NYSE:GPI Group 1 Automotive Q2 2024 Earnings Report $393.50 +0.80 (+0.20%) As of 03:25 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Group 1 Automotive EPS ResultsActual EPS$9.80Consensus EPS $9.36Beat/MissBeat by +$0.44One Year Ago EPS$11.73Group 1 Automotive Revenue ResultsActual Revenue$4.70 billionExpected Revenue$4.68 billionBeat/MissBeat by +$19.61 millionYoY Revenue Growth+3.00%Group 1 Automotive Announcement DetailsQuarterQ2 2024Date7/24/2024TimeBefore Market OpensConference Call DateWednesday, July 24, 2024Conference Call Time10:00AM ETUpcoming EarningsGroup 1 Automotive's Q1 2025 earnings is scheduled for Thursday, April 24, 2025, with a conference call scheduled at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Group 1 Automotive Q2 2024 Earnings Call TranscriptProvided by QuartrJuly 24, 2024 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's Second Quarter of 20 24 Financial Results Conference Call. Please be advised that this call is being recorded today. I would now like to turn the call over to Mr. Pete DeLongchamps, Group 1's Senior Vice President of Manufacturer Relations, Financial Services and Public Affairs. Operator00:00:20Please go ahead, Mr. DeLongchamps. Speaker 100:00:22Thank you, Joe, and good morning, everyone, and welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results we will refer to on this call for comparison purposes have been posted to Groupon's website. Before we begin, I'd like to make some brief remarks about forward looking statements and the use of non GAAP financial measures. Except for historical information mentioned during the call, statements made by management of Group 1 Automotive are forward looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Speaker 100:01:12Those risks included, but are not limited to risks associated with pricing, volume, inventory supply due to increased customer demand and reduced manufacturer production levels due to component shortages, conditions of markets, successful integration of our pending Inscape acquisition and adverse developments in the global economy and resulting impacts on demand for new and used vehicles and related services. Those and other risks are described in the company's filings with the Securities and Exchange Commission. In addition, certain non GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non GAAP financial measures to the most directly comparable GAAP measures on its website. Participating with me on today's call, Daryl Kenningham, our President and Chief Executive Officer and Daniel McHenry, Senior Vice President and Chief Financial Officer. Speaker 100:02:09I'd now like to hand the call over to Darryl. Speaker 200:02:13Thank you, Pete. Good morning, everyone. Despite a number of challenges, we are very pleased with our results this quarter. Our U. S. Speaker 200:02:21Team persevered through extreme weather events and the CDK outage. We witnessed unprecedented teamwork focused on caring for our customers, communities and our team members. The CDK outage was most significantly affected our U. S. Operations from June 19 to June 26. Speaker 200:02:43The company's businesses in the UK were not impacted as we use a different dealership management system there. During the disruption, all Group 1 US dealerships continued to serve our customers using alternative processes until CDK systems were again made available. We do believe that we could have sold more vehicles and performed additional service and repair work in the June quarter had we been operating at full capacity with our CDK dealer management systems. Once we are able to gain access to CDK on June 26, we mobilized our operations personnel to enter thousands of transactions performed during the outage into the CDK DMS, all of which were completed prior to June 30. The superior efforts by our field employees, our accounting shared services center in Houston and our investments in technology for transactional processing all paid tremendous dividends that enabled us to recover quickly from the outage. Speaker 200:03:50For example, we used our technology to process car deals, complete inventory stock ends and post factory vendor and bank statements in an expeditious manner. This phenomenal display of teamwork and unity by our U. S. Team allowed us to maintain our financial close timeline for the June quarter and shift our focus toward the future. We believe these actions are a key reason that we were able to minimize the financial impact of the CDK event on our profit performance. Speaker 200:04:24We estimate the pre tax income impact of the CDK incident to be approximately $17,000,000 or $0.97 in diluted earnings per share. Additionally, we made $5,900,000 in one time pre tax compensation payments to employees or approximately $0.34 in earnings per diluted share. This impact is prior to any insurance or other recoveries we expect to receive in future periods. Now I'd like to spend a few minutes discussing what we feel like differentiates Group 1. Prior to the CDK cyber attack, our disciplined execution led to great after sales and used car performance in the 2nd quarter. Speaker 200:05:15And our F and I performance and front end gross margin retention performed well throughout the entire quarter. Our SG and A leverage was outstanding as we continue to keep our primary cost drivers like headcount in check. Daniel McHenry will outline several specific examples of this disciplined execution in his upcoming comments. Another differentiator for Group 1 is our capital allocation strategy. We are a pure play new vehicle dealership group. Speaker 200:05:48While we regularly evaluate other business adjacencies, we believe in this environment, the best use of our shareholders' capital is investing in new vehicle franchise dealerships. We believe that entering other business verticals not only hurts returns, but also dilutes our focus. This year, we have acquired dealerships with expected revenues of 1,100,000,000 dollars Our ability to integrate these businesses into our existing portfolio allowed these transactions to be accretive from day 1. As previously announced, we recently completed the purchase of 4 Mercedes Benz dealerships north of London. We also look forward to closing the Inchcape acquisition in the Q3. Speaker 200:06:37As a reminder, we anticipate that the 54 inches Cape dealerships will add $2,700,000,000 in revenue to Group 1, doubling our size in the UK. The brand and geographic mix is outstanding and give us significant scale and reach and will improve our SG and A leverage. This is a transformative acquisition for Group 1 and we look forward to welcoming nearly 4,000 new teammates to the company. An important part of our capital allocation focus is what we don't buy. While we routinely discuss acquisitions that are pending or have closed, what's also important are the acquisitions that don't fit strategically or meet our investment hurdles. Speaker 200:07:26Some of those are in great markets with great brands. However, we will not chase revenue just for the sake of growing. Our portfolio optimization efforts are based on returns and strategic fit. Another important element of our capital allocation strategy is evaluating share buybacks as an alternative to purchasing revenue. We continue to balance acquisitions and dispositions with repurchasing our shares. Speaker 200:07:56This year, we bought another 2.6% of the company back for $100,000,000 Over the past 30 months, we've bought back 25% of our stock. Lastly, we believe close partnerships with our OEM partners has never been more important. And this is certainly a differentiator for Group 1. OEMs need great retail partners now more than ever. The good ones admit that and execute against that. Speaker 