Yahoo Finance

Daryl A Kenningham

Thank you, Pete.
Good morning, everyone.
Thanks to our teams in the UK and the US, we were pleased with our performance in the 1st quarter.
Let me start with our UK business.
Our UK business is on a good track in the first quarter. The UK market overall was up 6.4%, while the retail or private market was up 9.5%. Group 1 delivered record UK results in the 1st quarter, achieving our internal profit and cost targets.
We're extremely pleased with our integration with the integration of our acquisitions in the UK, which has substantially grown our market presence there.
We're back to pre-acquisition levels on SG&A as a percentage of gross profit and on track to take out 10% of our headcount and save north of $30 million pounds this year, most of it in the first half.
In addition, we are aligning our business processes across our entire UK platform.
Including our used car pricing and acquisition processes, technician recruiting and compensation plans, customer contact centers, and finance and insurance products.
Our team remains focused on managing our legacy business operations and our same store SGA leverage trended down year over year.
We delivered improvement across many key financial and operating metrics. Record new and used vehicle volumes helped offset moderating new and used vehicle GPUs on a same store basis.
Our used vehicle management has improved with better vehicle aging and significantly lower same store wholesale losses year over year.
Technician productivity has improved and our total gross margins have expanded. We will continue to optimize our UK business.
Thanks to our strong OEM engagement and acquisition approvability. In the quarter, we added 3 Toyota and 1 Lexus dealership.
At the same time, we undertook the strategic closure of 8 stand-alone used vehicle sites and 3 less accreted franchise sites. This strategy mirrors the approach taken in the US over the past few years, improving our performance and we believe, leading to higher shareholder returns.
Now turning to our US business.
US team managed the business very well in the first quarter. New and used vehicles and revenues sold were up on an as reported and same store basis. F&I performance performed well in the quarter, up $98 on the same basis.
As used vehicle finance, vehicle service contract, and other product penetrations improved.
We continue to view after sales as a differentiator at Group One, and we were pleased with our performance in the quarter. Customer pay was up over 6% to go along with a nearly 30% increase in warranty revenue.
We continue to believe that after sales is the most underinvested area of our business.
By the end of the year, we will be nearly finished with our workshop air conditioning project, having invested over $25 million in our technicians.
We are converting some of our collision footprint and traditional into traditional service operations, expecting to increase capacity where needed for the higher margin service business.
Adding human capacity is a critical leverage point in driving continued performance growth.
We ended the first quarter of 2025 with our US technician headcount nearly 8% higher than the year ago period.
Given our flexible scheduling, all day Saturday focus, and improving technician productivity, we still have significant capacity in our existing dealerships to increase our after-sales business, and we look to be even more aggressive in the future.
In the US in the first quarter, we didn't leverage SG&A as well as we could have. We had some creep in January and February in the variable part of our business, specifically compensation and outside services.
As a result, we put some focus on it and saw some improvement in March, continuing to monitor it, and we'll take additional steps as needed.
In the 4th quarter, we also kicked off a branding effort in the US where a number of our dealerships will be rebranded with a Group one name.
This project combined with our integrated marketing and customer data efforts will open opportunities across our footprint.
It's important to note that we continue to believe that the retail automotive business is a local business, and that's where we'll put our emphasis.
We've learned a great deal about this model from our UK business where all of our dealerships are already branded with a Group One name.
Lastly, a few thoughts on the evolving US landscape and broader global backdrop.
There's a great deal of conjecture about Washington and the impact the new administration's policies have on our trading partners, automotive retailers, OEMs, and consumers.
It's never an ever moving target.
In our view, the best way to capitalize on these changes is to ensure that Group One stays nimble and focused on execution.
We continue to see demand across all lines of service.
However, we are being cautious moving forward. Expectations are that new and used vehicle GPUs could remain elevated as inventories tighten from imposed tariffs.
We have deferred some capital expenditure projects and have re-evaluated some discretionary spending.
We also have contingency plans in place should we see a marked change in the competitive environment.
Now shifting to capital allocation.
We continue to balance acquisitions and dispositions with repurchasing our shares. In the first quarter of 2025, we acquired $100 million of revenues and bought back another 2% of the company for $122.8 million.
At current valuation levels, we believe buying back stock at every opportunity makes sense, especially given our liquidity position.
And we will continue to optimize our portfolios in the US and the UK, Testament to that is that since the beginning of 2023 we've bought assets generating $5 billion in annual revenue and disposed of assets generating a billion dollars in revenue.
Properly allocating our shareholders' capital will always be our highest priority. While we regularly evaluate other business adjacencies in this environment, we believe staying focused on the new vehicle retail franchise business is the best use of our shareholders' capital.
We will continue to be acquisitive, but we are also being very measured. In valuing acquisitions, engaging only in deals that we feel provide long term value for Group One shareholders.
And now I'll turn over the call to our CFO Daniel McHenry for an operating and financial overview.

