What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-04-26 compared with 2023-10-27 · 120 added, 489 removed, 421 unchanged (59% of the section changed)

9 unchanged sentences

and 34 towns and cities in the U.K.

As of September 30, 2023 , our retail network consisted of 145 dealerships in the U.S.

As of March 31, 2024 , our retail network consisted of 147 dealerships in the U.S.

and 55 dealerships in the U.K.

Recent Events

On October 7, 2023, Hamas, a U.S., U.K., and European Union designated terrorist organization and ruling party of the Gaza strip in Palestine, launched an attack on Israel.

On October 8, 2023, Israel declared war on Hamas with the armed conflict ongoing as of the date of this filing.

It is not known at this time what impact, if any, this war will have on the global economy, our operations or the operations of our suppliers.

On September 15, 2023, the United Auto Workers (“UAW”) announced a labor strike at certain facilities of Ford Motor Company, General Motors Company and Stellantis N.V.

(collectively the “Big 3” domestic automakers).

The strike is currently limited in its scope and we have yet to experience any material domestic vehicle or parts inventory shortages as a result of the ongoing strike.

However, the future impact of a prolonged UAW strike on our operations cannot be predicted with certainty.

We will continue to monitor and assess the progress of negotiations between the UAW and the Big 3 domestic automakers and manage, as necessary, the impact of the strike on our domestic vehicle and parts inventory.

Our manufacturers’ production continued at historically reduced levels in the quarter ended September 30, 2023 (“Current Quarter”), despite recent production improvements over the trailing twelve months ended September 30, 2023 for some of those manufacturers.

Prior to the UAW labor strike, production and related inventory constraints were primarily a result of sustained global semiconductor and other parts shortages, as well as armed conflicts impacting the global supply chain, including the ongoing conflict in 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 relative to pre-COVID levels.

EV inventory has been building over the Current Quarter for certain brands, outpacing the build up of non-EV inventory, as EV sales volume has lagged OEM deliveries in recent quarters.

Our new vehicle days’ supply of inventory was approximately 28 day s as of the Current Quarter, as compared to 16 days as of the quarter ended September 30, 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.

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, should the proposed regulations be 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 consumer repair costs for covered vehicles.

The EPA projects the regulations to become final by 2024.

The regulations, as proposed 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.

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

On March 20, 2024, the Environmental Protection Agency (“EPA”) finalized new emissions standards for light and medium-duty vehicles, including passenger cars, vans, pickups, sedans and sport utility vehicles for model years 2027 through 2032 and beyond.

The final rule sets new strict standards intended to reduce air pollutant emissions, including greenhouse gas emissions.

The EPA projects the final rule will accelerate the transition to, and availability of, clean vehicle technologies, including hybrid electric vehicles and plug-in hybrid electric vehicles.

Although the future impact of these regulations on our operations cannot be predicted with certainty, the regulations may have a significant impact on the future mix and demand for vehicles provided by our manufacturers.

We will continue to monitor the impact of the final regulations on our manufacturers and dealership operations.

Our manufacturers’ production volume improved during the quarter ended March 31, 2024 (“Current Quarter”), although inventories have not yet normalized across all brands to pre-COVID-19 pandemic levels.

Production and related inventory constraints were primarily a result of OEMs maintaining lower than pre-COVID-19 pandemic inventory, sustained global semiconductor and other parts shortages, as well as armed conflicts impacting the global supply chain, including the ongoing conflicts in Ukraine and Israel.

Increased deliveries from all manufacturers in the Current Quarter drove a higher volume of new units sold and lack of new vehicle availability in prior quarters also helped maintain elevated new vehicle retail sales prices and margins relative to pre-COVID-19 pandemic levels.

The higher inventory levels resulting from improved production during the Current Quarter also generated increased floorplan interest expense.

Our new vehicle days’ supply of inventory was approximately 37 day s as of the Current Quarter, as compared to 25 days as of the quarter ended March 31, 2023 (“Prior Year Quarter”).

Additionally, on March 26, 2024, the Francis Scott Key Bridge in Baltimore, Maryland, collapsed after being struck by a container ship, closing indefinitely the Port of Baltimore, the largest port in the U.S.

for shipments of automobiles.

The closure of the port could cause shipping delays for some of our manufacturers.

The impact of the closure of the port on our vehicle inventory and operations cannot be predicted with certainty.

The global economy continues to experience inflation.

In response to higher than historical average inflationary pressures and challenging macroeconomic conditions, the U.S.

Federal Reserve, along with other central banks, including in the U.K., increased interest rates throughout 2022 and 2023.

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 nine months ended September 30, 2023 (“Current Year”).

Additionally, during the Current Year, Silicon Valley Bank, Signature Bank and First Republic 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 Silicon Valley Bank, Signature Bank, First Republic Bank or any other financial institution currently in receivership, continued instability could impact our financial counterparties.

Finally, one financial institution that participated in our Revolving Credit Facility (as defined in 10.

Floorplan Notes Payable in the Notes to Condensed Consolidated Financial Statements), during the first quarter of 2023, announced plans to terminate its auto floorplan lending.

This lender’s capacity has since been replaced by an existing lender within our Revolving Credit Facility.

In recent months, certain lenders have implemented more restrictive lending standards, resulting in reduced loan-to-value ratios, leading to larger required down payments by consumers.

The impact of these higher down payments is a reduction to the income we earn on those loans.

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.

Federal Reserve, along with other central banks, including in the U.K., maintained interest rates at elevated levels throughout 2023 and during the Current Quarter.

During the Current Quarter, the Federal Reserve signaled that possible cuts to interest rates in 2024 may be at risk due to continued elevated inflation levels, further contributing to economic uncertainty.

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 sold under agency arrangements with certain manufacturers in the U.K.

Retail new vehicle units sold include new vehicle agency units sold under agency arrangements with certain manufacturers in the U.K.

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 as only the sales commission is reported in revenues for dealerships operating under an agency arrangement.

