Group 1 Automotive Announces Fourth Quarter and Full Year 2020 Financial Results

HOUSTON , Feb. 4, 2021 /PRNewswire/ -- Group 1 Automotive, Inc. (NYSE: GPI), ("Group 1" or the "Company"), an international, Fortune 500 automotive retailer, today reported fourth quarter and full year 2020 financial results. Fourth quarter 2020 net income per diluted share was $5.43 , a 111.2 percent increase from $2.57 per diluted share as reported for fourth quarter 2019. Fourth quarter 2020 adjusted net income per diluted share (a non-GAAP measure) was $5.66 , an 88.0 percent increase from $3.01 per diluted share as reported for fourth quarter 2019.

Full year 2020 net income per diluted share was $15.51 , a 66.0 percent increase from $9.34 per diluted share as reported for full year 2019. Full year 2020 adjusted net income per diluted share (a non-GAAP measure) was $18.06 , a 65.2 percent increase from $10.93 as reported for full year 2019.

As shown in the attached non-GAAP reconciliation tables, adjusted net income and diluted earnings per share excluded net after-tax adjustments of $4.3 million , or $0.23 per share, for fourth quarter 2020; $8.2 million , or $0.44 per share, for fourth quarter 2019; $47.1 million , or $2.55 per share, for full year 2020; and $29.6 million , or $1.59 per share, for full year 2019. The after-tax adjustments in all periods primarily related to non-cash asset impairments. Full year 2020 adjustments also included losses on debt extinguishment and an out-of-period adjustment to accelerate stock-based compensation expense for retirement of eligible employees. Full year 2019 adjustments primarily included non-cash impairments and costs related to catastrophic weather events.

As of December 31, 2020 , the Company's total cash liquidity was $263.7 million . There was also $284.2 million of borrowing capacity on the Company's U.S. syndicated acquisition line, bringing total immediate liquidity to $547.9 million at the end of 2020. During 2020, the Company generated $805.4 million of operating cash flow ( $503.7 million of adjusted operating cash flow), which was partially used to reduce non-floorplan debt by $196.2 million . Additionally, the Company's U.S. credit facility rent-adjusted leverage ratio was reduced to 2.3 times at the end of the year, down from 3.3 times at the end of 2019.

"Our strong fourth quarter results were highlighted by a further recovery in our U.S. revenue to last year's levels while maintaining outstanding cost discipline across the company. The effective reengineering of our processes throughout this year culminated in massive productivity improvements in our U.S. and U.K. businesses," said Earl J. Hesterberg , Group 1's President and Chief Executive Officer. "In the fourth quarter, we realized more than a 25-percent improvement in our U.S. technician productivity and more than a 33-percent increase in our salesperson productivity. In a similar fashion, major cost structure improvements in the U.K. throughout 2020 enabled us to remain profitable there every month of the quarter despite our showrooms being closed for 41 of 92 days due to COVID lockdowns. We expect long-term benefits from these cost improvements as the market recovers in 2021."

Consolidated Results for Fourth Quarter 2020 (year-over-year comparable basis)

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

• Total revenue decreased 3.9 percent (-3.6 percent), to $3.0 billion .
• Total gross profit increased 3.7 percent (4.1 percent), to $481.7 million .
• New vehicle revenues decreased 5.1 percent (-4.6 percent) on an 11.5 percent decrease in unit sales.
• Retail used vehicle revenues decreased 2.5 percent (-2.5 percent) on 10.9 percent lower unit sales.
• Parts and service gross profit decreased 3.8 percent (-3.6 percent) on a revenue decrease of 4.8 percent (-4.4 percent).
• Finance and Insurance (F&I) gross profit per retail unit (PRU) increased 12.3 percent (12.5 percent), to $1,772 .
• Selling, General and Administrative (SG&A) expenses as a percent of gross profit decreased 1,080 basis points, to 61.9 percent. Adjusted SG&A as a percent of gross profit decreased 930 basis points, to 63.6 percent.

