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Group 1 Automotive (GPI)

Participants
Pete DeLongchamps SVP of Manufacturer Relations, Financial Services and Public Affairs
Earl Hesterberg President and CEO
Daryl Kenningham President, U.S. and Brazilian Operations
Daniel McHenry SVP and CFO
Michael Wells VP and Corporate Controller
John Murphy Bank of America
Michael Ward Benchmark
Rajat Gupta JPMorgan
Rick Nelson Stephens
David Whiston Morningstar
Call transcript
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Operator

Good morning, ladies and gentlemen and welcome to Group 1 Automotive's 2020 Fourth Quarter and Full Year Financial Results Conference Call. All participants will be in a listen-only mode [Operator Instructions]. After today's presentation there will be an opportunity to ask questions [Operator Instructions]. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Mr. Senior Affairs. of X's, Services Relations, Group Public and DeLongchamps Vice Manufacturer President Financial Pete go please Sir, ahead.

Pete DeLongchamps

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

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

and are risks with described services. oil and can from include, with affect risks involve to future in last both the SEC the unknown and and current extent actual effects uncertainties, adversely the economic developments adverse Commission the recovery forecasted are periods the impacts risks the global to conditions on but an unknown of statements not cause in both associated results. in risks which months. Company's pricing, over may in these Those demand have and future Forward-looking volume, the the Those of oil will impacts and results markets, activities. from differ turn economic materially known vehicles limited in and filings duration filings and and U.S. virus various severity as current of which and commercial Copies for related XX producers Company. economy COVID-XX to services. and the vehicles demand Exchange resulting regarding on available the uncertainty and impacts and crisis and the Securities on Uncertainty international Company's likely are travel the And other related elsewhere authorities well public U.S. pace for COVID-XX and and transportation on of of health such unknown of new from as its restrictions and timing, impact regarding used the prices, and COVID-XX future our use

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

applicable President by with provides financial call, directly measures Corporate our President such the Financial required of today's Daniel Executive SEC Brazilian website. Controller. our rules, As U.S. and Vice of to Chief Senior Officer; me its Earl. comparable any on McHenry, like Participating Company President the Vice and reconciliations President to measures the I'd our to Wells, on Michael Earl non-GAAP and Chief Daryl GAAP Kenningham, and over hand Operations; and Hesterberg, most Officer; call

Earl Hesterberg

everyone. Good of is X given faced The outlook Thank short morning, late we in for was the record nothing fact a year Automotive Group that and you, Pete. XXXX March astounding April. early

profit full million, This able adjusted our were equates the of to adjusted of a over achieve we record translates income year, XXXX which This our of by the throughout structure was $XX.XX, the cost performance the swift the per share cutting and million earnings an For increase to improvement at driven of of results. record $XXX rationalization XX%. to XX% cost of net $XXX pandemic, an continued year. increase our actions largely onset

a XX%. we by quarter level more productivity the of of of by our U.S. the of profit adjusted US, points SG&A as by to SG&A record had a our XXXX, And XX.X%. the people our XX.X% fourth number by gross the As technicians reached even an impressive $XXX profit. the reducing at XX% than improved basis reduced percent company, adjusted XXX we million, productivity In gross a and more by of sales

as structure increasing reductions with retain we forward, cost our to of material use amount a Looking and leaner support of as these well expect operating technology. a

well to colleagues year. In at employees different our Group months, our business sacrifices three required occasions to employees faced thanks. for turning close hard the least yet remained business the deal and of showrooms our a disruptions results, ongoing I on putting we work our remain are a the for this and owe our customers of U.K., resilient been total and employees solid. of over of in and Before We markets. all of have three our All all thank great them throughout our X must safety QX our first the year

adjusted This prior quarter to year. of Turning income share, the results, to quarter per XX% million. X $X.XX of earnings report generated net for of the that share diluted adjusted an Group equates our fourth over $XXX to increase I'm pleased per

