Group 1 Automotive, Inc.

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's first quarter 2025 financial results conference call. Please be advised that this call has been recorded. I would now like to turn the call over to Mr. Pete Dulong-Shaw, Group 1's Senior Vice President, Manufacturers Relations and Financial Services. Please go ahead, Mr. Dulong-Shaw.

Okay, and thank you, Jacob, 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 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, conditions 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 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. Okay, so now I'll hand the call over to Darrell.

Thank you, Pete. Good morning, everyone. Thanks to our teams in the UK and the US, we were pleased with our performance in the first quarter. Let me start with our UK business. Our UK business is on a good track. In the first quarter, the UK market overall was up 6.4%, while the retail or private market was up 9.5%. Group 1 delivered record UK results in the first quarter, achieving our internal profit and cost targets. We're extremely pleased with the integration of our acquisitions in the UK, which has substantially grown our market presence there. We're back to pre-acquisition levels on SG&A as a percentage of gross profit and on track to take out 10% of our headcount and save north of 30 million pounds this year, most of it in the first half. In addition, we are aligning our business processes across our entire UK platform, including our used car pricing and acquisition processes, technician recruiting and compensation plans, customer contact centers, and finance and insurance products. Our team remains focused on managing our legacy business operations and our same-store SG&A leverage trended down year over year. We delivered improvement across many key financial and operating metrics. Record new and used vehicle volumes helped offset moderating new and used vehicle GPUs on a same store basis. Our used vehicle management has improved with better vehicle aging and significantly lower same store wholesale losses year over year. Technician productivity has improved and our total gross margins have expanded. We will continue to optimize our UK business. Thanks to our strong OEM engagement and acquisition approvability, in the quarter we added three Toyota and one Lexus dealership. At the same time, we undertook the strategic closure of eight standalone used vehicle sites and three less accretive franchise sites. This strategy mirrors the approach taken in the U.S. over the past two years, improving our performance and performance we believe, leading to higher shareholder returns. Now turning to our U.S. business. Our U.S. team managed the business very well in the first quarter. New and used vehicles and revenues sold were up on an as-reported and same-store basis. F&I performance performed well in the quarter, up $98 on a same-store basis. As used vehicle finance, vehicle service contract, and other product penetrations improved. We continue to view after sales as a differentiator at Group 1, and we were pleased with our performance in the quarter. Customer pay was up over 6% to go along with a nearly 30% increase in warranty revenue. We continue to believe that after sales is the most under-invested area of our business. By the end of the year, we will be nearly finished with our workshop air conditioning project, having invested over $25 million in our technicians. We are converting some of our collision footprint into traditional service operations, expecting to increase capacity where needed for the higher margin service business. Adding human capacity is a critical leverage point in driving continued performance growth. We ended the first quarter of 2025 with our U.S. technician headcount nearly 8% higher than the year-ago period. Given our flexible scheduling, all-day Saturday focus, and improving technician productivity, we still have significant capacity in our existing dealerships to increase our after-sales business, and we look to be even more aggressive in the future. In the U.S., in the first quarter, we didn't leverage SG&A as well as we could have. We had some creep in January and February in the variable part of our business, specifically compensation and outside services. As a result, we put some focus on it and saw some improvement in March, continuing to monitor it, and we'll take additional steps as needed. In the fourth quarter, we also kicked off a branding effort in the U.S. We're in a number of our dealerships. will be rebranded with a Group 1 name. This project, combined with our integrated marketing and customer data efforts, will open opportunities across our footprint. It's important to note that we continue to believe that the retail automotive business is a local business, and that's where we'll put our emphasis. We've learned a great deal about this model from our UK business, where all of our dealerships are already branded with a Group 1 name. Lastly, a few thoughts on the evolving US landscape and broader global backdrop. There's a great deal of conjecture about Washington and the impact the new administration's policies have on our trading partners, automotive retailers, OEMs, and consumers. That's an ever-moving target. In our view, the best way to capitalize on these changes is to ensure that Group 1 stays nimble and focused on execution. We continue to see demand across all lines of service. However, we are being cautious moving forward. Expectations are that new and used vehicle GPUs could remain elevated as inventories tighten from imposed tariffs. We have deferred some capital expenditure projects and have reevaluated some discretionary spending. We also have contingency plans in place Should we see a marked change in the competitive environment? Now shifting to capital allocation. We continue to balance acquisitions and dispositions with repurchasing our shares. In the first quarter of 2025, we acquired $100 million of revenues and bought back another 2% of the company for $122.8 million. At current valuation levels, we believe buying back stock at every opportunity makes sense, especially given our liquidity position. And we will continue to optimize our portfolios in the U.S. and the U.K. Testament to that is that since the beginning of 2023, we've bought assets generating $5 billion in annual revenue and disposed of assets generating billion dollars in revenue. Properly allocating our shareholders' 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. We will continue to be acquisitive, but we are also being very measured in valuing acquisitions. engaging only in deals that we feel provide long-term value for Group 1 shareholders. And now I'll turn over the call to our CFO, Daniel McHenry, for an operating and financial overview.