Asbury Automotive Group Q1 2025 Earnings Report

Asbury Automotive Group EPS Results

• Actual EPS: $6.82
• Consensus EPS: $6.84
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $7.21

Asbury Automotive Group Revenue Results

• Actual Revenue: $4.15 billion
• Expected Revenue: $4.31 billion
• Beat/Miss: Missed by -$158.15 million
• YoY Revenue Growth: -1.30%

Asbury Automotive Group Announcement Details

• Quarter: Q1 2025
• Date: 4/29/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, April 29, 2025
• Conference Call Time: 10:00AM ET

Asbury Automotive Group (NYSE:ABG) (NYSE:ABG) is one of the largest automotive retailers in the United States. Headquartered in Duluth, Georgia, the company operates a network of franchised dealerships representing a diverse portfolio of automotive brands. Its core business activities include the sale of new and pre-owned vehicles, as well as the provision of vehicle finance, insurance and protection products to retail customers.

In addition to retail sales, Asbury offers a comprehensive suite of after-sales services, from scheduled maintenance and certified collision repair to parts distribution. The company has also invested in digital retailing through its Driveway platform, enabling customers to complete much of the purchasing process online, including vehicle selection, financing arrangements and home delivery options.

Since its incorporation in 1995 and initial public offering in 1998, Asbury has grown both organically and through strategic acquisitions. The business footprint spans roughly 15 U.S. states and was extended into the United Kingdom with the 2017 acquisition of Bristol Street Motors. Asbury’s expansion strategy emphasizes targeted dealership investments, operational integration and a consistent focus on customer satisfaction.

Under the leadership of President and Chief Executive Officer David Hult, Asbury Automotive Group is committed to enhancing the consumer buying experience, optimizing operational performance and delivering long-term value to shareholders through disciplined growth and technology-enabled solutions.

Asbury Automotive Group Q1 2025 Earnings Call Transcript

Key Takeaways

• Record Parts & Service performance: Posted an all-time high in parts and service gross profit with same-store growth of 5% and customer-pay gross up 6%, marking a 97% increase over the last ten years.
• Tariff uncertainty: Potential new tariffs drove late-March pull-forward demand but make it challenging to predict future vehicle volumes and gross profit per unit, despite 56% of Q1 new vehicles being U.S.-made.
• Herb Chambers acquisition: Entering the resilient Boston luxury market through a $1.34 billion deal, with closing expected in Q2 and a commitment to reduce leverage over the next 18–24 months.
• Techeon rollout gains: Expanded the new DMS beyond the four-store pilot, showing early productivity and guest-experience improvements, with full conversion targeted by late 2026.
• Total Care Auto (TCA): Delivered $19.5 million of pre-tax income in Q1 but faces negative non-cash deferral impacts and timing shifts tied to potential tariff-driven volume changes.

Presentation

[Operator]

Welcome to the Asbury Automotive Group First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Reeves, Vice President of Finance and Investor Relations. Thank you, sir. You may begin.

[Chris Reeves, VP of Finance and Investor Relations at 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 First Quarter 2025 Earnings Call. The press release, with us are David Hult, President and Chief Executive Officer Dan Clara, our Chief Operating Officer, and Michael Welch, our Senior Vice President and Chief Financial Officer.

[Chris Reeves, VP of Finance and Investor Relations at Asbury Automotive Group]

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.

[Chris Reeves, VP of Finance and Investor Relations at Asbury Automotive Group]

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 31, 2024, 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 this call.

[Chris Reeves, VP of Finance and Investor Relations at Asbury Automotive Group]

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. Comparisons will be made on a year-over-year basis unless we indicate otherwise. We have also posted an updated investor presentation on our website, investors.asburyauto.com, highlighting our first quarter results. It is now my pleasure to hand the call over to our CEO, David Hult.

[Chris Reeves, VP of Finance and Investor Relations at Asbury Automotive Group]

David?

[David Hult, CEO at Asbury Automotive Group]

Thank you, Chris, and good morning, everyone. Welcome to our first quarter earnings call. I want to begin by expressing my appreciation for our hardworking team members in delivering strong first quarter results. I'm proud of the way our team members came together to serve our guests. Since 2017, Asbury has been the top public operator in adjusted SG&A as a percentage of gross profit and in adjusted operating margin.

[David Hult, CEO at Asbury Automotive Group]

We take pride in how we run our business to generate strong long-term results for our shareholders. I'd like to spend just a few moments addressing the issue of tariffs. As the scale and scope of the new tariff approach became more clear, we saw a rise in demand in late March as consumers purchased vehicles ahead of the potential price increases.

