What changed in this filing

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Item 1A. Risk Factors

2025-02-14 compared with 2024-02-14 · 149 added, 94 removed, 171 unchanged (59% of the section changed)

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Availability and demand for and pricing of our products and services may be adversely impacted by economic conditions, financial developments including rising inflation, high energy prices, increasing interest rates, a potential recessionary environment and other factors.

The automotive retail industry, and especially new vehicle unit sales, is influenced by general economic conditions, particularly consumer confidence, the level of personal discretionary spending, interest rates, exchange rates, fuel prices, technology and business model changes, supply conditions, consumer transportation preferences, unemployment rates and credit availability.

The automotive retail industry, and especially vehicle unit sales, is influenced by general economic conditions, particularly consumer confidence, the level of personal discretionary spending, interest rates, exchange rates, fuel prices, technology and business model changes, supply conditions, consumer transportation preferences, unemployment rates and credit availability.

Consumer spending can be materially and adversely impacted by periods of economic uncertainty or by consumer concern about manufacturer viability.

During the Current Year, the global economy experienced elevated inflation and increased volatility in gasoline and energy prices.

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

Federal Reserve, along with other central banks, including in the U.K., maintained interest rates at heightened levels throughout 2023, which could lower demand for new and used vehicles in future periods.

In Europe, rising energy costs as a result of supply disruptions and increased winter demand for heating could place additional strain on our suppliers’ ability to maintain current production levels of vehicles and vehicle parts.

Across the EU, these energy constraints could result in nations or region s enacting emergency energy related policies, limiting energy availability for manufacturers.

Any such production constraints could further exacerbate an already ailing supply chain.

Increased tariffs may increase inflation, which would likely result in interest rates not decreasing as fast as expected and consumer demand declining as a result of increased costs of vehicle ownership.

The global economy experienced elevated levels of inflation beginning in 2022.

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

Federal Reserve (“the Federal Reserve”), along with other central banks, including in the U.K., maintained interest rates at elevated levels throughout 2023.

In 2024, inflation began to return to historical norms.

As a result, during the Current Year, the Federal Reserve and the Bank of England lowered their interest rates by 100 and 50 basis points, respectively, in an effort to stimulate economic activity and reduce unemployment.

The impact of the lowering of interest rates on the levels of inflation and unemployment in the U.S., U.K.

and Europe is uncertain.

In Europe, rising energy costs as a result of supply disruptions and increased winter demand for heating could place strain on our suppliers’ ability to maintain current production levels of vehicles and vehicle parts.

Across the European Union, these energy constraints could result in nations or region s enacting emergency energy related policies, limiting energy availability for manufacturers.

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

Sustained inflation, increased energy costs and a prolonged recession could adversely impact our operations, the operations of our suppliers and customer demand for our vehicles and services.

Continued interest rate increases or the maintenance of interest rates at current levels could have a material adverse impact on our interest expense and ability to obtain financing through the debt markets, as well as consumers’ ability to obtain financing for the purchase of new and used vehicles.

On January 29, 2025, the Federal Reserve held rates unchanged.

On February 6, 2025, the Bank of England lowered interest rates by 25 basis points.

Additionally, President Donald Trump issued a series of executive orders since taking office in January 2025, including executive orders regarding tariffs.

Refer to Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders.

Inflation, increased energy costs and a prolonged recession could adversely impact our operations, the operations of our suppliers and customer demand for our vehicles and services.

The risk of slower future interest rate cuts or the maintenance of interest rates at current elevated levels could have a material adverse impact on our interest expense and ability to obtain financing through the debt markets, as well as consumers’ ability to obtain financing for the purchase of new and used vehicles.

Refer to Item 7A.

Quantitative and Qualitative Disclosures About Market Risk for additional analysis regarding our interest rate sensitivity.

Increased demand for personal electronics, coupled with the impact of the COVID-19 pandemic on manufacturers, created a shortfall of semiconductor chips.

This adversely impacted production of new vehicles, parts and other supplies in 2022 and much of 2023, thereby reducing new vehicle inventories, increasing new vehicle prices and limiting the availability of replacement parts.

Under these conditions, automotive dealer profits have increased sharply as new vehicle prices and margins have more than offset the effects of lower new vehicle volume.

While semi-conductor chip and other parts shortages were substantially resolved by the end of 2023 and vehicle production has increased, inventory levels remain below pre-COVID-19 pandemic levels for certain OEMs.

