Asbury Automotive Group Q2 2025 Earnings Call - Herb Chambers Acquisition Raises Leverage, TCA Deferral Hits Near-Term EPS

Conference Operator: Greetings. Welcome to Asbury Automotive Group’s second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press Star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Chris Reeves, Vice President of Finance and Investor Relations. Thank you. You may begin.

Chris Reeves, Vice President of Finance and Investor Relations, 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 second quarter 2025 earnings call. The press release detailing Asbury’s second quarter results was issued earlier this morning and is posted on our website at investors.asburyauto.com. Participating with me today are David Hult, our President and Chief Executive Officer, Dan Clara, our Chief Operating Officer, 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 we’ll 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 31, 2024, and 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. 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 second quarter results. It is now my pleasure to hand the call over to our CEO, David Hult.

David Hult, President and Chief Executive Officer, Asbury Automotive Group: David, thank you, Chris. Good morning, everyone. Welcome to our second quarter earnings call. This is an exciting time for Asbury, and I want to begin my remarks by thanking our team members who make it all possible through their hard work and approach to execution that has helped us consistently lead the pack in operating efficiency. I would also like to formally welcome the more than 2,000 team members from Herb Chambers, and finally, I want to personally thank Herb Chambers for the opportunity to be a steward of his business. We look forward to a bright future together, and we’re eager to partner with the Herb Chambers team members to continue growing our presence in the New England market with the high level of service you have been delivering for 40 years.

Shifting to our operational performance, we continue to see strong demand in the second quarter as consumers weighed the decision to buy ahead of potentially higher prices from an ever-changing tariff landscape. We did see the star decline as the quarter went on. We believe the outlook for the second half of the year will be heavily dependent on how various tariff decisions make their way to consumer level pricing. While new vehicle GPUs have been resilient year to date, we still see those metrics trending back towards the $2,500 to $3,000 range over time, with optimism that we end up more towards that $3,000 level. Used vehicle profitability has remained strong, supported by a constrained supply environment based on the limited pool of used vehicles. We have chosen to focus on gross profit but will continually evaluate that approach based on how the used vehicle market evolves.

Our parts and service business continued to deliver stable, consistent growth with same-store gross profit up 7% for the quarter. We are continuing to invest in tools and technology that will enable our fixed operations business to operate more efficiently and deliver an even better guest experience. Our transition to Techyon is part of that investment, and we are happy to report that our Kuhn stores are now 100% converted to the new DMS. As I mentioned at the start of the call, it’s been an exciting but busy time for Asbury. Our near-term focus will be ensuring all of our critical initiatives are executed at the highest level possible. I couldn’t wrap up my comments about our operational performance without commending the team for their focus on running the business efficiently.

Our same-store adjusted SG&A as a percentage of gross profit was 63.2% for the quarter, an improvement of over 100 basis points from the second quarter of 2024 and a sequential improvement from the first quarter of 2025. It is important to note that we still see opportunity to further reduce our SG&A profile over time. Our ability to grow the company through transformative acquisitions while maintaining our operating margin profile is a point of pride for us, but it’s just one element of our broader approach to strategically managing our portfolio and deploying capital to its highest and best use. In the second quarter and through July 28, we divested nine stores as part of an ongoing capital allocation in our effort to optimize our portfolio.

The proceeds from these transactions helped to offset some of our investment in Herb Chambers, and we anticipate prioritizing leverage reduction over the next 12 to 18 months as we work to integrate the acquisition and focus on our migration to Techyon. That said, share repurchases are an important component of our capital allocation strategy and we will be opportunistic in our execution of share buybacks even as we work to reduce our leverage ratio. Now for our consolidated results. For the second quarter we generated $4.4 billion in revenue at a gross profit of $752 million and a gross profit margin of 17.2%. We delivered an adjusted operating margin of 5.8%. Our adjusted EPS was $7.43 and our adjusted EBITDA was $256 million. Before I pass to Dan, I want to once again acknowledge our team members for their focus and dedication to the business.

