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Item 7. Management’s Discussion and Analysis

2026-02-13 compared with 2025-02-14 · 188 added, 151 removed, 460 unchanged (42% of the section changed)

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Our operating results reflect the combined performance of each of our interrelated business activities.

Historically, various facets of our business have been directly or indirectly impacted by a variety of supply/demand factors, including vehicle inventories, consumer confidence, consumer transportation preferences, discretionary spending levels, availability and affordability of consumer credit, new vehicle introductions and innovations, manufacturer incentives, weather patterns, fuel prices, inflation and interest rates.

Historically, various facets of our business have been directly or indirectly impacted by a variety of supply/demand factors, including vehicle inventories, government trade policies, consumer confidence, consumer transportation preferences, discretionary spending levels, availability and affordability of consumer credit, new vehicle introductions and innovations, manufacturer incentives, weather patterns, fuel prices, inflation and interest rates.

For example, during periods of sustained economic downturn or significant supply/demand imbalances, new vehicle sales may be negatively impacted as consumers tend to shift their purchases to used vehicles.

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Recent Events

On February 1, 2025, President Donald Trump signed executive orders imposing a 25% tariff on most imports from Mexico and Canada and a 10% tariff on most imports from China.

The tariffs were effective February 4, 2025, however that same day a 30-day pause was granted to Mexico and Canada.

While the potential implications of these imposed tariffs remain uncertain for the auto industry, there may be a significant impact on the price of our products as well as the future mix and demand for vehicles provided by our manufacturers.

We will continue to monitor the impact of the Trump administration’s policies on our manufacturers and dealership operations.

Since taking office on January 20, 2025, President Donald Trump has signed a series of executive orders.

Through these executive orders, the Trump administration, among other initiatives, directed the U.S.

to formally withdraw from the Paris Agreement, eliminate the EV mandate, put forth a federal energy policy to support traditional energy exploration and production, declared a national energy emergency to expedite energy and infrastructure projects, issued a regulatory freeze on all executive departments and agencies to review pending and existing laws and regulations and froze the hiring of federal civilian employees in the executive branch.

The executive orders also rescinded certain previous executive orders of the former Biden administration.

The impact of the Trump administration’s executive orders on our results of operations cannot be predicted with certainty.

On August 1, 2024, we completed the acquisition of Inchcape Retail automotive operations in the U.K.

The Inchcape Acquisition, comprised of 54 dealership locations, certain real estate and three collision centers, substantially increased our portfolio acro ss the U.K.

Refer to Note 3.

Acquisitions within our Notes to Consolidated Financial Statements for additional discussion of our acquisition of Inchcape Retail.

On June 19, 2024, we were informed of a cybersecurity incident experienced by CDK, which resulted in service outages on CDK’s dealers’ systems.

CDK provides clients in the automotive industry, including Group 1 dealerships in the U.S., with a SaaS platform used by dealerships in managing customer relationships, sales, financing, service, inventory and back-office operations.

The CDK Incident temporarily disrupted our business applications and processes in our U.S.

operations that rely on CDK’s dealers’ systems.

Despite the CDK Incident, all Group 1 U.S.

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

On June 26, 2024, CDK restored service to us for the core DMS, at which time, subject to certain modified procedures, we resumed processing transactions through the CDK DMS.

The overall impact of the CDK Incident did not have a material impact on our overall financial condition or on our ongoing results of operations.

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 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.

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.

Although the Federal Reserve and Bank of England decreased interest rates and inflationary pressures moderated during 2024, existing elevated prices as a result of previous rates of inflation above historical levels continue to reduce the disposable income of our customers.

In addition, volatility in new vehicle availability and higher interest rates over historical average rates have increased the monthly cost o f financing vehicles as compared to prior periods.

These factors have contributed to a continued decline in used vehicle prices during the Current Year as compared to the year ended December 31, 2023 (“Prior Year”).

Recent Accounting Pronouncements

Refer to Note 1.

Basis of Presentation, Consolidation and Summary of Accounting Policies within our Notes to Consolidated Financial Statements.

Critical Accounting Policies and Accounting Estimates

Changes in trade policy, tariffs and other governmental actions during the Current Year introduced additional uncertainty for the automotive industry.

On November 4, 2025, President Donald Trump issued an executive order directing federal agencies to modify the U.S.

tariff schedules for designated Chinese-origin goods under an existing bilateral arrangement.

While we do not directly import vehicles or parts from China, tariff changes may affect OEM pricing for vehicles, components, and accessories sourced from Chinese suppliers.

We are monitoring subsequent agency actions to evaluate any impact on vehicle and parts costs.

Effective November 1, 2025, a proclamation under Section 232 imposed 25% tariffs on imported medium- and heavy-duty trucks and parts.

It also granted a 3.75% production credit through 2030 for vehicles and engines assembled in the U.S.

