Group 1 Automotive Q1 2025 Earnings Report

Group 1 Automotive EPS Results

• Actual EPS: $10.17
• Consensus EPS: $9.68
• Beat/Miss: Beat by +$0.49
• One Year Ago EPS: $9.49

Group 1 Automotive Revenue Results

• Actual Revenue: $5.51 billion
• Expected Revenue: $5.37 billion
• Beat/Miss: Beat by +$139.00 million
• YoY Revenue Growth: +23.10%

Group 1 Automotive Announcement Details

• Quarter: Q1 2025
• Date: 4/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 24, 2025
• Conference Call Time: 10:00AM ET

Group 1 Automotive (NYSE:GPI), through its subsidiaries, operates in the automotive retail industry in the United States and the United Kingdom. The company sells new and used cars, light trucks, and vehicle parts, as well as service and insurance contracts; arranges related vehicle financing; and offers automotive maintenance and repair services. Group 1 Automotive, Inc. was incorporated in 1995 and is headquartered in Houston, Texas.

Group 1 Automotive Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, ladies and gentlemen. Welcome to Group one Automotive's First Quarter twenty twenty five Financial Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the call over to mister Pete Dulongshaw, Group one's senior vice president, manufacturers relations and financial services. Please go ahead, mister Dulongshaw.

[Pete DeLongchamps, Senior Vice President, Manufacturer Relations, Financial Services & Public Affairs at Group 1 Automotive]

Okay, and thank you, Jacob, and good morning, everyone, and welcome to today's call. The earnings release we issued this morning and the related slide presentation that include reconciliations related to the adjusted results that we will refer to on this call for comparison purposes have been posted to Group one's website. Before we begin, I'd like to make some brief remarks about forward looking statements and the use of non GAAP financial measures. Except for historical information mentioned during the conference call, statements made by management of Groupon Automotive are forward looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results.

[Pete DeLongchamps, Senior Vice President, Manufacturer Relations, Financial Services & Public Affairs at Group 1 Automotive]

Those risks include, but are not limited to, risks associated with pricing, volume, inventory supply, conditions of markets, successful integration of acquisitions, and adverse developments in the global economy and resulting impacts on demand for new and used vehicles and related services. Those and other risks are described in the company's filings with the Securities and Exchange Commission. In addition, certain non GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non GAAP financial measures to the most directly comparable GAAP measures on its website. Participating with me on today's call, Darrell Kenningham, our President and Chief Executive Officer and Daniel McHenry, Senior Vice President and Chief Financial Officer.

[Pete DeLongchamps, Senior Vice President, Manufacturer Relations, Financial Services & Public Affairs at Group 1 Automotive]

Okay, so now I'll hand the call over to Daryl.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Thank you, Pete. Good morning, everyone. Thanks to our teams in The UK and The US, we were pleased with our performance in the first quarter. Let me start with our UK business. Our UK business is on a good track in the first quarter.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

The UK market overall was up 6.4%, while the retail or private market was up 9.5. Group one delivered record UK results in the first quarter, achieving our internal profit and cost targets. We are extremely pleased with the integration of our acquisitions in The UK, which has substantially grown our market presence there. We are back to pre acquisition levels on SG and A as a percentage of gross profit and on track to take out 10% of our headcount and save north of £30,000,000 this year, most of it in the first half. In addition, we are aligning our business processes across platform, including our used car pricing and acquisition processes, technician recruiting and compensation plans, customer contact centers, and finance and insurance products.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Our team remains focused on managing our legacy business operations and our same store SG and A 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.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

We will continue to optimize our UK business. Thanks to our strong OEM engagement and acquisition approvability, in the quarter, we added three Toyota and one Lexus dealership. At the same time, we undertook the strategic closure of eight stand alone used vehicle sites and three less accretive franchise sites. This strategy mirrors the approach taken in The U. S.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Over the past two years, improving our performance and, we believe, leading to higher shareholder returns. Now turning to our U. S. Business. Our U.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

S. 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 and I performance performed well in the quarter, up $98 on a same store basis. As used vehicle finance, vehicle service contract and other product penetrations improved.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

We continue to view aftersales 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 aftersales 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 $25,000,000 in our technicians. We are converting some of our collision footprint into traditional service operations, expecting to increase capacity where needed for the higher margin service business.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Adding human capacity is a critical leverage point in driving continued performance growth. We ended the first quarter of twenty twenty five 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 aftersales business, and we look to be even more aggressive in the future. In The US in the first quarter, we did not leverage SG and 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.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

As a result, we put some focus on it and saw some improvement in March, continuing to monitor it and will take additional steps as needed. In the fourth 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 is important to note that we continue to believe that the retail automotive business is a local business, and that is where we will put our emphasis. We have learned a great deal about this model from our UK business, where all of our dealerships are already branded with a Group one name.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Lastly, a few thoughts on the evolving U. S. Landscape and broader global backdrop. There is 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. That is an ever moving target.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

