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GROUP 1 AUTOMOTIVE INC (GPI)·Q4 2024 Earnings Summary

Executive Summary

  • Record quarter: revenue $5.55B and gross profit $879.2M; adjusted EPS $10.02 grew 5.5% YoY, while GAAP EPS $7.08 declined on $33.0M franchise impairments and $16.7M U.K. restructuring charges .
  • U.S. operations strong: parts & service revenue hit a quarterly record ($680.2M), F&I revenue reached $225.5M; U.S. F&I PRU rose sequentially, but new-vehicle GPU remained down YoY as floorplan costs stayed elevated (net floorplan expense turned positive) .
  • U.K. integration depressed margins (SG&A 91.8% of GP) amid DMS conversion and workforce realignment; management targets at least 300 bps improvement in U.K. SG&A as % of GP in 2025 as integration completes and processes localize .
  • Capital allocation: repurchased $32.0M in Q4 and $161.6M in 2024, with $476.1M buyback authorization remaining at 12/31/24; liquidity ~$1.2B and rent-adjusted leverage 2.79x support ongoing M&A and buybacks .
  • Potential stock catalysts: visible U.K. cost take-out pacing, sustained aftersales growth (warranty tailwinds), and policy clarity on tariffs; absence of numerical guidance shifts focus to 2025 execution milestones .

What Went Well and What Went Wrong

  • What Went Well

    • Record quarterly revenue ($5.55B) and gross profit ($879.2M); adjusted EPS up YoY to $10.02 despite higher financing costs .
    • Aftersales strength: “parts and service revenue growth of 12.2% was the best quarter in the last four quarters” and record P&S revenue; management: “We will continue to invest in after sales” .
    • Sequential improvement in U.S. new-vehicle PRU and F&I PRU: “new vehicle PRUs were up sequentially” and U.S. F&I PRU +3% QoQ to $2,415 .

  • What Went Wrong

    • U.K. margin drag during integration: U.K. SG&A as % of gross profit rose to 91.8% (from 82.2% YoY); DMS conversion “disrupted operations” in late Q4 .
    • New-vehicle GPU pressure: consolidated new-vehicle PRU fell 12% YoY to $3,540; consolidated gross margin declined to 15.9% (vs 16.3% YoY) .
    • Higher interest costs: floorplan interest expense increased to $32.2M (+66% YoY); net floorplan expense was $7.2M vs $0.0M YoY .

Financial Results

  • Consolidated performance: YoY and sequential comparisons
MetricQ4 2023Q3 2024Q4 2024
Total Revenues ($B)$4.48 $5.22 $5.55
Gross Profit ($M)$730.6 $852.7 $879.2
Gross Margin (%)16.3% 16.3% 15.9%
Net Income – Cont. Ops ($M)$108.8 $117.1 $94.6
Diluted EPS – GAAP$7.87 $8.68 $7.08
Diluted EPS – Adjusted (non-GAAP)$9.50 $9.90 $10.02
Operating Margin (%)4.3% 4.4% 3.6%
SG&A as % of GP66.7% 69.4% 69.9%
Parts & Service Revenues ($M)$545.0 $660.0 $680.2
F&I Revenues ($M)$187.1 $214.1 $225.5
  • Segment and key operating metrics
Segment/KPIQ4 2023Q4 2024
U.S. Revenues ($M)$3,772.5 $4,234.8
U.S. Gross Profit ($M)$640.2 $695.9
U.S. New Vehicle PRU ($)$4,099 $3,587
U.S. Used Retail PRU ($)$1,513 $1,473
U.S. F&I PRU ($)$2,345 $2,415
U.S. SG&A as % GP (%)64.5% 64.1%
U.K. Revenues ($M)$707.5 $1,311.2
U.K. Gross Profit ($M)$90.5 $183.3
U.K. New Vehicle PRU ($)$3,656 $3,403
U.K. Used Retail PRU ($)$1,141 $1,345
U.K. F&I PRU ($)$885 $926
U.K. SG&A as % GP (%)82.2% 91.8%
  • KPIs and inventory
KPIQ4 2023Q4 2024
Retail New Units45,827 57,939
Retail Used Units44,656 55,337
Avg New ASP ($)$50,760 $51,106
Avg Used ASP ($)$29,884 $29,879
F&I PRU ($)$2,068 $1,991
Days’ Supply – New (Consol)37 44
Days’ Supply – Used (Consol)35 39
Days’ Supply – U.S. (New/Used)36 / 29 43 / 29
Days’ Supply – U.K. (New/Used)48 / 58 45 / 67
  • Non-GAAP adjustments and interest
    • Q4 adjustments included $33.0M impairments and $16.7M restructuring; adjusted pre-tax margin was 3.1% vs 2.2% GAAP .
    • Floorplan interest expense rose to $32.2M (vs $19.4M), with net floorplan expense at $7.2M vs $0.0M prior year .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
U.K. SG&A as % of GPFY2025None disclosedExpect ≥300 bps improvement vs 2024 adjusted run-rate (83.0%) as integration completes Raised efficiency target
Aftersales technician additions (U.S.)FY2025Implied similar to 2024Maintain aggressive hiring (~300 techs added in 2024); continue shop investments (A/C) to drive retention Maintained
Warranty tailwind (U.S.)FY2025None disclosedElevated warranty volumes expected to persist; ~1/3 of warranty ROs convert to customer pay upsell New positive tailwind
Capital returnOngoing$500M authorization (Nov’24) $476.1M authorization remaining at 12/31/24; repurchases continue subject to conditions Maintained capacity

Note: Company did not issue quantitative revenue/EPS/margin guidance in Q4 materials .