If vehicle inventory is restored to pre-COVID-19 pandemic levels, new vehicle prices could decrease thereby resulting in reduced profitability at our dealerships.

A significant portion of our vehicles purchased by customers are financed.

Tightening of the credit markets, increases in interest rates and credit conditions have and may continue to decrease the availability or increase the costs of automotive loans and leases and adversely impact our new and used vehicle sales and margins.

In particular, if sub-prime finance companies apply further higher credit standards or if there is a further decline in the overall availability of credit in the sub-prime lending market, the ability of selected consumers to purchase vehicles could be even more limited, which could have a material adverse effect on our business and results of operations.

In particular, if sub-prime finance companies apply further higher credit standards or if there is a further decline in the overall availability of credit in the sub-prime lending market, the ability of some consumers to purchase vehicles and F&I products could be even more limited, which could have a material adverse effect on our business and results of operations.

In addition, local economic, competitive and other conditions affect the performance of our dealerships.

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where we maintain our operations.

EV inventory has been building in 2023 for certain brands, outpacing the buildup of non-EV inventory, as EV sales volume has lagged OEM deliveries in recent quarters.

While EV sales continued to increase in 2023, the growth trend has not continued at the pace experienced in the two years prior.

Challenges with EV technologies continue to make headlines within the U.S.

While EV sales continued to increase in the U.S.

in 2024, challenges with EV technologies, including the development of the necessary charging infrastructure, continue to make headlines within the U.S.

media market, raising concerns around consumer demand and interest in the products.

Should EV demand decline at the same time as more OEMs transition to EV models, this could have a material adverse effect on our business and results of operations.

Recent negative developments affecting the financial services industry, such as insolvency, defaults, or non-performance by financial institutions, could adversely affect our access to capital, liquidity, financial condition and results of operations.

During the Current Year, closures of Silicon Valley Bank, Signature Bank and First Republic Bank and their placement into receivership with the FDIC created bank-specific and broader financial institution liquidity risk concerns.

The FDIC, the U.S.

Federal Reserve and the U.S.

Department of the Treasury jointly announced that depositors at Silicon Valley Bank, Signature Bank and First Republic Bank would have access to their funds, even those in excess of the standard FDIC insurance limits.

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, we maintain cash and floorplan offset balances at banks and third-party financial institutions in excess of FDIC insurance limits.

If any of our lenders or counterparties to any of our financial instruments were to be placed into receivership or become insolvent, our ability to access our capital and liquidity and process transactions could be impaired and could have a material adverse effect on our business, operations and financial condition.

In addition, if any of our suppliers, customers or other parties with whom we conduct business are unable to access funds or lending arrangements with relevant financial institutions, such parties’ ability to pay their obligations to us or to enter into new arrangements with us could be adversely affected.

In the event of any future closure of other banks or financial institutions, there is no guarantee that the FDIC, the U.S.

Federal Reserve and the U.S.

Department of the Treasury will provide access, on a timely basis or at all, to uninsured funds.

We cannot predict the effects of future disruptions in the financial services industry on our financial condition and operations, nor that of our suppliers, vendors or customers.

Should EV demand decline at the same time as more OEMs transiti on to EV models, this could have a material adverse effect on our business and results of operations.

In addition, President Donald Trump issued a series of executive orders since taking office in January 2025, including an executive order eliminating the EV mandate.

Refer to Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders.

government has established mandated targets for the sale of new zero emissions vehicles with increasing targets in future years.

The overall U.K.

market fell short of those mandated targets in 2024, with consumer preferences skewed towards traditional internal combustion engine vehicles.

The government targets established for 2025 are higher than those previously required in 2024, and are expected to further challenge new vehicle sales in 2025 and beyond.

These EV mandates could impact our vehicle manufacturers’ production mix and volumes, which in turn may impact our new vehicle sales and results of operations.

Deterioration in market conditions or changes in our credit profile could adversely affect our operations and financial condition.

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Quantitative and Qualitative Disclosures About Market Risk for additional analysis regarding our interest rate sensitivity.

We may fail to meet analyst and investor expectations, which could cause the price of our stock to decline.

Our common stock is traded publicly, and various securities analysts follow our financial results and frequently issue reports on the Company which include information about our historical financial results as well as their estimates of our future performance.