[David Hult, CEO at Asbury Automotive Group]

Our OEM partners are all working to determine how the tariff policies will impact their specific brand, and they will communicate those decisions to us when ready. As we assess our own scenario planning, we believe our portfolio is comparatively insulated from the tariff impacts on pricing. We estimate that approximately 56% of our new vehicle units in Q1 were produced in America and would be shielded from the tariffs.

[David Hult, CEO at Asbury Automotive Group]

As it stands today, we are seeing a wide range of approaches for how the OEMs are addressing the tariff impacts. We expect to get more clarity in the weeks and months ahead, but until then, predicting the trend lines for key metrics like volumes or new GPUs will be challenging. Transitioning to highlights for the quarter, we posted another all-time record in gross profit for our parts and service business.

[David Hult, CEO at Asbury Automotive Group]

The team built off their momentums from previous quarters, with same-store gross profit up 5% and same-store customer pay gross higher by 6%. I think it is important to give some historical context for the consistent growth we have produced with our stores over time. We look back at the subset of stores today that we operated in 2014 and saw a 97% increase in customer pay gross profit over that 10-year period.

[David Hult, CEO at Asbury Automotive Group]

Dan will provide additional detail about this in his comments, and I'm optimistic about our positioning for long-term growth. Our Tekion implementation continues to progress. We recently expanded the rollout beyond our four-store pilot. The Koons Group, which is on a different DMS than the rest of Asbury, has had multiple stores transition to Tekion and should be completed before the end of Q3. We have seen early signs of improvement in productivity and the guest experience.

[David Hult, CEO at Asbury Automotive Group]

Shifting to capital allocation, we are excited about the pending acquisition of the Herb Chambers Automotive Group. This is a strategic part of the country that we have been looking to enter for a long time as part of our disciplined growth strategy. The Boston area is traditionally a resilient market that can weather different economic cycles. In addition, they have a wonderful group of luxury stores that we expect will balance our overall brand portfolio. We expect to close the transaction following OEM approval by the end of the second quarter.

[David Hult, CEO at Asbury Automotive Group]

We also divested a Colorado Nissan store and a South Carolina Volvo store, and are continuously evaluating our portfolio to optimize brand mix. Following the pending acquisition of Herb Chambers, we intend to focus on reducing our leverage over the next 18 to 24 months. Michael will provide more details in his remarks.

[David Hult, CEO at Asbury Automotive Group]

Now for our consolidated results for the first quarter. We generated $4.1 billion in revenue, had a gross profit of $724 million, and a gross profit margin of 17.5%. Our same-store adjusted SG&A as a percentage of gross profit was 63.9%. We delivered an adjusted operating margin of 5.8%, and our adjusted earnings per share was $6.82. Our adjusted EBITDA was $240 million. Before I pass to Dan, I want to say thank you again to our valued team members for their performance and service to our guests. Now Dan will discuss our operational performance. Dan?

[Dan Clara, COO at Asbury Automotive Group]

Thank you, David, and good morning, everyone. I am thankful and proud of our team members' commitment to our North Star to be the most guest-centric automotive retailer. Thank you. Now, I am going to provide some updates on our same-store performance, which includes dealerships and TCA on a year-over-year basis unless stated otherwise.

[Dan Clara, COO at Asbury Automotive Group]

Starting with new vehicles, same-store revenue was up 6% year-over-year, and units were up 4%, driven by the boost in March sales. New average gross profit per vehicle was $3,449, a solid first quarter performance compared to normal seasonality from fourth quarter to the first quarter. Our volume for Stellantis was up 3% this quarter compared to national sales, down 12%. While this is an improvement from where we have been, we estimate the Stellantis headwind to our PVR was $125.

[Dan Clara, COO at Asbury Automotive Group]

Across all brands, our same-store new day supply was 44 days at the end of March versus 47 at the end of December. Turning to used vehicles, first quarter unit volume was down 8% year-over-year. Used retail gross profit per unit was $1,587, which marks the third quarter of sequential growth. We still plan to prioritize unit profitability at this point of the used car supply cycle.

[Dan Clara, COO at Asbury Automotive Group]

We remain ready to adjust our approach to the pre-owned business based on how market conditions are shaping up. Our same-store used day supply was 31 days at the end of the quarter. Shifting to F&I, we earned an F&I PVR of $2,263, a sequential increase versus the fourth quarter. That the first this year. We now plan to integrate TCA in the Koons stores by early Q4.

