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Group 1 Automotive (GPI)

Participants
Pete DeLongchamps Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs
Earl Hesterberg President and Chief Executive Officer
Daryl Kenningham President, U.S. Operations
John Rickel Senior Vice President and Chief Financial Officer
John Murphy Bank of America Merrill Lynch
Michael Ward Seaport Global
Rick Nelson Stephens
David Tamberrino Goldman Sachs
Armintas Sinkevicius Morgan Stanley
Rajat Gupta JPMorgan
David Whiston Morningstar
Call transcript
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Operator

Good morning ladies and gentlemen. Welcome to Group one Automotive's 2019 First Quarter Financial Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the conference over to Mr. Pete DeLongchamps Group 1's Senior Vice President of Manufacturer Relations, Financial Services, and Public Affairs. Mr. ahead go Please DeLongchamps.

Pete DeLongchamps

the and been earnings everyone morning release presentation for related related William to will today's this to on and welcome Group call. slide call to reconciliation include The we purposes that results good you, we and refer have morning comparison to a adjusted posed Thank issued website. this X's

information and make mentioned the made of I'd pursuant begin, that provisions remarks Reform brief Private Harbor we Except statements some for the of are Safe like measures. during Securities to Litigation historical of of call, by use Group Act forward-looking are Before non-GAAP X made financial statements forward-looking the the about management to Automotive statements XXXX.

the Company's other volume XX unknown of and Those the may available described these and risks periods limited, uncertainties Forward-looking the SEC the associated filings Those with in from months. forecasted Company. future not pricing SEC filings in last both risks company's differ results Copies and include, statements are cause materially and over from risks are to with risks the the to results. both known which actual condition of are markets. and but involve the

measures In discussed on rules addition this certain SEC financial under as call. non-GAAP defined may be

note year unless Lance and the and Participating to Daryl applicable remarks Chief and in our today President President rules, me U.S. and our Corporate measures that comparable Parker, John by period Operations; most Rickel, the same-prior of our the comparisons its with financial the Hesterberg, SEC non-GAAP Vice directly website. Vice required of measures Financial any prepared our Officer; As stated. Officer; company President provides are are all such otherwise reconciliations Kenningham, Senior Chief Executive Controller. Please President of GAAP Earl on

call Earl. over Now, hand I'd to like the to

Earl Hesterberg

$X.XX for was earned net million you, Thank report of in almost environment retail that the of morning increase X to vehicle income the increase everyone. down vehicle new delivered adjusted and of both U.K. the an where equates prior new declined overall earnings earnings the slowing first demonstrates an diluted to over sales our markets. and pleased record quarter. share Group core share, $XX.X quarter environment good grow per of sales Pete X%. our U.S. declining X% industry This XX% industry our where year. This markets result adjusted I'm an of even ability to This in sales in was in per

being are independent growth drive areas in by is profit these used we areas of vehicle have Initiatives in conditions. new continue the execution growth strong the control; undertaken market that strong same-store vehicles to driven after Our within and our sales. sales

and few used parts on vehicles cover We both moments. service details a in will more and

continued in WLTP-related to business X% and Turning the vehicle segments, constant new we as Audi revenues nearly supply a in decreased to the by vehicles. as during the U.K. consolidated the currency on well negatively general retailed declines our basis, our driven quarter, Total sales U.K. industry XX,XXX U.S. X% unit impacting a business constraints decrease new

new Our XX% mix Brazil. X% U.S., sales XX%, U.K., unit and geographic was

unit and units; represented by our for was new XX% XX% of new Honda led MINI Our VW/Audi and and XX% both Toyota/Lexus sales. Ford represented XX%; of mix which BMW brand our sales vehicle new percent; accounted represented Acura

a nearly driven will moment. used cover strong we XX,XXX retail in that During by in the also quarter continued U.S. the performance retailed Darryl units,

in XX%, basis, the unit. gross per vehicle driven X%. increase channel pay wholesale customer vehicle a sales X%, retail profit currency X% up used of increased So, and of and collision more warranty constant aftersales resulted of X%, revenue vehicle grew an a on parts wholesale in consolidated on X% Total X% our The profit by increased used increases conversion of consolidated revenues constant in basis. into X% gross currency total used