Daniel McHenry

Thank you, Daryl, and good morning, everyone.
In the first quarter of 2025, Group One Automotive reported quarterly record gross profit of $ 892 million. Adjusted net income of $ 134.7 million and quarterly adjusted diluted earnings per share from continuing operations of $10.17.
Starting with our US operations.
Revenue growth on our reported basis and same store basis occurred across all lines of business, with new vehicle revenues leading the way at 9.4% and 7.4% respectively over a comparable prior year quarter.
We experienced higher new vehicle units sold on a reported basis and the same store basis of 7.1% and 5.2% respectively.
This reflects the resiliency of demand, our operational execution, and the value generated from the ability to drive incremental volume through our dealership acquisitions.
At the same time, volumes increase, we saw prices increase by 2.2% on a reported and same store basis, coupled with the decline in GPU's t of 7.5% and 9.6% respectively.
These dynamics of lower GPU's t and higher volumes helped us hold same store and reported gross profit to a modest decline of less than 0.9%. And 4.9% respectively, versus the prior year comparable period.
Much like used much like new vehicles, we saw a similar pattern for used vehicles, higher units sold, higher prices, and lower GPU's t versus the prior year comparable period.
GPUs were only dying $55.66 dollars on a reported and same store basis, or 3.1% and 3.8% respectively.
We believe our ability to hold gross profit to modest declines while driving volume against higher prices versus the prior year comparable period is a testament to our process, discipline and use of technology with pricing of used vehicles.
Sequentially, units sold were up 2.4%, and we were able to increase GPUs by $230 or 15.6%, while prices fell 2.1%. Our first quarter [FNI GPU] of $2,426 is up $11.86 dollars sequentially and year over year respectively.
The performance by our FNI professionals has been outstanding to maintain GPU disciplines.
Shifting gears to after hills.
After sales revenues increased 7.3% and 5.6% on a reported and same store basis respectively.
These revenue increases, coupled with slight margin increases generated growth in gross profit of 8.5% and 6% on a reported and same store basis respectively.
Same store customer plan and warranty revenues comprised of 70.8% of the total same store after sales revenues for the first quarter, versus 67% for the prior comparable quarter.
Warranty work is up virtually across all brands. However, Toyota and Honda have the largest year over year increase, generated by some larger recalls ongoing in the first quarter
We expect this work to continue for some time, given the nature of the repairs.
In the case of Toyota, we're seeing increased work from the open Tundra engine recall.
Wrapping up the US, let's turn to SG&A.
US adjusted SG&A as a percentage of gross profit, increased 228 basis points sequentially to 66.9%. We have refocused our efforts on operational efficiency and resource management to bring these metrics in line with historical levels.
Turning to the UK, what an outstanding quarter. Acquisition activity fueled all-time quarterly growth in total revenues and gross profit, leading to a 92% and 109.6% year over year increase respectively.
We were pleased with the growth in gross profit of 8.7% on the same store basis thanks to improvement in new vehicles, after sales, and FI.
Same store retail gross vehicle units sold increased nearly 6% year over year, and GPUs decreased by 10.7%. The increased volume helped limit the decline in gross profit of approximately 5% on a constant currency basis.
Same store wholesale losses per unit improved to $8 from $842 loss compared to the prior year quarter respectively.
After sales is continuing to be on a positive growth path with a 3.5% increase in same store revenues on a constant currency basis and almost 6% increase in same store gross profit on a constant currency basis over a prior year quarter.
SAM adjustedcSG&A as a percent of gross profit declined 78 basis points versus the prior year quarter. We will continue to focus on cost control and business process efficiency as we execute our business integration activities.
We acquired $11.1 million of non-recurring restructuring costs in quarter 1 2025 in relation to our ongoing UK restructuring plan.
Turning to our balance sheet and liquidity, our strong balance sheet, cash flow generation, and leverage position will continue to support flexible capital allocation approach.
As of March 31st, our liquidity of $1 billion comprised of accessible cash of $176 million and $819 million available to borrow on our acquisition line.
Our rent adjusted leverage ratio as defined by our US syndicated credit facility was 2.7 times at the end of March. Cash flow generation through the first quarter of 2025 yielded $138 million of adjusted operating cash flow and $105 million of free cash flow after backing out $33 million of CapEx.
This capital was deployed in the same period through a combination of acquisitions, share repurchases, and dividends, including the acquisition of $100 million in revenues through March 31, $123 million repurchasing approximately 287,000 shares at an average price of $428.33 and $6.6 million in dividends to our shareholders.
Subsequent to the first quarter, we purchased 100,918 shares under a Rule 10b51 trading plan at an average price per common share of $385.28 for a total cost of $38.9 million.
This has resulted in an approximate 3% reduction in her share of cancer since January 1st.
We currently have $314 million remaining on our board authorized common repurchase plan. As of March 31st, approximately 60% of our [5 billion pounds in GBP4 and other debt was fixed.]
This would result in an annual EPS impact of about $1.21 for every 100 basis point increase in the secured overnight funding rate.
For additional detail regarding our financial condition, please refer to the schedules of additional information attached to our news release, as well as of our investor presentation posted on our website.
I will now turn the call over to the operator to begin the question and answer session, operator.