[Dan Clara, COO at Asbury Automotive Group]

The Koons stores are undergoing a transition to Tekion that we would like to focus on before rolling out TCA at those locations. Our total front-end yield per vehicle was $4,854. Moving to parts and service. As David mentioned, it was impressive to see the consistent growth over the last couple of quarters continue. Our same-store parts and service gross profit was up 5% in the quarter and up 7% in the month of March, driven by warranty. We believe growth would have been higher if not for the weather-related disruptions.

[Dan Clara, COO at Asbury Automotive Group]

For the quarter, we generated a gross profit margin of 58.3%, an expansion of 170 basis points. This expansion was driven by increased profitability of our higher margin segments. When looking at our customer pay and warranty performance together, they grew a combined 9.1% in gross profit.

[Dan Clara, COO at Asbury Automotive Group]

In our Western stores, this combined figure grew 14% in gross profit, led by 14.4% growth in customer pay. We continue to be bullish on the long-term trajectory of our parts and service business. As David mentioned earlier in his remarks, there were 54 stores in 2014 that we still owned in 2024. We looked at those stores and compared their customer pay performance back then to what they generated in 2024.

[Dan Clara, COO at Asbury Automotive Group]

For the cohort of rooftops, we saw our customer pay gross profit dollars grow from $122 million to $241 million, an increase of nearly 100% in that 10-year period. Through fluctuating store levels, macro conditions, and other economic factors, we have demonstrated our ability to consistently deliver robust, profitable growth year in and year out.

[Dan Clara, COO at Asbury Automotive Group]

We believe that the continually aging car parts and increasing complexity of modern vehicles means our stores are well-positioned to capture future service growth. Finally, we retailed over 10,500 sales through Clicklane in the first quarter. We sold approximately 5,000 new units, or about 47% of all Clicklane sales. We view this ability to sell new cars as an important differentiating factor in the marketplace.

[Dan Clara, COO at Asbury Automotive Group]

Thank you once again to our team members as we progress along our journey 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, SVP and CFO at Asbury Automotive Group]

Thank you, Dan. Thank you to our team members for a solid start to the year. For now, I will discuss our financial performance in the quarter. For the first quarter, adjusted net income was $134 million, and adjusted EPS was $6.82 for the quarter. Adjusted net income for the first quarter of 2025 excludes, net of tax, $11 million of non-cash asset impairments, $7 million of cyber insurance recovery proceeds, $3 million related to the gains on the divestures, and $2 million of professional fees related to the pending acquisition of the Herb Chambers Automotive Group.

[Michael Welch, SVP and CFO at Asbury Automotive Group]

There were no adjustments in the first quarter of 2024. Adjusted SG&A's percentage of gross profit came in at 64%. As we stand today, there is a risk for a slightly higher SG&A profile if tariff policies persist.

[Michael Welch, SVP and CFO at Asbury Automotive Group]

The adjusted tax rate for the quarter was 24.7%, and we forecast the full-year adjusted tax rate for 2025 to be 25.2%. TCA generated $19.5 million of pre-tax income in the first quarter. The negative non-cash deferral impact for the quarter was about $2 million, or $0.06 on an EPS basis. In the first quarter of 2024, this was a slight non-cash benefit to EPS.

[Michael Welch, SVP and CFO at Asbury Automotive Group]

We estimate that second quarter of 2025 would follow this trend of negative non-cash deferral impacts. As Dan mentioned, we now anticipate offering TCA in the Koons stores in early Q4. The updated schedule of the rollouts would affect the timing of deferrals in future periods. We have outlined our timeline and estimated impact on EPS on slide 18 of the presentation posted to our website this morning, along with the accounting example from last quarter.

[Michael Welch, SVP and CFO at Asbury Automotive Group]

The future periods have not been updated due to the uncertainty around tariffs. Now moving back to our results, we generated $187 million of adjusted operating cash flow for the first quarter of 2025. Excluding real estate purchases, we spent $21 million on capital expenditures through March. We anticipate approximately $250 million in CapEx spend for both 2025 and 2026. However, this is dependent on the impact and duration of tariff policies, with adjustments to spending as appropriate. Free cash flow was $166 million for the first quarter of 2025.

[Michael Welch, SVP and CFO at Asbury Automotive Group]

We ended Q1 with $964 million of liquidity comprised of floor plan offset accounts, availability on both our used line and revolving credit facility, and cash, excluding cash at Total Care Auto. In February, we announced the pending acquisition of Herb Chambers Automotive Group. The transaction is valued at $1.34 billion before inventory and fixed assets to be acquired at close.

