What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-28 compared with 2022-10-28 · 138 added, 479 removed, 409 unchanged (60% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and the notes thereto, as well as our 2021 Form 10-K.

Unless the context requires otherwise, references to “we,” “us” and “our” are intended to mean the business and operations of Group 1 Automotive, Inc.

and its subsidiaries.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“ MD&A”), should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and the notes thereto, as well as our 2022 Form 10-K.

We are a leading operator in the automotive retail industry.

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and 34 towns and cities in the U.K.

As of September 30, 2022, our retail network consisted of 148 dealerships in the U.S.

As of March 31, 2023, our retail network consisted of 149 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 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.

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

Refer to Note 4.

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

Recent Events

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

Conversely, the shortage of new vehicles has led to sharply higher new vehicle sales prices and gross margins.

Our new vehicle days’ supply of inventory was approximately 16 day s as of the quarter ended September 30, 2022 (“Current Quarter”), as compared to 13 days as of the quarter ended September 30, 2021 (“Prior Year Quarter”).

In August 2022, we announced certain upcoming management changes, including the retirement of our Chief Executive Officer Earl J.

Hesterberg, effective as of December 31, 2022, and the promotion of Daryl Kenningham to succeed Mr.

Hesterberg, effective January 1, 2023.

Please see our Current Report on Form 8-K, filed with the SEC on August 24, 2022, for additional information.

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 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.

In particular, the Russia and Ukraine Conflict has further impacted the ability of certain OEMs to produce new vehicles and new vehicle parts, which may result in continued disruptions to the supply of new and used vehicles.

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

Our manufacturers’ production continued at historically reduced levels in the quarter ended March 31, 2023 (“Current Quarter”), despite recent production improvements in the latter half of 2022 and the Current Quarter for some of those manufacturers.

Production constraints and related inventory constraints are a result of sustained global semiconductor and other parts shortages as well as the ongoing conflict between Russia and Ukraine.

Increased deliveries from certain manufacturers in the Current Quarter drove a higher volume of new units sold while also maintaining elevated new vehicle retail sales prices.

Used vehicle gross margins declined in the Current Quarter, driven by volatility from new vehicle supplies affecting our ability to source used vehicles, increased interest rates and the inflationary pressures and macroeconomic factors described further below.

Our new vehicle days’ supply of inventory was approximately 25 day s as of the Current Quarter, as compared to 11 days as of the quarter ended March 31, 2022 (“Prior Year Quarter”).

On April 12, 2023, the U.S.

Environmental Protection Agency (“EPA”) proposed regulations establishing more stringent air emissions limits for light- and medium-duty vehicles, which include passenger cars, vans, pickups, sedans and SUVs for model years 2027 through 2032.

The EPA proposes higher emissions stringency each year, beginning with model year 2027, new battery durability requirements and changes to certain existing air emissions credit programs.

If finalized in their current form, these regulations could increase or accelerate the adoption of certain emissions reducing technologies, and further market penetration for hybrid, plug-in and battery-electric vehicles.

For example, if the proposed regulations are enacted, the EPA projects that at least 60% of new light-duty passenger vehicles sold in the U.S.

would be battery-electric by 2030.

The EPA also estimates that the regulations, if finalized, would increase costs for auto manufacturers and reduce repair costs for covered vehicles.

The EPA projects the regulations to become final by 2024.

The regulations, if finalized in their current form, may have a significant impact on the future mix of vehicles provided by our manufacturers.

Any future impact of these regulations on our operations cannot be predicted with certainty.

The Company will continue to monitor the regulatory process and will further evaluate the regulations upon issuance by the EPA.

The global economy continues to experience inflation.

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

Federal Reserve, along with other central banks, including in the U.K., continued to increase interest rates throughout 2022.

Additionally, U.S.

Gross Domestic Product (“GDP”) shrank for the second consecutive quarter as of the quarter ended June 30,2022, 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.

In addition to the macroeconomic issues described above, the U.K.

faces additional political and economic uncertainty as a result of recent leadership changes in the country’s government.

This uncertainty has led to increased foreign currency exchange rate volatility for the country’s currency.

During the Current Quarter, the GBP to USD foreign currency exchange rate has declined 8.3% from £1 to $1.21 at June 30, 2022, to £1 to $1.11 at September 30, 2022, and as compared to the Prior Year Quarter, the GBP to USD foreign currency exchange rate has declined 17.3%, from £1 to $1.35 at September 30, 2021, to £1 to $1.11 at September 30, 2022.

Federal Reserve, along with other central banks, including in the U.K., increased interest rates throughout 2022 and the Current Quarter.

Continued inflation reducing the disposable income of our customers, volatility in new vehicle availability and higher interest rates increasing the monthly cost of financing vehicles contributed to used vehicle prices declining in the latter part of 2022 and during the Current Quarter.

Additionally, during the Current Quarter, Silicon Valley Bank (“SVB”) and Signature Bank were placed into receivership with the Federal Deposit Insurance Corporation (“FDIC”), indicating potential instability within the financial sector.

Although we are not a party to any transactions with SVB, Signature Bank or any other financial institution currently in receivership, continued instability could impact our financial counterparties.

Finally, one financial institution that participates in our Revolving Credit Facility announced plans to terminate its auto dealer services business offering floorplan lending.

Although there is no current material impact on the Company, future impact, if any, of these macroeconomic developments on our operations cannot be predicted with certainty.

Critical Accounting Policies and Accounting Estimates

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All computations have been calculated using unrounded amounts for all periods presented.

Retail new vehicle units sold for 2023 include new vehicle agency units.

The agency units and related revenues are excluded from the calculation of the average sales price per unit sold for new vehicles due to their net presentation within revenues.

The agency units and related net revenues are included in the calculation of gross profit per unit sold.

The following tables summarize our operating results on a reported basis and on a same store basis:

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(In millions, except unit data)

Three Months Ended September 30,

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

New vehicle retail sales $ 1,883.3 $ 1,513.9 $ 369.5 24.4 % $ (53.8) 28.0 %

Used vehicle retail sales 1,488.6 1,230.4 258.3 21.0 % (47.3) 24.8 %

Used vehicle wholesale sales 89.6 106.0 (16.5) (15.5) % (4.9) (11.0) %

Total used 1,578.2 1,336.4 241.8 18.1 % (52.2) 22.0 %

Parts and service sales 515.6 416.5 99.1 23.8 % (10.7) 26.4 %

F&I, net 186.3 146.0 40.3 27.6 % (2.8) 29.5 %

Total revenues $ 4,163.4 $ 3,412.8 $ 750.6 22.0 % $ (119.5) 25.5 %

Gross profit:

New vehicle retail sales $ 206.7 $ 161.5 $ 45.2 28.0 % $ (4.9) 31.0 %

Used vehicle retail sales 76.1 97.0 (21.0) (21.6) % (2.7) (18.9) %

Used vehicle wholesale sales (1.5) 7.4 (8.9) (120.8) % — (121.4) %

Total used 74.5 104.4 (29.9) (28.6) % (2.6) (26.1) %

Parts and service sales 285.1 226.8 58.4 25.7 % (6.3) 28.5 %

F&I, net 186.3 146.0 40.3 27.6 % (2.8) 29.5 %

Total gross profit $ 752.6 $ 638.7 $ 113.9 17.8 % $ (16.6) 20.4 %

Gross margin:

New vehicle retail sales 11.0 % 10.7 % 0.3 %

Used vehicle retail sales 5.1 % 7.9 % (2.8) %

Used vehicle wholesale sales (1.7) % 7.0 % (8.7) %

Total used 4.7 % 7.8 % (3.1) %

Parts and service sales 55.3 % 54.4 % 0.9 %

Total gross margin 18.1 % 18.7 % (0.6) %

Retail new vehicles sold 39,237 33,365 5,872 17.6 %

Retail used vehicles sold 48,427 42,514 5,913 13.9 %

Wholesale used vehicles sold 9,456 10,960 (1,504) (13.7) %

Total used 57,883 53,474 4,409 8.2 %

Average sales price per unit sold:

New vehicle retail $ 47,999 $ 45,373 $ 2,626 5.8 % $ (1,370) 8.8 %

Used vehicle retail $ 30,740 $ 28,941 $ 1,799 6.2 % $ (977) 9.6 %

Gross profit per unit sold:

New vehicle retail sales $ 5,267 $ 4,840 $ 427 8.8 % $ (125) 11.4 %

Used vehicle retail sales $ 1,571 $ 2,282 $ (712) (31.2) % $ (55) (28.8) %

Used vehicle wholesale sales $ (162) $ 673 $ (835) (124.1) % $ 5 (124.8) %

Total used $ 1,288 $ 1,953 $ (665) (34.1) % $ (45) (31.7) %

F&I PRU $ 2,125 $ 1,925 $ 201 10.4 % $ (32) 12.1 %

SG&A expenses $ 450.9 $ 376.3 $ 74.7 19.8 % $ (11.3) 22.9 %

SG&A as % gross profit 59.9 % 58.9 % 1.0 %

Floorplan expense:

Floorplan interest expense $ 6.5 $ 4.3 $ 2.2 50.1 % $ (0.2) 55.1 %

floorplan assistance (1)

13.9 12.2 1.8 14.4 % — 14.4 %

Net floorplan expense $ (7.4) $ (7.8) $ 0.4 $ (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)

Three Months Ended September 30,

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

New vehicle retail sales $ 1,534.6 $ 1,487.1 $ 47.5 3.2 % $ (52.8) 6.7 %

Used vehicle retail sales 1,271.4 1,213.6 57.8 4.8 % (46.8) 8.6 %

Used vehicle wholesale sales 76.5 104.6 (28.2) (26.9) % (4.8) (22.3) %

Total used 1,347.9 1,318.3 29.6 2.2 % (51.6) 6.2 %

Parts and service sales 438.8 408.6 30.2 7.4 % (10.1) 9.9 %

F&I, net 155.6 143.0 12.6 8.8 % (2.8) 10.8 %

Total revenues $ 3,476.9 $ 3,357.0 $ 119.9 3.6 % $ (117.4) 7.1 %

Gross profit:

New vehicle retail sales $ 163.7 $ 158.1 $ 5.6 3.6 % $ (4.8) 6.6 %

Used vehicle retail sales 64.0 96.3 (32.2) (33.5) % (2.6) (30.8) %

Used vehicle wholesale sales (1.2) 7.3 (8.5) (115.9) % — (116.5) %

Total used 62.9 103.6 (40.7) (39.3) % (2.6) (36.9) %

Parts and service sales 239.0 222.1 16.8 7.6 % (6.0) 10.3 %

F&I, net 155.6 143.0 12.6 8.8 % (2.8) 10.8 %

Total gross profit $ 621.2 $ 626.9 $ (5.7) (0.9) % $ (16.2) 1.7 %

Gross margin:

New vehicle retail sales 10.7 % 10.6 % — %

Used vehicle retail sales 5.0 % 7.9 % (2.9) %

Used vehicle wholesale sales (1.5) % 7.0 % (8.5) %

Total used 4.7 % 7.9 % (3.2) %

Parts and service sales 54.5 % 54.4 % 0.1 %

Total gross margin 17.9 % 18.7 % (0.8) %

Retail new vehicles sold 32,249 32,734 (485) (1.5) %

Retail used vehicles sold 41,684 41,866 (182) (0.4) %

Wholesale used vehicles sold 7,911 10,755 (2,844) (26.4) %

Total used 49,595 52,621 (3,026) (5.8) %

Average sales price per unit sold:

New vehicle retail $ 47,586 $ 45,431 $ 2,155 4.7 % $ (1,638) 8.3 %

Used vehicle retail $ 30,502 $ 28,988 $ 1,513 5.2 % $ (1,122) 9.1 %

Gross profit per unit sold:

New vehicle retail sales $ 5,078 $ 4,831 $ 247 5.1 % $ (149) 8.2 %

Used vehicle retail sales $ 1,536 $ 2,299 $ (764) (33.2) % $ (62) (30.5) %

Used vehicle wholesale sales $ (147) $ 682 $ (829) (121.6) % $ 6 (122.4) %

Total used $ 1,267 $ 1,969 $ (702) (35.6) % $ (52) (33.0) %

F&I PRU $ 2,105 $ 1,917 $ 188 9.8 % $ (38) 11.8 %

SG&A expenses $ 386.3 $ 368.4 $ 17.9 4.9 % $ (11.1) 7.9 %

SG&A as % gross profit 62.2 % 58.8 % 3.4 %

Reported Operating Data — Consolidated

(In millions, except unit data)

Nine Months Ended September 30,

Three Months Ended March 31,

2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

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(In millions, except unit data)

Nine Months Ended September 30,

Three Months Ended March 31,

2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

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(In millions, except unit data)

Three Months Ended September 30,

Three Months Ended March 31,

2023 2022 Increase/(Decrease) % Change

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(In millions, except unit data)

Three Months Ended September 30,

Three Months Ended March 31,

2023 2022 Increase/(Decrease) % Change

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SG&A as % gross profit 63.1 % 59.7 % 3.4 %

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

Region — Three Months Ended March 31, 2023 Compared to 2022

The following discussion of our U.S.

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Total revenues in the U.S.

during the Current Quarter increased $821.9 million, or 30.9%, as compared to the Prior Year Quarter.

This increase was driven by the acquisition of stores and higher same store revenues.

during the Current Quarter increased $251.0 million, or 8.1%, as compared to the Prior Year Quarter, primarily driven by higher same store revenues and the acquisition of stores.

Total same store revenues in the U.S.

during the Current Quarter increased $198.6 million, or 7.6%, as compared to Prior Year Quarter.

This increase was primarily driven by higher same store revenues from new and used vehicle retail sales, parts and service sales and F&I, net, partially offset by lower same store revenues from used vehicle wholesale sales.