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 reevaluated some discretionary spending.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

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 twenty twenty five, we acquired $100,000,000 of revenues and bought back another 2% of the company for $122,800,000 At current valuation levels, we believe buying back stock at every opportunity makes sense, especially given our liquidity position. We will continue to optimize our portfolios in The US and The UK.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Testament to that is that since the beginning of 2023, we have bought assets generating $5,000,000,000 in annual revenue and disposed of assets generating $1,000,000,000 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, Senior VP & CFO at Group 1 Automotive]

Thank you, Daryl, and good morning, everyone. In the first quarter of twenty twenty five, Group '1 Automotive reported quarterly record gross profit of $892,000,000 adjusted net income of $134,700,000 and quarterly adjusted diluted earnings per share from continuing operations of $10.17 Starting with our U. S. 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 9.47.4% respectively over a comparable prior year quarter. We experienced higher new vehicle units sold on a reported basis and a same store basis of 7.15.2% respectively.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

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 GPUs of 7.59.6% respectively. These dynamics of lower GPUs and higher volumes helped us hold same store and reported gross profit to a modest decline of less than 0.94.9% respectively versus the prior year comparable period. Much like new vehicles, we saw a similar pattern for used vehicles, higher units sold, higher prices and lower GPUs versus the prior year comparable period. GPUs were only down $55 and $66 on a reported and same store basis or three point one percent and three point eight percent respectively.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

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 F and I GPU of $2,426 is up $11 and $86 sequentially and year over year respectively. The performance by our F and I professionals has been outstanding to maintain GPU disciplines. Shifting gears to aftersales.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

Aftersales revenues increased 7.35.6% on a reported and same store basis respectively. These revenue increases coupled with slight margin increases generated growth in gross profit of 8.56% on a reported and same store basis, respectively. Same store customer pay 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.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

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 U. S, let's turn to SG and A. U.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

S. Adjusted SG and A as a percentage of gross profit increased two twenty eight 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 92109.6% year over year increase respectively.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

We were pleased with the growth in gross profit of 8.7% on a same store basis, thanks to improvement in new vehicles, aftersales and F and I. 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. Aftersales is continuing to be in 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 prior year quarter.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

Same store adjusted SG and 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 incurred 11,100,000 of non recurring restructuring costs in quarter one twenty twenty five 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.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

As of March 31, our liquidity of $1,000,000,000 comprised of accessible cash of $176,000,000 and $819,000,000 available to borrow on our acquisition line. Our rent adjusted leverage ratio is defined by our U. S. Syndicated credit facility was 2.7 times at the March. Cash flow generation through the first quarter of twenty twenty five yielded $138,000,000 of adjusted operating cash flow and $105,000,000 of free cash flow after backing out $33,000,000 of CapEx.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

This capital was deployed in the same period through a combination of acquisitions, share repurchases and dividends, including the acquisition of $100,000,000 in revenues through March 31, '1 hundred and '20 '3 million repurchasing approximately 287,000 shares at an average price of 4 and $28.33 and $6,600,000 in dividends to our shareholders. Subsequent to the first quarter, we purchased 100,918 shares under a Rule 10b5-one trading plan at an average price per common share of $385.28 for a total cost of $38,900,000 This has resulted in an approximate 3% reduction in our share count since January 1. We currently have $314,000,000 remaining on our Board authorized common repurchase plan. As of March 31, approximately 60% of our $5,000,000,000 in floor plan 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.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

For an additional detail regarding our financial condition, please refer to 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?

[Operator]

Thank you. We will now begin the question and answer session. To a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the star keys. The first question comes from Rajat Gupta with JPMorgan.

[Operator]

Please go ahead.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Great. Thanks for taking the question. I just had one question, firstly, 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, you know, maybe last week or last couple weeks, you know, had the traffic sustained, you know, have you started to see it slow down?

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

You know, any color you can give there on how things have trended, and just what our expectations are for the remainder of the year, both the new and used cars? I had one quick follow-up on SG and A.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

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

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Generally, our estimate was about a 5% lift in those last ten days or so.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

Rajat, it's Daniel here. One thing I would add to that is, a big part of our portfolio, as you know, is Toyota Lexus. When you look at the day supply that we ended the quarter in for Toyota and Lexus at twelve and five 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 Kenningham, CEO, President & Director at Group 1 Automotive]

Our margin patterns, Rajat, at least on new cars didn't differ materially between the third month of the quarter in Q1 versus the Q4 of last year or Q3 of last year. So you always get a little bump in the third 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, Executive Director, Autos at JP Morgan Chase & Co]

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

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

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 March and some of the OEMs are being a little cautious about allocations right now and nobody's taken 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.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

That'll affect obviously gross patterns and that supply can impact some of the brands. You saw that with Toyota last year quite a bit.

