With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

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Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

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The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

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Industrials came out on top this year, with 22 companies featured on the list.

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This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

The Atlanta-based car dealership operator went up 23 spots on the <em>Fortune</em> 500 this year, as stimulus checks and a migration from city to suburbs sparked a stellar year for car sales. Asbury reported $254.4 million in 2020 net income, a nearly 38% increase from the year prior.

This year's Fortune 500 marks the 66th running of the list.

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Revenues rose 5% in 2019 at this Atlanta-based operator of auto dealerships, as consumers bought more used cars or sought to refurbish the vehicles they already owned.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Asbury Automotive Group is one of the largest car retailers in the U.S., selling and servicing nearly three dozen automobile brands. As of 2025, it operates over 150 new vehicle dealerships across 14 states. It also operates an online car-buying platform and a vehicle protection provider. The company was founded in 1990, but has recently embarked on major acquisitive growth with the purchase of several billion-dollar automotive groups, including the Herb Chambers Companies and the Jim Koons Automotive Companies.

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Asbury Automotive Group (ABG): Company Profile, Stock Price, News, Rankings

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Asbury Automotive Group

asbury automotive group

Greetings. Welcome to Asbury Automotive Group's Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. 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.

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 twenty twenty five 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 Halt, 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 will 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 ks for the year ended 12/31/2024, 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?

Thank you, Chris, and good morning, everyone. Welcome to our second quarter earnings call. This is an exciting time for Raspberry, 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 forty years. Shifting to our operational performance. We continue to see strong demand in the second quarter as consumers waved the decision to buy ahead of potentially higher prices from an ever changing tariff landscape. But we did see the start 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 three thousand 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 we'll 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 Techeon 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 Raspberry. 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 and A as a percentage of gross profit was 63.2% for the quarter, an improvement of over 100 basis points from the 2024, and a sequential improvement from the 2025. It is important to note that we still see opportunity to further reduce our SG and 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 of nine stores as part of an ongoing capital allocation in our effort to optimize our portfolio. The proceeds from these transactions help to offset some of our investment in Herb Chambers, and we anticipate prioritizing leverage reduction over the next twelve to eighteen months as we work to integrate the acquisition and focus on our migration to Techeon. 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. And now for our consolidated results for the second quarter. We generated $4,400,000,000 in revenue, had a gross profit of $752,000,000 and a gross profit margin of 17.2%.

We delivered an adjusted operating margin of 5.8%. Our adjusted earnings per share was $7.43 And our adjusted EBITDA was $256,000,000 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?

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 fifty nine days at the June. Turning to used vehicles. Second quarter unit volume was down 4% year over year. Used retail gross profit per unit was $17.29 dollars 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 thirty seven days at the end of the quarter. Shifting to F and I. We earned an F and I PBR of $2,096 The deferred revenue headwind of TCA was a $161 decrease in the same store F and I PVR number year over year. As a reminder, we are planning the TCA rollout to Kuhn stores in the fourth quarter of this year, following the recent completion of the tachyon 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. And 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?

Thank you, Dan. To our investors, analysts, team members and other participants on the call, thank you for joining us this morning. And now on to our financial performance. For the second quarter, adjusted net income was $146,000,000 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 twenty twenty five excludes net of tax, dollars 4,000,000 of cyber insurance recovery proceeds, 4,000,000 related to the gain on divestitures and $2,000,000 of professional fees related to the acquisition of Herb Chambers. Adjusted SG and A as a percentage of gross profit came in at 63.6% noting that the Techeon implementation costs are beginning to impact our P and L. We still anticipate 2025 SG and A in the mid 60s, caveating that we are monitoring tariff and trade developments. While we see additional expenses for Techeon rollout and legal fees, we still are optimistic there are opportunities to lower SG and 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 $7,000,000 of pre tax income in the second quarter. The negative non cash deferral impact for the quarter was $11,000,000 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 SAAR 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 $334,000,000 of adjusted operating cash flow through the 2025. Excluding real estate purchases, we spent $60,000,000 on capital expenditures through the June.

We anticipate approximately $250,000,000 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 $275,000,000 through the 2025. We ended Q2 with $1,100,000,000 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 June.

Following the Chambers acquisition, we anticipate that this ratio will be above our target range. We will work down our leverage over the next twelve to eighteen months and expect to be below the higher end of our range in mid to late twenty twenty six. On July 21, we closed on the acquisition of Herb Chambers Automotive Group. Full year 2024 adjusted EBITDA for Herb Chambers was $176,800,000 and the transaction was valued at about $1,450,000,000 Of this amount, $750,000,000 represented Blue Sky and $610,000,000 was real estate and improvements. Please refer to slide 32 in our investor deck and the Form eight ksA filed this morning for more information on the pro form a financials.

Upon completion of the deal with our amended credit agreement, our revolver capacity increased to $925,000,000 and our new vehicle floor plan facility to $2,250,000,000 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 $619,000,000 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 $250,000,000 to $270,000,000 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 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. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jeff Licht with Stephens. Please proceed.