3 unchanged sentences

(In millions, except unit data)

Three Months Ended September 30,

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

New vehicle retail sales $ 2,264.5 $ 1,883.3 $ 381.2 20.2 % $ 25.6 18.9 %

Used vehicle retail sales 1,559.6 1,488.6 70.9 4.8 % 23.6 3.2 %

Used vehicle wholesale sales 114.7 89.6 25.2 28.1 % 2.4 25.4 %

Total used 1,674.3 1,578.2 96.1 6.1 % 26.0 4.4 %

Parts and service sales 566.9 515.6 51.4 10.0 % 5.2 8.9 %

F&I, net 199.4 186.3 13.0 7.0 % 1.3 6.3 %

Total revenues $ 4,705.1 $ 4,163.4 $ 541.7 13.0 % $ 58.2 11.6 %

Gross profit:

New vehicle retail sales $ 194.3 $ 206.7 $ (12.3) (6.0) % $ 2.3 (7.1) %

Used vehicle retail sales 81.4 76.1 5.3 7.0 % 1.1 5.5 %

Used vehicle wholesale sales (2.3) (1.5) (0.8) (52.2) % (0.1) (44.3) %

Total used 79.0 74.5 4.5 6.1 % 1.0 4.7 %

Parts and service sales 313.5 285.1 28.4 10.0 % 3.1 8.9 %

F&I, net 199.4 186.3 13.0 7.0 % 1.3 6.3 %

Total gross profit $ 786.2 $ 752.6 $ 33.6 4.5 % $ 7.7 3.4 %

Gross margin:

New vehicle retail sales 8.6 % 11.0 % (2.4) %

Used vehicle retail sales 5.2 % 5.1 % 0.1 %

Used vehicle wholesale sales (2.0) % (1.7) % (0.3) %

Total used 4.7 % 4.7 % — %

Parts and service sales 55.3 % 55.3 % — %

Total gross margin 16.7 % 18.1 % (1.4) %

Retail new vehicles sold 45,350 39,237 6,113 15.6 %

Retail used vehicles sold 50,799 48,427 2,372 4.9 %

Wholesale used vehicles sold 11,740 9,456 2,284 24.2 %

Total used 62,539 57,883 4,656 8.0 %

Average sales price per unit sold:

New vehicle retail $ 50,300 $ 47,999 $ 2,301 4.8 % $ 930 2.9 %

Used vehicle retail $ 30,701 $ 30,740 $ (39) (0.1) % $ 464 (1.6) %

Gross profit per unit sold:

New vehicle retail sales $ 4,285 $ 5,267 $ (982) (18.6) % $ 51 (19.6) %

Used vehicle retail sales $ 1,602 $ 1,571 $ 31 2.0 % $ 22 0.6 %

Used vehicle wholesale sales $ (199) $ (162) $ (37) (22.6) % $ (10) (16.2) %

Total used $ 1,264 $ 1,288 $ (24) (1.8) % $ 16 (3.1) %

F&I PRU $ 2,073 $ 2,125 $ (52) (2.4) % $ 13 (3.1) %

SG&A expenses $ 496.7 $ 450.9 $ 45.7 10.1 % $ 5.7 8.9 %

SG&A as % gross profit 63.2 % 59.9 % 3.3 %

Floorplan expense:

Floorplan interest expense $ 16.5 $ 6.5 $ 10.0 153.1 % $ 0.2 149.9 %

floorplan assistance (1)

18.8 13.9 4.9 35.1 % — 35.1 %

Net floorplan expense $ (2.3) $ (7.4) $ 5.1 $ 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,

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

New vehicle retail sales $ 2,095.3 $ 1,838.6 $ 256.7 14.0 % $ 25.3 12.6 %

Used vehicle retail sales 1,462.9 1,451.6 11.3 0.8 % 23.1 (0.8) %

Used vehicle wholesale sales 105.9 86.9 19.0 21.8 % 2.4 19.1 %

Total used 1,568.8 1,538.5 30.3 2.0 % 25.4 0.3 %

Parts and service sales 543.9 498.6 45.4 9.1 % 4.9 8.1 %

F&I, net 187.3 181.9 5.4 3.0 % 1.3 2.3 %

Total revenues $ 4,395.3 $ 4,057.6 $ 337.7 8.3 % $ 57.0 6.9 %

Gross profit:

New vehicle retail sales $ 179.3 $ 202.1 $ (22.8) (11.3) % $ 2.3 (12.4) %

Used vehicle retail sales 77.4 74.3 3.0 4.1 % 1.1 2.6 %

Used vehicle wholesale sales (2.1) (1.4) (0.7) (50.4) % (0.1) (41.3) %

Total used 75.3 73.0 2.4 3.2 % 1.0 1.9 %

Parts and service sales 299.0 275.8 23.2 8.4 % 2.9 7.4 %

F&I, net 187.3 181.9 5.4 3.0 % 1.3 2.3 %

Total gross profit $ 740.9 $ 732.8 $ 8.2 1.1 % $ 7.4 0.1 %

Gross margin:

New vehicle retail sales 8.6 % 11.0 % (2.4) %

Used vehicle retail sales 5.3 % 5.1 % 0.2 %

Used vehicle wholesale sales (2.0) % (1.6) % (0.4) %

Total used 4.8 % 4.7 % 0.1 %

Parts and service sales 55.0 % 55.3 % (0.3) %

Total gross margin 16.9 % 18.1 % (1.2) %

Retail new vehicles sold 42,550 38,252 4,298 11.2 %

Retail used vehicles sold 48,240 47,050 1,190 2.5 %

Wholesale used vehicles sold 11,028 9,141 1,887 20.6 %

Total used 59,268 56,191 3,077 5.5 %

Average sales price per unit sold:

New vehicle retail $ 49,626 $ 48,065 $ 1,561 3.2 % $ 979 1.2 %

Used vehicle retail $ 30,325 $ 30,852 $ (527) (1.7) % $ 478 (3.3) %

Gross profit per unit sold:

New vehicle retail sales $ 4,213 $ 5,282 $ (1,069) (20.2) % $ 54 (21.3) %

Used vehicle retail sales $ 1,604 $ 1,580 $ 24 1.5 % $ 23 0.1 %

Used vehicle wholesale sales $ (188) $ (151) $ (37) (24.7) % $ (11) (17.2) %

Total used $ 1,271 $ 1,299 $ (28) (2.1) % $ 16 (3.4) %

F&I PRU $ 2,063 $ 2,133 $ (69) (3.3) % $ 14 (3.9) %

SG&A expenses $ 477.3 $ 452.2 $ 25.1 5.5 % $ 5.5 4.3 %

SG&A as % gross profit 64.4 % 61.7 % 2.7 %

Reported Operating Data — Consolidated

(In millions, except unit data)

Nine Months Ended September 30,

Three Months Ended March 31,

2024 2023 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,

2024 2023 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

9 unchanged sentences

Used vehicle retail sales 77.5 74.6 2.9 3.9 % 0.6 3.0 %

Used vehicle wholesale sales 0.8 2.2 (1.5) (65.7) % — (65.8) %

Used vehicle wholesale sales (1.1) 2.0 (3.1) NM (0.1) NM

Total used 76.4 76.6 (0.2) (0.3) % 0.6 (1.1) %

24 unchanged sentences

SG&A as % gross profit 68.6 % 63.5 % 5.1 %

NM — Not Meaningful

Reported Operating Data — U.S.

