GPI - Earnings call 3 2023 | Group 1 Automotive, Inc.

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Operator

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

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

Peter Delongchamps

good and and call. to Jamie, you, morning, welcome everyone, today's Thank

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

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

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

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

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

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

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

Daryl Kenningham

in reported income. across all of the Automotive X adjusted revenues billion, total major an morning, quarter quarterly revenues third $XXX.X In XXXX, of lines quarterly $X.X of Good business. net all-time Group Record everyone. million

adjusted from operations Our record an of third quarter XXXX. delivered of teams from the continuing $XX.XX, EPS also diluted quarterly increase

operations. U.S. our with Starting

quarter third our In second and mix; shifts a from sales -- from our remained X% affected strike. our was inventory General mix, including Stellantis levels brands flat of new our XX%. the were in major quarter, XXXX, used basis, up vehicle X%; Motors, same-store UAW U.S. unit Our On the nearly relatively Ford, XX%. of no the by

the prior down new sales quarter. XX% quarter, During third in vehicle XX% the of the in were bit our U.S. from a presales,

Also note, used margins. sequentially, our in environment, used important We and a quarter vehicle tough the used sales margins up in saw gross up vehicle both our to vehicle throughout our were year-over-year. year-over-year were and strengthening

nearly repurchase, including our In quarter, we the saw we CPO XX% strengthening drive addition, on acquisitions customer focus driver in business which AcceleRide CPO through organic were mix. sourcing, is to up trades, and aftersales service loyalty acquisitions. of and and in to key continue and of a our

Our outstanding achieved are also and that revenues, both on good record vehicles. to F&I products good our capitalizing for team their quarterly sell the for customers opportunities

same-store per unit basis. $X,XXX sold minimally gross sequential a profit on declined Our only of

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

to us and Now shifting advisers, service increasing our of customer service impact the focus retention allows with to customer selling that the provide aftersales contracts more to training our targeted service aftersales. management customers. on vehicle on We hours, customer convenient journey through sales relationship software by improved marketing

high an record and our profit. industry, an to revenues quarter tenth heavily in in With acquire continue we quarterly all-time of we area consecutive gross achieve aftersales record service when notching our without focus, and and parts underinvestment new this is results, continues team that We the believe to stores. invest of and reservation

and challenging labor We market. hiring in technicians of the to retention continue focus this on

and week extending by customers during technician the in return, return productivity a in Our our X-day shops. to workweek our benefits hours -- our higher leads operation of

explore increase incremental to capacity We continue productivity. drive more our and avenues to

in new our one-to-one continue reach and to We ways customers also to by invest artificial using through marketing intelligence. technology

over customer service XXX,XXX development appointments and we In the our through digitally center. third quarter, set

We with believe just customers intelligence. to over expect six and appointments be We generated business customer brands also artificial service in this XX,XXX more generate to AI the using initiative and grow incremental, these future. incremental

on SG&A SG&A. XX.X% points of be percentage as only as year-over-year to to made basis XX.X% shift and a improvements our let's in Now gross continues improved inflationary XX percentage of structural reflecting cost environment this XXXX. a from since in pre-pandemic profit of pandemic. profit and Current U.S. focus increased adjusted SG&A controlling gross costs sequentially, the adjusted the down

thanks Now a Vehicle revenues, to quick performance. strong. vehicle record resilient availability and still the vehicle GPU quarterly constrained, demand record U.K. used pricing keeping vehicle U.K. remains is achieved and look new at

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

delivery in higher-than-anticipated of we from BMW, from gross of profit, percentage sale in these vehicle our a staffing the XXXX, SG&A Despite deliveries quarter the for as vehicle resulted sold, assuming Volkswagen The the these shortages units quarter. and this manufacturers lack same-store experienced potential of third giving limiting increase vehicles. of our levels, Mini upside in