Good morning, guys. Congrats on a great quarter and congrats acquisition. I know that means a lot to you, David, your New England roots up here. I just want to wonder if you could just walk through as the quarter progressed, kind of the cadence of GPU and also units and just where do you see things standing now as we are into the first month of Q3?

Morning, Jeff, this is Dan. So as the quarter progressed, we saw the, GPUs, started stronger, in the first part of the quarter, as the SAAR started to level off, as David mentioned in his remarks at the beginning of the call, started to see adjustment into the GPUs, as well. I'll tell you that as things move forward, situation is still pretty fluid. There's been, as you know, a few agreements that have been reached, with Japan and the European Union, but still trying to see where things are going to fall and how the OEMs will react. But back to the comment that David stated, earlier, we see those, still have belief that those GPUs fall into 2,500 to 3,000 range.

And that range you've given, that's inclusive of any, say, new of dealer invoiced MSRP adjustments and relationships?

Yeah, it's, again, it's still hard to tell where the product is going to fall for a lack of a better term until we start to see 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.

And 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, 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 gonna come down the pipeline. But you also gotta 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. So 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. Well, thanks very much for taking the question and best of luck in Q3.

Our next question is from Federico Morende with Bank of America. Please proceed.

Good morning, guys. So you had a solid SG and A performance during the quarter. And I was wondering, can you talk more about the initiatives that are allowing the SG and A to remain under control?

Yeah, 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 Techeon conversion cost in there. So that number would have been even lower if we wouldn't have the kind of Techeon conversion cost in that mix.

Thank you. And if we assume that in the second half volumes for new vehicles will be lower due to higher prices and so consumers won't buy vehicles, I would assume that it will be harder to leverage your SG and A. So how would you plan to offset the lower SG and A absorption?

Again, that productivity for employees is key because a lot of our costs are commission based and they adjust with either a downturn in volume or PVRs. So that cost discipline is key, but that's also why we kind of said mid 60s. To your point, it'll be a little tough to keep that, lower number if the PVR drops off, significantly or if the volume drops off, but, that discipline on productivity is kind of the key to keeping that number as low as possible.

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

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 and 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 of weeks you've had, incremental opportunities do you see, you know, to improve, like, just metrics at the store, you know, other areas around services or used cars, that you see you can bridge the gap to, you know, versus, versus asbury orders versus like broader industrial period that have better metrics. Just curious if you could just give us some more insight into what we should expect to see as the acquisition gets integrated further? And I have a follow-up.

Rajat, this is David. There was a few things that when 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. So we think we align philosophically in how to run the business. The best part about this in any transaction, there's always opportunities to improve. There's opportunities to improve in our same store, there's opportunity to improve with any acquisition that we have.

We'll work with the team over time to look for efficiencies to improve upon the business. But this was a strategic market for us. It's a defensive position. New England isn't a growth market, but it's 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. I just had a follow-up on parts and services 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 of quarters. Do you feel comfortable offsetting any of the warranty, the tougher warranty comps with more customer pay work here later

Just curious to get your thoughts on the cadence there. Thanks.

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. And, we have, the throughput in the stores, obviously the bay utilization, we have opportunity to grow that as well. So we feel comfortable, with that measurement and continue to have and push forward as we go into the second half.

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. But 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. So we're very optimistic about parts and service in the second half of the year, with your point of 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 with some peers, but curious if that's the case for you as well.

Yeah. It varies slightly, but overall, it runs higher on warranty than it does CP, the margin.

Understood. Great. Thanks for taking the questions, and good luck.

Our next question is from Ryan Sigdahl with Craig Hallum Capital Group. Please proceed.

I want to move over to used GPUs. Nice really strong in the quarter. I guess, the same store sales performance, it appears Asbury continues to stick with the profitability over volume. But can you talk through kind of the strategy, how you think about the second half and, if there's any change there?

Yeah, good morning, Ryan, it's, Dan. Our strategy, remains the same. As you know, we are facing the lack of, supply from the used car inventory in relation to, the pandemic. And I don't need to walk you through it, but lease turn ins, etcetera, that all took place during the pandemic. So with that thought in mind, our plan stays the same, maximizing gross profit rather than chasing the volume.

But as we've stated at the beginning of the call, this is something that we assess on a continuous basis, and we're ready to adjust as soon as we see the market shifting and more availability of inventory.

Ryan, I would jump on and say, we can see the rest of this year. The pool is just very shallow, but I think we're at our low point. To Dan's point about talking about the COVID peak, It starts to improve in 'twenty six with off lease vehicles, and that'll vary a little bit depending upon lease penetration in groups and how much access they have. So 'twenty six, 'twenty seven certainly get back to normal and I think you'll start to see increases mid-twenty six and beyond.

Helpful. Then just progress on Techeon. Good to see Kunz conversion completed a little ahead of of expectation there. Multipart question here, I guess, as it relates to Techeon. But one, anything surprising you thus far post that conversion with Kunz?

