Group 1 Automotive, Inc.

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's second quarter of 2024 Financial Results Conference Call. Please be advised that this call is being recorded today. I would now like to turn the call 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, Joe. And 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 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 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 material from forecasted results. Those risks included, 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, successful integration of our pending InScape acquisition, 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. I'd now like to hand the call over to Darrell. Thank you, Pete.

Good morning, everyone. Despite a number of challenges, we are very pleased with our results this quarter. Our U.S. team persevered through extreme weather events and the CDK outage. We witnessed unprecedented teamwork focused on caring for our customers, communities, and our team members. The CDK outage most significantly affected our U.S. operations from June 19 to June 26. The company's businesses in the UK were not impacted as we used a different dealership management system there. During the disruption, all Group 1 U.S. dealerships continued to serve our customers using alternative processes until CDK systems were again made available. We do believe that we could have sold more vehicles and performed additional service and repair work in the June quarter had we been operating at full capacity with our CDK dealer management systems. Once we were able to gain access to CDK on June 26th, we mobilized our operations personnel to enter thousands of transactions performed during the outage into the CDK DMS, all of which were completed prior to June the 30th. The superior efforts by our field employees, our accounting shared services center in Houston, and our investments in technology for transactional processing all paid tremendous dividends that enabled us to recover quickly from the outage. For example, we used our technology to process car deals, complete inventory stock ends, and post factory, vendor, and bank statements in an expeditious manner. This phenomenal display of teamwork and unity by our U.S. team allowed us to maintain our financial close timeline for the June quarter and shift our focus toward the future. We believe these actions are a key reason that we were able to minimize the financial impact of the CDK event on our profit performance. We estimate the pre-tax income impact of the CDK incident to be approximately $17 million, or 97 cents in diluted earnings per share. Additionally, we made $5.9 million in one-time pre-tax compensation payments to employees, or approximately 34 cents in earnings per diluted share. This impact is prior to any insurance or other recoveries we expect to receive in future periods. Now I'd like to spend a few minutes discussing what we feel like differentiates Group 1. Prior to the CDK cyberattack, our disciplined execution led to great after-sales and used car performance in the second quarter. And our F&I performance and front-end gross margin retention performed well throughout the entire quarter. Our SG&A leverage was outstanding, as we continue to keep our primary cost drivers, like headcount, in check. Daniel McHenry will outline several specific examples of this disciplined execution in his upcoming comments. Another differentiator for Group 1 is our capital allocation strategy. We are a pure play new vehicle dealership group. While we regularly evaluate other business adjacencies, we believe, in this environment, the best use of our shareholders' capital is investing in new vehicle franchise dealerships. We believe that entering other business verticals not only hurts returns, but also dilutes our focus. This year we have acquired dealerships with expected revenues of $1.1 billion. Our ability to integrate these businesses into our existing portfolio allowed these transactions to be accretive from day one. As previously announced, we recently completed the purchase of four Mercedes-Benz dealerships north of London. We also look forward to closing the Inchcape acquisition in the third quarter. As a reminder, we anticipate that the 54 Inchcape dealerships will add $2.7 billion in revenue to Group 1, doubling our size in the UK. The brand and geographic mix is outstanding and give us significant scale and reach and will improve our SG&A leverage. This is a transformative acquisition for Group 1, and we look forward to welcoming nearly 4,000 new teammates to the company. An important part of our capital allocation focus is what we don't buy. While we routinely discuss acquisitions that are pending or have closed, what's also important are the acquisitions that don't fit strategically or meet our investment hurdles. Some of those are in great markets with great brands, however, We will not chase revenue just for the sake of growing. Our portfolio optimization efforts are based on returns and strategic fit. Another important element of our capital allocation strategy is evaluating share buybacks as an alternative to purchasing revenue. We continue to balance acquisitions and dispositions with repurchasing our shares. This year, we've bought another 2.6% of the company back for $100 million. Over the past 30 months, we've bought back 25% of our stock. Lastly, we believe close partnerships with our OEM partners has never been more important, and this is certainly a differentiator for Group 1. OEMs need great retail partners now more than ever. The good ones admit that and execute against that. They need our capital, professionalism, and execution to win in this ultra-competitive environment. Our high performance on OEM scorecard metrics enables Group 1 to stay eligible to purchase more stores, something our team has done an outstanding job with the last two years. Our ability to respond to disruptive events quickly and effectively, like the CDK outage and catastrophic weather events, make us more valuable partners as well. Our willingness and ability to invest in world-class facilities, professional management, and the community makes us more valuable partners. Our breadth across two major markets gives us and our OEM partners competitive leverage and performance advantages. As a new vehicle dealer, a strong relationship with our OEM partners is more critical than ever and we don't see that changing in the future. We actually see that OEM relationship growing in importance. We believe the Inchcape acquisition allows Group 1 another outstanding opportunity to demonstrate that. And we believe that Group 1 being a great partner to our OEMs gives us significant advantages that ties directly to our capital allocation priorities. Now I'll turn the call over to our CFO Daniel McHenry, for an operating and financial overview. Daniel?