New and used vehicle retail revenues benefited from the sale of approximately 7,700 units from our online digital platform, AcceleRide®, during the Current Quarter, representing a 47.0% increase as compared to the Prior Year Quarter.

New vehicle retail same store revenues outperformed the Prior Year Quarter.

A shortage in new vehicle supply continued to drive strong pricing in the Current Quarter, mitigating the modestly lower new vehicle retail unit sales.

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

during the Current Quarter increased $130.9 million, or 4.3%, as compared to the Prior Year Quarter.

This increase was primarily driven by higher revenues from new vehicle retail, parts and service and used vehicle wholesale sales, partially offset by lower used vehicle retail sales and F&I PRU.

New and used vehicle retail revenues benefited from the sale of approximately 12,600 units from our online digital platform, AcceleRide®, during the Current Quarter, a 116.8% increase as compared to the Prior Year Quarter.

New vehicle retail same store revenues outperformed the Prior Year Quarter, driven by strong new vehicle retail pricing coupled with more units sold.

The prolonged shortage of new vehicle inventory, despite recent manufacturers’ production improvements, drove strong pricing.

Certain manufacturer vehicle deliveries were higher in the Current Quarter and as a result, our inventory levels were higher than the Prior Year Quarter, providing for the increase in units sold.

We ended the Current Quarter with a U.S.

new vehicle inventory supply of 27 days, 18 days higher than the Prior Year Quarter.

Used vehicle retail same store revenues outperformed the Prior Year Quarter, driven by strong used vehicle retail pricing due to increased demand, coupled with a modest increase in retail used vehicle unit sales.

Used vehicle wholesale same store revenues underperformed due to a decline in wholesale used vehicle unit sales.

We have increased our efforts to sell more used vehicles through retail sales channels 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 Quarter, driven by increases across all business lines, reflecting increased business activity and increased same store technician headcount as a result of our technician recruiting and retention efforts providing greater capacity to meet increased demand.

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

Total gross profit in the U.S.

during the Current Quarter increased $124.3 million, or 23.2%, as compared to the Prior Year Quarter, primarily driven by the acquisition of stores.

Total same store gross profit in the U.S.

during the Current Quarter increased $5.4 million, or 1.0%, as compared to the Prior Year Quarter.

This increase was primarily driven by higher same store gross profit from parts and service sales, F&I, net and new vehicle retail sales, partially offset by lower same store gross profit from used vehicle retail and wholesale sales.

New vehicle retail same store gross profit outperformed the Prior Year Quarter, driven by an increase in new vehicle retail same store gross profit per unit sold, partially offset by a modest decrease in same store retail new vehicle 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.

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

Used vehicle retail same store gross profit underperformed the Prior Year Quarter, driven by a decrease in used vehicle retail same store gross profit per unit sold, partially offset by modestly higher same store retail used vehicle unit sales.

The decrease in same store used vehicle retail gross profit was driven by inflationary impacts on our used vehicle customers and higher used vehicle acquisition prices.

Our used vehicle wholesale same store gross profit underperformed the Prior Year Quarter , 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 unit sales.

The decreases in wholesale gross profit per unit sold and in wholesale units were driven by efforts to sell more used vehicles through retail sales rather than the wholesale market as described above.

Parts and service same store gross profit outperformed the Prior Year Quarter, as described above for parts and service same store revenues.

F&I, net same store gross profit increased 9.6%, as described above for F&I, net same store revenues.

Total same store gross ma rgin decreased 123 basis points, primarily driven by lower same store used vehicle retail gross margin caused by inflationary impacts on our used vehicle customers and higher used vehicle acquisition prices.

SG&A Expenses

SG&A as a percentage of gross profit increase d 83 and 332 basi s points on an as reported and same store basis, respectively, compared to the Prior Year Quarter, primarily driven by increases in SG&A expenses.

Total SG&A expenses in the U.S.

during the Current Quarter increased $77.1 million, or 25.0%, 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 $20.7 million, or 6.9%, as compared to the Prior Year Quarter, primarily driven by increased labor costs, favorable non-recurring legal settlements in the Prior Year Quarter, and an increase in other variable expenses associated with the rise in certain business activities described above.

Reported Operating Data — U.S.

(In millions, except unit data)

Nine Months Ended September 30,

2022 2021 Increase/(Decrease) % Change

New vehicle retail sales $ 4,581.8 $ 3,958.9 $ 622.9 15.7 %

Used vehicle retail sales 3,447.6 2,481.7 965.9 38.9 %

Used vehicle wholesale sales 177.6 179.6 (1.9) (1.1) %

Total used 3,625.3 2,661.3 963.9 36.2 %

Parts and service sales 1,307.7 982.0 325.7 33.2 %

F&I, net 498.1 389.4 108.7 27.9 %

Total revenues $ 10,012.8 $ 7,991.6 $ 2,021.2 25.3 %

Gross profit:

New vehicle retail sales $ 538.5 $ 362.6 $ 175.9 48.5 %

Used vehicle retail sales 203.0 210.7 (7.8) (3.7) %

Used vehicle wholesale sales 3.8 13.6 (9.7) (71.7) %

Total used 206.8 224.3 (17.5) (7.8) %

Parts and service sales 713.1 535.1 178.0 33.3 %

F&I, net 498.1 389.4 108.7 27.9 %

Total gross profit $ 1,956.5 $ 1,511.4 $ 445.1 29.5 %

Gross margin:

New vehicle retail sales 11.8 % 9.2 % 2.6 %

Used vehicle retail sales 5.9 % 8.5 % (2.6) %

Used vehicle wholesale sales 2.2 % 7.6 % (5.4) %

Total used 5.7 % 8.4 % (2.7) %

Parts and service sales 54.5 % 54.5 % — %

Total gross margin 19.5 % 18.9 % 0.6 %

Retail new vehicles sold 92,870 89,183 3,687 4.1 %

Retail used vehicles sold 110,635 96,143 14,492 15.1 %

Wholesale used vehicles sold 18,513 19,804 (1,291) (6.5) %

Total used 129,148 115,947 13,201 11.4 %

Average sales price per unit sold:

New vehicle retail $ 49,335 $ 44,391 $ 4,945 11.1 %

Used vehicle retail $ 31,162 $ 25,813 $ 5,349 20.7 %

Gross profit per unit sold:

New vehicle retail sales $ 5,799 $ 4,066 $ 1,733 42.6 %

Used vehicle retail sales $ 1,834 $ 2,192 $ (357) (16.3) %

Used vehicle wholesale sales $ 207 $ 685 $ (478) (69.8) %

Total used $ 1,601 $ 1,934 $ (333) (17.2) %

F&I PRU $ 2,448 $ 2,101 $ 346 16.5 %

SG&A expenses $ 1,133.0 $ 883.0 $ 250.1 28.3 %

SG&A as % gross profit 57.9 % 58.4 % (0.5) %

Same Store Operating Data — U.S.