U.K. for increased Brazilian growth as on currency flat Our businesses quarter. and on insurance driven for XX% basis were the in sales retail was currency prior aftersales year. constant profit X% an gross and a Finance consolidated both the over unit basis. profit increase a from local increased This retail by units by roughly

I Regarding Operations over call turn President to our U.S. geographic discuss the results segment U.K. results, our Brazil. of quarterly Daryl? and Daryl I'd before Kenningham like cover to the U.S. to

Daryl Kenningham

X% vehicles, strong Thank with declines new X% you, our in generated U.S. able and business. pleased increase vehicles the in business grew quarter. in offset vehicle aftersales, We used F&I, and we in new our vehicles the used performance were X,XXX our and quarter; units Earl. first gross vehicles growth new sales time to were by retail Used U.S. to vehicles have used in first outsold Due profit. nearly the unit outsold total in very the same-store in

of and XX% quarterly grew our sales Val-U-Line represented volume. Our XX% used

inventories profit driving over levels. was At channel are been in saw up also above XX% increase to in gross basis. same-store $XXX. growth our unit the more XX-day critical We A total the gross our an profit on a supply with which business new recently used our vehicle along retail of pricing implemented prior per shift of an used year vehicle strategies targeted have

due in new Asian was some wholesale volumes, brands. this vehicle domestic by of our to programs an Some and OEMs lower oversupply

stores quickly this We situation. with our to are very address working closely

pay increase pay revenue on XX.X%, Our all-time X.X% in an up grew revenues parts X.X% quarterly collision X.X%, after Customer a increased customer U.S. The and wholesale increased warranty performance. basis. represents same-store sales record X.X%. X.X%

we're implemented happy to and fully It us has by stores driving very in the technician roughly results. our is by enabled our and XX%. workweek headcount retention better headcount XX and four-day our with increase advisor now have XX% We

service are track about end quarter, parts implement approximately by We our initiative in the revenues. to cover third which stores on of of the XX this will XX% and

confident digit headwinds from and year, per rest $X,XXX expect quarter initiative the can for to quarter. a Val-U-Line the of progress $X our the the growth to mid F&I growth for Despite we sales additional rising unit We income interest after we keep forward feel retail per during XXXX. rate. the increased to around would of our We efforts made rates, in F&I digital Looking single rest car. maintain $XX.XX

Our to with XX retailing goal U.S. is in we how do do At online of end business and us. March, our business want customers our initiative to of dealerships. when the had launched our

be to continue rates selling Our outstanding.

and with been are the pleased gross We feedback excellent. customer has profits

online the quarter. on are install before retailing We in of to the of end second U.S. stores track our all

the scheduling and our XXXX appointments appointments customer addition, first XX% now XX% are of of over service In online quarter online. service made versus grew

increased Our trends positive XX% traffic increased track. also XX%, traffic digital in continued increased website a visits lease and on XX%. Organic

was of from positive able continues SG&A the team our same-store half leverage by to basis down on XXX second a our points basis from performance Lastly, XXXX leverage XX.X%. This to XX.X% and we after SG&A able call I sales anticipate Earl. continuing our efforts. gross back use turn to over to will increase as to the and leverage we now be profit from

Earl Hesterberg

Thanks, Daryl.

our the decline. negatively down disproportionately issues early was earlier U.K. UK supply were and X% The the XX% by Audi industry surrounding legislation. with to affected uncertainty quarter, for Brexit was impacted mentioned As but due the a once in total WLTP brand again the operations

able this new As X%. of same-store one-third our sales shortfall we Audi about mix, profit basis. Despite represent sales, penetration, sales an would a XX% basis, currency a X% decline to decline brand's constant on were on constant increase new a increase F&I specific increase our after profit same-store of gross both currency in and reflecting in vehicle gross in explains normally the our U.K. vehicle

gross the same-store as able points to our profit to growth, SG&A by continue our recent assimilate team was XXX basis to leverage addition In on U.K. basis acquisitions. a we

to Brazil, X% a gross X% profit by increase F&I, constant recovery. ongoing the benefit Increase in X% vehicles. increased currency sales from basis, X% to in turning economic after Total in which a a continues on increase new driven a and Now same-store