200:08:27They need our capital, professionalism and execution to win in this ultra competitive environment. Our high performance on OEM scorecard metrics enables Group 1 to stay eligible to purchase more stores, something our team has done an outstanding job with the last 2 years. Our ability to respond to disruptive events quickly and effectively like the CDK outage and catastrophic weather events make us more valuable partners as well. Our willingness and ability to invest in world class facilities, professional management and the community makes us more valuable partners. Our breadth across 2 major markets gives us and our OEM partners competitive leverage and performance advantages. Speaker 200:09:18As a new vehicle dealer, a strong relationship with our OEM partners is more critical than ever, we don't see that changing in the future. We actually see that OEM relationship growing in importance. We believe the Inchcape acquisition allows Group 1 another outstanding opportunity to demonstrate that. And we believe that Group 1 being a great partner to our OEMs gives us significant advantages that ties directly to our capital allocation priorities. Now I'll turn the call over to our CFO, Daniel McHenry for an operating and financial overview. Speaker 200:09:58Daniel? Speaker 300:09:59Thank you, Daryl, and good morning, everyone. In the Q2 of 2024 Group 1 Automotive reported adjusted net income of $133,100,000 Quarterly adjusted diluted EPS from continuing operations of 9.80 dollars Current quarter total revenues of $4,700,000,000 a second quarter record and all time records in new vehicle sales of $2,400,000,000 and F and I of 200,000,000 Starting with our U. S. Operations, we achieved an all time record in new vehicle revenues of $2,000,000,000 driven by record new vehicle sales units sold, up 7% on a reported basis. This reflects the resiliency of demand and our continued emphasis on driving volume. Speaker 300:10:56New vehicle GPUs were essentially flat sequentially, down only $33 Used cars experienced a volume increase both sequentially and year over year with only slight declines in GPUs. We were pleased with our ability to hold margin and increase volume despite fluctuations in pricing between the periods. We believe this is a testament to our process, discipline and use of technology with the pricing of used vehicles. RF and I revenues of $184,000,000 were also quarterly record for the U. S. Speaker 300:11:39Our F and I GPUs of $2,393 increased on the same store basis sequentially and negligibly declined year over year. The performance by our F and I professionals has been outstanding to maintain GPU discipline. Shifting gears to after sales, despite the CDK challenges and weather events, after sales 2nd quarter revenues and gross profit were all time quarterly highs, outperforming sequentially and year over year. Same store customer pay and warranty revenues for May quarter to date period were up 6% and 12.5%, respectively. These gains against 2 top double digit growth comparative our ability to add after sales capacity on a same store basis. Speaker 300:12:39While our overall our overall same store U. S. Headcounts has declined 5% from 2019, our technician headcount is nearly up 5% in the same period. Wrapping up the U. S, let's shift to SG and A. Speaker 300:12:57U. S. Adjusted SG and A as a percentage of gross profit decreased 130 basis points sequentially to 64.4%, demonstrating our continued focus on managing costs at below pre COVID levels as new vehicle margins continue to normalize. Turning to the U. K, top line revenues grew 2.1% year over year driven by higher new vehicle and parts and service revenues of 8.2% and 9% respectively. Speaker 300:13:32While down from the prior year, new vehicle gross profit per unit slightly improved sequentially at the same time prices declined over the same period. Used vehicles remain challenged however. We did experience a slight improvement in GPU sequentially. Wholesale losses per unit remained flat compared to the sequential quarter. Regarding the UK adjusted SG and A as a percentage of gross profit, we recognize we still have some challenges to overcome and we will continue to focus on cost control and business process efficiency as we expand our business in the UK. Speaker 300:14:17Turning to our balance sheet and liquidity. Our strong balance sheet, cash flow generation and leverage position will continue to support a flexible capital allocation approach. As of June 30, our liquidity of 6.40 $4,000,000 was comprised of assessable cash of $159,000,000 $486,000,000 available to borrow on our acquisition line. Our rent adjusted leverage is defined by our U. S. Speaker 300:14:46Syndicated credit facility was 2.44 times at the end of June. Cash flow generation through the first half of twenty twenty four yielded $302,000,000 of adjusted operating cash flow and $223,000,000 of free cash flow after backing out $79,000,000 of CapEx. This capital was deployed in the same period through a combination of acquisitions, share repurchases and dividends, including the acquisition of $1,000,000,000 in revenues through the 30th June, dollars 100,000,000 repurchasing approximately 353,000 shares at an average price of $282.81 resulting in a 2.6% reduction in our share count since January 1 and $12,800,000 in dividends to our shareholder. As of June 30, approximately 53 percent of our €4,600,000,000 in floorplan and other debt was fixed, resulting in an annual EPS of about $1.23 for every 100 basis points increase in secured overnight funding rate. For additional detail regarding our financial condition, please refer to the schedules of additional information in the news release as well as our investor presentation posted on our website. Speaker 300:16:14I will now turn the call over to the operator to begin the question and answer session. Operator? Operator00:16:22We will now begin the question and answer session. And our first question here will come from Rajat Gupta with JPMorgan. Please go ahead. Speaker 400:17:00Great. Thanks for taking the questions. And congrats on the strong education this quarter. I wanted to like just follow-up on just the CDK impact in the Q2. And how should we think about the run rate of certain components of the P and L into July or Q3, if you could give us? Speaker 400:17:22And really the focus was more on SG and A to gross and purely very strong execution sequentially despite some of the deleveraging you might have seen from lost sales and lost service. So could you help like frame for us how should we think about the SG and A to gross level into the Q3? And any color you could give us around how the service business is doing so far in July and your expertise for the Q3? And anything else that you might want to highlight? And I have a quick follow-up. Speaker 400:17:59Thanks. Speaker 200:18:00Rajat, Daryl, one clarification in our script, we had mentioned that our headcount was down 5% from 2019, but our technician headcount is up actually 20% since that time period. So I want to clarify that point. And that's one reason our SG and A as a percentage of gross has been good as we've done a really good job managing our overall headcount and only adding where it drives capacity and after sales effectively. So and that's allowed us to maintain our after sales growth over a period of time and control SG and A at the same time. So I think in terms of the and I'll ask Dan and Luke to speak to some more SG and A issues. Speaker 200:18:44But I think in terms of the CDK impact, I think largely most of the impact is behind us. The CRM came up a little later than the DMS did. So there's still some work being done to try to recover the information on those customers as we move forward. But