Earnings call transcript: Asbury Automotive beats Q4 2024 expectations

Asbury Automotive Group Inc . (NYSE:ABG), a $6 billion market cap automotive retailer, reported its fourth-quarter 2024 earnings, surpassing Wall Street expectations with an adjusted earnings per share (EPS) of $7.26, compared to the forecasted $6.08. The company also reported a record revenue of $4.5 billion, exceeding the anticipated $4.18 billion. According to InvestingPro analysis, the stock appears overvalued at its current trading level of $305.51, despite showing a slight premarket dip of 0.11%.

Key Takeaways

• Asbury Automotive achieved record revenue, up 18% year-over-year.
• The company reported an adjusted EPS of $7.26, beating forecasts by 19.4%.
• Premarket trading showed a minor decline of 0.11%.
• Strong performance in luxury and select domestic brands.
• Promising results from Techheon DMS pilot program.

Company Performance

Asbury Automotive demonstrated robust growth in the fourth quarter of 2024, with revenue reaching $4.5 billion, an 18% increase from the previous year. The company’s focus on luxury and select domestic brands contributed significantly to this growth. Asbury’s same-store new vehicle revenue rose by 8%, while total units retailed increased by 13% compared to 2023.

Financial Highlights

• Revenue: $4.5 billion, up 18% year-over-year.
• Earnings per share: $7.26, surpassing the forecast of $6.08.
• Gross profit: $750 million, up 11%.
• Gross profit margin: 16.6%.
• Adjusted EBITDA: $254 million.
• Same-store adjusted operating margin: 6%.

Earnings vs. Forecast

Asbury Automotive’s actual EPS of $7.26 exceeded the forecasted $6.08 by 19.4%, marking a significant beat. The company’s revenue of $4.5 billion also surpassed expectations of $4.18 billion, reflecting strong operational performance and effective cost management strategies.

Market Reaction

Despite the earnings beat, Asbury Automotive’s stock experienced a slight premarket decline of 0.11%, trading at $305.51. The stock has shown impressive momentum, with a 17.15% return over the past week and currently trading near its 52-week high of $312.56. InvestingPro data indicates the stock is in overbought territory based on RSI, suggesting potential for near-term price consolidation. The overall market reaction appears neutral, possibly due to profit-taking or broader market conditions.

Discover comprehensive valuation analysis and 12 additional ProTips for ABG through InvestingPro’s detailed research reports, available for over 1,400 US stocks.

Outlook & Guidance

Looking ahead, Asbury Automotive anticipates a strong performance in 2025, with projected new vehicle gross profit per vehicle ranging from $2,500 to $3,000. The company expects SG&A as a percentage of gross profit to be in the mid-60s and forecasts a 2025 adjusted tax rate of 25.3%. Capital expenditures are projected at $250 million for both 2025 and 2026.

Executive Commentary

David Holt, CEO of Asbury Automotive, expressed optimism about the company’s momentum, stating, "We’re excited about the momentum we’ve built heading into 2025." He also highlighted the strong demand and positive momentum under the new administration, emphasizing a shift in strategy towards profitability over volume in the used vehicle segment.

Risks and Challenges

• Potential supply chain disruptions could impact vehicle availability.
• Market saturation in certain segments may pressure margins.
• Macroeconomic factors, such as interest rate changes, could affect consumer purchasing power.
• Brand performance challenges, particularly with Stellantis (NYSE:STLA), require strategic adjustments.
• Tariff impacts and regulatory changes pose potential risks.

Q&A

During the earnings call, analysts inquired about GPU trends and potential stabilization, strategies for improving Stellantis brand performance, and post-election consumer sentiment. The discussion also covered potential tariff impacts and complexities in TCA deferral accounting.

Full transcript - Asbury Automotive Group Inc (ABG) Q4 2024:

Conference Operator: Greetings and welcome to Asbury Automotive Group Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Chris Reeves, Vice President of Finance and Treasurer. Thank you. You may begin.

Chris Reeves, Vice President of Finance and Treasurer, Asbury Automotive Group: Thanks, operator, and good morning. As noted, today’s call is being recorded and will be available for replay later this afternoon. Welcome to Asbury Automotive Group’s fourth quarter twenty twenty four earnings call. The press release detailing Asbury’s fourth quarter results was issued earlier this morning and is posted on our website at investors.asburyauto.com. Participating with me today are David Holt, our President and Chief Executive Officer Dan Clara, our Senior Vice President of Operations and Michael Welch, our Senior Vice President and Chief Financial Officer.

