Group 1 Automotive, Inc.

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's fourth quarter and full year 2024 financial results conference call. Please be advised that this call is being recorded. I would now like to turn the call over to Mr. Pete DeLongshaw, Group 1's Senior Vice President, Manufacturer Relations and Financial Services. Please go ahead, Mr. DeLongshaw.

Thank you, Betsy. 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 that we will refer to on the call this morning for comparison purposes have been posted to the 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, condition of markets, successful integration of acquisitions, 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 Security 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. Our US team delivered outstanding results in the fourth quarter and our UK team has been hard at work integrating the operations of our growing UK footprint. I'll start with an update on the integration of our UK business and the broader UK market dynamics. We continue to be pleased with the acquisition of Inchcape's retail dealerships. I believe we're better positioned in the UK market than we've been at any point in our history. We're poised to capitalize on the additional scale, geographic diversification, and an outstanding brand portfolio. Integrating 54 stores and two corporate organizations has been a huge effort. We carried some incremental SG&A through the fourth quarter in the UK, and we've completed many of the difficult tasks and expect others will finalize in the first quarter and throughout 2025. And as always, based on business conditions, we will continue to refine and adjust as needed on a real-time basis. Our integration work included the initiation of the UK-wide restructuring plan. This plan consists of workforce realignment, strategic closing of certain facilities, systems integrations, and other efforts. Our systems integration included a conversion of the legacy EngCape dealer management system to our existing UK DMS. The in-store portion of the conversion did disrupt our operations for a period of time while being completed. It impacted results for those acquired stores. We've installed a leadership team steeped in the UK motor trade and are extremely focused on performance. We've made a number of process changes to focus on just that. A couple of examples. In the Inchcape retail stores, technician productivity was significantly behind our legacy Group 1 stores. So we modified compensation plans to focus and reward throughput. We moved decision-making on many day-to-day activities from the corporate office to the Inchcape stores. Examples include used car acquisition, pricing, and valuation, shop equipment procurement, and technician hiring. This will allow the Inchcape retail stores to be more nimble and responsive to the marketplace, an absolute must in today's UK environment. Now, we certainly have guidelines, technology, and training in place to help them with that transition. Turning to the broader UK market, we continue to see a challenged macroeconomic backdrop. Government-imposed zero-emissions vehicle mandates have proven difficult to achieve. and are expected to further challenge new vehicle sales in 2025. The overall market fell short of the 2024 mandated goal of 22% BEV mix. The market will need to see a further shift toward EVs in order to achieve 2025's target of 28%. And currently, lower margin fleet sales in the UK account for a majority of EV sales. Because of our size now in the UK, we've been able to significantly strengthen our presence with great brands like BMW, Volkswagen, Audi, Porsche, Mercedes-Benz, Toyota, Land Rover, and Ford. A close relationship with those OEM partners based on performance and commitment is critical to our growth focus and ability to overcome the broader UK market challenges. While we're not pleased with our UK results in the quarter, we are confident that the leadership, process, and integration actions that we've taken will result in improved performance in the year ahead. Now turning to our U.S. business. We saw record new vehicle units sold and a sequential improvement in PRU. New vehicle volumes outpaced the industry and same store use volumes were up 5% in a quarter that is traditionally new car focused. Our F&I business performed well in the quarter, up $109 PRU as new vehicle finance penetration improved. Used vehicle finance penetration held steady, and combined with improved product penetrations, that resulted in a $27 increase in UV PRU, a positive change from previous trends. Parts and service revenues reached a record for the quarter, with same-store growth of nearly 9% and customer pay same-store growth up more than 8%. We also saw a nice increase in customer counts in the quarter. We continue to view after sales as a differentiator at Group 1. We believe it is the most underinvested area of our business, and adding human capacity is the critical leverage in performance. In 2024, we increased our technician headcount on a same store basis by 7% in the U.S. And due to our creative scheduling and productivity, we have plenty of physical capacity to continue adding technicians well into the future. We will continue to invest in after sales. An example is our capital program to install air conditioning in nearly all of our U.S. shops, and it's on track to be completed by the end of 2025. As we've previously discussed, shops with air conditioning have much higher technician retention. Now shifting to capital allocation. Properly allocating capital will always be our highest priority. While we regularly evaluate other business adjacencies, in this environment, we believe staying focused on the new vehicle retail franchise business is the best use of our shareholders' capital. Part of that is certainly the return profile, but part of it is also being a great partner to our most important partners, the OEMs. They need their networks more than ever, and in turn, we need them more than ever. So we don't compete with them, and we intensely focus on driving performance metrics that determine acquisition eligibility, such as sales effectiveness and customer retention. As a result, our approvability is quite strong across nearly all of our OEMs. That allows us to engage in acquisition discussions on nearly any brand with the confidence that we will be approved. The diversity of acquisitions in 2024 with brands like Lexus, Honda, Mercedes, BMW, Toyota, Porsche, Land Rover, and Audi are all examples of our ability to acquire outstanding brands in desirable markets because we perform well on the OEM eligibility metrics. And we will continue to balance acquisitions, dispositions with repurchasing our shares. In 2024, while we grew the company 24% due primarily to acquisitions, over the past three years, we've repurchased 25% of our stock. And we will continue to focus on balancing those capital opportunities. Lastly, a few thoughts on the evolving U.S. landscape. There's a great deal of conjecture at the moment about Washington and the impact the new administration's policies will have on retailers and OEMs. While we don't know the outcome of the impact on changes in things like EV subsidies, taxes, tariffs, or interest rates, we feel the best way to capitalize is to ensure that Group 1 stays nimble and focused on execution. We have to be ready to compete on whatever playing field exists with whatever set of variables were presented. Over the past several years, I believe Group 1 has demonstrated the agility and flexibility that will allow us to win in any competitive environment. Now I'll turn the call over to our CFO, Daniel McHenry, for an operating and financial overview.