Group 1 Automotive(US:GPI)2022-10-26 19:12Financial Data and Key Metrics Changes - Group 1 Automotive reported adjusted net income of $188 million from continuing operations, equating to adjusted earnings per share of $12, a 27% increase over the prior year [8] - Adjusted results excluded non-core items totaling $9 million of after-tax gains, primarily from the sale of a dealership franchise [9] - The company generated $730 million of adjusted operating cash flow and $647 million of free cash flow after backing out $83 million of CapEx [24] Business Line Data and Key Metrics Changes - The aftersales business experienced double-digit same-store gross profit growth, with over 10% consolidated same-store gross profit growth on a local currency basis [14][19] - Same-store used retail sales increased by 2% in the US, despite the industry being down 12% [17] - Used vehicle margins declined sequentially from approximately $1,900 per unit in Q2 to roughly $1,600 in Q3 [10] Market Data and Key Metrics Changes - The UK market showed steady consumer demand with a new vehicle order bank of nearly 17,000 units, representing over a six-month backlog [11] - Texas outperformed total US same-store growth in new vehicle sales, used vehicle sales, aftersales, and net profitability [13] - The US new vehicle inventory stood at 5,000 units, representing a 15-day supply, with Toyota and Lexus having a combined 5-day supply [16] Company Strategy and Development Direction - The company continues to focus on high-quality external growth actions, having purchased six dealerships expected to generate $740 million in annual revenues [29] - Geographic exposure in Texas and the UK is viewed as a near-term and long-term advantage for the company and shareholders [13] - The integration of AcceleRide with DMS, CRM, and credit software is expected to provide faster and more transparent transactions for customers [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that consumers are under pressure due to inflation, but the majority of their business is with higher-income individuals who can still afford vehicles [58] - The company is prepared for normalization in used vehicle prices and has been responsive to market changes, maintaining a 30-day supply of used vehicles [60] - The parts and service business is expected to remain resilient even in a potential recession, as seen during the 2008 recession [61] Other Important Information - The company repurchased nearly 2.7 million shares at an average price of $171.1, representing 20% of its share float over the last 12 months [24] - The quarterly floor plan interest increased by $2.2 million from the prior year due to higher vehicle inventory holdings and interest rates [26] Q&A Session Summary Question: What does the new vehicle inventory and order book look like? - Management indicated that OEMs are optimistic about the fourth quarter, with pre-sold units in the US remaining steady compared to the second quarter [33][34] Question: How is the AcceleRide impacting staffing and cost savings? - Management noted that AcceleRide is changing the staffing model, focusing more on appointments and improving productivity [39][40] Question: What is the outlook for aftersales capacity utilization? - Management expressed confidence in increasing technician counts and service capacity, particularly in the UK market [52][54] Question: How does the company view consumer demand trends amid economic uncertainty? - Management acknowledged consumer pressure but emphasized that their customer base is primarily higher-income individuals, which supports continued vehicle purchases [58][59] Question: What is the expectation for F&I per unit into 2023? - Management remains bullish on the F&I business, indicating that structural improvements will sustain current performance levels [72]