At the conclusion of our remarks, we will open up the call for questions and will be available later for any follow-up questions. Before we begin, we must remind you that the discussion during the call today is likely to contain forward looking statements. Forward looking statements are statements other than those which are historical in nature, which may include financial projections, forecasts and current expectations, each of which are subject to significant uncertainties. For information regarding certain of the risks that may cause actual results to differ materially from these statements, please see our filings with the SEC from time to time, including our Form 10 K for the year ended December 2023, any subsequently filed quarterly reports on Form 10 Q and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward looking statements.

In addition, certain non GAAP financial measures as defined under SEC rules may be discussed on the call. As required by applicable SEC rules, we provide reconciliations of any such non GAAP financial measures to the most directly comparable GAAP measures on our website. We have also posted an updated investor presentation on our website investors.asburyauto.com highlighting our results. Now, it is my pleasure to hand the call over to our CEO, David Holt. David?

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Thank you, Chris, and good morning, everyone. Welcome to our The performance of our business is a direct reflection of the efforts of our team members, who come to work each and every day striving to improve the guest experience. Their hard work translated into strong results for the and I couldn’t be more proud of the team. After our recent election, we saw an increase in traffic and sales throughout Overall, volume for same store new vehicle was up 7% year over year, 12% sequentially, and same store gross profit per new vehicle was up $149 compared with the In 2025, we expect new vehicle gross profit per vehicle somewhere in the $2,500 to $3,000 range. Our performance in used vehicles is consistent with our shift in strategy in prioritizing profitability over volume given the supply challenges in the used vehicle market.

While overall volume was essentially flat, our gross profit per unit increased for the second quarter in a row. These results are particularly impressive when set against the backdrop of rising new vehicle incentives, which create headwinds on used vehicle pricing. We expect inventory challenges to persist throughout 2025. Shifting to our parts and service business, I couldn’t be more proud of how the team came together to deliver outstanding results for the quarter. On a same store basis, gross profit for our fixed operations business was up 11% and the all important customer pay segment was up 13%.

Looking ahead, we remain confident in a mid single digit growth rate where customer pay is sustainable. In parallel with our operational success, we remain keenly focused on cost discipline. Our SG and A costs as a percent of gross profit fell for the second consecutive quarter, coming in at 63% on an adjusted basis. While we are proud of our results to make the business more efficient, our work here is not done. We continue to evaluate other opportunities to deliver a guest experience in a more efficient manner.

Our fourth store pilot with Techheon went live in Oct. 0 and we’re encouraged by the early feedback from our operators. From sales to service, this new platform has the potential to simplify the guest experience, improve team member efficiency, all at a lower cost per transaction. Now for our consolidated results for the We generated a record 4500000000.0 in revenue, up 18% year over year at a gross profit of $7.50,000,000 dollars up 11% and a gross profit margin of 16.6%. Our same store adjusted SG and A as a percentage of gross profit was 62% and it was 63% on an adjusted all store basis.

We delivered a same store adjusted operating margin of 6% and an all store adjusted operating margin of 5.7%. Our adjusted earnings per share was $7,.26 and our adjusted EBITDA was $2.54,000,000 dollars Finally, thank you to our team members who continue to deliver and find innovative solutions to make our company better. I’m excited about the momentum we’ve built heading into 2025. Now Dan will discuss our operational performance. Dan?

Dan Clara, Senior Vice President of Operations, Asbury Automotive Group: Thank you, David, and good morning, everyone. I would also like to thank our hardworking team members. You make a difference by providing a high level of service that powers our strong results. Thank you. Now, I’m going to give some updates on our same store performance, which includes dealerships and TCA on a year over year basis unless stated otherwise.

Starting with new vehicles, same store revenue was up 8% year over year and units were up 7%, driven by strong performance from a number of our luxury brands as well as Hyundai (OTC:HYMTF), Kia, General Motors (NYSE:GM) and Ford (NYSE:F). New average gross profit per vehicle was $3,661 a sequential increase from the last time we spoke and in line with the typical seasonality and strength of luxury brands in the A broad solid performance across our portfolio helped overcome the pressure on gross per unit as it relates to Stellantis, which was down substantially year over year. Our same store new day supply was forty seven days at the December,. Turning to used vehicles. Unit volume was down slightly versus prior year results.

Used retail gross per unit was $15.84 dollars which was $19 higher than We believe in prioritizing unit profitability at this point for the used car supply cycle. At the same time, we’re monitoring market conditions that may shape our strategy within the pre owned business. Our same store used DSI was thirty seven day supply at the end of the quarter. Shifting to F and I, we earned an F and I per vehicle retail of $2,238 improving sequentially over the The deferred revenue headwind of TCA contributed $40 or the $72 decrease in the same store F and I PVR year over year. For the past several quarters, we’ve discussed the timing of the rollout of Coons in Florida in the and the impact it would have.

