GPI - Earnings call transcript Q2 2024 | Group 1 Automotive, Inc.

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Operator

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's Second Quarter of 2024 Financial Results Conference Call. Please be advised that this call is being recorded today.

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

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

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

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

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

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

Daryl Kenningham

we pleased are Thank a you, our of quarter. this Good Despite with very results morning, challenges, number everyone. Pete.

members. The CDK communities CDK were and we company's XX. team operations outage The witnessed June the U.S. June on focused significantly affected use businesses persevered our Our for customers, events not U.S. weather management different most system extreme and in outage. our caring as team a the We dealership from through to impacted our teamwork unprecedented XX was there. U.K.

disruption, the repair management available. our capacity using to we June do work until could believe the CDK systems. customers again processes alternative our dealerships we U.S. were at serve Group continued systems full in During additional We vehicles performed more operating been CDK have X and service all made dealer quarter, had that and with sold

June we were to personnel prior Once into we on XX, access of which operations transactions during mobilized XX. June performed to DMS, CDK enter our thousands the able completed to of were outage to gain CDK all the

paid shared efforts recover transactional by our to dividends all center our Houston from quickly technology in employees, tremendous services superior field processing us in for investments our The outage. enabled that the and accounting

line For by team phenomenal maintain example, statements and stock and and our the focus complete allowed teamwork financial shift toward post we Unity used This of factory, bank time display manner. June ends future. our technology inventory our for and an expeditious our to process in to car close us U.S. vendor the deals, quarter

million We incident We to minimize impact per diluted to of on approximately earnings key able or impact share. we the believe actions income in financial profit CDK our the CDK that these of $X.XX a reason the were performance. event the are be estimate $XX pretax

any is million prior payments share. onetime to This or Additionally, pretax insurance per impact we recoveries to $X.XX in future $X.X we expect employees periods. other receive or earnings in to made approximately in diluted compensation

performance cyberattack, to second to like car great differentiates quarter. and and performed discussing disciplined well minutes our margin entire X. Group in front-end like to the CDK the the gross used after-sales performance I'd F&I what throughout led Now few our feel Prior spend retention execution a quarter. we And

leverage as primary check. his Daniel like count, continue drivers, specific upcoming cost McHenry in outstanding will execution this head comments. Our keep was examples our to in of we disciplined SG&A outline several

Another differentiator capital X is allocation our Group strategy. for

dealership a are pure-play group. We new vehicle

believe, hurt regularly vehicle environment, we $X.X evaluate dealerships. acquired have While the with investing is that year, expected shareholders' we focus. believe also business of billion. revenues of We business other but dilutes verticals other our adjacencies, use in in not we this capital new This our best franchise dealerships entering only returns,

integrate to accretive our into existing these X. these allowed from businesses be portfolio Our to transactions ability day

dealerships As previously London. announced, north we recently purchase of Mercedes-Benz of X completed the

third closing the forward look the We Inchcape in acquisition to quarter. also

us to and forward look give a will improve SG&A is new This Group the we nearly U.K. As the outstanding reach our The is our welcoming X add to that and mix leverage. geographic brand significant Group revenue for in company. acquisition billion a and teammates $X.X doubling reminder, size and in will anticipate to XX transformative the dealerships and we scale Inchcape X, X,XXX

of part important we don't capital our is An focus allocation buy. what

we that meet fit have or that our discuss or are While pending strategically what's the hurdles. important investment also routinely acquisitions don't are acquisitions closed,

Some great of brands. those are in great markets with

revenue However, growing. the sake of chase will just for we not

Our portfolio strategic returns are optimization efforts and based fit. on

alternative of purchasing strategy Another important capital share element an buybacks revenue. is our evaluating to allocation as

our dispositions million. X.X% for This We of with we've continue and another $XXX shares. year, to back the balance company acquisitions bought repurchasing

our the back XX% Over stock. we've months, of XX bought past

believe and capital, never a ever. more ultra-competitive need great The win now close in execute with X. we certainly this partners need ones to Group Lastly, been OEMs good and differentiator that. OEM admit environment. and this is for professionalism execution than They retail our our more partnerships has that important, against partners

purchase enables outstanding scorecard something an to more X metrics stores, has team Group years. done Our on stay our OEM with last performance eligible X the high job to

disruptive Our outage ability well. and make to valuable and more quickly us partners respond CDK weather effectively, the to catastrophic like events events as

and willingness us professional management partners. in makes and community valuable to ability Our invest facilities, world-class the more

markets major and and advantages. us our gives OEM leverage X competitive across breadth partners' Our performance

