Asbury Automotive Group Inc

Greetings and welcome to the Asbury Automotive Group third quarter 2024 earnings 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 Reeves, Vice President of Finance, Treasurer. 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 third quarter 2024 earnings call. The press release detailing Asbury's third 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 third 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 third quarter earnings call. As I look at our results and set them against some of the unique challenges we face in the quarter, I'm really pleased with our overall performance and credit the team for their ongoing resiliency. In particular, those individuals and their families impacted by both Hurricane Helene and Milton. Operationally, we saw sequential quarterly growth in used vehicle profitability. and the pace of gross profit decline for new vehicles has started to moderate, a notable achievement given our exposure to Stellantis. Stellantis in particular continues to be a headwind for our business. To give you some context, our 20 Stellantis locations are seeing year-over-year new volume declines of 30%, with gross profit per vehicle down over 53% from Q3 of 2023. Encouragingly, however, we've recently seen them take a more aggressive stance on incentives, which we hope will begin to resolve some of the excess inventory challenges. Our SG&A as a percentage of gross profit improved quarter over quarter, showing that our efforts to take costs out of the business is gaining traction. And finally, our parts and service business continues to show healthy growth. For the quarter, we delivered adjusted earnings per share of $6.35. But as I mentioned at the start of the call, several unique events had a meaningful impact on our performance. Hurricane Helene affected store operations in Florida, Georgia, and South Carolina. And the extended stop sale order for certain Toyota, Lexus, and BMW models impacted volumes on some of our most profitable and in-demand vehicles. Excluding the negative effects from these two items we estimate our adjusted earnings per share for the third quarter would have been between $6.74 and $6.78 per share. With Hurricane Helene, stores in the path of the storm closed their doors early or opened later after the storm passed. Most importantly, however, all of our team members were safe, although many incurred damage to their homes and property. Temporary store closures and reduced customer traffic in the days leading up to the storm and immediately afterwards resulted in fewer new and used unit sales, along with lost business and fixed operations. All told, we estimate the impact of the storm on earnings per share to be between seven and nine cents per share. The various stop sale orders were even more impactful to our quarterly results. The Lexus TX, and Toyota Grand Highlander models have been popular vehicles with healthy gross profit margins. Based on our pre-stop sale trends for these models and for our BMWs, we estimate that this resulted in nearly 1,200 fewer new units sold for the quarter. The estimated negative impact to our third quarter earnings per share was between 32 and 34 cents per share. As it relates to Hurricane Milton, While we're still assessing the operation financial effects from this fourth quarter event, we believe the magnitude of the impact to our business will be greater than Hurricane Helene. The size and path of the storm placed it over a larger section of our store footprint, and the damage to our dealership locations was more extensive. A higher number of stores closed for longer compared to Helene. Several locations experienced flooding. parcel loss of vehicle inventories, and extended power outages. Other locations had varying degrees of wind and water damage, preventing them from reopening in a timely manner. Separate from the hurricane, we are also working to better understand the fourth quarter impact on all the various stop sale orders. This is inclusive of the ongoing stop sale for certain Toyota, Lexus, and BMW models, along with the recent Honda stop sale order for several of their more popular models. We'll provide additional details during our fourth quarter earnings call. Now for our consolidated results for the third quarter. We generated $4.2 billion in revenue, up 16% year over year, had a gross profit of $718 million, up 7%, and a gross profit margin of 16.9%. Our same store adjusted SG&A as a percentage of gross profit was 63.8% and 64.4% on an adjusted all-store basis. We delivered an adjusted operating margin of 5.6%. Our adjusted earnings per share was $6.35, and our adjusted EBITDA was $233 million. During the quarter, we repurchased nearly 400,000 shares for $89 million. bringing our year-to-date total through October 28 to approximately 830,000 shares for $183 million. In the third quarter, we divested one Chevrolet and one Honda store as part of our ongoing efforts to optimize our portfolio. And finally, in the fourth quarter, we launched our long-awaited pilot with Tachyon in four stores and our shared service center. Now, before I hand the call over to Dan, I want to say thank you again to our team members for delivering another solid performance. Given our heavy presence in Florida and the Southeast, the recent storms have had major impacts to our team members and the communities in which they serve. Their dedication to getting our stores back up and running is just a small part of the overall recovery effort, and I couldn't be more proud of them. Now, Dan will discuss our operational performance.