Michael will walk you through the additional details on the financial impact regarding TCA. In the our total front end yield per vehicle was $5,040 reflecting the healthy gross per unit in F and I TDR. Moving to parts and service. As David mentioned, our parts and service business excelled in the quarter. Our same store parts and service gross profit was up 11%.

For the quarter, we generated a gross profit margin of 57.9%, an expansion of two twenty four basis points. This expansion was driven by increased profitability of our higher margin segments, which contributed 124 basis points of the growth. In addition, I’d like to provide further visibility on the progress being made in our fixed operations by breaking out the components of our parts and service business. Our largest portion and most profitable piece of the business, customer pay generated gross profit growth of 13%. In warranty, we were up 26% driven by increased recalls.

Wholesale parts and collision were down 56% respectively. Our Western stores built upon their momentum in customer pay, posting a 21% growth in gross profit year over year and we continue to see strong performance in our Eastern stores as well. And finally, we retailed approximately 12000 sales through Click Lane in the a 6% increase over last year. This brought our total units retailed to over 51000 units for the year 2024, which is a 13% increase versus 2023. We sold approximately 6200 new units, an 8% increase year over year.

New vehicles made up 52% of all click lane sales. We view this ability to sell new as an important differentiating factor in the marketplace. I will close by once again expressing my gratitude for our hardworking team members as we focus our efforts to be the most guest centric automotive retailer. I will now hand the call over to Michael to discuss our financial performance. Michael?

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Thank you, Dan, and happy birthday. We are pleased with our results. Our teammates executed a high level and put the guests first, a great way to finish the year and head into 2025. And now I will discuss our financial performance in the quarter along with some full year figures. For the adjusted net income was $143,000,000 and adjusted EPS was $7,.26 for the quarter.

Adjusted net income for the excludes net of tax $11,000,000 of non cash asset impairments, $5,000,000 of losses related to Hurricane Milton and $1,000,000 of income related to the proceeds from the termination of our franchise. Adjusted SG and A as a percentage of gross profit came in at 63%, a sequential improvement over the We were pleased by the team’s discipline and agility to contain cost. We anticipate twenty twenty five SG and A as percentage on a percentage basis to be in the mid-60s given the projected glide path in new vehicle GPUs and the investments in our business. The adjusted tax rate for the quarter was 24.8% and we estimate the full year adjusted tax rate for 2025 to be 25.3%. PCA generated $20,000,000 of pre tax income in the and $79,000,000 for the full year.

The non cash deferral impact for the year was a benefit of $6,000,000 or $0,.22 per diluted share. We anticipate offering TCA in our Florida market in and the Coons platform in These rollouts along with the increasing vehicle volume levels are likely to be a headwind to earnings. We anticipate 2025 pretax income to be approximately $8,000,000 which includes a non cash deferral hit of $62,000,000 or $2,.35 per diluted share. We expect the first half of the year to have a small deferral benefit before flipping to a negative deferral impact after the rollout of Florida and Coons. We We expect the peak deferral to occur in 2026.

We have outlined the estimated impact on EPS over the next several years on Slide 17 of the presentation posted to our website this morning. In addition, we have included an example of a single TCA product life cycle and the effect it has on cash and GAAP. Please see the appendix for more detail. We hope this will better illustrate the mechanics of how the deal with TCA flows through our financials. Now moving back to our results.

We generated $6.88,000,000 dollars of adjusted operating cash flow for the full year 2024. Excluding real estate purchases, we spent 163000000 on capital expenditures in 2024. We anticipate approximately $2.50,000,000 dollars in CapEx spend for both 2025 and 2026 depending on the timing of several significant investments, projects and permitting. Free cash flow was $5.26,000,000 dollars for the year. We ended the quarter with $8.28,000,000 dollars of liquidity comprised of 4 plan offset accounts, availability on both our used line and revolving credit facility and cash excluding cash at Total (EPA:TTEF) Care Auto.

Our transaction adjusted net leverage ratio was 2.85 times at the December,. Finally, effective capital allocation remains 1 of our top priorities and we continually evaluate opportunities to grow the business in a disciplined approach. I will close by saying thank you again to all of our teammates who are working to ensure both our current and long term success. This concludes our prepared remarks. We will now turn the call over to the operator and take your questions.

Operator?

