Group 1 Automotive, Inc.

Good morning, ladies and gentlemen, and welcome to Group 1 Automotive's 2021 Third Quarter Financial Results Conference Call. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then 1 using a touchtone telephone. Please also be advised that today's conference call is being recorded. At this time, I'd like to turn the conference call over to Mr. Pete DeLongshaw, Group 1 Senior Vice President of Manufacturer Relations, financial services, and public affairs. Please go ahead, Mr. DeLongshaw.

Good morning, everyone, and welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results we will refer to on this call for comparison purposes have been posted to Group 1'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 Group 1 Automotive are forward-looking statements that are pursuant to the safe harbor provisions of the Private Securities Litigation and 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 forecast results. Those risks include, but are not limited to, risks associated with pricing, volume, inventory supply due to increased customer demand, and reduced manufacturing production levels due to component shortages, conditions of markets, and adverse developments in the global economy, as well as the public health crisis related to the COVID-19 virus, and resulting impacts on the 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 over the past 12 months. Copies of these filings are available from both the SEC and the company. 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 today on the call, Earl Hesterberg, our President and Chief Executive Officer, Darrell Kenningham, our President of U.S. and Brazilian Operations, and Daniel McHenry, our Senior Vice President and Chief Financial Officer. I'll now hand the call over to Earl.

Thank you, Pete, and good morning, everyone. I'm pleased to report that for the quarter, Group 1 generated adjusted net income of $178 million. This equates to adjusted earnings per share of $9.62 per diluted share, an increase of 38% over the prior year, and an increase of 219% over the pre-pandemic third quarter of 2019. Our adjusted results exclude nine core items totaling approximately $5 million of net after-tax losses. This net amount consists primarily of a loss on debt extinguishment, and acquisition costs related to the prime transaction, partially offset by favorable legal settlements recognized during the quarter. These profit results were largely a result of strong vehicle margins that were able to more than offset unit sales declines, as well as continued growth in after sales and impressive cost control. Consumer demand for vehicles remains extremely strong heading into the fourth quarter, and we continue to sell most units almost immediately after OEM delivery. This dynamic should continue throughout the fourth quarter and potentially much further out assuming no material change in consumer demand. As of September 30th, we had 2,700 U.S. new vehicle inventory units in stock representing an 11-day supply. Our used inventory situation is much stronger at 10,000 units and a 25-day supply. Darrell will speak more about inventory shortly. A very encouraging element of our third quarter results is the very strong continued recovery in our after sales business. Our U.S. market saw a 15.5% increase in after sales revenues versus the prior year. Again, Darrell will provide more detail on our U.S. results in a moment. As with the U.S., consumer demand for vehicles in the U.K. is extremely strong. but new vehicle availability is severely constrained. We have an order bank with most of our major UK brands extending into the second quarter of next year. Strong margins were able to more than offset sales declines due to inventory shortages, and we're proud to report that we generated an all-time record quarterly profit in the third quarter of 2021. We believe pent-up demand built over the past several years due to both Brexit and the pandemic will help drive strong UK vehicle demand into the foreseeable future. Finally, I want to acknowledge the impressive work all of our regions have continued to do on cost control. Our U.S. adjusted SG&A as a percentage of gross profit was 57.6%, the UK was 64.6%, and Brazil came in at a record 60.9%. While there is certainly a level of transitory impact due to vehicle margins, we continue to witness very high levels of productivity that will remain after vehicle inventories normalize. To provide some color on our U.S. and Brazil second quarter performances, I'll now turn the call over to Darrell Kenningham.