Consolidated Results for Full Year 2020 (year-over-year comparable basis)

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

• Total revenue decreased 9.9 percent (-9.4 percent), to $10.9 billion .
• Total gross profit decreased 2.6 percent (-2.2 percent), to $1.8 billion .
• New vehicle gross profit increased 9.9 percent (10.9 percent) on a revenue decrease of 11.6 percent (-11.0 percent). The Company retailed 140,221 new vehicles in 2020, which represented a 17.1 percent decrease in new vehicle unit sales from 2019, reflecting the pandemic's significant impact on inventory.
• Retail used vehicle gross profit increased 3.7 percent (4.0 percent) on a revenue decrease of 7.8 percent (-7.6 percent). The Company retailed 140,118 used vehicles in 2020, which represented an 11.6 percent decrease over used vehicle unit sales from 2019.
• Parts and service gross profit decreased 7.9 percent (-7.5 percent) on a revenue decrease of 8.0 percent (-7.5 percent).
• Finance and Insurance (F&I) gross profit per retail unit (PRU) increased 9.9 percent (10.1 percent), to $1,669 . Same Store Finance and Insurance (F&I) gross profit per retail unit (PRU) increased 10.3 percent (10.6 percent), to $1,685 .
• Selling, General and Administrative (SG&A) expenses as a percent of gross profit decreased 870 basis points, to 66.1 percent. Adjusted SG&A as a percent of gross profit decreased 810 basis points, to 65.8 percent. Same Store adjusted SG&A as a percent of gross profit decreased 800 basis points, to 65.5 percent.
• Operating margin grew 150 basis points, to 4.5 percent. Adjusted operating margin grew 150 basis points, to 4.9 percent. Same Store adjusted operating margin increased 150 basis points, to 4.9 percent.

Segment Results for Fourth Quarter 2020 (year-over-year comparable basis)

• United States :

The Company's U.S. operations accounted for 80.9 percent of total revenues and 84.1 percent of total gross profit. Total U.S. revenues were flat at $2.4 billion . Total gross profit increased 5.4 percent, to $404.9 million . Same Store U.S. total gross profit increased 5.0 percent, to $401.2 million .

• Same Store new vehicle revenue increased 0.4 percent, with units decreasing 5.6 percent. New vehicle gross profit increased 36.1 percent as gross profit per unit increased $882 , a 44.1 percent increase, to $2,883 and more than offset lower volumes.
• Same Store total used revenue declined 0.5 percent, with units decreasing 9.9 percent, as inventory shortages hampered sales later in the quarter. Same Store total used gross profit increased 5.5 percent as gross profit per unit increased $154 , a 12.5 percent increase, to $1,387 , which partially offset the volume decline.
• Parts and service revenues decreased 4.8 percent and gross profit decreased by 4.6 percent, to $161.3 million . Same Store parts and service revenues decreased 4.9 percent and gross profits decreased 4.9 percent, to $159.9 million .
• F&I revenues increased 2.0 percent, to $116.1 million . F&I gross profit PRU grew $184 , to $2,018 , or 10.0 percent. Same Store F&I gross profit PRU increased $190 , to $2,027 , or 10.3 percent.
• SG&A expenses as a percent of gross profit decreased 970 basis points, to 59.5 percent. Adjusted SG&A expenses as a percent of gross profit decreased 850 basis points, to 61.0 percent.

"Our excellent U.S. performance was driven by continued cost discipline and a significant focus on margin retention. As the market recovers and supplies improve, those areas of emphasis should achieve continued positive results. Also important to note is the continued growth in (our digital retailing platform) AcceleRide®," said Daryl Kenningham , Group 1's President of U.S. and Brazilian Operations. "In 4Q20, we sold 3,500 vehicles through the platform, a 65-percent increase over 4Q19. To continue our focus on omnichannel innovation, we have further enhanced AcceleRide® to offer our customers even greater convenience to do business how, when, and where they prefer. We have now integrated customer down payments into the platform, begun the implementation of instant credit decision-making features, established an electronic payment feature utilizing Zelle® to provide real time payment to customers selling us their vehicle through AcceleRide®, and launched the AcceleRide® app. We believe our digital retailing process is industry leading, and we will continue making improvements to ensure we are offering our customers a complete digital experience."

• United Kingdom :

The Company's U.K. operations accounted for 16.8 percent of total revenues and 13.7 percent of total gross profit as stringent lockdown orders in the U.K. continued to impact service operations and dealership sales. On a constant currency basis, Same Store total revenues decreased 14.4 percent, to $495.7 million . Same Store total gross profit decreased 2.4 percent, to $64.7 million . Same Store SG&A expenses as a percent of gross profit decreased 1,350 basis points, to 77.2 percent.

