What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-29 compared with 2022-05-05 · 463 added, 108 removed, 428 unchanged (57% of the section changed)

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and 35 towns and cities in the U.K.

As of March 31, 2022, our retail network consisted of 146 dealerships in the U.S.

As of June 30, 2022, our retail network consisted of 146 dealerships in the U.S.

and 55 dealerships in the U.K.

On November 12, 2021, we entered into a Share Purchase Agreement (the “Brazil Agreement”) with Original Holdings S.A.

Pursuant to the terms and conditions set forth in the Brazil Agreement, Buyer will acquire 100% of the issued and outstanding equity interests of our Brazilian operations (the “Brazil Disposal Group”) for approximately BRL 510 million in cash (the “Brazil Disposal”).

The transaction is expected to close before the end of the second quarter of 2022.

Pursuant to the terms and conditions set forth in the Brazil Agreement, Buyer agreed to acquire 100% of the issued and outstanding equity interests of our Brazilian operations (the “Brazil Disposal Group”) for approximately BRL 510 million in cash (the “Brazil Disposal”).

The Brazil Disposal Group met the criteria to be reported as discontinued operations.

Therefore, the related assets, liabilities and operating results of the Brazil Disposal Group are reported as discontinued operations (the “Brazil Discontinued Operations”) for all periods presented.

Effective as of the fourth quarter of 2021, we are aligned into two reportable segments:

On July 1, 2022, we completed the Brazil Disposal.

Refer to Note 4.

Discontinued Operations and Other Divestitures within the Notes to Condensed Consolidated Financial Statements within this Form 10-Q, for additional information regarding business dispositions.

Unless otherwise specified, disclosures in this Form 10-Q reflect continuing operations only.

Discontinued Operations and Other Divestitures within our Notes to Condensed Consolidated Financial Statements, for additional information regarding business dispositions.

Recent Events

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Infection rates and regulations continue to fluctuate in various regions and there are ongoing global impacts resulting from the pandemic, including challenges and increases in costs for logistics and supply chains, such as increased port congestion, intermittent supplier delays and a shortfall of semiconductor and other parts supplies, all of which impact our business either directly or indirectly.

Additionally, our manufacturers’ production is currently at reduced levels as a result of global semiconductor and other parts shortages, which is impacting new vehicle sales and inventory levels in all our markets.

Additionally, our manufacturers’ production is currently at reduced levels as a result of global semiconductor and other parts shortages, which is impacting new vehicle sales in all our markets.

The increased demand for new vehicles and reduced production levels have significantly reduced our new vehicle inventory levels.

Our new vehicle days’ supply of inventory was approximately 11 days as of the quarter ended March 31, 2022 (“Current Quarter”), as compared to 12 days as of the quarter ended December 31, 2021, and 33 days as of the quarter ended March 31, 2021 (“Prior Year Quarter”).

Our new vehicle days’ supply of inventory was approximately 15 days as of the quarter ended June 30, 2022 (“Current Quarter”), as compared to 19 days as of the quarter ended June 30, 2021 (“Prior Year Quarter”).

On February 24, 2022, Russia launched a military invasion of Ukraine (the “Russia and Ukraine Conflict”).

The ongoing Russia and Ukraine Conflict has provoked strong reactions from the U.S., the U.K., the European Union and various other countries around the world, including the imposition of broad financial and economic sanctions against Russia.

While the precise effects of the ongoing military conflict and these sanctions on the Russian and global economies remain uncertain, they have already resulted in significant volatility in financial markets, an increase in energy and commodity prices globally and further disruption of the global supply chain for certain raw materials and manufactured goods, including vehicle parts.

While the length, impact and outcome of the ongoing military conflict and these sanctions on the Russian and global economies remain uncertain, they have already resulted in significant volatility in financial markets, an increase in energy and commodity prices globally and further disruption of the global supply chain for certain raw materials and manufactured goods, including vehicle parts.

The Russia and Ukraine Conflict and other geopolitical conflicts, as well as related international responses, have exacerbated inflationary pressures, including causing increases in the prices for goods and services and global supply chain disruptions, which have resulted and may continue to result in shortages in materials and services.

Such shortages have resulted and may continue to result in inflationary cost increases for labor, fuel, materials and services, and could continue to cause costs to increase as well as result in the scarcity of certain materials.

During the six months ended June 30, 2022 (“Current Year”), the global economy experienced rising inflation and an increase in gasoline and energy prices.

In response to inflationary pressures and macroeconomic conditions, the U.S.

Federal Reserve, along with other central banks, continued to increase interest rates throughout 2022.

Additionally, U.S.

Gross Domestic Product (“GDP”) shrank for the second consecutive quarter as of the Current Quarter, indicating that the U.S.

economy may be entering a recession.

The impact of these macroeconomic developments on our operations cannot be predicted with certainty.

Critical Accounting Policies and Accounting Estimates

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Results of Operations

The “same store” amounts presented below include the results of dealerships and corporate headquarters 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.

For example, the results for a dealership acquired on August 15, 2020, will appear in our same store comparison beginning in 2021 for the period September 2021 through December 2021, when comparing to September 2020 through December 2020 results.

If we disposed of a store on August 15, 2020, the results from this store would be excluded from same store results beginning in August 2020 as July 2020 was the last full month the dealership was owned by us.

The “same store” amounts presented below include the results of dealerships and corporate headquarters for the identical months in each comparative period, commencing with the first full month in which we owned the dealership.

Amounts related to divestitures are excluded from each comparative period, ending with the last full month in which we owned the dealership.

Same store results provide a measurement of our ability to grow revenues and profitability of our existing stores and also provide a metric for peer group comparisons.

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(In millions, except unit data)

Three Months Ended March 31,

Three Months Ended June 30,

2022 2021 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

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Net floorplan expense $ (8.3) $ (6.6) $ (1.6) $ (0.2)

(1) Floorplan assistance is included within New vehicle retail sales Gross profit above and New vehicle retail sales Cost of sales in our Condensed Consolidated Statements of Operations.

(1) Floorplan assistance is included within Gross profit — New vehicle retail sales above and Cost of sales — New vehicle retail sales in our Condensed Consolidated Statements of Operations.

Same Store Operating Data — Consolidated

(In millions, except unit data)

Three Months Ended March 31,

Three Months Ended June 30,

2022 2021 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

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SG&A as % gross profit 60.2 % 56.8 % 3.5 %

Reported Operating Data — Consolidated

(In millions, except unit data)

Six Months Ended June 30,

2022 2021 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

New vehicle retail sales $ 3,596.4 $ 3,314.7 $ 281.7 8.5 % $ (43.8) 9.8 %

Used vehicle retail sales 2,865.3 2,071.9 793.4 38.3 % (44.9) 40.5 %

Used vehicle wholesale sales 189.3 172.0 17.4 10.1 % (5.2) 13.1 %

Total used 3,054.6 2,243.8 810.8 36.1 % (50.0) 38.4 %

Parts and service sales 975.5 735.7 239.8 32.6 % (8.3) 33.7 %

F&I, net 363.2 285.3 78.0 27.3 % (2.6) 28.2 %

Total revenues $ 7,989.7 $ 6,579.6 $ 1,410.2 21.4 % $ (104.7) 23.0 %

Gross profit:

New vehicle retail sales $ 411.5 $ 255.7 $ 155.8 60.9 % $ (4.2) 62.5 %

Used vehicle retail sales 177.3 166.6 10.7 6.4 % (2.4) 7.9 %

Used vehicle wholesale sales 3.6 12.7 (9.1) (71.7) % 0.1 (72.9) %

Total used 180.9 179.3 1.6 0.9 % (2.3) 2.2 %

Parts and service sales 537.5 410.4 127.1 31.0 % (5.1) 32.2 %

F&I, net 363.2 285.3 78.0 27.3 % (2.6) 28.2 %

Total gross profit $ 1,493.1 $ 1,130.7 $ 362.4 32.0 % $ (14.2) 33.3 %

Gross margin:

New vehicle retail sales 11.4 % 7.7 % 3.7 %

Used vehicle retail sales 6.2 % 8.0 % (1.9) %

Used vehicle wholesale sales 1.9 % 7.4 % (5.5) %

Total used 5.9 % 8.0 % (2.1) %

Parts and service sales 55.1 % 55.8 % (0.7) %

Total gross margin 18.7 % 17.2 % 1.5 %

Retail new vehicles sold 75,555 77,134 (1,579) (2.0) %

Retail used vehicles sold 92,713 82,045 10,668 13.0 %

Wholesale used vehicles sold 18,613 20,308 (1,695) (8.3) %

Total used 111,326 102,353 8,973 8.8 %

Average sales price per unit sold:

New vehicle retail $ 47,600 $ 42,974 $ 4,626 10.8 % $ (580) 12.1 %

Used vehicle retail $ 30,905 $ 25,253 $ 5,652 22.4 % $ (484) 24.3 %

Gross profit per unit sold:

New vehicle retail sales $ 5,446 $ 3,316 $ 2,131 64.3 % $ (55) 65.9 %

Used vehicle retail sales $ 1,913 $ 2,031 $ (118) (5.8) % $ (26) (4.5) %

Used vehicle wholesale sales $ 193 $ 625 $ (432) (69.1) % $ 8 (70.4) %

Total used $ 1,625 $ 1,752 $ (127) (7.2) % $ (20) (6.1) %

F&I PRU $ 2,159 $ 1,792 $ 367 20.5 % $ (15) 21.3 %

SG&A expenses $ 878.6 $ 680.0 $ 198.7 29.2 % $ (9.3) 30.6 %

SG&A as % gross profit 58.8 % 60.1 % (1.3) %

Floorplan expense:

Floorplan interest expense $ 11.2 $ 16.1 $ (5.0) (30.9) % $ (0.2) (29.7) %

floorplan assistance (1)

28.2 28.5 (0.3) (1.0) % — (1.0) %

Net floorplan expense $ (17.0) $ (12.3) $ (4.7) $ (0.2)

(1) Floorplan assistance is included within Gross Profit — New vehicle retail sales above and Cost of Sales — New vehicle retail sales in our Condensed Consolidated Statements of Operations.

Same Store Operating Data — Consolidated

(In millions, except unit data)

Six Months Ended June 30,

2022 2021 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

New vehicle retail sales $ 2,933.4 $ 3,272.0 $ (338.6) (10.3) % $ (40.3) (9.1) %

Used vehicle retail sales 2,429.8 2,048.5 381.4 18.6 % (39.7) 20.6 %

Used vehicle wholesale sales 158.4 170.4 (11.9) (7.0) % (4.7) (4.2) %

Total used 2,588.3 2,218.8 369.4 16.7 % (44.4) 18.7 %

Parts and service sales 832.7 723.8 109.0 15.1 % (7.4) 16.1 %

F&I, net 306.6 281.3 25.2 9.0 % (2.4) 9.8 %

Total revenues $ 6,660.9 $ 6,495.9 $ 165.0 2.5 % $ (94.5) 4.0 %

Gross profit:

New vehicle retail sales $ 330.2 $ 252.3 $ 77.9 30.9 % $ (3.8) 32.4 %

Used vehicle retail sales 148.9 164.9 (16.0) (9.7) % (2.1) (8.4) %

Used vehicle wholesale sales 2.2 12.6 (10.4) (82.6) % 0.1 (83.6) %

Total used 151.0 177.5 (26.4) (14.9) % (2.0) (13.8) %

Parts and service sales 449.9 403.7 46.2 11.5 % (4.5) 12.6 %

F&I, net 306.6 281.3 25.2 9.0 % (2.4) 9.8 %

Total gross profit $ 1,237.7 $ 1,114.8 $ 123.0 11.0 % $ (12.8) 12.2 %

Gross margin:

New vehicle retail sales 11.3 % 7.7 % 3.5 %

Used vehicle retail sales 6.1 % 8.0 % (1.9) %

Used vehicle wholesale sales 1.4 % 7.4 % (6.0) %

Total used 5.8 % 8.0 % (2.2) %

Parts and service sales 54.0 % 55.8 % (1.7) %

Total gross margin 18.6 % 17.2 % 1.4 %

Retail new vehicles sold 61,464 76,163 (14,699) (19.3) %

Retail used vehicles sold 78,393 81,067 (2,674) (3.3) %

Wholesale used vehicles sold 14,974 20,072 (5,098) (25.4) %

Total used 93,367 101,139 (7,772) (7.7) %

Average sales price per unit sold:

New vehicle retail $ 47,725 $ 42,960 $ 4,765 11.1 % $ (656) 12.6 %

Used vehicle retail $ 30,996 $ 25,269 $ 5,727 22.7 % $ (506) 24.7 %

Gross profit per unit sold:

New vehicle retail sales $ 5,372 $ 3,312 $ 2,060 62.2 % $ (62) 64.1 %

Used vehicle retail sales $ 1,899 $ 2,034 $ (135) (6.6) % $ (27) (5.3) %

Used vehicle wholesale sales $ 146 $ 626 $ (480) (76.7) % $ 8 (78.0) %

Total used $ 1,618 $ 1,755 $ (137) (7.8) % $ (21) (6.6) %

F&I PRU $ 2,192 $ 1,789 $ 403 22.5 % $ (17) 23.5 %

SG&A expenses $ 747.1 $ 669.7 $ 77.3 11.5 % $ (8.5) 12.8 %

SG&A as % gross profit 60.4 % 60.1 % 0.3 %

Reported Operating Data — U.S.

(In millions, except unit data)

Three Months Ended March 31,

Three Months Ended June 30,

2022 2021 Increase/(Decrease) % Change

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(In millions, except unit data)

Three Months Ended March 31,

Three Months Ended June 30,

2022 2021 Increase/(Decrease) % Change

36 unchanged sentences

SG&A as % gross profit 58.5 % 55.8 % 2.7 %

Region — Three Months Ended March 31, 2022 Compared to 2021

Region — Three Months Ended June 30, 2022 Compared to 2021

The following discussion of our U.S.

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Total revenues in the U.S.

during the Current Quarter, increased $687.0 million, or 28.6%, as compared to the Prior Year Quarter, driven by increases across all business lines.

during the Current Quarter increased $512.3 million, or 17.5%, as compared to the Prior Year Quarter.

This increase was primarily driven by the acquisition of stores, higher same store used vehicle retail sales and increased same store parts and service sales, partially offset by fewer same store new vehicle retail sales.

Total same store revenues in the U.S.

during the Current Quarter, increased $188.2 million, or 7.9%.

New and used vehicle retail sales revenues benefited from the sale of approximately 5,800 units from our online digital platform, AcceleRide®, during the Current Quarter, a 44.0% increase as compared to the Prior Year Quarter.

New vehicle retail same store sales revenues declined modestly, driven by a shortage in new vehicle supply, leading to fewer units sold.

The shortage of new vehicle inventory continues to drive strong pricing, which mitigated the sales revenue impact of lower unit sales.

during the Current Quarter, decreased $97.1 million, or 3.4%, as compared to Prior Year Quarter.

This decline was primarily driven by fewer same store new and used vehicle retail unit sales, partially offset by higher same store used vehicle retail sales prices and increased same store parts and service sales.

New and used vehicle retail revenues benefited from the sale of approximately 6,900 units from our online digital platform, AcceleRide®, during the Current Quarter, representing approximately a 22.1% increase as compared to the Prior Year Quarter.

New vehicle retail same store revenues declined compared to the Prior Year Quarter, driven by a shortage in new vehicle supply, leading to fewer units sold.

The shortage of new vehicle inventory continues to drive strong pricing, which partially mitigated the revenue impact of lower unit sales.

Supply chain issues, including an ongoing semiconductor and vehicle parts shortage, and other logistics challenges, continued into the Current Quarter for OEMs, leading to sustained lower vehicle production and deliveries of fewer vehicles to dealerships.

We ended the Current Quarter with a U.S.

new vehicle inventory supply of 9 days, 26 days lower than the Prior Year Quarter, and consistent with the December 31, 2021 days’ supply of 9.

