Group 1 Automotive Announces Third Quarter 2019 Financial Results

HOUSTON, Oct. 24, 2019 /PRNewswire/ -- Group 1 Automotive, Inc. (NYSE: GPI), ("Group 1" or the "Company"), an international, Fortune 500 automotive retailer, today reported 2019 third quarter net income of $38.0 million, diluted earnings per common share of $2.04, adjusted net income (a non-GAAP measure) of $56.4 million, and adjusted diluted earnings per common share (a non-GAAP measure) of $3.02.  The Company's 2019 third quarter total revenue was an all-time quarterly record of $3.1 billion.

Third quarter 2019 adjusted net income and diluted earnings per share exclude approximately $18.4 million of net after-tax adjustments, or $0.98 per common share, for non-core items.  These adjustments consist of catastrophic event costs of approximately $9.0 million after-tax, or $0.48 per common share, non-cash asset impairments of $8.3 million, or $0.44 per common share, and a net loss on real estate and dealership transactions of $1.1 million, or $0.06 per common share.  Reconciliations of non-GAAP financial measures are included in the attached financial tables.

"Our achievement of new quarterly records for total revenue and adjusted EPS in a flat U.S. new vehicle sales market, as well as a U.K. market in political turmoil, is a testimony to the strong operating execution of our entire team - especially in the U.S.," said Earl J. Hesterberg, Group 1's president and chief executive officer.  "Same Store U.S. gross profit growth of 16.6% in total used vehicles and 9.9% in parts and service are both remarkable performances, which drove one of the best quarters in our Company's history."

Consolidated Results for Third Quarter 2019 (year-over-year comparable basis)

For ease of comparison, we have included constant currency metrics (a non-GAAP measure) both below (shown in parenthesis) and in the financial tables that follow:

• Total revenue increased 7.9 percent (9.1 percent), to an all-time quarterly record of $3.1 billion.
• Total gross profit increased 7.0 percent (7.9 percent), to an all-time quarterly record of $465.6 million.
• New vehicle revenues increased 7.3 percent (8.4 percent) on a 2.4 percent increase in unit sales. New vehicle gross profit decreased 3.1 percent (1.9 percent), to $75.2 million. U.S. Same Store new unit sales increased 2.9 percent, outperforming the industry, which was about flat.
• Retail used vehicle revenues increased 9.8 percent (11.1 percent) on 9.6 percent higher unit sales. Retail used vehicle gross profit increased 8.2 percent (9.2 percent), to $54.2 million. Total used vehicle gross profit was up 9.6 percent (10.5 percent), to $54.6 million. U.S. Same Store retail used vehicle revenue increased 14.1 percent, driven by an 11.9 percent increase in unit sales and retail used gross profit increased 16.4 percent, reflecting the volume growth and a $54 per unit improvement in gross profit, to $1,386 per unit.
• Parts and service gross profit increased 8.7 percent (9.6 percent) on revenue growth of 8.2 percent (9.1 percent). U.S. Same Store parts and service revenues and gross profit grew 9.6 percent and 9.9 percent, respectively.
• Finance and Insurance (F&I) gross profit per retail unit (PRU) increased 3.9 percent (4.5 percent), to $1,485. U.S. Same Store F&I gross profit PRU grew 3.2 percent, to $1,751.
• Selling, General and Administrative (SG&A) expenses as a percent of gross profit increased 320 basis points, to 76.0 percent. Adjusted Same Store SG&A as a percent of gross profit increased 10 basis points, to 72.8 percent.

Segment Results for Third Quarter 2019 (year-over-year comparable basis)

• United States:
  The Company's U.S. operations accounted for 77.7 percent of total revenues and 83.1 percent of total gross profit.  Total U.S. revenues were $2.4 billion, an increase of 10.1 percent.  Retail used vehicle revenues increased 15.0 percent, F&I revenues increased 10.9 percent, parts and service revenues increased 8.8 percent, and new vehicle revenues increased 7.9 percent. 
  
