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Asbury Automotive Group(ABG) - 2025 Q2 - Earnings Call Transcript
2025-07-29 15:02
Financial Data and Key Metrics Changes - The company generated $4.4 billion in revenue, with a gross profit of $752 million and a gross profit margin of 17.2% [11] - Adjusted operating margin was 5.8%, and adjusted earnings per share (EPS) was $7.43, with adjusted EBITDA at $256 million [12][19] - Adjusted net income for the quarter was $146 million, with a non-cash deferral headwind of $0.43 per share due to TCA [19][20] Business Line Data and Key Metrics Changes - Same store revenue for new vehicles increased by 9% year over year, with units up by 7% and average gross profit per vehicle at $3,611 [12][12] - Used vehicle unit volume decreased by 4% year over year, with retail gross profit per unit at $17,290, marking the fourth quarter of sequential growth [13][14] - Parts and service gross profit increased by 7%, with a gross profit margin of 59.2% and a fixed absorption rate over 100% [16][17] Market Data and Key Metrics Changes - The same store new day supply was 59 days at the end of June, while the used day supply of inventory was 37 days [12][14] - The company noted strong demand in the second quarter, although a decline was observed as the quarter progressed due to tariff impacts [8] Company Strategy and Development Direction - The company is focused on integrating the Herb Chambers acquisition and optimizing its portfolio by divesting nine stores, which generated proceeds of $250 million to $270 million [11][25] - The transition to Techeon is a key investment aimed at improving operational efficiency and guest experience, with full conversion expected by 2027 [10][60] - The company aims to reduce leverage over the next 12 to 18 months while remaining opportunistic with share repurchases [11][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing the resilience of the automotive retail business despite potential headwinds from tariffs and market conditions [81][82] - The company anticipates that the second half of the year will depend heavily on tariff decisions and their impact on consumer pricing [8][19] Other Important Information - The average age of passenger cars on the road is 14.5 years, indicating a strong potential for service growth in the parts and service business [18] - The company has a transaction-adjusted net leverage ratio of 2.46 times, which is expected to be above the target range following the Chambers acquisition [23][24] Q&A Session Summary Question: Can you walk through the cadence of GPU and units as the quarter progressed? - Management noted that GPUs started strong but adjusted as the quarter progressed, with expectations for GPUs to fall into the $2,500 to $3,000 range [27][30] Question: What initiatives are keeping SG&A under control? - The focus is on productivity per employee and maintaining discipline on headcount, with some costs related to Techeon conversion impacting the SG&A numbers [34][35] Question: What opportunities for improvement exist with the Herb Chambers acquisition? - Management highlighted the luxury mix and market presence of Herb Chambers, indicating potential for operational efficiencies and improved metrics [39][41] Question: How does the company plan to maintain parts and service growth amid tougher comparisons? - Management expressed confidence in maintaining mid-single-digit growth in parts and service, despite anticipated headwinds from warranty work [42][45] Question: What is the strategy regarding used GPUs and inventory? - The strategy remains focused on maximizing gross profit rather than volume, with continuous assessment of market conditions [54][56] Question: What are the implementation costs for Techeon? - Implementation costs for Techeon were approximately $2 million in the quarter, split between duplication and third-party audit costs [62]
Asbury Automotive Group(ABG) - 2025 Q2 - Earnings Call Transcript
2025-07-29 15:00
Financial Data and Key Metrics Changes - The company generated $4.4 billion in revenue for Q2 2025, with a gross profit of $752 million and a gross profit margin of 17.2% [11] - Adjusted operating margin was reported at 5.8%, with adjusted earnings per share (EPS) at $7.43 and adjusted EBITDA at $256 million [12][19] - Adjusted net income for the quarter was $146 million, with a non-cash deferral headwind of $0.43 per share due to TCA [19][20] Business Line Data and Key Metrics Changes - Same store revenue for new vehicles increased by 9% year over year, with units sold up by 7% and average gross profit per vehicle at $3,611 [12][13] - Used vehicle unit volume decreased by 4% year over year, but used retail gross profit per unit increased to $17,290, marking the fourth quarter of sequential growth [13][14] - Parts and service gross profit increased by 7%, with a gross profit margin of 59.2% and a fixed absorption rate over 100% [16][17] Market Data and Key Metrics Changes - The same store new day supply was 59 days at the end of June, while the used day supply of inventory was 37 days [12][14] - The company noted strong performance in the Stellantis brand, with a 15.6% increase in volume compared to a national sales decline of 11.5% [12][13] Company Strategy and Development Direction - The company is focusing on integrating the Herb Chambers acquisition and optimizing its portfolio by divesting nine stores, which generated proceeds of $250 million to $270 million [11][25] - The transition to Techeon is a key investment aimed at improving operational efficiency and guest experience, with full conversion expected by 2027 [10][62] - The company aims to reduce