Group 1 Automotive, Inc.

Good morning, ladies and gentlemen. Welcome to the Group 1 Automotive Second Quarter 2025 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, Nick. 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 at 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 market, successful integration of acquisitions, and adverse developments in the global economy in 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 McKendry, our Senior Vice President and Chief Financial Officer. I'd now like to hand the call over to Darrell.

Good morning, everyone. Our U.S. performance was excellent in the second quarter, and our UK team is navigating the integration of operations while growing our business in a challenging UK market backdrop. Our adjusted net income from continuing operations improved .4% in the quarter, and EPS improved .5% on the same basis. Starting with our U.S. business, new car sales were up 6% on a same store basis outpacing the industry. Our PRUs held up versus the second quarter of 2024, and they were up $211 sequentially. Our inventories were flat versus the quarter and down nearly 15% compared to the end of 2024, and day supply is healthy at 48 days. Our used car volumes were up nearly 4% year over year, and gross profits were up $29. Our F&I performance in the quarter was very solid as well, up $90 per unit. And our after sales business is an area we continue to invest in and believe still has a great deal of opportunity. In the quarter, our after sales gross profit was up 14.3%. Customer pay revenue was up 13.6%, and warranty up 31.9%. While we certainly benefited from an easier comp versus the June 2024 CDK event, our after sales business was strong throughout the quarter. Our May quarter to date performance saw CP revenues up .2% and warranty up 28.7%. And we saw an 8% increase in same store RO count for the quarter. And we continue to believe that the potential of the after sales business warrants additional investment. And we've continued forward on this front. Our flexible scheduling, all day Saturday focus, improving technician productivity, give us significant physical capacity to increase after sales business in our existing dealerships. And by the end of 2025, 90% of all group one technicians in the US will work in an air conditioned shop. It's a boost to productivity, employee retention, and technician safety. We're also evaluating our collision footprint and repurposing capacity as that segment of the industry continues to decline. Lastly, we increased our technician head count by 6% in the US on a same store basis. And we've continued our branding efforts in the US. A number of our dealerships will be rebranded with a group one name. This project, when 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 rebranding from our UK business where all of our dealerships are already branded with the group one name. There remains movement in the new administration's policies and uncertainty for US trade partners, automotive retailers, OEMs, and consumers. And we continue to see demand across all lines of service and are focused on remaining operationally agile. However, we are being somewhat cautious moving forward. Expectations remain that new and used vehicle GPUs could elevate a bit as inventories tighten from imposed tariffs. We have deferred certain 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. That being said, we are taking advantage of our strengths during this time. By refocusing our efforts on improving productivity, we recognize our consumers are under pressure from car prices and other costs which have outpaced wage growth and higher interest, virtually double the rates we saw just a few years back. And I'll speak more on