Q2 2021 Asbury Automotive Group Inc Earnings Call

Good day and welcome to the Asbury. Automotive Group Q2.2021 earnings conference. Call today's conference is being recorded at this time. I'd like to turn the conference over to Karen read vice, president and Treasurer. Please go ahead.

Ed, thanks operator and good morning everyone, as he noted, today's call is being recorded and will be available for replay. Later this afternoon. Welcome to Asbury Automotive group's second quarter 2021 earnings. Call the press release detailing at very second quarter results was issued earlier this morning and is posted on our website at Asbury. Auto.com participating with me today are David, Hult, our president and chief executive officer and Dan Clara are

Your 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 that a statements relating to the duration and contemplated impact of the COVID-19, pandemics on our business and financial performance.

formance 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 the 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 rest, that may cause actual results to differ materially. See our filings with the SEC from time to time including our form 10-K for the year. Ended December

Ember 20/20 and he 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've also posted an updated investor presentation on our website, Asbury Auto.com, highlighting our second quarter results, it is now my pleasure to hand.

The call over to our CEO. David Hult. David thank you. Karen and good morning everyone. Welcome to our second quarter earnings call in our earnings release this morning. We reported adjusted EPS of 7 dollars, and seventy 8 cents, and all-time record up to hundred, 9 percent over the prior year.

Car continues to recover from prior year lows. Despite Supply disruptions due to the chip shortage is strong execution. In the face of a challenging macro environment, enabled us to deliver a strong gross margin of 19.2%, an expansion of 240 basis points versus the second quarter last year.

We've also stay disciplined in managing expenses. Resulting in sg&a as a percentage of gross profit of 54.2% an 850 basis point Improvement versus prior year.

Our total revenue for the quarter was up 79 percent year over year and total gross profit was up 105 percent.

Our balance sheet remains strong due to our performance and cash flow Arnett. Leverage ended. This quarter at 1 point 6 times. We are in a perfect position to deploy capital and are aggressively pursuing opportunities for growth. The quick update on our strategic Five-Year Plan as we announced 6 months in

Same store, Revenue growth assuming 2020, annualized revenue for Park Place, is up double digits and is exceeding expectations regarding clicklane, our unit sales of pacing ahead of our plants.

Regarding acquisition. We have about 400 million in Revenue under Loi right now. We are also reviewing other opportunities totaling over 8 billion in Revenue. We are confident in our goal of 5 billion in Revenue. Over the next 5 years with these trending results, we maintain full confidence in our execution, on our growth strategy, we will continue to provide quarterly updates on our Five-Year Plan.

Lance. Finally, I'd like to thank all the hard-working men and women in our company who are focused on our journey to become the most guests Centric. Retail automotive company, their passion to serve is inspiring. Thank you. I will now hand the call over to Dan to discuss our operating performance dance. Thank you, David and good morning everyone. My remarks will pertain to our same store performance compared to the second quarter of 2020.

Incomparable stores in 2019, when applicable.

Unless stated, otherwise looking at new vehicles based on current market conditions, we were focused and being opportunistic with our inventory and improving Grocers to maximize profit our new average gross profit per vehicle was 3 thousand, 4 hundred and ninety, 6 dollars of $1,599, or 84 percent from the prior year period.

David. All segment margins were up significantly from the prior year period. At the end of June our total new vehicle inventory was 226 million dollars and our day supply was at an all-time low of 17 days. Down 35 days from the prior year. Some of our stores were at 5 days Supply during the quarter. As we experienced major challenges, due to the lack of inventory, with no clear understanding of when production will return to normal levels, we expected, they supplied

Remain low. Throughout the remainder of the year, burning to use vehicles are used retail volume increased. Twenty 9 percent while gross margin was 10% of 230 basis. Points from the prior year representing, an average gross profit per vehicle of 2 thousand 6 hundred and thirty-five dollars as a result of our performance. Our gross profit was up, 96% are used vehicle. Inventory ended the quarter at 286 million.

Which represents a 37 Days Supply up..11 days from the prior year, we remain focused on sourcing inventory, that will generate a fair, return, burning to fni, our strong consistent and sustainable growth in F. And I delivered an increase of a hundred and sixty dollars to 1898 dollars per vehicle retail from the prior quarter career. Porter in the second quarter, our front-end yield per vehicle, increased 1448 dollars per

Equal to an all-time record of 5000 for dollars.

Earnings reports and service our parts and service Revenue. Increased 41% in the quarter. Gross profit, increase 48 percent and total 6 margin was 62.3% up..300 basis points. I would like to make a couple of additional comments about our performance compared to the second quarter of 2019 on a comparable store. Basis, new unit, sales were up 11% new vehicle. Gross profit was up a hundred and seventy 2 percent.

Used retail unit sales were up 10%.