[Operator]

Thank you. The next question comes from Danielle Hagen with Morgan Stanley. Please go ahead.

[Daniela Haigian, Vice President - Equity Research at Morgan Stanley]

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

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

It's very early, still, and we are still early in the process of renaming the stores, which is kind of a 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 it's done for us so far. We expect that what we'll be able to do is leverage our we brought a lot of our marketing and customer data management in house concurrent with this change. And what we believe it will allow us to do is manage our customers on a more proactive basis across our store base.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

And that would be on a local basis, not across the country or anything like that. We still believe our business is local. That's where we expect to to get to get leverage and and be able to to bring customers. We we had shared some data earlier about, you know, 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.

[Daniela Haigian, Vice President - Equity Research at Morgan Stanley]

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

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Brad, I 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 six months just to see if the environment is still uncertain or if those are ones that we could do. So we have deferred some of those.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

We haven't canceled anything. We've reviewed some of our discretionary spending things that potentially we could rein in, we did. 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? We do have a plan that outlines the steps that we would take from least severe to most severe and the timeframe with which we would execute those.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

We're trying to just be prepared, and as we mentioned in our comments, be nimble.

[Operator]

Thank you. The next question comes from John Murphy with Bank of America. Please go ahead.

[John Murphy, Analyst at Bank of America]

Good morning, guys. Just wanted to ask first, Daryl, as you think about the increase of 8% in your techs 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 uptick 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 Kenningham, CEO, President & Director at Group 1 Automotive]

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 techs year over year, we also improved our tech productivity year over year. So we do feel that way.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

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. 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 nine percentage 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 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, Analyst at Bank of America]

And then just maybe one quick follow-up.

[John Murphy, Analyst at Bank of America]

attention being paid to tariffs, but

[John Murphy, Analyst at Bank of America]

there's another significant policy around CARB and NHTSA and EPA that is pushing EVs still. But that seems like that's we're going get some relief on that real soon. I'm just curious either the current state of EVs in the business, how negative the GPUs are and how much they're dragging down the total? And if we get relief on CARB, what that means for the business on an operating basis and maybe making acquisitions going forward in CARB states?

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

John, 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 are at, I would say, 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 drag in GPU that we had seen for EV has reduced over the last quarter. However, we're still seeing about $1,000 differential between the GPU on a fab versus an ICE vehicle.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

Regarding the second part of the question, I'll pass that over to Daryl.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

It hasn't changed our view on acquisition strategy in carb states or not. There's a place for bev's 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.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Hopefully, will be more natural demand that's out there in the future that we'll see. That that's how we look at it.

[Operator]

Thank you. The next question comes from David Whiston from Morningstar. Please go ahead.

[David Whiston, Equity Strategist - U.S. Autos at Morningstar]

Hey, guys. Good morning. Guess on The UK First, can you talk a little bit about the over four fifty people who are let go? What roles were they in?

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

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 one stores where we had double functions. So two CFOs, two CEOs, two heads of marketing, etcetera. That was kind of the first phase I would have said.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

Second phase was centralized facilities like accounting where we centralized 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, Equity Strategist - U.S. Autos at Morningstar]

Were there any major salesperson reductions?

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

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

[David Whiston, Equity Strategist - U.S. Autos at Morningstar]

And just But the market growing in The

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

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

[David Whiston, Equity Strategist - U.S. Autos at Morningstar]

Yeah, is that why your UK new vehicle inventories down to sixteen days? Or is there another like supply chain reason?

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

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]

Thank you. The next question comes from Michael Ward with Citi. Please go ahead.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

Thanks very much. Good morning, everyone.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

Good morning, Mike.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

From a voluntary basis, The UK penetration has gone from under 20% now, like, placing a third of your overall revenue. Can you continue to expand that? Do you see a day where maybe it gets to fiftyfifty?

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

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 fifty-fifty from a third, two thirds today? Never say never, Mike. We don't have any plans to do that.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

We feel like certainly The UK market is more rolled up than The US market is. At least for the foreseeable future, the acquisition opportunities we see are more US based than UK based. 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 three or four years in The UK.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

Okay. And turning to The US, there was some weather impact 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.

[Michael Ward, Vice President & Senior Analyst - US Insurance at Citi]

And I think that's despite one or two less business days.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

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]

Thank you. The next question comes from Bret Jordan with Jefferies. Please go ahead.

[Bret Jordan, Managing Director at Jefferies LLC]

Hey, good morning guys.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

Hi Bret.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Morning Bret.

[Bret Jordan, Managing Director at Jefferies LLC]

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 rate?

