ABG - Earnings call transcript Q2 2024 | Asbury Automotive Group, Inc.

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Operator

Greetings, and welcome to the Asbury Automotive Group Second Quarter 2024 Earnings Conference Call.

[Operator Instructions]

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.

begin. may You

Chris Reeves

good and Thanks, morning. operator,

Earnings As Executive noted, posted today results be Automotive was recorded release on XXXX will issued me earlier and website is for call Group's Asbury's replay is quarter Quarter Asbury our being with available to later and Welcome at press Participating morning today's this second The Call. this Second detailing Welch, Officer; afternoon. investors.asburyauto.com. of are Senior Dan the our will will and David later any and Hult, Chief President Michael our open be questions Senior the our for and Operations; President follow-up Chief and At conclusion our President Vice Vice up Officer. remarks, questions. for available Clara, Financial call of we

that you the contain remind must discussion likely the today we begin, statements. we forward-looking call to is during Before

Forward-looking which than statements historical expectations, which may which and subject financial in are each to nature, are current are projections, uncertainties. forecasts other include of those statements significant

certain XX-Q to that please see the regarding XX-K release reports any statements, with SEC the subsequently December For risks filings ended earlier including earnings Form these filed actual time our year from may results differ on for Form from our and information XXXX, of our time, to materially the issued quarterly cause today.

any statements. We responsibility forward-looking disclaim to update expressly

this certain addition, call. on rules non-GAAP discussed In financial be measures SEC as under may defined

measures to directly applicable we any most rules, provide non-GAAP by the SEC financial required GAAP of our As measures reconciliations comparable website. on such

results. website, highlighting an also our posted our second have quarter updated investors.asburyauto.com investor on presentation We

Hult. to to our It call David the pleasure over is my David? now hand CEO,

David Hult

the of everyone. and efforts in management possible with Asbury CDK Their certain to by service earnings guest the through June and all partners the our our morning, dealer challenges thanking resourcefulness we all deliver were of Good certainly our system. impacted. sell Beginning the exception experience highest to utilize their which to on locations store levels Welcome Chris. stores, quarter want vehicles, stores members with speed ensure our and the and start to ensure to for although XX, call. continue affected associated Koons OEM different outage. banking continue team to a dedication efficiency I you, second outage helped Thank

initial the received X. to July We access on DMS

of all and However, of bolt-on CDK restored back DMS. other country to occurred activity for July the restored, online with to across functions in plug-ins were length days. were worked the coming until recovery the thereafter. process weeks approximately fully applications took not Due the tirelessly CDK transactional recreate the that X, services team into back Once during members disruption, the us the outage XX

parts a To give just service were business, recreated almost orders within and repair sense XXX,XXX into of scale, CDK. you our

investments a our We to app designed talked tool we've online. may years, designed experience started in-person transparent transactions is both more to guest disciplined showroom facilitate about that in Clicklane have create several For that technology, in and quicker. our

impacted the outage, mitigate to sale incident. our by dedication vehicles our financial with functionality impact the and CDK. way of from Clicklane us the the served not of performance the the such to facilitate application helped combined since as CDK was members this During partners these, Tools as primary team for of

sales, previous some included likelihood service in predict of in our this F&I reduction a of insurance certain recovery estimate. For or used earnings and our per the quarter, impact From recoveries portion vehicle recovering efforts, in not is and and the onetime mentioned share. to other we expenses to volumes and is the between and of which through related difficult diluted therefore fewer estimate new impacted $X.XX also to combination be this $X.XX parts a business,

Through like occur work focus to profit and members, for of record recoveries our outage. any total we $XXX team million. service do second second gross to revenue performance we delivered business, excluding I'd quarter the not the $XXX quarter record of impact revenue now may our turn the with and quarters our the of million longer. receive Additionally, hard several of parts and or

used X% in same-store the Our total a the X basis units towards on vehicles through were pacing first of months growth quarter.