[Michael Welch, SVP and CFO at Asbury Automotive Group]

This transaction amount represents $750 million of blue sky and $590 million of real estate and improvements. We expect this deal will be financed through a combination of our credit facility funding, proceeds from the new mortgage facility, and existing cash. Earlier this month, we amended our credit facility, which would increase our revolver capacity to $925 million and our new vehicle floor plan capacity to $2.25 billion.

[Michael Welch, SVP and CFO at Asbury Automotive Group]

It was very encouraging to see that the facility was oversubscribed, showing robust interest from our banks and OEM partners. These increases are conditioned upon and will become effective concurrent with the closing of the Chambers deal. Please refer to the 8-K filed on April 9th for more details. Our transaction adjusted net leverage was 2.75 times at the end of March.

[Michael Welch, SVP and CFO at Asbury Automotive Group]

We anticipate that this ratio will be near the higher end of our target range, shown in our presentation by next year. As it relates to capital allocation, we plan to focus on deleveraging over the next 18 to 24 months. We estimate that the net proceeds from pending divestitures and assets held for sale following the close of the pending Chambers deal should be between $250 million and $275 million, which would contribute a meaningful amount to paying down debt at the appropriate pace.

[Michael Welch, SVP and CFO at Asbury Automotive Group]

In closing, thank you again to all our team members for your efforts and resiliency. This concludes our prepared remarks. We will now turn the call over to the operator and take your questions. Operator.

[Operator]

Thank you.

[Operator]

Thank you.

[Operator]

We will now be conducting a question and answer session.

[Operator]

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we poll for questions. Our first question comes from Jeff Lick, Stephens. Please proceed with your question.

[Jeff Lick, Analyst at Stephens]

Hi, good morning, guys. Congrats on a nice quarter. Thanks for taking my question. As it relates to TCA, on slide 18, you guys highlighted a $0.74 benefit in one Q, and then you have a $0.30 benefit for the rest of the year. Is that simply implying that it's going to be a $0.44 cost the rest of the year? Also, building on slide 18, you highlighted that 2025 to 2029 were under review. Could you maybe highlight how tariffs will affect the TCA business as well?

[Michael Welch, SVP and CFO at Asbury Automotive Group]

Jeff, this is Michael. With tariffs, if it results in a decrease in the volume, that would slow down the deferral impact. You'd have less of the deferral impact in 2025 and push off that deferral impact in the future years. It is really what that does to the SAR level. If SAR ends up in the 15 million range, then that is going to be less of the deferral impact for 2025, but probably more of a deferral impact in 2026 and 2027. It just kind of slides it over a year depending on the impact on volumes.

[Jeff Lick, Analyst at Stephens]

Got it. Just a quick follow-up on Tekion. You mentioned you're rolling out stuff to Koons now. You guys have talked about the SG&A opportunity longer term. I'm just curious, in the short term, how is the integration going? Maybe if you could remind us just big picture how this is going to manifest itself into substantial SG&A savings. I think you guys even highlighted that you could get into the 50s.

[David Hult, CEO at Asbury Automotive Group]

Yeah. Jeff, this is David. The rollout's going extremely well, and it continues to progress. Our hope at this point is to have all stores converted by the end of 2026, beginning of 2027. We still have some pending litigation we have to deal with with CDK, but we're optimistic. The savings for us is certainly going to be a material number to us. It's on a twofold basis. We're basically unplugging two-thirds of the software applications that we have currently in CDK that we will no longer have to pay. With each application that we have in CDK, we have to pay a fee for integration on a monthly basis.

[David Hult, CEO at Asbury Automotive Group]

Those fees go away as well. There's a benefit on overall expense savings there. On the flip side, we see the benefits on the productivity. If our productivity increases per employee like we anticipate and what we're seeing early on, that lowers our personnel cost as well.

[Jeff Lick, Analyst at Stephens]

Great. I'll pass it along and congrats again.

[David Hult, CEO at Asbury Automotive Group]

Thank you.

[Operator]

Our next question comes from Rajat Gupta with JP Morgan. Please proceed with your question.

[Rajat Gupta, Analyst at JPMorgan]

Great. Thanks for taking the question. I just had one question on just overall gross profit performance. I mean, if you look at the unit performance and the same-store service performance, it seems a little bit below than some of the peers that have reported. I was curious if there's anything you can point to, either in terms of regional differences. I know you have a lot of exposure in the D.C. area. Maybe that caused an outsized headwind. Any way you can unpack what might be causing that divergence, if any, in your opinion, and have a quick follow-up. Thanks.