We John? John call are go advantage Rickel, market. of continue to results local our quarter of the some first take the detail. to in very well-positioned now work of over be turn has more full over to to and I'll proud recovering financial our CFO, done team our the

John Rickel

you, morning, Thank Good Earl. everyone.

basis, For adjusted XXXX of gain comparable net dealership quarterly and in of million hailstorm real $X.X of million XX.X% adjusted XXXX, by of and These after quarter $XX.X adjusted $XXX,XXX XXXX results Oklahoma of legal share transactions, tax gains, to matters. net partially the estate in increased to on due fully million. offset over income record. increased X.X% to a or first earnings million exclude net per inventory diluted a our results $X.X million $X.X our first On quarter consisting a $X.X $X.XX, damage

basis. currency which revenues, the generated a billion versus we constant on $X.X total quarter, prior the For was year flat in

gross however, gross basis to Our points profit X.X%, increased increased margin as XX XX.X%.

was significant a would rate and the forecast from XXX profit, to the gross rate of points to expect LIBOR our increased XX%. than interest between effective primarily going and On as tax higher cost is explained XX.X%, basis to full-year rates by efforts Floor or decreased percent XX.X% a to in swaps. expense growth. interest offset by tax Other XX% We be adjusted million, U.K. quarter continued by our was flat. benefit from U.S. partially expense earnings plan interest As year prior were $X.X for consolidated our we $XX.X contribute million, SG&A adjusted a control XXXX rate basically which forward. higher XX% interest they

our Turning immediately $XX.X and of invested million structure, in cash fund to our XX, of offset consolidated available account floor that to on we bringing March million had another a million. and plan total $XX.X of capital $XXX.X as hand was liquidity

dividends the share, used an approximately $X.X per annualized During is quarter, X.X%. to of yield pay we $X.XX million which first of

please the investor condition, website. back attached news over additional I'll detail now posted refer our call well release presentation schedules regarding turn the information as to the Earl. For additional to on financial of our

Earl Hesterberg

RAM trailing expected generated begin Operator? the facility have generate an to to To-date we earnings we that Thanks, efforts, the operator Chrysler our in a over question-and-answer $XX development revenues. to since in concludes call that Dodge seven Kia in XXXX, dealership U.K. California a have session. in disposed the I our $XXX now corporate John. of Relative turn add-point franchises will are Jeep revenues our This and XX-month opened existing last of call opened add-points and prepared disposed million to two the annual in in million remarks.

Operator

[Operator Instructions] John be go America questioner Bank of Murphy Our Merrill Lynch. first Please ahead. will with today

John Murphy

dig congrats kind guys. to I here. selling second. And you know on the you used than a morning, good just is impressive. hit that of a of very quarters this milestone wanted into new used more pretty fact for Good mean, I

those where we how you and when us go vehicles could as about further opportunity the on are Val-U-Line, Just there kind what from for well? specifically and think sourcing coming if curious, is much the this of of you Val-U-Line just can think particularly remind

Earl Hesterberg

Okay. in John, this expect is be comment But the shift market a Earl, will vehicle a and moment. the Daryl in towards just industry for used continue let general. I'll to there I

quite we is there think think I other. I it sell is can as of seems we as seeing we plot new sure we're direction. to a market don't way want direction. have to know many want as We new can, a trending vehicle We just you're and sales. or maximize to really bit used and vehicles one many continuing to that our We the that new do really be it prices make increased shift as

are and probably in incentives new with lot I OEMs more cut could a have I higher better think the quarter, rather a think to aggressive the in production pushing we little in vehicles cases. than going done of get

of in everyone's and used some play think know I don't easy good these And in how to that particular, out I they supply challenges securing either they and to had don't. or it's buy Val-U-Line very cars not vehicles come So will out. go