(In millions, except unit data)

Three Months Ended September 30,

Three Months Ended March 31,

2024 2023 Increase/(Decrease) % Change

38 unchanged sentences

(In millions, except unit data)

Three Months Ended September 30,

Three Months Ended March 31,

2024 2023 Increase/(Decrease) % Change

36 unchanged sentences

SG&A as % gross profit 67.0 % 62.9 % 4.1 %

Region — Three Months Ended September 30, 2023 Compared to 2022

Region — Three Months Ended March 31, 2024 Compared to 2023

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.

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

Total revenues in the U.S.

during the Current Quarter increased $415.4 million, or 11.9%, as compared to the Prior Year Quarter, driven by higher same store revenues and the acquisition of stores.

during the Current Quarter increased $303.3 million, or 9.1%, as compared to the Prior Year Quarter, driven by the acquisition of stores and higher same store revenues.

Total same store revenues in the U.S.

during the Current Quarter increased $145.1 million, or 4.5%, as compared to the Prior Year Quarter.

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

New and used vehicle retail revenues benefited from the sale of approximately 11,300 units from our online digital platform, AcceleRide®, during the Current Quarter, a 47.8% 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 shortage of new vehicle inventory, compared to pre-COVID levels, 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.

This increase was driven by higher revenues from new vehicle retail, used vehicle retail, parts and service and F&I.

New vehicle retail same store revenues outperformed the Prior Year Quarter, driven by more units sold, partially offset by lower new vehicle retail pricing.

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.

Higher new vehicle supply compared to the Prior Year Quarter created downward pressure on new vehicle retail pricing and margins.

We ended the Current Quarter with a U.S.

new vehicle inventory supply of 30 days, 15 days higher than the Prior Year Quarter, but below pre-COVID levels.

Used vehicle retail same store revenues underperformed the Prior Year Quarter, driven by lower used vehicle retail sales prices, partially offset by more units sold, due to 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 due to more wholesale units sold, partially offset by lower wholesale revenues per unit.

Parts and service same store revenues outperformed the Prior Year Quarter, driven by increases in customer pay, warranty and wholesale 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.

In addition to technician recruitment efforts, we have invested in improving the operations of our U.S.

customer contact center, online scheduling, one-to-one marketing initiatives and by using artificial intelligence, making it easier for our customers to schedule appointments.

F&I, net same store revenues outperformed the Prior Year Quarter, primarily driven by higher same store new vehicle unit sales.

The outperformance was partially offset by lower penetration rates as a result of customers seeking alternative providers of financing in this higher interest rate environment and tighter lending requirements requiring larger down payments.

In addition, service contract penetration has also declined as a result of vehicle affordability challenges for consumers with the higher interest rates.

new vehicle inventory supply of 43 days, 16 days higher than the Prior Year Quarter, but below pre-COVID-19 pandemic levels.

Used vehicle retail same store revenues outperformed the Prior Year Quarter, driven by more units sold, partially offset by lower pricing.

Improved new vehicle supply, impacts from inflation reducing the disposable income of our customers and higher interest rates increasing the monthly cost of financing vehicles continued to create downward pricing pressure.

Parts and service same store revenues outperformed the Prior Year Quarter, driven by increases in warranty and customer pay 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.

F&I same store revenues outperformed the Prior Year Quarter, primarily driven by higher same store new and used vehicle units sold, coupled with higher same store F&I gross profit per unit sold.

Vehicle service contract penetration and new vehicle finance penetration improved, contributing to the higher same store F&I gross profit per unit sold.

OEM incentives have increased in the Current Quarter, leading to the improved new vehicle F&I penetration.

Total gross profit in the U.S.

during the Current Quarter increased $23.4 million, or 3.6%, as compared to the Prior Year Quarter, driven by the acquisition of stores, partially offset by a decline in same store total gross profit.

during the Current Quarter increased $21.5 million, or 3.5%, as compared to the Prior Year Quarter, driven by the acquisition of stores.

Total same store gross profit in the U.S.

during the Current Quarter decreased $0.5 million, or 0.1%, as compared to the Prior Year Quarter, driven by downward pressures on new vehicle margins, partially offset by higher same store parts and service, total used and F&I, net, gross profit.

during the Current Quarter decreased $0.5 million, or 0.1%, as compared to the Prior Year Quarter, primarily driven by downward pressures on new vehicle margins.

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 of new vehicles for certain manufacturers as described above.

Used vehicle retail same store gross profit outperformed the Prior Year Quarter, driven by an increase in used vehicle retail same store gross profit per unit sold, coupled with higher same store used vehicle retail units sold.

The increase in used vehicle retail same store gross profit per unit sold benefited from the ongoing new vehicle supply shortage impacting the supply of used vehicles.

Our used vehicle wholesale same store gross profit outperformed the Prior Year Quarter, driven by an increase in used vehicle wholesale same store gross profit per unit sold, coupled with an increase in same store wholesale used vehicle units sold.

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

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

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

Used vehicle retail same store gross profit outperformed the Prior Year Quarter, primarily driven by higher same store used vehicle retail units sold.

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.

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

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

Total same store gross margin in the U.S.

decreased 118 basis points, primarily driven by the reasons described above for same store gross profit per unit sold for new vehicle retail.

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 increased 262 basis points and 196 basis points on an as reported and same store basis, respectively, compared to the Prior Year Quarter.

Total SG&A expenses in the U.S.

during the Current Quarter increased $31.6 million, or 8.2%, 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 Quarter, increased $12.2 million, or 3.1%, as compared to the Prior Year Quarter, primarily driven by increased activity related to loaner car related expenses, legal settlements, outside services and professional fees, advertising expenses, employee related costs and freight tools and supplies costs.

In addition, higher than historical average inflation has contributed to the increase in these same store SG&A expense categories.

These increases were partially offset by lower facilities related expenses.

Reported Operating Data — U.S.

