. cost continued

Our percentage savings of of percentage an from leverage US year gross technology prior as customer from increase continue employee quarter permanent portion SG&A profit fourth drive XX%, be as material of and adjusted to XXXX. to pre-pandemic point X these was down in and XX% we efficiencies. the only cost A will

sold their we percentage in way US sales, AcceleRide, the through quarter, of fourth customers to some continues vehicles the in that used of XX,XXX also fourth our XX% retail our record Over transaction all-time XX% an in total a increase. In an AcceleRide all-time record. quarter,

We're also and credit of software. DMS, AcceleRide integration looking CRM to with our our full

We several and dealerships a year. continue in full it rollout to expect test this

results transparent this are early very and we for more customers. provide Our will and our positive, expect transactions faster

UK. remains demand availability to new Now the is turning Vehicle steady and constrained. still vehicle

approximately remained worth was which six units, sales, order months' consistent XX,XXX quarter. Our prior vehicle with fairly new over of at year-end the bank

a luxury. economic reminder, times our business As mix predominantly uncertainty. those resilient are consumers is during of more UK And

that up years UK a Brexit demand both drive over strict to help and believe built to continue very vehicle demand pent lockdowns strong pandemic due We several throughout XXXX. the will past

both gross full been local store with has US, XX% currency and Our the aftersales growth same base as as fourth year the for in of growth XXXX. the just profit quarter a strong UK of on the

in second And UK finally, year. we to this fully expect the quarter integrated the of be AcceleRide in the platform

the a provide Daniel turn Now and call I'll McHenry. to sheet liquidity over CFO, our overview, balance to

Daniel McHenry

you, Daryl. And Thank morning, everyone. good

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

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

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

count an in at of average our shares result additional of million, over And The just XX% X repurchasing share this repurchase $XX.X a approximately XX over shares. the million repurchasing price XX,XXX spent we spent last an months. $XXX.XX. XXXX, activity reduction is In we month, $XXX million, in the

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

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

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

Our rates of as quarterly from the both floorplan the was year, of $X of $X.X inventory prime million million entirely interest million an due acquisition conjunction Non-floorplan vehicle increase expense as higher increased to higher rates. with prior to due debt in interest million interest well $X.X holdings. $XX

of fixed As been debt a our rate interest has through the swaps. majority reminder,

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

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

turn now call will to over the Daryl. back I

Daryl Kenningham

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

will include generation However, capital our cash approach, allocation likely flow serious a share support also purchases. flexible balance and will continue leverage position to of which consideration sheet,

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

Operator

today Bank of from from first John question [Operator Instructions]. comes our America. And Murphy

John Murphy

and question core one to one follow-up. have I

also normalize timeframe could them that's you higher just there out you Daryl, part sort Just So, then they I'm hedge that on what of what to savings sort in. of question, just corollary as come but process just still that new mentioned the of sales your GPUs, if And time, those of SG&A know expect you idea give on just that down, tough a is think thought down? to come but as or were there. a than happens be pre-pandemic. over curious, out savings GPUs goes grosses you sort some meaning comp? us that I natural falls of

Daryl Kenningham

still come we most we gross tight. back, saw brands, that a we we'll the they're of couple we other our than total it last a domestics, the the a up a seen well it profits will path see similar some this gross is year. are change. you very a got decline, any and has in quite In what to other tight. give I then, And And are glide this the time, really a when bit as saw year, couple erosion. can't since with holding something than tell in gradual brands still But In quite be expect John, of brands, and grosses think our Inventories quarter. Daryl. increased inventories very through we inventory. expect because I can't during normalize, we of the we've middle specific specificity steady real is you of

I'll ask SG&A Daniel the question. to address

Daniel McHenry

integrated and going to of platform, which of reduce SG&A infills really I think, that's expense or some think of our use going going that how will clearly, the into but executives think out to, our credit think importantly, I I And through, you're forward. the that we've dealerships, software, utilization a DMS, us integration profitability that John, SG&A, and referring our On percent help or couple help think drives in there I the going SG&A the further things going increase And, CRM us to AcceleRide I integrating going forward. forward. our a as that we're sales reduction of help that's growth, particular, in there's of AcceleRide impact