year-over-year our the return able were able grow and overall actually In the very the encouraging of substantial to customer improvement profit are service our that third adjusted in real estate legal signs versus continued increased in realized strong the fourth our the very transactions especially net were in and year by regional U.S. $XX.X October hampering partially U.K. from after These $X continue These to arising lockdowns we XXXX. In annual gross a despite fact intangible settlements. in from procedures, for sales a and fourth impairment benefit results and small gain million asset our our testing a U.K., traffic. of continued quarter U.S., the growth our were decline the net Our sales exclude we vehicle year. quarter. impressive, to business, our income $X.X especially were on the levels markets revenue prior and pay results million and given offset our dealership in last quarter we million a results

our in U.K. our with another entirety increased quarter. I operations of London flexible XX COVID more quarter. where the well the XXXX, were closed in of on and leveraging operation should functions the I'll off some the turn out total, XX to record This example is dealership restructured cases began management Kenningham. future. of To by U.K. cost across serve in we showrooms of more U.K. U.K. around our us X. our each our rapidly U.S. the will now team. we centralize U.K. scale. improve especially performance, in of This its also paid point in and over we Yet, on lockdowns month of provide most the of efficiency and Daryl mandatory structure Brazil operate that to However, days the to profits quarter able our In throughout support profitable remain November XXXX our color the and and resilience in the fourth were call

Daryl Kenningham

contributed Earl. factors U.S. fourth strong Thank quarter profit number to used our PRU discipline. of gross and F&I, outstanding namely results, SG&A and A growth, growth new you, vehicle

continuation and retail strong XX% new sales to third are which decreased used prior and All unit supplies same-store vehicle sales our quarter Due decreased versus of continued vehicle unit results. used X%, new from year. tight the vehicle

from vehicle lower To fantastic our levels staying on for the New volumes, year margins. teams of gross the X,XXX did - inventory December finished nearly a XXXX. XX-days down compensate units supply, job disciplined

nearly vehicle PRU margin in decline vehicle same-store increase as a a gross $XXX generated new and profit. our increase new outweighed XX% volume gross profit improvement Our far

unit from quarter. XX% it volume vehicle improved down the third in the the decline was significantly Although, our X% new in quarter,

improvement Our on increased vehicle sequentially gross X% used improved PRU a sales vehicle profit basis. drove our a used as total unit same-store well and strong

decline despite total driver was The F&I second retail major same-store a in units.

recover well, that PRU sales Our same-store increase as to to allowed $XXX basis same-store business our to quarter, the to decline was by growth due profit F&I warranty was gross X.X% collision. a although of In continued same-store $X,XXX and in after a fourth us X%. saw F&I profit down gross we on

customer gross was profit As for Earl mentioned the earlier, our quarter. pay up

after throughout XXXX. to our expect business We improve sales

outstanding factor our driving cost profit third was major performance The discipline.

mentioned, a And point from actions the record our drove our headcount. percentage and as targets. half aggressive the were the viability year's XX% As year, profit we quarter, March SG&A That to year. XXX of prior the and basis revenue in to in had XX% the adjusted environment. modify only we of company's of productivity of quarter of of fourth the the a extremely employee we fourth and during with in Throughout Earl the prior protect assess cutting economic all took continue the cost markets to unprecedented decrease second remainder decisive generated of gross XXX% three a

do this to expect previously, we not there be to level we've forward As expect although improvement significant versus pre-COVID we going do sustainable, mentioned be levels.

our I to on I would you to retailing a Before AcceleRide, digital on platform. moment Brazil, like update take touch

than our X% continue of at upward trajectory in prior an sources. AcceleRide, of selling We year close penetration the units increase sold. XX% of over higher continued Customers QX through a much our rate retail to X,XXX AcceleRide vehicles with our the over choosing other by

will I'd have soon number like of with AcceleRide to share enhancements or make the a to platform. we Additionally, you made

First, the we which communication a workflow. customer streamlines process and have payments for now eliminates the platform separate need into payments integrated down the

the quick all across by and successfully U.S. this end we stores instant have Second, implemented credit season quarter. to making fully and capability instant first be piloted expect the - of

payment Zelle fourth, used multiple AcceleRide. selling instant us This to on our augment payment through with to customers and we've choices as vehicle Third, believe will established our retailing interact their to also to will system an to we've updates with is how acceleride.com. customers. other an And We're transformative to our second for using launched electronics provides at that app AcceleRide We near customers digital numerous this We'll none. of technology forefront continue us. the enhancements process improvements working make remain through provide appropriate. provide future

vehicle growing very to turn solid the is inventories, in a XX% of structure decline percentage gross quickly and did a profit. profit cost aggressively XX% filling in a X's liquidity of to the our team industry to of new job the by tremendous for a despite the Turning sales positions McHenry region pandemic. realize sales quarterly Brazil, order I now our Group driven it as margins SG&A tight quarterly balance rebound and to out over ownership. sheet coming nicely years Daniel? overview. of a CFO, best And entire the over the call provide Daniel will performance the eight