(In millions, except unit data)

Nine Months Ended September 30,

2023 2022 Increase/(Decrease) % Change

New vehicle retail sales $ 5,444.3 $ 4,581.8 $ 862.5 18.8 %

Used vehicle retail sales 3,393.5 3,447.6 (54.1) (1.6) %

Used vehicle wholesale sales 242.2 177.6 64.6 36.3 %

Total used 3,635.7 3,625.3 10.4 0.3 %

Parts and service sales 1,459.4 1,307.7 151.7 11.6 %

F&I, net 502.3 498.1 4.2 0.8 %

Total revenues $ 11,041.7 $ 10,012.8 $ 1,028.8 10.3 %

Gross profit:

New vehicle retail sales $ 489.7 $ 538.5 $ (48.8) (9.1) %

Used vehicle retail sales 187.5 203.0 (15.5) (7.6) %

Used vehicle wholesale sales 3.0 3.8 (0.8) (21.2) %

Total used 190.5 206.8 (16.3) (7.9) %

Parts and service sales 787.4 713.1 74.3 10.4 %

F&I, net 502.3 498.1 4.2 0.8 %

Total gross profit $ 1,970.0 $ 1,956.5 $ 13.5 0.7 %

Gross margin:

New vehicle retail sales 9.0 % 11.8 % (2.8) %

Used vehicle retail sales 5.5 % 5.9 % (0.4) %

Used vehicle wholesale sales 1.2 % 2.2 % (0.9) %

Total used 5.2 % 5.7 % (0.5) %

Parts and service sales 54.0 % 54.5 % (0.6) %

Total gross margin 17.8 % 19.5 % (1.7) %

Retail new vehicles sold 104,657 92,870 11,787 12.7 %

Retail used vehicles sold 110,422 110,635 (213) (0.2) %

Wholesale used vehicles sold 23,296 18,513 4,783 25.8 %

Total used 133,718 129,148 4,570 3.5 %

Average sales price per unit sold:

New vehicle retail $ 52,020 $ 49,335 $ 2,685 5.4 %

Used vehicle retail $ 30,732 $ 31,162 $ (430) (1.4) %

Gross profit per unit sold:

New vehicle retail sales $ 4,679 $ 5,799 $ (1,119) (19.3) %

Used vehicle retail sales $ 1,698 $ 1,834 $ (137) (7.4) %

Used vehicle wholesale sales $ 130 $ 207 $ (77) (37.4) %

Total used $ 1,425 $ 1,601 $ (176) (11.0) %

F&I PRU $ 2,335 $ 2,448 $ (112) (4.6) %

SG&A expenses $ 1,209.8 $ 1,133.0 $ 76.8 6.8 %

SG&A as % gross profit 61.4 % 57.9 % 3.5 %

Same Store Operating Data — U.S.

(In millions, except unit data)

Nine Months Ended September 30,

2023 2022 Increase/(Decrease) % Change

New vehicle retail sales $ 5,042.6 $ 4,457.5 $ 585.1 13.1 %

Used vehicle retail sales 3,175.4 3,365.7 (190.3) (5.7) %

Used vehicle wholesale sales 220.9 171.7 49.2 28.7 %

Total used 3,396.3 3,537.4 (141.1) (4.0) %

Parts and service sales 1,401.5 1,276.9 124.6 9.8 %

F&I, net 473.4 485.7 (12.3) (2.5) %

Total revenues $ 10,313.9 $ 9,757.5 $ 556.4 5.7 %

Gross profit:

New vehicle retail sales $ 451.8 $ 524.0 $ (72.2) (13.8) %

Used vehicle retail sales 177.7 198.3 (20.6) (10.4) %

Used vehicle wholesale sales 3.3 3.9 (0.7) (16.6) %

Total used 181.0 202.3 (21.3) (10.5) %

Parts and service sales 752.5 695.1 57.3 8.2 %

F&I, net 473.4 485.7 (12.3) (2.5) %

Total gross profit $ 1,858.7 $ 1,907.1 $ (48.4) (2.5) %

Gross margin:

New vehicle retail sales 9.0 % 11.8 % (2.8) %

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

Used vehicle wholesale sales 1.5 % 2.3 % (0.8) %

Total used 5.3 % 5.7 % (0.4) %

Parts and service sales 53.7 % 54.4 % (0.7) %

Total gross margin 18.0 % 19.5 % (1.5) %

Retail new vehicles sold 97,918 89,841 8,077 9.0 %

Retail used vehicles sold 104,532 107,551 (3,019) (2.8) %

Wholesale used vehicles sold 21,713 17,739 3,974 22.4 %

Total used 126,245 125,290 955 0.8 %

Average sales price per unit sold:

New vehicle retail $ 51,498 $ 49,615 $ 1,883 3.8 %

Used vehicle retail $ 30,378 $ 31,294 $ (916) (2.9) %

Gross profit per unit sold:

New vehicle retail sales $ 4,614 $ 5,832 $ (1,218) (20.9) %

Used vehicle retail sales $ 1,700 $ 1,844 $ (144) (7.8) %

Used vehicle wholesale sales $ 152 $ 223 $ (71) (31.9) %

Total used $ 1,434 $ 1,615 $ (181) (11.2) %

F&I PRU $ 2,338 $ 2,461 $ (122) (5.0) %

SG&A expenses $ 1,159.4 $ 1,136.1 $ 23.3 2.0 %

SG&A as % gross profit 62.4 % 59.6 % 2.8 %

Region — Nine Months Ended September 30, 2023 Compared to 2022

The following discussion of our U.S.

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

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

Total revenues in the U.S.

during the Current Year increased $1.0 billion, or 10.3%, as compared to the same period in 2022 (“Prior Year”), driven by higher same store revenues and the acquisition of stores.

Total same store revenues in the U.S.

during the Current Year increased $556.4 million, or 5.7%, as compared to the Prior Year.

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

New and used vehicle retail revenues benefited from the sale of approximately 36,000 units from our online digital platform, AcceleRide®, during the Current Year, a 77.7% increase as compared to the Prior Year.

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

The shortage of new vehicle inventory, compared to pre-COVID levels, despite recent manufacturers’ production improvements, drove strong pricing.

While new vehicle inventory levels remain depressed compared to pre-COVID levels, certain manufacturer vehicle deliveries were higher in the Current Year and as a result, our inventory levels were higher than the Prior Year, providing for the increase in units sold.

Used vehicle retail same store revenues underperformed the Prior Year, driven by fewer units sold, coupled with lower pricing, 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 coupled with higher wholesale revenues per unit.

Parts and service same store revenues outperformed the Prior Year, 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.

In addition to technician recruitment efforts, we have invested in improving the operations of our U.S.

customer contact center, online scheduling, one-to-one marketing initiatives and by using artificial intelligence, making it easier for our customers to schedule appointments.

F&I, net same store revenues underperformed the Prior Year, primarily driven by lower penetration rates as a result of customers seeking alternative providers of financing in this higher interest rate environment and tighter lending requirements requiring larger down payments.

In addition, service contract penetration has also declined as a result of vehicle affordability challenges for consumers with the higher interest rates.

Total gross profit in the U.S.

during the Current Year increased $13.5 million, or 0.7%, as compared to the Prior Year, primarily driven by the acquisition of stores, partially offset by lower same store results.

Total same store gross profit in the U.S.

during the Current Year decreased $48.4 million, or 2.5%, as compared to the Prior Year, 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, 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 of new vehicles for certain manufacturers as described 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 lower same store used vehicle retail units sold.

These decreases were 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.