  Total gross profit grew 9.8 percent, to $387.0 million.  Parts and service Same Store gross profit grew an all-time record of 9.9 percent, to $168.0 million.  Same Store used vehicle gross profit grew 16.4 percent, to $42.5 million.  Same Store used retail unit sales grew 11.9 percent, as Val-U-Line ^® retail unit sales grew 10.3 percent and represented 10.8 percent of our quarterly used unit sales.  Same Store total used vehicle gross profit PRU increased $55, or 5.1 percent, to $1,127.  Same Store F&I gross profit PRU increased $54, or 3.2 percent per unit, to $1,751.
  
  SG&A expenses as a percent of gross profit increased 500 basis points, to 73.7 percent.  Same Store adjusted SG&A expenses as a percent of gross profit increased 40 basis points, to 70.4 percent.
  
  "Group 1's strategic initiatives in the areas of omnichannel capabilities, expanded used vehicle offerings with our Val-U-Line^® brand, and increased service capacity have been the key drivers of significantly improved profitability in our U.S. operations," said Daryl Kenningham, Group 1's president of U.S. operations.  "We are continuing to demonstrate that by focusing on used vehicles and aftersales operations, we can deliver significant profit improvements in our U.S. business."
  
  
• United Kingdom:
  The Company's U.K. operations accounted for 18.7 percent of total revenues and 14.0 percent of total gross profit.  Total Same Store U.K. revenues decreased 2.3 percent (increased 3.2 percent), to $547.6 million.  Same Store total gross profit decreased 8.7 percent (decreased 3.6 percent), to $59.6 million.  Continued weakness in consumer confidence and the overall auto market due to Brexit continues to exert downward pressure on new vehicle sales volumes and margins.
  
  SG&A expenses as a percent of gross profit increased 160 basis points, to 88.5 percent.  Same Store SG&A expenses as a percent of gross profit increased 40 basis points, to 85.7 percent.  On a sequential basis, adjusted SG&A as a percent of gross profit declined 440 basis points as cost reduction actions began to gain traction.
  
  
• Brazil:
  The Company's Brazilian operations accounted for 3.6 percent of total revenues and 2.9 percent of total gross profit.  The Company's Same Store new vehicle revenues increased 5.1 percent (6.1 percent), with units down 1.3 percent due to a product cycle lull in certain key brands.  Same Store total revenues increased 9.5 percent (10.2 percent), with the increase driven by constant currency revenue growth of 27.8 percent in total used vehicles, 6.1 percent in new vehicles, and 5.4 percent in parts & service.  SG&A expenses as a percent of gross profit decreased 25.6 percentage points, to 81.6 percent.  Adjusted Same Store SG&A expenses as a percent of gross profit decreased 130 basis points, to 81.8 percent.

Corporate Development

In October 2019, the Company opened a four-story flagship Jaguar-Land Rover dealership at the junction of two of the busiest roadways in northwest London.  This open point increases the Company's Jaguar-Land Rover dealership count to four in the U.K. and nine worldwide.  The new Jaguar-Land Rover dealership is expected to generate approximately $85 million in annual revenues. 

In September 2019, the Company opened a new standalone collision center in Atlanta, Georgia.  We now operate 30 collision centers in the U.S. and continue to explore opportunities for further expansion.

Also in September 2019, the Company disposed of a Volkswagen franchise in Texas, which generated approximately $40 million in trailing-twelve-month revenues.

Year-to-date 2019, the Company has acquired 13 franchises, which are expected to generate an estimated $340 million in annual revenues; and the Company has disposed of 12 franchises that generated approximately $240 million in trailing-twelve-month revenues.

Third Quarter 2019 Earnings Conference Call Details

Group 1's senior management will host a conference call today at 10 a.m.  ET to discuss the third quarter financial results and the Company's outlook and strategy.

The conference call will be simulcast live on the Internet at www.group1auto.com, then click on 'Investor Relations' and then 'Events' or through this link: http://www.group1corp.com/events.  A webcast replay will be available for 30 days.

The conference call will also be available live by dialing in 15 minutes prior to the start of the call at:

A telephonic replay will be available following the call through October 31, 2019 by dialing:

ABOUT GROUP 1 AUTOMOTIVE, INC.
Group 1 owns and operates 184 automotive dealerships, 240 franchises, and 49 collision centers in the United States, the United Kingdom and Brazil that offer 31 brands of automobiles. Through its dealerships, the Company sells new and used cars and light trucks; arranges related vehicle financing; sells service contracts; provides automotive maintenance and repair services; and sells vehicle parts.