Conference Operator: Thank Our first question comes from John Murphy with Bank of America. Please proceed with your question.

John Murphy, Analyst, Bank of America: Good morning, guys. A lot of good data points to ask questions about here, but I just David, just wanted to focus on GPUs. Obviously, you got the seasonal benefit sequentially here, but I don’t know if you can tease out how much of that is the seasonality and how much of this strength in new GPU specifically is a result of the market kind of bottoming out here on pricing and GPUs and maybe we’re seeing much more resilience than I think people were fearing. So I mean, just how do you think about that? How much was seasonality?

How much it is reaching this leveling off point?

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Thanks, John. It’s a great question and obviously it’s complicated to answer. You look at our day supply, we’re on a forty nine day supply and new. Within that, we have some brands that have a seven day supply and some that have almost a ninety day supply. What I would tell you and I’ll speak specifically to Asbury and reference the past for this, everyone’s focused on 2019 numbers and kind of comparing off of that.

I’ve stated before, I’ll state it again, Asbury is a different company today than in 2019. Our model mix is different, our brand mix is different and we’re in different markets. Almost all the acquisitions we’ve made over the years in the last five years, their GPUs were accretive to what Asbury was doing. So I think we’ll always stay above that number for lack of a better term. As we enter into this year, I think we had the biggest impact with Stellantis based on our size and number of rooftops we have.

It was still a huge material hit to us in the would have been significantly better if they just performed average for us. We do believe that they’re going to get their act together and improve, which should actually give us a little bit of a tailwind in the future when that happens. It’s not there yet. But it’s just all brands are not floating the same and it’s difficult to predict what the future is going to be. We’re being optimistic with some of the brands that we have.

Toyota (NYSE:TM) and Lexus have a very low day supply, a good gross profit, but so do a lot of other brands. And we have some import brands that were up 40% year over year in the quarter and some that were backwards 2%. So it’s really mixed right now. And I think it has to be a lot of work put into each of our peers and looking at the brand segments and what they have to really calculate what the future holds. But as we sit here today, we think we’re entering a more stable market.

I mean, with the new administration, it’s a little bit more pro business. With the shift from EVs coming back to ICE. We see these are all benefits. And again, we’re in a situation where the average age of the car is 12 point 5 to 13 years old. And you can see in our slide deck, the average miles on a car that we’re servicing is over 71000 now.

It keeps creeping up and we have some stores over 90, which means we’re doing a great job at retaining them after the warranty is over. So we’re optimistic about 25. There will certainly be some headwinds coming our way for sure. We’re excited that every month we get closer to Stellantis fixing the issues, which will have an impact on our business.

Brett Jordan, Analyst, Jefferies: That’s very helpful. And then just

John Murphy, Analyst, Bank of America: a second question on Techheon in the Force Duo test. You mentioned a couple of things, I’ll paraphrase. Efficiency is improved, consumer experience is improved and it’s all at a lower cost. So I don’t know, maybe you can maybe get into a little bit more specifics about like what the delta is versus your other DMS, and what the potential savings are and then maybe business opportunity to drive top line with Techheon?

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Yes, I would tell you without getting into too much particulars, switching from Techheon to CDK, one large pickup is we reduce our plug ons by about 70%. So you reduce those costs and you reduce the toll fees that the DMS charge for plug on. So that’s 1 large cost savings there. The other 1 is, it’s a heck of a lot easy to onboard and train someone with Techheon because of the way the software is designed. It just makes you far more efficient and more transparent with the guest.

Our productivity numbers, even in the pilot in the first few months where you expect things to be a little bit rocky, our productivity per employee went up in all the stores, some slight, some more than others, but a positive sign. At the end of the day, which is close to two years from now, year and a half anyhow, when we’re fully rolled out on Tachyon, there will be a material savings in SG and A costs, just because of the what I mentioned earlier with the software application. So too early to say only a 4 store pilot right now. We’re very encouraged. We’re getting great feedback from our associates.

Some of the leaders said it used to take us five days to onboard a service advisor. We can do it in a day now because the technology is so efficient. It also empowers our teammates more to handle the guests without going anywhere else. So transparency efficiency is going to raise our level of service. Easy use is going to make it a big differentiator for our teammates.

And to us, the exciting part is the software is going to increase our productivity, make us more efficient, allowing our folks to really create the experience.

John Murphy, Analyst, Bank of America: I’m sorry, if I could just sneak 1 in, you mentioned that sort of the Trump bump in showroom traffic and business just in general. A lot of concern that that might burn out over time and that might just be somewhat transitory. What are you seeing in Jan. 0? I mean maybe without even giving exact numbers, but just trying to understand if you’re seeing that momentum continue into Jan.