The measure is expected to affect vehicle costs, sourcing, and production decisions across the automotive industry, particularly for companies involved in the distribution and sale of medium- and heavy-duty vehicles.

Separately, effective retroactive to August 7, 2025, an order implementing the U.S.–Japan Agreement generally set a 15% duty on automobiles and auto parts from Japan, adjusted for existing tariff rates, replacing higher additional duties previously applied to these products.

Effective June 23, 2025, the U.S.–U.K.

Economic Prosperity Deal established an annual quota allowing 100,000 U.K.-made vehicles to enter the U.S.

at a total 10% tariff, with imports above the quota subject to 25%.

It also set a 10% total tariff on U.K.-origin parts for use in U.K.-made vehicles imported into the U.S.

On March 26, 2025, a separate Section 232 action imposed a 25% tariff on imported automobiles and certain parts.

Subsequent U.S.

Department of Commerce procedures provided partial relief for United States-Mexico-Canada Agreement-qualifying vehicles and allowed manufacturers with U.S.

assembly operations to apply for offsets on parts tariffs.

Although a federal appeals court in August 2025 limited certain emergency tariff authorities, the Section 232 automobile tariffs remained in effect.

Collectively, the effects of these executive orders, proclamations and related actions on our results of operations cannot be predicted at this time.

On December 10, 2025, the Federal Reserve lowered interest rates by 25 basis points in an effort to stimulate the labor market and economic activity, following earlier reductions in September and October.

On December 18, 2025, the Bank of England lowered interest rates by 25 basis points, following earlier reductions in February, May, and August 2025.

These interest rate cuts may improve vehicle affordability for consumers, however, the impact on our results of operations cannot be predicted with certainty at this time.

On October 10, 2025 and November 20, 2025, additional fires occurred at a major U.S.

aluminum production facility, following an initial fire in September 2025.

These incidents caused significant damage to the facility, and as a result, the timing of the plant’s return to full production capacity is uncertain.

The facility supplies several OEMs, including Ford, Toyota and Jeep, and the disruption is anticipated to affect the production of certain aluminum-intensive vehicle models.

Certain OEMs have indicated they are working with alternative aluminum suppliers to mitigate the impact of the fire.

In response to these supply constraints, Ford temporarily suspended production of certain SUV models, and additional impacts to truck production may occur if aluminum shortages persist.

While the ultimate impact on our new vehicle supply remains uncertain, these disruptions could result in reduced vehicle availability, which may adversely affect our results of operations.

On September 2, 2025, Jaguar Land Rover (“JLR”) disclosed that it had experienced a significant cybersecurity incident that resulted in the temporary shutdown of certain production facilities and information technology systems.

This disruption has led to delays in new vehicle deliveries, reduced availability of certain models and interruptions in certain parts supply.

JLR accounted for approximately 3.6% of our total consolidated revenues during the Current Year.

We cannot predict with certainty the expected total impact of the incident on our results of operations at this time and will continue to monitor developments closely.

In the U.K., the FCA is reviewing the historic use of discretionary commission arrangements in motor finance.

On August 1, 2025, the Supreme Court of the United Kingdom issued its judgment in the Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd cases.

The Supreme Court of the United Kingdom ruled that dealers do not generally owe fiduciary duties but confirmed that, in some cases, commission arrangements that were not properly disclosed to customers could be treated as creating an unfair relationship under the Consumer Credit Act.

On August 3, 2025, the FCA announced it will consult in October 2025 on a possible industry-wide redress scheme for affected consumers.

If adopted, the scheme could be finalized such that compensation payments may begin in 2026.

The FCA also confirmed that firms will not be required to issue final responses to related customer complaints until after December 4, 2025.

The outcomes of the FCA’s review, any redress scheme and related proceedings remain uncertain.

On July 4, 2025, H.R.

1, the OBBBA, was signed into law.

For the automotive industry, the bill provides consumers with a tax deduction for the interest on loans for certain U.S.-assembled vehicles.

The bill also eliminates federal EV tax credits for vehicles purchased or leased after September 30, 2025.

Additionally, the OBBBA reinstates 100% bonus depreciation for qualified property placed in service after January 19, 2025.

This provision allows for immediate expensing for income tax purposes of the full cost of eligible tangible assets, including certain machinery, equipment and building improvements.

The impact of the OBBBA on our results of operations cannot be predicted with certainty at this time.

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

On April 6, 2025, the U.K.

Prime Minister announced planned changes to the EV mandate, which aim to allow carmakers more flexibility in reaching their goal to phase out internal combustion engine vehicles.

The plan increases flexibility of the mandate through 2030, allowing more EVs to be sold in later years as demand increases.

Further, the plan allows for the continued sale of hybrid vehicles, which can be operated by both internal combustion and batteries, through 2035 to help ease the transition.