(In millions, except unit data)

Nine Months Ended September 30,

2022 2021 Increase/(Decrease) % Change

New vehicle retail sales $ 3,623.5 $ 3,889.8 $ (266.3) (6.8) %

Used vehicle retail sales 2,869.8 2,442.5 427.3 17.5 %

Used vehicle wholesale sales 139.9 176.7 (36.8) (20.8) %

Total used 3,009.7 2,619.2 390.5 14.9 %

Parts and service sales 1,104.8 970.4 134.4 13.9 %

F&I, net 413.6 382.5 31.1 8.1 %

Total revenues $ 8,151.7 $ 7,861.9 $ 289.7 3.7 %

Gross profit:

New vehicle retail sales $ 419.5 $ 355.8 $ 63.7 17.9 %

Used vehicle retail sales 166.9 208.3 (41.3) (19.9) %

Used vehicle wholesale sales 2.6 13.3 (10.8) (80.7) %

Total used 169.5 221.6 (52.1) (23.5) %

Parts and service sales 589.0 527.5 61.4 11.6 %

F&I, net 413.6 382.5 31.1 8.1 %

Total gross profit $ 1,591.5 $ 1,487.4 $ 104.1 7.0 %

Gross margin:

New vehicle retail sales 11.6 % 9.1 % 2.4 %

Used vehicle retail sales 5.8 % 8.5 % (2.7) %

Used vehicle wholesale sales 1.8 % 7.6 % (5.7) %

Total used 5.6 % 8.5 % (2.8) %

Parts and service sales 53.3 % 54.4 % (1.1) %

Total gross margin 19.5 % 18.9 % 0.6 %

Retail new vehicles sold 73,307 87,597 (14,290) (16.3) %

Retail used vehicles sold 92,490 94,574 (2,084) (2.2) %

Wholesale used vehicles sold 14,104 19,388 (5,284) (27.3) %

Total used 106,594 113,962 (7,368) (6.5) %

Average sales price per unit sold:

New vehicle retail $ 49,429 $ 44,406 $ 5,024 11.3 %

Used vehicle retail $ 31,029 $ 25,826 $ 5,202 20.1 %

Gross profit per unit sold:

New vehicle retail sales $ 5,722 $ 4,062 $ 1,660 40.9 %

Used vehicle retail sales $ 1,805 $ 2,202 $ (397) (18.0) %

Used vehicle wholesale sales $ 182 $ 688 $ (506) (73.5) %

Total used $ 1,590 $ 1,945 $ (355) (18.2) %

F&I PRU $ 2,495 $ 2,100 $ 395 18.8 %

SG&A expenses $ 949.8 $ 869.0 $ 80.8 9.3 %

SG&A as % gross profit 59.7 % 58.4 % 1.3 %

Region — Nine Months Ended September 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 $2.0 billion, or 25.3%, 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 $289.7 million, or 3.7%, as compared to the Prior Year.

This increase was primarily driven by higher same store revenues from used vehicle retail sales, parts and service sales and F&I, net, partially offset by lower same store revenues from new vehicle retail and used vehicle wholesale sales.

New and used vehicle retail revenues benefited from the sale of approx imately 20,300 units from our online digital platform, AcceleRide®, during the Current Year, representing approximately a 36.8% increase as compared to the Prior Year.

New vehicle retail same store revenues underperformed the Prior Year, driven by a shortage in new vehicle supply, leading to fewer unit sales.

The shortage of new vehicle inventory continues to drive strong pricing, which partially mitigated the revenue impact of lower new vehicle 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 unit sales, as increased demand drove prices higher.

Used vehicle wholesale same store revenues declined primarily driven by a decline in unit sales 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 and increased same store technician headcount through our technician recruiting and retention efforts providing greater capacity to meet increased demand.

These increases were partially offset by a decrease in warranty revenues, due to fewer new vehicles sold as a result of new vehicle shortages described above.

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 from fewer same store new and used vehicle unit sales.

Used vehicle retail same store revenues underperformed the Prior Year Quarter, primarily driven by lower used vehicle retail sales prices coupled with fewer units sold, due to the ongoing new vehicle supply shortage impacting the supply of used vehicles, as well as impacts from inflation reducing the disposable income of our customers and rising interest rates increasing the monthly cost of financing vehicles.

Used vehicle wholesale same store revenues increased primarily due to more wholesale units sold.

Parts and service same store revenues outperformed the Prior Year Quarter, primarily driven by increases across all business lines, reflecting increased business activity and increased same store technician headcount through our technician recruiting and retention efforts, providing greater capacity to meet increased demand.

F&I, net same store revenues underperformed the Prior Year Quarter, primarily driven by lower penetration rates as a result of customers seeking alternative providers in this higher interest rate environment.

The underperformance was partially offset by modestly higher same store new vehicle unit sales.

Total gross profit in the U.S.

during the Current Year increased $445.1 million, or 29.5%, as compared to the Prior Year, primarily driven by the acquisition of stores and higher same store results.

during the Current Quarter decreased $3.3 million, or 0.5%, as compared to the Prior Year Quarter, primarily driven by lower same store results, partially offset by the acquisition of stores.

Total same store gross profit in the U.S.

during the Current Year increased $104.1 million, or 7.0%, as compared to the Prior Year, primarily driven by higher same store gross profit from new vehicle retail sales, parts and service sales and F&I, net.

New vehicle retail same store gross profit outperformed the Prior Year, driven by an increase in new vehicle retail same store gross profit per unit sold, partially offset by a decrease in same store retail new vehicle unit sales.

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

Used vehicle retail same store gross profit underperformed the Prior Year, driven by a decrease in used vehicle retail same store gross profit per unit sold, coupled with a decrease in same store retail used vehicle unit sales.

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

Our used vehicle wholesale same store gross profit underperformed the Prior Year, driven by a decrease in used vehicle wholesale same store gross profit per unit sold, coupled with a decrease in same store wholesale used vehicle unit sales.

The decrease in used vehicle wholesale gross profit per unit sold and in wholesale used vehicle unit sales was driven by efforts to sell more used vehicles through retail sales rather than the wholesale market as described above.

Parts and service same store gross profit outperformed the Prior Year, as described above for parts and service revenues.

F&I, net same store gross profit outperformed the Prior Year, as described above for F&I, net same store revenues.

Total same store gross margin increased 60 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.

during the Current Quarter decreased $21.5 million, or 3.5%, as compared to the Prior Year Quarter, primarily driven by downward pressures on new and used vehicle margins and lower F&I PRU, partially offset by higher same store parts and service gross profit.

New vehicle retail same store gross profit underperformed the Prior Year Quarter, driven by a decrease in new vehicle retail same store gross profit per unit sold, partially offset by an increase in same store new vehicle retail units sold.

The decrease in new vehicle retail same store gross profit per unit is due to modestly higher production and inventory levels as described above for new vehicles.