Your commitment every day puts us on the path to be the most guest-centric automotive retailer and we’re optimistic about the future. Now Dan will discuss our operational performance.

Dan Clara, Chief Operating Officer, Asbury Automotive Group: Daniel, thank you, David, and good morning, everyone. 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. Starting with new vehicles, same-store revenue was up 9% year over year and units were up 7% new. Average gross profit per vehicle was $3,611. Brand unit performance varied widely depending on availability or potential for tariff impact. Our volume for Stellantis was up 15.6% this quarter compared to national sales down 11.5% across all brands. Our same-store new day supply was 59 days at the end of June. Turning to used vehicles, second quarter unit volume was down 4% year over year. Used retail gross profit per unit was $1,729, which marks the fourth quarter of sequential growth.

We continue to monitor conditions on a market-by-market basis for deploying our approach to pre-owned, and we still plan to prioritize unit profitability. At this point of the used car supply cycle, our same-store used day supply of inventory was 37 days at the end of the quarter.

Shifting.

To F&I, we earned an F&I PVR of $2,096. The deferred revenue headwind of TCA was a $161 decrease in the same-store F&I PVR number year over year. As a reminder, we are planning the TCA rollout to the Kuhn stores in the fourth quarter of this year following the recent completion of the Techyon conversion at those stores. The timing of this TCA rollout changes the magnitude of the deferral headwind that we had estimated at the start of the year. Michael later will walk you through additional details regarding TCA. In the second quarter, our total front-end yield per vehicle was $4,861. Moving to parts and service, as David mentioned earlier, our same-store parts and service gross profit was up 7% in the quarter. We generated a gross profit margin of 59.2%, an expansion of 53 basis points.

In addition, our fixed absorption rate was over 100%, an important benchmark for the strength of the business when looking at our customer pay and warranty performance. Customer pay gross profit was up 7% with warranty gross profit higher by 16% or 9% on a combined basis. In our western stores, we grew 15% on this combined metric. We continue to be bullish on the long-term trajectory of our parts and service business. We believe the continually aging car park and the increasing complexity of modern vehicles mean our stores are well positioned to capture future service growth. The average age of a passenger car on the road is 14.5 years old and the average truck is nearly 12 years old. Additionally, recent and upcoming models have more technology and innovative powertrains, which should create opportunity for our service departments for years to come.

Finally, on an all-store basis, we retailed over 9,500 sales through Clicklane in the second quarter. 46% of these sales were new units. Before I pass the call, I would like to once again thank our team members for their commitment to service and to be the most guest-centric automotive retailer. I will now hand the call over to Michael to discuss our financial performance.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Michael, thank you. Dan, to our investors, analysts, team members, and other participants on the call, thank you for joining us this morning. Now on to our financial performance for the second quarter. Adjusted net income was $146 million and adjusted EPS was $7.43 for the quarter. In addition, the non-cash deferral headwind due to TCA this quarter was $0.43 per share. Our adjusted EPS would have been $7.86 without the deferral impact. Adjusted net income for the second quarter 2025 excludes, net of tax, $4 million of cyber insurance recovery proceeds, $4 million related to the gain on divestitures, and $2 million of professional fees related to the acquisition of Herb Chambers. Adjusted SG&A as a percentage of gross profit came in at 63.6%.

Noting that the Techyon implementation costs are beginning to impact our P&L, we still anticipate 2025 SG&A in the mid-60s, caveating that we are monitoring tariff and trade developments. While we see additional expenses for Techyon rollout and legal fees, we still are optimistic there are opportunities to lower SG&A in the future. The adjusted tax rate for the quarter was 25% following the Chambers acquisition. We estimate the third and fourth quarter effective tax rate to be 25.5%. TCA generated $7 million of pre-tax income in the second quarter. The negative non-cash deferral impact for the quarter was $11 million or $0.43 on an EPS basis. As Dan mentioned, we now anticipate offering TCA in the Kuhn stores in early Q4. The updated schedule of the rollouts, along with the lower SAR projections versus our original estimate, will affect the timing of deferrals in future periods.

