What changed in this filing

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Item 1. Business

2023-02-16 compared with 2022-02-23 · 146 added, 160 removed, 174 unchanged (64% of the section changed)

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and sell vehicle parts.

We operate in geographically diverse markets that extend across 17 states in the U.S.

and across 35 towns in the U.K.

We are a multinational organization, with operations in geographically diverse markets that extend across 17 states in the U.S.

and 34 towns and cities in the U.K.

As of December 31, 2022, our retail network consisted of 149 dealerships in the U.S.

and 55 dealerships in the U.K.

The following chart presents total revenues and gross profit contribution from our operations by new vehicle, used vehicle, parts and service and F&I for the year ended December 31, 2021:

Discontinued Operations

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 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”).

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

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

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

On November 17, 2021, we completed the acquisition of the Prime Automotive Group (“Prime”), including 27 dealerships, certain real estate and three collision centers in the Northeastern U.S.

On November 18, 2021, we completed the purchase of a 28th Prime dealership (together, with the previously identified acquisitions from Prime, collectively referred to as the “Prime Acquisition”).

The aggregate consideration for the Prime Acquisition was approximately $934.2 million.

On October 18, 2021, we completed the acquisition of Capital City Honda in Sacramento, California.

On October 4, 2021, we completed the acquisition of Classic Chrysler Dodge Jeep Ram of Denton and Classic Mazda of Denton within the greater Dallas-Fort Worth metro area of Texas.

On July 6, 2021, we completed the acquisition of Robinsons Motor Group in northeast London, U.K., with operations representing the family of brands offered by the Volkswagen Group, along with one Citroen dealership.

On March 16, 2021, we completed the acquisition of two Toyota dealerships located in Hyannis and Orleans on Cape Cod in Massachusetts.

In addition, we also disposed of four franchises and terminated two franchises.

Refer to Note 3.

Acquisitions within the Notes to Consolidated Financial Statements within this Form 10-K, for additional information regarding acquisitions.

Dealership Operations

Our new vehicle revenues include new vehicle sales and new vehicle lease transactions, sold at our dealerships or via our digital platform, AcceleRide®.

We sell retail used vehicles directly to our customers at our dealerships or via AcceleRide® and wholesale used vehicles at third party auctions.

We sell replacement parts and provide both warranty and non-warranty (i.e., customer-pay) maintenance and repair services at each of our franchised dealerships, as well as provide collision repair services at the 46 collision centers that we operate.

We sell retail used vehicles directly to our customers at our dealerships and via AcceleRide® and wholesale our used vehicles at third party auctions.

We sell replacement parts and provide both warranty and non-warranty maintenance and repair services at each of our franchised dealerships, as well as provide collision repair services at the 46 collision centers that we operate.

We also sell parts to wholesale customers.

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We offer a wide variety of third-party finance, vehicle service and insurance products in a convenient manner at competitive prices.

To increase transparency to our customers, we offer all of our products on menus that display pricing and other information, allowing customers to choose the products that suit their needs.

The following chart presents our diversity of new vehicle unit sales by manufacturer for the year ended December 31, 2021:

The following table shows our new vehicle unit sales geographic mix for the year ended December 31, 2021 and our franchise count as of December 31, 2021:

We showcase our products on menus that display pricing and other information, allowing customers to choose the products that suit their needs.

The following chart presents total revenues and gross profit contribution from our operations by new vehicles, used vehicles, parts and service and F&I for the year ended December 31, 2022 (“Current Year”):

The following chart presents our diversity of new vehicle unit sales by manufacturer for the Current Year:

The following table shows our new vehicle unit sales geographic mix for the Current Year and our franchise count as of December 31, 2022:

New vehicle unit sales geographic mix (%) Franchises

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Texas 37.2 % 76

Oklahoma 7.3 20

Massachusetts 9.9 % 22

Oklahoma 5.8 % 20

California 5.4 % 7

Georgia 3.8 % 9

Florida 2.7 4

New Mexico 2.4 % 9

Maine 2.3 % 11

New Jersey 2.2 % 9

Louisiana 2.0 5

New Hampshire 1.9 % 5

Florida 1.9 % 4

South Carolina 1.8 % 3

New Mexico 1.5 8

Louisiana 1.7 % 10

Kansas 1.5 % 3

New York 1.4 % 4

Alabama 0.7 % 2

Mississippi 0.7 1

Maryland 0.6 % 2

New York 0.1 4

Mississippi 0.3 % 1

United Kingdom 19.2 % 78

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Our business strategy is built upon our commitment to maximize the return on investment for our stockholders.