Inchcape partners growing in strong than importance. OEM and our a see in don't critical ever, relationship new OEM the actually relationship acquisition to to that that is our that We partner with opportunity We vehicle the we Group see to allocation believe future. that OEMs that. great we significant demonstrate more Group ties X X directly believe changing priorities. As gives And advantages capital another our being us a dealer, outstanding a allows

our Now turn to Daniel? call I'll over financial the overview. an operating for Daniel and CFO, McHenry,

Daniel McHenry

a XXXX, good and vehicle Current of records Quarterly Group billion of quarter all-time second In million. quarter and record Daryl, adjusted $X.XX. quarter net Automotive diluted sales continuing you, billion, F&I Thank in revenues of $XXX of of X $XXX.X operations of income everyone. total adjusted reported new EPS from morning, the $X.X million. second $X.X on

vehicle Starting reflects of an vehicle and revenues $X with our by basis. the our record driving record new continued demand in on of volume. all-time achieved units U.S. new billion, driven emphasis resiliency reported sold, on This up sales operations. We a X%

New vehicle essentially flat GPUs sequentially, were down $XX. only

in fluctuations testament discipline, both the periods. with increase ability technology the with use hold Used slight sequentially were a used in declines is to year-over-year We with and We GPUs. cars our pleased pricing volume of and a pricing of our experienced vehicles. increase this and process, only despite between believe volume to margin

quarterly also for $XXX million the revenues U.S. record a were F&I of Our

been declined F&I The year-over-year. and outstanding F&I Our on a GPU has discipline. maintain increased performance of same-store professionals by to GPUs $X,XXX basis negligibly our sequentially

capacity weather year-over-year. challenges the quarter were second Despite highs, profit tough a and ] double-digit outperforming after-sales. on to and against basis. CDK all-time revenues X period X% XX.X%, respectively. gears and quarter-to-date after-sales growth customer [ ability were up year gross gains Shifting prior and paying events These May for add quarterly our periods revenues after-sales demonstrate sequentially to comparative Same-store warranty same-store

count our nearly same from up has period. X% While in declined head our head overall is technician U.S. same-store count X% XXXX, the

Wrapping points gross U.S., a SG&A the continued let's vehicle U.S. to SG&A. to sequentially XXX pre-Covid margins at our as demonstrating up shift the focus below profit on XX.X%, costs normalize. of adjusted basis continue new decreased as managing levels percentage to

vehicle respectively. grew X.X% higher U.K. parts year-over-year, and the driven revenues service to Top Turning X.X% of by X%, line and revenues new and

new gross same the profit unit same from sequentially over prior year, period. at improved down While the per the vehicle time, declined prices slightly

losses in Wholesale flat challenged, sequential slight remain the experience vehicles remained quarter. sequentially. compared Used to did improvement however, a we unit per GPU

U.K. focus on to percentage still of we a some business recognize profit, will efficiency as business control we the SG&A have the we and continue gross And cost process in adjusted challenges expand Regarding U.K. to our we overcome. as

balance to Turning sheet our and liquidity.

flexible a cash generation continue support sheet, approach. leverage balance capital to strong Our allocation position and will flow

line. $XXX XX, our liquidity million cash accessible our million of available on borrow of million and June of of was comprised to As $XXX acquisition $XXX

end the Our is was defined our facility at leverage credit U.S. rent-adjusted syndicated of June. by X.XXx

adjusted dividends. in XXth XXX,XXX of same Including our in count at dividends through the generation reduction free CapEx. $XX yielded in after average of price cash million and flow operating $XX.X an million flow, in acquisitions, out revenues and $X through $XXX a half approximately $XXX.XX repurchasing the our through shareholders. million acquisition of the of $XXX of flow of capital million of This since X.X% million to first cash $XXX was June, shares share billion combination deployed in and the repurchases a share backing XXXX January of resulting period X Cash

points an of was approximately fixed about for other of EPS XX, XX% XXX debt our overnight basis $X.X $X.XX in rate. in increase secured funding June of billion every As floorplan in and resulting annual

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

question-and-answer the call the now will turn to I Operator? the to session. operator begin over

Operator

question Rajat first from our will And with Instructions]. [Operator JPMorgan. here come Gupta

Rajat Gupta

quarter. components up the to clearly, give July in sales wanted you the P&L the on quarter, impact And some how rate was not growth. despite the second if third could CDK the of deleveraging ] the And you have should run strong just of seen really, and about lost follow or we sequentially lost from SG&A And [ execution into us? certain might focus I think to on more service. very just of the