We have outlined our timeline and estimated impact on 2025 EPS on slide 19 of the presentation posted to our website this morning. The periods beyond 2025 have not been updated due to uncertainty around tariffs. Now moving back to our results, we generated $334 million of adjusted operating cash flow through the first half of 2025, excluding real estate purchases. We spent $60 million on capital expenditures through the end of June. 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 $275 million through the first two quarters of 2025. We ended Q2 with $1.1 billion 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.

Our transaction adjusted net leverage ratio was 2.46 times at the end of June following the Herb Chambers acquisition. We anticipate that this ratio will be above our target range. We will work down our leverage over the next 12 to 18 months and expect to be below the higher end of our range in mid to late 2026. On July 21, we closed on the acquisition of Herb Chambers Automotive Group. Full year 2024 adjusted EBITDA for Herb Chambers was $176.8 million and the transaction was valued at about $1.45 billion. Of this amount, $750 million represented Blue sky and $610 million was real estate and improvements. Please refer to slide 32 in our investor deck and the Form 8-K/A filed this morning for more information.

Upon completion of the deal with our amended credit agreement, our revolver capacity increased to $925 million and our new vehicle floor plan facility to $2.25 billion. This deal was financed through a combination of our credit facility, funding, proceeds from a new mortgage facility, and cash. As noted in our release this morning, we divested nine stores with annualized revenue of $619 million since the start of the second quarter. This was done as part of our portfolio optimization strategy and it allowed us to use the net proceeds of $250 to $270 million towards reducing our leverage. Before we take questions, I want to thank our team members. We appreciate and recognize your efforts and performance and with that this concludes our prepared remarks. We will now turn the call over to the operator and take your questions. Operator, thank you.

Conference Operator: If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two 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 while we pull for questions. Our first question is from Jeff Lick with Stephens. Please proceed.

Good morning, guys. Congrats on a great quarter, and congrats on the acquisition. I know that means a lot to you, David, with your New England roots.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: I just wanted to wonder if you could just walk through as.

The quarter progressed, the cadence of GPU and also units. Where do you see things standing now as we are into the.

First month of Q3?

Dan Clara, Chief Operating Officer, Asbury Automotive Group: Morning Jeff, this is Dan. As the quarter progressed, we saw the GPUs started stronger in the first part of the quarter as the SAR started to level off. As David mentioned in his remarks at the beginning of the call, we started to see adjustment into the GPUs as well. I’ll tell you that as things move forward, the situation is still pretty fluid. There have been, as you know, a few agreements that have been reached with Japan and the European Union, still trying to see where things are going to fall and how the OEMs will react. Back to the comment that David stated earlier, we still have belief that those GPUs fall into the $2,500 to $3,000 range.

That range you’ve given, that’s inclusive of any, say, new kind of dealer invoice to MSRP adjustments and relationships?

Yeah, again, it’s still hard to tell where the FUD is going to fall, for lack of a better term, until we start to see how they’re adjusting. I will tell you there’s been a few OEMs, domestic and some of the luxury imports, that have slightly adjusted invoice, but it’s still too early to tell to see what the final impact is going to be.

Is it your thinking that most likely all of the kind of major adjustments, if there are any, will really kind of accompany the 2026 model year changeover?

Yes, I think, yes, the 2026 model. You know, when you think about the OEMs going through the transition right now, and this has been going on since the end of the first quarter, they’ve had plenty of time to strategize, think about it, and make the necessary adjustments that are going to come down the pipeline. You also got to think about that. Anything that has to do from a production standpoint, it takes time to really adjust the parts and the suppliers and what have you. I do expect that in the 2026 model, there’ll be the adjustments necessary to adjust to the tariff, but it’ll take some time when it comes down to the packages and the options that might be available, to adjust that accordingly with the suppliers. Awesome.

