Group 1 Automotive, Inc.

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's 2023 First Quarter Financial Results Conference Call. Please be advised that this call is being recorded. I'd now like to turn the floor over to Mr. Pete DeLongshaw, Group 1's Senior Vice President of Manufacturer Relations, Financial Services, and Public Affairs. Please go ahead, Mr. DeLongshaw.

Thank you, Jamie. 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 we will refer to on this call for comparison purposes have been posted at 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 made pursuant 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 forecasted 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, 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 the call today, Darrell Cunningham, our President and Chief Executive Officer, and Daniel McHenry, Senior Vice President and Chief Financial Officer. I now have to hand the call over to Darrell.

Good morning, everyone. In the first quarter of 2023, Group 1 Automotive reported $156.1 million in adjusted net income and a record first quarter adjusted diluted earnings per share of $10.93. This exceptional performance was led by record-breaking performances yet again by our outstanding after-sales teams in both the U.S. and the U.K. We also set new first-quarter records in new vehicle revenues and new and used vehicle unit sales. We continued to return capital to our shareholders by repurchasing $35 million in shares during the quarter. Our strong cash flow and leverage position, which Daniel McHenry will cover in a minute, provided us an opportunity to add a high-performing Chevrolet store to our Florida footprint and will continue to allow for significant capital deployment flexibility in the remainder of 2023. Now turning to our first quarter results. Starting with our U.S. operations, as of March 31st, we ended the quarter with 27-day supply of new vehicles and a 25-day supply of used vehicles. Inventory is a bit higher in our domestic brands, and import brands remain fairly constrained. Approximately 27% of our U.S. business is Toyota and Lexus, which continues to be very tight at a combined five-day supply. Our new vehicle sales increased 2%, right in line with the retail industry. During the quarter, 40% of our new vehicle sales in the US were pre-sales, down from 46% in the prior quarter. We've seen indications of manufacturer production discipline, which we believe points to slower margin normalization over time. We do expect new vehicle margins to eventually settle above our pre-pandemic levels. We experienced a sequential quarter improvement in used vehicle margins and vehicle unit sales. The source used inventory, we continue to focus on organic sourcing efforts, including acquisitions through Acceleride, customer trade-ins, and service drive acquisitions. Our F&I business has remained strong with same store gross profit per unit at $2,259, showing only minimal sequential decline. Looking forward, we do expect some continued moderation in F&I gross profit due to pressure on finance penetration rates driven by existing interest rates and a slightly tighter lending requirements for some buyers. Now turning to after sales. Our U.S. performance was outstanding. Customer pay generated 15.9% increase, same store growth. Collision was up 17.5%, warranty of 9%. and wholesale parts of 7.7%. We increased our same SOAR technician headcount by 10% in the quarter. In the first quarter, we set over 300,000 service appointments digitally and through our customer development center. We also continue to find ways to reach incremental customers through our one-to-one marketing initiatives and by using artificial intelligence. The first quarter, we generated nearly 8,000 customer appointments in just three brands using AI. We believe these customers to be incremental and expect this initiative to grow and generate more incremental service business in the future. We continue to invest in after sales and believe parts of service will be a strength through the rest of 2023. Our first quarter, you adjusted SG&A as a percentage of gross profit was 63.1%. increase of only 3.1% from the prior year and down from 74.2% in pre-pandemic 2019. While we do see some pressure from reduced margins and inflationary costs, we expect that a material portion of these SG&A savings will be permanent as we continue to leverage technology. Now to Acceleride, where our customers continue to vote yes. During the first quarter, we sold an all-time record of 12,500 vehicles through Acceleride, 19.2% of our U.S. retail sales, also an all-time record. Just as important is that over 78% of our customers engaged with Acceleride in some way in their transaction, a percentage that continues to increase. To further validate our confidence in Acceleride, J.D. Power recently completed an assessment of the digital retailing customer offerings. They found Group 1's Acceleride to be the most complete end-to-end digital shopping and buying experience among nearly 70 OEM, dealer, and third-party solutions. Now, turning to the UK. Vehicle demand remains steady, and new vehicle availability is still constrained. We are seeing signs of production improvement by certain manufacturers, as demonstrated by the 19% increase in new vehicle units sold. As of March 31, our new vehicle order bank was approximately 17,600 units, which represents more than a six-month backlog based on our current sales pace. As a reminder, Our UK business mix is predominantly luxury, and those customers are more resilient during times of economic uncertainty. Also, at this point, we've not seen a material impact on our Mercedes-Benz gross margins due to the agency model. And our after sales growth in the UK has been outstanding, with same store gross profit growth on a local currency basis of 21% for the first quarter of 2023. I will now turn the call over to our CFO, Daniel McHenry, to provide a balance sheet and liquidity overview. Daniel?