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Yeah, it was a lot of it was Tundra number. I think Daniel might have an exact number on how much it was.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

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

[Bret Jordan, Managing Director at Jefferies LLC]

Okay, and 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 reconcile traffic versus ticket today?

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Well, we were pleased this quarter with our traffic. When you look at our increase, was one third traffic count and two thirds price, which was up from the past year. And we're focused on traffic count. There's has been some pricing over the last couple of years and we're trying not to take some anymore in the after sales business. Now, if tariffs hit parts, that could potentially obviously change that.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

But when you look at,

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

I

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

think, retention opportunities that are 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 twenty twenty five is up another 1,000 miles from last year, which as mileage increases, that increases usually the dollars per RO. That could lead to higher dollars.

[Operator]

Thank you. The next question comes from Thomas Wendler with Stephens Inc. Please go ahead.

[Thomas Wendler, Associate at Stephens Inc.]

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, call it 6%. But Mercedes, Audi and BMW were all down for the quarter.

[Thomas Wendler, Associate at Stephens Inc.]

Does this kind of indicate that the midlines are outperforming luxury and that the luxury buyers pulling back a bit in The UK?

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

I think the Audi piece is more product cycle driven, to be honest with you. A lot of their new products come they launched in Q1, like the new Q5, but we 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, in The UK in Q1. 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?

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

I have nothing to add at this moment.

[Thomas Wendler, Associate at Stephens Inc.]

Alright. That that was the only one for me. Thank you, guys.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

Thank you.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Thanks.

[Operator]

Thank you. The follow-up question is from Rajat Gupta with JPMorgan. Please go ahead.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Great. Thanks for squeezing me back in. The follow-up question rule was pretty strict. The I had a question on the SG and A slide. I noticed that, you know, your your same store headcount reduction number is now 8% versus 2019.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Last quarter, that number was 6%. Curious, has there been more change or turnover that's happened at the stores? Or is this pro form a for Inchcape? I know you're taking out sales headcount at Inchcape, but maybe like other staffing. So curious if you could just clarify that.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

That was the only question I had. Thanks.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

Rajat, I think that we continue to increase headcount around technicians in particular. That 8% excludes technicians effectively. So that's SG and A within the stores and we're really focused and concentrating on not adding additional cost whenever it's non technician.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Rajat, I'll just add one thing. In The US, we added about 150 salespeople year over year, but our salesperson productivity with our volume increases was just dead flat year over year. So we're capturing the scale on those additional heads as well, but there's not a concerted effort to change that.

[Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co]

Understood. Thanks for clarifying and good luck.

[Operator]

Thank you. The next question comes from Ron Jacicco with Guggenheim. Please go ahead.

[Ron Jewsikow, Director at Guggenheim Securities, LLC]

Yeah. Good morning, and thanks for taking my question. You mentioned you had some SG and A creep in The U. S. In the quarter.

[Ron Jewsikow, Director at Guggenheim Securities, LLC]

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 is the process of getting that cost back in line kind of just started in March?

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

I would have said some of it, Ron. SG and A as a percent of gross was that February, would have said was a little weaker. January and February was a little weaker in terms of SG and A leverage and some of that was possibly around the lack of growth. And we talked earlier about the weather, etcetera, not that I ever really like to give weather as a reason for that. But equally so, we just saw some creep in variable expense, sales people commission, manager commission, etcetera.

[Daniel McHenry, Senior VP & CFO at Group 1 Automotive]

And I think there just needs to be some realignment of that and we realigned some of it in March and continuing into quarter two.

[Ron Jewsikow, Director at Guggenheim Securities, LLC]

Okay. And I know we're only kind of three 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 respect to their strategy going forward around volume, price, and I think dealer support incentives are a pretty important topic here.

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

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 them be modest with their increases early. The thing that I'm, I guess, most interested in is parts to see how that is affected and where that's affected. That's what they've been signaling to us.

[Ron Jewsikow, Director at Guggenheim Securities, LLC]

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

[Daryl Kenningham, CEO, President & Director at Group 1 Automotive]

Thank you very much.

[Operator]

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

Participants

Executives

• Pete DeLongchamps, Senior Vice President, Manufacturer Relations, Financial Services & Public Affairs
• Daryl Kenningham, CEO, President & Director
• Daniel McHenry, Senior VP & CFO

Analysts

• Rajat Gupta, Executive Director, Autos at JP Morgan Chase & Co
• Daniela Haigian, Vice President - Equity Research at Morgan Stanley
• John Murphy, Analyst at Bank of America
• David Whiston, Equity Strategist - U.S. Autos at Morningstar
• Michael Ward, Vice President & Senior Analyst - US Insurance at Citi
• Bret Jordan, Managing Director at Jefferies LLC
• Thomas Wendler, Associate at Stephens Inc.
• Ron Jewsikow, Director at Guggenheim Securities, LLC