However, quarter the due X% the outage. we ended to down CDK

into and record gross and total a quarter momentum we same-store I X% parts In performance outage. growth service, finishing beyond pacing X% strong this business. the in CDK growth with of am saw with due the dollars, going for performance profit June at before results to the pleased

for the margin profit generated in revenue quarter. consolidated at Now We results of XX.X%. gross billion $X.X our for a

Our as an was adjusted SG&A an all-store operating XX.X% XX.X% percentage same-store on gross margin delivered We profit of and a basis. X.X%. adjusted adjusted of

earnings and EBITDA adjusted was our per Our $XXX was share adjusted $X.XX million.

total for another During the we $XX shares brings year-to-date $XX for XXX,XXX shares XXX,XXX quarter, for through to shares million X This $XXX August far repurchased in XXX,XXX our the and third quarter. so million. million

repurchases. is Our to allocation investments the constantly acquisitions, approach optimal a and process, and organic continuous share between we're balance evaluating capital

most existing We continue in avenues for attractive opportunistic of allocation and prioritizing managing extends pursuing to Effective also growth. the use makeup of portfolio. be are strategic accretive to committed to the capital our we'll capital and

make we'll Nissan changes monitor the year. In to other X stores, quarter, continue the second to opportunities we divested and throughout

thank automotive most the for nights was late be call I to want solve all how again long and hand a and together to common you you through over team perseverance to continuing their Now say the of proud guest-centric Dan, retailer. to weekends. our I the challenge to sacrifice came I members while before

Dan? Dan our performance. discuss operation Now will

Dan Clara

morning, Thank good and you, everyone. David,

and for navigating guests above our team like by going to I'd beyond our serve members gratitude and this my this extend unprecedented through time. to First, situation

patience perseverance is and Your agility greatly appreciated.

utilized vehicles with more online-only allowing of occurring over CDK as serve stores. the sell through outage, During to tool. in as sales transactional Clicklane software June. the often an quarter in a than is the affected tool, omnichannel X,XXX We thought to we Clicklane, us platform, in our retailed XX,XXX Clicklane

the we app within used in-store facilitate functionality sales. Clicklane to showroom However,

on Now impact our the of which performance. unless and to TCA the help I same-store April of May includes performance, quantify provide moving dealerships our metrics disruption stated will to pace, some And and otherwise.

new unit the revenue In vehicles. unit growth. for period the Same-store the portfolio. full results May, volume brands and a were April decreased of with on we and among in with flat our Starting varying quarter X%

the profit gross year. gross average unit for was of line in new per with expectations New this per $X,XXX, roughly vehicle our profit path

vehicle was New margin X.X%. gross

at same-store to the end XX end of at of XX compared supply Our the due day was to new outage. days the May days June CDK

vehicles. Turning to used

last volume unit a the with quarter X% percentage first line quarter. in year, versus Second decreased

into we However, June, in up going volume. X% were

driven used by day same-store at the CDK Our higher quarter, historical of days the supply was our incident. than the end XX slightly average

For end supply day of the days May, reference, XX for same-store was at used. our

in Shifting to $X,XXX F&I. [ quarter. We earned ] the an PVR F&I of

to number per expect deferred TCA is starting year-over-year, contributed throughout first more was continue vehicle of be F&I and total our headwind $X,XXX. front-end As we decrease quarter, revenue It expected, this the XXXX. of headwind $XXX to yield to the $XXX impactful be the the pronounced. PVR in In

and service. Moving to parts

were of our very As performance happy and the record David business. service parts earlier, with mentioned we

ending profit at gross before service parts the X%. was year-over-year quarter at Our ] into going pacing [ X% and June