Daniel McHenry

Daryl, good and you, everyone. morning, Thank

bringing XX, had million. There December million. total line, invested to was million of syndicated liquidity and of another $XXX As $XXX immediate also our hand floorplan million million $XXX $XX on additional we cash total U.S. of our on liquidity $XXX accounts, acquisition capacity offset cash borrowing bringing in

also U.K. million another roughly We total the to liquidity in which mortgage, $XXX $XXX over near-term well real increasing have to our and to estate U.S. available million. adds $XXX million

very Our remains cash flow strong.

been the million balance $XX year brings used average As to per after cash pay million. we million dividends interest XXX,XXX $XXX repurchased fourth annual And share expense, in flow excluding free cash out expenditure. X% non-floorplan stock at will as capital shares flow the used $XXX $XXX has strongest which XXXX balance liquidity our save increase fourth year quarters. our primarily to cash of million in adjusted cash along $XX of the flow generated represented full cash $XXX on over both $XX of an generation our float, follows, of placed which generation $X.XX backing million million finance full cash quarter, million total of The roughly to This in in our million reduction and restructuring of of free in has used leases, in price and adjusted the $XXX flow debt share operating first position year's common Company's to and us of sheet a history. $XX.XX, debt this sheet, million a million $XX with $XXX

leverage Our strong sheet XXXX. at Company. balance This powder gives down flexibility at times rent U.S. plenty reduced times ratio to significantly to our the a grow of December, leverage end the end the Company more adjusted X.X position for allowing of of with X.X credit from dry

acquisition. Going to allocation add through to for scale our our preference capital forward, Company is

in the While returning as in at shareholders, moment, certainly the are markets cash $XX as by spent acquisitions repurchasing to the opportunity. on quarter. foreign acquisition our evidenced open targets, Absent the suitable U.S. is fourth open our we to to preferred the shares our right well given million market are we

million remaining program. $XXX have share on We our repurchase

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

Earl Hesterberg

the efforts, New we Cadillac in our Dallas-Fort in franchises Thanks, of Daniel. disposed in Buick in mini well in market. to development a and January of market, December, disposed franchise as GMC Orleans, as we the and corporate the Paso El Worth franchise Related

disposition should in points earlier but Additionally, been are the be actions Toyota Brazil. greater noted, it of we we small Paulo on have awarded Sao a number in year, that expect most market open to area two limited our of additional Also, now close dispositions this complete.

points in to half expect this of activate first We these year. the

underperforming past future Our actions now improve to our the our stabilize load face of debt with dispose two the good the in in efficiency up growth to and combined of Brexit of reduce to condition years our financial operating work efforts. ramp assets, us our our a puts over the position pandemic and Company

is Texas. U.S. [technical stated consider geographic in growth beyond to consider remains further strength priority friendly capital to Daniel as allocation the given business state, recent further position relocations diversifying and and of and U.K. Oracle. but population our the which our announcements to for rates internal growth In strategic both of We continue environment, latter acquisition, as our a evidenced significant be preferred state used difficulty] in benefit is investments by invest opportunities we As and HP by number via the U.S., the well our of the the corporate we Tesla, markets. very to well of external top see to our expansion, here footprint growth. vehicle economic expect as the strong as after-sales including

summary, and leverage debt well as over future of several lockdowns now improve This growth the ability in success recovery I'll us we're our sales in concludes our for We our We years to an cost levels, begin our and Operator? to the vehicle levels question-and-answer end, better our improved turn to ahead as of meaningful strength. new industry service as prepared with expect XXXX. remarks. this vehicle In see financial trend the and ability a to optimistic supply, call operator our continue. extremely and about growth business to prospects session.