leverage over the next 12 to 18 months while remaining opportunistic with share repurchases [11][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, despite potential headwinds from tariffs and market conditions, emphasizing the resilience of the automotive retail business [81][72] - The company anticipates that the second half of the year will depend heavily on tariff decisions and consumer pricing [8][19] - Management highlighted the importance of maintaining productivity per employee to control SG&A expenses amid potential volume declines [34][35] Other Important Information - The average age of passenger cars on the road is 14.5 years, indicating a growing opportunity for service growth [18] - The company ended Q2 with $1.1 billion in liquidity and a transaction-adjusted net leverage ratio of 2.46 times [23][24] Q&A Session Summary Question: Can you walk through the cadence of GPU and units as the quarter progressed? - Management noted that GPUs started strong but adjusted as the quarter progressed, with expectations of falling into the $2,500 to $3,000 range [27][28] Question: What initiatives are keeping SG&A under control? - The focus is on employee productivity and managing outside services, with some costs related to Techeon conversion impacting the SG&A ratio [34][35] Question: What opportunities exist for improving metrics post-Herb Chambers acquisition? - Management sees opportunities in luxury vehicle sales and operational efficiencies, emphasizing the strategic importance of the New England market [40][42] Question: How does the company plan to maintain parts and service growth amid tougher comparisons? - Management is confident in maintaining mid-single-digit growth, leveraging customer pay work to offset warranty headwinds [43][46] Question: What is the impact of tariffs on inventory and production? - Management indicated that while inventory is lean, it has not been negatively affected beyond normal operating levels, and OEMs have been preparing for tariff impacts [66][67] Question: Is California a potential market for future expansion? - Management stated that California is not currently a focus due to franchise laws and better investment opportunities in other states [69][70]
Asbury Automotive Group(ABG) - 2025 Q1 - Earnings Call Transcript
2025-04-29 18:52
Financial Data and Key Metrics Changes - The company generated $4.1 billion in revenue, with a gross profit of $724 million and a gross profit margin of 17.5% [12] - Adjusted operating margin was 5.8%, and adjusted earnings per share (EPS) was $6.82 [12] - Adjusted net income for Q1 2025 was $134 million, excluding certain non-cash items [21] - Adjusted SG&A as a percentage of gross profit was 64% [22] Business Line Data and Key Metrics Changes - Same store revenue for new vehicles was up 6% year over year, with units up 4% [14] - New average gross profit per vehicle was $3,449 [14] - Used vehicle unit volume was down 8% year over year, with used retail gross profit per unit at $15.87 [15] - Parts and service gross profit was up 5% for the quarter, with a gross profit margin of 58.3% [17] Market Data and Key Metrics Changes - Approximately 56% of new vehicle units sold in Q1 were produced in America, insulating them from tariffs [7] - The company experienced a wide range of approaches from OEMs regarding tariff impacts, making predictions challenging [7] Company Strategy and Development Direction - The company is focused on a disciplined growth strategy, highlighted by the pending acquisition of the Herb Chambers Automotive Group [10] - Plans to reduce leverage over the next 18 to 24 months following the acquisition [11] - The implementation of Techeon is expected to improve productivity and guest experience [9] Management's Comments on Operating Environment and Future Outlook - Management noted that the first quarter faced challenges due to weather-related disruptions and tariff uncertainties [42] - The company remains optimistic about long-term growth, particularly in parts and service due to an aging vehicle fleet [19] - Management emphasized the importance of focusing on gross profit rather than volume during uncertain market conditions [42] Other Important Information - The company expects to close the Herb Chambers acquisition by the end of Q2 2025, pending OEM approval [10] - Free cash flow for Q1 2025 was $166 million, with liquidity at $964 million [25] Q&A Session Summary Question: Regarding TCA and tariff impacts - Management indicated that tariffs could slow down deferral impacts, affecting future earnings [30] Question: Integration of Techeon and SG&A savings - The rollout of Techeon is progressing well, with expectations of significant SG&A savings through reduced software costs and improved productivity [32] Question: Gross profit performance compared to peers - Management acknowledged weather impacts and emphasized a focus on maximizing returns rather than chasing volume [42] Question: Impact of tariffs on the Herb Chambers acquisition - The asset purchase agreement does not include a breakup fee for the company, and management sees no reason to walk away from the deal [50] Question: Front end gross outlook - Management believes the company is reaching a floor on front end gross, focusing on profitability rather than volume [56] Question: Parts and service growth outlook - Management maintains a mid-single-digit growth outlook for parts and service, with expectations of increased traffic as weather conditions improve [60] Question: Techeon and revenue opportunities - The integration of Techeon is expected to enhance communication and marketing efficiency, leading to potential revenue growth [66]