We are focused on four key initiatives, as further described below, to deliver upon this commitment in 2022.

• strategic acquisitions and dispositions;

• digital initiatives to enhance the customer experience and efficiency of operations;

• parts and service growth;

• used vehicle retail growth.

Strategic Acquisitions and Dispositions

In 2021, the retail automotive industry experienced multiple merger and acquisition transactions aimed at further consolidation of the industry.

Despite the significant increase in merger and acquisition activity in 2021, the industry remains fragmented to a significant degree.

We believe there will continue to be opportunity for consolidation within the industry in 2022.

Consistent with our acquisition activity completed in 2021, we intend to capitalize on growth opportunities, specifically focusing on strategic acquisitions that enhance our dealership portfolio.

We evaluate all brands and geographies to expand our portfolio, seeking to acquire dealerships that represent growing brands, in growth-positioned markets.

Acquisitions completed within our existing markets provide us a competitive advantage, allowing us to capitalize on economies of scale, providing for cost savings opportunities in key expense areas such as used vehicle sourcing, advertising, purchasing, data processing and personnel utilization.

In 2021, we completed acquisitions in both our U.S.

regions, including Prime, the largest acquisition of a single dealership group in the Company’s history.

The expected aggregate annualized revenues, estimated at the time of the acquisitions, were $2.5 billion.

For additional information regarding the acquisitions completed in 2021, refer to Note 3.

Acquisitions within our Notes to Consolidated Financial Statements.

In addition to improving our portfolio of dealerships through acquisitions, from time to time, we make decisions to dispose of certain dealerships.

We intend to execute our business strategy by staying close to our core competencies and focusing on three key initiatives, each as further described below:

• organizational growth;

• teamwork and collaboration;

• aftersales excellence.

Key to the success of these initiatives, is our determination to be great partners to those around us, including but not limited to our customers, employees, vendors, OEM partners, philanthropic partners and the communities in which we do business.

Organizational Growth

In 2021 and 2022, the retail automotive industry experienced multiple merger and acquisition transactions aimed at further consolidation of the industry.

Despite this increase in merger and acquisition activity, the industry remains fragmented to a significant degree.

We believe there will continue to be opportunity for consolidation within the industry.

Consistent with our acquisition activity completed in 2021 and 2022, we intend to pursue growth opportunities in 2023, specifically focusing on brands and dealerships that will provide attractive returns to our dealership portfolio.

We evaluate all brands and geographies to expand our portfolio, seeking to acquire dealerships in growth-positioned or economically stable markets, or that are economically accretive to our existing markets.

Acquisitions completed within our existing markets allow us to capitalize on economies of scale and provide for cost saving opportunities in key expense areas such as used vehicle sourcing, advertising, purchasing, data processing and personnel utilization.

In addition to cost savings opportunities, scale enables us to make the EV, facility, compliance, real estate, and technology investments necessary to thrive in today’s retail automotive industry.

In addition to expanding our portfolio of dealerships through acquisitions, from time to time, we make decisions to optimize our portfolio by disposing of certain dealerships.

In some instances, we dispose of underperforming dealerships where we no longer believe opportunity exists for improvement.

We may also dispose of certain dealerships in order to complete strategic acquisition opportunities as a result of our franchise agreement requirements.

For instance, we may dispose of a less significant dealership to allow us to acquire a more substantial dealership within the same or another geographic area based on the respective franchise agreement requirements.

The Brazil Disposal was the result of a strategic decision to exit the Brazilian geographic market, allowing for redeployment of capital to other areas of our business.

We may also dispose of certain dealerships in order to complete strategic acquisition opportunities.

We may dispose of a less significant dealership to allow us to acquire a more substantial dealership within the same or another geographic area based on the ownership limitations in the respective franchise agreement.

Refer to Note 3.

Discontinued Operations and Other Divestitures within our Notes to Consolidated Financial Statements for additional information regarding the Brazil Disposal.

Digital Initiatives to Enhance the Customer and Employee Experience

We provide an omni-channel experience to our customers, ensuring that we can do business with our customers where and when they want to do business.

To deliver on our omni-channel experience, in addition to our investment in physical locations, we offer our customers and employees a modern retailing software and process.

AcceleRide® Digital Platform

Our online retail platform, AcceleRide®, modernizes the customer experience, allowing a customer to buy, sell or schedule vehicle service through the digital platform.

AcceleRide® was deployed to all of our existing U.S.

dealerships in 2019 and the first quarter of 2021, respectively, with deployment to acquired dealerships typically within three months of a completed acquisition.

We expect to complete the roll out of AcceleRide® to the dealerships acquired as part of the Prime Acquisition by March 2022.