John Murphy

on one follow and parts up kind of service. Just

of store growth is sort through techs in of – Because of smoothly read happen were service the same cadence same X% right, were of the XXXX the store on year, of hiring you during through techs Am assuming might, parts the the XX% those sales in said course course assume year. techs basis, they half gating and a to have correct factor the the more growth on kind in you what XXXX. You they was if versus and I of those techs year? in XXXX, the hired

can that capacity Just right now. think sits cadence, at we of understand kind where even about so

Daryl Kenningham

picked customers as half, we in to adding service in they with get the they the capacity assimilated when We drives I more our half year do us. want more in first belief And of up is expect, John. – than the business second ability our did to aftersales

we're techs continuing in And hire well. press these so, expect ability the to as to we've see see you more there And I beyond number added will that with that XXXX. technicians

Operator

Michael Benchmark. next question Your from comes from Ward

Michael Ward

have wonder swap, of that you slide the on of you me as doing group. unique can floorplan far rest rates? interest just think through XX if layers impact the the relative I Daniel, and the that I that's in your higher as handout, Because the walk you're to what

Daniel McHenry

It's Daniel.

slide just me Let up pull XX.

us enabled You're do all to our fix the that's interest of swaps out correct. rate We've XXXX. got to layers proportion big interest. of is way to What a

You at to the deck in at. the rate And layers fixed XXXX them the we've X.XX%. can is see in and rates out that the

– think that's versus I differentiator going to help with a our for competitors. So us

Michael Ward

rates we won't plan, quarter, floor the cost interest the see it or was on we see rate that Do the X.X%, we offset whatever go the same the these benefits? that As see, up at others? number swap in the that increase

Daniel McHenry

fixed That a at is correct, Mike. XX% of our is debt rate.

same will we the see increase as So, our competitors. not

Michael Ward

that's So that. on out netted

Operator

next Our Morningstar. Whiston from comes from question David

David Whiston

from confident Lexus the either shortage, mentioned to like little their more worst factory supply. no from but predict stoppages if allocation there the I'm the is think about or And Toyota the are easier maybe much curious more on still XXXX Or that still from absenteeism product production tight to You you chip – just you more visibility that? really them? there COVID of is

Daryl Kenningham

have plans. more more with optimism optimistic, in David, us their Toyota. they They're We're telling

and even are that thing at stores. our brand have brand demand pent typically, the in Toyota typically of things, Toyota presales such we have their presales presales, with fighting stores. customers. if orders they think our you luxury kind I of our is for And kind a of And Toyota numbers really for is up except look pipeline significant

by will get expect expect higher production I out a soaked also up year, So some are there. I that much still of of have this these presales get that'll they'll but

David Whiston

concerned On used lot at affordability, vehicle consumer What but too new price a guys the concerned? vehicle seem Are at about to level? affordability, you of attention high all the of there's all the new given you automakers poor don't about CEOs vehicles.

Daryl Kenningham

country. more of given a rates plus bit, think bundle think down a price, selling the The certainly the it's prices interest versus quite cost something bit incentives you everything, little is the from I gas support of the a probably seeing year OEMs. to some When of ownership And we're ago, average in in are about. vehicle parts down a terms

of saw announcement of about one not more are saying on But I the they're this I of some built inventory. we're worried rate interest them I support. So you continue a support, seeing And fact, to from of internally, it. publicly in OEMs think maybe those morning matter an would as especially expect that have that, would their see some on some brands vehicles.

Operator

Our comes Rajat from Morgan. next J.P. question from Gupta

Rajat Gupta

of Can anything and both started, you've And your new January into terms the a you GPUs? I a particularly Teslas? on brands follow-up. view price give how on cuts a And from us bit demand seen of impact on have for that used fairly sizable in and

Daryl Kenningham

on was cut us comment question? out What January, Rajat. our second On You for on speaker. January, tough your to of the half

Rajat Gupta

price the cuts impact your Any demand of sizeable from the on Teslas? for brand

Daryl Kenningham

that we can Not tell.