Used vehicle retail same store gross profit underperformed the Prior Year Quarter, driven by a decrease in used vehicle retail same store gross profit per unit sold, coupled with lower same store used vehicle retail units sold.

The decrease in used vehicle retail same store gross profit per unit sold was driven by the ongoing new vehicle supply shortage impacting the supply of used vehicles, as well as impacts from inflation reducing the disposable income of our customers and rising interest rates increasing the monthly cost of financing vehicles, outpacing the decline in used vehicle acquisition costs over that similar period.

Our used vehicle wholesale same store gross profit underperformed the Prior Year Quarter, driven by a decrease in used vehicle wholesale same store gross profit per unit sold, partially offset by an increase in same store wholesale used vehicle units sold.

The decrease in used vehicle wholesale same store gross profit per unit sold was driven by higher wholesale vehicle acquisition costs.

Parts and service same store gross profit outperformed the Prior Year Quarter, as described above for parts and service revenues.

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

Total same store gross margin decreased 152 basis points, primarily driven by the reasons described above for same store gross profit per unit sold for new vehicle retail, used vehicle retail, used vehicle wholesale and F&I, net.

In addition, same store parts and service gross margin declined slightly, largely due to increased labor costs.

SG&A Expenses

SG&A as a percentage of gross profit declined 51 basis points and increased 126 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.

SG&A as a percentage of gross profit increased 598 basis points and 343 basis points on an as reported and same store basis, respectively, compared to the Prior Year Quarter.

The increase in SG&A as a percentage of gross profit on an as reported and same store basis was driven by the decline in reported and same store gross profit as well as higher expenses.

Total SG&A expenses in the U.S.

during the Current Year increased $250.1 million, or 28.3%, as compared to the Prior Year, primarily driven by the acquisition of stores.

during the Current Quarter increased $35.1 million, or 9.9%, as compared to the Prior Year Quarter, primarily driven by the acquisition of stores and higher same store SG&A expenses.

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

during the Current Year increased $80.8 million, or 9.3%, as compared to the Prior Year, primarily driven by increased labor costs and an increase in other variable expenses associated with the rise in certain business activities.

during the Current Quarter, increased $7.2 million, or 2.0%, as compared to the Prior Year Quarter, primarily driven by increased activity related to outside services and professional fees, employee benefits and wages, facilities related expenses and advertising expenses compared to the Prior Year Quarter.

In addition, the inflationary impacts described above contributed to the increase in same store SG&A expenses.

These increases were partially offset by lower commission expenses.

Reported Operating Data — U.K.

(In millions, except unit data)

Three Months Ended September 30,

Three Months Ended March 31,

2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

38 unchanged sentences

(In millions, except unit data)

Three Months Ended September 30,

Three Months Ended March 31,

2023 2022 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

36 unchanged sentences

SG&A as % gross profit 67.1 % 64.9 % 2.1 %

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

Region — Three Months Ended March 31, 2023 Compared to 2022

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.

The GBP to USD foreign currency exchange rate has fluctuated from £1 to $1.35 at September 30, 2021, to £1 to $1.11 at September 30, 2022, or a decline of 17.3%, leading to a decrease in U.K.

The GBP to USD foreign currency exchange rate has fluctuated from £1 to $1.31 at March 31, 2022, to £1 to $1.24 at March 31, 2023, or a decline of 5.8%.

Although the exchange rate has shown recent improvement, it is still negatively impacting our U.K.

results when translated from GBP to USD in the Current Quarter when compared to the Prior Year Quarter.

Total revenues in the U.K.

during the Current Quarter decreased $71.3 million, or 9.5%, as compared to the Prior Year Quarter.

This decrease was primarily driven by the negative impact of foreign currency exchange rates, partially offset by the acquisition of stores.

during the Current Quarter increased $34.6 million, or 4.6%, as compared to the Prior Year Quarter, driven by the acquisition of stores and higher same store results, partially offset by the negative impact of foreign currency exchange rates.

Total same store revenues in the U.K.

during the Current Quarter decreased $78.7 million, or 10.5%, 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 5.2%, driven by outperformances across all revenue streams except used vehicle retail and wholesale sales.

New vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year Quarter.

A shortage in new vehicle supply continues to drive strong pricing on a constant currency basis.

during the Current Quarter increased $16.0 million, or 2.1%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store revenues increased 12.5%, driven by outperformances across all revenue streams except used vehicle wholesale sales.

New vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, primarily driven by more units sold, coupled with modestly higher new vehicle retail pricing.

The shortage of new vehicle inventory, despite recent manufacturers’ production improvements, drove strong pricing.

Vehicle demand was and continues to be pent-up from past years due to Brexit and the COVID-19 pandemic.

We ended the Current Quarter with a U.K.

new vehicle inventory supply of 20 days, which is consistent with the Prior Year Quarter’s new inventory supply of 19 days.

Used vehicle retail same store revenues, on a constant currency basis, underperformed the Prior Year Quarter due to a decline in retail used vehicle unit sales, driven by inflationary impacts on our used vehicle customers and the ongoing new vehicle supply shortage impacting the supply of used vehicles, partially offset by a higher average sales price on a constant currency basis.

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 higher business activity as 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 the majority of our products and higher income per contract on finance and VSCs, partially offset by fewer retail used vehicles sold in the Current Quarter.

Total gross profit in the U.K.

during the Current Quarter decreased $10.3 million, or 10.0%, as compared to the Prior Year Quarter, primarily driven by the negative impact of foreign currency exchange rates.

Total same store gross profit in the U.K.

during the Current Quarter decreased $11.1 million, or 10.9%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store gross profit increased 5.0%, primarily driven by improvements in gross profit from new vehicle 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, driven by 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 the Prior Year Quarter, driven by a decrease in same store used vehicle retail gross profit per unit sold, coupled with fewer same store retail used vehicle unit sales.

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

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 described above for F&I, net same store revenues.

Total same store gross margin in the U.K.

decreased 5 basis points, primarily driven by lower same store used vehicle retail gross margin caused by inflationary impacts on our used vehicle customers and the ongoing new vehicle supply shortage impacting the supply of used vehicles, and lower parts and service gross margin caused by increased labor costs.

SG&A Expenses

SG&A as a percentage of gross profit increased 459 and 484 basis points, on an as reported and same store basis, respectively, compared to the Prior Year Quarter, primarily driven by the decline in used vehicle retail and parts and service gross profit as described above, as well as the factors below impacting SG&A.

Total SG&A expenses in the U.K.

during the Current Quarter decreased $2.5 million, or 3.6%, as compared to the Prior Year Quarter.

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

during the Current Quarter decreased $2.8 million, or 4.2%, as compared to the Prior Year Quarter.

These decreases were primarily driven by the impact of foreign currency exchange rates.

On a constant currency basis, total same store SG&A expenses increased 12.4%, primarily driven by increased labor costs, an increase in other variable expenses associated with the rise in certain business activities, including costs associated with recent acquisitions, and Prior Year government COVID-19 assistance, inclusive of the temporary suspension of city tax, which did not recur in the Current Year.