XX,XXX vehicle our approximately XX, September bank of new units. order As was

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

operations share quarter. quarterly per of shareholders, allowing from benefit diluted dividends. And a approach our continuing capital to to us and buybacks capital continues high allocation all-time deployed our return the third capital allocation. opportunistic management, the form between the that the capital strategy achieve earnings share shareholders to in adjusted return-focused balances of in now of This We common portfolio in to use

from assets proposition or acquiring third proceeds the shares. to benefit for sales not back by franchise. disposed assets, these but also we ninth believe either higher Successful which the of buy buy XXXX, additional franchises only to disposing portfolio great dealerships voluntarily of management quarter shareholders of terminated In involves and We return eight we a a our using exists. intend additional

are priority clusters or positioned all is We company. evaluate economically seeking or dealerships to stable geographies growing markets expand the growth dealership markets. #X portfolio, the New to franchises our existing Manchester, in Subaru bringing Manchester in acquisition In brands number and we October owned economically Hampshire, in accretive consummated that pending or five. of to XXXX, acquire our Our the of to dealership a

well reminder Our approach. portfolio & of serve a this Masten as the Beck dealerships, Florida, of and recent acquisitions GMC optimization Kia Chevrolet as Estero strength in Bay of as

continue ways and optimizes proven We manner. our growth meaningful rooftop our incremental and capabilities, critical in our consolidate highly holdings and believe element is which in leverages and scalable integration performance the scale company this to dealerships our a explore profitable, We dealership clusters. grows to to a story,

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

Daniel McHenry

and Daryl, morning, you, Thank everyone. good

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

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

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

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

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

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

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

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

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

$X.X of year. prior interest million Non-floorplan million expense increased from $XX.X

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

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

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

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

Operator

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

John Murphy

levels. ask to wanted on just I question inventory a Daryl,

to may that, they You mentioned floorplan we levels the that just here sufficient? I'm curious do Or in think are can and U.S.? maybe you they levels constraining your on going, that go? constraining And the sales is in they U.K. are your secondly inventory our what of But kind understand sales? take are are inventory And where expense tight interest so

Daryl Kenningham

guess, the think basis. about so surprising -- day surprising thing didn't not I on supply the QX change they QX, over John, much is inventories, I -- maybe a surprising

of saw We with days. little didn't the bit. brands bit luxuries. down mix coming were And some I we much. up very remix between X the Stellantis think change little We of saw a a

was sales almost And constraining you that when presold, which, basically have at that's of I'm think at days at sales digits point, brands. still our our probably you and still growth brands. in look if surprised I in But a mix, those import the XX% by. look it's the And single this there, we little supply,

in -- so more there's I coming probably those think inventory And the brands.

luxuries right I the are about in think place. probably the

deal the announced see that impact, are think, I I terms with then mix UAW think with total. this non-EV. domestics, were the they've their and happens issues plans some fine the what week. to between with got especially And in EV We'll of

John Murphy

remind PVR what a could from. point, part one like spread-based? of thoughts it there forward? there's on And mean doing I the benefits is slight it's if product? well. sort going still on lot But that follow-up could F&I what And you a what good consumer us your sounds pressure just is of in in product F&I. mean of sneak fairly I I And

opportunity risk you even So I'm there. think just or curious forward what going is the

Peter Delongchamps

DeLongchamps. John, it's Peter

spread -- were from about it down -- the the penetrations the XXX pleased business. comes car with So And X/X product. were very basis gross I be year-over-year. think F&I overall we of used profit and X/X to and points originations, headwind from revenue the the our with continues

And more XXX overall penetrations basis of any I'll way look you, the either penetration. product at on results, our our points haven't product tell when I than varied

numbers we're that which sales PRU So certainly has pleased the keep our line. in really with helped product we've had,

Daryl Kenningham

thing not financing, on attachment incrementality over oftentimes, Pete mentioned, we're rate, on we do some one product John, on able -- lose is, we're though we rely preserve some do don't sales. when even see as the we to

but if of finance only lose we literally, lose this So might penetration. as take we X points an used cars, product example, or don't X.X penetration on points of so

some there's able to So still we're preserve.

Operator

next Rajat our Gupta And from comes JPMorgan. from question

Rajat Gupta

way Could Motor I help question have you or gauge especially little I higher color impact could to execution. and on parts the any you a on worry had we shortages Any on stores? Congrats Any and where should help When from helpful, a and be? follow-up. us us what your that the start shortages, exposure? part services. that to have potential Ford, quantify a understand hitting impact General about be would

Daryl Kenningham

is this Daryl. Rajat,

has so negotiations, moving to advance able strike the purchased that still say. ahead -- living far, on stock. minimal. the we're off and So we're the We fastest extra advance I the And -- of up contract should of stocked or impact still -- in parts been

quarter, other to were unreasonable it's we also brands leverage to do to think shortage. from that, a start you stores able see We mentioned. the next more don't we'll I when in country around part part issues shortage the the think our have two

us, they'll know responsive will don't don't been it severe. issue will us say with probably think be that it's in can't OEMs supply QX, able in it but but I -- to know I significant. for was bigger I that have The QX than a be be being I fairly it

