Earnings call transcript Q1 2023

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Operator

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

I'd 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.

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

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

Daryl. the call over now hand I'll to

Daryl Kenningham

the quarter after-sales In led XXXX, again in exceptional diluted by outstanding Automotive was first teams This performance our both adjusted the $XXX.X first earnings and by and income Group the Good yet U.S. record-breaking U.K. million X a share per $XX.XX. in of record everyone. of morning adjusted net reported quarter performances

also unit revenues in quarter new new used and vehicle set sales. first vehicle We records and new

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

Daniel a Florida flow Our minute, add allow store leverage strong will to high-performing to provided XXXX. position, deployment cover and a of Chevrolet an for us McHenry will continue opportunity flexibility our cash the in capital footprint significant in to remainder and which

domestic results. Now, supply Starting of days’ we a supply business fairly operations, our with our import of of at U.S. constrained. and Inventory and day our X very vehicles remain quarter of tight combined continues as Lexus, XX% to in turning higher and first brands March bit the our to XX be quarter with new ended brands a a supply. Approximately XX U.S. is vehicles. is used days’ Toyota XX which

in line X%, right sales vehicle new the retail Our increased industry. with

our pre-pandemic of new new points XX% expect time. the the XX% of settle quarter quarter. We've levels. believe in slower prior over pre-sales, we to our manufacturer vehicle above sales in eventually We indications margins discipline, the which U.S. were production normalization vehicle do During down margin to from seen

The We AcceleRide, through in including inventory, trade-ins, experienced unit vehicle improvement continue service a customer we vehicle sequential and focus efforts, acquisitions organic sales. source quarter drive and sourcing margins on used to acquisitions. used

with sequential decline. strong gross remained unit minimal has at per business F&I $X,XXX, only Our showing same store profit

penetration F&I forward, requirement profit for by gross tighter on Looking to driven a slightly some existing interest do expect in some rates, rates finance due we pressure lending buyers. and continued moderation

after to turning sales. Now

center. in our In through over we headcount increase appointments growth. Customer generated development pay the parts outstanding. service set by quarter technician same X.X%. the Collision up and quarter. XX.X%, Our wholesale was XX.X% U.S. XX% digitally was same X%, up up increased XXX,XXX warranty performance store and our We first customer store

ways find customers and to through our by intelligence. continue to marketing also one-to-one using reach incremental artificial initiatives We

We these be nearly AI. service first brands three generated initiative business using in quarter future. X,XXX to we more and appointments in incremental customers customer the to and incremental grow just believe generate The expect this

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

Our quarter SG&A in from gross a year as percentage an XX.X%, first of adjusted XXXX. increase prior and X.X% from down profit of only U.S. XX.X% was the pre-pandemic

pressure be that While we of a some and we see reduced costs, will we expect these to SG&A leverage continue material technology. permanent margins do portion inflationary as from savings

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

U.S. record. AcceleRide, first the sales, through During we all-time of also of our retail vehicles XX,XXX XX.X% sold quarter an record an all-time

of Just as that increase. over their AcceleRide way transaction, in some is in that percentage with to continues XX% important our engaged customers a

confidence our digital AcceleRide, customer shopping an and and recently AcceleRide solutions. validate buying and digital the found assessment Power end-to-end Group the of further completed X's among To be in They offerings. JD most to nearly dealer, third-party XX retail OEM, complete experience

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

seeing improvement are manufacturers, demonstrated production We certain units signs in by increase by XX% sold. vehicle the of as new

bank backlog current XX, XX,XXX pace. sales represents on vehicle more units, based which was March than our order of new As our approximately a six-month

first Also, reminder, U.K. those not same-store in seen our impact due to the resilient at been material on model. margins this growth gross of XXXX. basis during our luxury on for currency is after-sales XX% outstanding, Mercedes-Benz times a are economic with business As the agency and profit mix growth has a quarter local gross point customers predominantly in more U.K. our uncertainty. we've of And the a

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

Daniel McHenry

Thank you, morning and everyone. good Daryl,

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

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

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

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

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

by Our ratio March. as the rent-adjusted defined Syndicated X.Xx our was at U.S. of end Credit leverage facility

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

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

Non-floor million plan prior year. from $XX.X million interest of expense increased $X.X the

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

approximately every increase of in other plan XXX March debt XX% point floor of only and our about was fixed. basis Therefore, is $X.XX As billion impact $X.X in the for EPS XX, annual the

which debt Funding referenced instruments. Rate or in benchmark Overnight Secured is plan and SOFR, the mortgage our floor