Used vehicle retail same store sales revenues outperformed the Prior Year Quarter, despite a modest decline in units sold, as increased demand drove prices higher.

Used vehicle wholesale same store sales revenues declined only modestly as increased used vehicle demand drove higher prices, which partially offset a decline in units sold.

Parts and service same store revenues outperformed the Prior Year Quarter, driven by increases in customer pay revenues, wholesale revenues and collision revenues, partially offset by a slight decline in warranty revenues.

F&I, net same store revenues outperformed the Prior Year Quarter, primarily driven by higher income per contract on finance, VSCs and other insurance product offerings and higher penetration rates.

These increases were partially offset by a decrease in same store total retail unit sales and an increase in our overall chargeback experience.

new vehicle inventory supply of 11 days, 5 days lower than the Prior Year Quarter.

Used vehicle retail same store revenues outperformed compared to the Prior Year Quarter, despite a modest decline in units sold, as increased demand drove prices higher.

Used vehicle wholesale same store revenues declined due to a decline in units sold driven by efforts to sell more used vehicles through retail sales rather than the wholesale market as a result of the increased demand and pricing of used vehicle retail sales described above.

Parts and service same store revenues outperformed compared to the Prior Year Quarter, driven by increases in customer pay, collision and wholesale revenues reflecting increased business activity, partially offset by a decline in warranty revenues.

Warranty revenues have declined primarily due to fewer new vehicles sold as a result of new vehicle shortages.

F&I, net same store revenues were consistent with the Prior Year Quarter, driven by higher income per contract on finance, VSCs, other product offerings and improved penetration rates, partially offset by a decrease in same store total retail unit sales.

Total gross profit in the U.S.

during the Current Quarter, increased $205.6 million, or 49.5%, as compared to the Prior Year Quarter.

during the Current Quarter, increased $115.2 million, or 20.5%, as compared to the Prior Year Quarter, primarily driven by the acquisition of stores and increased same store parts and service sales.

Total same store gross profit in the U.S.

during the Current Quarter, increased $103.7 million, or 25.3%, as compared to the Prior Year Quarter.

New vehicle retail same store gross profit increased 73.2%, driven by a 109.4% increase in new vehicle retail same store gross profit per unit sold, partially offset by a 17.3% decrease in new vehicle retail same store unit sales.

during the Current Quarter, decreased $5.0 million, or 0.9%, as compared to the Prior Year Quarter.

This decrease was primarily driven by lower same store used vehicle retail gross profit, partially offset by increased same store parts and service gross profit.

New vehicle retail same store gross profit increased 2.6%, driven by an increase in new vehicle retail same store gross profit per unit sold, partially offset by a decrease in new vehicle retail same store unit sales.

The increase in new vehicle retail same store gross profit per unit sold reflects the strong demand resulting from the shortage of new vehicle inventory discussed above.

Used vehicle retail same store gross profit increased 14.4%, driven by an increase of 18.9% in used vehicle retail same store gross profit per unit sold, partially offset by a 3.8% decrease in used vehicle retail same store unit sales.

The increase in used vehicle retail same store gross profit per unit sold reflects a combination of higher market prices and strong demand.

The inventory shortage also drove the decrease in new vehicle retail same store unit sales.

Used vehicle retail same store gross profit decreased 29.1%, driven by a decrease in used vehicle retail same store gross profit per unit sold, coupled with a decrease in used vehicle retail same store unit sales.

The decrease in same store used vehicle gross profit and retail unit sales was driven by inflationary impacts on customers.

Additionally, the ongoing new vehicle supply shortage negatively impacted the supply of used vehicles.

Our used vehicle wholesale same store gross profit decreased 79.9%, driven by a decrease in used vehicle wholesale same store gross profit per unit sold, coupled with a decrease in used vehicle same store wholesale units.

Parts and service same store gross profit increased 13.0%, primarily driven by the increase in our customer-pay business reflecting increased business activity.

F&I, net same store gross profit increased 16.3%, driven by increases in revenue discussed above.

Parts and service same store gross profit increased 11.7%, primarily driven by the increase in our customer-pay, collision and wholesale business reflecting increased business activity.

F&I, net same store gross profit was consistent with the Prior Year Quarter, as described above for F&I, net same store revenues.

Total same store gross margin increased 49 basis points, primarily driven by higher new vehicle retail sales prices as a result of the strong new vehicle pricing caused by the new vehicle inventory shortage described above.

SG&A Expenses

SG&A as a percentage of gross profit increased 249 and 275 basis points on an as reported and same store basis, respectively, compared to the Prior Year Quarter, partially driven by the decline in used vehicle gross profit described above as well as the following factors impacting total SG&A.

Total SG&A expenses in the U.S.

during the Current Quarter, increased $81.0 million, or 25.9%, as compared to the Prior Year Quarter, primarily driven by the acquisition of stores.

Total same store SG&A expenses in the U.S.

during the Current Quarter, increased $12.2 million, or 4.0%, as compared to the Prior Year Quarter, primarily driven by increased labor costs and an increase in other variable expenses associated with the rise in certain business activities as described above.

Reported Operating Data — U.S.

(In millions, except unit data)

Six Months Ended June 30,

2022 2021 Increase/(Decrease) % Change

New vehicle retail sales $ 2,994.9 $ 2,750.4 $ 244.5 8.9 %

Used vehicle retail sales 2,235.5 1,579.4 656.1 41.5 %

Used vehicle wholesale sales 116.4 111.6 4.8 4.3 %

Total used 2,351.9 1,691.0 660.9 39.1 %

Parts and service sales 854.0 628.9 225.1 35.8 %

F&I, net 327.9 259.0 68.9 26.6 %

Total revenues $ 6,528.5 $ 5,329.3 $ 1,199.3 22.5 %

Gross profit:

New vehicle retail sales $ 357.8 $ 222.6 $ 135.2 60.8 %

Used vehicle retail sales 142.3 137.6 4.7 3.4 %

Used vehicle wholesale sales 5.1 10.3 (5.2) (50.6) %

Total used 147.4 148.0 (0.5) (0.4) %

Parts and service sales 464.1 346.8 117.3 33.8 %

F&I, net 327.9 259.0 68.9 26.6 %

Total gross profit $ 1,297.2 $ 976.3 $ 320.9 32.9 %

Gross margin:

New vehicle retail sales 11.9 % 8.1 % 3.9 %

Used vehicle retail sales 6.4 % 8.7 % (2.3) %

Used vehicle wholesale sales 4.4 % 9.3 % (4.9) %

Total used 6.3 % 8.8 % (2.5) %

Parts and service sales 54.3 % 55.1 % (0.8) %

Total gross margin 19.9 % 18.3 % 1.5 %

Retail new vehicles sold 61,125 63,199 (2,074) (3.3) %

Retail used vehicles sold 72,463 64,439 8,024 12.5 %

Wholesale used vehicles sold 12,060 13,046 (986) (7.6) %

Total used 84,523 77,485 7,038 9.1 %

Average sales price per unit sold:

New vehicle retail $ 48,996 $ 43,520 $ 5,476 12.6 %

Used vehicle retail $ 30,850 $ 24,510 $ 6,340 25.9 %

Gross profit per unit sold:

New vehicle retail sales $ 5,854 $ 3,522 $ 2,332 66.2 %

Used vehicle retail sales $ 1,964 $ 2,136 $ (172) (8.0) %

Used vehicle wholesale sales $ 423 $ 792 $ (369) (46.6) %

Total used $ 1,744 $ 1,910 $ (165) (8.7) %

F&I PRU $ 2,454 $ 2,029 $ 425 21.0 %

SG&A expenses $ 747.2 $ 574.3 $ 172.9 30.1 %

SG&A as % gross profit 57.6 % 58.8 % (1.2) %

Same Store Operating Data — U.S.