Earnings Call Themes & Trends

TopicQ2 2024 (Jul)Q3 2024 (Oct)Q4 2024 (Jan)Trend
Aftersales growthU.S. P&S revenue record; managed through CDK outage P&S GP +17% YoY; continued capacity focus Record P&S revenue; same-store P&S +~9% with higher customer counts Strengthening
New-vehicle GPUsPRUs pressured YoY PRUs down YoY; stop-sales impacted luxury brands Sequential PRU improvement; near trough levels per mgmt Stabilizing
U.K. strategy/integrationInchcape closing pending Closed Inchcape; large UK expansion DMS conversion disrupted ops; restructuring underway; 2025 SG&A improvement targeted Transition pain → improvement
Tariffs/macro——Monitoring potential tariffs; OEMs “war-gaming” scenarios; impact TBD Uncertain policy
Technology/systemsCDK outage recovery (U.S.) —U.K. DMS conversion caused temporary disruption Systems stabilization
Financing costsNet floorplan expense positive Net floorplan positive; rising rates impact Net floorplan $7.2M; 60% debt fixed; ~+$1.15 EPS per +100 bps SOFR Rate headwind moderating with fixed mix

Management Commentary

  • “Our parts and service revenue growth of 12.2% was the best quarter in the last four quarters. SG&A leverage was outstanding, and our new vehicle PRUs were up sequentially on a U.S. as reported basis.” — CEO Daryl Kenningham .
  • “The in-store [U.K. DMS] conversion did disrupt our operations for a period of time… As a result… we recognized $16.7 million in restructuring charges” — CEO .
  • “In the U.S., F&I GPU of $2,415 increased 3% sequentially… performance by our F&I professionals has been outstanding” — CFO Daniel McHenry .
  • “Our expectation is that we would take at least 300 basis points off [U.K. adjusted SG&A as % GP] going into next year” — CFO .
  • “We will continue to balance acquisitions, dispositions with repurchasing our shares… over the past 3 years, we’ve repurchased 25% of our stock” — CEO .

Q&A Highlights

  • Tariffs/policy: OEMs are modeling scenarios; no retailer pricing/cost-sharing specifics yet. Potential tariffs on imports could be modestly supportive for brands with U.S. production .
  • U.K. cost path: Integration created double-cost in Q4 (onshoring accounting, workforce changes). Mgmt expects ≥300 bps improvement in 2025 adjusted SG&A as % GP as one-offs end and decentralization benefits accrue .
  • GPUs trajectory: Management believes new-vehicle GPUs are near a bottom; Q4 sequential PRU firming seen, especially with tighter brands and rationalized production .
  • Aftersales capacity: Target to add technicians at least at 2024 pace (~300 adds in U.S.), with retention aided by shop investments (e.g., A/C), scheduling, and comp plans .
  • Warranty tailwind: Elevated warranty work expected to persist in 2025 and often drives incremental customer pay (~one-third of warranty ROs add CP work) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was not retrievable due to S&P Global access limits at the time of analysis. As a result, we cannot quantify beat/miss vs consensus for this quarter and will update when data access is restored (values would be sourced from S&P Global).

Key Takeaways for Investors

  • Core engine is healthy: Record total revenue and aftersales strength offset GPU normalization and rate headwinds; adjusted EPS expanded YoY even with integration noise .
  • U.S. execution resilient: Same-store P&S growth and sequential PRU improvements point to stable demand and strong in-store processes; F&I discipline maintained .
  • U.K. is the swing factor: Elevated U.K. SG&A should abate with integration completion and decentralized decision-making; ≥300 bps improvement in 2025 is a key watch item .
  • Rates/inventory: Net floorplan expense turned positive again; inventory days supply rose but remains manageable, with brand-level divergence (tight Toyota/Lexus vs higher-supply OEMs) .
  • Capital deployment remains supportive: ~$1.2B liquidity and $476.1M buyback capacity at year-end provide flexibility to continue M&A and repurchases alongside deleveraging .
  • 2025 tailwinds: Warranty repair wave and ongoing technician hiring should support aftersales; GPU stabilization and F&I penetration can underpin earnings quality .
  • Monitoring items: U.K. integration milestones, tariff policy outcomes, and any cadence changes in P&S growth are likely to drive near-term stock reaction .