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

back over turn I Daryl. call the will to now

Daryl Kenningham

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

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

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

Operator

[Operator today your ahead go Instructions]. question. And question of with from first our Bank John Murphy from comes America. Please

John Murphy

Good morning, guys.

a do how was of mean structurally in gating on positive I on you know you those factors the whatever real with curious I'm to there an parts of market. be what's lot dynamics have continued as on greater think what it's and be? is it market to you, and outpacing in service, going to seems and What to just Just the get going factor after it the you gating quarter much opportunity the your, short opposed fixing in may in you here run? transfer just how

Daryl Kenningham

to in our we service We our our elect like bays better of that's like retaining filling that Daryl. consider is amount can we two-thirds When within feel of in shops shops we work business. in customers bays this retention our like have growth so do productivity in defer, opportunity technicians that still an can of shops. customers, than more on technicians We consider do them. you open you more have hundreds a rates for and When and retain and some customers. with job put many the still opportunity feel some we John, we success still those cases our of our we dealerships, technicians, had parts there's and we've we feel

plenty of still car So us. like with XX-year-old out we a park, for there's feel there opportunity

John Murphy

to the right So, your or I Daryl, doing what's open those the sort now is to mean, would for enough bays fair factor that? say it process gating, techs hundreds and gating fill getting of the be of hands right hiring

Daryl Kenningham

hiring is ways. of it comments, it, new another example our customers I piece my piece certainly a of reaching is Yeah, is key as well. an stores certainly Driving productivity of techs of piece a it. that in through and gave in

be far continue scheduling that. success to try that to creative and attract we've So attract so be some with plans we people seen creative do our compensation We and people. our try with to with to to

Operator

your Daniel question. Stephens Incorporated. from Our next Imbro with comes question ahead Please go from

Daniel Imbro

Yep. Thanks the taking the on I’ll used for guys. quarter. of side I ask, start the morning, Good to on market. congrats and wanted questions our U.S.

only start the know of wanted supply if industry. seen used demand about the should better You but it ask XXXX out dearth cars while, to X% about And unit about think a we for mean, headwinds I there. supply. was growth or see is just I the headwinds XXXX, and young you than the from to we've down

like backdrop lack So, I'm given used it to be you'd you and grow growing curious about supply coming. this what looks how in how of a units able think

Daryl Kenningham

for Well, inventory as I us Daniel, key trade-ins. the a XX% from of is franchise almost used car think comes our dealer

customers on to those cars And trade for with cars are now right those really a and so to is how in. a appraise we do job customer when better what focused comes those trying

bigger We used for inventory have a in trades. to on open rely much the fortunately car have don't source markets And inventory. much of too those we

So lot of right that's where our focus a now. is

Daniel Imbro

service and I parts on question. then to up And it. Got John's follow wanted

added versus in think XX%? guys do about can where what the I You your you you you retention stacks guess, industry slides know, think the around service And some service is do then to data higher? retention. new that or I you've to to something at on initiative focused And higher additional relative a maybe and parts driving this that contribute could history? has growth drive that been ever up

Daryl Kenningham

differently bit have we measures little OEM, you hitting and at to all OEM honest for every have with responsible be them we measure we're Well, retention Daniel. that they a

So retention. of generally of retention. averages know apples we we'll and apples OEM that ever too. across are I comparison But find But the group be on within ahead our on an don't peer we all also should we feel like the each

We're more sophisticated.

caliber like the have facilities, and We and technology. the and after better of certainly that professionalism investment better. and feel that the with in should sales people We we equipment we training the have, be the the

unusual; opportunity of schedules, aggressive Our should the more is to full we ahead we still is industry which be feel aggressive approach retention, some like on for to unusual, Saturdays, and which wide we feel us. open like approach there there's our

Daniel McHenry

here. its Daniel Daniel,

and other data kind dealer Just compares that's in add source national of XX% at are lot groups a well we this a above said, to the average of Daryl the shown comes data. the to that ourselves what on from

that, to addition been I would XX%. have number to In back you years, five go about closer think XX% if rather than that

as really I percentage something we've think company driven that up the it's over So, a years. that

Daryl Kenningham

one just think I there, Daniel. more comment

power helps I with the too. to As that alternative trains us transition retention think happens,

those invest that who of and in working kind those to think helps franchise on I helps that power able trains. dealers are

Operator

your question ahead comes Stanley. from question. next go Our Jonas from Please Morgan Adam with

Adam Jonas

close And either sign seeing in Hey, or then of of follow-up. thanks. the the tighter Daryl! a April month have in lending used Hey any Hey Thanks. if you're see love quarter. of Daniel! the new to would So I after

Daryl Kenningham

is some let information he Pete can I'm Adam, Daryl. He's this going get into share to with that. you. got

Adam Jonas

Thank you.

