Group 1 Automotive(US:GPI)2023-01-25 19:26Financial Data and Key Metrics Changes - In Q4 2022, Group 1 Automotive generated adjusted net income from continuing operations of $158 million, or $10.86 per diluted share, representing a 15% increase year-over-year [22] - Adjusted net income for the full year grew 15% to a record $729 million, with adjusted EPS increasing 32% to an all-time high of $45.71 [43] - The company generated $916 million of adjusted operating cash flow and $803 million of free cash flow after accounting for $113 million of CapEx [30] Business Line Data and Key Metrics Changes - The F&I business remained strong at $2,369 per unit, showing only a minimal sequential decline [24] - Same store technician headcount increased by 16% in 2022, contributing to aftersales growth [25] - In Q4, the company sold a record 10,100 vehicles through AcceleRide, accounting for 15% of total US retail sales [26] Market Data and Key Metrics Changes - In the UK, vehicle demand remains steady, with a new vehicle order bank of approximately 16,000 units, consistent with the prior quarter [27] - The company noted that new vehicle availability is still constrained, particularly for Toyota and Lexus, which had a combined supply of only 4 days [45] Company Strategy and Development Direction - The company plans to continue integrating the AcceleRide platform with its DMS, CRM, and credit software to enhance customer experience and operational efficiency [49] - Group 1 Automotive aims to find additional growth opportunities in 2023, prioritizing growth in the US and UK markets [55] Management's Comments on Operating Environment and Future Outlook - Management expects a gradual decline in new vehicle margins throughout 2023 as inventory recovers, but anticipates that normalized margins will settle above pre-pandemic levels [23] - The company remains optimistic about the production plans from Toyota, indicating a potential increase in vehicle availability in 2023 [65] Other Important Information - The company repurchased $521 million in shares during the calendar year, reducing the share count by over 22% in the last 15 months [44][77] - Approximately 70% of the company's debt is fixed through interest rate swaps, which mitigates the impact of rising interest rates on earnings [78] Q&A Session Summary Question: Impact of Tesla's price cuts - Management noted that they did reprice their used Teslas in inventory following Tesla's announcement, but the impact was minimal as they had less than 100 units across the country [108] Question: January performance and demand impact - Management indicated that they did not see a significant impact on demand from Tesla's price cuts, with GPUs still above pre-pandemic levels [69] Question: Changes in UK vehicle backlog and consumer demand - Management reported minor changes in the UK vehicle backlog, indicating that demand remains relatively consistent [90] Question: Interest expense outlook - Management stated that approximately 70% of their debt is fixed, which will help mitigate the impact of rising interest rates on their financials [78] Question: Technician hiring initiatives - Management highlighted various initiatives to attract technicians, including a four-day workweek, which is currently implemented in about half of their stores [118]