As of July 16, 2025, U.K.

car manufacturers can apply for Electric Car Grants, which will discount eligible new EVs for consumers at the point of sale.

Certain manufacturers urged the U.K.

government to provide additional flexibility in the mandate, citing consumer demand, infrastructure limitations and the cost of compliance as potential barriers to meet future targets.

Further, as of December 2025, U.K.

political leaders have issued proposals to rescind the ban on gasoline and diesel-powered vehicles.

Additionally, on June 12, 2025, President Donald Trump signed resolutions revoking California’s authority to enforce certain regulations it previously set forth, including Advanced Clean Cars II, which imposes stricter emissions limits for vehicles than the federal standards and requires nearly all new car sales to be zero-emission by 2035.

California and ten other states set to implement Advanced Clean Cars II-like rules sued the EPA and President Donald Trump and are seeking to enjoin the resolutions.

The legal challenges remain ongoing.

The impact of these changes on our vehicle mix and results of operations cannot be predicted with certainty at this time.

Further, on August 1, 2025, the EPA issued a proposed rule to rescind the “Endangerment Finding,” which underpins the majority of the EPA’s GHG regulations, and all GHG emission standards for light-duty, medium-duty, and heavy-duty vehicles and engines.

We cannot predict whether such efforts will ultimately be successful.

While the possibility exists for delays, reductions, or exemptions of the automotive and reciprocal tariffs, the potential impacts of the tariffs described above, as well as the reaction of the OEMs to such tariffs, remain uncertain and could significantly increase the price of our products as well as the future mix and demand for vehicles provided by our manufacturers.

Additionally, reciprocal tariffs, tariffs on steel, aluminum, copper and other materials, and the elevated tariffs against China and other countries could negatively impact the global economy, demand for our products and our manufacturers’ global supply chains.

Our manufacturers’ supply chain dependencies and production facility locations vary by OEM, and as a result, certain manufacturers, vehicle models, vehicle model variations and parts could be affected more significantly by the imposition of tariffs than others.

We will continue to monitor the impact of the Trump Administration’s policies and the response of U.S.

trading partners on our results of operations in future periods.

Critical Accounting Estimates

The preparation of our financial statements in conformity with U.S.

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Goodwill and Intangible Franchise Rights

We are organized into two geographic regions, the U.S.

region and the U.K.

Each region represents a reporting unit for the purpose of assessing goodwill for impairment.

We are organized into two geographic segments, the U.S.

segment and the U.K.

Each segment represents a reporting unit for the purpose of assessing goodwill for impairment.

In addition to goodwill, we have identifiable intangibles in the form of rights under our franchise agreements with manufacturers, which are recorded at an individual dealership level.

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If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required.

In 2024, we elected to perform a quantitative test on the U.K.

During the Current Year, we recorded a goodwill impairment charge of $93.0 million based on a triggering event during the three months ended September 30, 2025 primarily related to the challenging U.K.

economy, impacting our financial performance.

For our October 31, 2025 annual goodwill impairment test, we elected to perform a quantitative test on the U.K.

reporting unit and a qualitative test on the U.S.

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Based on the tests performed for the U.S.

reporting units in the fourth quarter of 2024, no im pairments of goodwill were recorded during the Current Year.

reporting units in the fourth quarter of 2025, no further impairments of goodwill were recorded during the Current Year.

No goodwill impairments were recorded on any reporting units during the Prior Year.

T he quantitative goodwill impairment test is dependent on management estimates and assumptions used to determine the fair value of our reporting units.

While no impairment was recognized in 2024 based on our quantitative assessment of the U.K.

reporting unit, future sustained negative operating results, as well as the deterioration of the macroeconomic environment in the U.K., could result in impairment of the goodwill attributable to the U.K.

reporting unit in future periods.

Refer to Note 12.

Intangible Franchise Rights and Goodwill within our Notes to Consolidated Financial Statements for further discussion of goodwill, including management’s use of estimates and assumptions.

During the Current Year, impairment charges of $28.2 million were recorded for intangible franchise rights.

During the Current Year, non-cash impairment charges of $91.1 million were recorded for intangible franchise rights.

In the Prior Year, impairment charges of $28.2 million were recorded for intangible franchise rights.

As our intangible franchise rights are tested for impairment at the dealership level, any impairments are specific to the performance and outlook of the respective dealership.

We will continue to monitor the challenging macroeconomic and industry conditions in the U.K.

Further erosion in the macroeconomic environment, additional margin compression, or increases to our operating costs in the U.K.

may require us to re-assess the value of our goodwill and intangible franchise rights associated with our U.K.

reporting unit, which could result in additional material impairment charges in future periods.

Refer to Note 12.

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

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.

Retail new and used vehicle units sold include new and used 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 and used vehicles due to their net presentation within revenues as only the sales commission is reported in revenues for dealerships operating under an agency arrangement.