XXX the quarter, in issues quarter, basis and despite points the expansion we profit prior a margin from weather our For versus CDK the of gross earned impact markets year several of XX.X%, of event. an

we pacing which and pay to we were on warranty, give some like Wholesale repair before in buckets our up performance our CDK revenue, parts significant ] the some color call up the cohort an particularly ending down and year-over-year to June, financial The Michael? of our million the quarter, decrease up of was impacted to our XX% outage June a I order through Despite down as X% revenue. challenges the X XX%. on progress the hand CDK up down among in customer great the basis. stores and first month portfolio In over I'd same-store the X%. discuss outperformed the the months, [ X%. of had revenue finished Within how at our end for before quarter we flat outage business. ending team XX% Collision were was business. parts in quarter wholesale we of in in a XX%. our performance. and the in will now or Eastern saw Clicklane $X our the members May West, The was stores X% Michael May in

Michael Welch

you, Thank Dan.

members to team inspirational would echo said our First business beyond keep a all operating and Dan time, truly like during going about off, I involved. work above and what by challenging David to the

overview we results expect are pleased through CDK Our financial outage. But performance broadly normalize now to recovery were that Overall, our our by $X.XX was impacted speaking, walk quarter. detailed with us the net and adjusted for I mid-June XQ was of a clearly quarter. EPS through will efforts. we are results more million the $XXX through income the now and adjusted financial

and excluded the Adjusted hail $X.X net to tax of third-party divestiture XX.X%, a in higher $XXX.X income $XX.X second Adjusted XXXX asset costs. miscellaneous losses other damage profit of excludes net of million. losses net elevated and of gain damage and gain on on XXXX $X.X of percentage million as the divestitures million. advertising gross of of of quarter to of income Adjusted spend, of at vendor impairments, $X.X by million on expenses second tax, noncash related related gain for quarter SG&A million, million hail for compensation, settlement $X.X legal came of driven

do quarter at that the tax growth. The remainder estimate rate adjusted of approximately the with gross will XXXX for disciplined year. profit be the expect SG&A down bring we was XX%. rate now opportunities full been to expense tax still and the control, the XX.X%, always in for that year percentage our come a for expense as and of mid-XXs to the look not to cost be we of through targeted We've We reductions for

and a generated and in pretax basis. million year $XX $XX.X results million We million pretax $XX on of million between income be full the anticipate year-to-date. quarter $XX to second TCA

payments across second $XXX to timing slightly later than Koons, is flow markets by end June. to typical of million delayed the impacted TCA quarter adjusted the in We We This have offer rollout cash higher the due operating second through these our of year. Florida in this generated CDK. $XXX but the to quarter flow cash million in plan and TCA

repurchased year-to-date For $XX we million the through in shares and million August X. quarter, $XXX

$XXX expenditures and we purchases, full spend for Excluding real $XX we spent year-to-date, approximately million. million year to estate capital $XXX be million to anticipate

availability ended flow credit excluding liquidity, plan for the offset our and comprised cash floor We quarter audit. the $XXX of revolving cash both cash, and $XXX accounts, Free facility with million [indiscernible] year-to-date. of was used quarter $XXX on million million of and total

share our reflecting time on adjusted leverage activity, integrating view forma net during use repurchase focused capital we're acquisitions. the at of pro end June, of X.Xx compelling period our a Our a which recent was we of as where

committed capital to M&A investment buybacks, our creating share across We -- allocation approach purchase opportunities. are in and opportunities organic

Finally, you. This the Thank I and members to team for like concludes our again thank our guest our their experience focus remarks. strategy. on growth would prepared

call will operator take questions. We to your to the the now turn over Operator?