Prior to this planned rollout, Prime had no significant online retailing presence.

Our customers can easily complete a vehicle transaction entirely online, including applications for finance and selection of F&I products, or start the sales process online and complete the transaction at one of our dealerships.

Customers selling their used vehicles through AcceleRide® can receive real-time electronic payment through Zelle®.

Customers can even utilize our AcceleRide® platform in the dealerships, working with a sales representative, to complete as much or as little of the buying and selling process as they would prefer.

For instance, the customer can utilize the AcceleRide® platform to complete their finance application directly as opposed to providing the sales professional the information to enter.

During the year ended December 31, 2021 , U.S.

total online retail unit sales increased 77.2% to 19,586 units, c ompared to the same period in 2020.

Our parts and service digital efforts focus on our online customer scheduling appointment system within AcceleRide®.

We have seen continued growth in the percentage of appointments scheduled online over the past few years as we have continued to enhance this tool.

We have and continue to focus on improved integration with our parts and service customers by offering preferred communication options via dealership apps, phone, text or email and online payment options.

Process Automation

We are capitalizing on technology advances in robotic process automation and artificial intelligence to improve our marketing, call center and back-office efficiency.

We continuously evaluate our processes to identify opportunities for process automation, including the use of robotics, enabling us to bring our customers’ vehicle inventory selection on a more expedited basis, process parts inventory and F&I products transactions quicker and price cars more competitively for our customers using the latest and most accurate information available.

We believe our continued focus on process automation is a key value differentiator within the industry for our stockholders.

Process automation allows for more efficient absorption of acquired dealership back-office responsibilities and improved dealership performance.

Parts and Service Growth

We remain focused on sustained growth in our higher margin parts and service operations which continue to hinge on the retention and hiring of skilled service technicians and advisors.

Acquisitions and Note 4.

Discontinued Operations and Other Divestitures within the Notes to Consolidated Financial Statements within this Form 10-K, for additional information regarding our acquisitions and dispositions.

Teamwork and Collaboration

As a multinational automotive retailer, we seek to identify and implement operational improvements within our dealerships by leveraging the unique and varying experiences of our U.S.

automotive retailers.

has adopted EV technology at a much faster pace than the U.S., providing us the opportunity to develop best-in-class practices for servicing EV customers through our U.K.

Alternatively, our dealerships in the U.S.

were the first to adopt the use of AcceleRide® and likewise developed standard practices to enhance the customer experience with this technology.

With teamwork and collaboration, we are sharing these best-in-class standard practices across our U.S.

In addition to benefiting from our shared dealership experiences, we are capitalizing on technology advances in robotic process automation and artificial intelligence to improve our marketing, call center and back-office efficiency.

This effort, in recent years, has primarily focused on our U.S.

dealerships, from which we have gained valuable insight and knowledge.

In late 2022, we launched our first use of robotics within the back-office functions of the U.K.

This effort is expected to continue throughout 2023 as we leverage the already established processes developed in the U.S.

We continuously evaluate our processes to identify opportunities for process automation, enabling us to facilitate our customers’ vehicle inventory selection on a more expedited basis, process parts inventory and F&I products transactions quicker and price cars more competitively for our customers using the latest and most accurate information available.

We believe our continued focus on process automation, while collaborating across our global retail operations, is a key value differentiator within the industry for our stockholders.

Aftersales Excellence

We look to strengthen our aftersales excellence by further driving sustained growth in our higher margin parts and service operations.

Our success hinges on the retention and hiring of skilled service technicians and advisors and customer retention levels.

Many of our U.S.

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This change has resulted in increased service technician and advisor retention, thereby expanding our service capacity without investing additional capital in facilities.

We intend to transition additional service operations to a four-day work week in 2022 as we hire additional skilled service technicians to enable this change in schedule and expanded capacity.

Our online service appointment platform and centralized call centers have improved the customer experience.

We seek to increase the retention of our customers through more convenient service hours, training of our service advisors, selling service contracts with vehicle sales and customer relationship management software that allows us to provide targeted marketing to our customers.

The increasing complexity of vehicles, especially in the area of electronics and technological advancements, is making it increasingly difficult for independent repair shops to maintain the expertise and technology to work on these vehicles and provides us the opportunity to increase our market share well into the future.

Our service departments are equipped for any Electric Vehicle (“EV”) make and any model on the road today.

Used Vehicle Retail Growth

Used vehicles represent a stable consumer end market with approximately 41.0 million units sold in 2021 in the U.S.

according to the North American Automotive Dealers Association.

