Group 1 Automotive, Inc. Q1 FY2026 earnings call

• Focus on core competencies as a pure play retailer, navigated past challenges. - Q1 2026 weather impacted gross profit by ~$7M in after sales. - U.S. new vehicle margins robust, virtual F&I in one-third of U.S. stores doing 20% of deals. - U.S. after sales growth driven by AI marketing, customer data management, etc. - Completed half of U.S. store rebranding, anticipate full by end of year. - UK new vehicle margins steady, same-store volumes up, after-sales parts and service accelerating. - U.S. implemented cost reduction measures, cut headcount by ~700 and reduced SG&A costs by ~$14M. - Leveraging technology including AI across business areas.

In the U.S., Q1 2026 revenues were $5.4 billion, gross profit $878 million. New vehicle margins were robust at over $3,300 per car, with sequential improvement in used vehicle PRUs and a $95 same-store year-over-year increase in adjusted F&I PRU. After sales saw same-store customer pay gross profits increase nearly 6%, customer pay repair order count rose 2.5%. UK had revenues where new vehicle margins were steady, same-store used vehicle revenues up over 6% on local currency basis, same-store GPUs declined 2% on local currency basis. AfterShield and F&I delivered year-over-year growth, after-sales business was a stabilizer.

• Anticipate continued growth in virtual F&I through remainder of 2026 and into 2027. - Expect cost reduction efforts in U.S. to remove $50M of annual costs and return SG&A leverage to acceptable level. - Aim to get SG&A as a percent of gross as close to 80% as possible in UK. - Look forward to sharing more details on technology leverage efforts in future.

• Risks associated with pricing, volume, inventory supply, market conditions, successful integration of acquisitions, adverse global economy impacts on vehicle demand and related services. - UK incurred $3M incremental costs due to government-mandated national insurance and minimum wage increases.

Q: Walk through cost savings plan in more detail.

A: Cost cutting program included 700 headcount reduction (~$35M annual cost effective), ~$15M from contract cutting, expected ~$12.5M quarterly benefit.

Q: Path to get used profitability back up.

A: Sourcing challenge, need to improve organic sourcing, better inventory acquisition and aging management.

Q: Impact of rising negative equity values on customers.

A: Negative equity is high, but affordability has some positives.

Q: UK consumer impact from energy spikes.

A: Q1 order take rate high, used car inventory health better than last year.

Q: Plan to exit JLR brand.

A: In active negotiations, closed one of nine, close to finalizing contracts.

Q: Split of 700 headcount reduction.

A: Across board, in stores, corporate level, all U.S.

Q: Proceeds and EBITDA impact of divested California stores.

A: Multiple from stores higher than company trades at, pleased with outcome.

Q: Thoughts on consumer across different segments.

A: Consumers have distractions, still spending but confidence is a headwind.

Q: Worries about cutting 700 headcount.

A: Didn't cut muscle, used technology overlay to compensate, didn't touch long-term growth initiatives.

Q: Galey UK locations.

A: In existing Group 1 footprint, in owned buildings.

Q: Virtual F&I impact on F&I managers.

A: F&I managers more efficient, doing more deals, attracting different type of employees.

Q: SG&A cost savings focus in UK and U.S.

A: UK has less automation, focus on containing costs as growth, U.S. focus on people productivity.

Q: SG&A percentage in UK and U.S.

A: Aim to get UK SG&A as percent of gross close to 80%, U.S. saw improvement after cost measures.

Q: Weather impact on U.S. parts and service.

A: $7M impact, all on parts and service, inflated SG&A percentage.

Q: China brands position.

A: Three Geely stores to open in Q2, framework agreement with Geely, talking to other Chinese OEMs