[David Hult, CEO at Asbury Automotive Group]

Rajat, this is David. A lot went on in the quarter. It started off January a little bit soft for us. We had a lot of weather issues in a lot of our markets. We pull out Sundays and we look at the quarter. We generate around $50 million of revenue a day. That kind of ties into the days we lost with weather as far as where we're off there. As we started to progress into the quarter and things were heating up on the tariffs, my message to the operators was, "Don't chase volume. We can't replace the cars that we have. Focus on gross profit.

[David Hult, CEO at Asbury Automotive Group]

Don't get caught up in volume." I think when you look at growth quarter over quarter, you can't just get caught in the concept of how much someone's up, but what are the dynamics within the quarter, and how do we maximize our returns? I think at the end of the day, we're here to maximize our returns, which I think we did again by so far having the highest operating margin and the lowest SG&A.

[Rajat Gupta, Analyst at JPMorgan]

Were there any regions that saw maybe some outsized weakness relatively within your store group?

[Michael Welch, SVP and CFO at Asbury Automotive Group]

The only region, as you expect, the D.C. market, that area around D.C. and Baltimore, we saw some weakness there just with the uncertainties around government jobs. That's the one market that kind of stood out as a tough market. Other than the ones that David mentioned in terms of weather impact, we had weather impact across a lot of our stores.

[David Hult, CEO at Asbury Automotive Group]

We had in Georgia, the Carolinas, Indiana, St. Louis, northern Florida. Unfortunately, we just got hit hard compared to year-over-year, and Koons probably took the biggest hit.

[Rajat Gupta, Analyst at JPMorgan]

Got it. Got it. That's helpful. Just one question on Herb Chambers. I know in the past, when there was a lot of uncertainty during the pandemic years, you had exercised the option to walk away from the park-based deal, and you again renegotiated. Are those terms and agreements still in place even for Herb Chambers in case the macro got worse due to the tariff backdrop? Just curious how you'd approach it in that backdrop and what the breakup fee would be like for Herb Chambers. Thanks.

[David Hult, CEO at Asbury Automotive Group]

Sure. The asset purchase agreement we have does not have a breakup fee for us. It does for the seller. We do have a MAC in the contract. Based on current market conditions, we do not see any reason to not move forward with the deal, and there is nothing in the contract that would allow us to get out at this point. We do not have interest in getting out at this point in the contract.

[David Hult, CEO at Asbury Automotive Group]

The group is performing extremely well in the first half of the year. Like most, we are hoping the next couple of months create a lot of clarity with the tariffs. As we said in our statements, 56% of our products that we are selling is U.S.-based and not involved in the tariffs. Plus our parts and service business and our TCA business, we think we are in a good position.

[David Hult, CEO at Asbury Automotive Group]

We also think long-term as we should be thinking for our shareholders, this is a really great asset and a part of the country we've been trying to get into for a while. We believe the luxury mix and their brand recognition and name in the market is certainly the dominant player in that area.

[Rajat Gupta, Analyst at JPMorgan]

Understood. That's very clear. Thanks for all the color and good luck.

[David Hult, CEO at Asbury Automotive Group]

Thank you.

[Operator]

Bank of America. Please proceed with your question.

[Operator]

Good morning, guys. Just three quick ones. David, first on front-end grosses, 4,852 is a really good number. I mean, I think we're looking at the year-over-year decline and looking at some of the components. I think last year, as you kind of average out the year, you ran at 4,880. The year-over-year declines are slowing. You're kind of reaching what appears maybe sort of an asymptotic limit on the downside. How do you think about that front-end yield or that front-end gross going forward? I mean, there's a lot of moving parts in it, but it seems like we're kind of getting close to a floor here.

[David Hult, CEO at Asbury Automotive Group]

John, I'll take a shot at it. Hopefully, at some point, every time I repeat this, it'll get some credibility in the street. We're a different company today than we were pre-COVID. Our store balance mix is different. It shows that our acquisitions prior to COVID were accretive as far as GPUs go to what the legacy Asbury was. I think you're seeing that in the numbers.

[David Hult, CEO at Asbury Automotive Group]

The other comment that I would make, and Dan can follow this up if he wants, was my comment to Rajat. I don't think necessarily highest year-over-year increases in certain areas necessarily project a winner. I think it's based upon the market conditions. The market conditions were such in Q1 where we had beyond weather issues. You could see the winds coming with the tariffs.