Thanks very much for taking the question, and best of luck in Q3.

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

Conference Operator: Our next question is from Federico Marende with Bank of America. Please proceed.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Good morning, guys. You had a solid SG&A performance during the quarter, and I was wondering, can you talk more about the initiatives that are allowing the SG&A to remain under control? Yeah, I mean, the main one is just focusing on that productivity per employee. We just try to make sure we maintain that discipline on the headcount and gain the productivity for the employee side. That’s the big one because most of our expenses are compensation, but then also looking at the different outside services that we use and making sure we’re getting a good return for that investment. The one piece in that number that we still have in there is there’s a couple million dollars of Techyon conversion cost in there. That number would have been even lower if we wouldn’t have had the kind of Techyon conversion cost in that mix. Thank you.

If we assume that in the second half volumes for new vehicles will be lower due to higher prices and consumers won’t buy vehicles, I would assume that it will be harder to leverage your SG&A. How would you plan to offset the lower SG&A absorption? Again, that pro tip for employees is key because a lot of our costs are commission based and they adjust with the, you know, either a downturn in volume or PVRs. That cost discipline is key. That’s also why we kind of said, you know, mid-60s to your point, it’ll be a little tough to keep that lower number if the PVR drops off significantly or the volume drops off. That discipline on productivity is kind of the key to keeping that number as low as possible. Thank you very much.

Conference Operator: Our next question is from Rajat Gupta with JPMorgan. Please proceed.

David Hult, President and Chief Executive Officer, Asbury Automotive Group: Great.

Thanks for taking the question. I just had one first one on just the Herb Chambers acquisition. You now have them under the hood for a couple of weeks. It looks like the SG&A to gross profile for Herb Chambers is slightly better than the legacy Asbury business. I’m curious, have you been able to, given the couple weeks you’ve had, any incremental opportunities do you see to improve like just metrics at the stores, other areas around services or used vehicles that you see you can bridge the gap to versus Asbury or versus broader industrial period that have better metrics. Just curious if you could give us some more insight into what we should expect to see as the acquisition gets integrated further and have a follow up.

Rajat, this is David. There are a few things that we think about: their mix of luxury, over 60%, the name in the marketplace that they have, and the scale that they have in the market was most interesting to us, along with the quality, people, and tenure that they have. We think we align philosophically in how to run the business. The best part about this, in any transaction, is there are always opportunities to improve. There are opportunities to improve in our same-store, there is opportunity to improve with any acquisition that we have. We will work with the team over time to look for efficiencies to improve upon the business. This was a strategic market for us. It is a defensive position. New England is not a growth market, but it is a very stable market.

It performs well in a downturn, and with the luxury mix and the presence in this market with the level of service that they offer, we think this creates great stability for Asbury over time.

Understood. Just had a follow-up on parts and service into the second half. We’re going to start running into some tougher comparisons when it comes to warranty, specifically recall work later this year. Curious if you think you could maintain the mid single-digit type growth cadence here as we go through the next couple quarters. Do you feel comfortable offsetting any of the tougher warranty comps with more customer pay work later this year? Just curious to get your thoughts on the cadence there. Thanks.

Dan Clara, Chief Operating Officer, Asbury Automotive Group: Good morning Rajat, this is Dan. Yes, we feel comfortable with the mid single digits that we have been discussing as we move into the second half of the year. We have the throughput in the stores, obviously the bay utilization, and we have opportunity to grow that as well. We feel comfortable with that measurement and continue to have and push forward as we go into the second half.