Reported Operating Data — U.K.

(In millions, except unit data)

Nine Months Ended September 30,

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

New vehicle retail sales $ 898.0 $ 869.7 $ 28.3 3.3 % $ (97.6) 14.5 %

Used vehicle retail sales 906.3 820.5 85.8 10.5 % (91.5) 21.6 %

Used vehicle wholesale sales 101.2 98.4 2.8 2.8 % (10.0) 12.9 %

Total used 1,007.5 919.0 88.6 9.6 % (101.4) 20.7 %

Parts and service sales 183.4 170.2 13.2 7.7 % (19.0) 18.9 %

F&I, net 51.4 41.9 9.6 22.8 % (5.4) 35.7 %

Total revenues $ 2,140.3 $ 2,000.7 $ 139.6 7.0 % $ (223.4) 18.1 %

Gross profit:

New vehicle retail sales $ 79.6 $ 54.6 $ 25.0 45.8 % $ (9.0) 62.3 %

Used vehicle retail sales 50.4 52.9 (2.5) (4.7) % (5.0) 4.7 %

Used vehicle wholesale sales (1.8) 6.5 (8.3) (127.2) % 0.2 (129.9) %

Total used 48.7 59.5 (10.8) (18.1) % (4.8) (10.0) %

Parts and service sales 109.5 102.1 7.4 7.2 % (11.3) 18.3 %

F&I, net 51.4 41.9 9.6 22.8 % (5.4) 35.7 %

Total gross profit $ 289.2 $ 258.1 $ 31.2 12.1 % $ (30.6) 23.9 %

Gross margin:

New vehicle retail sales 8.9 % 6.3 % 2.6 %

Used vehicle retail sales 5.6 % 6.5 % (0.9) %

Used vehicle wholesale sales (1.7) % 6.6 % (8.4) %

Total used 4.8 % 6.5 % (1.6) %

Parts and service sales 59.7 % 60.0 % (0.3) %

Total gross margin 13.5 % 12.9 % 0.6 %

Retail new vehicles sold 21,922 21,316 606 2.8 %

Retail used vehicles sold 30,505 28,416 2,089 7.4 %

Wholesale used vehicles sold 9,556 11,464 (1,908) (16.6) %

Total used 40,061 39,880 181 0.5 %

Average sales price per unit sold:

New vehicle retail $ 40,962 $ 40,800 $ 162 0.4 % $ (4,452) 11.3 %

Used vehicle retail $ 29,711 $ 28,876 $ 835 2.9 % $ (2,999) 13.3 %

Gross profit per unit sold:

New vehicle retail sales $ 3,633 $ 2,563 $ 1,070 41.8 % $ (412) 57.8 %

Used vehicle retail sales $ 1,653 $ 1,863 $ (210) (11.3) % $ (164) (2.5) %

Used vehicle wholesale sales $ (185) $ 568 $ (753) (132.6) % $ 19 (135.9) %

Total used $ 1,215 $ 1,491 $ (276) (18.5) % $ (121) (10.4) %

F&I PRU $ 981 $ 842 $ 139 16.5 % $ (103) 28.7 %

SG&A expenses $ 196.6 $ 173.3 $ 23.3 13.4 % $ (20.6) 25.3 %

SG&A as % gross profit 68.0 % 67.1 % 0.8 %

Same Store Operating Data — U.K.

(In millions, except unit data)

Nine Months Ended September 30,

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

New vehicle retail sales $ 844.5 $ 869.3 $ (24.9) (2.9) % $ (93.3) 7.9 %

Used vehicle retail sales 831.4 819.6 11.8 1.4 % (86.0) 11.9 %

Used vehicle wholesale sales 95.0 98.3 (3.3) (3.3) % (9.5) 6.3 %

Total used 926.4 917.9 8.6 0.9 % (95.5) 11.3 %

Parts and service sales 166.7 161.9 4.8 3.0 % (17.5) 13.8 %

F&I, net 48.5 41.8 6.7 16.0 % (5.2) 28.4 %

Total revenues $ 1,986.2 $ 1,991.0 $ (4.8) (0.2) % $ (211.5) 10.4 %

Gross profit:

New vehicle retail sales $ 74.5 $ 54.6 $ 19.9 36.4 % $ (8.6) 52.2 %

Used vehicle retail sales 46.0 52.9 (6.9) (13.1) % (4.7) (4.3) %

Used vehicle wholesale sales (1.6) 6.6 (8.1) (123.7) % 0.2 (126.1) %

Total used 44.4 59.5 (15.0) (25.3) % (4.5) (17.7) %

Parts and service sales 99.9 98.3 1.6 1.6 % (10.6) 12.4 %

F&I, net 48.5 41.8 6.7 16.0 % (5.2) 28.4 %

Total gross profit $ 267.4 $ 254.2 $ 13.2 5.2 % $ (28.9) 16.5 %

Gross margin:

New vehicle retail sales 8.8 % 6.3 % 2.5 %

Used vehicle retail sales 5.5 % 6.5 % (0.9) %

Used vehicle wholesale sales (1.6) % 6.7 % (8.3) %

Total used 4.8 % 6.5 % (1.7) %

Parts and service sales 59.9 % 60.7 % (0.8) %

Total gross margin 13.5 % 12.8 % 0.7 %

Retail new vehicles sold 20,406 21,300 (894) (4.2) %

Retail used vehicles sold 27,587 28,359 (772) (2.7) %

Wholesale used vehicles sold 8,781 11,439 (2,658) (23.2) %

Total used 36,368 39,798 (3,430) (8.6) %

Average sales price per unit sold:

New vehicle retail $ 41,383 $ 40,813 $ 569 1.4 % $ (4,571) 12.6 %

Used vehicle retail $ 30,138 $ 28,900 $ 1,238 4.3 % $ (3,118) 15.1 %

Gross profit per unit sold:

New vehicle retail sales $ 3,650 $ 2,563 $ 1,087 42.4 % $ (422) 58.9 %

Used vehicle retail sales $ 1,666 $ 1,865 $ (199) (10.7) % $ (169) (1.6) %

Used vehicle wholesale sales $ (177) $ 573 $ (750) (130.9) % $ 18 (133.9) %

Total used $ 1,221 $ 1,494 $ (273) (18.3) % $ (124) (9.9) %

F&I PRU $ 1,011 $ 842 $ 169 20.1 % $ (108) 32.9 %

SG&A expenses $ 183.6 $ 169.2 $ 14.4 8.5 % $ (19.5) 20.0 %

SG&A as % gross profit 68.7 % 66.6 % 2.1 %

Region — Nine Months Ended September 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.

Total revenues in the U.K.

during the Current Year increased $139.6 million, or 7.0%, as compared to the Prior Year, primarily driven by the acquisition of stores, partially offset by the negative impact of foreign currency exchange rates.