Daryl Kenningham

– of that markets. Val-U-Line wholesaled as from, and units would feel ago, we The X,XXX know source try that's comes those some to run In and did Val-U-Line a and source have than Yeah. the there. there. not Darryl. quarter fewer many It's some room our to we quarter, wholesaled of source vehicles we there's the typically we through internally, is opportunity this where that the the still as same John, we year this lot still possible there's quarter like those unlimited, of a but auction we almost with out sourcing,

John Murphy

coming there in vehicles those in really another you is would I another are that mean, maybe vehicles bit or way Is is opportunity opportunity any that source there to otherwise wholesale? a that to it little trade push further? have

Earl Hesterberg

the But we our that sell John. be we ones yet. point are not best Val-U-Line. might There that vehicles includes We're trade that and at for

John Murphy

it. Got

sort just the main then basis, on And think on where utilization and staffing we how utilization stall Okay. parts It cap stand but keep sort capacity think should about putting teams service just this and and I'm your on what's sales cap mid-single you the thoughts if of where should like parts to are you of we second way coming are. operating there able what about same-store utilization flexible of flexible on curious, same-store to you sales up curious there? service. and and sort you're be question versus

Daryl Kenningham

will some will This is technicians And in correct. more our have we the We we have and in than this Darryl, have is we several you're capacity a to roll-out. U.S. still do again. stores. still stall Yes, network stores where we have point reach

that the flexible that we schedule we're be to -- confident we but and continue we'll can that we're leverage still fill have that. in have of to stalls work We technicians able stall -- we're capacity and because able more

John Murphy

Any, guess XX%, utilization XX%, sort XX% -- of, on cap though stands? mean think you roughly rough are it where I

Daryl Kenningham

tell will you. I

at today. Hang And John. it, on I I about on one second. think back utilization to But about you we're on XX% I'll XX% stall we're come think today.

John Rickel

John, John this is Rickel.

but because that, schedules I there a While looking this in the your now allowed really that you expand don't focus is flexible And part wouldn't capacity. point expands do that your he make Saturdays, full as the of beauty right? at as us we past what running we there which much is flexible day, to that so mean is hours the We're schedule. the capacity, on of business view that's to the is is

We're way assets to So it. friendly without this the utilizing grow capital business. is a additional very spending do cash fixed to

Daryl Kenningham

-- we and indicated XX% still in lot technicians have the of we we -- just technician on have John, that. go of John room about our Rickel stalls as run a today can to

John Murphy

than the stalls if lot you them a a room staff actually there's on left right? there's more there XX% of even you So efficiently as room and more potentially are lot

Daryl Kenningham

Right. Correct.

John Murphy

think shifts, used just And flow-through the us, business and the sort then and Or growth curious maybe you know SG&A service if you you forward give maybe new as going F&I? I'm just can lastly of, parts as about what on for and as out the used particularly is we at the attach highest of flow-through should new the be three service some rate these over pumping is higher is significantly on potentially SG&A other because SG&A look channels so time. gross and parts higher

the So or by any flow-through the idea segment? SG&A maybe of rate attach

John Rickel

In -- Rickel. used, and bit John we a and guide positive, massive be more service it's parts and but but kind but better between is on John, F&I to the you're right not massive. to it's going Yeah, Certainly target general, our it's of flow-through, little new than not elements. XX%

John Murphy

guys. Okay. Great. Thank much, very you

Operator

go And Global. our next Please questioner ahead. Seaport Ward today will with be Michael

Michael Ward

much. very Thanks morning, Good everyone.

being correct? U.S. up talked pay customer follow-up a service Is on the X.X%. business. Just you Earl, Earl the about that

Earl Hesterberg

Yes.

Michael Ward

Okay.

customer the right looking in about with schedules revenues, two-thirds the parts service ? wholesale I'm it the the if that affects is flexible of pay that at and So,

Earl Hesterberg

That's probably right.