Operator

from of your [Operator question comes with Please John today go question. Bank America. Instructions] And from first Murphy ahead our

John Murphy

Good morning, everybody.

I'm to it first can I'm and maybe in shifting, on seeing acquisitions a and share going this far sounds year, just any you're the consolidator. Just acquire potential you question in you and there if tone be be what as what's is industry per a after might is general stuff. thinking just going curious to the targets that focus? what like Earl, revenue definitive you change curious where shifted a be might really about the you're as and what

Earl Hesterberg

pandemic, pursue the revising a worked our then the mortgage mean, position feel well I everything much course so uncertainty not we were debt. trying year this I Yes. we we bond very the course, Sure, two were last the last And in of growth about sold We a aggressively one for out And hit, time in in favor. new to decide lot in call of terms understand some we to bond John. the of were issues. we in external Brexit of extremely half good bonds. did of rationale when first About question. pandemic what to were two year, issue in to we of year. the eventually called issues,

by issue leaner, We're U.K. the mentioned, a debt and a in $XXX place the got the and and U.K. and cost leverage what our clarity we're can re-tool million, to And in Daniel this better our million, the throughout amount see financial now. stability reduced and got you going next totally bring are U.S. pandemic different market. in U.S. a of both really kind few have we our on some we year, favorable $XXX from the As the years numbers out, now our actually to market clarity new U.K. good down, rate got businesses. used bond our lot

much be in we will now aggressive more externally. growing to So try

when revenue at we've too maybe We operate the area. relax destroy billion hurdle to to the growth other not be to add have financial market - in you a when to this thing you is is easy can't buy they a works it going annualized and capital we're in believe to year $X bit single what that going certainly the capacity have if But in our them, it's out a And We learned could you in get U.S. still rates. more. financial them. need accretive, do aggressive market you single in the have we've do run over every some these U.S. have every And we years profile. the learned, is point not stores, to

financial knowing more we acquisition wherewithal we to aggressive we will as be and So much have be the in as the U.S. issuer, and U.K. aggressive be can

that allocation. So in capital terms priority will of our be

John Murphy

moving on numerator sub-XX%, obviously seems maybe range now. of but to SG&A And estimates. ease least steady or normalizes you second better the as settle probably Okay. those just about levels in about over curious, bit. lot to world our gross question as a think way how And think back things and SG&A somewhere from at reasonable think maybe to little XX% is as that you a something then But forward and a in and about a a SG&A, XX% you is in, like parts achievable of that gross the in right of even in state there just it go a is denominator to sort bit time, lot the is is cost is gross at think

Earl Hesterberg

same the our Well, we've be you a bit, we there'll but to wasted the be materially upward vehicle token, cost temper than going yes, margins when new this And just we we'll if And us be couple movement can't keep a baseline. some were but And terms for structure, that's of have greater been as the work complete have reasons hard XXX of a re-tooling it's even better that and our is growing than I acquisition, otherwise come better to parts the not would state, lot we by cost numbers, service past. possible a in to. get back the pre-COVID, all we hard for basis work. of we've got than points confidence in and wasted an this priority out business year, to just

John Murphy

then delivery also XX XX And answer, know are your you is I understanding my are of Okay. the is mean, but to operate just likes. on I to but dealerships close curbside, mentioned question to days, and that out a able tough and U.K. this still they lastly,

in So U.K. the I'm any think you just forma quarter forward the U.K. going there trying what about how tough, would should we to there. you pro saw and actually the And as noise is in dropped into U.K. understand of pressure the you much do how shutdowns? way A it's think the have like, looked XXXX? or to lot

