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Group 1 Automotive Announces Record Third Quarter 2021 Financial Results

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Cision

- Record Quarterly EPS of $9.33

- Total Revenues Increase 15%

HOUSTON, Oct. 28, 2021 /PRNewswire/ -- Group 1 Automotive, Inc. (NYSE: GPI), ("Group 1" or the "Company"), an international, Fortune 500 automotive retailer, with 191 dealerships located in the U.S., U.K., and Brazil, today reported an all-time record third quarter 2021 ("current quarter") net income per diluted share of $9.33, a 36.5% increase from $6.83 per diluted share as reported for third quarter 2020 ("prior year quarter").

Current quarter adjusted net income per diluted share (a non-GAAP measure) was an all-time quarterly record of $9.62, a 38.0% increase from $6.97 adjusted net income per diluted share for the prior year quarter, and an increase of 219.1% over the pre-pandemic third quarter of 2019. Current quarter net income was $172.1 million, a 36.1% increase compared to net income of $126.4 million in the prior year quarter. Current quarter adjusted net income (a non-GAAP measure) was $177.5 million, a 37.6% increase compared to adjusted net income of $129.0 million for the prior year quarter. The Company's current quarter total revenues were $3.5 billion, a 15.4% increase compared to total revenues of $3.0 billion in the prior year quarter.

"Continued strong vehicle margins, further improvement in our service volume, and diligent cost control delivered this quarter's impressive results," said Earl J. Hesterberg, Group 1's President and Chief Executive Officer. "We continue to sell most new vehicles almost immediately upon manufacturer delivery. Assuming no material change in consumer demand, this dynamic should continue throughout the fourth quarter and into 2022. In addition to the recently announced dealership acquisition in the Dallas and Sacramento markets, we remain on track to close the purchase of the Prime Auto Group in November."

Current quarter adjusted net income and diluted earnings per share excluded net after-tax adjustments of $5.4 million, or $0.29 per common share, related to a loss on debt extinguishment of $3.8 million, or $0.21 per common share; acquisition costs of $3.4 million, or $0.18 per common share; an asset impairment charge of $1.3 million, or $0.07 per common share; and hurricane related losses of $0.4 million or $0.02 per common share. These adjustments were partially offset by favorable legal settlements of $2.9 million, or $0.16 per common share; and a non-cash gain associated with certain interest rate swaps of $0.7 million, or $0.04 per common share. Prior year quarter adjusted net income and diluted earnings per share excluded a net after-tax adjustment related to a loss on debt redemption of $2.6 million, or $0.14 per common share. Reconciliations of non-GAAP financial measures are included in the attached financial tables. Certain disclosures may not compute due to rounding.

Consolidated Operating Highlights for Current Quarter (year-over-year comparable basis)

Reported:

  • Total revenues increased 15.4%, to $3.5 billion.

  • Total gross profit increased 27.6%, to $653.2 million.

  • New vehicle revenues only decreased 0.3%, despite an 11.9% decline in units sold, driven by an increase in gross profit per retail unit (PRU) of 91.8%, to $4,773.

  • Used vehicle retail revenues increased 44.0%, driven by a 12.8% increase in units sold, and an increase in used vehicle retail gross profit PRU of 23.0%, to $2,279.

  • Parts and service gross profit increased 12.3%, on a 13.8% increase in revenue.

  • Finance and Insurance (F&I) gross profit PRU increased 13.9%, to $1,885.

  • Selling, General and Administrative (SG&A) expenses as a percentage of gross profit decreased 77 basis points, to 59.0%. Adjusted SG&A expenses (a non-GAAP measure) as a percentage of gross profit decreased 96 basis points, to 58.8%.

Same Store on a Constant Currency Basis (a non-GAAP measure):

  • Total revenues increased 11.5%.

  • Total gross profit increased 24.6%.

  • New vehicle gross profit increased 65.1%, despite a 14.3% decrease in units sold, driven by an increase in new vehicle gross profit PRU of 92.7%.

  • Used vehicle retail gross profit increased 32.2%, as units sold increased 9.0%, and used vehicle retail gross profit PRU increased 21.3%.

  • Parts and service gross profit increased 10.1%.

