Group 1 Automotive(GPI) - 2024 Q1 - Quarterly Results

Q1 2024 Financial Performance Overview Financial Highlights Group 1 Automotive reported a record first-quarter revenue of $4.5 billion, an 8.2% increase year-over-year. Despite this growth, net income from continuing operations decreased by 7.2% to $147.4 million, and adjusted diluted EPS fell 13.2% to $9.49. The company achieved record quarterly revenues in its Parts and Service segment and its U.K. operations Financial Highlights | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $4.5 billion | $4.1 billion | +8.2% | | Net Income (Continuing Ops) | $147.4 million | $158.8 million | -7.2% | | Adjusted Net Income (Continuing Ops) | $130.0 million | $156.1 million | -16.7% | | Diluted EPS (Continuing Ops) | $10.76 | $11.12 | -3.2% | | Adjusted Diluted EPS (Continuing Ops) | $9.49 | $10.93 | -13.2% | - The company achieved several record results in the first quarter of 2024: - Total revenues reached a first-quarter record of $4.5 billion[7] - Parts and service revenues hit a quarterly record of $576.2 million[7] - U.K. total revenues also set a quarterly record at $824.8 million[7] Key Performance Metric (Consolidated YoY, in millions, except units) | Key Performance Metric (Consolidated YoY) | Q1 2024 | % Change | | :--- | :--- | :--- | | Total Gross Profit | $742.6M | +2.0% | | New Vehicle Units Sold | 44,302 | +11.7% | | New Vehicle GP per Unit | $3,601 | -23.5% | | Used Vehicle Retail Units Sold | 49,183 | +8.2% | | Used Vehicle Retail GP per Unit | $1,669 | -1.2% | | F&I Revenues | $188.9M | +14.4% | Management Commentary The CEO highlighted strong execution in the U.S., with double-digit growth in vehicle sales volume and a 16% increase in F&I. The U.K. operations rebounded from Q4 2023, achieving record revenues in parts, service, and new vehicles. The company is actively scaling through acquisitions and expects to realize full benefits from U.K. cost reduction efforts in Q2 and beyond, ahead of the planned Inchcape U.K. acquisition in Q3 2024 - U.S. Performance: Achieved double-digit volume growth in both new and used vehicle sales, with F&I growth exceeding 16% year-over-year[4] - U.K. Rebound: The U.K. team recovered from a challenging Q4 2023, producing record quarterly revenues from parts and service and new vehicles. Used vehicle sales volume increased over 19% sequentially[4] - Strategic Initiatives: The company is integrating nine dealership acquisitions from Q1 and anticipates realizing the full benefits of its U.K. cost reduction efforts from Q2 2024 onwards. The acquisition of Inchcape's U.K. retail business is planned for Q3 2024[4] Corporate Development and Capital Allocation Acquisitions and Dispositions In the first quarter of 2024, the company expanded its portfolio by acquiring dealership operations expected to generate approximately $1.0 billion in annual revenues. Concurrently, it divested six dealerships in Beaumont, Texas, which had about $260.0 million in annual revenues - Acquisitions: Acquired and integrated dealership operations with total expected annual revenues of approximately $1.0 billion during the first quarter[9] - Dispositions: Disposed of six dealerships in Beaumont, Texas, which generated approximately $260.0 million in annual revenues[10] Share Repurchases The company repurchased 203,350 shares for $53.8 million during the first quarter of 2024. Over the last 15 months, it has bought back 6.5% of its outstanding common shares. As of March 31, 2024, $89.6 million remains available under the current share repurchase authorization Share Repurchase Activity | Share Repurchase Activity | Value | | :--- | :--- | | Q1 2024 Shares Repurchased | 203,350 | | Q1 2024 Average Price per Share | $264.41 | | Q1 2024 Total Cost | $53.8 million | | Remaining Authorization (as of Mar 31, 2024) | $89.6 million | - From January 1, 2023, to March 31, 2024, the company repurchased 932,932 shares for a total of $226.5 million, representing about 6.5% of the common shares outstanding at the start of the period[11] Detailed Financial Statements Condensed Consolidated Statements of Operations For the first quarter of 2024, total revenues grew 8.2% to $4.47 billion, primarily driven by an 11.6% increase in new vehicle retail sales. However, gross profit grew only 2.0% as cost of sales increased at a faster rate (9.6%). Higher floorplan and other interest expenses contributed to a 7.2% decline in net income from