we've seen the recovery. I would say much of it is behind us and I don't expect a material impact in the Q3. Speaker 200:19:13Daniel, what would you add? Speaker 300:19:15It's clearly in terms of SG and A, there was that one timer of additional pay that we made to employees of that 5,900,000 dollars Clearly, we missed out on a chunk of growth in June that would have really helped us dilute some of our expenses and help drive some further SG and A deleverage in the quarter. Clearly, there's work still to be done in the UK, taking on the Inchcape stores in this quarter. That should help us delever in the UK certainly going into 2025. Speaker 400:19:57Got it. And just on SG and A growth in the U. S, I mean, because you gave us this helpful breakout of U. Versus U. K. Speaker 400:20:06Given the U. S. Was still hurt from some deleveraging, is it fair to assume that the 64.4 that you saw in the U. S. Should continue to move lower from here because of some catch up in July and just because ex CDK that number would have actually been better than the 64.4 reported? Speaker 400:20:27And just like any color on like services into July that you can give us as well? Thanks. Speaker 200:20:35Tough to predict on the 64.4%. We saw our front end margins on new vehicles stay relatively flat sequentially year over year I'm sorry, quarter over quarter. So that certainly helped us and we're obviously watching that margin and that obviously impacts the SG and A number percentage of gross number. So tough to predict if it'll move lower in the near term, Rajat. We're seeing our service business, you saw it in through May, our CP was up 6% year over year same store. Speaker 200:21:10Our warranty was up 12% year over year same store. We're really happy with that. We continue to be able to add technician capacity, which is driving that. And we expect we'll be able to continue that here into the rest of the year as well. Operator00:21:30And our next question will come from John Murphy with Bank of America. Please go ahead. Speaker 500:21:37Good morning, guys. I know you do this on a public call, but remarkable execution, very good, very impressive quarter. Just a first question, when we think, Daniel, about that parts and service that may have been lost during the CDK outage, Is that the kind of revenue that you think could get and gross that can get picked back up or got picked back up? Or is that kind of just lost in the wind and we should see a normalization, but not necessarily a catch back up in the Q3? Speaker 300:22:08John, it's Daniel here. It's kind of hard to judge so early in the quarter. We had some pretty severe weather in Houston in the 1st week, 2 weeks of the quarter. It's harder to pick up parts and service business because that's more of a definitive bar effectively or time slot that you've sold of a technician. So it's harder to pick that up, but I would expect there to be some pickup from that. Speaker 300:22:37However, I think the bag will pick up. That will also be out there as well because clearly, I think a lot of those sales could just being delayed sales with so many to many stores and so many operators under the CDK platform. Speaker 200:22:53One thing, John, to note is our average miles driven increased again this quarter for cars coming through our service department. And excuse me, the average dollars per RO continue to rise mainly, I believe, as a result of that the age of the vehicle population. So that I think that is just good things means good things for parts and service in the future. Speaker 500:23:19Yes. That's helpful. Just a second follow-up on interest rates. And Daniel, you mentioned the impact if rates go up, but God forbid, rates go back down, which hopefully they will sometime soon. Is that impact sort of linear on the downside? Speaker 500:23:39And then also if we think about sort of the flow through of rates, I mean, the whole industry is faced by a 400 basis point increase in borrowing rates at the consumer level last two and a half years, but pricing has been very resilient. Grocers have come down a little bit from the peak. But how do you think about what could happen on the demand side and the pricing side as that massive surge in interest rate and expense backs off and the consumer can maybe put a little bit more money, not to interest expense, but to the price of the vehicle and maybe grosses. I mean, it just seems like there's a misunderstanding of how big a headwind this interest burden is into the consumer and it might actually be relieved sometime soon? Speaker 100:24:28Hey John, this is Pete DeLongchow. I think you're absolutely correct. One of the things that we're fortunate to have is terrific financial services company attached to the OEMs that have been able to cement the rates. You look at our attachment rates now they're up to 75% penetration on new F and I. So that's a positive. Speaker 100:24:48And I think where we could also really pick up some business through lower rates from the used side because those penetration rates are 62%, 63%. So I think you're spot on. With lower rates, it's going to certainly help our used car business and make the new car affordability, I think, better for the consumer. Speaker 200:25:08John, this is Daryl. Our data says that average selling price of a new car in the Q3 was down $1,000 So if you combine that with some lower interest rates, that should take some pressure off the consumer and hopefully drive some more volume. Operator00:25:29Our next question will come from David Whiston with Morningstar. Please go ahead. Speaker 600:25:36Thanks. Good morning. Just first clarification on CDK and a follow-up with that is, did you say loss business is $0.97 plus it's $0.34 for the comp, so it's $1.31 total? Speaker 300:25:51David, this is Daniel. Dollars 1.31 total, but the disaster pay on mine was already adjusted out of the $9.80 So the difference in the 980 and what you would deem to be the losses of bite of bug. Speaker 600:26:08Okay. And is it just luck that you guys got your service back core service back in about a week or were you able to Speaker 700:26:15work with CDK behind the scenes to get that top of the line? Speaker 200:26:21Absolutely no luck at all, David. Come on. Speaker 100:26:24The harder you work, David, the luckier you get. Speaker 200:26:28David, it's hard to say why. I mean, we one, we think our systems are architected in a way that helped us move faster. We felt comfortable being able to move with less risk. I think our team has a very good relationship with CDK. And honestly, we tried to work with all the public to try to help the industry get back honestly. Speaker 200:26:53I don't know how much helped us get back faster, but those were all things. And I think a lot of the technology on our back office really helped us get things back once we did have CDK access. Speaker 600:27:08And just on capital allocation with buybacks, very long term, even in the next decade, should we think about you guys kind of doing what AutoNation has done for a very long time where you're just trying to get that share count as low as you possibly can? Speaker 200:27:22No. We don't think about it in terms of share count necessarily. What we look at is when we're faced with an acquisition, we want to do just the math on a buyback using that capital for a buyback or using that capital for an acquisition. And if it's close, we'll do the acquisition because we want to grow the company and we think scale is important and growing their clusters is important, things like that. But we think about it in the context of just other uses of capital. Speaker 200:27:55We don't necessarily think about the share count. Daniel, you might have something to add to that. Speaker 300:28:00I