Question and Answer Session

Operator

Thank you.
We will now begin the question and answer session. (Operator instructions)
Rajat Gupta, JP Morgan

Rajat Gupta

Great, thanks for taking the question. I just had one question first on the pre-buy comment, in the slide deck, is there any way for us to estimate, how much of the volume, like late March, what you might be seeing there in early April, is driven by pre-buy versus what you feel is like normal business course.
And then anything you know that you've seen since the pre-buy started, maybe last week, last couple of weeks, has the traffic sustained, have you started to see it slow down, any color you can give there, and how things have trended, and just what our expectations are, for the remainder of the year, both the new and new cars, and I had one quick follow up on SG&A

Daryl A Kenningham

Good morning, Rajat. This is Daryl.
I'll speak to March. My estimate is in the last, 10 days of March or so we saw probably a 5% improvement in our traffic counts and we saw gross' firm during that time period.
Being the end of a quarter, sometimes it's harder to tell what is driven by the end of the quarter activity on OEM incentives, things like that with their targets generally our estimate was about a 5% lift in those last 10 days or so.

Daniel McHenry

Roger, it's Daniel here. One thing I would add to that is, the big, a big part of our portfolio, as is Toyota Lexus. When you look at the day's supply that we had at the quarter in for Toyota and Lexus at, 12 and 5 days respectively, we didn't actually have that much inventory in those two brands in particular going into that final buying period anyway.
So I think what we sold and those brands in particular, we probably would have sold anyway.

Daryl A Kenningham

Our margin patterns, Rajat, at least on new cars didn't differ materially between the 3rd month of the quarter in Q1 versus the Q4 of last year or Q3 of last year. So you know you always get a little bump in the 3rd month of the quarter. We got a little bump in Q1, we got a little bump in Q4, but it wasn't anything materially different.

Rajat Gupta

Anything on April, like, how is April shaked out so far, we didn't notice like from our checks like early April was strong, but maybe things have cooled off in recent weeks, any comment on that.

Daryl A Kenningham

Well, I think your read is probably pretty good, the thing that I'm watching is our inventories.
They're a little tight at the end of March and.
Some of the OEMs are being a little cautious about allocations right now, and nobody's taking any drastic steps, but we ended the quarter around 20,000 units of inventory, which is the lightest it's been in over a year.
So we're kind of watching that that'll affect obviously growth patterns and that supply can impact some of the some of the brands you saw that with Toyota last year quite a bit.