Total same store revenues in the U.K.

during the Current Year decreased $4.8 million, or 0.2%, as compared to the Prior Year, driven by the negative impact of foreign currency exchange rates.

On a constant currency basis, total same store revenues increased 10.4%, driven by outperformances across all revenue streams.

New vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year, driven by increased sales prices, partially offset by a modest decrease in same store retail new vehicle unit sales.

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

The increase in the new vehicle retail same store average sales price per unit sold 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 modest decline in retail used vehicle unit sales, as increased demand drove higher prices.

Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year, driven by increased business activity across all of our parts and service business lines 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 all finance and other products and higher income per contract for finance and VSCs, partially offset by a decline in same store new and used vehicle retail unit sales.

new vehicle inventory supply of 19 days, 2 days higher than the Prior Year Quarter.

Used vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, primarily driven by an increase in units sold, partially offset by slightly lower retail sales prices on a constant currency basis, due to the impacts from inflation reducing the disposable income of our customers and rising interest rates increasing the monthly cost of financing vehicles, coupled with the ongoing new vehicle supply shortage impacting the supply of used vehicles.

Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, driven by increased business activity across all of our parts and service business lines.

F&I, net same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, driven by an increase in retail units sold, partially offset by a decline in income per contract and penetration rates for finance fees .

Total gross profit in the U.K.

during the Current Year increased $31.2 million, or 12.1%, as compared to the Prior Year, primarily driven by the acquisition of stores and higher same store results.

during the Current Quarter increased $6.6 million, or 6.3%, as compared to the Prior Year Quarter, primarily driven by the acquisition of stores and higher same store results, partially offset by the negative impact of foreign currency exchange rates.

Total same store gross profit in the U.K.

during the Current Year increased $13.2 million, or 5.2%, as compared to the Prior Year.

On a constant currency basis, total same store gross profit increased 16.5%, driven by improvements in new vehicle 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, due to an increase in new vehicle retail same store gross profit per unit sold, resulting from increased prices as discussed above, partially offset by a modest decline in same store retail new vehicle unit sales.

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

These decreases were driven by inflationary impacts on customers coupled with the ongoing new vehicle supply shortage impacting the supply of used vehicles.

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

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

during the Current Quarter increased $3.7 million, or 3.6%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store gross profit increased 14.0% driven by improvements in new vehicle retail sales, parts and service sales and F&I, net, partially offset by downward pressures on used vehicle margins.

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 units sold, coupled with an increase in new vehicle retail same store gross profit per unit sold from increased prices as described above.

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

This decrease was caused by declines in same store retail used vehicle sales prices outpacing the decline in used vehicle cost of sales.

Used vehicle retail sales were negatively affected by inflationary impacts reducing the disposable income of our customers and rising interest rates increasing the monthly cost of financing vehicles, coupled with the ongoing new vehicle supply shortage impacting the supply of used vehicles.

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

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

Total same store gross margin in the U.

increased 69 basis points, driven by improvements in new vehicle retail gross margin due to higher prices from increased customer demand and vehicle supply constraints.

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

increased 20 basis points, driven by improvements in new vehicle retail gross margin due to higher prices from increased customer demand and vehicle supply constraints, described above.

The increase was partially offset by a decrease in same store used vehicle retail gross margin, resulting from inflationary impacts reducing the disposable income of our customers and rising interest rates increasing the monthly cost of financing vehicles as well as the ongoing new vehicle supply shortage, and a decrease in parts and service same store margins due to increased labor costs.

SG&A Expenses

SG&A as a percentage of gross profit increased 82 and 211 basis points on an as reported and same store basis, respectively, compared to the Prior Year.

SG&A as a percentage of gross profit increased 471 and 215 basis points on an as reported and same store basis, respectively, compared to the Prior Year Quarter.

Total SG&A expenses in the U.K.

during the Current Year increased $23.3 million, or 13.4%, as compared to the Prior Year, primarily driven by increases in same store SG&A and the acquisition of stores.

during the Current Quarter increased $9.3 million, or 14.3%, as compared to the Prior Year Quarter, 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 Year increased $14.4 million, or 8.5%, as compared to the Prior Year.

during the Current Quarter increased $4.7 million, or 7.0%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store SG&A expenses increased 18.1%.

These increases were primarily driven by higher business activity and acquisition costs 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 Nine Months Ended September 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 September 30,

2022 2021 Increase/ (Decrease) % Change

Depreciation and amortization expense $ 21.8 $ 19.2 $ 2.6 13.5 %

Floorplan interest expense $ 6.5 $ 4.3 $ 2.2 50.1 %

Other interest expense, net $ 19.6 $ 13.1 $ 6.5 49.9 %

Provision for income taxes $ 60.2 $ 51.6 $ 8.6 16.6 %

Nine Months Ended September 30,

These increases were primarily driven by increased activity related to employee benefits and wages, commissions, facilities related expenses, outside services and professional fees compared to the Prior Year Quarter.

In addition, the inflationary impacts described above contributed to the increase in same store SG&A expenses.

Consolidated Selected Comparisons — Three Months Ended March 31, 2023 Compared to 2022

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,

2023 2022 Increase/ (Decrease) % Change

4 unchanged sentences

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.

Depreciation and amortization expense for the Current Quarter was higher compared to the Prior Year Quarter, primarily driven by acquired property and equipment in our U.S.

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

Floorplan Interest Expense

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

prime rate or a benchmark rate.

prime rate or other benchmark rates.

Outstanding borrowings largely fluctuate based on our levels of new and used vehicle inventory.

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.

Total floorplan interest expense during the Current Quarter, increased $2.2 million, or 50.1%, as compared to the Prior Year Quarter, driven primarily by higher new and used vehicle inventories in the Current Quarter, resulting in additional floorplan interest expense, and an unrealized gain on interest rate swaps of $0.9 million in the Prior Year Quarter which did not recur in the Current Quarter.

For the Current Year, floorplan interest expense decreased $2.8 million, or 13.7%, as compared to the Prior Year, driven primarily by lower realized losses on our interest rate swap portfolio in the current year, due to increases in corresponding interest rates and an unrealized loss on interest rate swaps of $1.4 million in the Prior Year which did not recur in the Current Year.

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.

Total floorplan interest expense during the Current Quarter, increased $7.4 million, or 139.4%, as compared to the Prior Year Qua rter, driven primarily by an increase in floorplan interest expense on new and used vehicles due to an increase in interest rates between periods and an increase to the outstanding floorplan balance driven by increases in inventories, partially offset by realized gains on our interest rate swap portfolio due to increases in corresponding interest rates.

Refer to Note 7.

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Other interest expense, net during the Current Quarter, increased $2.2 million, or 12.9%, as compared to the Prior Year Quarter.

For the Current Year, other interest expense, net, increased $15.7 million, or 39.5%, as compared to the Prior Year.

The increase in other interest expense, net 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.

region, primarily related to the Prime Acquisition.