don't have anything further in the moment. Operator00:28:13Our next question will come from Michael Ward with Freedom right? Speaker 800:28:17So you had new So you had new and used unit sales lost, service business lost. In total, that was a $17,000,000 hit pre tax. Then you had the one time comp charges of $5,900,000 and that's included in the SG and A number we see. Is that the right way to think about it? Speaker 300:28:42That's correct. It's a one timer charge in our SG and A. Speaker 800:28:47And it's included, you didn't call that out. The $9,000,000 called out for catastrophic events was the weather related impact you had? Speaker 100:28:56That was weather and Speaker 300:28:57And the CDK. So that's let's say ballpark, 2 thirds CDK adjustment, a third weather. Speaker 800:29:07Okay. Okay. I just wanted Daniel, I think you said something like the service in April May in the U. S. Was running up 5% or 6% same store, is that correct? Speaker 200:29:19Customer pay was up 6% through the end of May, Q2 April, May. CP was up 6%, warranty was up 12. Speaker 800:29:29Okay. And so then in total, so that suggests somewhere around $20,000,000 or $30,000,000 hit from the CDK on the service revenue, somewhere in that 1 or 2 week period in June. Is that the ballpark? Speaker 200:29:45It's probably it. Speaker 300:29:46I think that's a fair assessment. Okay. And so Mike, it's Daniel here. It just took longer to process every transaction and it took longer to process every transaction back into the system than it normally would. It was just very inefficient. Speaker 800:30:03Okay. And from your performance coming out of it relative to the rest of the dealer group was much better. And so it sounds like it was the call center and Acceleride that really contributed. Is that right? Speaker 400:30:17Well, I think there was Speaker 200:30:18a number of things that contributed. I think the technology both at our customer contact center as well as our digital retail solution and our back office process as I think all of that help. Plus we had some alternative technology we could use in the service drive that help us as well. So I think a lot of the technology really did help us, yes. Operator00:30:45And our next question here will come from Ron Jusiakou with Guggenheim Securities. Please go ahead. Speaker 900:30:52Yes, good morning and congrats on the quarter team. It's really impressive with the CDK outage. On inventory levels, you call out you expected to normalize post, I think, the June number that looks like it was pretty heavily impacted by CDK in terms of the new day supply. Is that the right way to think about that? And should we assume if it goes back towards like 45 days that is the right way to estimate the new vehicle sales impact as well that you Speaker 300:31:20have on the Ron, it's Daniel here. In our investor deck in Page 5, we've laid it out pretty easily. At the end of March, we had 43 days supply. End of April, we have 46 days supply. End of May with 45 day supply. Speaker 300:31:38And assuming that we would have had a normal sales rate, run rate in June, I wouldn't have imagined that would have increased significantly over that ballpark. Now to put the total thing into perspective and inventory. At the end of June, we had 23,412 vehicles in inventory and about 1,000 vehicles are currently on stop sale of that 23,400. That's an 18% increase quarter on quarter. So my expectation is with an increased sales run rate that we will see the day supply come down pretty quickly. Speaker 900:32:22Okay. That's super helpful. And then on new profit per unit was really impressive this quarter in terms of the pretty much stabilization versus the Q1. How much of that do you think is attributable to either your internal efforts or brand mix where I think you really do probably have the best brand mix in the industry in terms of what consumers want today? But how much is that and how much do you think is reflective of the industry as a whole seeing more stabilization? Speaker 200:32:51Well, I think this is Daryl. I think our brand mix helps. Toyota is performing well. Their hybrid mix helps. Hybrid is in total our most profitable vehicle sell. Speaker 200:33:10So I think that certainly helps, but I do think there's some moderation across the board on the decline. And so I believe we'll see that. And we saw some improvement in things like EV gross margin. Even though it's a very small part of our mix, we did see some strengthening in EV margins this quarter and that was good to see because they were really tough in the Q1. I think there seems to be a sort of a leveling, which I think is probably a bit of an indication on the health of of the consumer as well. Speaker 200:33:47Anything you guys would add? Operator00:33:55And our next question will come from Glenn Chin with Seaport Research Partners. Please go ahead. Speaker 1000:34:02Thank you. Congrats team. Daryl, maybe just a follow on to that, just around the consumer. We've been getting a lot of mixed signals out of the consumer and we're seeing it in restaurants, consumer discretionary, especially higher dollar. Are you guys detecting any change in consumer strength or consumer behavior? Speaker 200:34:25We haven't Glenn, we haven't seen a material shift in like brand mix as a result of resistance. I would look at our used car performance was we were pleased with it and the gross has held up and usually that's where you'll see pressure. The mix versus the used car mix versus 2019 is still changing quite a bit. People aren't buying cheap cars, but that's not a new thing. So I didn't I don't I can't look at our data for Group 1, say that we saw or seeing any changes in the consumer, any material changes Speaker 1000:35:09in the consumer. Also, maybe just follow on to that, so no change in or I guess evidence of consumers maybe downsizing or trading down trim levels or de contenting or otherwise? Speaker 200:35:29Well, we saw $1,000 decline in average selling price versus the last quarter. We went to like $52,000 to $51,000 $51,169 is our average selling price in the quarter. We were over 52,000 last year. So there's we see that. Now there is more OEM suspension on rates this year than there was last year. Speaker 200:35:51So I'm sure that probably maybe holds that up a little bit. But so that's what we're seeing. I don't know that we've seen a material change from high trim levels or mid trim level or low trim level that we've been able to see. There's the pickup truck mix is down a little bit and that's through the industry. I know some people have opined that that's due to pricing pressure. Speaker 200:36:17But the SUV mix is still as strong as ever and SUVs are not cheap as we know. Speaker 300:36:23Glen, it's Daniel here. There's only one thing that I would add to all of that. I think part of our capital allocation strategy and the geographies that we currently operate in, they tend to be fairly demographically strong. And I think that's really helped with our GPUs and just our total operations. Operator00:36:48And with no remaining questions, we will conclude today's question and answer session in addition to today's call.Read moreRemove AdsPowered by Conference Call Audio Live Call not available Earnings Conference CallGroup 1 Automotive Q2 202400:00 / 00:00Speed:1x1.25x1.5x2xRemove Ads Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Group 1 Automotive Earnings HeadlinesGroup 1 Automotive (GPI) to Release Earnings on ThursdayApril 17 at 1:37 AM | americanbankingnews.comGroup 1 Automotive to Announce Q1 2025 ResultsApril 9, 2025 | tipranks.com[Action Required] Claim Your FREE IRS Loophole GuideThis shouldn't surprise anyone who's been paying attention, but... Pres. Trump may be about to unleash the biggest "dollar reset" since 1971.April 17, 2025 | Colonial Metals (Ad)Group 1 Automotive Schedules Release of First Quarter 2025 Financial ResultsApril 8, 2025 | prnewswire.comGroup 1 Automotive Inc (GAV.BE)April 5, 2025 | ca.finance.yahoo.comGroup 1 Automotive's (NYSE:GPI) earnings growth rate lags the 61% CAGR delivered to shareholdersMarch 30, 2025 | finance.yahoo.comSee More Group 1 Automotive Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Group 1 Automotive? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Group 1 Automotive and other key companies, straight to your email. Email Address About Group 1 AutomotiveGroup 1 Automotive (NYSE:GPI), through its subsidiaries, operates in the automotive retail industry in the United States and the United Kingdom. The company sells new and used cars, light trucks, and vehicle parts, as well as service and insurance contracts; arranges related vehicle financing; and offers automotive maintenance and repair services. Group 1 Automotive, Inc. was incorporated in 1995 and is headquartered in Houston, Texas.View Group 1 Automotive ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles 3 Reasons to Like the Look of Amazon Ahead of EarningsTesla Stock Eyes Breakout With Earnings on DeckJohnson & Johnson Earnings Were More Good Than Bad—Time to Buy? 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There are 11 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's Second Quarter of 20 24 Financial Results Conference Call. Please be advised that this call is being recorded today. I would now like to turn the call over to Mr. Pete DeLongchamps, Group 1's Senior Vice President of Manufacturer Relations, Financial Services and Public Affairs. Operator00:00:20Please go ahead, Mr. DeLongchamps. Speaker 100:00:22Thank you, Joe, and good morning, everyone, and welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results we will refer to on this call for comparison purposes have been posted to Groupon's website. Before we begin, I'd like to make some brief remarks about forward looking statements and the use of non GAAP financial measures. Except for historical information mentioned during the call, statements made by management of Group 1 Automotive are forward looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Speaker 100:01:12Those risks included, but are not limited to risks associated with pricing, volume, inventory supply due to increased customer demand and reduced manufacturer production levels due to component shortages, conditions of markets, successful integration of our pending Inscape acquisition and adverse developments in the global economy and resulting impacts on demand for new and used vehicles and related services. Those and other risks are described in the company's filings with the Securities and Exchange Commission. In addition, certain non GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non GAAP financial measures to the most directly comparable GAAP measures on its website. Participating with me on today's call, Daryl Kenningham, our President and Chief Executive Officer and Daniel McHenry, Senior Vice President and Chief Financial Officer. Speaker 100:02:09I'd now like to hand the call over to Darryl. Speaker 200:02:13Thank you, Pete. Good morning, everyone. Despite a number of challenges, we are very pleased with our results this quarter. Our U. S. Speaker 200:02:21Team persevered through extreme weather events and the CDK outage. We witnessed unprecedented teamwork focused on caring for our customers, communities and our team members. The CDK outage was most significantly affected our U. S. Operations from June 19 to June 26. Speaker 200:02:43The company's businesses in the UK were not impacted as we use a different dealership management system there. During the disruption, all Group 1 US dealerships continued to serve our customers using alternative processes until CDK systems were again made available. We do believe that we could have sold more vehicles and performed additional service and repair work in the June quarter had we been operating at full capacity with our CDK dealer management systems. Once we are able to gain access to CDK on June 26, we mobilized our operations personnel to enter thousands of transactions performed during the outage into the CDK DMS, all of which were completed prior to June 30. The superior efforts by our field employees, our accounting shared services center in Houston and our investments in technology for transactional processing all paid tremendous dividends that enabled us to recover quickly from the outage. Speaker 200:03:50For example, we used our technology to process car deals, complete inventory stock ends and post factory vendor and bank statements in an expeditious manner. This phenomenal display of teamwork and unity by our U. S. Team allowed us to maintain our financial close timeline for the June quarter and shift our focus toward the future. We believe these actions are a key reason that we were able to minimize the financial impact of the CDK event on our profit performance. Speaker 200:04:24We estimate the pre tax income impact of the CDK incident to be approximately $17,000,000 or $0.97 in diluted earnings per share. Additionally, we made $5,900,000 in one time pre tax compensation payments to employees or approximately $0.34 in earnings per diluted share. This impact is prior to any insurance or other recoveries we expect to receive in future periods. Now I'd like to spend a few minutes discussing what we feel like differentiates Group 1. Prior to the CDK cyber attack, our disciplined execution led to great after sales and used car performance in the 2nd quarter. Speaker 200:05:15And our F and I performance and front end gross margin retention performed well throughout the entire quarter. Our SG and A leverage was outstanding as we continue to keep our primary cost drivers like headcount in check. Daniel McHenry will outline several specific examples of this disciplined execution in his upcoming comments. Another differentiator for Group 1 is our capital allocation strategy. We are a pure play new vehicle dealership group. Speaker 200:05:48While we regularly evaluate other business adjacencies, we believe in this environment, the best use of our shareholders' capital is investing in new vehicle franchise dealerships. We believe that entering other business verticals not only hurts returns, but also dilutes our focus. This year, we have acquired dealerships with expected revenues of 1,100,000,000 dollars Our ability to integrate these businesses into our existing portfolio allowed these transactions to be accretive from day 1. As previously announced, we recently completed the purchase of 4 Mercedes Benz dealerships north of London. We also look forward to closing the Inchcape acquisition in the Q3. Speaker 200:06:37As a reminder, we anticipate that the 54 inches Cape dealerships will add $2,700,000,000 in revenue to Group 1, doubling our size in the UK. The brand and geographic mix is outstanding and give us significant scale and reach and will improve our SG and A leverage. This is a transformative acquisition for Group 1 and we look forward to welcoming nearly 4,000 new teammates to the company. An important part of our capital allocation focus is what we don't buy. While we routinely discuss acquisitions that are pending or have closed, what's also important are the acquisitions that don't fit strategically or meet our investment hurdles. Speaker 200:07:26Some of those are in great markets with great brands. However, we will not chase revenue just for the sake of growing. Our portfolio optimization efforts are based on returns and strategic fit. Another important element of our capital allocation