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

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Used vehicle retail sales 311.1 321.4 (10.3) (3.2) % 2.1 (3.9) %

Used vehicle wholesale sales (3.3) (3.6) 0.3 7.8 % (0.1) 10.8 %

Used vehicle wholesale sales 1.7 (2.9) 4.6 NM (0.3) NM

Total used 312.8 318.5 (5.7) (1.8) % 1.8 (2.4) %

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Used vehicle retail sales $ 1,489 $ 1,580 $ (91) (5.8) % $ 10 (6.4) %

Used vehicle wholesale sales $ (74) $ (86) $ 12 14.4 % $ (2) 17.3 %

Used vehicle wholesale sales $ 30 $ (58) $ 88 NM $ (5) NM

Total used $ 1,180 $ 1,255 $ (75) (6.0) % $ 7 (6.5) %

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SG&A as % gross profit 69.7 % 68.1 % 1.5 %

NM — Not Meaningful

Reported Operating Data — U.S.

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SG&A as % gross profit 66.7 % 64.9 % 1.8 %

Region — Year Ended December 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.

Segment — Year Ended December 31, 2025 compared to 2024

Total revenues in the U.S.

during the Current Year increased $958.7 million, or 6.5%, as compared to the same period in the Prior Year, driven by the acquisition of stores and higher same store revenues.

during the Current Year increased $853.9 million, or 5.4%, as compared to the same period in the 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 $319.8 million, or 2.2%, as compared to the Prior Year.

This increase was driven by higher revenues across all business lines except used vehicle retail sales.

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

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.

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

during the Current Year increased $714.9 million, or 4.6%, as compared to the Prior Year, driven by higher revenues across all business lines.

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

This outperformance reflects the resiliency of demand.

We ended the Current Year with a U.S.

new vehicle inventory supply of 43 days, 7 days higher than the Prior Year.

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

Used vehicle supply improved as a result of higher new vehicle supply.

However, lingering impacts from above-historical average inflation over the past two years reducing the disposable income of our customers and higher interest rates compared to historical averages increasing the monthly cost of financing vehicles, continued to create downward pressure on pricing.

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

This outperformance reflects increased business activity for warranty and customer pay services, supported by 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, primarily driven by higher same store new and used vehicle units sold, coupled with higher same store F&I gross profit per unit sold.

Penetration rates for vehicle service contracts, new vehicle finance and other F&I products improved, contributing to the higher same store F&I gross profit per unit sold.

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

new vehicle inventory supply of 44 days, one day higher than the Prior Year.

Used vehicle retail same store revenues outperformed the Prior Year, driven by higher pricing, coupled with more units sold.

This outperformance reflects the resiliency of demand and supply dynamics of the used vehicle market caused by Prior Year’s vehicle inventory shortages.

We ended the Current Year with a U.S.

used vehicle inventory supply of 29 days, consistent with the Prior Year.

Used vehicle wholesale same store revenues outperformed the Prior Year, driven by more units sold, coupled with higher pricing.

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

Customer pay repair order count and dollars per repair order increased compared to the Prior Year.

We are strategically reducing our collision footprint and repurposing a portion of that space to traditional service capacity, which we expect to increase returns from the higher margin service business.

In addition, we continue to invest in our aftersales capacity by expanding existing dealership facilities or when we undertake new construction of dealerships.

Same store technician headcount increased through our continued technician recruiting and retention efforts, providing greater capacity to meet increased demand.

F&I same store revenues outperformed the Prior Year, primarily driven by improved penetration rates across most product offerings, coupled with higher same store new and used vehicle units sold and improved income per contract from financing, vehicle service contracts (“VSC”), hazard and dent product offerings.

In addition, we have made investments in virtual finance operations, which are contributing to improved product penetration.

Total gross profit in the U.S.

during the Current Year increased $70.7 million, or 2.7%, as compared to the Prior Year, driven by the acquisition of stores, partially offset by lower same store gross profit.

during the Current Year increased $129.0 million, or 4.8%, as compared to the Prior Year, driven by higher same store gross profit and the acquisition of stores.

Total same store gross profit in the U.S.

during the Current Yea r decreased $27.7 million, or 1.1%, as compared to the Prior Year, driven by downward pressure on new vehicle margins, partially offset by increases from parts and service, F&I and used vehicle gross profit.

during the Current Year increased $105.7 million, or 4.0%, as compared to the Prior Year, driven by increases in parts and service, F&I and used vehicle wholesale, partially offset by decreases in new and used vehicle retail 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 units sold.

The decrease in new vehicle retail same store gross profit per unit sold is due to higher deliveries from our OEMs, leading to increasing inventory levels of new vehicles as described above.

Used vehicle retail same store gross profit outperformed the Prior Year, primarily driven by higher same store used vehicle retail units sold, partially offset by lower same store gross profit per unit sold, as described above for used vehicle retail same store revenues.