Don't use retail, gross profit was of 88 % F +. I / vehicle retailed increase $261 or 18% run in yield per vehicle. Retailed increase 1831 dollars or 64 percent parts and service customer pay revenue and gross profit increased 9%. And now I would like to provide an update on our omni-channel initiatives.

in 2016, we started

CN strategically on several omni-channel initiatives.

1 of those initiatives is to increase Organic website traffic through our sophisticated. Digital marketing efforts seems Q2.2016. Our organic traffic of unique very unique visitors to our dealership website has increased by over 6 million consumers and increase of over 5,000 percent. Another initiative is to increase online service appointments.

We achieve bookends of over a hundred and forty-two thousand online service appointments, an increase of over 400 percent in Q2.2016. And then all-time record this component positively impact service retention and increases the dollars per repair order. And of course clicklane the latest evolution in our omni-channel strategy, which was fully active at all of our dealerships for the complete quarter.

Before I go over the clicklane metrics, I want to remind you of the unique features of clicklane as well as highlight. Our recent enhancements, as we are constantly evolving the tools to provide our guests with a seamless and complete buying experience and strengthening that relationship.

Penny perfect loan. Payoffs a loan Market Place which now includes more than 35 lenders on average 9 out of 10 customers are apply for a loan or approved through clicklane. The ability to assign all documents online via DocuSign with 14 of our lenders. Now accepting documents executed via DocuSign in Tools, service, and collision, appointment, scheduler with ability to purchase parts and accessories within the tool as well.

We recently partnered with salty to deliver transparency and convenience by providing a One-Stop shopping experience for our guests to include their car insurance needs.

Salty is an embedded ecosystem for a consumer that provides competitive personalized. Insurance quote from over a dozen large National Carriers.

Clicklane guests benefit from an intuitive platform that retrieves a competitive quote from major carriers and provides a custom-built policy tailored towards the consumers wants and needs.

Asbury customers spend over 350 million in Insurance every year through our partnership. With salty, we receive a commission on the premiums of each auto insurance policy, as well as any additional policies that the guest originates. We also partner with Insignia to enhance our accessories tool and to enable visualization within clicklane Asbury. Customers often looked at third parties to outfit their vehicles after the point of purchase.

These new integration allows customers to add accessories in the back end of their clicklane account.

This enhancement allows customers to fully visualize accessories on the vehicle. Other choice in real time. Now, with a full quarter at all stores under our belt, we would like to share some performance metrics of our vehicles sold through clicklane, 54 percent of them were new vehicles and 46% were used as a reminder, with pushstart eighty percent of our sales where used vehicles.

We expect annualized volume through clicklane of at least 30,000 Vehicles by irem..93% of our transactions is quarter work with customers that were new to as berries dealership Network.

Albert's.

It's action time is 8 minutes for cassio's in 14 minutes for finance deals. Average down payment for new vehicles is 10 thousand 2 hundred and fifty 2 dollars more than 4 times. Our store average of 2 thousand 2 hundred and forty-two dollars average down payment for used vehicles is 4 thousand 7 hundred and sixteen dollars more than double our store average of 2 thousand and seventy 8 hours.

F&I PBR of 2066 dollars.

Sixty-four percent of new car. Customers in 68% of used car customers chose to take delivery at home and increase of over..15 percent from the first quarter. Average credit score is higher than the average credit score at our stores.

Trace taken through flea-killing or averaging front-end PVR of 2392 dollars.

Grace taken through clicklane or turning on average as expected clicklane. Customers are converting at greater rates than traditional internet leads, not surprisingly. We are quite excited about the performance of clicklane thus far, as it is tracking ahead of targets. And finally, I would like to take this opportunity to express our appreciation to all of our teammates seem to feel for their continued to focus on the guest experience their commitment to continuous Improvement.

And their perseverance. I will now hand the call over to Karen to discuss her financial performance. Karen

Thank you, Dan. I would like to provide some financial highlights, which marked yet another record quarter for our company for additional details on our financial performance for the quarter. I refer you to our financial supplement in our press release dated today. July 27th 2021 overall compared to the second quarter of last year. Our actions to manage gross profit and control expenses. Resulted in a second quarter, adjusted operating margin of 8.4%.

That an increase of 200.80 basis points above the same period last year and an all-time record and adjusted net income, increased 211 percent to a hundred fifty 1 point 7 million. Displaying our resilience through these interesting time for comparison to our pre coded performance, thus compared to the second quarter of 2019 for all stores, our total revenue was up 43% total. Gross profit was up 69%.

Rent and total gross margin was up 280 basis points. New unit sales were up 20 percent while used retail unit sales were up, 21% new margins improved 510 basis point while used retail margins improve 260 basis points. Total F&I Revenue was up 33 percent. Total Parts and Service Revenue was up 30%, our SGA percent as a

Gross profit, improved 13.

