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GROUP 1 AUTOMOTIVE INC (GPI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered record revenue ($5.70B) and gross profit ($935.8M), with adjusted diluted EPS of $11.52 up 17.5% year over year, driven by strong Parts & Service and continued F&I discipline .
  • EPS and revenue both beat Wall Street consensus; adjusted EPS beat by ~10.3% (actual $11.52 vs $10.45), and revenue beat by ~$34M (actual $5.7035B vs $5.6689B); EBITDA also exceeded expectations by ~$37.6M* [GetEstimates].
  • U.S. operations showed broad-based strength (P&S GP +13.1%, F&I PRU +4.4% YoY), while the U.K. remained challenged by BEV mandate-related margin pressures and higher wage/insurance costs; UK SG&A/GP elevated in Q2 but expected to ease in Q3 due to seasonality .
  • Corporate actions: three U.S. luxury acquisitions (expected $330M annual revenue), continued portfolio optimization, $44.5M buybacks in Q2, and dividend of $0.50 per share; $308.8M remains on repurchase authorization .

What Went Well and What Went Wrong

What Went Well

  • Parts & Service strength: consolidated P&S gross profit rose to $402.8M (+27.1% YoY) with margins +90 bps; same-store P&S GP $355.1M (+14.0% YoY). Management highlighted double-digit customer pay growth and warranty tailwinds in both markets .
  • F&I execution: consolidated F&I revenue reached $237.8M (+18.8% YoY); U.S. F&I PRU rose to $2,465 (+$104 YoY), with CFO lauding discipline and penetration improvements .
  • Acquisitions and strategic footprint: added Lexus, Acura (Fort Myers) and Mercedes-Benz (Austin), with ~$330M annual revenue expected; CEO: “We will continue to be acquisitive…but very disciplined in valuing acquisitions” .

What Went Wrong

  • SG&A leverage: consolidated SG&A/GP increased to 69.0% (+418 bps YoY); adjusted SG&A/GP to 68.7% (+237 bps), reflecting integration and cost inflation, especially in the U.K. .
  • U.K. margin pressures: BEV mandate-related mix and government-imposed wage/insurance increases lifted UK SG&A/GP to 84.3%, with $7.6M restructuring charges in Q2 .
  • Used retail GPUs modestly lower: consolidated used retail GP per unit fell to $1,600 (-2.3% YoY), though U.S. same-store PRU improved and UK wholesale losses narrowed materially .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$5.55 $5.51 $5.70
Gross Profit ($USD Millions)$879.2 $891.9 $935.8
Total Gross Margin (%)15.9% 16.2% 16.4%
Diluted EPS - Continuing Ops (GAAP)$7.08 $9.64 $10.77
Adjusted Diluted EPS - Continuing Ops (non-GAAP)$10.02 $10.17 $11.52
SG&A as % of Gross Profit69.9% 69.2% 69.0%
Operating Margin (%)3.6% 4.4% 4.4%

Segment breakdown (Q2 2025):

SegmentRevenue ($USD Millions)Gross Profit ($USD Millions)Notes
U.S.$4,177.2 $728.7 P&S GP $308.1 (+13.1% YoY); F&I PRU $2,465 (+4.4% YoY)
U.K.$1,526.4 $207.1 Elevated SG&A/GP 84.3%; restructuring $7.6M

KPIs (consolidated):

KPIQ2 2024Q1 2025Q2 2025
New Vehicle Units Sold47,661 56,099 55,763
NV GP per Retail Unit ($)$3,568 $3,381 $3,557
Used Retail Units Sold49,260 59,618 60,240
UV Retail GP PRU ($)$1,638 $1,569 $1,600
F&I PRU ($)$2,065 $1,955 $2,050
Parts & Service GP ($USD Millions)$316.8 $381.0 $402.8
Parts & Service Gross Margin (%)55.1% 55.1% 56.1%

Estimates vs Actual (Q2 2025):

MetricConsensusActualBeat/Miss
Adjusted Diluted EPS ($)10.45*11.52 Beat (≈+10.3%)*
Revenue ($USD Billions)$5.6689*$5.7035 Beat (≈+$0.0346B)*
EBITDA ($USD Millions)$252.3*$289.8*Beat (≈+$37.6M)*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ2 2025 payout$0.50 planned annualized rate $2.00$0.50 declared (payable Jun 16, 2025)Maintained
Share repurchase authorizationAs of 6/30/2025Not specified in Q1$308.8M remainingMaintained capacity
U.K. SG&A leverageQ3 2025~80% achievable YTD targetExpect slight improvement in Q3 vs Q2 (plate-change seasonality)Improving (qualitative)
Restructuring (U.K.)FY 2025OngoingAdditional less significant actions expected in 2025Continued optimization