Two, can you quantify what the implementation costs for Techeon were in the quarter? I mean, you had really nice SG and A leverage, especially comparing to peers in the quarter, even considering that, but if you're able to quantify. And then the last part would just be the conversion time line 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 Techeon was the simplicity of the software and not having as many bolt ons as we have. We see the benefits and efficiencies with that and making it easier for our teammates to work with the clients. But changing a DMS is like 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 times, things missing, it's just normal through it. So to the Coons folks credit, it 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. And when we're fully converted, which will hopefully be in 'twenty seven, is when we really recognize the SG and A benefits, but also operating efficiencies.

Positive feedback from some of the employees with less 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, so we're finding new things every day about it. So it's going to take us a while to become proficient on the software and work through the kinks of normal DMS conversions. But we're very happy and pleased with the progress, and quite honestly how resilient the Kunz team was working through it in the quarter, was just, it was inspiring for us to see.

And on the cost front, it's about $2,000,000 in costs in the quarter. About half of that is I'll call it duplication and implementation costs with Techeon. And the other half, because we're a public company, we have to go through a little bit pain and aggravation of testing the control environment. And so we have, we're paying outside resources to kind of work through the audit side of, SOX controls with the software. And so about a million of implementation and duplicated, DMS costs and about a million of third party audit costs.

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

Thanks. 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?

Good morning, David. This is Dan. No, it's lean, but we have not seen a negative effect on, you know, being leaner than what we're used to operating. And as you know, we've been operating under that, single digit to low double digit DSI for quite a while, and, it's all about the turn, And I feel like our stores are doing a pretty good job with that.

All right, thanks. And on, the EB tax credit and your EB 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 you have been able to monitor and see coming, for a while. I think, some of the OEMs have done a very good job of planning accordingly and the number, of EVs, whether they are in production or allocation or even on the dealer lots has been dwindling down. So I don't expect a tremendous amount of push because they have been preparing for it. And, you know, listen, 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 of investment to our shareholders, but we're going to be true partners and support our OEMs.

But like I stated before, they've been planning accordingly. We've seen the DSI go down into 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, 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, this is 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. So 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. But 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 or 40,000,000 in revenue per rooftop is just something that doesn't interest us.

We try and look at ten year economic outlooks of markets that we're in, what the franchise laws are and all that kind of stuff. And we think that's what helps our portfolio keep the SG and 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. And while we talk about the headwind of TCA and what it meant to an 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 $28 and $29 you're talking $4.5 to $5.5 per share before we sell a car. So 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.

And then you add in the concept of fully being on Tech Yeon and the benefits of SG and A. So the next six or seven months might be bumpy as we settle into tariffs and what happens there and stabilizing day supply. But we think the future is really bright and we're optimistic about it and excited for the future. But for now, California is not on the list and it's really focusing on the markets we're in.

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

Hey, 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 and 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 and I contracts at. So they're somewhat baked in there, but if you had a meaningful increase on the parts side to your point, labor is the biggest component of that. And so it'd have a small impact on the claims, but not a huge impact. On the twenty sixth through twenty ninth, what we're really trying to figure out there is where do we think SAAR shakes out?

That's the big driver of the TCA runoff. And when kind of that deferral hit hits you is when that SAAR rebounds. And so once we figure out kind of a better forecast for SAAR over the next couple of years, we'll come back and update those numbers for those SAAR projections.

And Brett, just to jump on that real quick, if you don't mind. When we acquired TCA, their A and BEST rating was an A-, we've improved it to an A rating. So we're real happy with the way we're managing the portfolio and loss ratios. And so we're very optimistic about the future for TCA regardless of tariffs.

Yeah, great. Thank you. And then I'd follow-up on regional dispersion, guess. You called out the Western stores having 2x the company average in parts and service growth. Is there anything else sort of interesting from a regional performance, either on units or puts and takes geographically?

No, Brett, this is Dan, by the way. No, I don't think that there's anything else interesting. I'll just expand on the double digit growth in the and we've been talking about this for the last, I don't know, twelve, eighteen months, 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, but more importantly, to enhance the guest experience through technology, even though we know that the employees in the front lines are the ones that create the experience.

I would just add to that. I would say more than geographical, mix matters. All brands are cyclical. So depending upon your portfolio, it can be a tailwind or a headwind based on what you have. But 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 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 twenty seven, twenty eight years now. There's been a lot of negativity over time with it. And as far as everyone looking for the headwinds going forward, one thing that's hold true, and especially through the recession in 'eight and 'nine, this is a resilient business model. And it's an accordion effect with its 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. And this business model, not just ours, but our peers in the private cap space will certainly adapt and come out on the other side of this just as strong as they did before.

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

Thank you. This concludes our call today. We appreciate everyone's participation and look forward to speaking with you after our third quarter. Have a great day.

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

Asbury Automotive Group (ABG) Q2 2025 Earnings Call Transcript

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