GROUP 1 AUTOMOTIVE INC Q3 FY2024 earnings call

• UK Business: Closed Inchcape retail transaction adding $2.7 billion in revenue from 54 dealerships; acquired additional Mercedes-Benz and BMW dealerships; Mark Raban joined as CEO of Group 1 UK; integration of stores and organizations ongoing with efforts in workforce alignment, system conversions, and operational efficiency expected to save SG&A. - US Business: Impact from CDK outage and hurricanes in Houston and Helene; record new and used vehicle units delivered; strong F&I revenue; after sales revenues and gross profits at all-time highs; focus on technician hiring and air conditioning installation in US shops; continued focus on investing in new vehicle franchise dealerships as best use of capital.

UK: Total revenues were an all-time quarterly record due to acquisition activity, up 55.2% year-over-year. Same-store new vehicle gross profit units (GPUs) declined, but after sales revenues and gross profits were all-time quarterly highs. Integration activities related to Inchcape are ongoing, expected to yield at least a 300 basis point saving in SG&A. US: Record new and used vehicle units delivered, F&I revenues were a quarterly record, after sales third quarter revenues and gross profits were all-time highs. US adjusted SG&A as a percentage of gross profit decreased to 64.3%, and same-store service business grew over 8% in the US.

• UK integration activities are expected to yield at least a 300 basis point saving in SG&A. - Continued focus on share buybacks, with $138 million spent on buying back 3.4% of the company this year, and remaining capacity in the share repurchase program.

• Risks associated with pricing, volume, inventory supply due to increased customer demand and reduced manufactured production levels due to component shortages. - Conditions of markets, successful integration of acquisitions, and adverse developments in the global economy and resulting impacts on demand for new and used vehicles and related services.

Q: Rajat Gupta asked about quantifying third quarter EPS excluding headwinds and UK SG&A opportunity.

A: Daniel McHenry said CDK and hurricane impacts cost ~$0.20-$0.30 in EPS, stop sale of ~2000 vehicles cost ~$0.20-$0.30 in EPS; Daryl Kenningham and Daniel McHenry discussed UK SG&A savings with 300 basis points expected from integration.

Q: John Murphy asked about UK M&A, US deals, and GPU.

A: Daryl Kenningham said large chunky deals less likely in UK, still opportunities in US; Daniel McHenry noted 11% BMW and 6% Lexus in brand mix affecting GPU; Daryl Kenningham discussed consumer pricing resistance and finance arm aggressiveness.

Q: Jeff Licht asked about Inchcape stores' magnitude and GPU noise.

A: Daryl Kenningham said Inchcape stores similar in size, no material difference; Daryl Kenningham and Daniel McHenry discussed customer stickiness in stop sales and GPU glide path.

Q: Michael Ward asked about Inchcape integration and adjacencies.

A: Daryl Kenningham said Inchcape integration substantially finished by year-end, with some spillover into next year; discussed cautious approach to adjacencies, evaluating them annually but not currently allocating capital to them.

Q: Glenn Chin asked about Inchcape's after sales and floor plan.

A: Daryl Kenningham said no inherent issues preventing aligning after sales; Daniel McHenry said Inchcape's floor plan is being realigned to Group 1's model with lower rate negotiations with banking partners.