These estimates are based on their own opinions and are often different from management’s estimates or expectations of our business.

If our operating results are below the estimates or expectations of public market analysts and the expectations of our investors, our stock price could decline, adversely affecting, among other things, our access to capital and investor confidence in management and those charged with governance.

We are subject to risks associated with our dependence on manufacturer business relationships and agreements.

The success of our dealerships is dependent on vehicle manufacturers whom we rely exclusively on for our new vehicle inventory.

The success of our business is dependent on vehicle manufacturers on whom we rely exclusively on for our new vehicle inventory.

Our ability to sell new vehicles is dependent on a vehicle manufacturer’s ability to produce and allocate to our dealerships an attractive, high quality and desirable product mix at the right time in order to satisfy customer demand.

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These investments could cause financial strain on our OEMs or fail to deliver attractive vehicles for customers which could lead to adverse impacts on our business.

The OEMs have been and could continue to be impacted by disruptions to the economy, lower than anticipated EV adoption, delays in increasing factory production, labor negotiations, parts shortages, including semiconductor chips, and other disruptions.

The OEMs have been and could continue to be impacted by disruptions to the economy, lower than anticipated EV adoption, higher supply chain costs than emerging EV manufacturer competitors, delays in increasing factory production, labor negotiations, parts shortages, including semiconductor chips, and other disruptions.

In the Current Year, a number of OEMs have announced write-offs of certain of their EV investments or scaled down electrification plans as EV demand slows, further contributing to the uncertainty of the EV market outlook and the long-term viability and profitability of OEM’s.

These and other risks could materially adversely affect the financial condition of any manufacturer and impact its ability to profitably design, market, produce or distribute new vehicles, which in turn could have a material adverse effect on our business, results of operations and financial condition.

During the Current Year, the majority of our manufacturers’ production continued at reduced levels as a result of global semiconductor and other parts shortages.

Despite recent improvements in production by certain manufacturers driving an improvement in vehicles days’ supply, our new vehicle inventory continues to be impacted compared to historical levels.

During the Current Year, the majority of our manufacturers’ production increased, driving an improvement in vehicles days’ supply.

Our new vehicle days’ supply of inventory was approximately 44 days as of December 31, 2024, as compared to 37 days and 24 days for the years ended December 31, 2023 and 2022, respectively.

It is impossible to predict with certainty the duration of the production issues or when normalized production will resume at these manufacturers.

It is impossible to predict with certainty when normalized production will resume at these manufacturers.

If our manufacturers’ production remains at current reduced levels or in some cases continues to decline, diminishing our ability to meet the immediate needs of our customers, the production shortage could have a material adverse impact on our financial and operating results.

Additionally, many U.S.

manufacturers of vehicles, parts and supplies are dependent on imported products and raw materials in their production.

Any significant increase in existing tariffs on such goods and raw materials, or implementation of new tariffs, could adversely affect our profits on the vehicles we sell.

Additionally, President Donald Trump issued a series of executive orders since taking office in January 2025, including executive orders regarding tariffs.

Refer to Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders.

Many manufacturers of vehicles, parts and supplies are dependent on imported products and raw materials in their production.

Any significant increase in existing tariffs on such goods and raw materials, or implementation of new tariffs, could increase production costs for OEM’s that would then be passed on to consumers, potentially leading to higher vehicle prices and reduced demand, which in turn could adversely affect our profits on the vehicles we sell.

Additionally, the tariffs and other market developments could potentially cause our current OEM’s to lose market share to emerging EV-only OEM’s.

Market share losses could not only impair our sales and profits but lead to potential impairments.

If we are unable to enter into new franchise agreements with manufacturers in connection with dealership acquisitions or maintain or renew our existing franchise agreements on favorable terms, our operations may be significantly impaired.

We are dependent on our relationships with manufacturers, which exercise a great degree of influence over our operations through the franchise agreements.

Our franchise agreements may be terminated or not renewed by the manufacturer for a variety of reasons, including any unapproved changes of ownership or management, sales and customer satisfaction performance deficiencies and other material breaches of the franchise agreements.

Manufacturers may also have a right of first refusal if we seek to sell dealerships.

Additionally, we cannot guarantee that the terms of any renewals will be as favorable to us as our current agreements.

Although we are generally protected by automotive dealership franchise laws requiring “good cause” be shown for such termination, if such an instance occurs, we cannot guarantee that the termination of the franchise will not be successful.