Operator

Daniel Hagen, Morgan Stanley

Daniel Hagen

Thanks. So can you speak a little bit more to the efficiencies you've seen so far with your cluster marketing initiative? You spoke to some learnings from branding in the UK business. What proof points can we look to in localizing inventory and reconditioning?

Daryl A Kenningham

It's very early still, and we are still in the process of renaming the stores, which is kind of the first step in it. We've done one reconditioning pilot up in Boston that we're still assessing and evaluating and so it's hard for us to quantify what the what it's done for us so far.
We expect that what we'll be able to do is leverage our, we've brought a lot of our marketing and customer data management in-house concurrent with this bank and what we believe will allow us to do is manage our customers on a more proactive basis across our store base and that would be on a local basis, not across, the country or anything like that.
We still believe our business is local, so that's where we expect to get leverage and be able to bring customers.
We had shared some data earlier about, loyalty of customers that buy a used car at a same brand car store versus an off-brand store. Those are things we're trying to leverage with this effort.

Daniel Hagen

Got it. And then any shift to your capital allocation strategy with the current environment, does the policy uncertainty complexities bring more private dealerships to the table for M&A? How have you seen that evolve, if at all?

Daryl A Kenningham

Probably haven't seen the uncertainty drive the acquisition environment yet.
Had some conversations with some folks yesterday that they feel like it hasn't changed yet.
On capital allocation for us, we have deferred some capital projects that were, discretionary, and when I say deferred, we've put them off like 6 months just to see, if the environment is still uncertain or if those are ones that we could do and so we have deferred some of those. We haven't canceled anything. We've reviewed some of our discretionary spending.
And things that potentially we could rein in we did and so we'll continue to do that. We do have a contingency plan developed in writing that, should something dramatic happen, and we saw that with COVID, something dramatic happened.
What are the steps that we would take and we do have a plan that outlines the steps that we would take from, least severe to most severe and the time frame with which we would execute those. So we're trying to just be prepared and as we mentioned in our comments, be nimble.

Operator

John Murphy, Bank of America

John Murphy

Good morning, guys. Just wanted to ask you first, Daryl, as you think about the increase of 8% in your tech, year over year, just curious, how much capacity you think you have.
If we see a real slowdown at the front end on new and used sales and people hold on to their vehicles longer and we see, an uptake in service opportunities, is that something you think you can capture significantly, and is there potentially room to ramp that tech and capacity count even more.

Daryl A Kenningham

The short answer is yes, John. We feel like there is more capacity. We still have hundreds of bays that we can grow into in addition to leveraging the bays that we have more efficiently, even though we added 8% more tax year over year, we also improved our tech productivity year over year so we do feel that way. We're looking at some other things to TRY to drive more efficiency and productivity in our shops.
Right now we're just studying those, and you know the thing will be done with our air conditioning project this year and just to remind everybody in a Group one shop, the tech turnover is up to 9% points lower in a shop that has air conditioning than a shop that doesn't. And so in our minds that's well worth the trade off on the capital spend.
To be able to have our technicians working in air conditioning and hopefully increasing our retention rate, lowering our turnover which will effectively increase our capacity as well.

John Murphy

And then just maybe one quick follow up. There's a lot of attention being paid to tariffs, but there's another significant policy around CARB and NHTSA and the EPA that is pushing EVs still, but that seems like that's we're going to get some relief from that real soon.
I'm just curious, the current state of EVs in the business, how negative the GPUs are and how much they're dragging you down the total, and if we get relief on carb. You know what that means for the business on an operating basis and maybe making acquisitions going forward in car states.

Daniel McHenry

I'll take the first part around the PRUs and inventory in the business. I would say our inventory for EV is really quite good at the moment. We're at I would say a record low levels over the last two years, and some of that's what we did last quarter in terms of managing our EV inventory.
I would say the dragon GPU that we had seen for an EV has reduced over the last quarter. However, we're still seeing about $1000 differential between the GPU and a versus a nice vehicle.
Regarding the second part of the question, I'll pass that over to Daryl.