Rajat Gupta

execution levels. of business, approach all? GPUs days. us you a at And you the managing XX versus pre-pandemic you're levels on how see was strong. under this GPUs Maybe Can transition your used period any environment? comment car during above on Maybe pricing temporarily GPUs below Inventory still pretty volumes? current pricing falling sense pre-pandemic on are give the do

Daryl Kenningham

all the we – the Well, value want and many the market and trade parts attachment, costs. those daily, the we there for err do. units opportunity And volume for daily business on in for which more it's the that market volume side us. those Also, of a in the at price F&I then want is of be we all more on do We and of to we And in service because volume. we strength better volume puts want that Not stores based than constantly on something at with real reprice operation want or customers. out time. to off us another to our often to vehicles cases. never That's GPUs,

So, GPU that for like philosophically, versus we volume that reason. trade-off

a believe cars the of we're Moving because cars the the used And couple for to that over PRUs or like over I basis forward, I used shortage Cox will could take years. pandemic-related that the some declines of out And macro agree three for support if couple somewhat the couple years on them, you look three which saying, anyway. at I saw years. SAR next of of four with coming are firms of it that what next to of on tend we – is going market a years, believe see

probably see that's something So, happen, we to think is it. going is we the way

Operator

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

Joseph Enderlin

This is for Joe Enderlin on Daniel.

backlog, the looking UK like sounds down this step that Just quarter. slight at vehicle it took a

the do backdrop demand changes Have quarter? wondering, there? noticeable think last remains seen relatively you you Just in consumer consistent any from

Daryl Kenningham

indicative quarter-over-quarter seen. in haven't minor wouldn't anything any a of that we've what just at or we've seen trend the No, material we and And backlog change seen different changes. strength all. I changes anything take than meaningful as

Joseph Enderlin

from this looks like Could how slides, think at have the As and year. on much using sure XX% goals if you of customer much a have some left, how about maybe then the it AcceleRide retention to color provide you platform over up, that course is, looking XX% year? optimization next follow for you any you has increased

Daryl Kenningham

drive us of will customer feel so AcceleRide. buying that with We believe experience first areas but a our cars customer baseball cars, believe of but AcceleRide a in value game. number new payments, of transacting or in value and their business. we digitally platform that just couple innings even you're customers And at drive that of it's retention help there's we're the customers we for looking AcceleRide do in retention cars just like us, used we that believe make with to of buying more is much our transparency selling to much can better. we in used of And Not in number the and – them how us, indicative experience

We every customers just transaction use in continue month going that's up. XX% single to of month, see go the way. up some almost in our AcceleRide now every usage their

run long AcceleRide. We're a to we we happy really with with there's where So still are. way believe

Operator

from our next question Stanley. Jonas Morgan And from comes Adam

Adam Jonas

Just questions. couple of a

cutting with That's real cuts, while pretty XX%. necessarily wasn't are First, stores, the more selling, situation. price Tesla, the nameplates any that of already you with like doesn't unusual saw maybe anyone little kind head after time I'm I that some of impact compete price you all you'd if of guys those have whether might agree, And don't this it to a, those a curious cuts. remember head type product. directly you covered

Daryl Kenningham

used Daryl. Teslas didn't we We after have very we did our But inventory announcement their is looked We and many in honestly. repriced. at This immediately reprice.

an for I from there And than that like country. numbers say would so, XXX perspective, the less across the are us impact was but

then, that And and cars shop haven't for there's sure. the but made. we or a doing. Teslas and we're where per watching material se, and it on yet we EVs segments a seen luxury they're impact ICE they in some sell was it vehicles, between And luxury what That's move do every cross with we day bold sell

Adam Jonas

Any either ones kind asking we couple floor of plan, not and particularly for given housekeeping of with as are up. on kind to expense, creeping interest where but something rebuilt directional, the Just units versus just expense on today a side the the rates or right kind guide you of of seeing you get environment. I'm me. little specifically, on the interest other then floorplan pre-COVID comments

Daniel McHenry

have Daniel. moment, debt fixed we floorplan. well as That's out. XX% it's mortgages of the our swapped At Adam, as

the interest. some XXX that increase EPS see at in per of increase rate, to As in the inventory But will interest at see $X.XX bps continues we we current rebuild, expense.

Operator

from comes from Chin question Seaport Partners. Our Research Glenn next

Glenn Chin

quarter. fourth confirm price you price, Understood in, some ASPs mix highs to or but they that on function that December? continued that that increase party pricing. then, providers continued through of third more is that is Just before quarter both? And the cuts follow-up to suggest a Tesla through came new reach Can

Daryl Kenningham

about assume you're new cars? talking I

Glenn Chin

Correct.