We are dependent on our relationships with manufacturers, which exercise a great degree of influence over our operations through the franchise and similar agreements.

These agreements may be terminated or not renewed by the manufacturer for a variety of reasons, including network consolidation plans, any unapproved changes of ownership or management, sales and customer satisfaction performance deficiencies and other material breaches of the franchise agreements.

For example, in the U.K., the Volkswagen Group has disclosed a five-year plan to reduce the number of partners in its dealer network.

That plan may require us to dispose of, or close, up to thirteen of our Volkswagen and up to three Audi dealerships.

Correspondingly, the plan may require us to purchase dealerships adjacent to our territories.

In the U.S., manufacturers may also have a right of first refusal if we seek to sell dealerships.

We also cannot guarantee that the terms of any renewals will be as favorable to us as our current agreements.

Although we are generally protected in the U.S.

by automotive dealership franchise laws requiring “good cause” be shown for such termination, if such an instance occurs, we cannot guarantee that the termination of the franchise will not be successful.

A manufacturer may also limit the number of its dealerships that we may own overall or in a particular geographic area.

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Business — Competition for further discussion of competition in our industry.

Regulatory requirements to reduce emissions in response to climate change, as well as changes in consumer demand towards fuel-efficient vehicles, and shifts in product offerings by manufacturers to meet such demand, could adversely affect our new and used vehicle sales volumes, parts and service revenues and our results of operations.

Volatile fuel prices have affected and may continue to affect consumer preferences in connection with the purchase of our vehicles.

Rising fuel prices result in consumers being less likely to purchase larger, more expensive vehicles, such as sports utility vehicles or luxury automobiles, and more likely to purchase smaller, less expensive and more fuel-efficient vehicles.

Conversely, lower fuel prices could have the opposite effect.

Sudden changes in customer preferences make maintenance of an optimal mix of large and small vehicle inventory a challenge.

Further increases or sharp declines in fuel prices could have a material adverse effect on our business and results of operations.

Changes in fuel prices, changes in customer preferences, government support, improvements in EVs and more EV options have increased the customer demand for more fuel-efficient vehicles and EVs.

Significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that have or may be imposed on vehicles and automobile fuels could adversely affect demand for certain vehicles, annual miles driven or the products we sell.

For example, on April 12, 2023, the 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.

Representatives of the U.K.

government have proposed a ban on the sale of gasoline engines in new cars and new vans that would take effect as early as 2035.

These and similar proposals 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.

With a potential increase in demand by consumers for EVs, and government support for such actions, certain manufacturers have also announced plans to increase production of fuel-efficient vehicles and EVs.

As more EVs potentially enter the market, and internal combustion or diesel engine vehicle production is reduced, it will be necessary to adapt to such changes by selling and servicing these units effectively in order to meet consumer demands and support the profitability of our dealerships.

We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to EV and other technologies that minimize emissions.

If maintenance costs of EVs were to substantially decrease, this could have a material adverse effect on our parts and service revenues.

If consumer demand increases for fuel efficient vehicles or EVs and our manufacturers are not able to adapt and produce vehicles that meet the customer demands or we are unable to align with the manufacturers of these vehicles, such events could adversely affect our new and used vehicle sales volumes, parts and service revenues and our results of operations.

Additionally, in October 2023, the Governor of California signed the Climate Corporate Data Accountability Act (“CCDAA”) and Climate-Related Financial Risk Act (“CRFRA”) into law.

The CCDAA requires both public and private U.S.

companies that are “doing business in California” and that have a total annual revenue of $1 billion to publicly disclose and verify, on an annual basis, Scope 1, 2 and 3 GHG emissions.

The CRFRA requires the disclosure of a climate-related financial risk report (in line with the Task Force on the Climate-related Financial Disclosures (“TCFD”) recommendations or equivalent disclosure requirements under the International Sustainability Standards Board’s (“ISSB”) climate-relate disclosure standards) every other year for public and private companies that are “doing business in California” and have total annual revenue of $500 million.

Reporting under both laws would begin in 2026.

Currently, the ultimate impact of these laws on our business is uncertain—the Governor of California has directed further consideration of the implementation deadlines for each of the laws, and there is potential for legal challenges to be filed with respect to the scope of the law—but, absent clarification or revisions to the law, alongside the SEC proposed rule, finalization and implementation may result in additional costs to comply with these disclosure requirements as well as increased costs of and restrictions on access to capital for us or our customers.