I So and And highlight? have level about like the how in service any And color should expectation And to the you your could is else to third quick July doing us, we thanks. might a third anything for you SG&A gross us the follow-up, you how help around quarter? into could think frame quarter? that for so give want the far business

Daryl Kenningham

Rajat, Daryl. up that technician since our head our is XXXX, was had actually period. clarification our mentioned One head down script. X% count time but from count in that XX% We

of to where that done drives been count I percentage capacity So reason our SG&A it clarify and as overall a has our and gross good really that's after-sales wanted one good adding effectively. head job managing as a point. we've And only

same the time. So that's allowed period a growth us to maintain time after-sales at over control our and of SG&A

in So came of of is think I'll in behind speak SG&A issues. the some The us. impact impact, CRM CDK DMS to Daniel the -- up did. and I I to largely, more of terms But little I the than a later the think ask most terms think,

the we the move there's as say, try it So work on forward. done I of don't the But still a to customers us, in recovery, much I to information would some and impact is third being seen quarter. those behind expect recover material we've

you would add? what Daniel,

Daniel McHenry

to the deleverage still quarter. delever Clearly, expenses in that should going us the in into Either XXXX. SG&A, out done some Inchcape quarter. there some certainly Clearly, million. our that dilute U.K. of missed really in have timer be in there's chunk pay that That terms the of to of made $X.X our this X growth and help in we stores in work drive of us help on on the helped Clearly, a U.K. SG&A employees, taking would June we additional further that was

Rajat Gupta

on Got because the U.S. versus helpful U.S., U.K.. breakout SG&A it. this And give just growth mean I in us of you

to deleveraging, fair from move can from in you XX.X% because well, U.S. number color actually the Given reported? you services just us XX.X% better July thanks. that like would and lower that the should assume have been U.S. because July in hurt still like continue of than to here saw ex-CDK, the was the is catch-up just any give it into And as on some that that

Daryl Kenningham

relatively predict quarter-over-quarter. flat to stay the -- vehicles We year-over-year saw sorry, on XX.X%. our or I'm margins Tough front-end sequentially on new

the obviously So -- that SG&A and us. margin And certainly watching obviously number that numbers. gross of impacts helped that percentage we're

if to the near We're in it move So our predict lower Rajat. business. tough term, seeing will service

through -- up year-over-year in You X% saw it CP was May, our same-store.

XX% was happy year-over-year We're really same-store. Our warranty with up that.

as here to into able continue well. capacity, to We the technician that that. able expect driving which the be And of add is year continue rest we'll to we be

Operator

our America. next Murphy with will And question come from Bank John of

John Murphy

up? parts been think, first that could that that service a during necessarily is -- a we in or picked may the kind the lost up kind that get the CDK Just question. that revenue wind that outage, gross get can see a you back in just about should got but of think the not lost we of and Or picked have catch and quarter? and back When third back up Daniel, normalization is

Daniel McHenry

quarter. a Daniel more the that you've slot to quarter. so because here. of or of two severe Houston hard the up in the sold our to harder service It's kind it's some weather pick and It's weeks, John, We judge had to first in time early that's of the effectively pretty in parts technician. week, definitive business

some from I expect that up, pick that. there be pickup to to it's So but harder would

to think of the could those operators well the think stores many delayed a clearly, as out been because many pickup, I be and well have platform. sales to does sales there with to under However, lot that I just vehicle CDK

Daryl Kenningham

department. One the thing, note believe mainly, to Continue that average quarter as is dollars result our our coming of age to service increased And vehicle of I again a miles the for rise, population. this the driven average cars through [indiscernible] John,

-- parts future. good things and good just that things means is So that -- service for the in I think

John Murphy

Yes. That's helpful.

impact a which you of level very second but at have the the of whole I a on soon. might interest And rates mean, back rates but sometime been about about of Grosses X.X a if the think do you has industry what the the pricing and sometime if put basis Just the resilient. the the seems hopefully peak. the also, point last of could sort this and bit can vehicle I on interest be forbid Is on down they flow-through maybe linear up, relieved big that we that then interest the just in rates. sort consumer impact rates in go follow-up will the happen side rates, downside? Daniel, down, mean has faced and from years, how come God and backs XXX borrowing pricing expense consumer go the little to but mentioned expense of I price a rate there's But headwind as to and more consumer interest is, and bit how a the to little demand money side a not grosses. like mean misunderstanding is it it actually burden -- think off surge soon. about maybe increase the massive