Peter DeLongchamps

Sure Adam.

been we've our press of looking So, the some up. lenders lot approval with what's slight happening, – And amongst lenders. some there's been and tightening some are the a quarter and been discussion where first in There's lenders got the it's interesting. shift a around There's our rates who actually certainly been at also other lenders. and volumes

retail banks think of our it's lending, utilizing for I strategy when But at our paying off you look overall us. the of for all big

right of as you tell and now, would we retail I are with So headwinds availability lender credit. seeing no

Adam Jonas

Thanks, Pete.

and on given which you you're appreciate that's your stores trends, COVID, Thanks. love would the could of see anniversary year-on-year the information – of part useful. similar in were you really behind on information volume book, follow-up, to the if sequentially I pre-order kind I just that to had returns your or outlook but on Wondering of order on imagine returns, and to terms Just give lease you in starting some trend worst numbers that. lease either

Peter DeLongchamps

a on number I've the have and can with just seen, with at don't you. you up data cycle I give But some point agree given based maybe I follow a to later. It's you, we low bits on COVID. of

Operator

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

David Whiston

Good morning. Thanks.

just did PRU. grow X.X%, was primarily ATP’s go Is curious why nearly F&I it. attachment? Just your driving what's up F&I decline in I Because that curious so didn't with less that XX%

Peter DeLongchamps

I'll real is talking service This other investor about page a our quarter but are maintenance take of throughout is investor been and the biggest that all vehicles, right first refer headwind David. flat our on But calls, XX deck. [inaudible] finance and and now been you penetration if contracts, headwind that's use. has in or finance on to look, Pete, up. we've But Sure, products, used relatively you our with the vehicle penetrations

David Whiston

engaging AcceleRide can Okay. a And bit talk than customers you about before? little how are deeper

Daryl Kenningham

the some our every high number that more AcceleRide now. of up. engage then we Almost customers in is purchase see AcceleRide in our multiple and touch deeper XX% level. month, used range customers It's way, Well, times vehicle. of they XX% on The a of XX% engage to David, customers the

more We're That's and integration So we're our that's improvements. some time driving and for customers with more AcceleRide. more seeing engagement. team doing just productivity and saving

ask and to listen they and for our how respond to trying to we're just they shop. So want to customers hard what

Operator

Morgan. question. Our ahead next comes question from Please your go from Rajat J.P. with Gupta

Rajat Gupta

Great! Good questions. morning. Thanks for taking the

follow-up. Could a these Just to stores, those the just U.K. And right-size on versus trending also of and you what like moved for for GPUs retail I have the maybe economics? to stores the have one give F&I a were new have on started stores comment those versus are separately? and us you those had And model. stores agency profitability pre-pandemic? GPU broader And how just first which of maybe or a Mercedes sense Thanks. the pre-agency an

Daryl Kenningham

U.K., Rajat. This stores some Hi answer and Mercedes two is Daniel in has actually and of jump Daryl. XX are he'll of U.K. that very in. Okay. if On I'll in five of have then the anything them to small. dealerships the out add, we agency

that some more. our not We that seen, saw of in sell have not in rest a we it's what gross a there What U.K. brands. part of we saw we brands business huge that among different saw our we than our So profit change admittedly. had Mercedes the the was business the any little

some sell less. a have that little brands We

stores our them. the difference rest So didn't between see a and Benz we material of

profitability really and so different. of their of of time at to happening attention and haven't any I had lot the we've is my And terms a and the we've they months U.K. been to it they make we in are for it tell with only from may seen adjustments. are to contacts are we paying they on discussions this at In on impression OEM you difference. listening retailers willing retail the them now, over something see three can dealerships, what's

anything would add? Daniel, you

Daniel McHenry

small the Yeah, GPUs. it's drop, in percentage drop think and relatively Rajat, I a

account around you're plan need floor demo that the big the cars there the to to in expense the expenses station offset being in take I run and primarily and U.K. into expected think you

have Daryl I rightly think profit being impacted, costs as effectively because is says, dealership gone. really not the of the those