0?

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Jan. 0 is kind of mixed and kind of like the day supply. It really depends upon the brand. And then just from our geographics, this Jan. 0 has been worse than most in the last four or five years with weather.

We’ve had a lot of stores and a lot of our states shut down for multiple days with weather. So that’s going to impact us. If you take those days out, which you can’t, we’re seeing an increase over prior year, not dramatic, but an increase. But I think Jan. 0 traditionally is a slower month.

But we’re encouraged with what we’re seeing in parts and service and sales so far. I don’t think it’s going to burn out with the new administration. They seem to have an agenda. They seem to be very business friendly. Going back to that average age of the car where it is, This has the potential to be a fairly, I would say strong, but certainly stable year for us in the automotive industry.

John Murphy, Analyst, Bank of America: Yes, I guess probably have a few more of those in front of you at least in my opinion. Thank you very much guys. Good quarter. Thank you.

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Thank you.

Conference Operator: Our next question comes from Rajeev Gupta with JPMorgan. Please proceed with your question.

Rajeev Gupta, Analyst, JPMorgan: Great. Thanks for taking the question. Firstly, just on the SG and A, the 63% level was definitely a very solid number. I was curious if there’s any way to unpack that a little bit. If you look at versus gross profit went up $40,000,000 SG and A went up $10,000,000 I’m assuming it’s primarily given due to some of the CDK related payments that you had to still make to your sales force for the lost sales that you did not have to in the But curious like if you could unpack that on what drove that sequential leverage?

And then I just have a follow-up on DCA. Thanks.

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Roza, this is David. I’ll start and then Michael can come in. We mentioned prior quarter that we’re working on cost reductions. So I think part of it is you’re seeing the cost reductions, part of it is the increasing gross profit and the incremental benefit we get for every incremental dollar. I would tell you and just not picking on them, but Stellantis was a major headwind to us materially in the that absolutely hurt SG and A.

So there’s an opportunity for us when Stellantis writes itself, if you will, that we could improve even more. We’ve been very focused on cost discipline. We think we have our personnel expense at a pretty good number. We have an opportunity to increase our efficiency per associate, which leaves a little bit of savings there as well. And we’ve been pretty disciplined over time regarding our operating costs and being conservative.

So while it was a nice job in the quarter, there was looking at it from our side, looking at the detail, there was a lot of opportunity there that just with a little bit different brand mix would have had better results.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Yes. Roger, your other question, had the impact and a little bit in for CDK, but not a whole lot. So really it’s just the cost savings and the increase in both fixed ops and new vehicle margins that helped the number.

Rajeev Gupta, Analyst, JPMorgan: Got it. And just a follow-up on MTCA. I mean, just looking at what you had provided us last quarter, looks like the deferral headwinds are a lot higher now for ’25 and ’26. Curious what’s driving that? Is it just a higher expectation for unit growth or just rollout cadence?

I don’t know, higher claims. Just curious why that drag is higher than what you had like three months ago? Thanks.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Yes. So it’s kind of perfect storm of the roll off of 2018 and 2019 from the legacy LHM stores is kind of at the end of early this year. And as volume comes back up, we’re kind of at the low point for the five year kind of cumulative SAR. And so now you’re adding that volume back. So yes, it’s higher expectations on SAR and used vehicle growth, the ending of those good years from LHM and then Florida and Coons rolling on.

And so you basically lose the good news from the old years and all you have is kind of the deferral hit for growing SAR, growing used cars and Florida and Coons coming fully on.

Rajeev Gupta, Analyst, JPMorgan: Got it, it. And just as a follow-up with last 1, the F and I numbers excluding like the headwind was pretty nice acceleration. Was that just mix? Was there like penetration increase on contracts or like the non service contracts more ancillary stuff? Just curious what drove that pretty solid number?

Thanks.

Dan Clara, Senior Vice President of Operations, Asbury Automotive Group: Hey, good morning, Rajat. We just continue to focus on our bottom 20%. We continue to focus on the training and believe that to the extent that we continue to make improvements there, the number moves. So great job to the training team, great job to the field team, but this is history and we got to continue the trend.

David Holt, President and Chief Executive Officer, Asbury Automotive Group: And Rizat, just to add on to that, I would say nothing’s changed as far as the mix. It’s still one third finance reserve and 2 thirds product sales. Probably with the lift in cost of sale a little bit and the down payments coming down a little bit, that gives you a little bit of a tailwind in your PVR.