Michael Ward

Okay.

somewhere like increases looking looks the it X% we're normal? is X% or new that last So at in the type year so, range to that of

Earl Hesterberg

We would be, We like maintain. like can has thus to there it and it we been consistently we feel think yes.

Michael Ward

is XX% the how XXXX and the that stand And schedule, retention. it retention technicians just December where flexible in day -- vehicles is the than you four service or Okay. other handout expanded the you does sold have XXXX those today? In going? December Are

John Rickel

or your to buckets. so both in service-to-service Rickel. John when upward customer car on now to And seeing right trend I And the as able on know, we retention. of sold trend do upward retention running those to is we the and that guess, we XX-months service what and, retention to in business for the are know, a we the mid-XXs what's nice continue you quote service business. see answer wants in long kind we're the you the an do of we're question this Normally either, Mike, is

Michael Ward

growing to up that online is Okay. as that as increase level? Does does continues the is now XX% -- it service retention that -- grow appointment

Earl Hesterberg

think it's available possible it that our digital us can of we we to easier and very makes in comes today mobile and and apps XX% of do service make -- you as sites as many schedule Well, with from places business traffic appointments all through mobile our easily.

easier think to make So, that yes, we and secure little a us more that. makes

Michael Ward

All right.

center one goes doing there the in one through that that all goes Houston? of when through service online you're center the appointment confirm service service to that Just

Earl Hesterberg

through Those software. are online scheduling our

Michael Ward

Okay.

Earl Hesterberg

service service development center telephone Houston the takes on calls in -- center service. or system The our

Michael Ward

see. I

Beautiful. Okay.

Earl Hesterberg

They hit HTC. Houston, the

Michael Ward

a share repurchase. just on John question And

You year. were very active last

anything that if still the didn't share structurally first the in or remain justifies on et there do You price cetera? anything do you'll changed quarter. think aggressive you Is

John Rickel

Yes.

We will continue.

were don't right, just quarter, little cash going a to really any It's we good of in acquisitions breather bit kind in think of back. there's returns. let mix I no, the so You're come that balances quarter, and But wanted strategy. fourth a aggressive change fundamental to first be provide the repurchase always company's the in in share we between the took

Michael Ward

much very Thanks Beautiful. guys.

Operator

be will the Please with questioner ahead. Nelson next And Rick today go Stephens.

Rick Nelson

great up follow acquisitions. on on question Like morning to quarter. the last Good Thanks. and

your appetite characterize If you for that see the could environment acquisitions? you and

Earl Hesterberg

there's acquisitions It's work been continuous Yes. past math Hi, fairly Rick, making appetite has our but stream is a and the challenging. somewhat the it's I of Well, Earl. year. good -- say over that would been for sellers just this

new businesses There have years we than to mentioned, markets balance at million previously is of business our -- different remain very trade these creative just seen a our how they we you're still generated you've interested. of still of and of in lower which to flow just and interested. very profit But capital. future how sector, capital there to not XX.X rates And what or these adjust. use three are, these to two is industry. John unit we're tougher and deploying these ways two you're it nice many down a sellers whole find, in yes, actions project opportunities we think But, having as capital valuations, plenty now makes the buying I when destroy and

Rick Nelson

this there of How by to that Like very to and on Good drivers other or factors service, improvement, good are parts color. the follow the improvement? or also driven shift up much is toward SG&A there. mix

John Rickel

I SG&A this really kind and and get on little team bit that it of Rick, grinded item that did Yes, out is benefits. through the the mix line When of of out did, of John Rickel. pay exercise reductions. shift the in you but look the clearly, all Daryl to the last by from mean, item line a operating continues hard the team of the elements, mean the majority second hard lot was flow-through year. other yards at I this of that cost I the work the from the a benefit of business, is the it's vast half came

So, I'd say, a lot the in that team's of it is just sustainable cost reductions delivered.