Gross profit per unit sold continues to moderate towards pre-COVID levels, facing pressure from affordability concerns of consumers due to rising costs of vehicles from OEMs and relatively high consumer interest rates.

Used vehicle retail same store gross profit underperformed the Prior Year, primarily driven by lower same store gross profit per unit sold, partially offset by higher same store used vehicle retail units sold.

Gross profit per unit sold continues to face pressure from affordability concerns of consumers due to rising vehicle acquisition costs and relatively high consumer interest rates.

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

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

Parts and service same store gross profit outperformed the Prior Year, driven by increases in customer pay and warranty gross profit, partially offset by decreases in wholesale and collision gross profit.

This reflects both the benefit of the strategic decision regarding our collision footprint as described above, and our focus on shop efficiency.

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 58 basis points, primarily driven by an underperformance in new vehicle retail, for the reasons described above for same store gross profit per unit sold for new vehicle retail.

This underperformance was partially offset by improvement in parts and service and used vehicle gross margins.

remained flat for the Current Year as compared to the Prior Year.

SG&A Expenses

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Total SG&A expenses in the U.S.

during the Current Ye ar increased $81.1 million, or 5.0%, as compared to the Prior Year, primarily driven by higher same store SG&A expenses.

during the Current Year increased $160.1 million, or 9.4%, as compared to the Prior Year.

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

during the Current Year increased $65.3 million or 4.2% as compared to the Prior Year, primarily driven by increased employee related costs, outside services, advertising expenses, loaner car and related expenses, and fees associated with the Inchcape Acquisition.

SG&A expenses also included $5.9 million in pre-tax one-time compensation payments to retain our field employees during the CDK Incident.

during the Current Year increased $118.3 million or 6.9% as compared to the Prior Year, primarily driven by increased employee related costs, third-party services, unfavorable legal settlements and higher facility related expenses.

Reported Operating Data — U.K.

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SG&A as % gross profit 83.9 % 83.8 % 0.1 %

Region — Year Ended December 31, 2024 compared to 2023

Retail new vehicle units sold include new vehicle agency units.

Segment — Year Ended December 31, 2025 compared to 2024

Retail new and used vehicle units sold include new and used 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 rat e has fluctuated from £1 to $1.273 at December 31, 2023, to £1 to $1.254 at December 31, 2024, or a slight decrease in the value of the GBP of 1.5%.

The GBP to USD foreign currency exchange rate has fluctuated from £1 to $1.254 at December 31, 2024, to £1 to $1.346 at December 31, 2025, or an increase in the value of the GBP of 7.3%.

Total revenues in the U.K.

during the Curren t Year increased $1.1 billion, or 36.0%, as compared to the Prior Year, primarily driven by the acquisition of stores and changes in foreign currency exchange rates.

during the Current Year increased $1.8 billion, or 42.8%, as compared to the Prior Year, primarily driven by the acquisition of stores.

Total same store revenues in the U.K.

during the Current Year increased $25.1 million, or 0.8%, as compared to the Prior Year, primarily driven by the positive impact of changes in foreign currency exchange rates, outperformances in new vehicle retail sales and parts and service, offset by lower used vehicle sales and F&I.

On a constan t currency basis, same store revenues decreased 2.0%, primarily driven by underperformances in used vehicle sales and F&I, offset by higher new vehicle retail sales and parts and service.

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

during the Current Year increased $181.0 million, or 4.5%, as compared to the Prior Year, driven by outperformances across all lines of business except new vehicle retail.

On a constant currency basis, same store revenues increased 1.3%, driven by outperformances across all lines of business except new vehicle retail.

New vehicle retail same store revenues, on a constant currency basis, underperformed the Prior Year, driven by fewer units sold, partially offset by higher pricing.

The underperformance reflects the challenges within the broader U.K.

new car market, from EV mandates and new vehicle market entrants.

We ended the Current Year with a U.K.

new vehicle inventory supply of 45 days, three days lower than the Prior Year.

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

Used vehicle wholesale same store revenues, on a constant currency basis, underperformed the Prior Year, primarily driven by a decrease in wholesale used vehicle units sold.

Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year, 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.

F&I, net same store revenues, on a constant currency basis, underperformed the Prior Year, driven by decreases in income per contract for retail finance fees and service contracts.

new vehicle inventory supply of 52 days, seven days higher than the Prior Year.

Used vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year, driven by more units sold and higher prices.

We ended the Current Year with a U.K.

used vehicle inventory supply of 55 days, 12 days lower than the Prior Year.

Used vehicle wholesale same store revenues, on a constant currency basis, outperformed the Prior Year, primarily driven by an increase in wholesale used vehicle units sold.

Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year, driven by an increase in customer pay and wholesale revenues, partially offset by a decrease in warranty revenues.