The increase in other interest expense, net during the Current Quarter, was primarily attributable to the additional increase in borrowings used to acquire property in our U.S.

region, partially offset by the gain on the de-designation of the mortgage interest rate swap of $4.0 million during the Current Quarter.

Refer to Note 9.

Debt within our Notes to Condensed Consolidated Financial Statements for additional discussion of our debt.

Refer to Note 7.

Financial Instruments and Fair Value Measurements within our Notes to Condensed Consolidated Financial Statements for additional discussion of the de-designation of the mortgage interest rate swap.

Provision for Income Taxes

Provision for income taxes of $60.2 million during the Current Quarter increased by $8.6 million, or 16.6%, as compared to the Prior Year Quarter.

For the Current Year, our provision for income taxes of $182.1 million increased by $50.0 million, or 37.8%, 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 23.0%, as compared to the Prior Year Quarter.

The tax rate increase was primarily due to the increase of state income tax expense due to the mix of domestic earnings following the Prime Acquisition, partially offset by tax benefits from an increase in foreign earnings taxed at lower rates in the Current Quarter as compared to the Prior Year Quarter.

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

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.

Provision for income taxes from continuing operations during the Current Quarter decreased by $13.6 million, or 22.2%, as compared to the Prior Year Quarter.

During the Current Quarter, we recorded a tax provision from continuing operations of $47.6 million.

The tax expense decrease in the Current Quarter, as compared to the Prior Year Quarter, was primarily due to lower pre-tax book income.

Our Current Quarter effective tax rate of 23.1% was lower than our Prior Year Quarter effective tax rate of 23.3%.

The tax rate decrease was primarily due to higher excess tax deductions for stock-based compensation in the Current Quarter compared to the Prior Year Quarter.

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.

Liquidity and Capital Resources

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

September 30, 2022

March 31, 2023

Cash and cash equivalents $ 21.3

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

Nine Months Ended September 30,

Three Months Ended March 31,

2023 2022 % Change

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Adjusted net cash used in financing activities $ (121.2) $ (102.3) (18.5) %

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

For the Current Year, net cash provided by operating activities decreased by $584.1 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash provided by operating activities increased by $136.4 million.

The increase on an adjusted basis was primarily driven by an $809.3 million increase in adjusted net floorplan borrowings and a $129.6 million increase in net income, partially offset by a $799.6 million increase in inventory levels.

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

For the Current Year, net cash used in in vesting activities increased by $162.3 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash used in investing activities increased by $157.5 million, primarily driven by a $347.2 million increase in acquisition activity, partially offset by a $115.3 million increase in proceeds from disposition of franchises and property and equipment and a $59.4 million increase in net proceeds from the sale of discontinued operations.

Sources and Uses of Liquidity from Operating Activities — Three Months Ended March 31, 2023 Compared to 2022

For the Current Quarter, net cash provided by operating activities decreased by $83.4 million, as compared to the Prior Year Quarter.

On an adjusted basis for the same period, adjusted net cash provided by operating activities decreased by $127.8 million.

The decrease on an adjusted basis was primarily driven by a $145.8 million increase in inventory levels and a $44.5 million decrease in net income, partially offset by a $43.2 million decrease in contracts-in-transit and vehicle receivables.

Sources and Uses of Liquidity from Investing Activities — Three Months Ended March 31, 2023 Compared to 2022

For the Current Quarter, net cash used in in vesting activities decreased by $99.9 million, as compared to the Prior Year Quarter.

On an adjusted basis for the same period, adjusted net cash used in investing activities decreased by $105.9 million, primarily driven by a $178.3 million decrease in acquisition activity, partially offset by a $71.8 million decrease in proceeds from disposition of franchises and property and equipment.

Capital Expenditures

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We critically evaluate all planned future capital spending, working closely with our manufacturer partners to maximize the return on our investments.

We forecast our capital expenditures for the full year of 2022 will be approximately $105.0 million as compared to $99.6 million for the full year in 2021, excluding expenditures related to real estate purchases and future acquisitions, which could generally be funded from excess cash.

For the Current Year , $93.3 million was used to purchase property and equipment, primarily consisting of $83.7 million in capital expenditures and $10.0 million in purchases of real estate associated with existing dealership operations.

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

For the Current Year, net cash used i n financing activities decreased by $543.8 million, as compared to the Prior Year.

For the Current Quarter , $35.8 million was used to purchase property and equipment.

Sources and Uses of Liquidity from Financing Activities — Three Months Ended March 31, 2023 Compared to 2022

For the Current Quarter, net cash used i n financing activities increased by $57.4 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 $18.9 million.

The increase in net cash used in financing activities on an adjusted basis was primarily driven by Current Year increases in share repurchases of $340.9 million and net repayment of debt of $49.6 million, partially offset by increases in net borrowings on our Floorplan lines of $211.6 million (representing the net cash activity in our floorplan offset account).

The increase in net cash used in financing activities on an adjusted basis was primarily driven by net repayment of debt of $60.3 million and decreases in net borrowings on our Floorplan lines of $41.5 million (representing the net cash activity in our floorplan offset account), partially offset by decreases in share repurchases of $80.4 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 September 30, 2022 (in millions):

The following table summarizes the commitment of our credit facilities as of March 31, 2023 (in millions):

Commitment Outstanding Available

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$ 2,290.4 $ 1,100.2 $ 1,190.2

(1) The available balance at September 30, 2022, includ es $206.1 million of immediately available funds.

(1) The available balance at March 31, 2023, includ es $106.7 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 September 30, 2022, includes $12.4 million of immediately available funds.

(3) The available balance at March 31, 2023, includes $16.1 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 September 30, 2022, we were in compliance with the requirements of the financial covenants under our debt agreements.

As of March 31, 2023, 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 September 30, 2022

As of March 31, 2023

Required Actual

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Fixed charge coverage ratio > 1.20 5.29

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

Based on our position as of March 31, 2023, 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 September 30, 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.

On August 16, 2022, our Board of Directors increased the share repurchase authorization by $130.5 million to $250.0 million.

During the nine months ended September 30, 2022, 2,047,658 shares were repurchased at an average price of $175.58 per share, for a total of $359.5 million.

As of September 30, 2022, we had $164.0 million available under our current stock repurchase authorization.

During the Current Quarter, we adopted a Rule 10b5-1 trading plan that was effective from October 3, 2022 to October 19, 2022.

Under the plan, we repurchased an additional 638,072 shares subsequent to September 30, 2022, at an average price of $156.70 per share, for a total cost of $100.0 million.

During the three months ended March 31, 2023, 180,982 shares were repurchased at an average price of $191.85 per share, for a total of $34.7 million, excluding excise taxes of $0.2 million.

As of March 31, 2023, we had $128.5 million available under our current stock repurchase authorization.

During the Current Quarter, our Board of Directors approved a quarterly cash dividend of $0.45 per share on all shares of our common stock, which resulted in $6.2 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.

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, changes in laws and regulations, 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 in our 2022 Form 10-K.

Our exposure to market risk has not changed materially since December 31, 2022.

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