The retail market is a fragmented market with franchised dealers having a less than 40% market penetration.

Used vehicle gross profit depends primarily on a dealership’s ability to obtain a high-quality supply of used vehicles at reasonable prices.

We believe our franchised dealer network and approach to used vehicle sourcing provide us a competitive advantage.

We acquire a substantial majority of our used vehicle inventory directly from our customers through trade-ins, direct buys and lease returns.

In October 2020, we introduced “Sell A Ride” to our AcceleRide® platform to increase our ability to purchase used vehicle inventory directly from customers with a cash offer within 30 minutes during business hours, home pickup and immediate payment through Zelle®, a U.S.

based digital payments network.

To a lesser extent, our dealerships supplement their used vehicle inventory with purchases at auctions, including manufacturer-sponsored auctions available only to franchised dealers.

We employ data driven pricing strategies to ensure that our used vehicles are priced to market.

This generates more traffic to our omni-channel platform.

We review our market pricing on a constant basis and work to limit discounting from our advertised prices.

With a focus on the aftersales impact on the customer journey, we have and will continue to increase customer retention through more convenient service hours, training of our service advisors, selling service contracts with vehicle sales and customer relationship management software that allows us to provide targeted marketing to our customers.

Our online service appointment platform and centralized call centers have also improved the customer experience.

Improved aftersales customer retention should lead to future additional or replacement vehicle purchases, continuing the containment of the entire customer life cycle within our dealerships.

The complexity of vehicles, especially in the area of electronics, and technological advancements, are making it increasingly difficult for independent repair shops to maintain the expertise and technology to work on these vehicles.

Our service departments are equipped for any EV make and any model on the road today.

This provides us the opportunity to advance our market share well into the future.

The automotive retail industry is highly competitive across all our service lines.

Consumers have an increasing number of choices when deciding where and how to (i) purchase a new or used vehicle as well as select related vehicle financing and insurance products;

Consumers have a number of choices when deciding where and how to (i) purchase a new or used vehicle as well as select related vehicle financing and insurance products;

(ii) purchase related parts and accessories;

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New and Used Vehicles Sales

We believe the principal competitive factors in the automotive retailing business are location, service, price, selection, online capabilities and established customer relationships.

We believe the principal competitive factors in the automotive retailing business are location, service, price, selection, online capabilities, established customer relationships, and reputation.

In the new vehicle market, our dealerships compete with other franchised dealerships in their market areas, as well as auto brokers, leasing companies and internet companies that provide referrals to, or broker vehicle sales with, other dealerships or customers.

We are subject to competition from dealers that sell the same brands of new vehicles that we sell and from dealers that sell other brands of new vehicles that we do not sell in a particular market.

Our new vehicle dealer competitors also have franchise agreements with the various vehicle manufacturers and, as such, generally have access to new vehicles on the same terms as we do.

We do not have any cost advantage in purchasing new vehicles from vehicle manufacturers, and our current franchise agreements do not grant us the exclusive right to sell a manufacturer’s product within a given geographic area.

Several companies are currently manufacturing EVs for sale primarily through the internet, under a direct to consumer model, without using the traditional dealer-network or are considering such a strategy, including some of our manufacturer partners.

In the used vehicle market, our dealerships compete both in their local market and nationally with other franchised dealers, large multi-location used vehicle retailers, local independent used vehicle dealers, automobile rental agencies and private parties for the supply and resale of used vehicles.

The internet has also become a significant part of the advertising and sales process in our industry.

Customers are using the internet as part of the sales process to compare pricing for cars and related F&I services, which may increase competition and reduce gross profit margins for new and used cars and profits for related F&I services.

Some retailers offer vehicles for sale over websites without the benefit of having a dealership franchise, although they must currently source their vehicles from a franchised dealer.

Several companies are currently manufacturing EVs for sale primarily through the internet without using the traditional dealer-network.

In response, in October 2020, we introduced “Sell A Ride” to our AcceleRide® platform to increase our ability to purchase used vehicle inventory directly from customers with a cash offer within 30 minutes during business hours, home pickup and payment available within one hour.

Parts and Service

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Our dealerships also compete with other automobile dealers, franchised and independent service center chains and independent repair shops for non-warranty repair and maintenance business.

In addition, our dealerships sell replacement and aftermarket parts both locally and nationally over the internet in competition with franchised and independent retail and wholesale parts outlets.

In addition, our dealerships sell replacement and aftermarket parts both locally and nationally in competition with franchised and independent retail and wholesale parts outlets.

A number of regional or national chains offer selected parts and services at prices that may be lower than ours.