Daryl Kenningham

necessarily see an didn't quarter We the new increase on through pricing. car

Glenn Chin

parts margins mix? Just that down and slightly. Sequentially. function ticked a on Is service, of

Daryl Kenningham

to at you. some it drove see I'd at a look which look more that back but have parts it did, of to get and probably to if we can take that,

Operator

Bank John of And our next question from comes Murphy America. from

John Murphy

on leverage, I follow-up just one had Daniel.

You mentioned either even up saw leverage. UK, kind in the acquisition acquisition? large that of or potentially could think curious small, a I'm what good potentially X.X as where the take your in you times just you a if current US to you capacity mid you to have do, and

Daniel McHenry

I X.X to set times us, to prepared we what is think we For go that out be would levered.

prepared facility big to a reduce go acquisition allows or the on we proviso quickly. to X be If go under to that again that were was that X.XX. down or would X that but us back credit times, times X doing, in something to pretty to interested it really would we be we really would Our

John Murphy

with depending X.X of comfortable you're comfortable to you here to you X, acquisition, a way very up X best that's there's would leverage grind jump an the on to can – go. X back that so to just turn but you're But grabs, – on for to X, meaning want

Daniel McHenry

those well. Absolutely, Clearly, and levels We pre-pandemic, to be at would were those okay levels to happy were we John. we as above go X.

Operator

from comes question next Gupta from Morgan. Rajat Our J.P.

Rajat Gupta

count does in [indiscernible], consumer if seeing defaults all, used improvement picking the you don't to and some comment the earnings provide? you interest base up new remain if and that see revenue and are comment weak, around and or it as would could going takes based on higher guardrails you on Are car new today's the or be backdrop you at delinquency rates, see any to you puts what trough for share able company

Daryl Kenningham

Rajat, we don't.

XXXX effectively don't I that's that be we back give model would put guess on guidance. to goes know, it prepared you you modeled but out we that. have levels, the your comment far as to as model, and you I As there have within think

Operator

from next our Morningstar. And Whiston from question comes David

David Whiston

the increase to I tech XX% go wanted headcounts. in back to

one then how like just you've summarize a like get couple you they work some been doing in been that getting saying – what are initiatives talked were of You why new you're Could at the you best Group the a right, remember has are and was week. things they most have main it about And briefly if two what or things I years the candidates of people? ago talent, X? to chose four doing doing, more to also, to success the work top things day

Daryl Kenningham

for keep it's because creates customers open customers. above busy. is real customers, We convenient thing technicians they us. We do our of pressure philosophically our We the do for right for which full a key work, want puts pay business now, stores. our it's wide our business usually when that in our when us. convenient a make with Because We means market market on we stores our it don't at on keep to or schedules for the us traffic which of do lot

And in then, We're stores which workweek, work rooftop the of an half the thing. to we important our is day today, That's in count that. continue US. about XX four

schemes we're something place compensation not now specifically. to it well. and ready is determine are an to better make as that even our in on in work. that's front at compensation We those different thinking our – And ways But to right plans across I to center say looking schemes, comment footprint

a number Also, stores across of we a have of mentoring programs techs in and schools number us training relationships to the that with help help technical us. schools number markets we of feed have and a and country that

number of have things It's we So, things. that different of different never-ending. do, a we a number

David Whiston

about in over that drastically the half higher said day stores. Do time? four see getting of you You is the workweek

Daryl Kenningham

facilities. to equipment. put And a Inevitably, in stores over That we in things is the do we And as is tech off dealership the revenue That a first year-and-a-half. new one last we aftersales brought in $X in us in tech areas and invest. billion recruitment, buy usually all aftersales. that And we more means training. integrate that time. there's think continue ways we for underinvestment store we when staffing we when in those find and Yes, in we and as that what very well. retention of means We of to invest find pays more means

Operator

we'll question-and-answer showing for ending well gentlemen, session as now ladies do today's And has further as thank no today's The questions, in attending. be presentation. We conference and you concluded.

may now lines. your You disconnect

Group 1 Automotive (GPI) 25 Jan 232022 Q4 Earnings call transcript