Operator

[Operator Instructions]

Our comes John of first Murphy America. Bank with question from

John Murphy

David, Maybe July, there first of question new catch-up on you verticals the service? as think of different the we the as system will of sort through how and of situation. think course used parts as you about the think just and a here of catch-up has simple be normalized sort much the do CDK

David Hult

functioning competitors are the as it local our Over and when see non-CDK John, were you normal. the And could performance half see in you activity. they market it's month-end could David.

pick almost wait don't tend their can upon people to who I make think so to the You who CDK purchases product. different some wait a while and had will tend was go and on out and DMS, depending

miss get and you those the back. Parts services, opportunities, you hours, sell those hours don't

also to And I nicely steady into parts of to very July probably transactional in So be said half we've service to of that, profit what quarter. gross grew second our the a I prior think when go call compared lot Having coming revenue we normal seen going there's don't and July and the in July operations. year. back increase is would a

John Murphy

CDK here helpful. the disruption. on parts That's then second second I think that you high mean half dented reasonably XXXX, in Okay. and that number year mean, you and single-digit the just hard sales it's mid- into as of number, forward achievable. service. of And you same-store to running hot, previous mean a think I got is a I sort June. about pretty question really going

David Hult

Yes, absolutely.

that numbers. be certainly to will and We high closer probably the single-digit

John Murphy

system. But going with a was I Band-Aid to of like reliance of to more sort it the than Okay. here? any be longer-term there that it you're And mean, of forward? CDK about kind investment is then Or Clicklane just what pretty sounded an already even sort thought lastly, what do redundancy incremental I good Could the actually it make is is? going in mean, on Clicklane process robust thought

David Hult

it like dealership a with going capable It's that other are with all system question, something seen online, always be with needs least a at other stand-alone you attacks really fix quick itself think solutions this great as to up we've they're John, happens forward. intention Every catastrophic built well. served and and coming. than industries Clicklane's and about transactional come it to management cyber we think was dealer a that's tool

or system. accounting the states even It it's documents can where the all wet require but signatures, an some not print DMS documents,

functioned own. handled it the all into, system. need financing, back but DMS it's So signatures, we the handled plug transactions. deals it's the had those to to the It its into on leasing, did it still the all an be still It outlet recreated handled

So management unfortunately, an aggregate system our the I or will, industry, a a see system, you and data. workaround, if to accounting dealer we don't need

Operator

question comes with Gupta JPMorgan. next Our Rajat from

Rajat Gupta

Great.

follow-up a like services, gross give that second pricing and bit. you as that a earlier sense follow-up. the quarter number? mix? drove a high going Just and us you expectation what the unpack And forward. Was a revenue well? can curious Or in through? or single-digit of And on parts number little parts on gross expansion margin John's I Was the that profit Just quick if in strong a there services just question could just have was a more drop just

David Hult

to We gross than Sure. profit The on high because that's bill. what that. tend clarifying pays more single digits, thank the you for ultimately focus revenue

that's piece high of that single-digit it. So

it's wholesale parts profit, increase, revenue few as massive of same-store into $X We're margin have on in us a wholesale brings parts would the things. Missing year-over-year total close and the to in million a revenue far quarter was combination down margins. As a large gross basis. which a a your and impact sales put flat

the a little was wholesale So of that picking tailwind lack sales. with of a margin the bit up

lot many Collision of work so transactional on in because there have we as Collision, In were A the they didn't outlets waiting the reverse. parts happen well.

can our raising gross margin the up, our our also days, margin that were our across indication as very service why alone. within and We to our on So we're saw end, XX nice certainly been forward. but those a of everything X it's sticks part business incremental we've went growth all the make sure brands on the last we markets going and doing to all focused

Rajat Gupta

used assumptions give remainder mid-XXs that the Got and it. the there? And kind then to helpful new on of clarification. SG&A year, the some That's expectations color for of GPU gross you Could side what forecast? underlying us

Michael Welch

Yes.

on of the will for come see -- raise the the the we remainder don't we've probably to that vehicles used On year glide the this change path then that are throughout been vehicle And environment. new things the of in GPUs, used kind on. current PVRs to for down expect at lot vehicle continue a stay those to year. of least market remainder of the in going to We the

are new those lower that for current are in forecast. both GPUs So vehicles kind of slightly