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We believe the principal competitive factors in the F&I business are convenience, interest rates, product availability and affordability, product knowledge and flexibility in contract length.

We face competition in arranging financing for our customers’ vehicle purchases from a broad range of financial institutions.

Many financial institutions now offer F&I products over the internet, which may reduce our profits from the sale of these products.

Relationships and Agreements with our Manufacturers

We face competition in arranging financing for our customers’ vehicle purchases from a broad range of unaffiliated third-party financial institutions.

Many financial institutions now offer their own menu of F&I products, providing an alternative to our product offering, which may reduce our profits from the sale of these products through reduced penetration.

Manufacturers’ Relationships and Agreements

Each of our U.S.

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We work with these manufacturers to address any performance issues.

Our dealership service departments perform vehicle repairs and service for customers under manufacturer warranties.

We are reimbursed for the repairs and service directly from the manufacturer.

Some manufacturers offer rebates to new vehicle customers that we are required, under specific program rules, to adequately document, support and collect.

In addition, some manufacturers provide us with incentives to order and/or sell certain models and/or volumes of inventory over designated periods of time.

Under the terms of our dealership franchise agreements, the respective manufacturers are able to perform warranty, incentive and rebate audits and charge us back for unsupported or non-qualifying warranty repairs, rebates or incentives.

In addition to the individual dealership franchise agreements discussed above, we have entered into framework agreements in the U.S.

with most major vehicle manufacturers and distributors.

These agreements impose a number of restrictions on our operations, including our ability to make acquisitions and obtain financing, and on our management.

These agreements also impose change of control provisions related to the ownership of our common stock.

For a discussion of these restrictions and the risks related to our relationships with vehicle manufacturers, please refer to Item 1A.

Risk Factors.

Governmental Regulations

Automotive and Other Laws and Regulations

We operate in a highly regulated industry.

A number of laws and regulations applicable to automotive companies affect our business and conduct, including, but not limited to our sales, operations, financing, insurance, advertising and employment practices.

These laws and regulations include state franchise laws and regulations, consumer protection laws and other extensive laws and regulations applicable to new and used motor vehicle dealers.

Additionally, in every jurisdiction in which we operate, we must obtain various permits and licenses in order to conduct our businesses.

In general, the U.S.

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antitrust rules prohibiting certain restrictions on the sale of new vehicles and spare parts and on the provision of repairs and maintenance.

For example, as a matter of 2020 EU law, authorized dealers are generally able to, subject to manufacturer facility requirements, relocate or add additional facilities throughout the EU, offer multiple brands in the same facility, allow the operation of service facilities independent of new car sales facilities and ease restrictions on cross supplies (including on transfers of dealerships) between existing authorized dealers within the EU.

As a matter of 2020 EU law, authorized dealers are generally able to, subject to manufacturer facility requirements, relocate or add additional facilities throughout the EU, offer multiple brands in the same facility, allow the operation of service facilities independent of new car sales facilities and ease restrictions on cross supplies (including on transfers of dealerships) between existing authorized dealers within the EU.

However, certain restrictions on dealerships may be permissible, provided the conditions set out in the relevant EU Block Exemption Regulations are met.

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law, as amended in accordance with the U.K.

competition framework, but may be further amended, revoked or extended by subsequent U.K.

Our dealership service departments perform vehicle repairs and service for customers under manufacturer warranties.

We are reimbursed for the repairs and service directly from the manufacturer.

Some manufacturers offer rebates to new vehicle customers that we are required, under specific program rules, to adequately document, support and typically collect.

In addition, some manufacturers provide us with incentives to order and/or sell certain models and/or volumes of inventory over designated periods of time.

In addition to the individual dealership franchise agreements discussed above, we have entered into framework agreements in the U.S.

with most major vehicle manufacturers and distributors.

These agreements impose a number of restrictions on our operations, including our ability to make acquisitions and obtain financing, and on our management.

These agreements also impose change of control provisions related to the ownership of our common stock.

For a discussion of these restrictions and the risks related to our relationships with vehicle manufacturers, please refer to Item 1A.

Risk Factors.

Governmental Regulations

Automotive and Other Laws and Regulations

We operate in a highly regulated industry.

These laws and regulations include state franchise laws and regulations, consumer protection laws and other extensive laws and regulations applicable to new and used motor vehicle dealers.

Additionally, in every jurisdiction in which we operate, we must obtain various permits and licenses in order to conduct our businesses.

competition framework.

In July 2022, the Competition and Markets Authority of the U.K.

published proposed recommendations broadly similar to the Block Exemption Regulations currently in effect, but these may be further amended, revoked or extended by subsequent U.K.