Rick Nelson

around what be could And helpful. to these of XX F&I, the pilot, attachment and ask that I kind you're and if color the an economics that would you online Great. what with capabilities, use provide exactly could encompasses to lift on seeing some finally, stores

Daryl Kenningham

stores was business. it In those question start right XX your me rest with Okay, basically with is F&I, where the let on we our on are of first. The Daryl. this -- Rick, last

So identical identical. -- PRU it's it's almost on basically basis, a

talk our like trade -- customer price retailing, either online to go can to value the decide and of vehicle and to submit can purchase us select can deliver they select, can commit offer a can In if they'd and like they and what go can they inventory, our select car dealership, drive their the they their out they purchase terms about or means the car we they can of to insurance retailing they or online. they website, would kind to make if a on when a payment home, digital an can -- products, or finance through our that of to

And funnel, than provider at not normal another final lead somewhere green is that go those to once some with through seeing into of may one come look or walking customers purchase some one to are in a before websites we're and off in more way much the them But in because stop they they through -- predisposed to street. they us commit want the the go get on site to blue what they see all the one our people that they or and the step, it. who to might through way, middle,

should and they business The second information new middle, purchase as see finish robust grosses the by So see to that of very our front rest compare and if we in the somewhere the we'll our out they the end we used propensity either some be if started more done and transaction to roll quarter, seen be in we with. to expect, way, stopped what to their are or I comparable able good. we've dealerships, is end of

Daryl Kenningham

Thank and good luck. you. Thanks

Rick Nelson

Thank you.

Operator

will next questioner Tamberrino Sachs. Please Our go be with ahead. Goldman David today

David Tamberrino

here. you trended and reasonably have and the seeing in the of Great. within some U.S. you're throughout the I Oklahoma larger that quarter? questions for taking region Thanks maybe wanted exposures the how Texas as to to trends dig my in and what

Daryl Kenningham

the wouldn't I changes and -- and in mean, that the say our regions. we Texas our saw materially stores different Northeast I between in slight stores some across in anything Sure. were Oklahoma. there

where enough a we to I say was wouldn't significant So saw change. it that difference, David,

David Tamberrino

of performance industry units within continues I versus think expect economic being that the continue down were specific Good. to while drivers there? your up. were What And then do recovery the the and type you Brazil,

Earl Hesterberg

Earl. Yes.

biggest our think we're better. was manage there trying issue I to flow the cash

our because our the particularly then ages, we back there as interest too cash. inventory up year, that down where it it last off inventory on much we and rates late high Honda soaks and had supply tend So pay we cut to

biggest restrained bit we've Honda our So the a we’re brand, on in Brazil. little retailer biggest supply our

I So Brazil got have cash manage positive think in But we to do too function we the perfectly. dialed have decent get biggest tightly that's you that. to probably as inventories – and some didn't your we flow in

John Rickel

David, this is John Rickel.

piece think also volume. bit I would is of some add for traded the I other to a that The team margin that of

our were even actually vehicle look grew down, sales revenue, the we the you profit though new gross dollars. If

the able So lining the least the we in silver on all had. team that at was gross to is units

David Tamberrino

Understood. some incentivize pull bit in terms seeing your just incentive that And then the in or in within with the what going OEM back conversations you from more back on expectation April? interesting hood Is about the that little comments your region, remarks cash of production. within partners prepared do? is your of US your to you not so made they're to been for far your the a Have opinion OEMs more that

Daryl Kenningham

shying have for This on from Daryl. at XX several of Ford an the OEMs OEMs some and was X% but months we appears increase We've the with being which seen it FXXX, is enhancements OEMs some new the April, as saw some in other of interest because an announced the example that been away costs, rates the during April. interest announced April in programs that

So vehicle that this issue. to address inventory trying expect we they're new

David Tamberrino

throughout parts on to you the that a I think that think up sure perspective Understood. make and a From It’s for Are is, bit very continue you I expecting within but the to just remainder me service, helpful. warranty last mid-teens. wanted touched little and earlier, of year? the And was one clear.

Daryl Kenningham

We know lot really high of would OEMs Darryl. saw I expect increases certainly see continue year. quarter expect in rate, the continue. at warranty a some is if really of I that it'll warranty This good this we'll have but we would that and I a it business don't in do.