[David Hult, CEO at Asbury Automotive Group]

To us, the inventory we had on the ground could not be replaced at the same dollar value in general thinking. Why would we give the cars away? We should focus on gross profit and not chase volume. That is what we chose to do. It is certainly debatable, but that is what we chose to do. The weather days, as I said earlier, tied into the revenue miss that we think we had. We feel really comfortable with the stability that we had.

[David Hult, CEO at Asbury Automotive Group]

I think Dan's comment is really relevant. When you look at customer pay and warranty combined at 9%, that is a pretty strong number coming through the weather issues and the delays we had within Q1.

[David Hult, CEO at Asbury Automotive Group]

Okay. And then just a second one on parts and service. I mean, I guess you're talking about this on the weather, etc., that depressed the quarter. I mean, there's no change really in your view that you should be doing mid to high single digits on a same-store basis. I'm just curious if there's any change there. Are you seeing the consumer kind of getting freaked out and maybe buying ahead on vehicles, but maybe on service work hitting the pause button? We're seeing some deferred maintenance potentially build up with a slightly slower same-store sales on parts and service.

[Dan Clara, COO at Asbury Automotive Group]

Hi, John. Good morning. This is Dan. No, our thought process is still the same. We're not changing our outlook of fixed operations, mid-single-digit growth. As far as the second question of if we're seeing any slowdown or pushing back service work because of the tariffs, I would say we've seen a little bit of the opposite where customers are calling in and getting more information as to what the true impact is of the parts, the cost of the parts to repair future services. We share with them that this is something that the OEMs are cautiously watching, and we only share the information that we have with them.

[Dan Clara, COO at Asbury Automotive Group]

In some cases, some of these guests have decided to move their services upfront rather than delay it in hopes that if the tariffs do impact parts in a negative way, that they have already serviced their car, at least for the short term.

[David Hult, CEO at Asbury Automotive Group]

John, I would add, as I said in my statement, that base of 54 stores that we still own and 24 to go from 122 to $240 million with essentially flat volume because SAR went up and down during that period. When you snapshot 14 against 24 to grow $100 million in 54 stores with essentially flat volume shows our growth within the market and stays consistent.

[David Hult, CEO at Asbury Automotive Group]

The other thing that I think is really important to refer to is slide 15 on our IR deck where it shows the average miles through the shop at over 71,000, approaching 72,000. We have some stores over 90,000, but the average is over 71,000. That is pretty strong, and it shows tremendous growth there. That also insinuates supposedly the franchise dealer loses the customer after warranty.

[David Hult, CEO at Asbury Automotive Group]

This is well after warranty, and it shows we're retaining it and we keep getting it. It's not coming in huge chunks at once, but it's slow, steady growth, which we think is smart because we want to retain the customers as well. We are very focused on that. As I've said in prior calls, in my opinion, between now and 2030, between the EVs and all the other things going on in the marketplace right now and technology changing,

[David Hult, CEO at Asbury Automotive Group]

we think we're in an opportunity over the next several years to grow revenue because cost of ownership is going to go up and the service expenses are going to go up as well. The cost for ownership is going to go up. We see this as favorable for us. With technology the way it is, we think it makes it tougher for the independents.

[David Hult, CEO at Asbury Automotive Group]

We see it as an opportunity for the franchise model to continue to thrive and grow.

[David Hult, CEO at Asbury Automotive Group]

I completely agree. Just one last one, David. On Tekion, I think a lot of folks tend to focus on the cost side of the equation. But as that system is integrated, are there other revenue opportunities as folks become more efficient? How do you think about it sort of on the top-line potential benefit as opposed to just the cost side?

[David Hult, CEO at Asbury Automotive Group]

Sure, John. I'll take a stab at it, and please follow up if it doesn't make sense what I'm saying. One of the main elements that we did when we designed our software with Tekion was a one-customer profile. Basically, right now in Atlanta, with the stores that we have, if you do business in one store and your wife does business in another store, the two stores can't see that.

[David Hult, CEO at Asbury Automotive Group]

With our one-customer profile, all stores see that customer and the family and what goes on. It allows us to better communicate. It's also a one CRM for all departments. Usually, CRMs are just for a sales department. They have a CRM for sales, service, parts, collision. It allows us better connectivity, better communication, more efficient marketing and communication to that consumer as well. We see an opportunity with efficiencies and costs with marketing.

[David Hult, CEO at Asbury Automotive Group]

We see obviously lower costs with the software. To your point, as technology continues to advance, our production per employee or on the sales side, sales units per salesperson, we expect to see it go up over time fairly materially, which is going to save us on the expense line. We are also starting to see it on the productivity per service advisor as well.

