Asbury Automotive Group Q1 Earnings Call Highlights

Key Points

• Q1 results: Asbury reported revenue of $4.1 billion, gross profit of $727 million (17.7% margin), adjusted EBITDA of $207 million and adjusted EPS of $5.37 (would have been $5.63 excluding a TCA deferral), with performance weighed down by severe winter weather and moderating consumer demand.
• Tekion rollout: More than 50% of stores are live on Tekion and Asbury expects to be fully converted by fall 2026; management warned of elevated short‑term disruption and implementation costs (peaking late 2Q into 3Q) but said efficiencies should materialize after the ramp, with early Koons results showing substantial service productivity gains.
• Demand, pricing and inventory: same‑store new vehicle revenue fell ~9% year‑over‑year, but per‑unit new gross profit is trending toward a normalized range near $3,000, while used vehicle GPU rose ~12% to $1,828 and inventory days (new 54, used 30) remain supportive of pricing.

Asbury Automotive Group NYSE: ABG executives pointed to a “noisy” first quarter shaped by severe winter weather, moderating consumer demand following last year’s tariff-driven sales spike, and temporary disruption from the company’s ongoing rollout of the Tekion dealer management system (DMS). Management said it remains on track to complete the conversion by the fall, with more than half of stores already running on Tekion.

Quarter results and key headwinds

President and CEO David Hult said the quarter reflected “the expected decrease in volumes as consumer demand moderated from last year's tariff-driven spike in sales,” along with tougher weather and the impact of stores converting to Tekion. The company reported first-quarter revenue of $4.1 billion and gross profit of $727 million, translating to a 17.7% gross margin, which Hult said was up 22 basis points. Asbury delivered a 5% adjusted operating margin, adjusted EBITDA of $207 million, and adjusted earnings per share (EPS) of $5.37.

Senior Vice President and CFO Michael Welch said adjusted net income was $102 million and noted a non-cash deferral headwind related to Total Care Auto (TCA) of $0.26 per share. “Our adjusted EPS would have been $5.63 without the deferral impact,” Welch said. He added that adjusted results excluded several items, including “net gain on divestitures of $94 million,” $5 million in Tekion implementation expenses, $3 million of weather-related losses, and $1 million tied to duplicate DMS-related expenses.

Welch estimated weather reduced consolidated gross profit by $19 million and EPS by $0.56. During Q&A, Hult described January and February as “really rough” and said the business “didn't recover” after mid-January storms, though March was “a good sign” and April was tracking similarly.

Tekion migration: disruption now, efficiencies later

Hult said the first and second quarters represent the peak period for Tekion store transitions, which keeps integration costs and operational disruption “elevated” as teams adapt. “Today, over 50% of our stores are running on Tekion,” he said, adding the company anticipates being fully converted by fall 2026 and expects to begin “fully realizing the cost and efficiency benefits” after that.

COO Dan Clara described the DMS change as complex but necessary to improve the guest experience and operational performance. He cited the Koons dealerships—converted last summer—as an early example of Tekion’s impact. In March, Clara said that group posted:

• Gross dollars per technician up 21% year-over-year
• Average productivity per service advisor up 16%
• Support costs in stores down 5%

Clara said there is a short-term learning curve: “We believe it takes about four to six months to overcome the muscle memory of the legacy software.” In response to questions on timing, Welch said the cumulative “stack-up effect” of stores in their first four to six months on Tekion would likely peak “very late 2Q into 3Q,” with a crossover to more stores past the ramp-up period “sometime in 4Q.”

Clara also provided an update on the Herb Chambers integration, saying it is going well and that Tekion rollout there started last month. He said roughly “in the 20 range” of Chambers stores had already converted, with the remaining stores expected to convert in June. “By June, Herb Chambers will be completely converted to Tekion,” Clara said.

