Summary of Asbury Automotive Group Q2 2026 Earnings Call

1Key Financial Results and Metrics

Revenue:: $4.4 billion

Gross Profit:: $753 million (Gross Profit Margin: 17.2%)

Adjusted Operating Margin:: 5.3%

Adjusted Net Income:: $125 million

Adjusted EBITDA:: $235 million

Adjusted EPS:: $6.82 (would have been $7.48 without a noncash deferral headwind of $0.66 per share)

Adjusted SG&A as a percentage of gross profit:: 66% (260 basis points improvement from Q1)

Liquidity:: $966 million

Share Repurchases:: 668,000 shares for $131 million in Q2; 1.35 million shares for $278 million year-to-date.

2Strategic Updates and Business Highlights

Tekion Rollout:: 70% of stores have transitioned to the new DMS, with completion expected by October 2026. Early adopters show improved productivity and efficiency metrics.

Operational Focus:: The company is concentrating on five strategic pillars: increasing new vehicle market share, enhancing customer pay gross profit, driving used vehicle volume growth, managing SG&A, and leveraging technology.

Used Vehicle Strategy:: Shifted to a more aggressive volume approach while maintaining gross profit per vehicle (PVR). The used vehicle retail PVR was $1.93 thousand, with a 5% sequential increase.

Parts and Service:: Customer pay business was flat year-over-year, but June showed a 4% increase in fixed gross profit.

3Forward Guidance and Outlook

SG&A Improvement:: Expected to continue declining in Q3 and Q4, potentially reaching low 60% range by the end of 2027.

Used Vehicle Volume:: Anticipated to increase in Q4 2026 as the company ramps up its strategy.

Fixed Operations Growth:: Projected to achieve low to mid-single-digit growth in customer pay services.

4Bad News, Challenges, or Points of Concern

Declining New Vehicle Sales:: New vehicle units down 6% year-over-year, with a noted impact from the Tekion rollout and market conditions, particularly in the Stellantis portfolio, which saw a 28% decline.

Operational Transition Costs:: Ongoing costs associated with the Tekion rollout are creating frictional expenses that are expected to ease over time.

Market Pressures:: Concerns about affordability affecting consumer behavior and potential impacts on labor rates and service traffic.

5Notable Q&A Insights

Impact of Tekion on Sales:: The transition to Tekion has resulted in a temporary decline in new vehicle sales, but recovery is expected as staff adapt to the new system.

Used Vehicle Competition:: No significant impact from increased competition in the used vehicle market was reported, with the company leveraging its fleet of loaner cars to enhance inventory.

M&A Strategy:: The company is currently prioritizing the completion of the Tekion rollout and operational improvements over acquisitions, although they are reviewing potential deals.

Negative Equity Concerns:: No significant uptick in negative equity was reported, maintaining historical norms despite slight declines in used vehicle pricing. This summary captures the essential elements discussed during the earnings call, providing a clear overview of Asbury Automotive Group's financial performance, strategic initiatives, and outlook for the future.