Earl Hesterberg

what can can you able and give Yes, months lockdowns it a of experienced you might I have But we've The November on don't help three now I me by what's what on if I quantifying at began bit. than lockdown. a lot more help let XX. some least without. see think can color to do been I

showrooms, vehicles will closed we is platform. with call sales and least year. it used which to they and click car shift actually operating we AcceleRide through do what at a new sell later this to vendor selling basically As AcceleRide AcceleRide And and our six we're collect, the continue brands which types of

different policing at areas people these the begin online And out the were in you U.K., on find. actually lockdowns but vehicles these November if home. very highest London, you're mean we was at to level, to have lockdown aggressively stay I a sell what to roads about they're around XX So in which much capability least on caught get is, pretty full

you service to is too. keep XX%. traffic to just that industry industry January, able I that when today, U.K. been a basically, coming they're see vehicle numbers the which our open, about we've shops see the kept think And but going out depressed come bit out, Now, has down you're new

they're what just that's throttling the back And traffic. so do lockdowns of is, kind these

being March When is lease There we closed. these closed proxy demand the get there. until a is U.K. lot pretty schools level, pent-up inquiry inspection. country demand schools and mandated lot is service X, now people is because for a government the closed there reopens, internet the a However, know, of right being have are of good to

you're it up, we think the two pretty it open of stay quarter, profitable magnitude when So closed. of to three But business. able it were showrooms the demand. are there'll some like those it And I are is does nice is fourth really And pent-up that showrooms months of closed, real back. all out absolutely of throttled be when months, when the much looks amazing

kind cost. we as are. that be back just in of the out. our we can far where sometime hoping back March, that's back then, I'm customers we've as throttle will So throttle Until

Daniel McHenry

John, it's Daniel here.

In around that that Brexit the I I'd that your clarity is, addition, some will help pull to also we're pent-up end vehicles XXXX at got one the that we've that companies XXXX, like with demand, of the forward thing should change add think especially of in now to into XXXX. with looking

John Murphy

That's Thanks, guys. very helpful.

Operator

Please go from next Our question from Ward Benchmark. with Michael your question. ahead comes

Michael Ward

other, On that side, savings much be how got from right, spending costs is about how and U.S., I if stick? will the was ongoing. half it from other in the and half to and be able down of personnel of much SG&A million, your ad $XXX going the that were the If of SG&A to

Earl Hesterberg

some as will that in Michael. people comes part to I keep afraid we've that. most And We minutes I'm of volume it you, few I back have of big mentioned quantify were to ago, a as for add can't a clearly people got But right. out. a

Michael Ward

But you're back. not going

going not 'XX? the You're to back

Earl Hesterberg

our techs they month. back. our many how go were salespeople, they month. can't per the per more gross XX% sell And quarter, productive the terms We no. can't No, productive in more of generate by back. as go And we profit fourth I cars XX% meaning with mentioned We with

So efficiency rate. keep to we've that got

XX% a of up to to pre-COVID to that compared say, what and we ago, work. get on productivity That's Let's we least come hold year got gain. to

Daryl Kenningham

Daryl, our taught that on is an us We just centralized count. our from on head business all cost basis a much is of differently. manage these thing manage how reductions lot to one now perspective, a it bigger closer ago year and ago we SG&A and this were from different leaders the operating Mike, to today we And in company manage two spends, processes and variable place years years year two we ago segment. than did in that a in a ago, have the and

so, that mentioned, Earl to the moving - it. good We I different. forward company And believe we're totally as see going manage news with

Michael Ward

thing same in the it's U.K., the correct? And

Earl Hesterberg

and just had yes - really of had a group. we We a to around Yes, added a XX years group. it the we two XX business like have and couple ago, structured of years three or more dealership U.K. And structured acquisitions half time ago. be big XX-dealership never a Brexit, our

been employees we F&I call from after XXX. that, week support in hit we've the March, one and in along support, able U.S. pandemic the to sales X,XXX way like to we center late went So do when centralize it the in things in - more our the U.K. And,

we - we I were shut so down, And really shutdown. because mean we

the do very we which have employees when for operating retool back so And X,XXX business, to XXX would up enables us or that so. been then with while difficult built to

Michael Ward

the the - I efforts. into AcceleRide, sold sell year on compare if quarter, So, fourth on of compare, And the units were your the X% for said normal How those? through a way? grosses the tied did vehicle grosses some versus it did AcceleRide if looks like how think you in digital just XX,XXX it's you

Daryl Kenningham

grosses - grosses Daryl. comparable is The This are front-end F&I, as is Mike.

Michael Ward

It is.

Okay.