"Despite the many challenges of government mandated COVID lockdowns throughout the last nine months of 2020 and ongoing Brexit turmoil, we were able to substantially restructure our U.K. business this year. Even with our showrooms closed for more than 90 days, we were able to generate outstanding profits and establish an efficient cost structure that will serve us well as the U.K. market recovers," commented Hesterberg.

• Brazil :

The Company's Brazilian operations accounted for 2.3 percent of total revenues and 2.2 percent of total gross profit. On a constant currency basis, Same Store total revenues decreased as the market continued to be weakened by various local shelter-in-place orders, closure requirements, and operating hour restrictions. Despite the weak market due to the pandemic, the company focused on cost and managed to reduce Same Store SG&A expenses as a percent of gross profit by 210 basis points, to 76.0 percent.

Share Repurchase Authorization

During the fourth quarter of 2020, the Company repurchased 265,808 shares at an average price per common share of $117.66 , for a total of $31.3 million . During 2020, the Company repurchased 863,572 shares at an average price of $92.86 , for a total of $80.2 million . The Company has $168.7 million remaining on its Board authorized common stock share repurchase program. Future repurchases may be made from time to time, based on market conditions, legal requirements and other corporate considerations, in the open market or in privately negotiated transactions, and subject to Board approval and covenant restrictions.

Corporate Development

During 2020, the Company disposed of three franchises (Nissan in Mississippi , as well as Buick and GMC in Louisiana ) that generated approximately $60 million in trailing-twelve-month revenues. Year-to-date 2021, the Company has disposed of two franchises (Cadillac and Mini) in Texas that generated approximately $40 million in trailing-twelve-month revenues.

Hesterberg added, "In 2020 were able to achieve record profits, a major cost structure overhaul, and a significant reduction in our corporate debt levels. With an expected market recovery in both the U.S. and U.K., we are in a good position to more actively pursue growth via acquisitions, as well as through our core aftersales and used vehicle businesses."

Fourth Quarter 2020 Earnings Conference Call Details

Group 1's senior management will host a conference call today at 10 a.m. ET to discuss the fourth quarter and full year 2020 financial results. The conference call will be simulcast live on the Internet at www.group1auto.com , then click on 'Investor Relations' and then 'Events' or through this link: http://www.group1corp.com/events . A webcast replay will be available for 30 days.

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

A telephonic replay will be available following the call through February 18, 2021 by dialing:

ABOUT GROUP 1 AUTOMOTIVE, INC.
Group 1 owns and operates 182 automotive dealerships , 236 franchises, and 49 collision centers in the United States , the United Kingdom and Brazil that offer 31 brands of automobiles. Through its dealerships, the Company sells new and used cars and light trucks; arranges related vehicle financing; sells service contracts; provides automotive maintenance and repair services; and sells vehicle parts.

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

FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which are statements related to future, not past, events and are based on our current expectations and assumptions regarding our business, the economy and other future conditions. In this context, the forward-looking statements include statements regarding our goals, plans, and business strategy to repurchase shares of Group 1 common stock, our expectations regarding the reinstatement of our quarterly dividend as well as other statements, and may include 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) board approval of future dividends, (b) general economic and business conditions, (c) the level of manufacturer incentives, (d) the future regulatory environment, (e) our ability to obtain an inventory of desirable new and used vehicles, (f) our relationship with our automobile manufacturers and the willingness of manufacturers to approve future acquisitions, (g) our cost of financing and the availability of credit for consumers, (h) our ability to complete acquisitions and dispositions and the risks associated therewith, (i) foreign exchange controls and currency fluctuations, (j) our ability to retain key personnel, (k) the impacts of COVID-19 on our business, (l) the impacts of any potential global recession, and (m) our ability to maintain sufficient liquidity to operate. For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

NON-GAAP FINANCIAL MEASURES, SAME STORE DATA, AND OTHER DATA
In addition to evaluating the financial condition and results of our operations in accordance with U.S. GAAP, from time to time our management evaluates and analyzes results and any impact on the Company of strategic decisions and actions relating to, among other things, cost reduction, growth, profitability improvement initiatives, and other events outside of normal, or "core," business and operations, by considering alternative financial measures not prepared in accordance with U.S. GAAP. In our evaluation of results from time to time, we exclude items that do not arise directly from core operations, such as non-cash asset impairment charges, 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

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SOURCE Group 1 Automotive, Inc.