strategy is evaluating share buybacks as an alternative to purchasing revenue. We continue to balance acquisitions and dispositions with repurchasing our shares. Speaker 200:07:56This year, we bought another 2.6% of the company back for $100,000,000 Over the past 30 months, we've bought back 25% of our stock. Lastly, we believe close partnerships with our OEM partners has never been more important. And this is certainly a differentiator for Group 1. OEMs need great retail partners now more than ever. The good ones admit that and execute against that. Speaker 200:08:27They need our capital, professionalism and execution to win in this ultra competitive environment. Our high performance on OEM scorecard metrics enables Group 1 to stay eligible to purchase more stores, something our team has done an outstanding job with the last 2 years. Our ability to respond to disruptive events quickly and effectively like the CDK outage and catastrophic weather events make us more valuable partners as well. Our willingness and ability to invest in world class facilities, professional management and the community makes us more valuable partners. Our breadth across 2 major markets gives us and our OEM partners competitive leverage and performance advantages. Speaker 200:09:18As a new vehicle dealer, a strong relationship with our OEM partners is more critical than ever, we don't see that changing in the future. We actually see that OEM relationship growing in importance. We believe the Inchcape acquisition allows Group 1 another outstanding opportunity to demonstrate that. And we believe that Group 1 being a great partner to our OEMs gives us significant advantages that ties directly to our capital allocation priorities. Now I'll turn the call over to our CFO, Daniel McHenry for an operating and financial overview. Speaker 200:09:58Daniel? Speaker 300:09:59Thank you, Daryl, and good morning, everyone. In the Q2 of 2024 Group 1 Automotive reported adjusted net income of $133,100,000 Quarterly adjusted diluted EPS from continuing operations of 9.80 dollars Current quarter total revenues of $4,700,000,000 a second quarter record and all time records in new vehicle sales of $2,400,000,000 and F and I of 200,000,000 Starting with our U. S. Operations, we achieved an all time record in new vehicle revenues of $2,000,000,000 driven by record new vehicle sales units sold, up 7% on a reported basis. This reflects the resiliency of demand and our continued emphasis on driving volume. Speaker 300:10:56New vehicle GPUs were essentially flat sequentially, down only $33 Used cars experienced a volume increase both sequentially and year over year with only slight declines in GPUs. We were pleased with our ability to hold margin and increase volume despite fluctuations in pricing between the periods. We believe this is a testament to our process, discipline and use of technology with the pricing of used vehicles. RF and I revenues of $184,000,000 were also quarterly record for the U. S. Speaker 300:11:39Our F and I GPUs of $2,393 increased on the same store basis sequentially and negligibly declined year over year. The performance by our F and I professionals has been outstanding to maintain GPU discipline. Shifting gears to after sales, despite the CDK challenges and weather events, after sales 2nd quarter revenues and gross profit were all time quarterly highs, outperforming sequentially and year over year. Same store customer pay and warranty revenues for May quarter to date period were up 6% and 12.5%, respectively. These gains against 2 top double digit growth comparative our ability to add after sales capacity on a same store basis. Speaker 300:12:39While our overall our overall same store U. S. Headcounts has declined 5% from 2019, our technician headcount is nearly up 5% in the same period. Wrapping up the U. S, let's shift to SG and A. Speaker 300:12:57U. S. Adjusted SG and A as a percentage of gross profit decreased 130 basis points sequentially to 64.4%, demonstrating our continued focus on managing costs at below pre COVID levels as new vehicle margins continue to normalize. Turning to the U. K, top line revenues grew 2.1% year over year driven by higher new vehicle and parts and service revenues of 8.2% and 9% respectively. Speaker 300:13:32While down from the prior year, new vehicle gross profit per unit slightly improved sequentially at the same time prices declined over the same period. Used vehicles remain challenged however. We did experience a slight improvement in GPU sequentially. Wholesale losses per unit remained flat compared to the sequential quarter. Regarding the UK adjusted SG and A as a percentage of gross profit, we recognize we still have some challenges to overcome and we will continue to focus on cost control and business process efficiency as we expand our business in the UK. Speaker 300:14:17Turning to our balance sheet and liquidity. Our strong balance sheet, cash flow generation and leverage position will continue to support a flexible capital allocation approach. As of June 30, our liquidity of 6.40 $4,000,000 was comprised of assessable cash of $159,000,000 $486,000,000 available to borrow on our acquisition line. Our rent adjusted leverage is defined by our U. S. Speaker 300:14:46Syndicated credit facility was 2.44 times at the end of June. Cash flow generation through the first half of twenty twenty four yielded $302,000,000 of adjusted operating cash flow and $223,000,000 of free cash flow after backing out $79,000,000 of CapEx. This capital was deployed in the same period through a combination of acquisitions, share repurchases and dividends, including the acquisition of $1,000,000,000 in revenues through the 30th June, dollars 100,000,000 repurchasing approximately 353,000 shares at an average price of $282.81 resulting in a 2.6% reduction in our share count since January 1 and $12,800,000 in dividends to our shareholder. As of June 30, approximately 53 percent of our €4,600,000,000 in floorplan and other debt was fixed, resulting in an annual EPS of about $1.23 for every 100 basis points increase in secured overnight funding rate. For additional detail regarding our financial condition, please refer to the schedules of additional information in the news release as well as our investor presentation posted on our website. Speaker 300:16:14I will now turn the call over to the operator to begin the question and answer session. Operator? Operator00:16:22We will now begin the question and answer session. And our first question here will come from Rajat Gupta with JPMorgan. Please go ahead. Speaker 400:17:00Great. Thanks for taking the questions. And congrats on the strong education this quarter. I wanted to like just follow-up on just the CDK impact in the Q2. And how should we think about the run rate of certain components of the P and L into July or Q3, if you could give us? Speaker 400:17:22And really the focus was more on SG and A to gross and purely very strong execution sequentially despite some of the deleveraging you might have seen from lost sales and lost service. So could you help like frame for us how should we think about the SG and A to gross level into the Q3? And any color you could give us around how the service business is doing so far in July and your expertise for the Q3? And anything else that you might want to highlight? And I have a quick follow-up. Speaker 400:17:59Thanks. Speaker 200:18:00Rajat, Daryl, one clarification in our script, we had mentioned that our headcount was down 5% from 2019, but our technician headcount is up actually 20% since that time period. So I want to clarify that point. And that's one reason our SG and A as a percentage of gross has been good as we've done a really good job managing our overall