We are subject to numerous laws and regulations designed to protect information of clients, customers, employees and other third parties that we collect and maintain.

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We contract for recycling and/or disposal of used fluids, filters and other waste materials generated by our operations.

These laws, regulations and controls may impose numerous obligations upon our operations including the acquisition of permits to conduct regulated activities, the imposition of restrictions on where or how to manage or dispose of used products and wastes, the incurrence of capital expenditures to limit or prevent releases of such material, and the imposition of substantial liabilities for pollution resulting from our operations or attributable to former operations.

For example, in the U.S., most of our dealerships utilize storage tanks that are subject to testing, containment, upgrading and removal regulations under the federal Resource Conservation and Recovery Act.

These laws, regulations and controls may impose numerous obligations on our operations including the acquisition of permits to conduct regulated activities, the imposition of restrictions on where or how to manage or dispose of used products and wastes, the incurrence of capital expenditures to limit or prevent releases of such material, and the imposition of substantial liabilities for pollution resulting from our operations or attributable to former operations.

Failure to comply with these laws, regulations and permits may result in the assessment of sanctions, including administrative, civil and criminal penalties, the imposition of investigatory remedial and corrective action obligations or increase of capital expenditures, restrictions, delays and cancellations in permitting or in the performance or expansion of projects and the issuance of injunctions limiting or preventing some or all of our operations in affected areas.

Additionally, certain of these environmental laws may result in imposition of joint and several strict liability, which could cause us to become liable as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties.

Additionally, certain environmental laws may result in imposition of joint and several strict liability, which could cause us to become liable as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties.

For instance, an accidental release from one of our storage tanks could subject us to substantial liabilities arising from environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury and property damage and fines or penalties for related violations of environmental laws or regulations.

Moreover, laws and regulations protecting the environment generally become more stringent over time, which may result in increased costs for future environmental compliance and remediation.

Properties that we now or have in the past owned or leased in the U.S.

are subject to the federal Comprehensive Environmental Response, Compensation and Liability Act and similar state statutes.

These statutes can impose strict and joint and several liability for cleanup costs on those that are considered to have contributed to the release of a hazardous substance, including for historic spills that occurred prior to our ownership of our properties even if we did not know of, or did not cause the release of such hazardous substances.

We also are subject to the Clean Water Act, analogous state statutes, and their implementing regulations which, among other things, prohibit discharges of pollutants into regulated waters without permits, require containment of potential discharges of oil or hazardous substances, and require preparation of spill contingency plans.

Air emissions from some of our operations, such as vehicle painting, may be subject to the federal Clean Air Act and analogous laws.

Laws and regulations protecting the environment are complex and generally become more stringent over time, which may result in increased costs for future environmental compliance and remediation.

Comparable laws and regulations have been enacted in the U.K.

Certain health and safety standards promulgated by the Occupational Safety and Health Administration of the U.S.

Department of Labor and related state agencies also apply to our operations.

The threat of climate change continues to attract considerable attention in the U.S., U.K.

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On January 20, 2021, President Joe Biden issued an executive order recommitting the United States to participation in the Paris Agreement, which is a United Nations-sponsored, non-binding agreement for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020.

is similarly committed to the Paris Agreement, with the U.K.

announcing in late 2020 that it plans to ban sales of new gasoline and diesel-powered vehicles after 2030.

is similarly committed to the Paris Agreement, and the U.K.

announced in late 2020 that it plans to ban sales of new gasoline and diesel-powered vehicles after 2030.

Additional regulation of GHG emissions from the vehicles could increase the cost of vehicles sold to us.

Consumer concerns regarding climate change could also alter consumer preferences and adversely affect our ability to market and sell vehicles.

These developments could increase our costs of operation as well as reduce our volume of business.

Vehicle manufacturers in the U.S.

are also subject to regulations by the EPA and the NHTSA that establish corporate average fuel economy (“CAFE”) standards applicable to light-duty vehicles.

These agencies have finalized more stringent standards for both heavy-duty and light-duty vehicles and for increased fuel economy for vehicles in upcoming model years.

California and other states have indicated they would pursue more stringent CAFE and GHG standards than required by current EPA and NHTSA standards.

Comparable laws and regulations have been enacted in the U.K.

Comparable laws and regulations have been enacted in the U.K, including updated standards for cars, vans and heavy-duty trucks for upcoming model years.

Our OEMs require lead time to prepare new vehicle models and more stringent regulations could result in increased costs and time constraints, or result in our OEMs deciding to increase production targets of EVs in anticipation of such regulations.

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Human Capital

The key to our success is the talent of our people.