Separately, these and other enhanced climate related disclosure requirements could lead to reputational or other harm with customers, regulators, investors or other stakeholders and could also increase our litigation risks relating to alleged climate-related damages resulting from our operations, statements alleged to have been made by us or others in our industry regarding climate change risks, or in connection with any future disclosures we may make regarding reported emissions.

If we are unable to acquire and successfully integrate new dealerships into our business, the growth of our revenues and earnings could be adversely affected.

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As competition for acquisitions increases that may result in fewer acquisition opportunities available to us and/or higher acquisition prices, and some of our competitors may have greater financial resources than us.

In addition, acquisitions involve a number of special risks, including, among other things:

In addition, acquisitions involve a number of particular risks, including, among other things:

• incurring significantly higher capital expenditures and operating expenses;

• failing to obtain manufacturers’ consents to acquisitions of additional franchises;

• failing to integrate the operations and personnel of the acquired dealerships;

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• failing to retain key personnel of the acquired dealerships;

• failing to implement or improve controls and policies and information systems;

• impairing relationships with employees, manufacturers and customers;

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Our management devotes a substantial amount of time and attention to the process of integrating the operations of acquired dealerships into our business.

If any of these factors limits our ability to integrate acquired dealerships into our operations successfully or on a timely basis, our expectations regarding future results of operations, including certain run-rate revenue and expense synergies expected to result from acquisitions, might not be met.

Additionally, the Company doubled its footprint in the U.K.

during the Current Year through its acquisition of Inchcape Retail.

Failure to effectively integrate the Inchcape Acquisition into the legacy U.K.

operations could negatively impact our operating results in the U.K.

If any of these factors limit our ability to successfully integrate acquired dealerships into our operations or on a timely basis, our expectations regarding future results of operations, including certain run-rate revenue and expense synergies expected to result from acquisitions, might not be met.

As a result, we may not be able to realize the expected benefits that we seek to achieve from the acquisitions.

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Vehicle manufacturers may alter their distribution models.

On January 1, 2023, Mercedes Benz transitioned to an agency model for distribution of vehicles in the U.K.

In 2023, Mercedes Benz transitioned to an agency model for distribution of vehicles in the U.K.

after collaborating with various automotive retailers and conducting pilot programs.

In addition to the transition by Mercedes Benz in the U.K., certain of our other vehicle manufacturers serving the U.K.

markets recently announced plans to explore an agency model for selling new vehicles.

These announcements include, among others, a transition to agency model in the U.K.

for Mini and Jaguar Land Rover in 2025 and BMW in 2026.

markets have announced plans to explore an agency model for selling new vehicles.

Under an agency model, our franchised dealerships receive a fee for facilitating the sale of a new vehicle to a customer but no longer record the vehicle sales price as revenue, record vehicles in inventory or incur floorplan interest expense, as has been historical practice.

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Notwithstanding this fact, we cannot predict the actions of other manufacturers and whether the agency models proposed by them will have the same terms and conditions as those contracted by Mercedes Benz.

The agency model, if adopted by other manufacturers, would reduce revenues.

The agency model, if adopted by other manufacturers, would reduce revenues with only the facilitation fee recorded as revenue.

The other impacts to our U.K.

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Operational Risks

A cybersecurity breach, including loss of confidential information or a breach of personally identifiable information (“PII”) about our customers or employees, could negatively affect operations and result in high costs.

We rely on third-party vendors and suppliers for key components of our business.

Many components of our business, including data management, key operational processes and critical customer systems, are provided by or licensed from various third-party vendors and suppliers.

In addition, we also rely on third-party vendors to supply key products and services to us and our customers.

One or more of these third-party vendors or suppliers may experience financial distress, technology challenges, cybersecurity incidents, staffing shortages or liquidity challenges, file for bankruptcy protection, go out of business, or suffer other disruptions in their business, each of which could affect their ability to serve us and our customers.

For example, in June 2024, CDK Global LLC (“CDK”) experienced a cybersecurity event, which resulted in service outages on CDK’s dealers’ systems including our CDK DMS.

If any of our vendors or suppliers fail to deliver their products or services for any reason, our business and results of operations and financial condition could be adversely impacted.

