Asbury Automotive Group Inc

ladies and gentlemen good day and welcome to the asbury automotive group first quarter 2021 earnings call today's conference is being recorded at this time i would like to turn the conference over to miss karen reed please go ahead thanks david and good morning everyone as david mentioned today's call is being recorded and will be available for replay later this afternoon welcome to asbury automotive first quarter 2021 earnings call i'm karen reed Asbury's new treasurer and head of investor relations. I look forward to engaging with our analysts and our investor community. The press release detailing Asbury's first quarter results was issued earlier this morning and is posted on our website at asburyauto.com. Participating with me today are David Holt, our president and chief executive officer, PJ Guido, our chief financial officer, and Dan Clara, our senior vice president of operations. At the conclusion of our remarks, we will open up the call for questions, and I will be available later for any follow-up questions that you may have. 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, including those statements relating to the duration and contemplated impact of the COVID-19 pandemic on our business and financial performance. the impact of the chip shortage, as well as the financial projections and expectations about our products, markets, and growth. All forward-looking statements are subject to significant uncertainties, and actual results may differ materially from those suggested by these statements, including potential impacts from the COVID-19 pandemic and the semiconductor chip shortage on us, our industry, and our customers, suppliers, vendors, and business partners. For information regarding certain of the risks that may cause actual results to differ, please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2020, 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. We have also posted an updated investor presentation on our website, Asbury.com, highlighting our first quarter results. It is now my pleasure to hand the call over to our CEO, David Holtz. David?

Thank you, Karen. We're excited to have you on our team. Welcome to our first quarter earnings call. We have just reported record adjusted EPS of $4.68, up 160% over the prior year. Star continues to recover from prior year lows, despite supply chain disruptions due to the chip shortage and COVID. This strong demand in the face of lower day supply helps us deliver a strong gross margin of 17.5%, an expansion of 60 basis points versus the first quarter last year. We've also stayed disciplined in managing expenses, resulting in SG&A as a percentage of gross profit of 62.7%, an 880 basis point improvement versus prior year. Of note, this result includes an estimated 22 cent negative EPS impact from the winter storm experience in February that caused us to close stores in several markets along with some structural damage. Our total revenue for the quarter was up 36% year-over-year, and total gross profit was up 40%. Showing strong signs of recovery, new unit sales were up 24%, and used unit sales were up 16%, with margin expansion in both segments. Total F&I revenue was up 25%, while revenue from parts and service was up 18% from last year. We saw signs of growth in parts and service over this past quarter as drivers are returning to the road. Our balance sheet remains strong due to our performance and cash flow. Our pro forma adjusted net leverage ended this quarter at 1.7 times. This leverage level will allow us to maintain a more active acquisition pipeline and grow our business by strategically deploying capital. A couple of additional comments regarding performance. We achieved an adjusted operating margin of 6.1%, up 180 basis points over last year, and we successfully launched ClickLane, which Stan will discuss further. Regarding acquisitions, it is a very active market, and we are engaged in many conversations, but remain disciplined in our approach. We are confident we will find deals that make sense for Asbury. Looking forward, we are focused on our five-year plan, while we continue our disciplined approach to operating our business and allocating capital to its highest returns. Finally, I would like to thank all the hardworking men and women who showed up every day throughout the past year with a positive attitude and a commitment to serving our guests. Once again, you delivered great results for our company. I will now hand the call over to Dan to discuss our operating performance. Dan?

Thank you, David, and good morning, everyone. My remarks will pertain to our same-store performance compared to the first quarter of 2020. Looking at new vehicles. Based on current market conditions, we are focused on being opportunistic with our inventory and improving grosses to maximize profits. Our new average gross profit per vehicle was up $640 per car, or 39% from the prior year period. All segment margins were up significantly from the prior year period. Factoring in the acquisition of Park Place, luxury represented 45% of our total revenue, up from 34% in the first quarter of 2020, driving our all-store new vehicle PVRs up $1,114, or 67%. At the end of March, our total new vehicle inventory was $527 million, and our day supply was at an all-time low of 34 days, down 71 days from the prior year. Some of our brands were below 20-day supply during the quarter and experienced major challenges due to the lack of inventory. With no clear understanding of when production will return to normal levels, we expect the day supply to remain low throughout the remainder of the year. Turning to used vehicles. Our gross margin was 8.1%, up 100 basis points from the prior period, representing an average gross profit per vehicle of $1,943. As a result of our performance, our gross profit was up 36%. Our used vehicle inventory ended March at $193 million, which represents a 27-day supply, down 15 days from the prior year. We remain focused on sourcing inventory that will generate a fair return. Turning to F&I. Our strong, consistent, and sustainable growth in F&I delivered an increase of $114 to $1,798 per vehicle retail from the prior year quarter. In the first quarter, our front end yield per vehicle increased $637 per vehicle to a first quarter record of $3,932. Turning to parts and service. Our parts and service revenue increased 1% in the quarter, with business exceeding pre-COVID numbers in March. We continue to see this trend thus far in April. And now, I would like to provide an update on our omni-channel initiatives. In December, we launched ClickFlame. which is the latest evolution in our omni-channel strategy that we began more than five years ago. We are excited to announce that we have completed the rollout of Clicklane to all stores in this quarter. As a reminder, Clicklane is a complete transactional tool which allows for a true online car buying and selling experience. It fills many of the gaps that exist with online automotive retail platforms currently on the market. which basically are lead generators and unable to fully complete an online transaction. Features that are unique to ClickLane include penny-perfect trading values and loan payoffs, real payment figures based on local taxes and fees, a loan marketplace, which now includes more than 30 lenders, VIN-specific finance and insurance products customized to the vehicle and consumers, the ability to sign all documents online via DocuSign, in-tool service and collision appointment scheduler, and, we just added, parts and accessories. Although ClickLane just fully launched in all stores, we have some promising initial metrics to share. Average down payment is more than double our in-store average. F&I PBR is 17% higher when compared to our stores. Nearly 50% of customers chose to take delivery at home. Credit scores, on average, are higher than our stores. On average, 9 out of 10 customers that apply for a loan are approved through Clicklane. 50% of transactions had a payoff with their trade. Trades taken through Clicklane that were retailed are averaging higher front-end PVRs when compared to our stores. Trades through Clicklane are turning in less than 15 days. We are certainly excited about these early indicators. And finally, I would like to take this opportunity to express appreciation to all of our teammates in the field for their continued focus on the guest experience, their commitment to continuous improvement, and their perseverance. I will now hand the call over to PJ to discuss our financial performance. PJ?