Rajeev Gupta, Analyst, JPMorgan: Got it. Thanks. Great to have a strong quarter.

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Thank you.

Conference Operator: Our next question is from Jeff Licht with Stephens. Please proceed with your question.

Jeff Licht, Analyst, Stephens: Good morning, guys. Congrats on a fine quarter and extend my happy birthday wishes to Dan. I was wondering if you could just talk about in terms of the everyone’s a little more excited about the SAAR environment for 2025 and obviously that’s kind of spurred on by what happened in just to the extent that obviously to sell more units you’re going to need more inventory. But I’m just curious kind of there’s a relationship between the more inventory you add that could put pressure on GPUs because the marginal sale might not be as profitable as the last sale. Just any thoughts there just on the relationship as we build inventory and the GPU environment?

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Jeff, you’re spot on. The direct correlations there, the higher the day supply, the lower the margin. A lot of the OEMs are still being more disciplined than in the years past, which is keeping it tighter, which is great. But certainly some OEMs have been penalized with that. But even in our circumstance, let’s just say we don’t go with the market in the sense that we’re more disciplined on our day supply and we have a lower day than the market.

It still impacts us because we have to compete within the market. So the key is really a balanced day supply in the market. So where we do business and there’s always conversations with our OEM partners to do the best job we can. And they’ve really as a domestic, General Motors is a great example of 1 that’s done a fantastic job at managing the day supply over time.

Jeff Licht, Analyst, Stephens: I guess just a quick follow-up, David. I’d be curious, as you’ve listened to all the questions and kind of parse through everything that’s being written. As you look at 2025, what do you think is the things that the investment community just under appreciates or maybe doesn’t understand whether biggest chance for a variance relative to expectations in 2025?

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Sure. It’s always subjective, but being an operator, you tend to be optimistic. There has been a depletion of the used vehicles that are out there because of what happened during COVID. We’ll start to see a benefit in 2026. We, Asbury has a headwind of TCA, but as you can look in our investor deck, there’s a huge tailwind a few years down the road that’s going to make us have a material difference, we believe, against our peers.

As it relates to ’25, I would tell you the demand is still strong. There’s a lot of positive momentum with the new administration. We believe that we can feel it and hear it in our markets. The average age of the car, our mile is going up, the high margin business we have in parts and service. I think the revenue numbers at parts and service are less relevant than the gross profit numbers and that’s where the focus should be.

But then we still have the potential to grow our fixed operations business. So I would tell you like usual, this everyone seems to fear this space and always think the worst. I would kind of invert that and look at it with consolidation that’s happened with more consolidation coming with EVs being pushed out a little bit, the average age of the vehicle, this looks like a pretty sustainable market for a period of time. Now that can certainly be thrown off by a World War, something else going on that is not foreseen. But generally speaking, the industry is upbeat about 2025.

We’re certainly upbeat with what we’ve done and what we’ve built. Selfishly, we know Stellantis will fix itself at some point. When it does, it’s really going to be a tailwind for us.

Jeff Licht, Analyst, Stephens: Great. Well, impressive quarter and best of luck on 2025.

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Thank you.

Conference Operator: Our next question comes from Ryan Sigdahl with Craig Hallum Capital Group. Please proceed with your question.

Ryan Sigdahl, Analyst, Craig Hallum Capital Group: Hey, good morning guys. Sounds like a lot of optimism kind of with and seeing improved trends, Trump EV switching back to ICE, etcetera, etcetera, etcetera. Given new vehicle GPU that glide path lower decelerated in the last two quarters were better than expected, flatlined a little bit. I guess your commentary on the outlook for 2025, like how to rate was 2500 to 3000 GPU and applied to a pretty big acceleration, I guess, lower on the GPU. So I guess what are you currently seeing or what’s the cause of that?

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Yes, Ryan, it’s a fair point, a fair question. And you’re right, based upon the trend, it’s probably a little draconian. We anticipate SAAR growing a little bit this year. We don’t have insight beyond forty five, sixty days what’s coming for inventory and what people are building and how they’re going to try and adjust to that new SAAR number and what the fleet business is going to look like as well. So I would tell you, you, it’s probably a conservative number at this point in time and may not happen till later in the year than in the first half of the year.

But I think that potential lift in the that you see is really driven by luxury. And the 1 thing that’s true about our space, it’s seasonal. It just is. I mean, Jan. 0 is a slower month, Nov.

0 is a slower month, March 0 is a bigger month. There are certain months that you just go with the seasonality of it. So I think in the short term, the PVRs will hold up the gross per unit will hold up better. But over time, it may adjust a little bit. And from our standpoint, we’re about a 40% mix of import and about a 30% mix in domestic.

