Asbury Automotive Group Q4 Earnings Call Highlights

Key Points

• Asbury posted a record Q4 with $4.7 billion in revenue and $793 million gross profit, reporting adjusted EPS of $6.67 (would be $6.98 excluding a $0.31 non‑cash TCA deferral) and adjusted EBITDA of $250 million.
• The company completed acquisitions adding $2.9 billion of revenue and is selling 13 stores (~$750 million annualized revenue) to accelerate deleveraging; transaction‑adjusted net leverage is 3.2x with a goal to move below 3.0x by summer or by year‑end 2026 while continuing opportunistic buybacks.
• Asbury is accelerating its Tekion DMS rollout (46 stores, >25% of the portfolio), which will drive a near‑term “front‑half” SG&A hit from duplicated systems and implementation but is expected to deliver back‑half efficiency and guest‑experience benefits, while management warns of early‑2026 headwinds with anticipated improvement in the second half.

Asbury Automotive Group NYSE: ABG executives used the company’s fourth-quarter 2025 earnings call to highlight portfolio actions, technology investments, and a view that 2026 will begin unevenly before conditions improve later in the year. Management also pointed to normalization in new-vehicle profitability, ongoing efforts to lift used-vehicle performance, and a renewed push in customer-pay service growth.

Fourth-quarter results and key metrics

Chief Executive Officer David Hult said Asbury delivered a “fourth-quarter record” $4.7 billion in revenue and a record $793 million of gross profit. Gross profit margin was 17%, representing a 31 basis point expansion, according to management. Asbury posted an adjusted operating margin of 5.4%, adjusted EBITDA of $250 million, and adjusted earnings per share (EPS) of $6.67.

Chief Financial Officer Michael Welch added that adjusted net income was $129 million. Welch also discussed the impact of Total Care Auto (TCA) accounting deferrals, noting a non-cash deferral headwind of $0.31 per share in the quarter. Excluding that deferral impact, he said adjusted EPS would have been $6.98.

Welch said adjusted net income excluded, net of tax, several items, including non-cash asset impairments of $87 million, a $26 million net gain on divestitures, $5 million in Tekion implementation expenses, $3 million of non-cash fixed asset write-offs, and $1 million of professional fees related to the acquisition of Herb Chambers Automotive Group.

2025 portfolio activity, leverage, and capital allocation

Hult characterized 2025 as a “productive year,” saying Asbury expanded both revenue and geographic footprint by acquiring businesses representing $2.9 billion in revenue. He emphasized that portfolio composition also improved through strategic divestitures. Hult said the company ended the year ahead of its leverage expectations, with a transaction-adjusted net leverage ratio of 3.2x versus a forecast of 3.5x.

On capital allocation, management said Asbury deployed $186 million in capital expenditures (CapEx) during 2025 and continued share repurchases, buying back $50 million in shares in the fourth quarter and $100 million for the full year.

Hult said Asbury divested four stores in the quarter and expected to divest another nine stores by the end of the first quarter, for a total of 13 transactions representing $750 million of annualized revenue. He said these deals were at “attractive multiples” and would help accelerate deleveraging and create more flexibility for share repurchases.

Welch said the four store divestitures in the quarter generated an estimated $150 million of annualized revenue. He also noted that assets sold or not held for sale reduce the need for what he described as low-return CapEx, allowing cash to be deployed into other strategic decisions. Looking ahead, Welch said Asbury anticipates approximately $250 million of CapEx spending in both 2026 and 2027.

For 2025, Welch reported $651 million of adjusted operating cash flow and adjusted free cash flow of $465 million. Asbury ended the year with $927 million of liquidity, which management said includes floor plan offset accounts, availability on the used line and revolving credit facility, and cash excluding cash held at Total Care Auto.

Asked about the path to below 3.0x leverage, Welch said the nine divestitures expected to close in the first quarter should “free up some cash” and that, if proceeds and free cash flow were directed toward debt reduction, Asbury could get below 3.0x “by the summer.” He added that share repurchases could affect timing, and the company’s goal remains to get below 3.0x by year-end 2026 while balancing buybacks and other uses of cash.

Operating trends: new, used, F&I, and fixed operations

Chief Operating Officer Dan Clara reviewed same-store results and noted that the quarter’s new-vehicle comparison reflected a prior-year post-election surge. Same-store new-vehicle revenue was down 6% year over year, which Clara said followed a 5% contraction in SAAR. New average gross profit per vehicle (PVR) was $3,135, with Clara noting import brand PVRs “gave some ground” but were offset by seasonal strength in luxury. Asbury’s same-store new day supply was 49 days at the end of December, down from 58 days at the end of the third quarter.