People make up the foundation of everything we do at the Company.

Our core values — Integrity, Transparency, Professionalism, Teamwork and Respect — define our culture and help us attract and retain talented employees.

Our employee survey results indicate we have established the correct core values and our relationship with our employees is favorable.

As of December 31, 2021, we had 13,711 employees (full-time, part-time and temporary), of which 10,813 were employed in the U.S.

and 2,898 in the U.K.

Training and Recognition

We offer a variety of approximately 200 training courses to employees based on job categories, including a management training program and a technician training program.

The majority of our training is offered through our online training platform.

In addition to job specific courses, we also offer leadership training and diversity training.

As of December 31, 2022, we ha d 15,491 e mployees (full-time, part-time and temporary), of which 12,004 w ere employed in the U.S.

a nd 3,487 in the U.K.

Employee Engagement

We engage in activities aimed at listening to our employees and addressing their concerns.

In turn, our employees deliver exceptional service to our customers, and ultimately achieve exceptional results for our investors.

We solicit employee feedback through multiple channels such as employee surveys and town halls.

Our annual employee survey provides our management team with valuable insight into employees’ perception of workplace culture and progress on our corporate mission.

The results inform our overall human capital management methods and other growth strategies.

In 2022, we launched an all-in-one communication platform that keeps our employees across the U.S.

up-to-date on the latest company news and brings our teams together digitally.

The platform offers our executive team the ability to engage in direct and more frequent, real-time communication with our employees.

The features of the platform include targeted announcement capabilities, company documents like policies, guidelines and benefits plans, and quick access to employee and department directories.

We believe that working together is critical to prepare for coming opportunities and changes affecting us internally and externally.

Training and Development

We offer a variety of training courses and professional development opportunities to employees based on job categories, including a management training program and a technician training program.

In addition to job specific courses, we also offer leadership training.

Employees have opportunities for various certification levels based on training completed and tenure.

The certification levels include an employee rewards program.

Diversity, Equity and Inclusion (“DEI”)

We established a DEI council that is chaired by our Chief Diversity Officer.

We maintain a DEI council that is chaired by our Chief Diversity Officer.

The council’s mission is to foster a diverse and inclusive culture where employees of all backgrounds are respected, valued and developed.

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Each area has an employee chairperson, as well as an executive sponsor.

In addition, employees participate in on-going diversity and inclusion training programs which were developed for us.

Employee Engagement

Employees are offered opportunities to enroll in quarterly wellness programs that are fully funded by us and also include the opportunity for family member participation.

In addition, our medical plans include opportunities for lower monthly premiums for employees who receive an annual physical.

Executive management participates in quarterly employee videos where the results of each quarter are shared with employees.

Various other employee recognition programs are celebrated in our dealerships.

In addition, employees participate in on-going diversity and inclusion training programs which were specifically developed for the Company.

Environmental, Social and Governance (“ESG”)

Group 1 is working toward a more sustainable future by continually working to improve various aspects of our business in the ESG areas most relevant to us, our stakeholders and our industry.

With oversight from our Board of Directors, throughout 2021 we performed a thorough review of our business operations pertaining to:

We are committed towards a more sustainable future by working to improve various aspects of our business in the ESG areas most relevant to us, our stakeholders and our industry.

With oversight from our Board of Directors, in 2021 we performed a thorough review of our business operations pertaining to:

hiring practices, equal pay, promotional practices, health and safety, health insurance, community impact and environmental impact.

We have aimed to formalize certain policies and further our alignment with our core values, including exploring further initiatives where we have identified a need or opportunity.

We strive to create a culture where our employee base is diverse and inclusive, we provide equal pay and opportunities throughout the Company, and we care for our employees’ health and safety and the environment.

Building off this analysis, we performed a second assessment in 2022.

This effort included a detailed desktop study reviewing key material topics relevant to the automotive industry, an analysis of survey responses from our internal and external stakeholders, and interviews with executive leaders across our business and our Board members.

With the aide of the assessment results, the Company placed priority on pressing ESG issues and designated resources for their management and disclosure.

Environmental

Our commitment to sustainability includes reducing our impact on the environment and doing our share to contribute to a healthier planet.

We look for opportunities to reduce our energy consumption, eliminate waste, and accommodate the growing EV market.

One of our principal business activities is the construction and operation of new and remodeled dealership facilities.

We continue to invest in numerous initiatives to improve our environmental footprint as we strive to be good stewards of the environment, such as climate control thermostats and LED lighting to improve our energy efficiency, solar panels to increase our usage of renewable energy, and up-to-date waste management systems to improve our handling of chemicals and other byproducts from our dealerships’ operations.