We 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 customer pay parts and service activity driving an increase in revenues as compared to the Prior Year.

F&I, net same store revenues, on a constant currency basis, outperformed the Prior Year, driven by higher income per contract from our retail finance fees, improved penetration rates on finance and VSC fees and higher used vehicle retail unit sales.

Total gross profit in the U.K.

during t he Current Year increased $150.0 million, or 36.6%, as compared to the Prior Year, primarily driven by the acquisition of stores, partially offset by lower same store gross profit.

T otal same store gross profit in the U.K.

during the Current Year decreased $12.5 million, or 3.1%, as compared to the Prior Year.

On a constant currency basis, total same store gross profit decreased 5.8%, driven by downward pressures on margins across 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 units sold, as a result of the increase in vehicle inventory production generating downward pressure on new vehicle margins.

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.

during the Current Year increased $251.8 million, or 45.0%, as compared to the Prior Year, primarily driven by the acquisition of stores, changes in foreign currency exchange rates and improved same store performance.

Total same store gross profit in the U.K.

during the Current Year increased $25.6 million, or 4.7%, as compared to the Prior Year.

On a constant currency basis, total same store gross profit increased 1.6%, driven by increases in parts and service, F&I and used vehicle wholesale, partially offset by downward pressure on new and used vehicle retail margins.

New vehicle retail same store gross profit, on a constant currency basis, underperformed the Prior Year, primarily driven by general economic headwinds within the U.K.

market, coupled with short-term supply challenges due to a cyberattack against an OEM partner during the second half of the Current Year.

Used vehicle retail same store gross profit, on a constant currency basis, underperformed the Prior Year, primarily due to macroeconomic factors as the U.K.

economy continues to face challenges, including persistent inflation, elevated interest rates, rising energy costs and a slowdown in consumer spending.

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, as discussed above.

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

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

Total same store gross margin in the U.K.

decreased 52 basis points, driven by margin declines across all lines of business attributable to the factors as described above under gross profit.

remained flat for the Current Year as compared to the Prior Year.

SG&A Expenses

SG&A as a percentage of gross profit increased by 1,074 and 787 basis points on an as reported and same store basis, respectively, compared to the Prior Year.

SG&A as a percentage of gross pr ofit decreased 92 basis points on an as reported basis and increased 12 basis points on a same store basis, respectively, compared to the Prior Year.

Total SG&A expenses in the U.K.

during the Curre nt Year increased $171.3 million, or 56.4%, as compared to the Prior Year.

during the Current Year increased $206.2 million, or 43.4%, as c ompared to the Prior Year.

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

during the Current Year increased $21.6 million, or 7.1%, as compared to the Prior Year.

during the Current Year increased $22.1 million, or 4.9%, as compared to the Prior Year partially due to changes in foreign currency exchange rates.

On a constant currency basis, total same store SG&A expenses increased 1.7%.

The increases on a total same store basis were primarily driven by fees associated with the Inchcape Acqui sition, coupled with increased employee related costs, demonstration and loaner car expenses and advertising costs, offset by lower facilities costs compared to the Prior Year.

These increases on a total same store basis were primarily driven by higher employee related costs, vehicle delivery and facility costs, offset by lower professional and legal fees, compared to the Prior Year.

Consolidated Selected Comparisons — Year Ended December 31, 2025 compared to 2024

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$ 28.4 $ 16.7 $ 11.7 70.3 %

Other operating (income) expense

$ (10.0) $ — $ (10.0) (100.0) %

Floorplan interest expense $ 101.5 $ 108.5 $ (7.0) (6.5) %

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

regions, 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 improve the overall customer experience.

segments, 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 improve the overall customer experience.

Impairment of Assets

During the Current Year and the Prior Year, we recorded no goodwill impairments.

During the Current Year and Prior Year we recorded impairments of franchise rights of $28.2 million and $25.1 million for franchise agreements in the U.S.

region, respectively.

We review long-lived assets including property and equipment and ROU assets for impairment at the lowest level of identifiable cash flows whenever there is evidence that the carrying value of these assets may not be recoverable (i.e., triggering events).

During the Current Year, there was no asset impairment charges associated with property and equipment and ROU assets.

During the Prior Year, we recorded total property and equipment and ROU asset impairment charges of $6.8 million in the U.S.

During the Current Year, we recognized $4.8 million in intangible asset impairment associated with assets held for sale.

During the Current Year, we recorded goodwill impairments of $93.0 million, compared to none in the Prior Year.

During the Current Year, we recorded total impairments of intangible franchise rights of $91.1 million, consisting of $27.8 million in the U.K.

segment , excluding impairments associated with restructuring charges, and $63.3 million in the U.S.

During the Prior Year, we recorded impairments of intangible franchise rights of $28.2 million, all of which were recorded in the U.S.