Other than 80 basis points and are adjusted operating. Margin improve, 370 basis points. Now back to current results, net income for the second quarter 2021 was adjusted for real estate net gains a point 5 million dollars or 2 cents per Delhi to chair net income. For the second quarter 2020 was adjusted for a 1.2 million or 5 cents per diluted, share legal settlement, gain our effective tax rate was 24 points.

7 percent for the second quarter 2021 compared to 25.2% in 2020.

Floorplan interest expense for the quarter decreased by 2 million dollars over the prior year, quarter driven primarily by lower inventory levels coupled with lower LIBOR rate. With respect to Capital deployed this quarter, we exercised our purchase option on the Park Place, properties utilizing approximately 33 million dollars of our cash on balance sheet with the remainder, a hundred Eighty-Four million dollars financed through a mortgage facility. In addition, we spent

Approximately 15 million dollars in capital expenditures and we repaid approximately 9 million dollars of debt. Also in planning for our new Plano, Acura site we sold and least back our Plano Acura facility resulting in incoming funds before million dollars. Net of its mortgage payoff. As a result of our operational performance, our balance sheet remains in a very strong position and we ended the quarter with approximately 5 hundred and Seventy-Six million of liquidity.

As of cash floorplan offset accounts and availability on both are used line and revolving credit facility. Also, at the end of the quarter Arnett leverage ratio stood at 1 point 6 times. Well, below our targeted net leverage of 3 times as we look forward to the remainder of 2021. We anticipate similar conditions to what we assume this quarter new vehicle inventory, supplies are likely to remain low, and unpredictable through at least the end of the year.

Overall, as we did in Q2, we are still planning to a 16 million Saar environment, but we'll keep our business Nimble and flexible with an emphasis on Gross margins and sg&a. Expense management..1 ship with highlighting is that as the economy opens up more? We expect our parts and service business, to return to its historical growth rate in closing. I would also like to thank our teams across the business to continue to work tirelessly during this unprecedented time to ensure.

Current and long-term success. This concludes our prepared remarks, we will now turn the call over to the operator and take your questions. Operator, thank you. Have you like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, you may press star 1 to ask a question. Our first question comes from Rick Nelson with Stevens.

Thanks. Good morning that you're seeing there in this additional 8 billion that's in active discussions. How does the pricing look there?

Rick. Thanks for the question and good morning. It's really mixed, you know, as you can imagine. There's a lot of different buyer, excuse me. Sellers out there right now, that would like to work multiples off of, you know, COVID-19 earnings and the key from our perspective is to have a blended look at it and stay disciplined and on our approach. So I would say it's a little bit all over the board. We've probably in the last you know, 6 months walked away.

De from 3 or 4 billion dollars in business because we just didn't feel like it was priced appropriately. We feel very confident about the 400 million under Loi. As far as the locations and Brands and how they fit into our portfolio and the other, the other 8 billion and we're assessing right now. It's actually closer to 9. It's the same thing. They're a little bit larger in size, so there's it's a little bit longer conversations and their little a little bit slower.

Proceed. So still up in the air and what the multiples of be for there. But we have under Ela. We feel really confident with where we've landed

Congress her about all the so I mean I can appreciate you don't have a lot of visibility as to when suppliers will normalize from the current 17 days. But when things do normalize Duty, thank you Williams will run tighter on inventory than they have in the past. Or do they go back to their prior?

The Habit. So it seems everybody is more profitable and, you know, tighter Supply environment.

Rick, it's a great question and 1 that I certainly don't know the answer to. I would say, they've done a fantastic job at managing the chip shortage and really trying to produce vehicles that consumers want to purchase and we're very thankful for that in the partnership. There is a lot of talk internally with the manufacturers about operating in this environment. I'm hopeful that when things normalized, we don't quite settle back in at the 70, 80 Days Supply, we were, you know, we run a

20 days below that too early to tell I think next year is going to be a strong year for retail automotive and then we should start to see a lot of electric vehicles coming to the market soon after that. So interesting times as you look forward, even with that coming back a little bit, I think you look at the the transactions that are taking place online and how that'll grow over time, there's still some opportunity with sg&a even if those margins come somewhat close with the pre COVID-19 know,

But he might get an electric vehicles covered time with Evie's at. They start going direct to Consumer and how how do you think that impacts? You know it's a traditional dealers like has great

Sure.

You know, we feel that the best model of supply to the consumer is through the dealer franchise system. These cars are very complex. People need to be able to communicate locally and I think we're in the perfect position to do that as a very mature system. The dealer body is embracing and welcoming electric vehicles, and certainly invest making a lot of investments in training and equipment and material. So we feel really strongly about the future for the franchise model, especially with you.

Online transactions that are coming. I think the director consumer is really all about the online transaction. And as the franchise dealer adapts to that, it seems like a winning model.