Daryl A Kenningham

It hasn't changed our view on acquisition strategy and, carb states or not. There's a place for BEVs, customers continue to vote for them, they're still growing, the economics for the retailers are improving, so.
It's not something we're certainly afraid of. Hopefully more natural demand that's out there in the future that we'll see.
That, that's how we look at it.

Operator

David Whiston, Morningstar

David Whiston

Hey guys, good morning. I guess on the UK first, can you talk a little bit about the over 450 people who were let go? What roles were they in?

Daniel McHenry

David, it's Daniel, I would have said initially the cost reductions that we did were around central office functions. That's where we had I guess between doing the acquisitions and the original Legacy Group 1 stores where we had double functions, so 2 CFOs, 2 CEOs, two heads of marketing, etc. That was kind of the first phase I would have said.
Second phase was centralized facilities like accounting where we centralize that all into one office or one function.
Third phase was we went out to the stores and looked at some store reductions, but again, generally duplicative roles.
That was principally what we have undertaken so far.

David Whiston

Were there any major salesperson reductions?

Daryl A Kenningham

No. we have technicians and salespeople, as a matter of fact, we're focused on adding technicians and salespeople in some of the inscape retail stores. They were a little understaffed, so.

David Whiston

Okay.

Daryl A Kenningham

And just the market now.
I'm sorry, David, it's the market growing in the UK now, we don't want to pull back on the customer facing positions at all.

David Whiston

Yeah, is that why your UK new vehicle inventory is down to 16 days, or is there another like supply chain reason?

Daniel McHenry

It's Daniel here. Traditionally March is the biggest selling month, March and September of the year in the UK.
So effectively that tends to be cyclical and that's generally the case. Now it's slightly lower than we would have expected, but our sales rate was pretty strong in March.

Operator

Michael Ward, Freedom Capital Markets

Michael Ward

Thanks very much. Good morning, everyone.
On a longer term basis, the UK penetration has gone from under 20% to now increasing a third of the overall revenue. Can you continue to expand that? Do you see a day where maybe it gets to 50/50?

Daryl A Kenningham

Mike, this is Daryl. Just so I can repeat the question so everybody can hear your voice is a little muffled. Would our UK exposure ever get to 50/50 from 3, 2/3 today?
Never say never, Mike. We don't have any plans to do that.
We feel like, certainly the UK market is more rolled up than the US market is, and At least for the foreseeable future, the acquisition opportunities we see are more US based than UK based. It doesn't mean we won't do them in the UK, but I don't expect they will be of the scale that you've seen over the last 3 or 4 years in the UK.

Michael Ward

Okay, and turning to the US, it, there was some weather impact in early in the quarter. Were you able to make that up? Did it have an overall impact on your business and it looks like parts and services, was very strong relative to the market in the US, and I think that's despite one or two less business days.

Daniel McHenry

Hi Mike, it's Daniel here.
I would have said that it did have some impact in February in the northeast and Houston in particular.
The stores were closed for a number of days in that period, which makes it Pretty difficult to catch up that service work, generally when you look at our shops and look at the efficiency and the capacity in our shops that we have today, we're already fairly full, so it's hard to catch that business back.

Operator

Bret Jordan, Jefferies

Daniel McHenry

Hey, good morning, guys.

Daryl A Kenningham

Good morning

Bret Jordan

on the parts and service 30% growth in warranty, is that tied to a major program like the Tundra engine recall or I guess how long, what drives that and how long can we expect that kind of a run around?

Daryl A Kenningham

Yeah, it was a lot of us. It was the tundra number. I think Daniel might have an exact number on how much it was.

Daniel McHenry

Fred, I don't have the number to hand, but Toyota and Honda with a lion's share of that increase, and you know Tundra is ongoing currently, so we don't see that dropping off significantly this quarter.

Bret Jordan

Okay, and then I guess we look at parts and service going forward and obviously the tariff changes daily, but if as it stands today, what do you think the price contribution to parts and service growth would be into the second half?
Are you going to see mid-single digits pick up just on price without any traffic as well, or I guess how do you? Reconciled traffic versus ticket today.