We review long-lived assets including property and equipment for impairment at the lowest level of identifiable cash flows whenever triggering events suggest the carrying value of these assets may not be recoverable.

During the Current Year, we recorded fixed asset impairments of $3.6 million in the U.S.

segment and $7.4 million in the U.K.

During the Prior Year, no fixed asset impairments were recorded.

For previously impaired assets held for sale, we recognized a gain of $2.3 million during the Current Year, compared to an additional asset impairment of $4.8 million in the Prior Year.

Refer to Note 12.

Intangible Franchise Rights and Goodwill, Note 11.

Property and Equipment, Net and Note 12.

Leases within our Notes to Consolidated Financial Statements for further discussion of our assessment for impairments.

Intangible Franchise Rights and Goodwill and Note 10.

Property and Equipment, Net within our Notes to Consolidated Financial Statements for further discussion of our assessment for impairments.

Restructuring Charges

During the Current Year, we incurred $ 16.7 million of restructuring charges.

Restructuring charges primarily consist of planned workforce realignment, strategic closing of certain facilities and systems integrations, among other efforts to increase operational efficiency and profitability in connection with the integration of the Inchcape Retail acquisition with our U.K.

Refer to Note 5.

Restructuring within our Notes to Consolidated Financial Statements for further discussion of our restructuring plan.

Other Operating Income

During the Current Year, we recognized $ 10.0 million of business interruption insurance recoveries as a result of the June 2024 cybersecurity incident experienced by CDK, which resulted in service outages on CDK’s dealers’ systems.

The CDK Incident temporarily disrupted the Company’s business applications and processes in its U.S.

operations that rely on CDK’s dealers’ systems.

The CDK Incident did not have a material impact on our overall financial condition or on our ongoing results of operations.

During the Current Year, we recognized $ 28.4 million of restructuring charges, compared to $ 16.7 million in the Prior Year.

Restructuring charges primarily consist of planned workforce realignment, strategic closing of certain facilities and systems integrations, among other efforts to increase operational efficiency and profitability related to the integration of Inchcape Retail with its existing U.K.

The Company anticipates implementing further restructuring plans in the U.K.

in future periods to further optimize our operations and reduce costs.

Refer to Note 4.

Basis of Presentation, Consolidation and Summary of Accounting Policies within our Notes to Consolidated Financial Statements for further discussion of the CDK Incident.

Restructuring within our Notes to Consolidated Financial Statements for further discussion of our restructuring plans.

Floorplan Interest Expense

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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.

For the Current Year, floorplan interest expense increased $44.4 million, or 69.3%, as compared to the Prior Year, 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.

For the Current Year, floorplan interest expense decreased $7.0 million, or 6.5%, as compared to the Prior Year, driven primarily by decreased floorplan interest rates compared to the Prior Year.

Refer to Note 7 .

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Other Interest Expense, Net

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”), $500.0 million 6.375% Senior Notes due January 2030 (“6.375% 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 4.00% Senior Notes, 6.375% Senior Notes, real estate related debt and other debt, partially offset by interest income.

For the Current Year, other interest expense, net, increased $41.5 million, or 29.4%, as compared to the Prior Year.

The increase in other interest expense, net during the Current Year was primarily attributable to the issuance of the 6.375% Senior Notes during the Current Year, additional real estate related and other debt in our U.S.

regions, primarily due to acquisition activity.

Additionally, the difference in the Current Year was partly due to a decrease in the gain recognized on the de-designation of a mortgage interest rate swap as compared to the Prior Year of approximately $3.8 million .

The increase in other interest expense, net during the Current Year was primarily attributable to the full year of interest expense on the 6.375% Senior Notes issued in 2024, as w ell as interest expense attributable to the Acquisition Line and other debt.

Refer to Note 14.

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

Refer to Note 8 .

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

Provision for Income Taxes

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The year-over-year tax expense decrease was primarily due to lower pre-tax book income.

The 2024 effective tax rate of 24.5% was lower than the 2023 effective tax rate of 24.8%.

The tax rate decrease was primarily due to the mix of earnings and an increase in tax credits.

The 2025 effective tax rate o f 28.0% was higher than the 2024 effective tax rate of 24.5%.

The tax rate increase was primarily due to the book impairment of goodwill in the U.K.

reporting unit that is not deductible for income tax purposes in the Current Year.

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.

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CASH FLOWS FROM FINANCING ACTIVITIES:

Net cash provided by financing activities:

Net cash (used in) provided by financing activities:

$ (31.1) $ 681.1

Change in Floorplan notes payable, excluding floorplan offset (28.4) (115.2)

Adjusted net cash provided by (used in) financing activities $ 565.9 $ (362.1)

Adjusted net cash (used in) provided by financing activities $ (59.4) $ 565.9

Sources and Uses of Liquidity from Operating Activities — Year Ended December 31, 2025 compared to 2024

For the Current Year, net cash provided by operating activities increased by $108.2 million as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash provided by operating activities decreased by $36.9 million.