David Hult, President and Chief Executive Officer, Asbury Automotive Group: Rajat, this is David. I’ll just jump on that too. It’s kind of tough looking at year over year with the CDK issue last year. So far against our peers, our warranty growth was about half of our peers. Warranty isn’t something that you sell, it’s something that you do based upon what’s going on with the product. Mix wise we’re similar. I can only think when we’re off that much year over year, we must have just done a better job last year closing warranty. To your point, going into the second half of the year, we’re definitely going to have some headwinds on the warranty side, but we’re convinced that CP will continue to be stable and the Chambers organization just does a fantastic job with fixed as well.

We are very optimistic about parts and service in the second half of the year, with, to your point, a question mark on warranty.

That’s helpful. Just one clarification. Are the warranty margins higher than customer pay for Asbury? I know it’s higher at some peers.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: am curious if that’s the case for you as well.

David Hult, President and Chief Executive Officer, Asbury Automotive Group: Yeah, it varies slightly, but overall it runs higher on warranty than it does CP. The margin.

Understood.

Conference Operator: Great.

Thanks for taking the question, and good luck.

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

Conference Operator: As a reminder, to star one on your telephone keypad if you would like to ask a question. Our next question is from Ryan Segdal with Craig Hallum Capital Group. Please proceed.

Hey, good morning, guys.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Want to move over to used vehicles?

Nice. Really strong in the quarter, I guess. Given the same-store sales performance, it appears Asbury continues to stick with the profitability over volume. Can you talk through the strategy, how you think about the second half, and if there’s any change there?

Dan Clara, Chief Operating Officer, Asbury Automotive Group: Yeah, good morning Ryan, it’s Dan. Our strategy remains the same. As you know, we are facing the lack of supply from a used car inventory in relation to the pandemic, and I don’t need to walk you through it, but less lease turn ins, et cetera. That all took place during the pandemic. With that thought in mind, our plan stays the same, maximizing gross profit rather than chasing the volume. As we stated at the beginning of the call, this is something that.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: We assess.

Dan Clara, Chief Operating Officer, Asbury Automotive Group: On a continuous basis, we’re ready to adjust as soon as we see the market shifting and more availability of inventory.

David Hult, President and Chief Executive Officer, Asbury Automotive Group: Ryan, I would jump on and say, you know, we can see the rest of this year. The pool is just very shallow. I think we’re at our low point. To Dan’s point about talking about the COVID peak, it starts to improve in 2026 with off lease vehicles and that’ll vary a little bit depending upon lease penetration in groups and how much access they have. 2026, 2027 certainly get back to normal and I think you’ll start to see increases mid 2026 and beyond.

Helpful then just progress on Techyon. Good to see Kuhn’s conversion completed, a little ahead of expectation there. Multi part question here I guess as it relates to Techyon, but one, anything surprising you thus far post that conversion with Kuhn’s? Two, can you quantify what the implementation costs for Techyon were in the quarter? I mean you had really nice SG&A leverage, especially comparing to peers in the quarter even considering that, but if you’re able to quantify. Then the last part would just be the conversion timeline for the remaining Asbury stores.

Ryan, I’ll start and then Michael can jump in on the cost related stuff. One of the reasons we chose to go with Techyon was the simplicity of the software and not having as many bolt ons as we have. We see the benefits and efficiencies with that in making it easier for our teammates to work with the clients. Changing a DMS is like a heart transplant. It’s the one thing that dealerships never want to go through, and even with planning and execution, you’re still going to have a lot of snafus, and we had that throughout the quarter. Inconsistency with software applications, stuff going down at moments in time, things missing, it’s just normal through it. To the Koons folks’ credit, it was a frustrating quarter for them having to go through that.