these efforts shortly. Now shifting to our UK business. The UK business was managed well compared to the broader market which continues to face macroeconomic challenges such as weak economic growth and inflation levels exceeding the Bank of England expectations. We recognize that our customers in the UK share many of the same adverse economic impacts as our US customers. There's also a drag on gross profits due to the BEV mandates in the UK. However, the UK government did announce subsidies of up to 3750 pounds on BEV vehicles. This is a great first step. In terms of our costs in the UK, without the benefit of a plate change in the second quarter, our SG&A percentage of gross rose to 84.3%. We also absorbed some new government required costs for insurance and wages. And we continue to work on our cost structure in the UK. And Daniel McHenry will have more to discuss on this topic. We're seeing the benefits of continued progress on our process alignment in the UK and cost reductions. We performed well in used vehicle volumes. And we also added 8% more technicians driving a customer pay increase of nearly 8% in our UK business. And our F&I PRU in the UK was up 27% in the quarter. This quarter, we also marked a major milestone with the opening of our new UK headquarters in Milton Keynes. Centrally located with strong transport links and proximity to key OEM partners like Mercedes-Benz and the Volkswagen Group, the site reflects our deep commitment to the UK market, our employees, and our manufacturer partners. I'm incredibly proud of the work our UK team has done. And we're confident Group 1 UK is well positioned for long-term growth as a leading force in the UK motor trade. Now shifting to capital allocation. We acquired three dealerships in the quarter, further strengthening our partnership with Mercedes-Benz, Lexus, and Acura. These dealerships expand existing footprints in Austin, Texas, and Fort Myers, Florida, adding more scale on these proven markets consistent with our cluster strategy. And we're consistently balancing acquisitions and dispositions with repurchasing our shares. In the first half of 2025, we bought back 3% of the company for $167.3 million. And we will continue to optimize our portfolios in the US and the UK. Since the beginning of 2023, we've bought assets generating $5.4 billion in annual revenue and disposed of assets generating $1.3 billion in revenue. We will continue to be acquisitive, but we are also being very disciplined in valuing acquisitions, engaging only in deals that we feel provide long-term value for Group 1 shareholders. And let me close with a word about the future. Our belief is that in the future, those retailers who can drive scale, productivity, and lower costs per transaction will be the winners. Our customers can no longer simply absorb higher pricing and in turn, that will create margin pressure. We're committed to lowering our transaction costs for productivity gains by increasing our use of technology, first-party data, and process improvements throughout our enterprise. We're making investments in technology to improve our customer experience and drive industry-leading productivity. We believe artificial intelligence has the capability to improve our business, including elevating the customer experience within the sales and service processes, utilizing robotics to automate operational functions, transaction processing, and analysis. With AI, we can connect with and interact with our customers anytime they want to do business. We're testing some very exciting things which will help us elevate the customer experience at Group 1. And now I'd like to turn the call over to our CFO, Daniel McHenry, for an operating and financial overview.

