Asbury Automotive Group, Inc. Q2 FY2025 earnings call

• David Hult welcomed the Herb Chambers team and discussed integration into the New England market. - Operational performance: Strong demand in Q2, SAAR decline, new vehicle GPUs trending to 2,500-3,000 range, used vehicle profitability strong, parts and service growth. Transition to Tekion with Koons stores 100% converted. SG&A improved with same-store adjusted SG&A as a percentage of gross profit at 63.2%. Divested 9 stores as part of capital allocation, with proceeds offsetting investment in Herb Chambers. - Consolidated results: Revenue, gross profit, margins, adjusted EPS, and EBITDA figures provided.

New Vehicles: Same-store revenue was up 9% year-over-year and units were up 7%. New average gross profit per vehicle was $3,611. Used Vehicles: Second quarter unit volume was down 4% year-over-year. Used retail gross profit per unit was $1,729, marking the fourth quarter of sequential growth. Parts and Service: Same-store parts and service gross profit was up 7% for the quarter, with a gross profit margin of 59.2% and fixed absorption rate over 100%. Customer pay gross profit was up 7%, and warranty gross profit was higher by 16% (9% combined). Consolidated: Generated $4.4 billion in revenue, had a gross profit of $752 million and a gross profit margin of 17.2%. Delivered an adjusted operating margin of 5.8%, adjusted earnings per share was $7.43, and adjusted EBITDA was $256 million.

• TCA rollout to Koons stores expected in early Q4 2025, with updated schedule and SAAR projections affecting deferral timing. - Anticipate 2025 SG&A in the mid-60s, monitoring tariff and trade developments. - Focus on leverage reduction over 12-18 months while being opportunistic with share repurchases. - Tekion implementation benefits expected in 2027, with long-term optimism on EPS growth beyond the next 12-18 months.

• Uncertainty in tariff landscape affecting consumer pricing and new vehicle GPU trends. - Impact of Tekion conversion costs on P&L. - TCA rollout timing and SAAR projections creating uncertainties in future EPS and operational performance.

Q: Jeff Lick asked about GPU, units, and Q3 status.

A: Dan Clara said GPUs started stronger but adjusted as the quarter progressed, with GPUs expected to fall in the $2,500 to $3,000 range, and 2026 model year likely to see adjustments due to tariffs.

Q: Federico Merendi inquired about SG&A initiatives.

A: Michael Welch mentioned focusing on productivity per employee and managing outside services, with Tekion conversion costs contributing to the SG&A number.

Q: Rajat Gupta asked about Herb Chambers acquisition and Tekion.

A: David Hult discussed integration challenges with Tekion conversion, including software issues, and Michael Welch noted $2 million in Tekion implementation costs in the quarter.

Q: Ryan Sigdahl asked about used GPU strategy and Tekion progress.

A: Dan Clara said strategy remains focused on profitability over volume, and David Hult mentioned used vehicle inventory improving mid-2026 and beyond. David Hult also discussed Tekion conversion challenges and progress.

Q: David Whiston asked about Toyota/Lexus inventory and EV tax credit.

A: Dan Clara said inventory is lean but not more so than usual, and Daniel Clara noted OEMs have planned for EV tax credit changes.

Q: Bret Jordan asked about TCA and regional focus.

A: Michael Welch discussed TCA cost impacts and David Hult mentioned California not being on the acquisition list currently