Investors please visit www.group1corp.com, www.group1auto.com, www.group1collision.com, www.facebook.com/group1auto, and www.twitter.com/group1auto, where Group 1 discloses additional information about the Company, its business, and its results of operations.

FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which are statements related to future, not past, events and are based on our current expectations and assumptions regarding our business, the economy and other future conditions. In this context, the forward-looking statements often include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should," "foresee," "may" or "will" and similar expressions. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. Any such forward-looking statements are not assurances of future performance and involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. These risks and uncertainties include, among other things, (a) general economic and business conditions, (b) the level of manufacturer incentives, (c) the future regulatory environment, (d) our ability to obtain an inventory of desirable new and used vehicles, (e) our relationship with our automobile manufacturers and the willingness of manufacturers to approve future acquisitions, (f) our cost of financing and the availability of credit for consumers, (g) our ability to complete acquisitions and dispositions and the risks associated therewith, (h) foreign exchange controls and currency fluctuations, (i) our ability to retain key personnel, and (j) uncertainty of the outcome and potential impact of Brexit. For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

NON-GAAP FINANCIAL MEASURES, SAME STORE DATA, AND OTHER DATA
In addition to evaluating the financial condition and results of our operations in accordance with U.S. GAAP, from time to time our management evaluates and analyzes results and any impact on the Company of strategic decisions and actions relating to, among other things, cost reduction, growth, profitability improvement initiatives, and other events outside of normal, or "core," business and operations, by considering alternative financial measures not prepared in accordance with U.S. GAAP. In our evaluation of results from time to time, we exclude items that do not arise directly from core operations, such as non-cash asset impairment charges, legal matters, gains and losses on dealership franchise or real estate transactions, and catastrophic events, such as hailstorms, hurricanes, and snow storms. Because these non-core charges and gains materially affect the Company's financial condition or results in the specific period in which they are recognized, management also evaluates, and makes resource allocation and performance evaluation decisions based on, the related non-GAAP measures excluding such items. This includes evaluating measures such as adjusted selling, general and administrative expenses, adjusted net income, adjusted diluted income per share, and constant currency. These adjusted measures are not measures of financial performance under U.S. GAAP, but are instead considered non-GAAP financial performance measures. Non-GAAP measures do not have definitions under U.S. GAAP and may be defined differently by, and not be comparable to similarly titled measures used by, other companies. As a result, any non-GAAP financial measures considered and evaluated by management are reviewed in conjunction with a review of the most directly comparable measures calculated in accordance with U.S. GAAP. We caution investors not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable U.S. GAAP measures.

In addition to using such non-GAAP measures to evaluate results in a specific period, management believes that such measures may provide more complete and consistent comparisons of operational performance on a period-over-period historical basis and a better indication of expected future trends. Our management also uses these adjusted measures in conjunction with U.S. GAAP financial measures to assess our business, including communication with our Board of Directors, investors, and industry analysts concerning financial performance. We disclose these non-GAAP measures, and the related reconciliations, because we believe investors use these metrics in evaluating longer-term period-over-period performance, and to allow investors to better understand and evaluate the information used by management to assess operating performance. The exclusion of certain expenses in the calculation of non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. We anticipate excluding these expenses in the future presentation of our non-GAAP financial measures.

In addition, we evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our underlying business and results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period reported results for entities reporting in currencies other than U.S. dollars using comparative period exchange rates rather than the actual exchange rates in effect during the respective periods. The constant currency performance measures should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP.

The Same Store amounts presented include the results of dealerships for the identical months in each period presented in comparison, commencing with the first full month in which the dealership was owned by us and, in the case of dispositions, ending with the last full month it was owned by us. Same Store results also include the activities of our corporate headquarters.

Certain disclosures are reported as zero balances or may not compute due to rounding.

Investor contacts:
Sheila Roth
Manager, Investor Relations
Group 1 Automotive, Inc.
713-647-5741 | [email protected]

Media contacts:
Pete DeLongchamps
Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs
Group 1 Automotive, Inc.
713-647-5770 | [email protected] 
or
Clint Woods
Pierpont Communications, Inc.
713-627-2223 | [email protected]

 

SOURCE Group 1 Automotive, Inc.

Related Links

http://www.group1auto.com