And when you look at our domestic PVR in the tables, overall it doesn’t look bad. I would tell you 2 of the 3 brands are a real healthy number and the other brand is really dragging that number down. So there’s opportunity there. And as I said earlier, with the acquisitions we made out west in The Mountain States with some of these domestic franchises, the GPUs are just higher than what legacy Asbury was and we think that will stay sustainable going into the future. So probably to sum it up, probably a little bit too aggressive in the comments for the first half of the year.

Really just trying to predict what’s going to happen, which may or may not happen. Michael, anything you want to add to that?

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Yes. I mean, to me, that $2,500 to $3,000 is kind of where we think we end up as kind of the new normal. The question is when is it or is it But that’s more of a projection of where we think the PBR shake out at for kind of that new normal.

Ryan Sigdahl, Analyst, Craig Hallum Capital Group: So just to be clear, that is a new normal, steady state versus that’s what you expect on average for the year?

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Correct. That’s where we end up at the end.

Dan Clara, Senior Vice President of Operations, Asbury Automotive Group: Got it.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Question mark on when that occurs during 2025.

Ryan Sigdahl, Analyst, Craig Hallum Capital Group: Yes. But that the average for the year will be higher just because the starting point where we are today is higher

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: than that. Correct. Okay.

Ryan Sigdahl, Analyst, Craig Hallum Capital Group: Very good. And then Stellantis, I know a lot of talk and don’t want to get too specific on 1 OEM and what’s going on, but it feels like they’ve made some nice improvements to help dealers out, getting a little more incentives, pricing help, etcetera. But it sounds like a pretty big headwind in So I guess given the changes that were made in the fall, what else needs to happen there? Or I guess was it just kind of churning through and cycling and getting those initiatives kind of running to get that in a better place?

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Ryan, this is David. I’ll start and then Dan can jump in. I would tell you they brought the inventory day supply down, which was way out of control, which is great, still too high, but a big improvement. But they had to throw a lot more incentives and we had the wrong inventory on the ground and not just us, our peers as well, competitors. So you had to work through a lot of selling the vehicles that really weren’t the right vehicles for the market with heavy incentives.

So it’s still very low GPUs. As we move forward with better inventories more in the sense of the right models with the right equipment at the right price has the potential to help GPU. So there’s upside there with them bringing the right vehicles and right equipment with more growth because there’ll be higher demand. Was more about getting the inventories down and pushing through with the incentives, but really selling a lot of inventory that wasn’t highly desirable to the consumer.

Dan Clara, Senior Vice President of Operations, Asbury Automotive Group: Brett, the only I’m sorry, Ryan, the only item that I would add is, there were some restrictions anytime that we had an allocation on what was available or not available to order. We’re starting to see some of those restrictions lifted, which allows us to order the cars with the options that the consumer wants and the turns faster. So from a short term as that starts to kick in, we’re excited about that. The overall sentiment from the operators when I speak to them, the Stellantis stores, they feel a shift. But it’s not going to happen overnight.

There’s also they abandoned some products and models that were quick volume because of that we lost market share with Stellantis and all that is being talked about being brought back, but that is going to take some time. So now essentially just we just got to put to fruition everything that has been laid out by the Stellantis leadership team and we need to execute at the store level as it comes around.

Ryan Sigdahl, Analyst, Craig Hallum Capital Group: Helpful. Thanks David, Michael and happy birthday Dan. That’s it for us.

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Thank you. Thank you.

Conference Operator: Our next question comes from Brett Jordan with Jefferies. Please proceed with your question.

Brett Jordan, Analyst, Jefferies: Hey, good morning guys.

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Good morning.

Brett Jordan, Analyst, Jefferies: I’ll log Stellantis one more time. I guess following up on the last question, is it feel like the GPU is sort of bottomed here if their production mix is more in line with customer demand and volumes are coming down from an inventory standpoint, it’s not continuing to step down, but kind of flatlining?

David Holt, President and Chief Executive Officer, Asbury Automotive Group: It’s a great question. No way of knowing the future, but in my opinion, yes. I would say the was the low point in pushing through the inventory that was overpriced and really not as desirable. So there should be some upside from there. Dan, do you I agree.

Brett Jordan, Analyst, Jefferies: Okay. And then a question on the cost per pay service, obviously really strong. It doesn’t appear you’re driving that with promotions given the margins are strong, but sort of what do you attribute the strength in customer pay to? Is it capacity expansion or somehow better reaching the customer post warranty?