Operator

Instructions] [Operator

Group. Capital Sigdahl Our Craig-Hallum next with from comes Ryan question

Ryan Sigdahl

band-aid early XX, performance. Slide Clicklane versus -- in-store But nice enabling much software the walk you to at as that had can system consumer sales CDK to Looking shows or exactly burden you is the why from end lost effectively just my could -- were tool a slide it of kind the guess a when quarter software question transact? you so outage, through transactional there impact end I sales. performed show or of change

David Hult

Craig and ], then I'll can [ Ryan start Dan (sic) in. jump

onetime -- the my think I perception. is this

-- on unpack itself. mix. lot luxury, back a struggling almost our dealerships. brands right more I are XXX that brand market folks us have very and within performance sales. And We but it's have the of Stellantis you it's -- to think buckets all each sales are had simply to what's now. and I up to at with year-over-year of in going is cyclical, our we look had do brand of domestic really it's rooftops. XX% import, think It's brands The within

impact decrease well. our And Nissan, look unit year-over-year XXX% it import at when was Also in of Stellantis. on in as to in tied you material sales the a with it domestic, is us side

of as because far little a around outage with brand our we're brands couple bit mix, we're heavy that the struggling even a percentage a as CDK bit So our a of of little with business.

are all again, brands But cyclical.

So headwind tailwind going for back to future the while right now, it's us. for be come us in they it's a a as

think API of was with tool financial I the the transactional it well. Where some function connections lacks with really OEM some worked arms.

their the API don't and Some more ability as ours of to them have European little software brands of with couple bit as especially connections, challenging, a it make don't which relates it a as have sophisticated the leasing. for

So that differently. think brand with I we to I do feel than performed well really to you But don't the know miss than slowed down on if mix had more outage. me, of Dan, generally, the the more kind process. that volume

Dan Clara

to prior is that, visibility CRM, were moment leads in down what no CDK or any the were extremely Elead that -- that we us Ryan, we outage. I agree and well under the want deals And David. also add, are impact We Elead's outage. But blank went to that XXX% during stores was the or transactional working as I Elead means do our mode. of can a to that cannot you with tool had most the affected outage. we on had Yes. Clicklane the forget worked also operating to

a outage but to lost of able team also of with move So contributed momentum lack -- being that we us our to the up follow allowed with our prior the to Clicklane guests from lot and members to performance. forward,

David Hult

that. will by And team for us and the respond Ryan, But I third up that is development just sandbox, create utilize. internally follow Elead capture that's a to on ability to our quickly with to them. CDK owned we CRM basically our within to say our parties system integrated leads

we top. a little but up able delay, of bit back on to get So were

Ryan Sigdahl

Great. And follow-up. then just my for

Tekion. well? kind cetera, to on well. et forward? cloud-based, on that You changes to anything Curious you guys that that's on then this DMS how of some are on that stores in battle going based X technology about you timeline ] would as versus server love comment as if path data [ trial, unlocking And And think to that hear if between like I the would headlines. legal of

David Hult

want to ongoing we're is would legal don't say I about excited it XXX% Ryan. Thanks, cloud-based. I comment issues. Tekion, on

won't will our applications. have our eggs if because will, We as in But from members team be more standpoint our and with basket nearly able customers. them, we that we being one to as a positive many transparency with view all you deal service guests bolt-on a

I everyone and some is attack. intend But age, with unfortunately, they stores and X on the their in and again, Tekion we've their in and XXXX. conversations center industry our October comfortable, out on SOC kind continue starting from launch we've really early service shared great We to to subject in of there with this cyber had to We're SOC at point day every what and this and do. roll hopefully seen and as cybersecurity II

Operator

[Operator Instructions]

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

David Hult

end operator. we call, Take everyone's all at a quarter. and with of day of on participation weekend. care. Have forward We great to speaking you a today the you, wonderful third appreciate the and the Thank look

Operator

today's concludes teleconference. This

this participation. lines your disconnect Thank may time. you your You for at

Asbury Automotive (ABG) 2 Aug 242024 Q2 Earnings call transcript