(In millions, except unit data)

Six Months Ended June 30,

2022 2021 Increase/(Decrease) % Change

New vehicle retail sales $ 2,380.9 $ 2,708.0 $ (327.1) (12.1) %

Used vehicle retail sales 1,872.6 1,556.9 315.7 20.3 %

Used vehicle wholesale sales 91.5 110.1 (18.6) (16.9) %

Total used 1,964.1 1,667.0 297.1 17.8 %

Parts and service sales 724.6 622.4 102.3 16.4 %

F&I, net 274.0 255.1 18.9 7.4 %

Total revenues $ 5,343.6 $ 5,252.5 $ 91.1 1.7 %

Gross profit:

New vehicle retail sales $ 281.2 $ 219.1 $ 62.1 28.3 %

Used vehicle retail sales 118.1 135.9 (17.8) (13.1) %

Used vehicle wholesale sales 3.5 10.2 (6.7) (65.8) %

Total used 121.6 146.1 (24.5) (16.8) %

Parts and service sales 384.8 342.6 42.2 12.3 %

F&I, net 274.0 255.1 18.9 7.4 %

Total gross profit $ 1,061.6 $ 962.9 $ 98.7 10.2 %

Gross margin:

New vehicle retail sales 11.8 % 8.1 % 3.7 %

Used vehicle retail sales 6.3 % 8.7 % (2.4) %

Used vehicle wholesale sales 3.8 % 9.2 % (5.4) %

Total used 6.2 % 8.8 % (2.6) %

Parts and service sales 53.1 % 55.0 % (1.9) %

Total gross margin 19.9 % 18.3 % 1.5 %

Retail new vehicles sold 48,453 62,244 (13,791) (22.2) %

Retail used vehicles sold 60,972 63,518 (2,546) (4.0) %

Wholesale used vehicles sold 9,179 12,835 (3,656) (28.5) %

Total used 70,151 76,353 (6,202) (8.1) %

Average sales price per unit sold:

New vehicle retail $ 49,138 $ 43,506 $ 5,632 12.9 %

Used vehicle retail $ 30,713 $ 24,512 $ 6,201 25.3 %

Gross profit per unit sold:

New vehicle retail sales $ 5,804 $ 3,521 $ 2,283 64.8 %

Used vehicle retail sales $ 1,937 $ 2,140 $ (203) (9.5) %

Used vehicle wholesale sales $ 379 $ 791 $ (413) (52.1) %

Total used $ 1,733 $ 1,913 $ (180) (9.4) %

F&I PRU $ 2,504 $ 2,028 $ 476 23.4 %

SG&A expenses $ 627.0 $ 566.9 $ 60.1 10.6 %

SG&A as % gross profit 59.1 % 58.9 % 0.2 %

Region — Six Months Ended June 30, 2022 Compared to 2021

The following discussion of our U.S.

operating results is on an as reported and same store basis.

The difference between as reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings.

Total revenues in the U.S.

during the Current Year increased $1.2 billion, or 22.5%, as compared to the same period in 2021 (“Prior Year”), primarily driven by the acquisition of stores.

Total same store revenues in the U.S.

during the Current Year increased $91.1 million, or 1.7%, as compared to the Prior Year.

This increase was primarily driven by higher same store used vehicle retail sales and increased same store parts and service sales, partially offset by fewer same store new vehicle retail sales.

New and used vehicle retail revenues benefited from the sale of approximately 12,600 units from our online digital platform, AcceleRide®, during the Current Year, representing approximately a 31.2% increase as compared to the Prior Year.

New vehicle retail same store revenues declined compared to the Prior Year, driven by a shortage in new vehicle supply, leading to fewer units sold.

The shortage of new vehicle inventory continues to drive strong pricing, which partially mitigated the revenue impact of lower unit sales.

Supply chain issues, including an ongoing semiconductor and vehicle parts shortage, and other logistics challenges, continued into the Current Year for OEMs, leading to sustained lower vehicle production and deliveries of fewer vehicles to dealerships.

Used vehicle retail same store revenues outperformed the Prior Year, despite a modest decline in units sold, as increased demand drove prices higher.

Used vehicle wholesale same store sales revenues declined primarily driven by a decline in units sold driven by efforts to sell more used vehicles through retail sales rather than the wholesale market as a result of the increased demand and pricing of used vehicle retail sales described above.

Parts and service same store revenues outperformed the Prior Year, primarily driven by increases in customer pay, wholesale and collision revenues reflecting increased business activity, partially offset by a decline in warranty revenues.

Warranty revenues have declined primarily due to fewer new vehicles sold as a result of new vehicle shortages.

F&I, net same store revenues outperformed the Prior Year, primarily driven by higher income per contract on finance, VSCs and other product offerings and improved penetration rates, partially offset by a decrease in same store total retail unit sales.

Total gross profit in the U.S.

during the Current Year, increased $320.9 million, or 32.9%, as compared to the Prior Year, primarily driven by the acquisition of stores and increased same store parts and service sales.

Total same store gross profit in the U.S.

during the Current Year, increased $98.7 million, or 10.2%, as compared to the Prior Year, primarily driven by same store new vehicle retail sales, same store parts and service sales and same store F&I, net.

New vehicle retail same store gross profit increased 28.3%, driven by an increase in new vehicle retail same store gross profit per unit sold, partially offset by a decrease in new vehicle retail same store unit sales.

The increase in new vehicle retail same store gross profit per unit sold reflects the strong demand resulting from the shortage of new vehicle inventory discussed above.

Used vehicle retail same store gross profit decreased 13.1%, driven by a decrease in used vehicle retail same store gross profit per unit sold, coupled with a decrease in used vehicle retail same store unit sales.

The decrease in same store used vehicle gross profit and retail unit sales was driven by inflationary impacts on customers coupled with the ongoing new vehicle supply shortage impacting the supply of used vehicles.

Our used vehicle wholesale same store gross profit decreased 65.8%, driven by a decrease in used vehicle wholesale same store gross profit per unit sold, coupled with a decrease in used vehicle same store wholesale units.

Parts and service same store gross profit increased 12.3%, primarily driven by the increase in our customer-pay, collision and wholesale business reflecting increased business activity.

F&I, net same store gross profit increased 7.4%, as described above for F&I, net same store revenues.

Total same store gross margin increased 153 basis points, primarily driven by higher new vehicle retail sales prices outpacing new vehicle costs of sales.

This increase was partially offset by a decrease in same store used vehicle gross margin, driven by inflationary impacts on our used vehicle customers and the ongoing new vehicle supply shortage increasing acquisition costs for used vehicles, as well as a decrease in same store parts and service gross margin primarily due to increased labor costs.

SG&A Expenses

SG&A as a percentage of gross profit declined 607 and 341 basis points on an as reported and same store basis, respectively, compared to the Prior Year Quarter.

SG&A as a percentage of gross profit declined 122 basis points and increased 19 basis points on an as reported and same store basis, respectively, compared to the Prior Year.

The increase in SG&A as a percentage of gross profit on a same store basis was partially driven by the decline in used vehicle same store gross profit described above as well as the following factors impacting total SG&A.

Total SG&A expenses in the U.S.

during the Current Quarter, increased $91.9 million, or 35.1%, as compared to the Prior Year Quarter.

during the Current Year, increased $172.9 million, or 30.1%, as compared to the Prior Year, primarily driven by the acquisition of stores.

Total same store SG&A expenses in the U.S.

during the Current Quarter, increased $47.9 million, or 18.5%, as compared to the Prior Year Quarter, primarily driven by increased variable commission payments as a result of improvements in gross profits in our operations and an increase in other variable expenses associated with the rise in certain business activities as described above.

during the Current Year, increased $60.1 million, or 10.6%, as compared to the Prior Year, primarily driven by increased variable commission payments as a result of improvements in gross profits in our new vehicle operations and an increase in other variable expenses associated with the rise in certain business activities as described above.

Total same store SG&A expenses in the U.S.

for the Prior Year Quarter, included $2.2 million in disaster pay and insurance deductible expense associated with the February winter storm in Texas and a $1.0 million gain related to a favorable legal settlement.

for the Prior Year, included $2.2 million in disaster pay and insurance deductible expense associated with a February winter storm in Texas and a $1.0 million gain related to a favorable legal settlement.

Reported Operating Data — U.K.