David Tamberrino

you Thank for taking the Okay. questions.

Operator

be questioner And Stanley. Sinkevicius our Morgan today ahead. next Please with go Armintas will

Armintas Sinkevicius

taking you morning. Good question. A Thank quick Oklahoma-Texas the on question for the dynamic.

if could not materially simple it When different. higher, mentioned prices you would that a to tailwind? as as going do provide crude as see some As or context just you be we it's start helpful? that Is there

Earl Hesterberg

prices This we've lot is but up say have I to trending backbone a and jobs wouldn't economy. seen added conveyed the spurts I Houston insightful, in Earl. two any oil don't energy think clearly are in being of particular. there's I recently, but been

at you those would I decent I've least minimum markets some be seen and any we tell growth ahead. But at the that potential for to so quarters with And spurts. expect in couldn't steady stable

Armintas Sinkevicius

feel the Okay. the then company I your too was What just is initiatives, commentary covered seemed long, to this last just quarters in you've -- but pickup a having on have maybe the like And several digital not some for trying and how been approached in on your as traffic you peak then there's would and suggest. that numbers run pilot interest success successes initial the just built digital, it or to first pilot idea? a curious itself maybe

Earl Hesterberg

it's because vendors more have large any to last primarily or degree. the mean, these perception don't ourselves that capabilities is just do we money have my been you how quoted working times your consistently and year just it’s This the part be and become business develop customers do Daryl it already for want to as couple today, a has to able competitive and it's on and when. Earl. been spend But way requirement of to a we the business, of competitive I being

vehicles. point I have vast the trigger part of just an it's we developed purchasing majority capability of pull think. and for the soon, to have can capabilities So now very And the online vendor where being the competitive

Armintas Sinkevicius

and in I point, logistics? some in-source you logistics. At and have the then invest the to more need of logistics? more to And what would in-house some third-party believe, need the any more you see

Earl Hesterberg

long we've long, for cars been Well, time. delivering to a customers

move to we but it of yes those a already other more capability way, do things. infrastructure the to in there have who spurt have cost that We would of business us inventories, to sell do all deliver, cars well people around, the If do wanted that. were lot

Armintas Sinkevicius

Got value And of the it. procuring or talked then one your emphasized about peers inventory. -- of the

source or to whole? for your and there's that cars Just from get homes an vehicles implement customer there, to as about if thoughts opportunity to think you approach no-haggle opportunity you a how want to pickup a

Earl Hesterberg

know We I in to with tell Theoretically long tested and our business need makes we of approach. do we that's if for and that kind customers way it can have But can't time a continue that them. also bases, way cover you want toyed buy And sense. cars. we'll yet. you, several buy that different struck period to buy there have to We and cars. a oil ways. of can we Any logical that

a they Daryl we know and found keep and patency until that there's testing and I will works. find tested things, trying few we've no has So yet. But something

Armintas Sinkevicius

you for taking question. Okay. the Thank

Earl Hesterberg

me We've inventory, partners and just and expand our brief we're business we doing might couple add of partnered looking actively even with how we're that Let that, procuring at one today. always the comment. on

Armintas Sinkevicius

Thank you. Okay.

Operator

Rajat And be next Gupta with questioner our today will Please JPMorgan. go ahead.

Rajat Gupta

taking morning. question. for Good guys. Thanks my Hi,

in about do your Just follow-up capacity if the on you U.S. the on to to diversify? in follow-up. your regions then, standalone comments. you the wanted end in acquisition a that, overall to much on bit side? talk focused more up And have you the are see specific particularly little any Could willing And you're And outside with order of I a we I could doing potentially how something stretch new deals and leverage? potentially related mean to UK, for deals, terms