The stores that we originally piloted last year are all the way through that and really starting to see the efficiencies of the software. When we’re fully converted, which will hopefully be in 2027, is when we really recognize the SG&A benefits, but also operating efficiencies. Positive feedback from some of the employees with fewer screens to utilize. Some of the feedback that we get from leadership, the software is a little bit like a Ferrari. It’s got more to it than what we’re used to. We’re finding new things every day about it. It’s going to take us a while to become proficient on the software and work through the kinks of normal DMS conversions. We’re very happy and pleased with the progress and, quite honestly, how resilient the Koons team was. Working through it in the quarter was just inspiring for us to see.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: On the cost front, it’s about $2 million in cost in the quarter. About half of that is, I’ll call it duplication and implementation cost with Techyon, and the other half, because we’re a public company, we have to go through a little bit of shipping pain and aggravation of testing the control environment. We have, you know, we’re paying outside resources to kind of work through the audit side of SOX controls with the software. It’s about $1 million of implementation and duplicated DMS costs and about $1 million of third party audit cost.

Thanks, guys.

Appreciate it. Good luck.

David Hult, President and Chief Executive Officer, Asbury Automotive Group: Thanks, Ryan.

Conference Operator: Our next question is from David Whiston with Morningstar Equity Research. Please proceed.

Thanks.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Good morning.

I was curious how, I’m sure your Toyota Lexus inventory is lean, but is it leaner than it normally would be due to tariffs slowing production out of Japan?

Dan Clara, Chief Operating Officer, Asbury Automotive Group: Morning, David. This is Dan. No, it’s lean, but we have not seen a negative effect on being leaner than what we’re used to operating. As you know, we’ve been operating under that single digit to low double digit DSI for quite a while. It’s all about the turn, and I feel like our stores are doing a pretty good job with that.

All right, thanks. On the EV tax credit and your EV inventory, do you expect the OEMs post September 30, once the credit’s gone, to be very aggressive on trying to pressure you on allocation?

You know, this is something that.

Chris Reeves, Vice President of Finance and Investor Relations, Asbury Automotive Group: You.

Dan Clara, Chief Operating Officer, Asbury Automotive Group: have been able to monitor and see this coming for a while. I think some of the OEMs have done a very good job of planning accordingly. The number of EVs, whether they are in production, allocation, or even on the dealer lots, has been dwindling down. I don’t expect a tremendous amount of push because they have been preparing for it. At the end of the day, we’re good partners. We are always going to make the best decision to make sure that we return the right level of return on investment to our shareholders. We’re going to be true partners and support our OEMs. Like I stated before, they’ve been planning accordingly.

We’ve seen the DSI go down in the EVs, and we’re monitoring that closely on a day-to-day basis to make sure that we retail the EVs that we have on the ground before that September 30, 2023 date.

Okay, and just one last question on your geographic mix with Herb Chambers. Really the one major part of the country you’re not in is California. I know historically you haven’t wanted to be there, but are you perhaps thinking more about the West Coast now that you’ve got the Northeast?

David Hult, President and Chief Executive Officer, Asbury Automotive Group: David, I’ll take that question. Based upon the franchise laws in the different states and the economics in California, we just see there’s better investments and better returns in other states. You can never say never, but for the near term, we divested our two stores in California. I think we’ll stay outside of California and focus on the markets that we’re in as a footprint. Now we’re actually in the states that we want to be in and don’t want to leave any of the states that we’re in currently. That’s not the plan anyhow. We’ll look at things as they come. Size and scale matter to us to a certain degree. Buying a store in a smaller state that has $30 million or $40 million in revenue per rooftop is just something that doesn’t interest us.

We try and look at 10-year economic outlooks of markets that we’re in, what the franchise laws are and all that kind of stuff. We think that’s what helps our portfolio keep the SG&A as tight as it is. We’re not hyper focused on growth as a top line revenue growth, but really being strategic about the capital allocation, where we’re buying stores, what our returns are for our shareholders, and making sure that we’re doing it thoughtfully and building to the future. While we talk about the headwind of TCA in what it meant in EPS, I think $0.43 or so in the quarter, when you look at slide 19 of our IR deck, when you get out to 2028 and 2029, you’re talking $4.50 to $5.50 per share before we sell a car.

