Group 1 Automotive(GPI) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Group 1 Automotive reported record gross profit of $892 million and adjusted net income of$ 134.7 million for Q1 2025, with adjusted diluted earnings per share of $10.17 [25][30] - Revenue growth occurred across all lines of business, with new vehicle revenues increasing by 9.4% on a reported basis and 7.4% on a same-store basis [26][30] - Same-store SG&A as a percentage of gross profit increased by 28 basis points sequentially to 66.9% [32] Business Line Data and Key Metrics Changes - In the UK, total revenues and gross profit increased by 92% and 9.6% year-over-year, respectively, with same-store retail gross vehicle units sold increasing nearly 6% [33][34] - Aftersales revenues in the US increased by 7.7% on a reported basis and 5.6% on a same-store basis, contributing to an 8.5% growth in gross profit [30][31] - F&I performance in the US improved, with a same-store increase of$ 98, and customer pay revenues rose over 6% [14][29] Market Data and Key Metrics Changes - The UK market overall was up 6.4%, with the retail market up 9.5% [9] - In the US, new vehicle units sold increased by 7.1% on a reported basis and 5.2% on a same-store basis [26] - The company ended Q1 2025 with approximately 20,000 units of inventory, the lowest in over a year [49] Company Strategy and Development Direction - The company is focusing on optimizing its UK business and aligning processes across its platform, including used car pricing and technician recruiting [10][12] - Group 1 continues to balance acquisitions and share repurchases, acquiring $100 million in revenues and repurchasing 2% of the company for$ 122.8 million in Q1 2025 [22][38] - The company plans to remain nimble in response to changing market conditions and has deferred some capital expenditure projects [21][58] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding future demand, anticipating that new and used vehicle GPUs could remain elevated due to tightening inventories [21] - The company is prepared for potential changes in the competitive environment and has developed contingency plans [60] - Management noted that the retail automotive business is local, emphasizing the importance of local market execution [19] Other Important Information - The company incurred $11.1 million in nonrecurring restructuring costs in Q1 2025 related to its UK restructuring plan [36] - As of March 31, the company had liquidity of$ 1 billion, including accessible cash and available borrowing [37] Q&A Session Summary Question: Can you estimate how much of the volume in late March was driven by pre-buy versus normal business? - Management estimated a 5% improvement in traffic counts during the last ten days of March, with some firming in grosses [45] Question: How is April shaping up so far? - Management noted that inventory was tight at the end of March, affecting gross patterns, and they are monitoring the situation closely [49] Question: Can you speak to the efficiencies seen with your cluster marketing initiative? - Management indicated it is early in the process, but they expect to leverage marketing and customer data management for local business management [55] Question: What is the current state of EVs in the business? - Management reported a reduction in GPU drag for EVs, with a $1,000 differential between EV and ICE vehicles [68] Question: Can you discuss the headcount reduction in the UK? - Management clarified that reductions were primarily in central office functions and not in sales positions [72][76] Question: How did weather impact your business in February? - Management acknowledged that weather had some impact, particularly in the Northeast, but overall efficiency remained strong [88] Question: What is the outlook for parts and service growth? - Management indicated that growth was driven by both traffic count and price, with significant retention opportunities [97]