Thank you, Darrell, and good morning, everyone. In the second quarter of 2025, Group 1 Automotive reported quarterly record revenues of $5.7 billion, quarterly record gross profit of $936 million, adjusted net income of $149.6 million, and quarterly adjusted diluted earnings per share from continuing operations of $11.52. Starting with our U.S. operations, revenue growth on an as-reported and same-store basis occurred across all lines of business over the comparable prior year quarter. Notably, parts and service revenues reached a quarterly high, increasing $11.7 and $12.8 on an as-reported and same-store basis, respectively. Over the prior year comparable quarter, and F&I revenues reached a quarterly high of $199 million. We experienced higher new vehicle units sold in an as-reported and same-store basis of 4.6 and 6% respectively over the comparable prior year quarter. This reflects the resiliency of demand and our operational execution and the value generated from the ability to drive incremental volume through our dealership acquisitions. At the same time volumes increased, we saw prices increase by .5% and 1% on a reported and same-store basis, coupled with a slight decline in GPUs of 0.3 and .9% respectively. The higher volume more than offset the lower GPUs and contributed to an as-reported and same-store gross profit increases of 4.3 and 5% respectively versus the prior year comparable period. Used vehicle revenues were the third highest quarter on record and volume in the second quarter was 11 vehicles shy of the quarterly record, growing 2.7 and .9% on an as-reported and same-store basis versus the prior year comparable period respectively. GPUs were also up, increasing $25 and $29 on an as-reported and same-store basis. Our processes, discipline, and use of technology with pricing of used vehicles helped create this gross profit growth while driving volume against higher prices versus the prior year comparable period. Our second quarter F&I GPUs of $2,465 was just $3 off the quarterly record high and is up $104 and $90 on an as-reported and same-store basis versus the prior year comparable period respectively. Our performance by our F&I professionals has been outstanding to maintain GPU discipline and drive product penetration. Shifting gears to after sales. After sales revenues had double-digit increases of 11.7 and 12.8 on an as-reported and same-store basis respectively. These revenue increases coupled by slight margin increases generated growth in gross profit of 13.1 and 14.3 on a reported and same-store basis respectively. Same-store customer pay and warranty revenues comprised of .2% of same-store after sales revenues. For the second quarter versus 69.1 for the prior comparable quarter. Customer pay dollars per euro increased .4% over the prior year reflecting the aging US car park and increasing prices partly due to higher prices from tariffs. Warranty work is up for Toyota, BMW and Honda. Warranty work continues to increase due to the number of new vehicles sold in recent years requiring warranty service and an increase in the warranty recall campaigns by manufacturers. Recent examples include the Tundra and GM engine recalls. Ford recently announced a recall of up to 850,000 vehicles. Wrapping up the US that shift to SG&A. US suggested SG&A as a percent of gross profit decreased by 265 basis points sequentially to 64.2%. We are seeing the benefits of our refocusing efforts on operational efficiency and resource management to bring these metrics in line with recent historical levels. Turning to the UK. Acquisition activity led to a .9% and .6% increase in -over-year in revenues and gross profit respectively. We are pleased with double digit growth in gross profit on the same store basis with used vehicles, parts and service and F&I growing 16%, 12% and .7% respectively. Same store retail used vehicle units sold increased over 8% -over-year while GPUs remained relatively flat. Same store wholesale losses per unit improved to $414 from $842 compared to the prior year quarter respectively. After sales is continuing on a positive growth path with a .4% increase in same store revenues on a constant currency basis and almost 6% increase in same store gross profit on a constant currency basis over the prior year quarter. Same store adjusted SG&A as a percent of gross profit increased 216 basis points versus the prior year quarter. However, on a -to-date basis adjusted SG&A as a percent of gross profit with 78.6%, an increase of only 70 basis points. Reported adjusted SG&A as a percent of gross profit with 84.3%. However, on a -to-date basis adjusted SG&A as a percent of gross profit with 81%, near the 80% expectation we believe achievable. Effective April 2025, the UK government increased the national minimum wage for employees and national insurance for employers. This increase resulted in approximately 4 million of additional costs in the second quarter, our .9% in additional SG&A as a percent of gross profit. To date, we have removed approximately 800 headcount from the UK business, lowering our overall costs and reducing the exposure to these government imposed increases. We will continue to focus on cost control and business process efficiency as we execute our business integration activities in order to offset some of these increases in employee compensation. We incurred 7.6 million of restructuring costs in quarter to 2025 in relation to our ongoing UAK restructuring plan. Turning to our balance sheet and liquidity, our strong balance sheet, cash flow generation and leverage position will continue to support flexible capital allocation approach. As of June 30th, our liquidity of 1.1 billion was comprised of accessible cash of 374 million and 739 million available to borrow on our acquisition line. Our rent adjusted leverage ratio is defined by our US syndicated credit facility was 2.72 times at the end of June. Cash flow generation through the second quarter of 2025 yielded 350 million of adjusted operating cash flow and 267 million of free cash flow after backing out 83 million of capital expenditure. This capital was deployed in the quarter through a combination of acquisitions, share repurchases and dividends, including the acquisition of 330 million in revenues, 45 million repurchasing approximately 115,000 shares at an average price of $387.39 and 6.5 million in dividends to our shareholder. As of June 30th, approximately 60% of our 5.2 billion in floor plan and other debt was fixed resulting in an annual EPS impact of $1.31 for every 100 basis points increase in secured overnight funding rate. For detail regarding our financial condition, please refer to the schedules of additional information in our news release as well as our investor presentation posted on our website. I will now turn the call over to the operator to begin the Q&A section. Operator.

I will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We ask that you please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. And your first question today will come from Rajat Gupta with JPMorgan. Please go ahead.

Great. Thanks for taking the questions and good results. I had one question on the new card GPUs. Pretty strong pickup sequentially here in the quarter. Could you give us a sense of how those GPUs progressed through the course of the quarter? How was April, May, June? Before averaging out to the 3665 that you reported for the quarter. I have a quick follow-up.

We can get you a little more detail on that after, but they were fairly strong all quarter. We didn't see a spike due to necessarily any change in inventories or any change in manufacturer incentives support or anything like that. So they stayed fairly strong through the quarter.

Understood. I just had a couple of clarifications on the UK. It looks like you took up your cost out target there from 22 pounds to 27 pounds for the four-year, just comparing the two slide decks. Could you, is that primarily to offset some of the government in those gross increases or are there other changes you're making just in light of just the weak macro backdrop there? And just one more quick follow-up on UK.

Rajat, it's Daniel here. We expanded, I guess, some of our headcount reduction. The headcount reduction now today is looking at circa 800 people. That's higher than we initially projected. A couple of reasons for that is that we have decided to close a couple of additional stores that are very close to other stores of the same brand that we have.

Got it.

Rajat,

this is

Darryl. I just confirmed on the new car PRU in the US. There wasn't any spike between the months. It was fairly even. April was actually pretty good, but May and June held up very well, so pretty flat through the quarter.

Understood. Thanks for clarifying that quickly. And lastly, just on the parts and services business in the UK, pretty strong constant currency growth there, 6%. Given the productivity improvements, you're starting to see an inch cave. Any color you can give us as to the expected run rate here on that into the second half, maybe early next year, if this is a sustainable number, could it accelerate further? Any color there would be helpful. Thank you.

We believe there's more room to run in the quarter. We added 8% more technicians to our technician base. And the increase that we saw in after sales, there was actually a decline in warranty in the quarter in the UK. That was more than offset by a higher increase in CP of 8%. We do have opportunity to increase our customer count, Rajat. There's a lot of that increase that we saw was per RO dollars. And so what we are focused on is trying to drive more car count, especially since we have 8% more technicians to be able to accommodate it.

And your next question today will come from Daniela Hagan with Morgan Stanley. Please go ahead.

Hi, good morning. So parts and service tends to be a ballast for group one. You see continued strength, customer pay, margins up, technician head counts up. But thinking out the next one to three years or so, what are the key puts and takes to think about the top line? You have on one hand vehicle unaffordability weighing on SAR, which can increase mileage, create demand for reconditioning, but it also may limit the origination of newer cars that tend to have that stickiness on the service side. So what are the critical vintages to look out for and how can group one navigate that period of turbulent?

A key to growth in the next three years and after sales, Daniela, in the US specifically, is us reaching deeper into the owner base in terms of people who have owned their cars longer. And we have to be able to increase our share of that market. So call it four plus years of ownership. And we need to be able to reach into that market deeper, penetrate it deeper, increase our penetration there, increase our spend there. Ways to do that are we're looking at our make sure our labor rates are attractive to that customer segment. It's a sensitive customer segment pricing. So we have to make sure that we're attractive. We have to make sure that we're not overpriced for what they're looking for. And then also the restructuring of our marketing at group one to where we're now using first party data. We know more about those customers than we ever have. And so our focus and I think success moving into the years ahead is going to be how do we reach out to those customers who've owned their cars longer than three years. And that's what we're putting a lot of focus on right now.

Daniela, just to add to what Daryl says, is the average car coming into our store a 2022 vehicle versus a 2019 vehicle, which is the average age, average model age of a car within our store. It's over a third higher, the average RO value that we get from that vehicle. So it's vitally important that we keep those within our ecosystem.

Got it. Makes sense. Second question is around the used business. A large online only retailer growing volumes 50% year over year in the market. They're pushing for a three million used car sold annually in the next five to ten years. I know it's an incredibly fragmented market. How do you view the competition from the likes of these online pure play retailers? And is there a greater opportunity to grow and consolidate in the used business?

There's probably opportunity to consolidate. Yes, agreed. We try to learn from those online retailers. They're great competitors, especially in the shopping process. And those are things that we pay attention to and try to learn from. We feel like, at least today, we still have tremendous opportunity to grow our used business inside our footprint of our stores today, especially as used car sales become more digital. And they're as digital as any part of our business today. So we feel like we can still grow inside of our footprint. We have grown. If you were to look at our used to new ratio five years ago, it was much less than it is today. And we've improved our used car performance, but there's still room to run. And I think you're right. I think those digital retailers are proving that.

And your next question today will come from Federico Morendi with Bank of America. Please go ahead.

Good morning, guys. So we've heard that OEMs for model year 26 may take some of the features that in the prior model year were basically standard and put them as optional. So basically, there would be a higher price to get the same features of last year vehicle. What have you seen on your order sheet so far?

Federico, this is Darryl Kenningham. They're just announcing the 26th contenting and pricing. And some are still waiting to see what happens with the tariffs. I mean, the Japan announcement this week. And there's still not enough specifics around it, I don't think, for the OEMs to make pricing decisions. And then Europe is supposed to be finalized very soon. We don't. What we believe will happen, and I think this will absolutely happen, is you will see OEMs play with trim levels, contenting, repricing price walks between grades, things like that to optimize margins and reduce the impact of the tariffs. So what you stated in your question, I think, is absolutely true. And I think that will happen. And then standard equipment may become optional in the future in order to keep the base car more competitively priced.

Thank you, Darryl. And my follow-up would be on parts and service. So you did a great job to increase your ad count. I was wondering, for every 1% of incremental ad count, what's the translation into earnings or like gross profit for every technician that you add to your ad count, basically?

Well, we can get you some more detail around it, but generally, group one, how we look at a technician, they're worth about $15,000 in gross profit per month, average, across our brands. Some brands it's more, some brands it's less. But when we can put a technician in a stall and have them work for a month, that's like another $15,000 in gross profit. And that's how we kind of look at our costs. We look at the cost of not having a technician rather than the cost of what it costs to acquire a technician. So, and Daniel can give you some more depth on that later today, if you like.

And your next question today will come from Michael Ward with City Research. Please go ahead. Thanks very much. Good morning, everyone.

Good morning, Mike. How does the, how do the BED mandates in the UK affect your gross? What happens there?

A lot of the BEV volume, Mike, is going into corporate fleets. If you were to look at the retail mix of the BEV mix and just the straight retail consumer, it's like 10, 11% of the mix. If you look at it in the corporate fleets, it's much higher than that. And it blends out at like 26% today. And when we sell cars to the corporate fleets, we still make positive margin on it, but it's less than what we make at retail. And so as long as there's all that, it's kind of like in the US when they're, you know, they're putting a lot of BEVs in rental car service right now, it's similar, similar. So it's just corporate fleets there and it drives the margin down as a result.

Okay. You made a few more acquisitions in 2Q. What is the environment like out there? Are there big lumpy acquisitions out there? I mean, the Herb Chamber is one that Asbury took was a big chunk. Are there any big acquisition opportunities out there, do you think, or is it any more tuck-ins that we're seeing?

Well, I think as a general statement, I think there will be in the next few years, there will be larger ones. Interesting. And up to right now, the year has been fairly quiet because of the uncertainty. It feels like in the last couple of weeks, there's a little more activity. We're starting to see some more inbound here, I mean, literally in the last few days. So we'll see if that is a blip or a harbinger of it getting more active. We'll see. I'm not sure yet.

Your next question today will come from Jeff Lick with Stevens, Inc. Please go ahead.

Good morning, guys. Congrats on a great quarter again. So I was just kind of curious. This quarter, the metrics were a little more variable if you tried to predict all these. If you look at new growth, new units, service and parts used, I'm just kind of curious, which ones surprised you the most? And as we look into Q3 and Q4, which ones are sustainable and kind of predictive for our models and which ones might tail off?

Well, I wouldn't... We were really pleased with the after sales performance in both markets. I cannot tell you that we would expect to maintain what was a 13% customer pay growth on an ongoing basis. Generally, we plan for mid-single digits, maybe high mid-single digits on that. So I wouldn't lean on the current after sales growth like it is. And when you look at the warranty numbers, they won't be 31% in the quarters ahead, I don't think. It might be great if they are, but I wouldn't plan on

it.

I think there's resilience in the... And I'll ask Pete to comment on this, especially on news cards and F&I, but on the new car side, I think there's resilience in the new car margin, Jeff. It's held up now for a year and doesn't seem to be weakening. And the day supply in total anyway is still reasonable, and the OEMs seem to be managing that well. And Pete may have some comments on F&I and news cards in terms of...

Jeff, I think that I wouldn't say that we were surprised. We've got our processes in place, the team is in place, and I think we've executed on the strategy that we've laid out to you over the last few years. So the demand is still there for use. Acquisition is very difficult. We ended the quarter with a 31-day supply, so we were consistent there. And then I think if you look at the F&I, whether it's the revenue that we're getting from the finance piece of the business, along with our increased margins, or increased percentages on product, it turned out to be a great quarter for us. So I think there's still demand out there for use and facilitation of finance and insurance.

Roger, this time, you're the only thing I would add to -G&A. In the UK in particular, there wasn't a plate change month this quarter, so I'd expect that &G&A's percent of growth to come down slightly in quarter three versus quarter two, just because of that additional growth.