  • F&I gross profit PRU increased 15.9%.

  • SG&A expenses as a percentage of gross profit decreased 98 basis points. Adjusted SG&A expenses as a percentage of gross profit decreased 116 basis points.

Corporate Development

As previously announced in September 2021, the Company entered into a definitive agreement to purchase substantially all the assets, including real estate, of Prime Automotive Group, which includes 30 dealerships and three collision centers in the Northeastern U.S. In 2020, the corresponding Prime dealerships generated $1.8 billion in annual revenues. As previously announced in October 2021, the Company acquired two dealerships in Texas and one in California, which are expected to generate approximately $235 million in annualized revenues.

Year-to-date, Group 1 has completed transactions representing $655.0 million of acquired annual revenues, growing the Company's portfolio by 17 franchises. With the Company's previously announced pending acquisition of Prime Automotive Group expected to close in November 2021, the Company's total acquired revenues are expected to be approximately $2.5 billion at the anticipated closing date, and Group 1's total dealership count would increase to 221 locations globally, which would include 150 U.S. locations.

Year-to-date, the Company has disposed of four franchises, which generated approximately $70 million in trailing-twelve-month revenues.

Third Quarter 2021 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 2021 financial results. The conference call will be simulcast live on the Internet at group1auto.com, then click on 'Investor Relations' and then 'Events' or through this link: 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:

Domestic:

1-888-317-6003

International:

1-412-317-6061

Conference ID:

3636071

A telephonic replay will be available following the call through November 4, 2021 by dialing:

Domestic:

1-877-344-7529

International:

1-412-317-0088

Replay ID:

10160522

ABOUT GROUP 1 AUTOMOTIVE, INC.

Group 1 owns and operates 191 automotive dealerships, 248 franchises, and 49 collision centers in the United States, the United Kingdom and Brazil that offer 33 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 group1corp.com, group1auto.com, group1collision.com, acceleride.com, facebook.com/group1auto, and 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 strategic investments, goals, plans, projections and guidance regarding our financial position, results of operations 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) the impacts of COVID-19 on our business, (j) the impacts of any potential global recession, (k) our ability to maintain sufficient liquidity to operate, (l) the risk that proposed transactions will not be consummated in a timely manner, (m) risks that any of the closing conditions to the Prime Acquisition may not be satisfied or may not be satisfied in a timely manner, and (n) our ability to successfully integrate recent and future acquisitions. 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 Securities and Exchange Commission, 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, out-of-period adjustments, 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 earnings 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 amounts in the financial statements may not compute due to rounding. All computations have been calculated using unrounded amounts for all periods presented.

Investor contacts:
Sheila Roth
Manager, Investor Relations
Group 1 Automotive, Inc.
713-647-5741 | sroth@group1auto.com

Media contacts:
Pete DeLongchamps
Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs
Group 1 Automotive, Inc.
713-647-5770 | pdelongchamps@group1auto.com
or
Clint Woods
Pierpont Communications, Inc.
713-627-2223 | cwoods@piercom.com

Group 1 Automotive, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In millions, except per share data)












Three Months Ended September 30,



2021


2020


Increase/(Decrease)


% Change

REVENUES:









New vehicle retail sales


$

1,576.2



$

1,580.7



$

(4.5)



(0.3)

%

Used vehicle retail sales


1,248.3



867.2



381.1



44.0

%

Used vehicle wholesale sales


109.4



86.7



22.7



26.2

%

Parts and service sales


427.6



375.6



52.0



13.8

%

Finance, insurance and other, net


147.7



129.5



18.2



14.1

%

Total revenues


3,509.2



3,039.6



469.6



15.4

%

COST OF SALES:









New vehicle retail sales


1,408.5



1,481.5



(72.9)



(4.9)

%

Used vehicle retail sales


1,149.8



796.1



353.7



44.4

%

Used vehicle wholesale sales


101.8



80.7



21.0



26.0

%

Parts and service sales


195.9



169.4



26.6



15.7

%

Total cost of sales


2,856.0



2,527.7



328.3



13.0

%

GROSS PROFIT


653.2



512.0



141.3



27.6

%

Selling, general and administrative expenses


385.1



305.8



79.3



25.9

%

Depreciation and amortization expense


19.6



19.1



0.5



2.5

%

Asset impairments


1.7





1.7



%

INCOME FROM OPERATIONS


246.8



187.1



59.7



31.9

%

Floorplan interest expense


4.8



8.1



(3.3)