We are continuously working with our OEM partners and third-party construction consultants to enhance the buying experience in our facilities and, while also doing what we can to reduce our environmental footprint.

In 2021, we established a team responsible for driving capital allocation recommendations and execution of the EV infrastructure in our dealerships.

We continue to invest in numerous initiatives to improve our carbon and broader environmental footprint as we strive to be good stewards of the environment, such as climate control thermostats and LED lighting to improve our energy efficiency, solar panels to increase our usage of renewable energy, and up-to-date waste management systems to improve our handling of chemicals and other byproducts from our dealerships’ operations.

We are continuously working with our OEM partners and third-party construction consultants to enhance the buying experience in our facilities.

In 2021, we established a team responsible for driving capital allocation recommendations for the expansion of the EV infrastructure in our dealerships.

EV chargers, lifts, shop equipment and battery storage facilities are all critical elements to address the emerging market for EVs.

We work closely with our manufacturing partners to enable access to these vehicles and play a large role in servicing them.

We are certified to repair and service EVs, including Tesla electric vehicles at select locations.

We provide EV batteries and parts.

We work closely with our manufacturing partners to market these vehicles and play a large role in servicing them.

We are certified to repair and service EVs, including Tesla EVs at select locations.

We also provide EV batteries and parts.

We are committed to supporting our customers who currently own EVs and those that purchase EVs in the future.

As discussed above under “Human Capital,” we maintain a human capital strategy that supports a diverse and inclusive workforce with equal opportunity and programs for training and career advancement, strong benefits, incentives, and health, safety and wellness initiatives.

Our core values start at the top, with our Board of Directors.

We maintain a human capital strategy that supports a diverse and inclusive workforce with equal opportunity.

The Company offers programs for training and career advancement, strong benefits, incentives, and health, safety and wellness initiatives.

Our Board of Directors has four standing committees to assist in fulfilling its responsibilities:

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We believe the composition of our Board of Directors is critical to our success.

As our Company continues to evolve, so do the perspectives, skills and experiences that the Board of Directors seeks in its director nominees.

As the Company continues to evolve, so do the perspectives, skills and experiences that the Board of Directors seeks in its director nominees.

Since 2016, we have welcomed five new independent directors, each of whom brings extensive experience and fresh perspectives to enrich the Board of Directors’ dialogue and enhance its ability to effectively oversee our business.

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Each committee is comprised entirely of independent directors (except the Finance/Risk Management Committee) and oversees risks associated with its respective area of responsibility.

At the corporate level, we established a Safety and Risk Steering Committee, which reviews the effectiveness of the Company’s risk management system, including a review of policies and all profiles of financial and non-financial risks.

We track and identify new and emerging risks, and to the extent they affect or could potentially affect our business, we develop action plans with assigned sponsors to address and mitigate that risk.

We use an internal process to help identify if we have enough controls in place to properly manage each risk.

In late 2022, we appointed a Compliance Officer to oversee compliance across the organization.

As the compliance leader, this individual is responsible for establishing standards and implementing procedures to ensure that the compliance programs throughout the organization are effective and efficient in identifying, preventing, detecting and correcting noncompliance with company policies, applicable laws and regulations.

Our operating results are generally subject to seasonal variations, as well as changes in the economic environment.

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Other factors unrelated to seasonality, such as changes in economic conditions, manufacturer incentive programs, supply issues, seasonal weather events and/or changes in foreign currency exchange rates may exaggerate seasonal or cause counter-seasonal fluctuations in our revenues and operating income.

The COVID-19 pandemic and current economic environment, led by a supply chain disruption slowing the production of new vehicles, have led to a deviation from historical seasonal variations.

The shortage of new vehicle supply, led by a global semiconductor and other parts shortage, as well as the current rising inflation and increasing interest rate environment, has and could continue to lead to a deviation from historical seasonal variations.

As a result, historical seasonal variation patterns may not be an appropriate indicator of current and future trends in seasonal variations.

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• Our Code of Ethics for our Chief Executive Officer, Chief Financial Officer and Controller (“Code of Ethics”);

• Our Sustainability Report.

Within the time period required by the SEC and the NYSE, as applicable, we will post on our website any modifications to the Code of Conduct and Code of Ethics and any waivers applicable to senior officers as defined in the Code of Conduct or Code of Ethics, as applicable, as required by the Sarbanes-Oxley Act of 2002.

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The SEC also maintains a website at http://sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file and furnish electronically with the SEC.

References to the Company's website in this Form 10-K are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Form 10-K.

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-K

Item 1. Business