(In millions, except unit data)

Three Months Ended March 31,

Three Months Ended June 30,

2022 2021 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

9 unchanged sentences

Used vehicle retail sales 15.8 20.8 (5.0) (24.1) % (1.7) (15.7) %

Used vehicle wholesale sales (1.1) 2.5 (3.6) (143.3) % 0.1 (148.4) %

Total used 14.7 23.3 (8.6) (37.0) % (1.6) (30.0) %

Parts and service sales 34.5 31.0 3.6 11.6 % (3.9) 24.2 %

F&I, net 17.1 15.7 1.4 8.7 % (1.9) 21.0 %

Total gross profit $ 92.1 $ 88.4 $ 3.7 4.2 % $ (10.5) 16.1 %

Gross margin:

New vehicle retail sales 8.9 % 6.1 % 2.8 %

Used vehicle retail sales 5.1 % 6.9 % (1.8) %

Used vehicle wholesale sales (3.0) % 7.7 % (10.7) %

Total used 4.3 % 7.0 % (2.7) %

Parts and service sales 60.5 % 61.5 % (0.9) %

Total gross margin 13.0 % 12.6 % 0.4 %

Retail new vehicles sold 7,195 7,395 (200) (2.7) %

Retail used vehicles sold 10,384 10,494 (110) (1.0) %

Wholesale used vehicles sold 3,455 4,124 (669) (16.2) %

Total used 13,839 14,618 (779) (5.3) %

Average sales price per unit sold:

New vehicle retail $ 40,241 $ 40,727 $ (486) (1.2) % $ (4,517) 9.9 %

Used vehicle retail $ 29,640 $ 28,672 $ 969 3.4 % $ (3,327) 15.0 %

Gross profit per unit sold:

New vehicle retail sales $ 3,580 $ 2,484 $ 1,096 44.1 % $ (423) 61.1 %

Used vehicle retail sales $ 1,521 $ 1,984 $ (463) (23.3) % $ (168) (14.8) %

Used vehicle wholesale sales $ (316) $ 611 $ (927) NM $ 37 NM

Total used $ 1,063 $ 1,597 $ (534) (33.4) % $ (117) (26.1) %

F&I PRU $ 973 $ 879 $ 94 10.6 % $ (110) 23.2 %

SG&A expenses $ 66.6 $ 56.0 $ 10.5 18.7 % $ (7.5) 32.1 %

SG&A as % gross profit 72.2 % 63.4 % 8.9 %

NM — Not Meaningful

Region — Three Months Ended June 30, 2022 Compared to 2021

The following discussion of our U.K.

operating results is on an as reported and same store basis.

The difference between as reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings.

At the end of 2020, the U.K.

experienced a surge in COVID-19 cases, which led to a government-mandated closure of all non-essential businesses beginning January 4, 2021 through April 12, 2021.

In mid-April 2021, the COVID-19 restrictions affecting our U.K.

dealership showrooms were lifted and our dealerships were able to reopen.

The lifting of restrictions in the Prior Year Quarter drove a substantial increase in business activity for our U.K.

dealerships due to pent-up demand.

This led to the underperformance of Current Quarter same store results as compared to the Prior Year Quarter.

However, Current Year same store results exceeded Prior Year same store results, demonstrating that the same store underperformance of the Current Quarter is due to the unique business environment of the Prior Year Quarter as described above.

Total revenues in the U.K.

during the Current Quarter, increased $7.5 million, or 1.1%, as compared to the Prior Year Quarter.

This increase was primarily due to the acquisition of stores, partially offset by the negative impact of foreign currency exchange rates on same store revenues.

Total same store revenues in the U.K.

during the Current Quarter, decreased $57.9 million, or 8.3%, as compared to the Prior Year Quarter, primarily driven by the negative impact of foreign currency exchange rates.

On a constant currency basis, total same store revenues increased 2.0%, driven by outperformances across all revenue streams except new vehicle retail sales.

New vehicle retail same store revenues, on a constant currency basis, underperformed compared to the Prior Year Quarter, driven by a shortage in new vehicle supply, leading to fewer units sold.

The decrease in units sold is due to the ongoing semiconductor shortage and other logistics challenges, which continued into the Current Quarter for OEMs, leading to sustained lower vehicle production and deliveries of fewer vehicles to dealerships.

We ended the Current Quarter with a U.K.

new vehicle inventory supply of 31 days;

which is consistent with the Prior Year Quarter and two days lower than December 31, 2021 days’ supply of 33.

The increase in the average new vehicle retail same store sales price was driven by both supply shortages and strong vehicle demand.

Used vehicle retail same store revenues, on a constant currency basis, modestly outperformed the Prior Year Quarter due to higher used vehicle retail same store average sales prices, benefited by strong consumer demand and new vehicle inventory shortages discussed above, partially offset by a decline in used vehicle retail same store units sold.

Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, driven by increases in all of our parts and service business lines reflecting increased business activity with the reduction of COVID-19 restrictions compared to the Prior Year Quarter.

F&I, net same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, driven by improved penetration rates on all of our product offerings and higher income per contract on finance and VSCs, partially offset by a decline in retail units.

Total gross profit in the U.K.

during the Current Quarter, increased $3.7 million, or 4.2%, as compared to the Prior Year Quarter, primarily driven by the acquisition of stores.

Total same store gross profit in the U.K.

during the Current Quarter, decreased $3.9 million, or 4.5%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store gross profit increased 6.4%, primarily driven by improvements in new vehicle retail gross profit, parts and service gross profit and F&I, net.

New vehicle retail same store gross profit, on a constant currency basis, outperformed compared to the Prior Year Quarter due to an increase in new vehicle retail same store gross profit per unit, resulting from increased prices as discussed above.

Used vehicle retail same store gross profit, on a constant currency basis, underperformed compared to the Prior Year Quarter due to a decrease in used vehicle retail same store gross profit per unit sold, coupled with a decrease in used vehicle retail same store unit sales.

Parts and service same store gross profit, on a constant currency basis, outperformed the Prior Year Quarter, driven by the increases in our parts and service business activities discussed above.

F&I, net same store gross profit, on a constant currency basis, outperformed the Prior Year Quarter as discussed above.

Total same store gross margin in the U.K.

increased 52 basis points, primarily driven by higher new vehicle retail sales prices outpacing new vehicle costs of sales as a result of the strong new vehicle pricing caused by the new vehicle inventory shortage described above.

SG&A Expenses

SG&A as a percentage of gross profit increased 885 and 845 basis points, on an as reported and same store basis, respectively, compared to the Prior Year Quarter, partially driven by the decline in used vehicle gross profit described above as well as the following factors impacting total SG&A.

Total SG&A expenses in the U.K.

during the Current Quarter, increased $10.5 million, or 18.7%, as compared to the Prior Year Quarter, primarily driven by the acquisition of stores.

Total same store SG&A expenses in the U.K.

during the Current Quarter, increased $4.5 million, or 8.3%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store SG&A expenses increased 20.4%.

These increases were primarily driven by higher business activity due to fewer COVID-19 restrictions compared to the Prior Year Quarter, as well as government COVID-19 assistance and the related temporary suspension of city tax in the Prior Year Quarter which did not recur in the Current Quarter.

Same Store Operating Data — U.K.