Daryl Kenningham

asset. offline our Through

Michael Ward

as related I sort in the for you've far the repeat doing, or or the of several booking years side have retention the later that as to think ownership rate like information? And of customers been of business you years? the any digital, Do data service

Earl Hesterberg

I to of more don't do digitally years that know it that But, with so relates us that to do hopefully important. to be business have helps. specific as tend customers data ownership. We

Michael Ward

you percentage the of have service your gone digitally, the the Okay. that reservations? - with has And do

Earl Hesterberg

the was In XX%. it quarter,

Michael Ward

been And increasing... XX%. that's

Earl Hesterberg

appointments. ago. year XX%] a was service XXX,XXX [It Over

Michael Ward

much. Thank you very

Earl Hesterberg

you. Thank

Operator

next from our go comes Gupta Rajat question ahead question. And Please with from JPMorgan. your

Rajat Gupta

for my Thanks taking questions.

previous on have a after Just to follow-up the I of couple and that. follow-up questions,

run on mean, XQ to likely I Just final now mean, comment. going normal so vehicle or point environment gross be gross something that just are looking return normalized SG&A more to is as basis would point rate - to more once to - about points number? you're a levels? below you expect strong. still are to back on put I new the a for normal to sales under or mentioned obviously But the that you favorable talking like XX% pre-pandemic a given we XXX finer

Daniel McHenry

comment number, Well, couldn't comment with I specific that a but I to couldn't we can certainly live again. XX%

we XX%. So have to be below

I be competitive. think to

I moved on. think the world's

so below would we expect yes So, XX% certainly level. be significantly to a

Rajat Gupta

Okay, below. significantly

risk - some and next have to the you're targets obviously you above AcceleRide, of over good terms respect then expect mind units, at like in the any in the expect Okay, numbers fourth stores? just maybe that with just couple on to platform got you sell us give this the that the the over it. on year you seeing here conversion what of And traction some from third leads. to quarter you And around quarter? Could years

Daryl Kenningham

is the what Daryl, our lead sort. it's through us was Rajat, conversion this points almost, is in we XX.X%, higher some Internet fourth that about X.X up quarter than come see which an customers to

way specific over again have it and want we we at this and able that. us This over we be a and specific know proven keep that What that to In to with won't some target us. way terms necessarily to all we of business don't they customers do to of want them do point, share. a is business target, would do enable

transparently can customers for and been build where model and kind seamlessly is - our what of to and that we're successful that's so and a so. seeing tried we we've So, go far that's on offline believe focus what customers and

Rajat Gupta

M&A the you I stores. commentary on that to in color acquiring looking that yes, follow-up more to appreciate the just all And earlier gave participate you are no,

in now mean forward then or need talked all? to of you Going Thanks. regions some order response of a able at regional the - you and lot peers Would online the your be potential pretty the of presence. where combination your point one public I were order of publics players? - you some mean the that will forward, your in be divest about just but participating recently would be to going the today, would the consolidate you be fear to some like or that Texas in to in skewed and assets in some consider presence what and way for with I compete would would be to looking so diversify

Earl Hesterberg

Okay, let if can that's fairly me question, see broad I help. but

a I that the natural not consolidation many in privately occur distribution simply of all is efficient brands think among too auto to brands, dealers operate networks. the of the to many retail There of U.S. them, in are network. many needs owned there

So on cost more there technology just developing is been has and trend of going big a and return like costs player amortizing people a time. a for and the on investment that. and investment. becoming more long And things this it's And of capital game because

expect And retail will been years, in a larger and that I that So, have OEMs. accelerate. it lot that I is opportunities of the reason few past there acquisition will I I would the think And remaining benefit the that the trend as think that accelerates to they think benefit will groups. be

era I think a move opportunities. think M&A to - I for these partners going of And the so OEMs. an catalyst is we're that so much for very to continue And bigger there, to

cost as been about you seem know of any. that just as big we're able as structure groups, Now, we've it as the advantages would many create nearly not to a competitive yet other that's scale

but scale, is there markets benefit that is a I can is to on of So smaller continue a to from. return And efficiently point operate think gap widening of the to we a diminishing compared diversity a of the a and ability for benefit brands operator - operator. bigger there to potentially there between

helps I not. those this topic, or know trends all think that that relate So I to don't industry M&A that are you if

Rajat Gupta

that's But much like the potential with another It very you combination any seems would answer? rule out public.