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, 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, as described above for parts and service same store revenues.

F&I, net same store gross profit underperformed the Prior Year, 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.

decreased 82 basis points, primarily driven by underperformance in new vehicle retail and used vehicle wholesale margins, for the reasons described above for same store gross profit per unit sold for new vehicle retail and used vehicle wholesale.

This underperformance was partially offset by a slight improvement in parts and service margins for the reasons described above, used vehicle retail margins, largely due to lower used vehicle acquisition costs, and improved F&I performance.

SG&A Expenses

SG&A as a percentage of gross profit increased 350 basis points and 280 basis points on an as reported and same store basis, respectively, compared to the Prior Year.

SG&A as a percentage of gross profit decreased 115 basis points and increased 412 basis points on an as reported and same store basis, respectively, compared to the Prior Year Quarter.

Total SG&A expenses in the U.S.

during the Current Year increased $76.8 million, or 6.8%, as compared to the Prior Year, primarily driven by the acquisition of stores and higher same store SG&A expenses.

during the Current Quarter increased $6.2 million, or 1.6%, as compared to the Prior Year Quarter, primarily driven by higher same store SG&A expenses, partially offset by lower SG&A expenses from store dispositions.

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

during the Current Year increased $23.3 million, or 2.0%, as compared to the Prior Year, primarily driven by increased activity related to outside services and professional fees, loaner car related expenses, advertising expenses, freight tools and supplies costs and legal settlements compared to the Prior Year.

In addition, higher than historical average inflation has contributed to the increase in these same store SG&A expense categories.

These increases were partially offset by lower employee related costs.

during the Current Quarter, increased $24.1 million, or 6.5%, as compared to the Prior Year Quarter, primarily driven by increased activity related to employee-related costs, outside services and professional fees, loaner car and related expenses and advertising expenses.

Reported Operating Data — U.K.

(In millions, except unit data)

Three Months Ended September 30,

Three Months Ended March 31,

2024 2023 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,

2024 2023 Increase/ (Decrease) % Change Currency Impact on Current Period Results Constant Currency % Change

37 unchanged sentences

NM — Not Meaningful

Region — Three Months Ended September 30, 2023 Compared to 2022

Region — Three Months Ended March 31, 2024 Compared to 2023

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.

The GBP to USD foreign currency exchange rate has fluctuated from £1 to $1.11 at September 30, 2022, to £1 to $1.22 at September 30, 2023, or an increase in the value of the GBP of 9.6%.

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

Retail new vehicle units sold 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 as only the sales commission is reported within revenues.

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

The GBP to USD foreign currency exchange rate has fluctuated from £1 to $1.24 at March 31, 2023, to £1 to $1.26 at March 31, 2024, or an increase in the value of the GBP of 2.1 %.

Total revenues in the U.K.

during the Current Quarter increased $126.4 million, or 18.6%, as compared to the Prior Year Quarter, driven by higher same store results and the acquisition of stores.

Total same store revenues in the U.K.

during the Current Quarter increased $116.2 million, or 17.2%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store revenues increased 8.8%, driven by outperformances across all of our business lines.

during the Current Quarter increased $37.1 million, or 4.7%, as compared to the Prior Year Quarter, primarily driven by foreign currency exchange rates and outperformances in new vehicle retail sales and parts and service, partially offset by lower used vehicle sales.

On a constant currency basis, revenues increased 0.3%, primarily driven by an outperformance in new vehicle retail sales.

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

The shortage of new vehicle inventory, compared to pre-COVID levels, 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.

In addition, d espite the increase in same store new vehicle units sold, we experienced vehicle delivery shortages from BMW, MINI and Volkswagen in the Current Quarter, limiting our revenue potential for the Current Quarter.

The shortage of new vehicle inventory, compared to pre-COVID-19 pandemic levels, despite recent manufacturers’ production improvements, drove strong pricing.

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

We ended the Current Quarter with a U.K.

new vehicle inventory supply of 22 days, two days higher than the Prior Year Quarter , but below pre-COVID levels .

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

Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, driven by i ncreases in customer pay, warranty and wholesale revenues, reflecting increased business activity and increased same store technician headcount, providing greater capacity to meet increased demand.

new vehicle inventory supply of 20 days, one day higher than the Prior Year Quarter , but below pre-COVID-19 pandemic levels .

Used vehicle retail same store revenues, on a constant currency basis, underperformed the Prior Year Quarter, primarily driven by lower used vehicle retail pricing on a constant currency basis, partially offset by more units sold.

Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year Quarter, driven by i ncreases in customer pay, warranty and wholesale revenues reflecting increased business activity.

W e have invested in improvements to our U.K.

customer contact center, streamlining operations to make scheduling appointments easier for customers, resulting in an increase in parts and service activity driving an increase in revenues 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 an increase in retail units sold, partially offset by a decrease in income per contract for retail finance fees.

F&I same store revenues, on a constant currency basis, modestly underperformed the Prior Year Quarter, primarily driven by decreases in income per contract for retail finance fees and service contracts, partially offset by an increase in retail units sold.

Total gross profit in the U.K.

during the Current Quarter increased $10.2 million, or 10.9%, as compared to the Prior Year Quarter, driven by higher same store results and the acquisition of stores .

during the Current Quarter decreased $6.9 million, or 6.2%, as compared to the Prior Year Quarter.

Total same store gross profit in the U.K.

during the Current Quarter increased $8.7 million, or 9.5%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store gross profit increased 1.4% driven by improvements in new vehicle retail, parts and service sales and F&I, net gross profit, partially offset by the decline in total used vehicle gross profit.

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, partially offset by a decrease in new vehicle retail gross profit per unit sold, on a constant currency basis.

Used vehicle retail same store gross profit, on a constant currency basis, underperformed the Prior Year Quarter, driven by 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 in gross profit per unit sold was driven by increases in used vehicle acquisition costs, outpacing the increase in used vehicle retail average sales price per unit sold as a result of continued inflationary pressures.

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.

during the Current Quarter decreased $6.9 million, or 6.3%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store gross profit decreased 10.3%, driven by downward pressures on margins for all lines of business.

New vehicle retail same store gross profit, on a constant currency basis, underperformed the Prior Year, primarily due to decrease in new vehicle retail gross profit per unit sold, partially offset by an increase in new vehicle retail units sold, as a result of the increase in vehicle inventory production as described above generating downward pressure on new vehicle margins.

Parts and service same store gross profit, on a constant currency basis, slightly underperformed compared to the Prior Year Quarter.

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

Total same store gross margin in the U.K.

decreased 90 basis points, primarily driven by lower same store total used gross margin caused by inflationary impacts on our used vehicle customers and higher used vehicle acquisition prices.

decreased 147 basis points, driven by margin declines for all lines of business caused by inflationary impacts.

