Group 1 Automotive, Inc.

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's first quarter 2026 financial results conference call. Please be advised that this call is being recorded. I would now like to turn the floor over to Mr. Pete DeLongshaw, Group 1's Senior Vice President, Manufacturer Relations and Financial Services. Please go ahead, Mr. DeLongshaw.

Thank you, Jamie. 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 Provision of the Private Securities Litigation Reform Act of 1995. Four 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 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 gap 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, Chief Financial Officer. I'd now like to hand the call over to Darrell.

Thank you, Pete. At Group 1, we pride ourselves on performing effectively in challenging times. We've successfully navigated economic recessions, the COVID pandemic, and the CDK outage in 2024. We focus on what we can control, and by remaining a pure play retailer, we minimize distractions and remain focused on what we feel are our core competencies. We estimate that Q1 2026 weather impacted our results by about $7 million in gross profit, driven largely by our after sales business. Important to note, is that Group 1 typically pays our employees during weather closures. And in some markets, our stores were closed for as long as a week this year. In the first quarter of 2026, we continued to focus on our strengths. Where our performance did not meet our expectations, we acted promptly to address those issues. And I will provide further details on those areas later in my remarks. In the U.S., our new vehicle margins remained robust at over $3,300 per car, exceeding $3,250 for the third consecutive quarter. We saw sequential improvement in used vehicle PRUs and a $95 same-store year-over-year increase in adjusted F&I PRU. Three years ago, we introduced a virtual F&I process in our U.S. stores. giving customers the opportunity to conduct their transactions with a virtual agent. This innovation is now installed in one-third of our U.S. stores, doing 20% of our deals in those stores. We're very pleased with the results of Virtual F&I. Our PRU results are strong. Transaction times have improved, improving customer convenience and the overall experience. Thus far, customer feedback is very positive. In addition, compensation costs are lower than compared to our in-store transactions. We anticipate continued growth in virtual F&I through the remainder of this year and into 2027. In after sales, we're committed to setting ourselves apart. This quarter, we increased same-store customer pay gross profits by nearly 6%, and we're pleased In our U.S. business, our customer pay repair order count rose by 2.5%. Our growth in after sales is driven by marketing initiatives utilizing artificial intelligence, vertically integrated customer data management, decreased technician turnover, completion of our workshop air conditioning project, and the addition of 130 new technicians on a same store basis. Turning to a progress update on our Group 1 U.S. Store Rebranding Initiative. We successfully completed the rebranding of half of our U.S. stores and anticipate being complete by the end of the year. Our team is actively gathering insights from each converted market, allowing us to refine our approach and apply our learning as we go. In the long term, we believe rebranding will improve the effectiveness of our marketing investments and drive greater customer retention. particularly as we focus on engaging households under the Group 1 brand, especially in cluster markets. Our UK operation is demonstrating notable progress across key segments. New vehicle margins remain steady year-over-year, while same-store volumes increased 2 percent. Same-store use volumes rose nearly 5 percent, accompanied by sequential PRU improvements. F&I continued its positive trajectory, up year over year and sequentially on a same-store constant currency basis. Our UK parts and service business continues to accelerate, increasing 20% year over year in same-store gross profit, and customer pay increased 18%. We're applying many of the same principles we use in our US business, opening our workshop schedules, expanding our hours, pricing our maintenance offerings on the aftermarket competition, eliminating diagnosis fees, and increasing capacity by hiring technicians. Turning to our UK SG&A performance, we incurred $3 million in incremental costs due to government-mandated national insurance and minimum wage increases. Without this headwind, we improved our leverage, but we continue to focus on further efficiency there. In the US, SG&A performance did not meet our expectations. Currently, consequently, in early April, we implemented cost reduction measures in our US business, cutting our headcount by nearly 700 full-time employees and reducing SG&A costs by approximately $14 million through contract and vendor elimination. We expect that these efforts will remove $50 million of annual costs from our U.S. operations that will return our SG&A leverage to a more acceptable level. In both markets across all areas of our business, we continue to look for ways to leverage technology, including artificial intelligence, to improve our returns. Many of these investments are still in the early stages, but they are beginning to demonstrate real benefits. AI can support customer acquisition and retention enhance inventory optimization through more informed sourcing decisions, drive efficiencies by digitizing processes to reduce SG&A, and put more consistency and performance across all of our rooftops, a key strategic focus for Group 1. We will continue to drive these efforts and look forward to sharing more details in the future. In the first quarter, we also continued our commitment to disciplined capital allocation. particularly in M&A and share buybacks. We divested two Mercedes-Benz dealerships in California. These stores were high-cost operations with significant real estate and operating constraints. In the UK, aligned with the Volkswagen Group's ideal network plan, we acquired one Skoda and two Volkswagen dealerships, while also disposing of one underperforming Volkswagen and one underperforming Skoda dealership. And in the UK, we finalized a framework agreement with Chinese OEM Geely and will open three Geely dealerships in Q2 in facilities that we already own. We are in additional discussions with Geely and other Chinese OEMs about further representation. Our primary intention is to develop direct understanding of the retail model of Chinese brands. We also believe there is significant profit and sales opportunity with these brands, in leveraging our large corporate fleet business in the UK. During the quarter, we repurchased 205,190 shares, or approximately 1.7% of our outstanding shares. We are managing the business with discipline and purpose, ensuring we deliver strong, resilient performance that our shareholders expect, even in today's dynamic environment. I'll now turn the call over to our CFO, Daniel McHenry.