headcount and only adding where it drives capacity and after sales effectively. So and that's allowed us to maintain our after sales growth over a period of time and control SG and A at the same time. So I think in terms of the and I'll ask Dan and Luke to speak to some more SG and A issues. Speaker 200:18:44But I think in terms of the CDK impact, I think largely most of the impact is behind us. The CRM came up a little later than the DMS did. So there's still some work being done to try to recover the information on those customers as we move forward. But we've seen the recovery. I would say much of it is behind us and I don't expect a material impact in the Q3. Speaker 200:19:13Daniel, what would you add? Speaker 300:19:15It's clearly in terms of SG and A, there was that one timer of additional pay that we made to employees of that 5,900,000 dollars Clearly, we missed out on a chunk of growth in June that would have really helped us dilute some of our expenses and help drive some further SG and A deleverage in the quarter. Clearly, there's work still to be done in the UK, taking on the Inchcape stores in this quarter. That should help us delever in the UK certainly going into 2025. Speaker 400:19:57Got it. And just on SG and A growth in the U. S, I mean, because you gave us this helpful breakout of U. Versus U. K. Speaker 400:20:06Given the U. S. Was still hurt from some deleveraging, is it fair to assume that the 64.4 that you saw in the U. S. Should continue to move lower from here because of some catch up in July and just because ex CDK that number would have actually been better than the 64.4 reported? Speaker 400:20:27And just like any color on like services into July that you can give us as well? Thanks. Speaker 200:20:35Tough to predict on the 64.4%. We saw our front end margins on new vehicles stay relatively flat sequentially year over year I'm sorry, quarter over quarter. So that certainly helped us and we're obviously watching that margin and that obviously impacts the SG and A number percentage of gross number. So tough to predict if it'll move lower in the near term, Rajat. We're seeing our service business, you saw it in through May, our CP was up 6% year over year same store. Speaker 200:21:10Our warranty was up 12% year over year same store. We're really happy with that. We continue to be able to add technician capacity, which is driving that. And we expect we'll be able to continue that here into the rest of the year as well. Operator00:21:30And our next question will come from John Murphy with Bank of America. Please go ahead. Speaker 500:21:37Good morning, guys. I know you do this on a public call, but remarkable execution, very good, very impressive quarter. Just a first question, when we think, Daniel, about that parts and service that may have been lost during the CDK outage, Is that the kind of revenue that you think could get and gross that can get picked back up or got picked back up? Or is that kind of just lost in the wind and we should see a normalization, but not necessarily a catch back up in the Q3? Speaker 300:22:08John, it's Daniel here. It's kind of hard to judge so early in the quarter. We had some pretty severe weather in Houston in the 1st week, 2 weeks of the quarter. It's harder to pick up parts and service business because that's more of a definitive bar effectively or time slot that you've sold of a technician. So it's harder to pick that up, but I would expect there to be some pickup from that. Speaker 300:22:37However, I think the bag will pick up. That will also be out there as well because clearly, I think a lot of those sales could just being delayed sales with so many to many stores and so many operators under the CDK platform. Speaker 200:22:53One thing, John, to note is our average miles driven increased again this quarter for cars coming through our service department. And excuse me, the average dollars per RO continue to rise mainly, I believe, as a result of that the age of the vehicle population. So that I think that is just good things means good things for parts and service in the future. Speaker 500:23:19Yes. That's helpful. Just a second follow-up on interest rates. And Daniel, you mentioned the impact if rates go up, but God forbid, rates go back down, which hopefully they will sometime soon. Is that impact sort of linear on the downside? Speaker 500:23:39And then also if we think about sort of the flow through of rates, I mean, the whole industry is faced by a 400 basis point increase in borrowing rates at the consumer level last two and a half years, but pricing has been very resilient. Grocers have come down a little bit from the peak. But how do you think about what could happen on the demand side and the pricing side as that massive surge in interest rate and expense backs off and the consumer can maybe put a little bit more money, not to interest expense, but to the price of the vehicle and maybe grosses. I mean, it just seems like there's a misunderstanding of how big a headwind this interest burden is into the consumer and it might actually be relieved sometime soon? Speaker 100:24:28Hey John, this is Pete DeLongchow. I think you're absolutely correct. One of the things that we're fortunate to have is terrific financial services company attached to the OEMs that have been able to cement the rates. You look at our attachment rates now they're up to 75% penetration on new F and I. So that's a positive. Speaker 100:24:48And I think where we could also really pick up some business through lower rates from the used side because those penetration rates are 62%, 63%. So I think you're spot on. With lower rates, it's going to certainly help our used car business and make the new car affordability, I think, better for the consumer. Speaker 200:25:08John, this is Daryl. Our data says that average selling price of a new car in the Q3 was down $1,000 So if you combine that with some lower interest rates, that should take some pressure off the consumer and hopefully drive some more volume. Operator00:25:29Our next question will come from David Whiston with Morningstar. Please go ahead. Speaker 600:25:36Thanks. Good morning. Just first clarification on CDK and a follow-up with that is, did you say loss business is $0.97 plus it's $0.34 for the comp, so it's $1.31 total? Speaker 300:25:51David, this is Daniel. Dollars 1.31 total, but the disaster pay on mine was already adjusted out of the $9.80 So the difference in the 980 and what you would deem to be the losses of bite of bug. Speaker 600:26:08Okay. And is it just luck that you guys got your service back core service back in about a week or were you able to Speaker 700:26:15work with CDK behind the scenes to get that top of the line? Speaker 200:26:21Absolutely no luck at all, David. Come on. Speaker 100:26:24The harder you work, David, the luckier you get. Speaker 200:26:28David, it's hard to say why. I mean, we one, we think our systems are architected in a way that helped us move faster. We felt comfortable being able to move with less risk. I think our team has a very good relationship with CDK. And honestly, we tried to work with all the public to try to help the industry get back honestly. Speaker 200:26:53I don't know how much helped us get back faster, but those were all things. And I think a lot of the technology on our back office really helped us get things back once we did have CDK access. Speaker 600:27:08And just on capital allocation with buybacks, very long term, even in the next decade, should we think about you guys kind of doing what AutoNation has done for a very long time where you're just trying to get that share count as low as you possibly can? Speaker 200:27:22No. We don't think about it in terms of share count