Earl Hesterberg

grew called we're requirements, out, that deals online. North has we're we've it we're U.S.. a capacity a one our the in some a five high can there where and meet to area UK, another we dealerships but well. about more we got to in the we a we're have because In growing market find Earl over or and years. is we into is two and that employees. We've perception have of with acquisitions. we about a year been, that very acquired doing very good ago, capital, a we're We have My the doing moved brand two quickly not open anywhere bring too, And Mercedes JLR large consider or if business expansion dealerships We are three is very dealerships X,XXX last good again. minus facilities, that do cost time our if in bit as creative business, XX because Yeah. plus restructuring use London This BMW than

the of Company. potential UK, lot with we're So for a of business digesting that long-term we our see in but a great profit kind as

So was it's we us not something it but more United short-term, expand acquisition to If in likely seem opportunities in are for to that found the UK. the impossible in States. our the occur attractive, really would

John Rickel

times would adjusted. comment. there’s Rajat, We're that dry this Earl's plenty John. capacity right. mean at leverage X.X just can of comfortable. plenty is add deals of There's we I the is I The for powder. rent I He's find. to

Rajat Gupta

Understood.

flowing the digital, of focused on provide that's is spending level we Or digital you all Just there forward? And currently? could currently? that was in the if update your on of going investments? incremental it the majority spending through? spending is could the And could Where an you quantify expect base any

John Rickel

the develop vendor go choose, on don't ourselves. we're already that basically the as pick all it's using this rapidly. pick stuff software. Earl And is Yeah it that we It can tools. basically that -- But described, John We're utilizing. you way, of great is a And this lot you moves exact software is This Rickel. money right because we're spending in that's can and base. Rajat

from it the to redeploy just You one other.

to an this. So, there's incremental really piece not

that's getting the spending. just of of we're leverage out been kind this beauty dollars we've better the of So,

Rajat Gupta

XX% your the to Is XX.X%? one guidance just tax one, for the it change Great, last any in in year? rate still

John Rickel

the up top the of We end kind XX%. ticked of

-- XX%. Brazil. of calendarization of the lumpy in So kind in the way the kind first came at there XX.X% quarter XX% was comp quarter and a more couple your stock to pieces falls was around is which the We for

is weakest first quarter in Brazil. The the

we're So, but still other that, than comfortable XX% XX%. to

little Jersey. things of is tax full tax the which One load state the unitary has went a kind increased that changed in of New the to bit New year Jersey a

Rajat Gupta

Understood, my that’s it. And taking thanks questions. for

Operator

Our Please questioner next with today Whiston Morningstar. be go will David ahead.

David Whiston

to back go I Thanks. to first. Brazil Good morning. wanted

the was you It and addition issue Is to talked in a Honda working pricing issue the profitability quarter. purely going to In is there something improve looks or that really the on like else about there? struggle used Honda capital.

Daryl Kenningham

try move out also on to to lower there to to get inventory vehicles, used it cash. No the more create was

second some -- and luxury in we've big So, third it we're it JLR was the retailer. biggest used just because Brazil, one wasn't or retailers brand maybe vehicles BMW

reduction. So, it was again inventory

David Whiston

car And vehicle dominating? terms -- is Okay. up in be which people truck over of still are seeing wanting could in area. a truckers you and difference good light slowing Are starts U.S. light any the markets in Are stores? as there market coming traffic with new oil but your energy for demand seeing you the definitely any

Daryl Kenningham

seen it's trend. Well Kenningham. dominating, Light demand that in change still truck Daryl no have is

David Whiston

Darryl, I XX% was that technician earlier hear saying U.S. right did with And Okay. you the headcount quarterly? down

Daryl Kenningham

XX%. Up,

David Whiston

It was uptake.

more very lot gentlemen. make that’s Thank Okay you. a good sense,

Daryl Kenningham

Sure.

David Whiston

for important Its that. you thank clarification and

Operator

question-and-answer conclude remarks. the Earl to session. would turn this for And our I Hesterberg any conference over will to back closing like

Earl Hesterberg

look call Thanks to day. Have in everyone quarter good on second to updating our We us July. for a forward earnings you joining today.

Operator

all presentation. disconnect And the And today's for lines. conference has now you concluded. your now Thank attending you may