Group 1 Automotive, Inc. Q2 FY2025 earnings call

U.S. Performance: Excellent in Q2; adjusted net income from continuing operations up 12.4%, EPS up 17.5%. New car sales up, PRUs, inventories, days supply healthy. Used car volumes and gross profits up. F&I solid. Aftersales strong with growth in various metrics; investing in aftersales with air-conditioned shops, technician headcount increase, rebranding efforts. U.K. Business: Navigating integration, growing in challenging market. Managed well vs broader market. Acquisitions driving revenue and gross profit growth. Addressing cost increases from government wage and insurance changes through headcount reduction and restructuring. Capital Allocation: Acquired 3 dealerships, bought back 3% of company for $167.3M in H1 2025. Balancing acquisitions, dispositions, and share repurchases. Focus on driving scale, productivity, and lower cost per transaction using technology and AI.

U.S. Business: New car sales up 6% same-store; PRUs up $211 sequentially; inventories flat vs quarter, down nearly 15% from end 2024; days supply 48 days. Used car volumes up nearly 4% year-over-year, gross profits up $29. F&I up $90 per unit. Aftersales gross profit up 14.3%, customer pay revenue up 13.6%, warranty up 31.9%. Increased technician headcount by 6% same-store; 90% of U.S. technicians to work in air-conditioned shops by end 2025. U.K. Business: Managed well vs broader market facing macro challenges. Revenue and gross profit up due to acquisition activity. Same-store used vehicles, parts and service, F&I grew 16%, 12%, 28.7% respectively. SG&A as % of gross profit increased but year-to-date adjusted SG&A as % of gross profit near 80% target. Incurred $7.6M restructuring costs in Q2 2025.

Expectations of new and used vehicle GPUs to elevate as inventories tighten from tariffs. Deferred certain capital expenditure projects and reevaluated discretionary spending. Have contingency plans for competitive environment changes. Focus on improving productivity. U.K. business expects adjusted SG&A as % of gross profit to come down in Q3 due to no plate change month.

Risks associated with pricing, volume, inventory supply, market conditions, acquisitions integration, global economy impacts on vehicle demand. Government policy changes and uncertainty in U.S. trade partners, automotive retailers, OEMs, and consumers. U.K. facing macroeconomic challenges like weak growth and inflation.

Q: Rajat Gupta on new car GPUs in U.S., U.K. cost-out, parts and service in U.K.

A: Daryl and Daniel respond on new car PRU being flat, U.K. headcount reduction, parts and service growth potential.

Q: Daniela Haigian on parts and service ballast, used business competition A: Daryl and Daniel discuss aftersales growth sustainability, used business opportunities vs online retailers.

Q: Federico Merendi on OEMs changing features to optional, parts and service technician headcount impact A: Daryl on OEMs adjusting trim levels, Daniel on technician headcount impact.

Q: Michael Ward on OEMs 2026 contenting, parts and service technician headcount A: Daryl on OEMs adjusting pricing, Daniel on SG&A in U.K.

Q: Jeff Lick on metrics surprise, lease returns A: Daryl and Daniel on aftersales growth sustainability, lease returns impact.

Q: David Whiston on U.K. Mercedes divestiture, Toyota inventory A: Daryl on Mercedes relationship, Daniel on Toyota inventory.

Q: Ron Jewsikow on U.K. SG&A, parts and service warranty A: Daniel on U.K. SG&A, Daryl on aftersales capacity.

Q: Bret Jordan on U.S. GPU, parts and service CDK benefit A: Peter and Daniel on U.S. GPU trend, CDK benefit