Vehicle demand, pricing, and inventory

On the retail environment, management said demand softened, with weather a notable contributor early in the quarter and broader uncertainty also weighing on consumers. Clara said same-store new vehicle revenue was down 9% year-over-year, and he noted the company is “monitoring consumer behavior in light of ongoing geopolitical events.”

Despite lower new-vehicle volume, per-unit profitability held up relatively well. Hult said new vehicle PVRs on an all-store basis were down $73 sequentially and $177 year-over-year, suggesting profitability is nearing “normalized levels.” Clara put same-store new gross profit per vehicle at $3,061, with luxury holding in line with the prior year while import and domestic moderated. On an all-store basis—including the “positive impact of the Chambers platform”—new gross profit per unit was $3,271, down $177 year-over-year.

Inventory levels were described as supportive of pricing. Clara said same-store new day supply ended March at 54 days, which the company believes can “support resilient gross profits per unit.” In response to an analyst question on normalized new-vehicle gross profit, Welch said Asbury’s previous framework of $2,500 to $3,000 per unit has shifted higher. “We believe now that that number is moderating and it is closer to that 3,000 range,” he said.

Used vehicle results showed improving profitability, according to management. Hult said used vehicle PVR on an all-store basis was $1,847, up 5% sequentially and 16% year-over-year. Clara reported used retail gross profit per unit rose 12% to $1,828, up $201 from the prior year and $79 versus the fourth quarter. He said this was the second consecutive quarter of GPU improvement and noted Asbury expects used supply to increase through the year with lease returns, creating an opportunity to lift volume while maintaining profitability. Same-store used days’ supply ended the quarter at 30 days, down from 35 at the end of Q4.

On mix and consumer behavior amid higher gas prices, Clara said it typically takes “five to six months” for buyers to shift purchasing habits and that Asbury has not yet seen customers meaningfully trading down to smaller vehicles. He added that used demand remains supported by the cost gap between new and used vehicles as insurance and ownership costs rise.

Fixed operations, SG&A, and capital allocation

Parts and service performance was pressured by weather and the DMS transition, but management said underlying trends improved later in the quarter. Clara said same-store parts and service gross profit was down slightly year-over-year, but customer pay gross profit rose 1% and warranty gross profit increased 3%. He added that March produced 4% growth in both customer pay and warranty gross profit, and “April to date is trending similar to March.” Over time, Hult said the company still expects fixed operations gross profit to grow at a mid-single-digit rate.

Welch reported adjusted same-store SG&A as a percentage of gross profit of 66.9%, including $2 million of legal expense tied to “a specific matter.” He said March adjusted same-store SG&A was in the low 60s and suggested results would have been “more solidly within” expectations absent weather impacts. In Q&A, Welch said that without the weather, “mid-sixties” would have been appropriate for the quarter and that the company expects to move toward that level as Tekion efficiencies begin to flow through later in the year.

Asbury also highlighted portfolio optimization and shareholder returns. Hult said the company divested 10 dealerships and a collision center at “attractive multiples,” representing about $600 million in annualized revenue; Welch put the combined annualized revenue of divested and exited operations at $625 million and noted the company terminated seven franchises, including exits from the Alfa Romeo and Maserati brands. Hult said $147 million of proceeds went to repurchase 678,000 shares, with the remainder used to pay down debt. Welch added the company bought back shares in January through March and did not indicate additional repurchases in April beyond what was disclosed in the earnings release.

Welch said Asbury generated $166 million in adjusted operating cash flow and $120 million in adjusted free cash flow in the quarter. Excluding real estate purchases, capital expenditures totaled $46 million, and the company continues to target about $250 million in CapEx for both 2026 and 2027. Asbury ended the quarter with $1.2 billion in liquidity and a transaction-adjusted net leverage ratio of 3.2x.

The quarter also marked a leadership transition. Hult thanked employees and said he will move to Executive Chairman, while Clara—introduced as incoming CEO—emphasized continued focus on execution through the Tekion rollout and operational improvements across the business.

About Asbury Automotive Group NYSE: ABG

Asbury Automotive Group, Inc 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.

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