[David Hult, CEO at Asbury Automotive Group]

As the technicians get more comfortable with videos and technology that they have and how seamless it is integrated into Tekion, it just makes it a lot easier. It also allows the consumer at the same time, instead of just getting a text message to see how their car did on an MPI, they are getting to see all the documents and create their own library.

[David Hult, CEO at Asbury Automotive Group]

The transparency and communication, we think, is going to build trust, which is going to allow us to capture more business within the markets we compete in.

[David Hult, CEO at Asbury Automotive Group]

Super helpful. Thank you very much.

[David Hult, CEO at Asbury Automotive Group]

Thank you.

[Operator]

Our next question comes from Ryan Sigdahl, Craig-Hallum Capital Group. Please proceed with your question.

[Operator]

Hey, thanks. This is Matthew Raab on for Ryan. I believe it was mentioned there's risk to a slightly higher SG&A profile if the tariffs persist. What sort of guardrails would you provide to us knowing what you know today about the tariff situation? I think last quarter, you called out kind of a mid 60% range for 2025. Any puts takes there would be helpful. Thanks.

[Michael Welch, SVP and CFO at Asbury Automotive Group]

Yeah, it'd be slightly higher than that. Call it mid to high 60s if that's assuming that you had a big falloff on volume. We will be able to control the cost. A lot of our costs are variable and compensation-related or advertising-related. We were able to pull the leverage pretty quick to get the cost out. If you saw a meaningful drop-off in the sales volume, you'd see a little bit of an uptick on the SG&A side.

[David Hult, CEO at Asbury Automotive Group]

Just to follow up, if the volume goes down, we can track the headcount. Generally speaking, over the last few decades in the franchise model, when volume decreases, usually margins sustain or grow.

[David Hult, CEO at Asbury Automotive Group]

That's great. Thank you very much.

[David Hult, CEO at Asbury Automotive Group]

Thank you.

[Operator]

As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our next question comes from David Whiston with Morningstar. Excuse me. Please proceed with your question.

[David Whiston, Analyst at Morningstar]

Thanks. Good morning. Going back to Tekion, David, you said that personnel costs are going down with the pilot. And so once you roll that out everywhere, does that mean would these personnel costs be more from at that point, headcount reductions could be done, or do you mean that there would be less replacement hiring?

[David Hult, CEO at Asbury Automotive Group]

Yeah, David, let me clarify that. Headcount has not gone down today. Like anything else, you get better with practice with software, and you become more efficient with it over time. Compared to the software and the stores we had before and what we have with Tekion, it's kind of like going from a car to a Ferrari, a traditional car. It takes a while to get used to it.

[David Hult, CEO at Asbury Automotive Group]

We're confident that over time, headcounts will come down because we will be more productive. It is also part of our vision of being a flatter organization and offering our better guest experience. Time and efficiency is what matters to our guests. We think this software, along with future training and efficiencies, will certainly get us there.

[David Hult, CEO at Asbury Automotive Group]

We also think when the headcount comes down, our income per employee will go up, which is going to allow us to garner a higher quality employee to service our guests. Our focus is that. I mean, at the end of the day, we gain or grow our business based on the level of service we offer.

[David Whiston, Analyst at Morningstar]

On tariffs, likely there'll be some type of price increases eventually. Do you think that the automakers would be more likely to first try and cut incentives, try and do it in an indirect way, or do you think they'll just be more blunt and just do an increase and try and get it over with?

[David Hult, CEO at Asbury Automotive Group]

Yeah, I wish I knew the answer to that. I would tell you it's going to vary dramatically by brand. And let's face it, I mean, your demand from the consumer is going to dictate what the threshold is for price increases. If you have a product pre-tariff that has a high-day supply and a low turn, that's not a car that can absorb a price increase. I would assume the first lever would be to back off on incentives.

[David Hult, CEO at Asbury Automotive Group]

Some have already done that. Some have not. I think it's really too early to tell, and everyone's trying to navigate what the future holds. I think the other thing is whatever sticks at the end of the day, all of us will be able to create our plans and move forward, which we're excited to get to that point.

[David Hult, CEO at Asbury Automotive Group]

It also could fluctuate what models you see coming to the U.S. and what kind of supply and if any models get eliminated along the way. Again, I wish I had more insight, but I think it's a little bit early to figure out where it's going to settle.

[David Whiston, Analyst at Morningstar]

On that point of uncertainty, which I totally understand, I'm going to ask you another one that's tough to say, but do you think a lot of March was more pull forward or a lot of pent-up demand?