SG&A Expenses

SG&A as a percentage of gross profit increased by 681 basis points on both an as reported and same store basis compared to the Prior Year Quarter.

SG&A as a percentage of gross profit increased by 1,130 and 1,127 basis points on an as reported and same store basis, respectively, compared to the Prior Year.

Total SG&A expenses in the U.K.

during the Current Quarter increased $14.1 million, or 21.7%, 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 Quarter increased $7.1 million, or 9.6%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store SG&A expenses increased 11.6%.

These increases were primarily driven by increased employee-related expenses and facilities-related expenses as a result of higher activity and continued inflationary pressures compared to the Prior Year Quarter.

The lack of vehicle deliveries from certain manufacturers discussed above, resulted in higher than anticipated SG&A as a percentage of gross profit given our staffing levels assumed the sale of these vehicles.

Reported Operating Data — U.K.

(In millions, except unit data)

Nine Months Ended September 30,

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

New vehicle retail sales $ 1,019.1 $ 898.0 $ 121.2 13.5 % $ (6.6) 14.2 %

Used vehicle retail sales 965.6 906.3 59.2 6.5 % (11.4) 7.8 %

Used vehicle wholesale sales 96.9 101.2 (4.3) (4.2) % (1.3) (3.0) %

Total used 1,062.5 1,007.5 55.0 5.5 % (12.7) 6.7 %

Parts and service sales 217.9 183.4 34.5 18.8 % (1.9) 19.9 %

F&I, net 52.5 51.4 1.0 2.0 % (0.5) 3.0 %

Total revenues $ 2,352.0 $ 2,140.3 $ 211.7 9.9 % $ (22.0) 10.9 %

Gross profit:

New vehicle retail sales $ 92.8 $ 79.6 $ 13.1 16.5 % $ (0.2) 16.8 %

Used vehicle retail sales 49.4 50.4 (1.0) (2.1) % (0.7) (0.6) %

Used vehicle wholesale sales (2.5) (1.8) (0.7) (40.6) % — (40.9) %

Total used 46.9 48.7 (1.8) (3.6) % (0.7) (2.2) %

Parts and service sales 127.5 109.5 18.0 16.5 % (1.1) 17.5 %

F&I, net 52.5 51.4 1.0 2.0 % (0.5) 3.0 %

Total gross profit $ 319.7 $ 289.2 $ 30.4 10.5 % $ (2.7) 11.4 %

Gross margin:

New vehicle retail sales 9.1 % 8.9 % 0.2 %

Used vehicle retail sales 5.1 % 5.6 % (0.4) %

Used vehicle wholesale sales (2.6) % (1.7) % (0.8) %

Total used 4.4 % 4.8 % (0.4) %

Parts and service sales 58.5 % 59.7 % (1.2) %

Total gross margin 13.6 % 13.5 % 0.1 %

Retail new vehicles sold 25,082 21,922 3,160 14.4 %

Retail used vehicles sold 32,578 30,505 2,073 6.8 %

Wholesale used vehicles sold 9,311 9,556 (245) (2.6) %

Total used 41,889 40,061 1,828 4.6 %

Average sales price per unit sold:

New vehicle retail $ 42,149 $ 40,962 $ 1,187 2.9 % $ (272) 3.6 %

Used vehicle retail $ 29,639 $ 29,711 $ (73) (0.2) % $ (351) 0.9 %

Gross profit per unit sold:

New vehicle retail sales $ 3,699 $ 3,633 $ 66 1.8 % $ (10) 2.1 %

Used vehicle retail sales $ 1,516 $ 1,653 $ (137) (8.3) % $ (22) (7.0) %

Used vehicle wholesale sales $ (267) $ (185) $ (82) (44.3) % $ 1 (44.6) %

Total used $ 1,120 $ 1,215 $ (95) (7.8) % $ (17) (6.4) %

F&I PRU $ 910 $ 981 $ (71) (7.2) % $ (8) (6.4) %

SG&A expenses $ 229.6 $ 196.6 $ 33.0 16.8 % $ (1.8) 17.7 %

SG&A as % gross profit 71.8 % 68.0 % 3.9 %

Same Store Operating Data — U.K.

(In millions, except unit data)

Nine Months Ended September 30,

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

New vehicle retail sales $ 1,000.0 $ 895.9 $ 104.1 11.6 % $ (6.5) 12.3 %

Used vehicle retail sales 941.9 901.4 40.5 4.5 % (11.1) 5.7 %

Used vehicle wholesale sales 94.9 100.7 (5.9) (5.8) % (1.2) (4.6) %

Total used 1,036.7 1,002.1 34.6 3.5 % (12.4) 4.7 %

Parts and service sales 201.8 174.9 26.9 15.4 % (1.8) 16.4 %

F&I, net 51.4 51.1 0.3 0.6 % (0.5) 1.5 %

Total revenues $ 2,290.0 $ 2,124.0 $ 166.0 7.8 % $ (21.4) 8.8 %

Gross profit:

New vehicle retail sales $ 90.8 $ 79.5 $ 11.3 14.2 % $ (0.2) 14.5 %

Used vehicle retail sales 47.6 50.1 (2.5) (5.0) % (0.7) (3.6) %

Used vehicle wholesale sales (2.5) (1.7) (0.8) (45.7) % — (45.9) %

Total used 45.0 48.3 (3.3) (6.8) % (0.7) (5.4) %

Parts and service sales 120.3 105.4 14.9 14.2 % (1.1) 15.2 %

F&I, net 51.4 51.1 0.3 0.6 % (0.5) 1.5 %

Total gross profit $ 307.5 $ 284.3 $ 23.2 8.2 % $ (2.5) 9.1 %

Gross margin:

New vehicle retail sales 9.1 % 8.9 % 0.2 %

Used vehicle retail sales 5.1 % 5.6 % (0.5) %

Used vehicle wholesale sales (2.7) % (1.7) % (0.9) %

Total used 4.3 % 4.8 % (0.5) %

Parts and service sales 59.6 % 60.2 % (0.6) %

Total gross margin 13.4 % 13.4 % — %

Retail new vehicles sold 24,654 21,836 2,818 12.9 %

Retail used vehicles sold 31,716 30,246 1,470 4.9 %

Wholesale used vehicles sold 9,150 9,471 (321) (3.4) %

Total used 40,866 39,717 1,149 2.9 %

Average sales price per unit sold:

New vehicle retail $ 42,103 $ 41,027 $ 1,076 2.6 % $ (272) 3.3 %

Used vehicle retail $ 29,697 $ 29,802 $ (105) (0.4) % $ (351) 0.8 %

Gross profit per unit sold:

New vehicle retail sales $ 3,683 $ 3,640 $ 43 1.2 % $ (10) 1.4 %

Used vehicle retail sales $ 1,500 $ 1,656 $ (156) (9.4) % $ (22) (8.1) %

Used vehicle wholesale sales $ (277) $ (184) $ (93) (50.9) % $ — (51.0) %

Total used $ 1,102 $ 1,217 $ (115) (9.5) % $ (17) (8.1) %

F&I PRU $ 912 $ 981 $ (70) (7.1) % $ (8) (6.2) %

SG&A expenses $ 221.0 $ 194.8 $ 26.1 13.4 % $ (1.9) 14.4 %

SG&A as % gross profit 71.9 % 68.5 % 3.3 %

Region — Nine Months Ended September 30, 2023 Compared to 2022

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.