Peter Delongchamps

is Yes, correct. this absolutely DeLongchamps. I think Peter John, you're

a rates. One that OEMs fortunate to financial the to that of services attached terrific to things have the been subvent is the we're able have company

they're You look on now, up rates at penetration to attachment F&I. our new XX%

XX%, up because rates some are XX%. And So used I penetration really that's lower the pick on rates also side positive. we a business think those where could through

lower think the car business consumer. to better it's help new the you're certainly car rates, I and I So make for going think, spot our used affordability, on. With

Daryl Kenningham

John, this is Daryl.

that quarter selling data down the new average Our car in was third price $X,XXX. of says the

you should combine if off lower some rates, that that So the take and volume. hopefully some interest drive with some consumer more pressure

Operator

next come Whiston from Morningstar. with Our David question will

David Whiston

it's plus with so is Just loss CDK first, say $X.XX and is, did it's that a $X.XX $X.XX you clarification [indiscernible] comp, the follow-up on a for total?

Daniel McHenry

but $X.XX. total, disaster out the already mind $X.XX adjusted Daniel. is this David, our of in pay was the

]. [ and losses So the about you be in the deem what a to buck difference $X.XX the

David Whiston

somehow core in able Okay. Or the scenes you the a you were your And about to guys that service it work in luck that CDK, back [indiscernible]. back week? got is just service

Daryl Kenningham

Absolutely, David. Come at on. luck all, no

Peter Delongchamps

you work, harder the get. David, The you luckier will

Daryl Kenningham

faster, say I to way in helped hard mean being we it's architected we one, our David, we why. less move move felt to that able -- think with comfortable a are risk. systems us

those with tried it to I all our honestly, back, much very the know to a get get were we honestly. helped dealers all how try good us work industry faster. to don't back think I team relationship things. And with But CDK. help the public has

lot back CDK us think of did I technology really we access. once And a have on back helped things get our office the

David Whiston

with for even guys And decade. very has share very think term, buybacks, you trying long time low we just of AutoNation in about you kind on a capital doing that just you're can? what the long Should allocation, get next done count as where possibly to as

Daryl Kenningham

is, buyback, the using terms because necessarily in do buyback that. growing uses we new or faced the capital an of No, scale things want that necessarily. math important and What think is share and we grow think acquisition with about a is for look don't on we in acquisition. like of of we're it's close, about But about we'll if acquisition, think context company, a to using important count. and do that for want at share don't an clusters we it to it capital think the when other we And the We capital. ] we [ the count just

you Daniel, have to to add that. something might

Daniel McHenry

I further the at don't anything moment. have

Operator

Instructions]. [Operator

Our next come question Freedom Michael will from Capital. with Ward

Michael Ward

and and So Is that -- CDK to lost, try to pretax. you Just was it? hit about think onetime to service way we to million just a the $XX in the million, clarify lost, want that right in number And had business that's comp the SG&A the had impact, of unit charges included $X.X I total, right? used you sales new clarify see.

Daniel McHenry

in our That's correct. SG&A. a onetimer It's charge .

Michael Ward

didn't And called you for out. $X it's weather-related impact But out catastrophic The the was had. events million that you included. call

Peter Delongchamps

weather was That and...

Daniel McHenry

And the CDK.

weather. X/X let's So CDK say X/X that adjustment, -- ballpark,

Michael Ward

Okay.

the correct? Daniel, running was up and -- something May X% in April I think same-store. Is or service to like wanted U.S. X% in that just I Okay. the said you

Daryl Kenningham

quarter, of second X% X%. [indiscernible] the Customer May, end April, through Warranty XX%. up up pay was was May, up was

Michael Ward

Okay.

from And somewhere CDK service in so that a million total, revenue or somewhere $XX ballpark? June. so on then in around X-week hit in or $XX million the period that suggests Is the that X-

Daryl Kenningham

It's probably...

Daniel McHenry

a Daniel. took and it took normally just system than it very transaction that's inefficient. was Mike, would. longer It the it's into to transaction, It longer think fair process just I every process assessment. every to back

Michael Ward

coming performance was dealer your relative to it from of the And group Okay. the of much better. rest out

And really call was that right? the like that [indiscernible] contributed. and it sounds a so Is it center

Daryl Kenningham

contributed. a that was there of things think I Well, number

think I customer that processes, back as all some center plus could retailing service as our our the solution office digital us both think use well as technology, and at the well. technology in that help our I had contact we we help, of alternative drive

technology So did a I think really help of us, the lot yes.