(In millions, except unit data)

Three Months Ended June 30,

2022 2021 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

New vehicle retail sales $ 267.5 $ 301.2 $ (33.7) (11.2) % $ (30.0) (1.2) %

Used vehicle retail sales 272.1 300.9 (28.7) (9.6) % (30.5) 0.6 %

Used vehicle wholesale sales 33.7 32.5 1.1 3.5 % (3.8) 15.1 %

Total used 305.8 333.4 (27.6) (8.3) % (34.3) 2.0 %

Parts and service sales 50.8 47.5 3.3 6.9 % (5.7) 18.9 %

F&I, net 15.8 15.7 0.1 0.5 % (1.8) 11.9 %

Total revenues $ 639.9 $ 697.9 $ (57.9) (8.3) % $ (71.8) 2.0 %

Gross profit:

New vehicle retail sales $ 23.7 $ 18.4 $ 5.3 29.0 % $ (2.8) 44.2 %

Used vehicle retail sales 13.9 20.8 (6.9) (33.3) % (1.5) (25.9) %

Used vehicle wholesale sales (0.9) 2.5 (3.4) (135.5) % 0.1 (139.7) %

Total used 13.0 23.3 (10.3) (44.3) % (1.4) (38.2) %

Parts and service sales 30.7 29.7 1.0 3.4 % (3.5) 15.1 %

F&I, net 15.8 15.7 0.1 0.5 % (1.8) 11.9 %

Total gross profit $ 83.2 $ 87.1 $ (3.9) (4.5) % $ (9.5) 6.4 %

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Used vehicle retail sales $ 1,560 $ 1,984 $ (425) (21.4) % $ (172) (12.7) %

Used vehicle wholesale sales $ (293) $ 611 $ (904) (147.9) % $ 35 NM

Total used $ 1,086 $ 1,597 $ (511) (32.0) % $ (119) (24.5) %

F&I PRU $ 1,024 $ 879 $ 145 16.5 % $ (116) 29.7 %

SG&A expenses $ 59.5 $ 54.9 $ 4.5 8.3 % $ (6.7) 20.4 %

SG&A as % gross profit 71.5 % 63.1 % 8.5 %

NM — Not Meaningful

Reported Operating Data — U.K.

(In millions, except unit data)

Six Months Ended June 30,

2022 2021 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

New vehicle retail sales $ 601.6 $ 564.3 $ 37.2 6.6 % $ (43.8) 14.4 %

Used vehicle retail sales 629.8 492.5 137.3 27.9 % (44.9) 37.0 %

Used vehicle wholesale sales 72.9 60.4 12.6 20.8 % (5.2) 29.4 %

Total used 702.7 552.8 149.9 27.1 % (50.0) 36.2 %

Parts and service sales 121.5 106.8 14.7 13.8 % (8.3) 21.5 %

F&I, net 35.4 26.3 9.1 34.5 % (2.6) 44.4 %

Total revenues $ 1,461.2 $ 1,250.3 $ 210.9 16.9 % $ (104.7) 25.2 %

Gross profit:

New vehicle retail sales $ 53.7 $ 33.2 $ 20.5 61.9 % $ (4.2) 74.5 %

Used vehicle retail sales 35.0 29.0 6.0 20.6 % (2.4) 29.0 %

Used vehicle wholesale sales (1.5) 2.4 (3.9) NM 0.1 NM

Total used 33.5 31.4 2.1 6.7 % (2.3) 14.0 %

Parts and service sales 73.4 63.6 9.8 15.4 % (5.1) 23.4 %

F&I, net 35.4 26.3 9.1 34.5 % (2.6) 44.4 %

Total gross profit $ 195.9 $ 154.4 $ 41.5 26.9 % $ (14.2) 36.1 %

Gross margin:

New vehicle retail sales 8.9 % 5.9 % 3.1 %

Used vehicle retail sales 5.6 % 5.9 % (0.3) %

Used vehicle wholesale sales (2.1) % 3.9 % (6.0) %

Total used 4.8 % 5.7 % (0.9) %

Parts and service sales 60.4 % 59.5 % 0.8 %

Total gross margin 13.4 % 12.3 % 1.1 %

Retail new vehicles sold 14,430 13,935 495 3.6 %

Retail used vehicles sold 20,250 17,606 2,644 15.0 %

Wholesale used vehicles sold 6,553 7,262 (709) (9.8) %

Total used 26,803 24,868 1,935 7.8 %

Average sales price per unit sold:

New vehicle retail $ 41,689 $ 40,498 $ 1,191 2.9 % $ (3,037) 10.4 %

Used vehicle retail $ 31,101 $ 27,973 $ 3,128 11.2 % $ (2,216) 19.1 %

Gross profit per unit sold:

New vehicle retail sales $ 3,721 $ 2,379 $ 1,342 56.4 % $ (289) 68.5 %

Used vehicle retail sales $ 1,727 $ 1,647 $ 80 4.9 % $ (120) 12.1 %

Used vehicle wholesale sales $ (230) $ 325 $ (555) NM $ 23 NM

Total used $ 1,249 $ 1,261 $ (12) (1.0) % $ (85) 5.8 %

F&I PRU $ 1,020 $ 834 $ 186 22.3 % $ (75) 31.3 %

4 unchanged sentences

(In millions, except unit data)

Three Months Ended March 31,

Six Months Ended June 30,

2022 2021 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

37 unchanged sentences

NM — Not Meaningful

Region — Three Months Ended March 31, 2022 Compared to 2021

Region — Six Months Ended June 30, 2022 Compared to 2021

The following discussion of our U.K.

1 unchanged sentence

The difference between as reported amounts and same store amounts is related to acquisition and disposition activity, as well as new add-point openings.

experienced a surge in COVID-19 cases at the end of 2020, which led to a government-mandated closure of all non-essential businesses beginning January 4, 2021 through April 12, 2021.

The national lockdown impacted our new and used vehicle sales as our showrooms were closed the entire Prior Year Quarter, but had a lesser impact on our service operations as they remained open.

At the end of 2020, the U.K.

experienced a surge in COVID-19 cases, which led to a government-mandated closure of all non-essential businesses beginning January 4, 2021 through April 12, 2021.

In mid-April 2021, the COVID-19 restrictions affecting our U.K.

dealership showrooms were lifted, and our dealerships were able to reopen.

Total revenues in the U.K.

during the Current Quarter, increased $203.4 million, or 37.0%, as compared to the Prior Year Quarter.

during the Current Year, increased $210.9 million, or 16.9%, as compared to the Prior Year, primarily driven by the acquisition of stores.

Total same store revenues in the U.K.

during the Current Quarter, increased $131.8 million, or 24.2%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store revenues increased 28.1%, driven by out performances across all revenue streams.

New vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year Quarter due to an increase in new vehicle retail same store average sales price per unit sold.

New vehicle units sold remained consistent amid an ongoing semiconductor shortage and other logistics challenges, which continued into the Current Quarter for OEMs, leading to sustained lower vehicle production and deliveries of fewer vehicles to dealerships.

We ended the Current Quarter with a U.K.

new vehicle inventory supply of 17 days;

12 days lower than the Prior Year Quarter and 16 days lower than December 31, 2021 days’ supply of 33.

The increase in the average new vehicle retail same store sales price was driven by both supply shortages and strong vehicle demand, which was pent-up over past years due to Brexit and the COVID-19 pandemic.

Used vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year Quarter due to increased used vehicle retail same store unit sales, coupled with higher used vehicle retail same store average sales prices, benefited by strong consumer demand and new vehicle inventory shortages.

Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, driven by increases in our customer-pay, collision and wholesale businesses reflecting increased business activity with the reduction of COVID-19 restrictions compared to the Prior Year Quarter.

F&I, net same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, driven by higher income per contract, as well as improved penetration rates on all of our product offerings, coupled with an increase in used vehicle retail sales same store units sold.

during the Current Year, increased $73.9 million, or 5.9%, as compared to the Prior Year.

On a constant currency basis, total same store revenues increased 13.5%, driven by outperformances across all revenue streams.

New vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year due to an increase in new vehicle retail same store average sales price per unit sold, partially offset by fewer same store new vehicle retail units sold.

The increase in the average new vehicle retail same store sales price was driven by both new vehicle shortages, as described above, and strong vehicle demand, which was pent-up over past years due to Brexit and the COVID-19 pandemic.

Used vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year, despite a slight decline in units sold, as increased demand drove higher prices.

Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year, driven by increases in our customer-pay, collision and wholesale businesses reflecting increased business activity with the reduction of COVID-19 restrictions compared to the Prior Year.

F&I, net same store revenues, on a constant currency basis, outperformed the Prior Year, driven by improved penetration rates on finance and other products and higher income per contract for finance and VSCs, partially offset by lower retail units sold.

Total gross profit in the U.K.

during the Current Quarter, increased $37.8 million, or 57.3%, as compared to the Prior Year Quarter.

during the Current Year, increased $41.5 million, or 26.9%, as compared to the Prior Year, primarily driven by the acquisition of stores and increased same store new vehicle retail sales, same store parts and service sales, F&I, net and same store used vehicle retail sales.