Rajat Gupta

does continue Or already that? strike for feel the start it. that you another impact fourth before to week so Got you Have need the started or in quarter? to to feel

Daryl Kenningham

Well, the quarter we full until so won't is it's have hard over, a to right now. picture after say

Rajat Gupta

it. Got it. Got

color permanent see. to to how helpful color the us deck expect you've past, you the much productivity reduction improvements. then, In around SG&A some on given Just slide SG&A around on gross the

more than I think basis this past, ago. you XXX to XXX points like the probably year in like was mentioned a

what be any to normalized the terms -- SG&A what the as thinking or Curious based on the that Any be in of about business, seeing we new should to should if you're you update guardrails for even in to guide have rails U.K.? business? in gross

Daniel McHenry

Daniel Rajat, it's here.

in that that that, to the basis. our we're a I think on X% investor versus think in down And U.S. is is of note XX% same-store still technicians. have I head in terms deck statistic XXXX added count don't more important with we an

the SG&A is count. even head So of than element to down terms in related more X%

this count time, pre-pandemic. head to productivity don't at that returning. I were And any Clearly, going per salesperson. I back that we additional us ways see don't XX% see of Again, the

all I of So cost added permanently. that count think people -- that added reduction that's is head

In company, SG&A the of to see as above the XX%, all we we've I guidance, a that or terms given, of growth. industry. being subject whole I major percent guess, XX% in were changes that at recession don't pre-pandemic, ever

Operator

question comes Whiston next from from Our Morningstar. David

David Whiston

who Like look you consumer, the $XX,XXX? really well? on how you struggling as the to to wanted really. side, Really procurement the how with impressed of at used pay both over by are then up I But keeping vehicle GPU the sides it performance. is convincing used affordability, are just

Daryl Kenningham

David, Daryl.

being I sourcing about acquisition, helps we're we're pricing. and with We sourcing. year us think new smarter technology a helps implemented it about what which with and ago, some how us we're

responsive. ever a basis. lack for more intelligence better relies more mass And of a just leveraging data better of on market our, not that It we out we're, of more much basis, instinct than word, on our it's believe, car-by-car and And on much takes it I a today have. heavily gut and

have some car not that in getting our used out performance probably of past. the we we're think seen I So incrementality

is well, so some I country try year think you're some help the really training to that's believe used the around And a I difference. the seeing, I with that's fruition. We the country dealerships our additional results the as what to some of of cars and coming about staffing to execution added ago think that in around on and and

are those believe are us. helping I So that things

we And we is have just organically able -- this, we source advantage the get being for advantage -- know things real a I mean, to you of just us.

used plays. to the And compared -- car so we're pure

so And able to do we're to extremely that. fortunate be

David Whiston

in Are on worthwhile staying the on your mean, it they're just consumer that really up? And to pay topic, mix any you them -- changed Or to though, they have side, I able way are struggling. you to get... make to

Daryl Kenningham

bit, almost down I $X,XXX, year-over-year. are ASPs little believe, The a

the that with And how be seeing the that's coming do were So to is that, down to to gross we are preserve some. able we and responding pricing able we're margins. right stock our

with there's it so stocking that And I we're given today, what think we're and market pressure on being price from more perspective. more responsive a the payment

Operator

comes from Michael Benchmark. next Our question Ward from

Michael Ward

smaller consumers? the I'm correctly? the some some And that that you're a bigger. of of then and one, availability change It question one. any Am stores growing I credit imply the service Are second bigger should is like you're all parts more ones. quick departments you get that off at and reading like of guessing kind seems First for And selling seeing in strategic. the

Daryl Kenningham

This and second will Daryl. first take then Mike, I'll question. your is Pete your take question,

You're correctly. reading it

our correctly. in. real reading rooftop feed higher which, looking operate We We're to want on and better stores business, develop us build consider of for we and our strengths service And exactly we we generally in generally certainly one can invest clusters something portfolio. our You're with scale where us, and a and revenue basis. that parts heavily helps for

Chevrolet, North a at the that Beck absolutely. Estebero large, So stores high-revenue Austin, of we cluster Masten and they Beck whether stores. right they're of in over or or yes, own. Masten, And the North couple other for look Austin, & middle & Toyota of our it's Toyota are last And years, when you acquisitions Bay