Dan Clara, Senior Vice President of Operations, Asbury Automotive Group: Yes, I’ll start. Greg, good morning. This is Dan. I’ll start it and then David can add whatever I missed. There has been we talked about this in several quarters

John Murphy, Analyst, Bank of America: about

Dan Clara, Senior Vice President of Operations, Asbury Automotive Group: the whole cycle of the guest experience. And it all starts with a proper multipoint inspection and then the tools that we installed about a year ago in our Western stores that were already being utilized in the legacy stores. So a big part of what you’re seeing there is just a more efficient way to inspect the cars, a more efficient and a more guest centric way to present the recommended services to the consumer in a more efficient way for them to approve or decline that service. In addition to that, the store level is doing a pretty good job of retaining customers. As David mentioned, our average mileage are 71000 miles.

So that means they’re doing a good job retaining the guest after the warranty expires. And with that higher mileage, it comes with maintenance items that break and that need to be taken care of and repairs or what have you. So it’s a combination of training, execution of the tools and then ultimately delivering a much more efficient guest experience.

David Holt, President and Chief Executive Officer, Asbury Automotive Group: And to add on top of that, I would tell you, we’ve been fortunate with our hiring over the last year and a half of adding some great leadership into our Western stores. We’ve had it in our Eastern stores all along and people make the difference in this business. And some of our new leadership that has come in has just made a material difference and really driving better results. And there’s still the good news is there’s still good upside for us. For the year overall, we had a 5% increase in tech headcount, which is a benefit to us, but we still have a lot of opportunity to grow our space without adding brick and mortar.

So again, it’s on us to offer a higher level of service, get better at what we do. And I think we’re making great strides in that and you can see the material impact the team has had out west.

Brett Jordan, Analyst, Jefferies: Thank you.

Rajeev Gupta, Analyst, JPMorgan: Thank you.

Conference Operator: Our next question comes from David Whiston with Morningstar. Please proceed with your question.

Chris Reeves, Vice President of Finance and Treasurer, Asbury Automotive Group0: Good morning. Just on the possibility of Trump tariff threats, the 25% and whatnot. I mean, as a dealer, you’re the importer here. Or do you have any kind of contingency plan or have you had discussions with the OEMs on sharing the cost burden or are you just going to have to either eat it or pass it all through to the consumer if it happens?

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Yes. David, this is David and others can jump in. We haven’t had any conversations with the manufacturers yet. I think it’s too early to call. A lot of the products are made in The U.

S. Even on the import side. We have a healthy parts and service business with the average age of the car out there and the used car businesses out there as well. I think always at the end of the day, we fear something more than we should and it tends to work itself out. And I don’t pretend to have any inside knowledge because I don’t, but I assume this is going to be 1, it’s going to get worked out.

I’m sure the administration understands how important the retail automotive space is to the GDP number.

Chris Reeves, Vice President of Finance and Treasurer, Asbury Automotive Group0: Thank you. And on affordability post election, have you noticed any kind of, I guess, reduction in consumers’ concerns about affordability because they feel better post election or is affordability still a really major problem for both new and used?

Dan Clara, Senior Vice President of Operations, Asbury Automotive Group: David, good morning. This is Dan. Back to David’s comment, we did see an uptick after the election and it feels like the affordability is question and issue is still up there, but the sentiment is much more positive and customers are as we saw it, there was pent up demand and it took place in the

David Holt, President and Chief Executive Officer, Asbury Automotive Group: And David, I would add to that in the because it’s always strong with luxury. We had the opportunity to have a better quarter than what we did. We were limited by product availability. Our luxury customers are they can handle the adversity of a down market or anything else. The demand was there.

In some cases, we just didn’t have the product to sell them. And there was more opportunity, which really held up the margin as you can see with luxury.

Chris Reeves, Vice President of Finance and Treasurer, Asbury Automotive Group0: And what was the $11,000,000 non cash impairment for?

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: So each year at the end of the year we have to do our annual impairment test and go through some stores. And so we had some stores out west that we had some impairments on just as we went through kind of the cash flow model for those stores. So about 5 stores had impairments this year.

Rajeev Gupta, Analyst, JPMorgan: Thank you. Thank you.

Conference Operator: We’ve reached the end of the question and answer session. I’d now like to turn the call back over to David Holt for closing comments.

David Holt, President and Chief Executive Officer, Asbury Automotive Group: Thank you, operator. This concludes the call today. We appreciate your participation and look forward to talking discussing the with you in the future. Have a great day.

Conference Operator: This concludes today’s conference. You may disconnect your lines at this time and we thank you for your participation.

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