Total same store gross profit in the U.K.

during the Current Quarter, increased $28.2 million, or 43.6%, as compared to the Prior Year Quarter.

during the Current Year, increased $24.3 million, or 16.0%, as compared to the Prior Year.

On a constant currency basis, total same store gross profit increased 24.4%, driven by improvements in new and used retail sales, parts and service sales and F&I, net.

New vehicle retail same store gross profit, on a constant currency basis, outperformed the Prior Year Quarter due to an increase in new vehicle retail same store average gross profit per unit, resulting from increased prices as discussed above.

Used vehicle retail same store gross profit, on a constant currency basis, outperformed the Prior Year Quarter due to an increase in used vehicle retail same store average gross profit per unit sold, coupled with an increase in used vehicle retail same store unit sales.

The increase in used vehicle retail same store average gross profit per unit sold resulted from increased prices as discussed above.

Parts and service same store gross profit, on a constant currency basis, outperformed the Prior Year Quarter, driven by the increases in our businesses discussed above.

F&I, net same store gross profit, on a constant currency basis, outperformed the Prior Year Quarter as discussed above.

New vehicle retail same store gross profit, on a constant currency basis, outperformed the Prior Year due to an increase in new vehicle retail same store gross profit per unit, resulting from increased prices as discussed above, partially offset by a modest decline in new vehicle retail same store units sold.

Used vehicle retail same store gross profit, on a constant currency basis, outperformed the Prior Year due to an increase in used vehicle retail same store gross profit per unit sold, partially offset by a decrease in used vehicle retail same store units sold.

The increase in used vehicle retail same store gross profit per unit sold, on a constant currency basis, resulted from increased prices as discussed above.

Parts and service same store gross profit, on a constant currency basis, outperformed the Prior Year, driven by the increases in our parts and service businesses discussed above.

F&I, net same store gross profit, on a constant currency basis, outperformed the Prior Year as discussed above.

Total same store gross margin in the U.K.

increased 186 basis points, driven by improvements in new vehicle retail sales, used vehicle retail sales and parts and service sales margins due to increased customer demand and vehicle supply constraints.

increased 116 basis points, driven by improvements in new vehicle retail sales due to increased customer demand and vehicle supply constraints.

The increase was partially offset by a decrease in same store total used vehicle gross margin, resulting from inflationary impacts on our used vehicle customers and the ongoing new vehicle supply shortage increasing acquisition costs for used vehicles.

SG&A Expenses

SG&A as a percentage of gross profit declined 1,271 and 885 basis points, on an as reported and same store basis, respectively, compared to the Prior Year Quarter.

SG&A as a percentage of gross profit declined 136 basis points on an as reported basis and improved 42 basis points on a same store basis, respectively, compared to the Prior Year.

Total SG&A expenses in the U.K.

during the Current Quarter, increased $15.2 million, or 30.7%, as compared to the Prior Year Quarter.

during the Current Year, increased $25.7 million, or 24.4%, as compared to the Prior Year, primarily driven by increases in same store SG&A and the acquisition of stores.

Total same store SG&A expenses in the U.K.

during the Current Quarter, increased $12.7 million, or 26.4%, as compared to the Prior Year Quarter.

during the Current Year, increased $17.2 million, or 16.7%, as compared to the Prior Year.

On a constant currency basis, total same store SG&A expenses increased 25.0%.

These increases were primarily driven by higher business activity due to fewer COVID-19 restrictions compared to the Prior Year Quarter.

Consolidated Selected Comparisons — Three Months Ended March 31, 2022 Compared to 2021

The following table (in millions) and discussion of our results of operations are on a consolidated basis, unless otherwise noted.

Three Months Ended March 31,

These increases were primarily driven by higher business activity due to fewer COVID-19 restrictions compared to the Prior Year, as well as government COVID-19 assistance and the related temporary suspension of city tax in the Prior Year which did not recur in the Current Year.

Consolidated Selected Comparisons — Three and Six Months Ended June 30, 2022 Compared to 2021

The following tables (in millions) and discussion of our results of operations are on a consolidated basis, unless otherwise noted.

Three Months Ended June 30,

2022 2021 Increase/ (Decrease) % Change

3 unchanged sentences

Provision for income taxes $ 60.8 $ 51.5 $ 9.3 18.1 %

Six Months Ended June 30,

2022 2021 Increase/ (Decrease) % Change

Depreciation and amortization expense $ 44.2 $ 37.6 $ 6.6 17.5 %

Total depreciation and amortization expense for the Current Quarter, was higher compared to the Prior Year Quarter, primarily attributable to acquired property and equipment in our U.S.

Floorplan interest expense $ 11.2 $ 16.1 $ (5.0) (30.9) %

Other interest expense, net $ 35.9 $ 26.7 $ 9.2 34.3 %

Provision for income taxes $ 122.0 $ 80.6 $ 41.4 51.4 %

Depreciation and Amortization Expense

Total depreciation and amortization expense for both the Current Quarter and Current Year, was higher compared to the Prior Year Quarter and Prior Year, primarily attributable to acquired property and equipment in our U.S.

region, as we continue to strategically add dealership related real estate to our investment portfolio and make improvements to our existing facilities intended to enhance the profitability of our dealerships and the overall customer experience.

1 unchanged sentence

Total floorplan interest expense during the Current Quarter, decreased $2.7 million, or 31.8%, as compared to the Prior Year Quarter.

Our floorplan interest expense fluctuates with changes in our outstanding borrowings and associated interest rates, which are based on LIBOR, SOFR, U.S.

For the Current Year, floorplan interest expense decreased $5.0 million, or 30.9%, as compared to the Prior Year.

Our floorplan interest expense fluctuates with changes in our outstanding borrowings and associated interest rates, which are based on SOFR, U.S.

prime rate or a benchmark rate.

To mitigate the impact of interest rate fluctuations, we employ an interest rate hedging strategy, whereby we swap variable interest rate exposure on a portion of our borrowings for a fixed interest rate.

The decrease in floorplan interest expense during the Current Quarter, is primarily due to lower floorplan interest expense on new vehicles due to a decrease in new vehicle inventories between periods, as well as lower realized losses on our interest rate swap portfolio due to increases in corresponding interest rates.

The decrease in floorplan interest expense during the Current Quarter and Current Year, is primarily due to lower floorplan interest expense on new vehicles due to a decrease in new vehicle inventories between periods, as well as lower realized losses on our interest rate swap portfolio due to increases in corresponding interest rates and an unrealized loss on interest rate swaps of $2.3 million in the Prior Year Quarter which did not recur in the Current Quarter.

These decreases were partially offset by an increase in floorplan interest expense on used vehicles due to an increase in used vehicle inventories between periods.

Refer to Note 7.

Re fer to Note 7.

Financial Instruments and Fair Value Measurements within our Notes to Condensed Consolidated Financial Statements for additional discussion of interest rate swaps.

1 unchanged sentence

Total other interest expense, net during the Current Quarter, increased $4.9 million, or 36.1%, as compared to the Prior Year Quarter.

For the Current Year, other interest expense increased $9.2 million, or 34.3%, as compared to the Prior Year.

Other interest expense, net consists of interest charges primarily on our 4.00% Senior Notes, real estate related debt and other debt, partially offset by interest income.

The increase was primarily attributable to the additional 4.00% Senior Notes issued in October 2021 and the Bridge Facility established in conjunction with the Prime Acquisition in November 2021.

The increase in other interest expense during the Current Quarter and Current Year, was primarily attributable to the additional 4.00% Senior Notes issued in October 2021 and an increase in borrowings used to acquire property in our U.S.

Refer to Note 9.

2 unchanged sentences

Provision for income taxes of $60.8 million during the Current Quarter increased by $9.3 million, or 18.1%, as compared to the Prior Year Quarter.

The tax expense increase was primarily due to higher pre-tax book income in the Current Quarter.

Our Current Quarter effective tax rate increased to 23.3% from 22.4% in the Prior Year Quarter, primarily due to lower excess tax deductions for stock based compensation in the Current Quarter.

