• Revenue: $4.5 billion, up 18% year-over-year.
• Gross Profit: $750 million, up 11%.
• Gross Profit Margin: 16.6%.
• Adjusted Earnings Per Share (EPS): $7.26.
• Adjusted EBITDA: $254 million.
• Same-Store New Vehicle Volume: Up 7% year-over-year.
• Same-Store New Vehicle Gross Profit Per Vehicle: $3,661.
• Used Retail Gross Profit Per Unit: $1,584.
• F&I Per Vehicle Retail: $2,238.
• Same-Store Parts and Service Gross Profit: Up 11%.
• SG&A as a Percentage of Gross Profit: 63% on an adjusted all-store basis.
• Adjusted Operating Margin: 6% same-store, 5.7% all-store.
• Adjusted Net Income: $143 million for the quarter.
• Adjusted Operating Cash Flow: $688 million for the full year 2024.
• Free Cash Flow: $526 million for the year.
• Liquidity: $828 million at the end of the quarter.
• Transaction Adjusted Net Leverage Ratio: 2.85 times at the end of December.

• Warning! GuruFocus has detected 6 Warning Signs with ABG.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Asbury Automotive Group Inc (NYSE:ABG) reported a record $4.5 billion in revenue for the fourth quarter, marking an 18% year-over-year increase.
• The company achieved a gross profit of $750 million, up 11% from the previous year, with a gross profit margin of 16.6%.
• Same-store new vehicle volume increased by 7% year-over-year, with a 12% sequential increase, and gross profit per new vehicle rose by $149 compared to the third quarter of 2024.
• The parts and service business delivered outstanding results, with same-store gross profit up 11% and customer pay segment up 13%.
• The company successfully reduced SG&A costs as a percentage of gross profit to 63% on an adjusted basis, marking the second consecutive quarter of improvement.

Negative Points

• Inventory challenges are expected to persist throughout 2025, particularly affecting the used vehicle market.
• Stellantis brand performance was a significant headwind, with gross per unit down substantially year-over-year.
• The rollout of Total Care Auto (TCA) in Florida and Koons is anticipated to be a headwind to earnings, with a projected noncash deferral hit of $62 million or $2.35 per diluted share in 2025.
• The company faces potential headwinds from rising new vehicle incentives, which could impact used vehicle pricing.
• Weather-related disruptions in January affected sales, with multiple store closures impacting performance.

Q & A Highlights

Q: Can you discuss the factors contributing to the strong new vehicle gross profit per unit (GPU) in Q4, and how much of this is due to market conditions versus seasonality? A: David Hult, CEO, explained that the strong GPU was influenced by a mix of factors, including a balanced days supply and the brand mix. He noted that Asbury's acquisitions have been accretive to GPU, and while some brands like Stellantis faced challenges, others performed well. The company anticipates a more stable market in 2025, with potential tailwinds as Stellantis improves its inventory and pricing strategies.

Q: What are the expected benefits of the Tekion platform pilot, and how does it compare to your current DMS? A: David Hult, CEO, highlighted that Tekion reduces plug-on costs by about 70% and simplifies onboarding and training. The platform enhances transparency and efficiency, leading to increased productivity. Asbury anticipates material SG&A savings once fully rolled out, with improved guest experiences and employee empowerment.

Q: How did the SG&A leverage improve in Q4, and what are the expectations for 2025? A: Michael Welch, CFO, attributed the improvement to cost reductions and increased gross profit, particularly in fixed operations and new vehicle margins. The company expects SG&A as a percentage of gross profit to be in the mid-60s in 2025, considering new vehicle GPU projections and business investments.

Q: What is driving the higher deferral headwinds for TCA in 2025 and 2026 compared to previous expectations? A: Michael Welch, CFO, explained that the higher deferral headwinds are due to the roll-off of strong years from legacy LHM stores, increased SAAR and used vehicle growth expectations, and the rollout of TCA in Florida and Koons. These factors contribute to a temporary deferral impact, with a peak expected in 2026.

Q: How is the company addressing the challenges with Stellantis, and what improvements are expected? A: David Hult, CEO, noted that Stellantis has reduced inventory days supply and lifted some ordering restrictions, allowing for better alignment with consumer demand. The company anticipates improvements in GPU as the right inventory mix becomes available, although it will take time for these changes to fully materialize.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.