The decrease on an adjusted basis was primarily driven by a $103.5 million decrease in net income, a $440.1 million decrease in floorplan notes payable – manufacturer affiliates, partially offset by a $313.2 million decrease in inventory levels, a $126.8 million decrease in contracts-in-transit and vehicle receivables and a $51.5 million increase in accounts payable and accrued expenses.

On an adjusted basis for the same period, adjusted net cash provided by operating activities increased by $16.2 million.

The increase on an adjusted basis was primarily driven by a $206.7 million decrease in inventories and a $164.8 million increase in asset impairment charges, partially offset by a $173.0 million decrease in net income, a $162.0 million decrease in floorplan notes payable – manufacturer affiliates, and a $117.9 million decrease in accounts payable and accrued expenses.

Sources and Uses of Liquidity from Investing Activities — Year Ended December 31, 2025 compared to 2024

For the Current Year, net cash used in investing activities increased by $916.5 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash used in investing activities increased by $915.7 million, primarily due to a $926.8 million increase in acquisition activity, and a $59.7 million increase in purchases of property and equipment, including real estate, partially offset by a $52.8 million increase in proceeds from disposition of franchises and property and equipment.

For the Current Year, net cash used in investing activities decreased by $611.3 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash used in investing activities decreased by $616.5 million, primarily due to a $731.0 million decrease in acquisition activity, partially offset by a $79.9 million decrease in proceeds from disposition of franchises and property and equipment and a $24.9 million increase in purchases of property and equipment, including real estate.

Capital Expenditures

Our capital expenditures include costs to extend the useful lives of current dealership facilities, as well as to start or expand operations.

Our capital expenditures include costs to extend the useful lives of current dealership facilities, improve the customer experience, as well as to start or expand operations.

In general, expenditures relating to the construction or expansion of dealership facilities are driven by dealership acquisition activity, new franchises being granted to us by a manufacturer, significant growth in sales at an existing facility, relocation opportunities or manufacturer imaging programs.

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Sources and Uses of Liquidity from Financing Activities — Year Ended December 31, 2025 compared to 2024

For the Current Year, net cash provided by financing activities increased by $495.9 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash provided by financing activities increased by $928.1 million.

The increase in net cash provided by financing activities on an adjusted basis was primarily driven by a $586.4 million increase in net borrowings of other debt, including real estate-related debt, the issuance of $500.0 million of 6.375% Senior Notes, and increases in net borrowings on our U.S.

For the Current Year, net cash used in financing activities increased by $712.2 million, as compared to the Prior Year.

On an adjusted basis for the same period, adjusted net cash used in financing activities increased by $625.4 million.

The increase in net cash used in financing activities on an adjusted basis was primarily driven by a $654.3 million increase in net repayments of other debt, including real estate-related debt, the issuance of $500 million of 6.375% Senior Notes in the Prior Year, an increase in share repurchases of $393.2 million, and an increase in net repayments on our U.S.

Floorplan line of $203.0 million (representing the net cash activity in our floorplan offset account).

These increases were partially offset by a $249.6 million increase in net repayments on the Acquisition Line.

This was partially offset by a $1.1 billion increase in net borrowings on the Acquisition Line.

Credit Facilities, Debt Instruments and Other Financing Arrangements

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The available borrowings may be limited from time to time, based on certain debt covenant calculations, and as a result, the outstanding balance plus available borrowings may not equal the total commitment.

(3) The available balance as of December 31, 2024, includes $2.0 million of immediately available funds.

(3) The available balance as of December 31, 2025, 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 December 31, 2024, can be used for General Motors new and rental vehicle inventory financing.

(5) The outstanding balance excludes $590.1 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.

(4) The remaining available balance as of December 31, 2025, includes no immediately available funds.

The remaining available balance can be used for General Motors new and loaner vehicle inventory financing.

(5) The outstanding balance excludes $641.5 million of borrowings with manufacturer-affiliates and third-party financial institutions for foreign and loaner vehicle financing not associate d with any of our U.S.

credit facilities.

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Debt within our Notes to Consolidated Financial Statements for further information.

Our Revolving Credit Facility, indentures governing our 4.00% and 6.375% Senior Notes and certain mortgage term loans contain customary financial and operating covenants that place restrictions on us, including our ability to incur additional indebtedness, create liens or to sell or otherwise dispose of assets and to merge or consolidate with other entities.

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.

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Share Repurchases and Dividends

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

From time to time, our Board of Directors authorizes the repurchase of shares of our common stock up to a certain monetary limit and at a prescribed cost limit per share.

On November 11 , 2025 , our Board of Directors increased the share repurchase authorization to $500.0 million.

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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 7. Management’s Discussion and Analysis