(40.9)

%

Other interest expense, net


13.2



14.6



(1.5)



(10.1)

%

Loss on extinguishment of debt


3.8



3.3



0.5



15.2

%

INCOME BEFORE INCOME TAXES


225.0



161.0



64.0



39.8

%

Provision for income taxes


52.9



34.6



18.3



53.1

%

NET INCOME


$

172.1



$

126.4



$

45.7



36.1

%

Less: Earnings allocated to participating securities


5.7



4.5



1.2



25.5

%

Net income available to diluted common shares


$

166.4



$

121.9



$

44.5



36.5

%

DILUTED EARNINGS PER SHARE


$

9.33



$

6.83



$

2.50



36.5

%

Weighted average dilutive common shares outstanding


17.8



17.8





%

Weighted average participating securities


0.6



0.7



(0.1)



(7.7)

%

Total weighted average shares


18.4



18.5



(0.1)



(0.3)

%

Effective tax rate


23.5

%


21.5

%


2.0

%



Group 1 Automotive, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In millions, except per share data)












Nine Months Ended September 30,



2021


2020


Increase/(Decrease)


% Change

REVENUES:









New vehicle retail sales


$

4,974.9



$

3,985.5



$

989.3



24.8

%

Used vehicle retail sales


3,342.7



2,287.4



1,055.3



46.1

%

Used vehicle wholesale sales


286.0



221.9



64.1



28.9

%

Parts and service sales


1,180.4



1,028.2



152.2



14.8

%

Finance, insurance and other, net


435.7



338.7



97.1



28.7

%

Total revenues


10,219.7



7,861.7



2,358.0



30.0

%

COST OF SALES:









New vehicle retail sales


4,542.9



3,759.7



783.2



20.8

%

Used vehicle retail sales


3,075.5



2,127.9



947.5



44.5

%

Used vehicle wholesale sales


265.3



212.9



52.4



24.6

%

Parts and service sales


530.9



473.9



57.0



12.0

%

Total cost of sales


8,414.5



6,574.4



1,840.1



28.0

%

GROSS PROFIT


1,805.1



1,287.2



517.9



40.2

%

Selling, general and administrative expenses


1,080.3



870.9



209.3



24.0

%

Depreciation and amortization expense


57.9



56.5



1.4



2.4

%

Asset impairments


1.7



23.8



(22.1)



(92.8)

%

INCOME FROM OPERATIONS


665.3



336.0



329.3



98.0

%

Floorplan interest expense


21.2



31.1



(9.9)



(32.0)

%

Other interest expense, net


40.7



49.0



(8.3)



(17.0)

%

Loss on extinguishment of debt


3.8



13.7



(9.9)



(72.0)

%

INCOME BEFORE INCOME TAXES


599.6



242.2



357.4



147.6

%

Provision for income taxes


134.6



55.8



78.8



141.1

%

NET INCOME


$

465.0



$

186.4



$

278.7



149.5

%

Less: Earnings allocated to participating securities


15.6



6.7



8.9



132.8

%

Net income available to diluted common shares


$

449.4



$

179.7



$

269.7



150.1

%

DILUTED EARNINGS PER SHARE


$

25.21



$

10.08



$

15.12



150.0

%

Weighted average dilutive common shares outstanding


17.8



17.8





0.1

%

Weighted average participating securities


0.6



0.7





(6.8)

%

Total weighted average shares


18.5



18.5





(0.2)

%

Effective tax rate


22.4

%


23.1

%


(0.6)

%



Group 1 Automotive, Inc.

Additional Information - Consolidated

(Unaudited)












September 30, 2021


December 31, 2020


Increase/(Decrease)


% Change

SELECTED BALANCE SHEET INFORMATION:







(In millions)









Cash and cash equivalents


$

296.9



$

87.3



$

209.7



240.3

%

Inventories, net


$

...

850.8



$

1,468.0



$

(617.2)



(42.0)

%

Floorplan notes payable, net (1)


...