Asbury Automotive Group Inc

Greetings and welcome to the Asbury Automotive Group second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Reeds, Vice President of Finance and Investor Relations. Thank you, sir. 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 2024 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 Holt, our President and Chief Executive Officer, Dan Clara, our Senior Vice President of Operations, 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-K for the year ended December 2023, 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, investors.asburyauto.com, highlighting our second quarter results. It is my pleasure to now hand the call over to our CEO, David Holt. David? Thank you, Chris.

Good morning, everyone. Welcome to our second quarter earnings call. I want to start by thanking our team members and our OEM and banking partners for their efforts to ensure we continue to deliver the highest possible guest experience through the challenges associated with the CDK outage. Their resourcefulness and dedication helped to ensure all store locations continued to sell and service vehicles, although certain levels of speed and efficiency were certainly impacted. Beginning on June 19th, The outage affected all Asbury stores, with the exception of our Kuhn stores, which utilize a different dealer management system. We received initial access to the DMS on July 1st. However, all functions of CDK were not fully restored for us until July 8th, with other plugins and bolt-on applications coming back online in the weeks thereafter. Once CDK services were restored, Team members across the country worked tirelessly to recreate transactional activity that occurred during the outage back into the DMS. Due to the length of the disruption, the recovery process took approximately 12 days. To give you a sense of scale, just within our parts and service business, almost 100,000 repair orders were recreated into CDK. For several years, We've talked about our disciplined investments in technology, designed to create a guest experience that is both more transparent and quicker. We designed the showroom app and our click lane tool to facilitate in-person transactions that may have started online. During the outage, this application served as the primary way for us to facilitate the sale of vehicles, since click lane functionality was not impacted by CDK. Tools such as these, combined with the dedication of our team members and partners, help to mitigate the impact of our financial performance from the CDK incident. For the quarter, we estimate this impact to be between $0.95 and $1.15 in diluted earnings per share from a combination of fewer new and used vehicle sales, which also impacted our F&I business. a reduction in parts and service volumes, and certain one-time expenses related to our recovery efforts. The likelihood of recovering some portion of this through insurance or other recoveries is difficult to predict and is therefore not included in the previous mentioned estimate. Additionally, any recoveries we do receive may not occur for several quarters or longer. I'd now like to turn our focus to the performance of our business, excluding the impact of the outage. Through the hard work of our team members, we delivered record second quarter total revenue and record second quarter parts and service revenue with $581 million and gross profit of $340 million. Our used vehicles were pacing towards 1% growth in total units on a same store basis through the first two months of the quarter. However, we ended the quarter down 2% due to the CDK outage. In parts and service, beyond the record quarter for total gross profit dollars, we saw strong performance in same store results, pacing at 8% growth going into June, before finishing with 4% growth due to the CDK outage. I am pleased with the performance and momentum of this business. Now for our consolidated results for the quarter. We generated $4.2 billion in revenue at a gross profit margin of 17.2 percent. Our same-store adjusted SG&A as a percentage of gross profit was 64.4 percent and 64.8 percent on an adjusted all-store basis. We delivered an adjusted operating margin of 5.6 percent. our adjusted earnings per share was $6.40, and our adjusted EBITDA was $236 million. During the quarter, we repurchased 193,000 shares for $43 million, and another 160,000 shares for $36 million so far in the third quarter. This brings our year-to-date total through August 1st to 592,000 shares for $130 million. Our approach to capital allocation is a continuous process, and we're constantly evaluating the optimal balance between acquisitions, organic investments, and share repurchases. We are committed to prioritizing the most strategic and accretive use of capital and will continue to be opportunistic in pursuing attractive avenues for growth. Effective capital allocation also extends to managing the makeup of our existing portfolio. In the second quarter, we divested two Nissan stores and will continue to monitor opportunities to make other changes throughout the year. Now, before I hand the call over to Dan, I want to say thank you again to our team members for their perseverance and sacrifice. Through the late nights and long weekends, I was proud of how you came together to solve a common challenge, all while continuing to be the most gas-centric automotive retailer. Now Dan will discuss our operation performance. Dan?