Operator

next come our will here Ron question with And Jewsikow from Securities. Guggenheim

Unknown Analyst

levels, should towards it right was like that way the to [indiscernible]. the That back pretty sales about June estimate think impact looks as you that called if inventory days, the way number days by the to well? that like to is we you vehicle heavily that? Is new think, goes you out, impacted in expect I post, terms it CDK On of have supply. new XX right And it assume the normalize

Daniel McHenry

Ron, here. it we've pretty out it's deck In investor our in laid Page X, Daniel easily.

significantly days XX have wouldn't I June, rate of normal sales March run end -- rate that had in have we end had ] increased had a [ that over ballpark. supply. supply, XX of we May assuming And imagined we days that April supply, of would we think days would have had I end XX

we At of an Now to in increase inventory quarter-on-quarter. XX,XXX had XXXX and vehicles inventories. into inventory. had March, XX,XXX. that of XX,XXX XX% That's vehicles thing on end of total At ] the currently perspective unit stop in June, we and the [ end vehicles about the are put sale absolute

see day expectation rate sales pretty will supply with my the So increased an that run come down quickly. is we

Unknown Analyst

of per Okay. that really first attributable that? where brand what in I stabilization And is think is profit the seeing That's best the pretty or to of But probably how helpful. brand much have internal you a how as industry you this whole, And mix terms consumers super the think in much want really do quarter. the then of unit much versus today. do of quarter think impressive efforts on reflective is terms new more either do industry your was the How in much you stabilization? mix

Daryl Kenningham

Daryl. is this -- think I Well,

in I helps. brand Hybrid total, mix most to sell. think our vehicle well. Their is performing profitable mix Toyota our hybrid helps. is,

But that things our And the in think it's think across I some I saw tough quarter. in was good EV -- margins this margin. very some So certainly there's we improvement board see to EV because were that. Even of decline. gross some And do in they though quarter, first did part believe moderation I on so a mix, see strengthening like and helps. the the really we'll we small that see

there a think consumer well. I to add as So probably an a which is health onto be think on a bit of the the I leveling, Anything seems would of indication sort that? guys of you

Operator

come Glenn And Chin our Research will Seaport with Partners. next from question

Glenn Chin

of Daryl, been it a restaurants, mixed consumer. consumer the of seeing We're Are maybe to guys lot detecting strength the consumer out just higher you or discretionary, getting consumer especially change behavior? just in a in dollar. follow-on any signals consumer. around that, We've

Daryl Kenningham

brand buying And used quite resistance used and I shift were We that's cars, as -- car at aren't our material that's has usually, The of haven't where with new bit. gross a the but look a held mix you'll haven't pleased mix cheap -- versus result a car we would shift XXXX seen the not still mix People versus a was we in, see Glenn, up. a like, it, thing. changing pressure. performance is

are -- don't in -- changes the -- any So and material can't I I consumer, that X Group look for any we consumer. the get say in didn't seeing changes our to I saw data

Glenn Chin

on Also a follow maybe Daryl. just to that,

evidence of down or maybe in levels trading consumers otherwise? downsizing or I change no trim or for So guess, decontenting

Daryl Kenningham

went decline quarter. last to $XX,XXX average in quarter. $X,XXX Well, like We a price $XX,XXX were selling as saw the over our last $XX,XXX year. $XX,XXX. we average We price in selling the to versus

that. see we So

subvention Now this year last on it rates there was more year. than OEM is

that so seen industry. we're know high truck is know -- been not probably don't mix that maybe opined There's a bit. little have and or level, strong is that pressure. to from what little sure we've change I to able I'm But midterm So see. holds low level material level that's seeing. a up -- trim that term we've due are the some SUV down I the that's to that bit, through ever people as a pickup as But that's and we cheap as still know. the pricing mix SUVs

So.

Daniel McHenry

Glenn, only it's strategy the one I think that I our think and I of total to be is helped with GPUs of Daniel our capital thing just operations. There's that part operate that's They to here. geographies our currently demographically all fairly and strong, we would and really add in. allocation tend that

Operator

no we conclude today's question-and-answer remaining questions, with And will session.

Thank to addition presentation, disconnect and today's you attending your call. much today's you very for In now lines. may

Group 1 Automotive (GPI) 24 Jul 242024 Q2 Earnings call transcript