A failure of any of our information systems or those of our third-party service providers or a cybersecurity incident, including loss or unauthorized access of confidential information or PII about our customers or employees, could negatively affect our business, operations and financial condition.

We depend on the efficient operation of our information systems and those of our third-party service providers and rely on information systems at our dealerships in all aspects of our sales and service efforts, as well as in the preparation of our consolidated financial and operating data.

All of our dealerships currently operate on two DMSs, one DMS for the U.S.

and one DMS for the U.K.

Additionally, in the ordinary course of business, we receive significant PII about our customers and our employees.

PII is primarily collected at our dealerships and through our AcceleRide® platform via an online DMS.

A cybersecurity attack to obtain such information could be caused by malicious insiders and third parties using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, malware, fraud, trickery, or other forms of deception.

Although companies across all industries are affected by malicious efforts to obtain access to PII, the automotive dealership industry has been a particular target of identity thieves.

The techniques used by cyber attackers change frequently and may be difficult to detect.

We have implemented security measures that are designed to detect and protect against cyberattacks, as well as policies governing the deletion of PII, to limit the information exposed to a potential cyberattack.

Despite these measures and any additional measures we may implement or adopt in the future, our facilities and systems, and those of our third-party service providers, have been and are vulnerable to security breaches, computer viruses, malware, lost or misplaced data, programming errors, scams, ransomware, burglary, human errors, acts of vandalism, misdirected wire transfers or other events.

If an unauthorized party is successful in obtaining trade secrets, PII, confidential, or otherwise protected information of our dealerships, our customers or our employees or in disrupting our operations through a cyberattack, the attack could result in loss of revenue, increase the costs of doing business, harm our competitiveness, reputation or customer or vendor relationships, satisfaction or loyalty.

In addition, security breaches and other security incidents could expose us to a risk of loss or exposure of this information, which could result in potential liability, investigations, regulatory fines, penalties for violation of applicable laws or regulations, costs related to remediation or the payment of ransom, and litigation including individual claims or consumer class actions, administrative, civil or criminal investigations or actions, any of which could have a material adverse effect on our business, results of operations or financial condition.

Likewise, our business could be significantly disrupted if (i) the DMS fails to integrate with other third-party information systems, customer relations management tools or other software, or to the extent that any of these systems become unavailable to us or fail to perform as designed for an extended period of time or (ii) our relationship with our DMS providers or any other third-party provider deteriorates.

Despite ongoing efforts to improve our ability to protect data from compromise, we may not be able to protect all of our data across our diverse systems and third-party vendors.

For example, during the quarter ended June 30, 2024, we were informed of a cybersecurity incident experienced by CDK, which resulted in service outages on CDK’s dealers’ systems (the “CDK Incident”).

CDK provides clients in the automotive industry, including our dealerships in the U.S., with a software as a service platform (“SaaS platform”) used by dealerships in managing customer relationships, sales, financing, service, inventory and back-office operations.

In response to the CDK Incident, we immediately activated our cyber incident response procedures and proactively took measures to protect and isolate our systems from CDK’s platform.

All of our U.S.

dealerships continued to conduct business using alternative processes until CDK’s dealers’ systems were fully back online.

We also do not believe that the CDK Incident resulted in a breach of any PII about our customers or employees.

Our dealerships in the U.K.

do not use CDK’s dealers’ systems and were therefore not impacted by the CDK service outage.

As a consequence, we do not expect the CDK Incident to have a material impact on our overall financial condition or on its ongoing results of operations.

However, if we, or any of our third-party services providers were to experience a material cybersecurity event, our business and results of operations and financial condition could be materially and adversely impacted.

A cybersecurity breach, including loss of confidential information or a breach of PII about our customers or employees, could negatively affect operations and result in high costs.

In the ordinary course of business, we receive significant PII about our customers and our employees.

A security incident to obtain such information could be caused by malicious insiders and third parties using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery, or other forms of deception.

Although many companies across many industries are affected by malicious efforts to obtain access to PII, the automotive dealership industry has been a particular target of identity thieves.

The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time.

We have implemented security measures that are designed to detect and protect against cyberattacks.

Despite these measures and any additional measures we may implement or adopt in the future, our facilities and systems, and those of our third-party service providers, have been and are vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, scams, ransomware, burglary, human errors, acts of vandalism, misdirected wire transfers or other events.