Hult reiterated Asbury’s view that new-vehicle profitability will “eventually stabilize” in the $2,500 to $3,000 range, while cautioning that the future remains difficult to predict. During Q&A, he said margin pressure would be most acute if industry inventories build materially, but added that most OEM forecasts point to a flat or slightly down year, which he said reduces the likelihood of sitting on high day supply. He also pointed to affordability, noting new-vehicle cost of sale was over $52,000 in the quarter and said higher prices can pressure margins as retailers work to complete deals.

In used vehicles, Clara said total same-store used gross profit rose 6% year over year. Used retail gross profit per unit increased 18% to $1,749, up $271 versus the prior year and up $198 sequentially from the third quarter of 2025. Same-store used days supply inventory (DSI) ended the quarter at 35 days, in line with the third quarter.

Executives said they are focusing on not “chasing volume” while working to improve sourcing. Clara told analysts the company is limiting auction purchases and increasing units acquired through trades and direct guest purchases. He also said management wants to reduce the average cost of used vehicles—citing a level “over $30,000”—and expects more opportunity to do so in the second half of 2026 as lease returns increase and inventory availability improves.

In finance and insurance, Clara said Asbury earned an F&I PVR of $2,335 in the quarter. He said the non-cash deferral impact from TCA was $105, implying F&I PVR would have been $2,440 without that year-over-year impact. Clara said the company plans to implement TCA at the Chambers stores by year-end, completing the rollout across platforms. He also noted total front-end yield per vehicle of $4,897, up $259 sequentially.

Parts and service results were mixed. Clara said same-store parts and service gross profit increased 2% year over year. Customer pay gross profit was up 3%, while warranty gross profit rose 6%. Clara said the company was lapping strong prior-year comparisons, when customer pay and warranty were up 13% and 26%, respectively, in 2024. Parts and service gross margin was 58.1%, up 13 basis points.

On an all-store basis, Clara said Asbury posted a record fourth quarter for parts and service, with total revenue up 12% to $658 million. Still, in Q&A, Clara said management was “not satisfied” with customer-pay growth and maintained a forecast of mid-single-digit customer-pay growth, citing a renewed strategy in fixed operations. Hult added that service traffic was “okay and normal,” but customers spent fewer dollars per visit in October and November before improving in December; he said January dollars “are pretty good again,” though weather reduced traffic.

Tekion rollout, costs, and efficiency expectations

A major theme was the rollout of Tekion, Asbury’s new dealer management system (DMS). Hult said the company transitioned 15 additional stores to Tekion during the quarter, ending 2025 with 38 stores on the platform. Clara added that Asbury implemented Tekion at eight more stores in January, bringing the total to 46 stores, or more than 25% of the portfolio.

During Q&A, Clara said there are 125 more stores to transition, with the rollout expected to be completed by the third quarter. Welch explained that stores experience a period of duplicated costs while both systems run in parallel during transition, and he expects a “front-half hit” to SG&A in 2026 from duplicated software costs and implementation fees, followed by a “back-half benefit” as Tekion savings more than offset duplication. He also said the company has not been adjusting out duplicated software costs in its adjusted results, only certain implementation and compliance-related expenses.

Management described early operational benefits at the first stores to adopt Tekion, including better efficiency, productivity, transparency across departments, and improvements to the guest experience, while noting a learning curve for employees and technicians.

2026 outlook: early-year headwinds, second-half improvement, and EV commentary

Looking to 2026, Hult said Asbury is “confident” investments and the team’s execution position the company for value creation, but he cautioned that the year may start slowly. He cited harsh January weather—particularly in the Northeast—and said the first half of 2026 will “probably be a little bit more of a struggle,” while the second half “should start to free up a little bit.” He also said the outlook for tariffs and incentives remains unsettled across brands.

Hult also addressed brand dynamics, saying Asbury has significant exposure to Stellantis stores that were challenging in 2025, but management believes the cycle can turn into a tailwind. He added that, with planned divestitures, the company’s luxury mix is expected to rise from 32% to roughly 36%.

On EVs, Clara said company-wide EV inventory is “right-sized,” though he cited pockets such as Colorado where levels are higher than he would like. He said EVs represented about 5% of total sales in the fourth quarter of 2024 and about 2% in the fourth quarter of 2025, and he expects that level to continue into 2026.

Welch said the company’s adjusted tax rate was 25.8% in the quarter and estimated the full-year 2026 effective tax rate will be approximately 25.5%.

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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