Group 1 Automotive(US:GPI)2022-04-27 17:47Financial Data and Key Metrics Changes - Group 1 Automotive reported adjusted net income of $185 million from continuing operations, translating to adjusted earnings per share of $10.81, a 96% increase year-over-year and an all-time quarterly record [9][11] - The adjusted results excluded noncore items totaling approximately $16 million from the sale of two franchises and excess real estate [10] Business Line Data and Key Metrics Changes - The U.S. same-store used vehicle retail unit sales declined by 4% compared to Q1 2021, while customer pay same-store revenue grew by 19% [16][19] - Same-store collision revenues increased by 28% and wholesale parts revenues increased by 29%, contributing to a 19% growth in same-store total after sales revenue [19] - AcceleRide sold 5,800 vehicles online, representing over 9% of total U.S. retail sales, with a 22% sequential increase from Q4 2021 [21] Market Data and Key Metrics Changes - The U.K. new vehicle order bank exceeds seven months, with some luxury brand orders extending into 2023, indicating strong pent-up demand [12] - Texas market outperformed total U.S. same-store growth in new vehicle sales, used vehicle sales, after sales, and net profitability [13] Company Strategy and Development Direction - The company plans to focus on high-quality external growth actions, including the acquisition of two large U.S. Toyota stores expected to generate $550 million in annual revenues [31] - The balance sheet and cash flow generation will support a flexible capital allocation approach, including share repurchases and pursuing external growth opportunities [32] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer demand for vehicles remains extremely strong, with most units sold almost immediately after OEM delivery [11] - Inflation may impact lower demographic sectors, but the company has not observed a decrease in consumer activity in its stores [46][48] Other Important Information - The company had $216 million in total cash liquidity as of March 31, with $319 million of adjusted operating cash flow generated in Q1 [24][26] - The quarterly floor plan interest decreased by 30% year-over-year, while non-floor plan interest increased by 32% due to debt rates related to acquisitions [28] Q&A Session Summary Question: Comments on parts and service performance - Management confirmed strong customer pay growth and a slight decline in warranty work, with digital service appointments fully integrated at Prime [35][36] Question: Inventory management and sales - U.S. inventory was reported at a nine-day supply, with over 60% of sales occurring off the truck [37][38] Question: Capital allocation and share buybacks - Management confirmed that share buybacks and acquisitions are part of their capital allocation strategy, with a focus on improving structural earnings power [41][43] Question: Demand trends in the market - Management indicated that while inflation affects lower demographics, overall demand remains strong, particularly in luxury brands [45][48] Question: AcceleRide performance and customer retention - AcceleRide customers show a higher attachment rate for F&I products compared to in-store customers, with a retention rate of 71% for AcceleRide customers [57][70] Question: Future outlook on F&I and gross margins - Management acknowledged that margins may not remain high indefinitely, but emphasized their flexible cost structure to adapt to changing conditions [76][78]