If an unauthorized party is successful in obtaining trade secrets, PII, confidential, or otherwise protected information of our dealerships or our customers or in disrupting our operations through a cyberattack, the attack could result in loss of revenue, increase costs of doing business, negatively affect customer satisfaction and loyalty, and expose us to negative publicity.

In addition, security breaches and other security incidents could expose us to a risk of loss or exposure of this information, which could result in potential liability, investigations, regulatory fines, penalties for violation of applicable laws or regulations, costs related to remediation or the payment of ransom, and litigation including individual claims or consumer class actions, administrative, and civil or criminal investigations or actions, any of which could have a material adverse effect on our business, results of operations or financial condition.

If an unauthorized party is successful in obtaining trade secrets, PII, confidential, or otherwise protected information of our dealerships, our customers or our employees or in disrupting our operations through a cyberattack, the attack could result in loss of revenue, increase costs of doing business, negatively affect customer satisfaction and loyalty, and expose us to negative publicity.

Further, advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security or other developments may result in a compromise or breach of the technology we use to safeguard confidential, personal, or otherwise protected information.

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• fluctuations in foreign currency translations within our financial statements driven by exchange rate volatility;

• infrastructure readiness for the U.K.’s transition to EVs.

We may fail to meet analyst and investor expectations, which could cause the price of our stock to decline.

These estimates are based on their own opinions and are often different from management’s estimates or expectations of our business.

Legal, Regulatory and Compliance Risks

Volatile fuel prices have affected and may continue to affect consumer preferences in connection with the purchase of our vehicles.

Conversely, lower fuel prices could have the opposite effect.

Sudden changes in customer preferences make maintenance of an optimal mix of large and small vehicle inventory a challenge.

Further increases or sharp declines in fuel prices could have a material adverse effect on our business and results of operations.

Changes in fuel prices, changes in customer preferences, government support, improvements in EVs and more EV options have increased the customer demand for more fuel-efficient vehicles and EVs.

For example, on March 20, 2024, the EPA finalized new emissions standards 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.

Representatives of the U.K.

government have proposed a ban on the sale of gasoline engines in new cars and new vans that would take effect as early as 2035.

These and similar proposals 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.

With a potential increase in demand by consumers for EVs, and the former Biden administration’s support for such actions, certain manufacturers announced plans to increase production of fuel-efficient vehicles and EVs.

We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to EV and other technologies that minimize emissions.

If maintenance costs of EVs were to substantially decrease, this could have a material adverse effect on our parts and service revenues.

In addition, President Donald Trump issued a series of executive orders since taking office in January 2025, including an executive order eliminating the EV mandate.

Refer to Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders.

Additionally, in October 2023, the Governor of California signed the Climate Corporate Data Accountability Act (“CCDAA”) and Climate-Related Financial Risk Act (“CRFRA”) into law.

The CCDAA requires both public and private U.S.

companies that are “doing business in California” and that have a total annual revenue of $1 billion to publicly disclose and verify, on an annual basis, Scope 1, 2 and 3 GHG emissions.

In September 2024, the Governor of California signed into law the Climate Corporate Accountability:

Climate-Related Financial Risk Act, which amends certain climate disclosure requirements in CCDAA.

The CRFRA requires the disclosure of a climate-related financial risk report (in line with the Task Force on the Climate-related Financial Disclosures recommendations or equivalent disclosure requirements under the International Sustainability Standards Board’s climate-relate disclosure standards) every other year for public and private companies that are “doing business in California” and have total annual revenue of $500 million.

Reporting under both laws would begin in 2026.

Currently, we are assessing the impact of these laws on our business and there are legal challenges to be filed with respect to the scope of the law.

However, absent clarification or revisions to the law, finalization and implementation may result in additional costs to comply with these disclosure requirements, as well as increased costs of and restrictions on access to capital for us or our customers.

Further, the SEC released its final rule on climate-related disclosures on March 6, 2024, requiring the disclosure of certain climate-related risks and financial impacts, as well as GHG emissions.

Under the rule, large accelerated filers would be required to incorporate the applicable climate-related disclosures into their filings beginning in fiscal year 2025, with additional requirements relating to the disclosure of Scope 1 and 2 GHG emissions, if material, and attestation reports for certain large accelerated filers subsequently phasing in.

However, the future of the SEC climate rule is uncertain at this time given that its implementation has been stayed pending the outcome of legal challenges;

moreover, it is uncertain whether the Commission may seek to change or revoke the rule though we cannot predict whether such action will occur or its timing.