Earl Hesterberg

the support clear major haven't to for ability major call], I not of our of to decision and me. not public concept I some about any clear that all brands. am not larger - of me OEMs sure OEMs of the to be at any It's is that heard that of would [part that, our support from that the the but

Operator

from question go your Morgan question. next Stanley. from comes with our ahead Please [indiscernible] And

Unidentified Analyst

have I right All with morning. I we're seeing have towards more - direct-to-consumer. trend More Jonas]. good of start-ups going behalf so these so on one EV the question [Adam

kind the making question the guess a going the do companies versus is route? I EV Do think you're using you mistake direct-to-consumer going kind this you by why you. model? So franchise Thank think of of are more

Daryl Kenningham

a demand to of does companies It to And customer where direct been will to for service the will local This is not most demand there asset. because point relates trying be the be eventually many dealership that an both critical supply. in the dealership appear look networks companies a that our and in share. that and above becomes plateaus network Tesla their when that's as satisfaction aggressive customers Daryl. in sell expanding reach ability at clearly like becomes a element they And continue has to of want problem as most the Tesla And repeat direct. But to I'm start-ups model And marketing long purchases. to the sure when enter retailing these market evolution power is not history. although you their automotive market works

have reached to all appear reached that that doesn't point. yet, companies Tesla but some So, at

a extended also our to someone manufacturers is strain distribution the capital and carry And the gate produce period auto to under this and big be may our out very books can inventory, - be time. strong to that industry They their their traditional When selling it a can't in money. that on our clips that unload difficult right. company books while of else's when And credit line. point car, that to it on is enough work-in-process it quickly network Tesla carry at from the basically start-ups books, of for an capital very for amount a So network large automotive their direct. the

more start-ups independently So network represent over advantages a but the what would dealer for brand. might yes, I an funded mature to see time go of we'll direct, competitive expect then the

Operator

ahead your Our next from from question comes with question. go Please Nelson Stephens. Rick

Rick Nelson

and XXXX. I appreciate the to in there earlier color U.K. what early seeing you're

U.S., were you - with curious you're seeing? what you're to recovery that's seeing and speak units? Daryl the something just the hearing If could you about if

Daryl Kenningham

Daryl. Hi, We're is Rick. now. right This seeing quite - inventory constrained we're

month-over-month As what an used both you is into improvement probably January. be constrained first know so. and and new sequentially continue we expect the seen the we're goes that of half and seeing new that But to year. car inventory in for situation the We've to

Rick Nelson

And as are well? GPUs holding they

Daryl Kenningham

Yes.

Rick Nelson

on if win, how you're see follow-ups the competitors and aggressive? of environment two guess valuations of lot on had with front quite How is a there? it acquisition opportunities your for seeing where you I these some do the acquisition you And deals competitive - being Great. curious

Earl Hesterberg

Yes, from you Well, are independent that's have of of awful infusions of true And free from who capital good opportunities. a question. an program. Rick, lot and there PPP course benefited lot that's a the dealers,

don't and We bubble continue think high-quality that capital, market is competition have But hurdle accretive, a mentioned rate I to like is I of year. grow is expect they much more need you our excited in very lot be we certain that's will I subside to market of the that point them little I And get It's to abandon easy more dealerships, right destroy year. you're rolling earlier externally. discipline. and and where this can't acquisitions, and which that this a motivated about there why think and for to their there there, to a

is really you've this that have times most we to more have the in any the past increased set of earnings reasons prefer seen for not share for the per you lot of grew EPS I'm companies of want their got end numbers, best per target share year. last the is universe fact of adjusted because looking which in long many at last fourth me earnings We profit XX% me, that to you I at being important at this dealerships I'm been revenue as, that And to if all with of may but to the any to acquisitions where you? year additional by growth per no XX%, anybody the good There quality and buy their by a our of stores. for fourth We seeing cost buy know. was adjusted seem one the it if How looking I that locations. share - quarter been purchased and their not wrong generating our growth some I'm has a a XX% thing great would and at as I Rick a you in XX%, our up some mean stores number, thing lot not us, added get right So earnings mode But maybe by we quarter didn't don't grew us quarterly the shareholders. growth else year. at

represents the XX%, per seldom we buy to half I want I'm pretty our our a impressed earnings and market time impressed XX%, in XX% grew the in say by some do. half closed don't I close U.K. to we by XX%, the - was quarter, have Now I of share I what revenue. were this time year and we that we that in much were we mean,

did no full-year, XX%, industry have we think, due So that QX, acquisitions, down are and to to year COVID. like XX% yes, but acquisitions, that with up last I'd I some we was in an the in for