The GBP to USD foreign currency exchange rate has fluctuated from £1 to $1.11 at September 30, 2022, to £1 to $1.22 at September 30, 2023, or an increase in the value of the GBP of 9.6%.

Although the exchange rate has shown recent improvement, rate fluctuations during the period still negatively impact our U.K.

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

Total revenues in the U.K.

during the Current Year increased $211.7 million, or 9.9%, as compared to the Prior Year, driven by higher same store results and 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 increased $166.0 million, or 7.8%, as compared to the Prior Year.

On a constant currency basis, total same store revenues increased 8.8%, primarily driven by outperformances across all same store revenue streams except used vehicle wholesale sales.

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

The shortage of new vehicle inventory, compared to pre-COVID levels, despite recent manufacturer production improvements, continued to drive strong pricing.

Vehicle demand was and continues to be pent-up from 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, primarily driven by an increase in units sold, coupled with higher used vehicle retail pricing, on a constant currency basis.

Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year, driven by increases across all business lines, reflecting increased business activity and increased same store technician headcount .

W e have invested in improvements to our U.K.

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

Total gross profit in the U.K.

during the Current Year increased $30.4 million, or 10.5%, as compared to the Prior Year, primarily driven by higher same store results and the acquisition of stores, 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 $23.2 million, or 8.2%, as compared to the Prior Year.

On a constant currency basis, total same store gross profit increased 9.1%, driven by improvements in new vehicle retail sales, parts and service sales and F&I, net, partially offset by downward pressures on total used vehicle margin.

New vehicle retail same store gross profit, on a constant currency basis, outperformed the Prior Year, driven by 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, driven by 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 driven by increases in used vehicle acquisition costs outpacing the increase in used vehicle retail average sales price per unit sold as a result of continued inflationary pressures.

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

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.

Total same store gross margin in the U.K.

was flat period over period driven by improvements in new vehicle retail gross margin due to higher prices from increased customer demand and vehicle supply constraints, described above.

SG&A Expenses

SG&A as a percentage of gross profit increased 386 and 332 basis points on an as reported and same store basis, respectively, compared to the Prior Year.

Total SG&A expenses in the U.K.

during the Current Year increased $33.0 million, or 16.8%, as compared to the Prior Year, primarily driven by increases in same store SG&A and the acquisition of stores.

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

during the Current Year increased $26.1 million, or 13.4%, as compared to the Prior Year.

during the Current Quarter increased $6.9 million, or 9.4%, as compared to the Prior Year Quarter.

On a constant currency basis, total same store SG&A expenses increased 4.8%.

The lack of vehicle deliveries from certain manufacturers as discussed above, resulted in higher than anticipated SG&A as a percentage of gross profit given our staffing levels assumed the sale of these vehicles in the Current Quarter.

Consolidated Selected Comparisons — Three and Nine Months Ended September 30, 2023 Compared to 2022

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,

2023 2022 Increase/ (Decrease) % Change

Depreciation and amortization expense $ 23.1 $ 21.8 $ 1.3 6.2 %

Floorplan interest expense $ 16.5 $ 6.5 $ 10.0 153.1 %

Other interest expense, net $ 26.5 $ 19.6 $ 6.9 35.3 %

Provision for income taxes $ 56.4 $ 60.2 $ (3.8) (6.2) %

Nine Months Ended September 30,

These increases were primarily driven by increased employee-related expenses as a result of higher activity and legal fees associated with the pending acquisition of Inchcape plc, coupled with increased demonstration and loaner car expenses compared to the Prior Year Quarter.

Consolidated Selected Comparisons — Three Months Ended March 31, 2024 Compared to 2023

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,

2024 2023 Increase/ (Decrease) % Change

4 unchanged sentences

Depreciation and Amortization Expense

Depreciation and amortization expense for the Current Quarter and Current Year was higher compared to the Prior Year Quarter and Prior Year, 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.

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

Floorplan Interest Expense

3 unchanged sentences

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 $10.0 million, or 153.1%, as compared to the Prior Year Qua rter.

For the Current Year, floorplan interest expense increased $27.1 million, or 153.1%, as compared to the Prior Year.

The increase in floorplan interest expense during the Current Quarter and Current Year was driven primarily by an increase in inventories due to improvements in manufacturer inventory as well as acquisitions, partially offset by realized gains on our interest rate swap portfolio due to increases in corresponding interest rates.

Total floorplan interest expense during the Current Quarter, increased $7.9 million, or 62.6%, as compared to the Prior Year Qua rter, driven primarily by an increase in inventories added to our floorplan due to improvements in manufacturer production as well as acquisitions, partially offset by realized gains on our interest rate swap portfolio due to increases in corresponding interest rates.

Refer to Note 6.

1 unchanged sentence

Other Interest Expense, Net

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

Other interest expense, net consists of interest charges primarily on our $750.0 million 4.00% Senior Notes due August 2028 (“4.00% Senior Notes”), real estate related debt and other debt, partially offset by interest income.

Other interest expense, net during the Current Quarter, increased $9.6 million, or 48.9%, as compared to the Prior Year Quarter.

For the Current Year, other interest expense, net, increased $16.6 million, or 29.9%, 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 borrowings used to acquire property in our U.S.

The increase in the Current Year was partially offset by the gain on the de-designation of the mortgage interest rate swap of $4.0 million.

The increase in other interest expense, net during the Current Quarter was primarily attributable to increased borrowings on the Acquisition Line, additional real estate related debt in our U.S.

region, a decrease in the gain recognized on the de-designation of mortgage interest rate swaps of approximately $3.8 million, and higher interest on existing borrowings.

Refer to Note 8.

4 unchanged sentences

Provision for income taxes of $45.8 million during the Current Quarter decreased by $1.7 million, or 3.7%, as compared to the Prior Year Quarter.

For the Current Year, our provision for income taxes of $161.6 million decreased by $20.6 million, or 11.3%, as compared to the Prior Year.