continuing operations to $147.4 million Income Statement (in millions) | Income Statement (in millions) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $4,470.5 | $4,130.0 | +8.2% | | Gross Profit | $742.6 | $727.9 | +2.0% | | Income from Operations | $242.6 | $241.5 | +0.5% | | Net Income from Continuing Ops | $147.4 | $158.8 | -7.2% | | Diluted EPS from Continuing Ops | $10.76 | $11.12 | -3.2% | Selected Balance Sheet & Other Information As of March 31, 2024, total debt increased by 22.6% to $2.57 billion compared to year-end 2023, while inventories grew by 7.0% to $2.10 billion. The days' supply for new vehicles in the U.S. increased to 43 days from 27 a year ago, while in the U.K. it remained stable at 20 days. Toyota/Lexus remains the largest brand mix for new vehicle sales Selected Balance Sheet Items (in millions) | Selected Balance Sheet Items (in millions) | Mar 31, 2024 | Dec 31, 2023 | % Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $41.9 | $57.2 | -26.7% | | Inventories, net | $2,101.4 | $1,963.4 | +7.0% | | Total debt | $2,572.9 | $2,098.8 | +22.6% | | Total equity | $2,772.4 | $2,674.4 | +3.7% | - Geographic Mix (New Vehicle Units): The U.S. accounted for 79.8% of sales in Q1 2024, up from 77.9% in Q1 2023[26] - Brand Mix (New Vehicle Units): Toyota/Lexus increased its share to 25.4% from 22.1% YoY, while Volkswagen Group's share decreased to 13.8% from 17.7%[26] Days' Supply in Inventory | Days' Supply in Inventory | Mar 31, 2024 | Mar 31, 2023 | | :--- | :--- | :--- | | U.S. New Vehicle | 43 | 27 | | U.S. Used Vehicle | 26 | 25 | | U.K. New Vehicle | 20 | 19 | | U.K. Used Vehicle | 46 | 44 | Segment and Operational Performance Consolidated Operational Data On a consolidated basis, the company saw an 11.7% increase in new vehicle units sold and an 8.2% increase in used vehicle retail units. However, profitability per unit faced pressure, with new vehicle gross profit per unit (PRU) declining 23.5% to $3,601. This was partially offset by a 4.1% increase in Finance & Insurance (F&I) PRU to $2,020 Consolidated Operating Metric (YoY, in millions, except units) | Consolidated Operating Metric (YoY) | Q1 2024 | % Change | | :--- | :--- | :--- | | Total Revenues | $4,470.5M | +8.2% | | Total Gross Profit | $742.6M | +2.0% | | Retail New Vehicles Sold (Units) | 44,302 | +11.7% | | New Vehicle GP per Unit | $3,601 | -23.5% | | Retail Used Vehicles Sold (Units) | 49,183 | +8.2% | | Used Vehicle Retail GP per Unit | $1,669 | -1.2% | | F&I GP per Unit (PRU) | $2,020 | +4.1% | U.S. Segment Operational Data The U.S. segment delivered strong top-line growth, with total revenues up 9.1% to $3.6 billion, driven by a 14.4% increase in new vehicle unit sales. Total gross profit grew 3.5%. While new vehicle gross profit per unit fell by 25.2%, this was mitigated by growth in used vehicle and parts & service gross profit, along with a 3.6% increase in F&I PRU to $2,340 U.S. Operating Metric (YoY, in millions, except units) | U.S. Operating Metric (YoY) | Q1 2024 | % Change | | :--- | :--- | :--- | | Total Revenues | $3,645.7M | +9.1% | | Total Gross Profit | $639.1M | +3.5% | | Retail New Vehicles Sold (Units) | 35,341 | +14.4% | | New Vehicle GP per Unit | $3,731 | -25.2% | | Retail Used Vehicles Sold (Units) | 37,885 | +10.0% | | Used Vehicle Retail GP per Unit | $1,758 | +1.3% | | F&I GP per Unit (PRU) | $2,340 | +3.6% | U.K. Segment Operational Data The U.K. segment achieved record quarterly revenue of $824.8 million, a 4.7% increase year-over-year. However, total gross profit declined by 6.2% to $103.5 million. This was due to significant margin compression, with new vehicle gross profit per unit falling 17.0% and used vehicle retail gross profit per unit dropping 11.2%. SG&A as a percentage of gross profit also increased notably from 67.2% to 78.5% U.K. Operating Metric (YoY, in millions, except units) | U.K. Operating Metric (YoY) | Q1 2024 | % Change | | :--- | :--- | :--- | | Total Revenues | $824.8M | +4.7% | | Total Gross Profit | $103.5M | -6.2% | | Retail New Vehicles Sold (Units) | 8,961 | +2.2% | | New Vehicle GP per Unit | $3,085 | -17.0% | | Retail Used Vehicles Sold (Units) | 11,298 | +2.7% | | Used Vehicle Retail GP per Unit | $1,370 | -11.2% | | F&I GP per Unit (PRU) | $863 | -2.6% | Same-Store Operational Data On a same-store basis, which excludes the impact of recent acquisitions and dispositions, the company's performance reflects underlying market trends. While