Rick Nelson

revenues EPS [technical to navigate. helps. that, your ability grow speaks difficulty] to to down like X% That

clears, back growth and out X.X% that than driven I service or to parts the go would our grow that X.X% to get faster were fourth think? you in pent-up U.S., think we demand consolidated. growth drive So whereas you else quarter the down type Do guess starts when virus would people in again. mid-single-digit

Earl Hesterberg

a say, business collision you as business amazing smiles, Yes, maybe because U.S., a Yes, people will of a a which that's that driving lot our that's on we warranty brand come got recalls, statistics Rick, too. soft warranty, rare, the in by in growth come are the Daryl comes back after-sales which a that back, flat weak, it business the comment, really customer mix And and our relative is QX up we issue, up, or think usually don't but more XX% control quite holding extremely make makes some pay EPS usually simply a has volume is doesn't were I'll lot a bit will and of of is well, back, I driven collision and was it to… was but even it? which our business Daryl will course of function

Daryl Kenningham

bit in was up a up was gross quarter, That profit pay. the in customer

Operator

our David question. and gentlemen, Please Morningstar. ladies Whiston your comes from question And go with ahead next from

David Whiston

Sticking difficulty] on service compared [technical first, with vehicle is American owners?

Earl Hesterberg

the it mandated we're governments But go to of I of as a would people pressure to to a government home they govern get because people rush stay being completed. more out, and say delaying the from actually customer good simply are the coming lockdowns those told as some leniency the fine if you of having and U.K., in difficulty] debt and In U.S., justification And get called be in a the free service the behavior on MOT, there caught for business soon number for required the without a get an is there being of seems there. flow of Ministry everybody feel things the having road. to going these area inspections dealerships and to country. Transport on into the [technical of the timing still have by is you

David Whiston

doing U.K.? So lot what those of cost cuts business U.K. need or you is then purely type cutting, help the just you too, in revenue profitable a salary kept in the where cost it you to

Daniel McHenry

higher vehicles in the used U.K. vehicles. margins and Yes, slightly new in and with think significantly margins higher both I

As you business service say and quarter. was pretty good the parts the for

parts and a put instituted U.K. service in I and outbound a year inbound we the probably for both had think center we call in we about and ago, that's began that and better processes much something an

and the addition I and could we quarter year-to-date. already that growth we to that pattern. for back So scaling costs And any a or of taking think on both the natural in to in that, was terms staffing bone you're out costs levels it cut

David Whiston

reverse And big U.S. first about on you by want choice to the year, acquisition U.S., and the over Texas. being then talked the for you this to for deal

even your States? of new choice a markets to or in first Texas, the part existing you be other to region And your the choice So do country. want first than what is U.S. then is

Earl Hesterberg

it's Austin I going to oil to want in in clearly, patch. really because of patch in not patch Texas. is think is U.S. and places parts that's the the from footprint And Well, only talent, oil where understand most oil have like for our Dallas we outside important we that market and part prioritize - that's of in really the that, benefit to can the the we're general, diversifying which Texas we people

our not geographic of we our afraid expand U.S. we're Texas. benefits So to But I company the lot in footprint think can a degree long-term, more the

that preference. would be So our

David Whiston

[technical then difficulty]? And Okay.

Earl Hesterberg

vehicle where main our service product sales and a in ….the drivers on we increase lift on contract. and nice penetration finance nice we really had also had focused

team. it effort is So the a good by

be I to will and which to our on the continue compliance also in We think processes, laser focused pay off future. continue

Operator

call questions. over management any I'm to no like back for to And remarks. ladies this the additional closing turn I'd time, gentlemen, conference showing at and

Earl Hesterberg

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

Operator

We call. And gentlemen thank for conference ladies today's and conclude with we'll that, attending. you

now may lines. your disconnect You