For the Current Year, our provision for income taxes of $122.0 million increased $41.4 million, or 51.4%, as compared to the Prior Year.

The tax expense increases in the Current Quarter and Current Year, as compared to the Prior Year, were primarily due to higher pre-tax book income.

Our Current Quarter effective tax rate increased to 23.4% from 21.4%, as compared to the Prior Year Quarter.

The tax rate increase was primarily due to the increase of state income taxes due to the mix of earnings in the Current Quarter, and the absence of a deferred tax benefit from the U.K.

tax rate increase on deferred tax assets applicable in the Prior Year Quarter which did not recur in the Current Quarter.

We expect our effective tax rate for the remainder of 2022 will be between 23.5 % and 24.0%.

We believe that it is more-likely-than-not that our deferred tax assets, net of valuation allowances provided, will be realized, based primarily on assumptions of our future taxable income, considering future reversals of existing taxable temporary differences.

We b elieve that it is more-likely-than-not that our deferred tax assets, net of valuation allowances provided, will be realized, based primarily on assumptions of our future taxable income, considering future reversals of existing taxable temporary differences.

Liquidity and Capital Resources

5 unchanged sentences

We had the following sources of liquidity available (in millions):

March 31, 2022

June 30, 2022

Cash and cash equivalents $ 26.3

16 unchanged sentences

GAAP basis to the corresponding adjusted amounts (in millions):

Three Months Ended March 31,

Six Months Ended June 30,

2022 2021 % Change

16 unchanged sentences

Adjusted net cash used in financing activities $ (139.4) $ (153.3) 9.0 %

Sources and Uses of Liquidity from Operating Activities — Three Months Ended March 31, 2022 Compared to 2021

For the Current Quarter, net cash provided by operating activities decreased by $12.5 million, as compared to the Prior Year Quarter.

Sources and Uses of Liquidity from Operating Activities — Six Months Ended June 30, 2022 Compared to 2021

For the Current Year, net cash provided by operating activities decreased by $391.9 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash provided by operating activities increased by $97.2 million.

The increase on an adjusted basis was primarily driven by an increase from changes in floorplan notes payable.

Sources and Uses of Liquidity from Investing Activities — Three Months Ended March 31, 2022 Compared to 2021

For the Current Quarter, net cash used in investing activities increased by $127.8 million, as compared to the Prior Year Quarter.

The increase on an adjusted basis was primarily driven by a $518.3 million increase in adjusted net floorplan borrowings and a $106.0 million increase in net income, partially offset by a $527.9 million increase in inventory levels.

Sources and Uses of Liquidity from Investing Activities — Six Months Ended June 30, 2022 Compared to 2021

For the Current Year, net cash used in investing activities increased by $201.8 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash used in investing activities increased by $190.7 million, primarily driven by a $271.1 million increase in acquisition activity, partially offset by a $79.6 million increase in proceeds from disposition of franchises and property and equipment.

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We forecast our capital expenditures for the full year of 2022 will be approximately $130.0 million, excluding expenditures related to real estate purchases and future acquisitions, which could generally be funded from excess cash.

For the Current Quarter, $33.9 million was used to purchase property and equipment, consisting of $25.5 million in capital expenditures and $8.0 million in purchases of real estate associated with existing dealership operations.

Sources and Uses of Liquidity from Financing Activities — Three Months Ended March 31, 2022 Compared to 2021

For the Current Quarter, net cash used in financing activities decreased by $156.0 million, as compared to the Prior Year Quarter.

On an adjusted basis for the same period, adjusted net cash used in financing activities increased by $19.5 million.

The increase on an adjusted basis was primarily driven by Current Quarter increases in share repurchases of $115.2 million and net repayments of debt of $43.1 million, partially offset by increased net borrowings on our Floorplan lines of $140.7 million (representing the net cash activity in our floorplan offset account).

For the Current Year, $63.0 million was used to purchase property and equipment, primarily consisting of $55.1 million in capital expenditures and $8.0 million in purchases of real estate associated with existing dealership operations.

Sources and Uses of Liquidity from Financing Activities — Six Months Ended June 30, 2022 Compared to 2021

For the Current Year, net cash used in financing activities decreased by $503.2 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash used in financing activities decreased by $13.8 million.

The decrease on an adjusted basis was primarily driven by Current Year increases in net borrowings on our Floorplan lines of $338.1 million (representing the net cash activity in our floorplan offset account), partially offset by increases in share repurchases of $235.5 million and net repayment of debt of $87.5 million.

Credit Facilities, Debt Instruments and Other Financing Arrangements

Our various credit facilities, debt instruments and other financing arrangements are used to finance the purchase of inventory and real estate, provide acquisition funding and provide working capital for general corporate purposes.

The following table summarizes the commitment of our credit facilities as of March 31, 2022 (in millions):

The following table summarizes the commitment of our credit facilities as of June 30, 2022 (in millions):

Commitment Outstanding Available

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$ 2,297.4 $ 811.0 $ 1,486.4

(1) The available balance at March 31, 2022, includes $197.2 million of immediately available funds.

(1) The available balance at June 30, 2022, includes $77.9 million of immediately available funds.

The remaining available balance can be used for vehicle inventory financing.

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The available borrowings may be limited from time to time, based on certain debt covenants.

(3) The available balance at March 31, 2022, includes $2.4 million of immediately available funds.

(3) The available balance at June 30, 2022, includes $5.5 million of immediately available funds.

The remaining available balance can be used for Ford new vehicle inventory financing.

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Certain of our mortgage agreements contain cross-default provisions that, in the event of a default of certain mortgage agreements and of our Revolving Credit Facility, could trigger an uncured default.

As of March 31, 2022, we were in compliance with the requirements of the financial covenants under our debt agreements.

As of June 30, 2022, we were in compliance with the requirements of the financial covenants under our debt agreements.

We are required to maintain the ratios detailed in the following table:

As of March 31, 2022

As of June 30, 2022

Required Actual

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Fixed charge coverage ratio > 1.20 6.10

Based on our position as of March 31, 2022, and our outlook as discussed within Item 2.

Based on our position as of June 30, 2022, and our outlook as discussed within Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations, we believe we have sufficient liquidity and do not anticipate any material liquidity constraints or issues with our ability to remain in compliance with our debt covenants.

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Debt and Note 10.

Floorplan Notes Payable in our Notes to Condensed Consolidated Financial Statements for further discussion of our debt instruments, credit facilities and other financing arrangements existing as of March 31, 2022.

Share Repurchases and Dividends

From time to time, our Board of Directors authorizes the repurchase of shares of our common stock up to a certain monetary limit.

As of January 1, 2022, we had $74.3 million available share repurchase program.

From January 1, 2022 to February 16, 2022, we utilized $18.5 million of the then-available authorized share repurchase program.

On February 16, 2022, the Board of Directors increased the authorization to repurchase shares of our common stock by $144.2 million to $200.0 million.

During the period February 17, 2022 to March 31, 2022, we utilized $96.7 million of the available share repurchase program, leaving $103.3 million available under our current authorization to repurchase our common stock.

During the three months ended March 31, 2022, 638,696 shares were repurchased at an average price of $180.30 per share, for a total of $115.2 million.

During the Current Quarter, the Board of Directors increased the existing authorization to repurchase shares of our common stock by $174.6 million to $250.0 million.

This authorization was incremental to the $144.2 million that was authorized previously by our Board of Directors in February 2022.

During the six months ended June 30, 2022, 1,437,729 shares were repurchased at an average price of $176.74 per share, for a total of $254.1 million.

As of June 30, 2022, we had $139.0 million available under our current stock repurchase authorization.

During the Current Quarter, our Board of Directors approved a quarterly cash dividend of $0.37 per share on all shares of our common stock, which resulted in $5.9 million paid to common shareholders and $0.2 million to unvested RSA holders.

Future share repurchases and the payment of any future dividends are subject to the business judgment of our Board of Directors, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance, current economic environment and other factors considered relevant.

Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk affecting us, refer to Item 7A.

Quantitative and Qualitative Disclosures About Market Risk of our 2021 Form 10-K.

Our exposure to market risk has not changed materially since December 31, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis