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.