Group 1 Automotive, Inc.

Good morning, everyone, and welcome to Group One Automotive's 2021 fourth quarter and full year financial results conference call. Please be advised that this call is being recorded. And now I'd like to turn the conference call over to Mr. Pete DeLongshaw, Group One's Senior Vice President of Manufacturer Relations, Financial Services and Public Affairs. Please go ahead, Mr. DeLongshaw.

Thank you, Jamie. 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'll 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 Group 1 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 material 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 manufacturer 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 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 today on the call, Earl Hesterberg, our President and Chief Executive Officer, Daryl Kenningham, our President of U.S. Brazilian Operations, Daniel McHenry, Senior Vice President and Chief Financial Officer, and also joining us is Chris Gillette, our VP and Corporate Controller. I'd like to hand the call over to Earl.

Thank you, Pete, and good morning, everyone. 2021 was another record year for Group 1 Automotive, driven by strong vehicle sales demand, strong margins due to vehicle supply constraints, double-digit growth in after-sales as miles driven have recovered, and continued strong expense control as we benefit from process and personnel efficiencies realized during the pandemic. We achieved record adjusted net income of $642 million and record adjusted earnings per share of $35.02 per share in 2021, which represents year-over-year growth of over 90 percent for both metrics. This strong performance was consistent across all three of our regions, I should note that the pending sale of our Brazilian business is likely to close during the second quarter of this year. In addition to strong same-store growth of 24 percent in revenue and 37 percent in gross profit, 2021 was also a record year for external growth with the acquisition of $2.5 billion in annualized revenues. This was driven by the acquisition of the Prime Automotive Group in the Northeastern U.S. and the Robinsons Group in the UK. The 2021 acquisitions further diversify our footprint outside of the energy belt, and early indications from these new stores are all very positive. Most importantly, this strong growth initiative did not preclude us from returning meaningful capital to shareholders, with share repurchases of $211 million. These repurchases, which predominantly took place in November and December, represented 6 percent of our beginning of 2021 share count. Our strong cash flow and leverage position, which Daniel will cover in a minute, will continue to allow for significant capital deployment flexibility in 2022. Turning to our fourth quarter results, I'm pleased to report that for the quarter, Group 1 generated adjusted net income of $172 million inclusive of Brazil, which is now classified as discontinued operations within our financial statements. This equates to adjusted earnings per share of $9.54 per diluted share, an increase of 68 percent over the prior year. Our adjusted results exclude non-core items totaling approximately $85 million of net after-tax losses. This net amount consists primarily of a $78 million non-cash charge related to our pending disposal of our Brazilian discontinued operations due to historical exchange rate translation adjustments recorded within accumulated other comprehensive income on our balance sheet that are required to be taken through earnings upon the sale of a foreign entity. The remaining charges relate primarily to transaction costs associated with the acquisition of the Prime Automotive Group. These profit results were largely a result of our strong vehicle margins that were able to more than offset weak new vehicle supply, as well as continued strong growth in our U.S. after sales business and impressive cost control. Consumer demand for vehicles remains extremely strong heading into 2022, and we continue to sell most units almost immediately after OEM delivery. This dynamic should continue throughout the first half of the year and potentially further out, assuming no material change in consumer demand. As of December 31st, we have 3,400 U.S. new vehicle inventory units in stock, representing a nine-day supply. Our used inventory situation is much stronger at 14,400 units and a 36-day supply. Darrell will speak more about inventory shortly. The continued recovery in our after-sales business is very impressive. Our U.S. market saw an 18% increase in same-store after-sales revenues versus 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, and new vehicle availability is severely constrained. We have an order bank with most of our major U.K. brands, extending well into the second half of 2022. 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 fourth quarter and full year profit records in 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. To provide some color on our U.S. fourth quarter performance, I'll now turn the call over to Darrell Kenningham.