[David Hult, CEO at Asbury Automotive Group]

Yeah, David. I heard our peers. From our standpoint, March was kind of pacing along like a traditional March for us. It was not until the last 7 to 10 days of the month that it started to go on a little bit higher trajectory. Again, I cannot stress it enough. We really started focusing on in the middle of the quarter, do not chase volume. Let us focus on margin.

[David Hult, CEO at Asbury Automotive Group]

Hold off. You cannot replace that car. So right or wrong, our focus was on generating growth, meaning per transaction and less on volume. There was a slight uptick towards the end of the quarter. I would not say there was any uptick in parts and service, but we certainly did see it on the sales side slightly.

[David Whiston, Analyst at Morningstar]

Okay. Thanks, guys.

[David Hult, CEO at Asbury Automotive Group]

Thank you.

[Operator]

Our next question comes from Bret Jordan with Jefferies. Please proceed with your question.

[Bret Jordan, Managing DIrector at Jefferies]

Hey, good morning, guys. On the parts and service, could you give us—and maybe you said it and I missed it—but what was the contribution from price versus car count? I guess as you think about the year shaking out, how do you see price contributing to that mid-single digit growth in parts and service?

[David Hult, CEO at Asbury Automotive Group]

Bret, I'm sorry, I missed a question. Can you please repeat it?

[Bret Jordan, Managing DIrector at Jefferies]

Yeah. In the parts and service, what was price versus car count in a ticket versus traffic? I guess in your outlook for the year, where do you see price contributing to the mid-single digit growth?

[David Hult, CEO at Asbury Automotive Group]

This is David, Brett. I would tell you because of the weather impacts, the traffic count was slightly above. What we've been trending the last couple of quarters has been the revenue or dollar increases. Part of it you can kind of see in our brand mix of what we have and what we're generating per transaction. It is generally dollar increases more than traffic increases. We anticipate in the future quarters, meaning the spring and summer, not to have weather-related issues and that car count to increase. What you saw in the quarter was mainly dollar increase.

[Bret Jordan, Managing DIrector at Jefferies]

A question on luxury. It seems like a couple of the German brands are holding product free tariff at the import. Do you see any sort of short-term issue on supply? It sounds like maybe Porsche, Audi have enough to get through May. What you hear from the OEs, will they probably keep the inventory flowing, or is there a risk that we're going to stock out in some of the German luxury brands?

[David Hult, CEO at Asbury Automotive Group]

Yeah. Kind of the comment earlier about us not chasing volume, you can't replace it. When the brands announced—Porsche, Audi, and Land Rover kind of announced that they were holding off shipments coming to the U.S.—generally, they had between a 45-60 day supply of vehicles currently in the United States. That gave them—this is my thought, not theirs.

[David Hult, CEO at Asbury Automotive Group]

They don't share it. It gave them inventory on the ground that was not tariffed. If they brought shipments in early, meaning continued the shipments, they were going to have that heavy tariff. If for some reason things got worked out and 45, 60 days later, they would have had that product on the ground at a much higher tariff rate potentially. I'm assuming it was a little bit strategic to say, "Let's take a breath. We have enough product in the United States."

[David Hult, CEO at Asbury Automotive Group]

Let's see where the dust settles to decide what we're going to do. To your point, we are certainly getting down at a lower day supply than we would like to be at. We are looking forward to those shipments to continue. Not inside knowledge from an OEM perspective, just an opinion from sitting on the sidelines watching it.

[Bret Jordan, Managing DIrector at Jefferies]

Okay. Great. Thank you.

[David Hult, CEO at Asbury Automotive Group]

Thank you. This concludes our call.

[Operator]

There are no further questions.

[David Hult, CEO at Asbury Automotive Group]

I'm sorry. Go ahead, Aubrey.

[Operator]

There are no further questions at this time. I would now like to turn the floor back over to David Hult for closing comments.

[David Hult, CEO at Asbury Automotive Group]

Thank you very much. This concludes our call today. We appreciate you all participating, and we look forward to discussing our performance in the next quarter. Have a great day.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• David Hult, CEO
• Dan Clara, COO
• Michael Welch, SVP and CFO
• Chris Reeves, VP of Finance and Investor Relations

Analysts

• Jeff Lick, Analyst at Stephens
• Analyst at Craig-Hallum Capital Group
• Bret Jordan, Managing DIrector at Jefferies
• Rajat Gupta, Analyst at JPMorgan
• David Whiston, Analyst at Morningstar
• Analyst