While the next year, year and a half, is tough on us, on EPS, you start to look out a few years, we really look like a solid company. Then you add in the concept of fully being on Techyon and the benefits of SG&A. The next six or seven months might be bumpy as we settle into tariffs and what happens there and stabilizing day supply. We think the future is really bright and we’re optimistic about it and excited for the future. For now, California is not on the list and it’s really focusing on the markets we’re in.

All right, thank you very much.

Thank you.

Conference Operator: Our next question is from Bret Jordan with Jefferies. Please proceed.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Good morning on slide 19.

I guess you’re pending full visibility in the tariff impact for the estimate reviews. Is there meaningful exposure on the parts side where you’ve written warranties that might see a higher parts cost than expected, or is most of that in labor or just too small in the total TCA portfolio to really make a difference in the next several years?

Yeah, it’s a good point. We try to bake in inflation into our estimates for what we price the F&I contracts at, so they’re somewhat baked in there. If you had a meaningful increase on the parts side, to your point, labor is the biggest component of that, so it’d have a small impact on the claims, but not a huge impact on the 26th through 29th. What we’re really trying to figure out there is where do we think SAR shakes out. That’s the big driver of the TCA runoff. When that deferral hit hits you is when that SAR rebounds. Once we figure out a better forecast for SAR over the next couple years, we’ll come back and update those numbers for those SAR projections.

David Hult, President and Chief Executive Officer, Asbury Automotive Group: Bret, just to jump on that real quick, if you don’t mind, when we acquired TCA, their AM Best rating was an A-. We’ve improved it to an A rating. We’re real happy with the way we’re managing the portfolio and loss ratios, and we’re very optimistic about the.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Future for TCA, regardless of tariffs. Yeah, great.

Thank you. A follow up on regional dispersion. I guess you called out the western stores having 2x the company average in parts and service growth. Is there anything else interesting from a regional performance either on units or, you know, puts and takes geographically?

Dan Clara, Chief Operating Officer, Asbury Automotive Group: No, you know, Bret, this is Dan, by the way. No, I don’t think that there is anything else interesting. I’ll just expand on the double-digit growth in the West, and we’ve been talking about this for the last, I don’t know, 12, 18 months. There has been a lot of focus on the integration of our West stores and really putting the processes and procedures in place to maximize the opportunity on a day-to-day basis. More importantly, to enhance the guest experience through technology, even though we know that the employees on the front lines are the ones that create the experience.

David Hult, President and Chief Executive Officer, Asbury Automotive Group: I would just add to that. I would say more than geographical, brand mix matters. All brands are cyclical. Depending upon your portfolio, it can be a tailwind or a headwind based on what you have. Things are pretty stable, and I think everything is really the market’s kind of sitting still, waiting to see where the tariffs shake up, what the manufacturers end up doing with pricing, and you know, we’ll make that one-time adjustment and move on. The one thing that’s proven true about this industry, because I know there’s a lot of negative talk about the second half of the year, what’s going to happen with tariffs and margins and all that kind of stuff, the public auto space has been public for 27, 28 years now. There’s been a lot of negativity over time with it.

As far as everyone looking for the headwinds going forward, one thing that holds true, especially through the recession in 2008 and 2009, this is a resilient business model, and it’s an accordion effect with expense control, and it always finds a way to perform and continue to go on. The transportation retail business is strong. It’s not going to go anywhere in this business model. Not just ours, but our peers in the private cab space will certainly adapt and come out on the other side of this just as strong as they did before.

Michael Welch, Senior Vice President and Chief Financial Officer, Asbury Automotive Group: Great.

Thank you.

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

Conference Operator: We have reached the end of our question and answer session. I would like to turn the conference back over to David Hult for closing remarks.

David Hult, President and Chief Executive Officer, Asbury Automotive Group: Thank you. This concludes our call today. We appreciate everyone’s participation and look forward to speaking with you after third quarter. Have a great day.

Conference Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.