Daryl A Kenningham

Well, we were pleased this quarter with our traffic. When you look at our increase, it was A 1/3 traffic count and 2/3 price which was up from the past year and we're focused on traffic count, there's been some pricing over the last couple of years and we're trying not to take some more in the in the after sales business. Now, if tariffs hit parts that could potentially obviously change that but you know when you when you look at.
I think that still the retention opportunities they're still significant, which would lead us to believe there's traffic count opportunity. One thing that could drive dollars up is the average mileage in early 2025 is up another 1,000 miles.
From last year, which as mileage increases, that increases usually the dollars per RO, so that could lead to higher dollars.

Operator

Thomas Windler, Stephens inc.

Thomas Windler

Hey, good morning, everyone.
I just wanted to go back to the UK for a second here. March was registration month and the market was up, called 6%, but Mercedes, Audi, and BMW were all down for the quarter. This kind of indicate that the midlines are outperforming luxury and that the luxury buyer is pulling back a bit in the UK.

Daryl A Kenningham

I think the Audi is more product cycle driven, to be honest with you a lot of their new products they've launched in Q1, like the new Q5, but they haven't been able to sell them until they get the pipeline full.
We were pleased with our Mercedes business and pleased with our BMW business honestly and the UK I can't say that I could make a general statement about midline buyers versus luxury buyers. Daniel, do you have anything to add to that? I have nothing to add at.

Daniel McHenry

This moment.

Thomas Windler

All right, that was the only one for me.
Thank you.

Daryl A Kenningham

Thank you.

Operator

(Operator instructions)
Rajat Gupta, JP Morgan

Rajat Gupta

Great, thanks for squeezing me back in, the follow-up question rule is pretty strict. The, I had a question on the SG&A slide.
I noticed that, your same store head conduction number is now 8% versus 2019.
Last quarter that number was 6%.
I'm curious, like, is there has there been more change or turnover that's happened at the stores or is this pro forma for Ica? I know you're not taking out sales, head count at incape, but maybe like other staffing so curious if you could just clarify that was the only question I had.

Daniel McHenry

I think that we continue to increase head count technicians in particular that 8% excludes. Includes technicians, excludes technicians effectively, so that's SG&A within the stores, and we're really focused on concentrating on not adding additional cost whenever it's non-technician.

Daryl A Kenningham

Roger, I'll just add one thing in the US, we added 100/150 salespeople year over year, but our salesperson productivity with our volume increases was just dead flat year over year. So we're seeing, capturing the scale of those additional head as well, but there's not a concerted effort to change that.

Rajat Gupta

Understood. Thank, thanks for clarifying and good luck.

Operator

Ron Juleau, Securitas Security Services

Ron Juleau

Yeah, good morning and thanks for taking my question.
You mentioned you had some SG&A creep in the US in the quarter.
Maybe I missed this, but is there a way to quantify the impact of the higher spend in January and February and if that was normalized in March or if this the process of getting that cost back in line kind of just started in.

Daniel McHenry

March?
I would have said some of it wrong.
SGA is a percent of gross.
February, I would have said was a little weaker. January and February was a little weaker in terms of SG&A leverage, and some of that was possibly around the lack of growth, and we talked earlier about, the weather, etc. Not that I ever really liked to give weather as a reason for that. But equally so, we just saw some creep and variable expense, salespeople commission, manager commission, etc.
And I think there just needs to be some realignment of that and we realigned some of it in March and continuing in quarter M2.

Ron Juleau

Okay, and I know we're only kind of 3 weeks into the potential new world with tariff changes, but I did kind of have a question just on OEM plans from here. It seems like We will start getting some modest price increases starting in May, emphasis on modest, but during your conversations with your OEM partners.
What are they signaling to you kind of with their respect with respect to their strategy going forward around volume price, and I think dealer support incentives are a pretty important topic here.

Daryl A Kenningham

I think what we'll see is a moderation of incentives first, and then I think on pricing, formal pricing, not just transaction pricing, we'll see.
The be modest with their increases early.
The thing that I'm I guess most interested in his parts to see how that that is affected and where that's affected and so but that that's what they've been signaling to us.

Ron Juleau

Okay, that that's super helpful. I appreciate you taking my questions.

Daryl A Kenningham

Thank you very much.

Operator

Thank you. The conference has now concluded.
Thank you for attending today's presentation. You may now disconnect.