So think all before, in pretty as I we all we're same position in neutral it. the were about feeling still

Rajat Gupta

XXXX you or referring when you versus versus, mentioned that XXXX, the that are like is like profit? And versus

Daniel McHenry

quarter ‘XX. same XXXX,

Rajat Gupta

it. got it, Got

Okay, that's helpful.

this approaches. be how to follow-up seem about thinking on backdrop? you deploying know, your different allocation, peers taking to You capital like broadly current cash Just are macro in

Some are aggressive, buy up being even to levering shares. back more

are M&A. more around doing certainty waiting Some buyback a conservative, for be or little to looking before more macro the

So M&A, of it you how then the that? was pipeline is just specifically a give I curious, are what what looking maybe And on there? strategizing assets us like and are sense did multiples looking like for the Thanks. out

Daryl Kenningham

we are quite for discipline a tell unrealistic expectations pay try win – I coming We're few I to to sellers I acquisitions. there's that. would there we that opportunities bidding say in. But group like a we've would portion never say a for at of will and there always and that war. a stores, we'll have out certain to what is of continued people with stick looking

first the want that true, company, and We to grow our choice. is that's always

However, year as stores. than really the half, two buy years, to back when we better external are value buy we've will shown going markets over the a like and last they a feel shares we to

still So keep has that's for a continue option which is the to for table. something That us, we'll on not us. significant changed

Operator

And and by state Seaport our Partners. next your comes followed question Please your Research question follow-up. from name,

Glenn Chin

Chen. morning, folks. Good Glenn

Daryl Kenningham

Glenn. morning, Good

Glenn Chin

morning. Good

So quick just follow-ups. some

the attributable First and how just the by increase much the which way. them? was you the of parts of in on impressive share the size and of volume Can much was the repair service growth, to how related drivers is to orders

Daryl Kenningham

was [inaudible]. per and the margin to two-thirds lift increases was and In the both both customer of related growth markets, lift dollars pricing of customer, Glenn, a count third or

Glenn Chin

Okay. [Cross And Talk] the...

Daniel McHenry

to to Sorry Glenn, just that. add

is our average older, think as in dollar are you'll per the look you deck, if that order repair getting increasing. vehicles I see

real there, customer have that because helping parts that's our grow in that's ultimately retention and on that really to putting the I we goes we're emphasis in business. think think exhibited back the service I deck us that

Glenn Chin

that And back get to trying Okay. or count, the a that normal? to repair does normal we just pre-pandemic? feel order of is how curiosity, to Just ahead out Are if. of – compare for already

Daryl Kenningham

look. don’t to have I into want would that. I to jump

Glenn Chin

Okay.

then, very sorry, And store late, good. mention that's I Okay, the warranty basis fine, same what on hopped you year-over-year? did, call did but

Daryl Kenningham

was up X%, Collision XX%. was up correct. Warranty

Operator

from comes question. question Benchmark. Please from next with go our And your Ward ahead Michael

Michael Ward

Thanks very much.

on follow-up quick F&I a side. Just the

buying because On F&I financing that Is that the you in decline per explained are mentioned vehicle, the the unit. vehicles? used partly people more year-over-year out

Peter DeLongchamps

No Mike. is This Pete.

what's we're to cash the we're when possibly or business I buyers attachment, unions. losing think happening not that that getting is credit

Michael Ward

Oh, meant. okay. Oh, that's I what

So okay. cash credit buyers unions, or

cheaper get to Just rates?

Peter DeLongchamps

It's all based on rates.

Michael Ward

Okay. any And take U.K. have what your in? the expected U.S.? XX% still months to What current are high you these gave it indication type come out. then, of of you orders do six percentage us – in on the they you Are sounds like XX% incoming rates seeing about to sold the vehicles

Daryl Kenningham

pre-sold. In I as use the did XX% of measure. kind quarter would were them we that of your

Michael Ward

In pre-COVID, XX%? was below that

Daryl Kenningham

like maybe to Yeah. Probably XX% XX%, something that.

Operator

be And do conference and session, gentlemen, today's call as ladies concluding and We for with presentation. thank today's as joining. that we'll you question-and-answer well

You may your now lines. disconnect

Group 1 Automotive (GPI) 26 Apr 232023 Q1 Earnings call transcript