Group 1 Automotive, Inc.

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's 2023 Second Quarter Financial Results Conference Call. Please be advised that this call is being recorded. I would 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. 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 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 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. Those risks include, but are not limited to, risks associated with pricing, volume, inventory supply due to increased customer demand and reduced manufactured production levels due to some 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 recently Parable gap measures on this website. Participating with me on the call today, Darrell Kenningham, our President and Chief Executive Officer, and Daniel McHenry, Senior Vice President and Chief Financial Officer. I now turn the call over to Darrell. Thank you, Pete.

Good morning, everyone. In the second quarter of 2023, Group 1 Automotive reported $166.1 million in adjusted net income and record total quarterly revenues of of $4.6 billion, led by all-time highs in new vehicle, parts and service, and finance and insurance revenues. Our parts and service team continued to deliver record revenue levels for nine consecutive quarters. We also set an all-time record for quarterly total gross profits, supported by an all-time record parts and service gross of $304.1 million. We continue to deploy capital efficiently in the quarter to acquire the highly desirable Beck & Mastin stores, further strengthening our strong Texas footprint with an outstanding brand. We also return capital to our shareholders by repurchasing $31 million in shares during the quarter. Our strong cash flow and leverage position, which Daniel McHenry will cover in a minute, will continue to allow for significant capital deployment flexibility in the remainder of 2023. Turning to our second quarter results, starting with our U.S. operations, we ended the quarter sequentially flat with 27 days' supply of new vehicles and 31 days' supply of used vehicles. Consistent with our comments on inventory last quarter, our domestic brands have improved slightly and import brands have remained very constrained. Approximately 28% of our U.S. business is Toyota and Lexus, which continues to be very tight at a combined five-day supply. Our new vehicle revenues increased an impressive 19% sequentially and 22% over the second quarter of last year. While we saw a slight moderation in GPUs, new vehicle units sold reached the second highest level in company history, a 19% increase over the first quarter, and 16% over the second quarter of last year. 33% of our new vehicle sales in the U.S. were pre-sales, down from 40% in the prior quarter. Used vehicles were challenged in the second quarter, with sourcing more difficult from the lack of new vehicle supply. We entered the quarter low on used vehicles. However, we picked up some ground as the quarter progressed, thanks in large part to trade-ins from record new vehicle sales. Source used inventory, we continue to focus on organic sourcing efforts, including acquisitions through Acceleride, customer trades, and service drive acquisitions. Finance and insurance business has remained strong, with same store gross profit per unit at $2,379, a sequential quarter improvement. Despite this resiliency, looking forward, we expect pressure on finance penetration rates driven by existing interest rates and slightly tighter lender requirements for some buyers. Now turning to after sales. Our U.S. performance was outstanding. After sales revenues grew double digits and same store revenues were up over 8%, led by strong customer pay, same store growth of nearly 12%. Technician headcount grew 10% in the second quarter, and we continue to invest in new ways to reach our customers through one-to-one marketing technology and by using artificial intelligence. We continue to invest in after sales and believe parts and service will be a strength through the rest of 2023. Our second quarter U.S. adjusted SG&A as a percentage of gross profit was 61.7%, an increase of only 303 basis points from prior year, and a decrease of 1.4% sequentially and down from over 70% in pre-pandemic 2019. We do see some pressure from reduced margins and inflationary costs. We expect that a material portion of our SG&A savings will be permanent. Now to Acceleride, where our customers continue to vote yes. During the second quarter, we saw deeper engagement through Acceleride, Over 80% of our customers engaged in some way in their transaction through Acceleride, and nearly half of our customers engaged Acceleride on at least five steps of the car buying process. We experienced significant year-over-year increases in trade-ins, credit applications, F&I attachment, and significantly more sales. 12,200 vehicles sold in the quarter. That was up 78% year-over-year. Turning to the U.K., Vehicle demand remains resilient, and new vehicle availability is still constrained, keeping vehicle GPUs strong. New and used GPUs outpaced the prior year quarter by 7% and 5.4% respectively. We continue to see signs of production improvement by certain manufacturers, as demonstrated by the 10% increase in same-store new vehicle units sold. As of June 30th, our new vehicle order bank was approximately 19,400 units, a 10% increase over the prior quarter. As a reminder, our UK business mix is predominantly luxury, and those customers are more resilient during times of economic uncertainty. And our after sales growth in the UK has been outstanding, with same store revenues and gross profit on a local currency basis increasing 19.8% and 17.2% respectively. Similar to our efforts in the U.S., we've worked to grow technician headcount, experiencing an approximate 10% increase over the prior year. We have also invested in improvements to our U.K. customer contact center, streamlining operations and improving the customer experience. I will now turn the call over to our CFO, Daniel McHenry, to provide a balance sheet and liquidity overview. Daniel?