revenues grew across all regions, gross profit declined on a consolidated and U.K. basis due to significant pressure on new vehicle margins. The U.S. same-store gross profit remained flat Consolidated Same-Store Data Consolidated same-store revenues increased 4.6% to $4.2 billion, but total gross profit fell 1.1% to $695.6 million. The decline was driven by a 24.2% drop in new vehicle gross profit per unit, despite a 6.4% increase in units sold. SG&A expenses as a percentage of gross profit increased by 510 basis points to 68.6% Consolidated Same-Store Metric (YoY, in millions, except units) | Consolidated Same-Store Metric (YoY) | Q1 2024 | % Change | | :--- | :--- | :--- | | Total Revenues | $4,174.0M | +4.6% | | Total Gross Profit | $695.6M | -1.1% | | Retail New Vehicles Sold (Units) | 40,898 | +6.4% | | New Vehicle GP per Unit | $3,584 | -24.2% | | SG&A as % of Gross Profit | 68.6% | +5.1% | U.S. Same-Store Data U.S. same-store revenues grew 4.5% to $3.4 billion, while total gross profit was nearly flat, declining just 0.1%. A 7.7% increase in new vehicle unit sales was offset by a 25.9% decrease in gross profit per unit. F&I PRU showed modest growth of 2.9% to $2,340 U.S. Same-Store Metric (YoY, in millions, except units) | U.S. Same-Store Metric (YoY) | Q1 2024 | % Change | | :--- | :--- | :--- | | Total Revenues | $3,352.1M | +4.5% | | Total Gross Profit | $593.4M | -0.1% | | Retail New Vehicles Sold (Units) | 31,937 | +7.7% | | New Vehicle GP per Unit | $3,724 | -25.9% | U.K. Same-Store Data U.K. same-store revenues increased by 4.7% to $821.8 million, but gross profit saw a significant decline of 6.3% to $102.1 million. The drop was driven by margin compression in both new vehicles (GP per unit down 17.0%) and used vehicles (GP per unit down 11.1%) U.K. Same-Store Metric (YoY, in millions, except units) | U.K. Same-Store Metric (YoY) | Q1 2024 | % Change | | :--- | :--- | :--- | | Total Revenues | $821.8M | +4.7% | | Total Gross Profit | $102.1M | -6.3% | | Retail New Vehicles Sold (Units) | 8,961 | +2.2% | | New Vehicle GP per Unit | $3,085 | -17.0% | Non-GAAP Financial Measures Explanation of Non-GAAP Measures The company utilizes non-GAAP financial measures, such as adjusted net income and adjusted SG&A, to provide investors with a clearer view of its core operational performance. These measures exclude items that management considers non-core, including gains or losses on asset sales, legal matters, and catastrophic events. The company also presents results on a constant currency basis to remove the impact of foreign exchange fluctuations - Management evaluates performance using non-GAAP measures to exclude items not arising from core operations, such as asset impairment charges, legal matters, gains/losses on dealership transactions, and catastrophic events[17] - These adjusted measures are used to assess the business, communicate with the Board and investors, and are believed to provide more consistent period-over-period comparisons and better indications of future trends[18] - The company also evaluates results on a constant currency basis, a non-GAAP measure that excludes the impact of foreign currency exchange rate fluctuations to show underlying business performance[19] Reconciliation of Non-GAAP Measures For Q1 2024, the company's GAAP net income from continuing operations of $147.4 million was adjusted to a non-GAAP figure of $130.0 million. Key adjustments included excluding a $23.0 million net gain from dealership and real estate transactions, while adding back costs related to acquisitions, severance, and legal fees. Consequently, GAAP diluted EPS of $10.76 was reconciled to an adjusted diluted EPS of $9.49 Reconciliation (in millions) | Reconciliation (in millions) | Q1 2024 | | :--- | :--- | | Net Income from Continuing Ops (GAAP) | $147.4 | | Gain on dealership/real estate transactions | ($23.0) | | Acquisition costs | $2.3 | | Legal items and other professional fees | $2.4 | | Other adjustments (catastrophic events, severance) | $0.7 | | Adjusted Net Income from Continuing Ops (Non-GAAP) | $130.0 | EPS Reconciliation | EPS Reconciliation | Q1 2024 | | :--- | :--- | | Diluted EPS from Continuing Ops (GAAP) | $10.76 | | Impact of dealership/real estate transactions | ($1.68) | | Impact of acquisition costs | $0.17 | | Impact of legal/professional fees | $0.17 | | Other adjustments | $0.07 | | Adjusted Diluted EPS from Continuing Ops (Non-GAAP) | $9.49 |