And then just a quick follow-up. The lease return issue, obviously this year, down below a million, it looks like they're down 30%, 40% year over year. That should flip depending on what the buyout turn-in rate is next year, but it's going to be up. That should

be a good source of traffic. I don't think we're really focused on 2026 that much, given what's going on in 2025. But if you could just speak to how you guys think the lease turn-in issue, how that plays out, and what effect

it has in 2026. I think it's going to be very – Jeff, this is Pete. It's difficult to forecast that because you don't know what the equity situation is going to look like next year. And it could be very good on especially the ICE vehicles. I think the wild card in that is what the BEV lease returns look like. But with the situation with acquisition and availability, we are taking as many off-lease vehicles as possible, and I think that will continue through next year, depending on pricing.

And your next question today will come from David Whiston with Morningstar. Please go ahead.

Thanks. Good morning. I was just curious on the vestiture of those two UK Mercedes stores. Is that more of a geographic reason, a factory reason, or are you not happy with Mercedes prospects in the UK going forward?

We're very happy with Mercedes-Benz in the UK. We're the largest Mercedes retailer in the UK, and we're happy about that. And we have a terrific relationship with the OEM. There was some – in those two cases, those stores were closer to other stores that we owned and just in partnership with the OEM. We closed those, consolidated them into another point. So no dissatisfaction whatsoever from us, from Mercedes-Benz or their agency model. Daniel may have something.

Yeah, you know, the one store in particular was only seven miles away from another one of our stores, and we're actually going to redevelop that store into a larger store in the coming future. So we see some cost-benefit from that, and we don't expect to lose any of our customer base.

Okay, and just curious if your Toyota inventory is abnormally too low given any reluctance by them to export vehicles from Japan right now?

Well, it's low, and basically what we have is Tacomas and Tundras. Would we like a little more? Yeah, we probably would, but we're okay with tight supply at Toyota. That's for sure.

And your next question today will come from Ron Fuzica with Guggenheim Securities. Please go ahead.

Yeah, good morning, team. Yeah, nice quarter, and thanks for taking my question. On the UK SG&A piece, Daniel, I think you mentioned four million of higher costs related to required national insurance contribution changes. Was there anything else noteworthy this quarter? Because I know you've kind of had this ongoing integration effort post-Inchcape and cost savings underway, but dollars were up more than that four million sequentially despite lower gross profits.

You know, when I look at the dollars, I think some of it is January and February is generally a lower cost base. It's kind of more even in quarter two. You know, the expectation always was that we would be slightly above 80 percent. SG&A is a percent of gross on the basis, on an annualized basis. We expected it to be closer to 80, but there's nothing really unusual in there apart from the increases in national insurance and national minimum wage.

Okay, I know that's super helpful. And then on parts and service slack, just kind of if warranty slows, and I understand there are probably structural tailwinds for warranty going forward, but in the event warranty work slows, just trying to stress test our model, are you confident there's kind of enough built up demand from customer pay to offset if there is a slowdown in warranty work or how should we think about the two? I'm just not sure if you're wall to wall in your service departments right now or how to think about that.

You know, I don't think we can cover 31 percent increase in warranty with CP, but we think there's still room to improve CP. And as we look back on prior quarters where warranty was lower, you know, we were able to deliver CP growth there as well. So, you know, I can't tell you it'd be dollar for dollar, but we certainly think there's room there. And we generally feel like, you know, capacity is the key to driving after sales growth.

And your next question today will come from Brett Jordan with Jeffreys. Please go ahead.

Hey, good morning, guys. On GPU, I guess you saw a $29 lift in comp. Does that, was that pulled forward or was there demand surge around liberation day or do you see is GPUs sort of able to stable or expand from here?

I think, Brett, you know, if you take a look at our trend, it's been pretty consistent on the used and I would expect that to continue. You know, it's in the used business, it's all about the acquisition and our team has done a spectacular job of navigating, whether it's trades, auction purchases or outside purchases. So I think it gets from a gross profit standpoint, it's been pretty consistent over the last year.

OK, and then I guess parts and service, can you sort of carve out how much was the benefit of CDK? You know, sort of obviously late in the quarter last year, there was very little parts and service.

You know, for us as a company, I think whenever we made our earnings call last year, we said that the effect of the CDK for parts and service specifically was about $12 million in terms of our pre-tax income. So I would run that kind of estimate, Brett. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines and have a great day.