Group 1 Automotive(US:GPI)2023-04-26 17:08Financial Data and Key Metrics Changes - In Q1 2023, Group 1 Automotive reported adjusted net income of $156.1 million and adjusted diluted earnings per share of $10.93, marking a record for the first quarter [56] - The company's adjusted SG&A as a percentage of gross profit was 63.1%, an increase of 3.1% from the prior year but down from 74.2% in pre-pandemic 2019 [59] - The company generated $191 million of adjusted operating cash flow and $151 million of free cash flow after accounting for $40 million of CapEx [61] Business Line Data and Key Metrics Changes - U.S. new vehicle sales increased by 2%, aligning with the retail industry, while after-sales performance showed significant growth with customer pay up 15.9%, collision up 17.5%, warranty up 9%, and wholesale parts up 7.7% [45][47] - AcceleRide achieved record sales of 12,500 vehicles, representing 19.2% of U.S. retail sales, with over 78% of customers engaging with AcceleRide in some capacity [48] Market Data and Key Metrics Changes - In the U.K., vehicle demand remains steady with a 19% increase in new vehicle units sold, and the new vehicle order bank stood at approximately 17,600 units, indicating a six-month backlog [60] - The average supply of new vehicles in the U.S. was 27 days, while used vehicles had a supply of 25 days, with Toyota and Lexus brands experiencing a tight supply of only 5 days [57] Company Strategy and Development Direction - The company is focused on growth through acquisitions while maintaining a disciplined approach to capital allocation, including share repurchases when deemed a better value [8][9] - There is an emphasis on improving customer retention and expanding the parts and service business, with ongoing investments in technology and marketing initiatives [47][72] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are opportunities for acquisitions, some sellers have unrealistic expectations, and the company will not engage in bidding wars [8] - The company expects new vehicle margins to eventually settle above pre-pandemic levels, despite current pressures from reduced margins and inflationary costs [46][58] Other Important Information - The company repurchased approximately 181,000 shares for $35 million at an average price of $191.85, resulting in a 1.3% reduction in share count [51] - The company has a strong balance sheet with $21 million in cash and $123 million in a floorplan offset account, totaling $144 million in cash liquidity [75] Q&A Session Summary Question: What is driving the decline in F&I PRU? - Management indicated that the decline is primarily due to lower finance penetration on used vehicles, despite an increase in average transaction prices [17][18] Question: How is AcceleRide performing? - Management reported increased customer engagement with AcceleRide, with more customers using the platform for vehicle purchases [19][37] Question: What is the impact of the agency model in the U.K.? - Management stated that the profitability of Mercedes stores under the agency model has not materially changed compared to pre-agency levels [22][24] Question: What are the challenges in parts and service growth? - Management highlighted the need for more technicians to fill open bays as a key challenge in driving parts and service growth [80][81] Question: How does the company plan to grow used vehicle sales? - The company plans to focus on trade-ins, as nearly 70% of used car inventory comes from customer trade-ins [84]