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

Our Current Quarter effective tax rate of 25.6% was higher than our Prior Year Quarter effective tax rate of 23.4%.

The tax rate increase was primarily due to taxable gains from asset dispositions and the higher U.K.

statutory tax rate in the Current Quarter compared to the Prior Year Quarter.

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 23.7% was higher than the Prior Year Quarter’s effective tax rate of 23.1%.

The tax rate increase was primarily due to taxable gains from asset dispositions 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.

6 unchanged sentences

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

September 30, 2023

March 31, 2024

Cash and cash equivalents $ 41.9

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

Nine Months Ended September 30,

Three Months Ended March 31,

2024 2023 % Change

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CASH FLOWS FROM FINANCING ACTIVITIES:

Net cash used in financing activities:

Net cash provided by (used in) financing activities:

$ 349.4 $ (67.0) 621.3 %

Change in Floorplan notes payable, excluding floorplan offset 55.3 (54.2)

Adjusted net cash used in financing activities $ (224.7) $ (399.1) 43.7 %

Sources and Uses of Liquidity from Operating Activities — Nine Months Ended September 30, 2023 Compared to 2022

For the Current Year, net cash provided by operating activities decreased by $140.9 million, as compared to the Prior Year.

Adjusted net cash provided by (used in) financing activities $ 404.7 $ (121.2) 433.8 %

Sources and Uses of Liquidity from Operating Activities — Three Months Ended March 31, 2024 Compared to 2023

For the Current Quarter, net cash provided by operating activities increased by $110.5 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 $19.9 million.

The decrease on an adjusted basis was primarily driven by a $157.8 million increase in inventory levels and a $101.7 million decrease in net income, partially offset by a $99.4 million increase in floorplan notes payable — manufacturer affiliates.

Sources and Uses of Liquidity from Investing Activities — Nine Months Ended September 30, 2023 Compared to 2022

For the Current Year, net cash used in investing activities increased by $20.0 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash used in investing activities increased by $2.9 million, due to a $59.4 million decrease in sales proceeds due to the sale of the Brazil Disposal Group in the Prior Year, which did not reoccur in the Current Year, a $44.1 million increase in purchases of property and equipment, including real estate and a $18.9 million decrease in proceeds from disposition of franchises and property and equipment.

These increases to adjusted net cash used in investing activities were partially offset by a $117.8 million decrease in acquisition activity compared to the Prior Year.

The decrease on an adjusted basis was primarily driven by a $126.8 million decrease in floorplan notes payable — manufacturer affiliates, partially offset by a $97.8 million decrease in inventory levels.

Sources and Uses of Liquidity from Investing Activities — Three Months Ended March 31, 2024 Compared to 2023

For the Current Quarter, net cash used in investing activities increased by $513.7 million, as compared to the Prior Year Quarter.

On an adjusted basis for the same period, adjusted net cash used in investing activities increased by $492.9 million, primarily due to a $571.9 million increase in acquisition activity and a $27.4 million increase in purchases of property and equipment, including real estate, partially offset by a $95.8 million increase 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.

For the Current Year , $137.4 million was used to purchase property and equipment.

Sources and Uses of Liquidity from Financing Activities — Nine Months Ended September 30, 2023 Compared to 2022

For the Current Year, net cash used in financing activities decreased by $156.7 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash used in financing activities decreased by $174.4 million.

The decrease in net cash used in financing activities on an adjusted basis was primarily driven by decreases in share repurchases of $229.0 million compared to the Prior Year, net repayments on the Acquisition Line of $147.2 million and debt issuance costs of $4.3 million, partially offset by decreases in net borrowings on our U.S.

Floorplan line of $110.4 million (representing the net cash activity in our floorplan offset account) and decreases in net borrowings of other debt of $96.3 million.

For the Current Quarter , $63.2 million was used to purchase property and equipment.

Sources and Uses of Liquidity from Financing Activities — Three Months Ended March 31, 2024 Compared to 2023

For the Current Quarter, net cash provided by financing activities increased by $416.4 million, as compared to the Prior Year Quarter.

On an adjusted basis for the same period, adjusted net cash provided by financing activities increased by $525.9 million.

The increase in net cash provided by financing activities on an adjusted basis was primarily driven by a $275.2 million increase in net borrowings on the Acquisition Line, a $234.1 million increase in net borrowings of other debt, including real estate-related debt and increases in net borrowings on our U.S.

Floorplan line of $34.1 million (representing the net cash activity in our floorplan offset account).

These increases were partially offset by a $19.0 million increase in cash paid for share repurchases.

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, 2023 (in millions):

The following table summarizes the commitment of our credit facilities as of March 31, 2024 (in millions):

Commitment Outstanding Available

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300.0 106.8 193.2

GM Financial Facility (4)

348.1 168.4 179.7

credit facilities (5)

$ 2,648.1 $ 1,854.0 $ 794.1

(1) The available balance at September 30, 2023, includ es $191.7 million of immediately available funds.

(1) The available balance at March 31, 2024, includ es $180.4 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, 2023, includes $19.0 million of immediately available funds.

(3) The available balance at March 31, 2024, includes no immediately available funds.

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

(4) The remaining available balance as of March 31, 2024, can be used for General Motors new and rental vehicle inventory financing.

(5) The outstanding balance excludes $334.8 million of borrowings with manufacturer-affiliates and third-party financial institutions for foreign and rental vehicle financing not associated with any of our U.S.

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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, 2023, we were in compliance with the requirements of the financial covenants under our debt agreements.

As of March 31, 2024, 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, 2023

As of March 31, 2024

Required Actual

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Fixed charge coverage ratio > 1.20 4.32

Based on our position as of September 30, 2023, and our outlook as discussed within Item 2.

Based on our position as of March 31, 2024, 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 9.

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, 2023.

Share Repurchases and Dividends

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On August 2, 2023, our Board of Directors increased the share repurchase authorization to $250.0 million.

For the Current Year, 568,614 s hares were repurchased at an average price o f $229.57 per share, for a total of $130.5 million, excluding excise taxes o f $1.1 million .

As of September 30, 2023, we had $184.9 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 $6.1 million paid to common shareholders and $0.2 million to unvested RSA holders.

For the Current Quarter, 203,350 s hares were repurchased at an average price o f $264.41 per share, for a total of $53.8 million, excluding excise taxes o f $0.4 million .

As of March 31, 2024, we had $89.6 million available under our current stock repurchase authorization.

During the Current Quarter, our Board of Directors approved a quarterly cash dividend of $0.47 per share on all shares of our common stock, which resulted in $6.2 million paid to common shareholders and $0.1 million to unvested restricted stock award 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, changes in laws and regulations, current economic environment and other factors considered relevant.

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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