No formal quantitative company-wide revenue/EPS guidance was provided for Q3/Q4.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current (Q2 2025)Trend
AI/Technology & productivityEarly-stage adoption; in-house data/marketing; shop A/C investments improving retention Testing AI for customer engagement, robotics for operational automation; aim to lower transaction costs Increasing focus
Supply chain, tariffs, macroCaution on inventory allocations; potential GPU resilience as inventories tighten; deferred some capex Expect OEMs to adjust trims/pricing to offset tariffs; managing local market dynamics Ongoing risk management
Parts & ServiceQ1: CP up >6%, warranty ~30% on recalls; adding technicians (~8% YoY) Q2: CP up 13.6% same-store; warranty tailwind; capacity expansion continues Strong, but growth likely normalizes
U.K. integration & costsQ1: record UK GP; SG&A back to pre-acquisition levels; $11.1M restructuring Q2: UK SG&A elevated (wage/insurance), $7.6M restructuring; expect seasonal SG&A relief in Q3 Integration progressing; cost pressure elevated
Product mix & BEV mandates (UK)UK EV margin drag highlighted BEV fleet sales compress margins; government BEV subsidies up to £3,750 noted Policy headwind persists
Acquisitions/portfolio optimizationOngoing U.S. and U.K. M&A; closures of underperforming sites Added Lexus/Acura/Mercedes; dispositions and closures (U.S. and U.K.) Active capital allocation

Management Commentary

  • CEO: “We were pleased with our growth…Parts and service was a bright spot…F&I was also a good story…we closed on three outstanding dealerships in the U.S.” .
  • CEO on U.K.: “The U.K. market continues to be challenging…with BEV mandate-related margin pressures…positive momentum anticipated in the second half of the year” .
  • CFO: “U.S. adjusted SG&A as a percent of gross profit decreased…we are seeing the benefits of refocusing on operational efficiency” .
  • CEO on AI: “We are making investments in technology…Artificial intelligence has the capability to improve our business…We are testing some very exciting things” .
  • CFO on U.K. costs: “Effective April 2025…the UK government increased the national minimum wage and national insurance…~$4M additional costs in Q2; UK SG&A/GP 84.3%” .

Q&A Highlights

  • New car GPUs: Held fairly strong across April–June with no specific spike; resilience expected as OEMs manage day-supply .
  • U.K. cost actions: Headcount reductions (~800) and closures near overlapping locations; aim to reduce SG&A while preserving customer-facing roles .
  • F&I and used performance: Continued strong F&I PRU; used GPUs stable with acquisition excellence; U.S. used 31-day supply .
  • Warranty vs Customer Pay: Warranty elevated cannot be fully offset by CP if it normalizes, but capacity and CP growth remain opportunities .
  • BEV mandates impact (UK): Corporate fleet mix dilutes retail margins; ongoing headwind to gross .

Estimates Context

  • Q2 2025 adjusted EPS of $11.52 beat consensus $10.45*, potentially prompting upward revisions to FY EPS run-rate assumptions given P&S momentum and F&I strength *.
  • Revenue of $5.7035B beat by ~$34.6M*, with EBITDA of ~$289.8M vs ~$252.3M*, reflecting mix and operational efficiencies*.
  • Q1 2025 and Q2 2024 also showed beats vs consensus on revenue/EPS, supporting an estimate revision trend*.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Strength in P&S and disciplined F&I are offsetting modest GPU compression, supporting near-term EPS resilience; watch for normalization in warranty tailwinds into H2 .
  • U.K. margin headwinds persist, but seasonal Q3 plate-change and ongoing cost actions should improve SG&A leverage; monitor wage/insurance and BEV mix impacts .
  • Capital allocation remains accretive—$330M revenue acquisitions, opportunistic buybacks ($44.5M in Q2) and $308.8M authorization remaining—providing downside support .
  • Tariff dynamics likely push OEMs to adjust content/pricing; GPI expects GPU resilience and is prioritizing nimble operations—potentially a catalyst if day-supply tightens .
  • Technician capacity, shop A/C investments, and first-party data/branding initiatives are medium-term drivers of aftersales throughput and loyalty .
  • Near-term trading: bias positive on P&S/F&I momentum and consensus beats; risk skew from U.K. margin pressure and macro tariff outcomes.
  • Medium-term thesis: scale, productivity, and local-market strategy with technology enablement should sustain cash generation for continued M&A and buybacks.