necessarily. What we look at is when we're faced with an acquisition, we want to do just the math on a buyback using that capital for a buyback or using that capital for an acquisition. And if it's close, we'll do the acquisition because we want to grow the company and we think scale is important and growing their clusters is important, things like that. But we think about it in the context of just other uses of capital. Speaker 200:27:55We don't necessarily think about the share count. Daniel, you might have something to add to that. Speaker 300:28:00I don't have anything further in the moment. Operator00:28:13Our next question will come from Michael Ward with Freedom right? Speaker 800:28:17So you had new So you had new and used unit sales lost, service business lost. In total, that was a $17,000,000 hit pre tax. Then you had the one time comp charges of $5,900,000 and that's included in the SG and A number we see. Is that the right way to think about it? Speaker 300:28:42That's correct. It's a one timer charge in our SG and A. Speaker 800:28:47And it's included, you didn't call that out. The $9,000,000 called out for catastrophic events was the weather related impact you had? Speaker 100:28:56That was weather and Speaker 300:28:57And the CDK. So that's let's say ballpark, 2 thirds CDK adjustment, a third weather. Speaker 800:29:07Okay. Okay. I just wanted Daniel, I think you said something like the service in April May in the U. S. Was running up 5% or 6% same store, is that correct? Speaker 200:29:19Customer pay was up 6% through the end of May, Q2 April, May. CP was up 6%, warranty was up 12. Speaker 800:29:29Okay. And so then in total, so that suggests somewhere around $20,000,000 or $30,000,000 hit from the CDK on the service revenue, somewhere in that 1 or 2 week period in June. Is that the ballpark? Speaker 200:29:45It's probably it. Speaker 300:29:46I think that's a fair assessment. Okay. And so Mike, it's Daniel here. It just took longer to process every transaction and it took longer to process every transaction back into the system than it normally would. It was just very inefficient. Speaker 800:30:03Okay. And from your performance coming out of it relative to the rest of the dealer group was much better. And so it sounds like it was the call center and Acceleride that really contributed. Is that right? Speaker 400:30:17Well, I think there was Speaker 200:30:18a number of things that contributed. I think the technology both at our customer contact center as well as our digital retail solution and our back office process as I think all of that help. Plus we had some alternative technology we could use in the service drive that help us as well. So I think a lot of the technology really did help us, yes. Operator00:30:45And our next question here will come from Ron Jusiakou with Guggenheim Securities. Please go ahead. Speaker 900:30:52Yes, good morning and congrats on the quarter team. It's really impressive with the CDK outage. On inventory levels, you call out you expected to normalize post, I think, the June number that looks like it was pretty heavily impacted by CDK in terms of the new day supply. Is that the right way to think about that? And should we assume if it goes back towards like 45 days that is the right way to estimate the new vehicle sales impact as well that you Speaker 300:31:20have on the Ron, it's Daniel here. In our investor deck in Page 5, we've laid it out pretty easily. At the end of March, we had 43 days supply. End of April, we have 46 days supply. End of May with 45 day supply. Speaker 300:31:38And assuming that we would have had a normal sales rate, run rate in June, I wouldn't have imagined that would have increased significantly over that ballpark. Now to put the total thing into perspective and inventory. At the end of June, we had 23,412 vehicles in inventory and about 1,000 vehicles are currently on stop sale of that 23,400. That's an 18% increase quarter on quarter. So my expectation is with an increased sales run rate that we will see the day supply come down pretty quickly. Speaker 900:32:22Okay. That's super helpful. And then on new profit per unit was really impressive this quarter in terms of the pretty much stabilization versus the Q1. How much of that do you think is attributable to either your internal efforts or brand mix where I think you really do probably have the best brand mix in the industry in terms of what consumers want today? But how much is that and how much do you think is reflective of the industry as a whole seeing more stabilization? Speaker 200:32:51Well, I think this is Daryl. I think our brand mix helps. Toyota is performing well. Their hybrid mix helps. Hybrid is in total our most profitable vehicle sell. Speaker 200:33:10So I think that certainly helps, but I do think there's some moderation across the board on the decline. And so I believe we'll see that. And we saw some improvement in things like EV gross margin. Even though it's a very small part of our mix, we did see some strengthening in EV margins this quarter and that was good to see because they were really tough in the Q1. I think there seems to be a sort of a leveling, which I think is probably a bit of an indication on the health of of the consumer as well. Speaker 200:33:47Anything you guys would add? Operator00:33:55And our next question will come from Glenn Chin with Seaport Research Partners. Please go ahead. Speaker 1000:34:02Thank you. Congrats team. Daryl, maybe just a follow on to that, just around the consumer. We've been getting a lot of mixed signals out of the consumer and we're seeing it in restaurants, consumer discretionary, especially higher dollar. Are you guys detecting any change in consumer strength or consumer behavior? Speaker 200:34:25We haven't Glenn, we haven't seen a material shift in like brand mix as a result of resistance. I would look at our used car performance was we were pleased with it and the gross has held up and usually that's where you'll see pressure. The mix versus the used car mix versus 2019 is still changing quite a bit. People aren't buying cheap cars, but that's not a new thing. So I didn't I don't I can't look at our data for Group 1, say that we saw or seeing any changes in the consumer, any material changes Speaker 1000:35:09in the consumer. Also, maybe just follow on to that, so no change in or I guess evidence of consumers maybe downsizing or trading down trim levels or de contenting or otherwise? Speaker 200:35:29Well, we saw $1,000 decline in average selling price versus the last quarter. We went to like $52,000 to $51,000 $51,169 is our average selling price in the quarter. We were over 52,000 last year. So there's we see that. Now there is more OEM suspension on rates this year than there was last year. Speaker 200:35:51So I'm sure that probably maybe holds that up a little bit. But so that's what we're seeing. I don't know that we've seen a material change from high trim levels or mid trim level or low trim level that we've been able to see. There's the pickup truck mix is down a little bit and that's through the industry. I know some people have opined that that's due to pricing pressure. Speaker 200:36:17But the SUV mix is still as strong as ever and SUVs are not cheap as we know. Speaker 300:36:23Glen, it's Daniel here. There's only one thing that I would add to all of that. I think part of our capital allocation strategy and the geographies that we currently operate in, they tend to be fairly demographically strong. And I think that's really helped with our GPUs and just our total operations. Operator00:36:48And with no remaining questions, we will conclude today's question and answer session in addition to today's call.Read moreRemove AdsPowered by