SG&A ability to of case. that. speak on So scale lending parts ability and that the to all our service grow and drive and key to are leverage to leverage and our Pete ask and And I'll in F&I question the the base more buyers environment, then benefits

Peter Delongchamps

for Mike, different certainly it's big And banks is what strategy that our partnering of credit all think right a credit with certainly we've dividend is with us available. now. tiers paying the I in seen

tightening are we audit with with been clearly business has loan-to-value metrics. our and all run our There some loss in of or line our with and of But way ratios than better the some their compliance, on lenders.

if all And great had we've lost credit? that's time, car to a ask partnerships. So I our we the resounding deals operators no. due it's -- And

Daryl Kenningham

up now. as really We're car And really I helps rely to programs that more also really, stepped or they've get an seeing from that able on aggressive additional the as well. right us them OEM new and support and obviously, dealers, avenue be give with to us support captives think some --

Michael Ward

Daryl, issue. the could if dealership follow I up on

in have benefits AcceleRide there and couple a You the and and about slides of EV growth the good sales. parts in the the charts business

more As has the other it, dealers is at call electric especially EV service Rivian? independent are companies battery of service on these constrained, stores complex, the done vehicles your start-up because some able become no a side, the to that Are aftermarket. there to like service be

Daryl Kenningham

hope I the do we our with brands. work all own that Well, have we can

haven't work like that. discussions any We that had anything around any with work or Rivian like repair or like anything warranty or a anybody

that -- we we the we is relationships we do, on I'm on today, could But have we certain work those. Could with on work our Mike. brands if focus the that brands

Daniel McHenry

We thing Mike, can that. I for do to collision just the EV. It's the Daniel work add here. two

operators. companies our work or collision start-up centers So established we and more for are EV of approved that those some

Operator

[Operator Stephens Instructions] Imbro from Our Inc. Daniel next question from comes

Daniel Imbro

to the I a the want side. on up start on service -- Daryl, or follow quarter. Congrats

trends obviously, So remain there. strong

parts about talked You availability.

labor to over go Let's side.

and retain testing been some but hire X-day think new you a workweek, for comp with to I the have plans. able you've So here guys been while

lead Is reception of hiring your the on materially side? the kind availability that technician you changed curious on has Just retention? And been? has helping maintain how anything the or

Daryl Kenningham

are you. over year last focused had thank them. Daniel, success we on attracting have the Yes, and technicians some still attracting

Our more we plans attractive their place rate And are are hope turnover down a with in give to year-over-year. us will different we we certainty compensation. -- then technicians compensation that work, will technicians also more piloting is some and hope make

stores in super to piloting obviously, and We and as are we've we and retention there. sure now, maintain productivity our employee make that that our throughput, as four right about want measuring. well important got And engagement, we're

testing we're So yes, that.

either We're also we other around at look through can existing to work capacity or of some then, There's the increase productivity, shop And of taking can much productivity shops are there. increase taking base. a a to there at we put shops? hard might our look so those pull those some things Daniel. how throughput metrics traditional our shop do able levers But the we be and we're

aftersales, we in we at -- time day, run. growth to continue of So for lots the there And continued see end want to to think of into see -- lots still that be future. a we to And going the there invest there's of we long room the opportunity aftersales. and

Daniel Imbro

is And one, appreciate Daniel, having about I it. helpful. you're then, That's maybe cap allocation.

you same-store compressing So at the from what here market to portfolio the stock priorities spend to fall with capital we as that and generation, as made how multiple your free where continuing do share look seeing. the further in you've peak repurchases kind earnings? just compress cash the flow move M&A of in curious guess Are But seller progress, cash? you're obviously, on good And I from optimization. multiples

Daniel McHenry

priority continue Daryl as to company. said, Daniel, is our grow to the key

the potential there's it's lot to moment. at fair say on think of I market acquisitions the a

been. the the ever buoyant I market more than is at has it moment think probably

remain capital remarks. think prices Quality We'll clearly We're I in was we think the to still continue buy acquisitions as buy our opportunistic stock expensive, think more I in continue messaged terms compress. balanced to of will it's stock allocation when going our to that and prepared our are back, and and to back. that

Operator

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

lines. may You your disconnect now

Group 1 Automotive (GPI) 25 Oct 232023 Q3 Earnings call transcript