Asbury Automotive Group, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Company Overview: 2025 was productive with revenue growth and strategic divestitures. Leverage was 3.2x vs forecast 3.5x. Deployed $186M in CapEx and repurchased $100M in shares. Transitioned 15 stores onto Techeon, ending the year with 38 stores on the new DMS.
• Same-Store Metrics: New vehicle sales volume reflected prior year post-election surge; used vehicles saw 6% year-over-year gross profit growth with retail PVRs up 18%; parts and service had a pullback in consumer spending but optimistic about fixed operations.
• Capital Allocation: Divested 4 stores in the quarter, on track to divest 9 more by end of Q1, with 13 transactions totaling $750M annualized revenue. Plan to continue share repurchasing.
• Techeon Rollout: Transitioned 15 stores onto Techeon, with plan to implement TCA to chamber stores by year-end, ending rollout across all platforms by fall 2026.

Segment Performance

• New Vehicles: Same-store revenue was down 6% year-over-year. New average gross profit per vehicle was $3,135. Same-store new day supply was 49 days at the end of December. New vehicle profitability is expected to stabilize in the $2,500 to $3,000 range.
• Used Vehicles: Fourth-quarter total used gross profit was up 6% year-over-year. Used retail gross profit per unit was up 18% to $1,749. Same-store used DSI was 35 days at the end of the quarter.
• Parts and Service: Same-store parts and service gross profit was up 2% year-over-year. Customer pay gross profit was up 3% and warranty gross profit was up 6%. The parts and service business had total revenue of $658 million in the fourth quarter, a record for the period.

Guidance

• 2026 Outlook: Confident for 2026 with expectations of challenges in first half due to weather and transitions, improving in second half. GPU expected to stabilize $2,500-$3,000. Parts and service optimistic about long tail of operations.
• Capital Allocation: Aim to get leverage below 3x by end of 2026, with plan to continue share repurchasing.
• Techeon Rollout: 125 more stores to transition onto Techeon, done by fall 2026. Anticipate duplicated costs in first half, with savings in second half.

Risks

• Market Uncertainties: Weather impact on sales, inventory supply constraints, consumer spending pullback, and uncertainties around tariffs and incentives.
• Transition Risks: Challenges during Techeon rollout, duplicated costs during software transition, and potential inefficiencies during software adoption.

Q: Jeff Licht inquired about 2026 outlook, including lapping tariffs, lease returns, and qualitative path of travel.

A: David Hult stated first half likely challenging due to weather and transitions, second half expected to improve; GPU stabilization in $2,500-$3,000 range.

Q: Rajat Gupta asked about parts and service customer pay growth and leverage.

A: Dan Clara said not satisfied with customer pay growth but optimistic about fixed operations strategy; Michael Welch mentioned plan to get leverage below 3x by summer of 2026 with divestitures.

Q: Glenn Chin asked about Techeon rollout path and double expenses.

A: Dan Clara said 125 more stores to transition, done by fall 2026; Michael Welch explained duplicated costs in first half with savings in second half.

Q: Matthew Rob asked about TCA SAAR assumptions change.

A: Michael Welch said adjustment based on third-party SAR projections, TCA rollout to complete late summer 2026.

Q: Daniela Heigen inquired about SAAR, used market, and EV outlook.

A: Dan Clara stated used market supply tight but optimistic about second half volume with lease turn-ins, and EV inventory right-sized overall with pockets in Colorado having excess.