In addition, the Trump Administration may take action with respect to these climate-related disclosures, the outcome of which we cannot predict with certainty.

As a result, the ultimate impact of the SEC rule, or any similar climate-related disclosure requirements imposed in the future, on our business is uncertain and may result in increased compliance costs and increased costs of and restrictions on access to capital.

Changes to laws and regulations could adversely impact our operations and financial condition.

New laws and regulations at the state and federal level may be enacted which could materially adversely impact our business.

For example, in December 2023, the FTC adopted new regulations for automotive dealers that would prohibit a wide range of current industry-accepted sales practices with regard to sales and advertising of our vehicles and products, require an extensive series of both oral and written disclosures to be made at the initial contact in regard to the sale price of vehicles, financial terms and voluntary protection products, mandate the posting of certain pricing and other information on dealer websites, and impose burdensome recordkeeping requirements (the “CARS Rule”).

While litigation has stayed the implementation of the CARS Rule, if implemented our failure to adhere to these new policies could subject the Company to significant monetary and other penalties or require us to make adjustments to our products and services, any or all of which could result in lost revenues, increased expenses and substantial adverse publicity.

These changes, if adopted as proposed, may lead to additional transaction times for the sale of vehicles, complicate the transaction process, decrease customer satisfaction, and impose recordkeeping burdens on our employees, among other effects.

While the proposed rule has been vacated, if similar regulations were implemented, our failure to adhere to new policies could subject the Company to significant monetary and other penalties or require us to make adjustments to our products and services, any or all of which could result in lost revenues, increased expenses and substantial adverse publicity.

These changes, if adopted as proposed, may lead to longer transaction times for the sale of vehicles, complicate the transaction process, decrease customer satisfaction, and impose recordkeeping burdens on our employees, among other effects.

If these regulations were to be enacted, it could have an adverse effect on our business and profitability.

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

From time to time, various regulatory agencies conduct reviews of business practices that impact our industry, like the Financial Conduct Authority’s ongoing industry investigation into customer complaints related to financing transactions, which was extended on January 11, 2024.

Any failure to comply with these laws and regulations may result in the assessment of administrative, civil or criminal penalties, the imposition of investigatory remedial obligations or the issuance of injunctions limiting or prohibiting our operations.

Any failure to comply with these laws and regulations may result in administrative, civil or criminal penalties, the imposition of investigatory remedial obligations or the limitations on certain aspects of our operations.

Refer to Item 1.

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Our business activities in the U.S.

are subject to stringent federal, regional, state and local laws, regulations and other controls governing specific health and safety criteria to address worker protection, the release of materials into the environment or otherwise relating to environmental protection.

are subject to stringent federal, state and local laws, regulations and other controls governing specific health and safety criteria to address worker protection, the release of materials into the environment or otherwise relating to environmental protection.

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

Our compliance with these regulations may expose us to significant costs and liabilities.

With a potential increase in demand by consumers for EVs, and government support for such actions, we will incur costs and liabilities to sell and service EVs, including, but not limited to, personal protective equipment for employees, capital expenditures for specialized tools and equipment, service shop space and battery storage costs.

With a potential increase in demand by consumers for EVs, we will incur costs and liabilities to sell and service EVs, including, but not limited to, personal protective equipment for employees, capital expenditures for specialized tools and equipment, service shop space and battery storage costs.

In addition, President Donald Trump issued a series of executive orders since taking office in January 2025, including executive orders eliminating the EV mandate and impacting environmental regulations.

Refer to Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders.

Additionally, vehicle manufacturers in the U.S.

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No goodwill impairments were recorded during the years ended December 31, 2024 , 2023 and 2022 .

During the years ended December 31, 2023 and 2022, we recognized $25.1 million and $1.3 million, respectively, of intangible franchise rights impairment.

We did not recognize any intangible franchise rights impairment during the year ended December 31, 2021.

During the years ended December 31, 2024, 2023 and 2022, we recognized $28.2 million , $25.1 million and $1.3 million , respectively, of intangible franchise rights impairment.

We may be required to record impairment charges if market and industry conditions deteriorate to such a level whereby the fair value of our reporting units, individually, is less than the carrying value of the corresponding reporting unit.

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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-K

Item 1A. Risk Factors