If you could speak to overall profitability of clicklane sale compared to an end store, you know, sale at AP up. And I attach my how does that look relative damn store? Overall profits.

Sure, the front end margin on clicklane right now in the quarter, ran about 250 to 300 dollars below the store average and the F and I was mixed. It was a little bit higher on use F and I, and a little bit lower on new, but averaged out similar. We're really happy with the growth rate of clicklane with the sails and the adaption and you know where the smallest public out there and you heard 1 pays for

Sales, and you've heard some of our peers. So we're excited about the direction that we're going in. And again these are 30,000 sales. There were a hundred percent completed online 9 out of 10 people are getting financed 8 out of 10 are being done automatically. If you will instant approval of the 35 lenders, a little over 18 of them, have instant decision. So they're getting their answers and 45 seconds which is, which is really fast. And now that we have a good handful or I should say

A dozen Banks accepting, DocuSign. It's making it that much more convenient as well. So very optimistic, it's going to continue to grow and we see good upside and opportunity with our partnership with salty as well.

Thanks for all the color. Good luck.

Thank you. Very

Thank you. Our next question comes from John Murphy, with Bank of America.

Gotta good morning everybody. David just, you know, on the inventory shortage and I'm just curious what you're seeing on, you know, vehicles, in transit, coming in the next month or 2. I mean, it just seems like the inventory is crunching a little bit tighter. I mean, you know, saying, you know, there's all sylheti and unknowns is kind of code for, you know, it's getting a bit tougher and I'm just curious, you know what you're seeing and how you're going to, you know, handle what seems to be a tithing situation on.

Vehicle side which is actually crunching sales, you know in you know in a July +.

I'll start, and then can jump in if you want. You know, we came into this quarter anticipating July and August to be probably the toughest months for availability in the sense of what the demand is going to be relevant to what will receive what we're experiencing so far in July is just that, again, the manufacturers are doing a great job with what they have and producing vehicles and getting them out to us, but it's difficult. I mean, the demand is high right now, and we anticipate that

This quarter to be pretty tough. Don't know about some September. You get some seasonality adjustment after Labor Day. So we're hopeful that we'll see a an incremental increase in days Supply as we go into the fourth quarter but well behind where we anticipate we should be. Yeah, the only thing I would add to that John. Good morning by the way is you know we have July and August is what we expected it to be the lowest month.

But also to David's point a good job that the OEM for doing building the inventory that they that the consumer 1 is also allowing us to be very good at selling on order vehicles and delivering them as soon as they're hitting the other lat. So you know, a lot of benefits of that or turn rate is a is very high in will just continue to navigate through the throughout the next 2 months. And we know that we have the support from the oems on shipping.

Is the inventory, that's helpful. I mean, when you think about backfilling for this, I mean is there enough used inventory to which you can transfer some of these customers over for? Are you finding that consumers are willing to wait in in sort of an in some cases an indeterminate amount of time for the vehicle that they want? I mean, what's, you know, what sort of the capture rate on the used side and and is that used inventory, even available to kind of make that kind of push to the consumer?

Yes, the great question, the inventory. Although it's a little bit harder to find but it is available out there in the great news is like I mentioned earlier, we do have a pretty good amount of sold orders coming our way and and the biggest stream of of inventory for you score, the apartment is coming from the trade. And then we also have, you know, specific items that are only available to the dealer body. First come first serve, which will be your least earnings. And also

You know, some of the loaner cars as well. So our consumers are willing to wait for the for the vehicle of their choice. Yes, we're seeing a lot more patients from the consumer. Standpoint waiting, an additional few weeks for the car toys is definitely not an issue and again that goes back to what I said earlier. It allows us to to really have a very high turn rate, Windows new cars, come in,

In touch, and can you pre-sale that used as well? Because you know what's going to be coming in and trade? I mean, can you work that? Can you work? That deal ahead of time? Is that something that's possible?

Yeah, we can.

Definitely. Yes the answer your question is yes we can market for lack of a better term on a retail standpoint. We can Market sold to the consumer, but we're not able to process any of the paperwork on till the, the mother deal of the first deal. Is completed, gotcha. And then, if you think about the SGA the to gross, I mean obviously you know you're you're getting the benefit of you know, very high gross is but you're also clearly executing well, so it's a combination of the 2. I mean as we step forward into a

Normal period. Let's say hopefully in 2022. You know how much of this front end yields?

If you think you can hold on to and at the same time, how much of the SGA savings? Do you think you can? Hold on to my mean, obviously there's a lot of variables in the in that, you know, in that equation or in that question. But you know, when you think you think about things normalizing? I mean, north of 5,000 on friend yield is, you know, 1500 to 2000 dollars higher than we would typically think about this stuff. An estimated gross is, you know, 10 points lower than we typically, think about this stuff, you know, even you know I mean that's you know, maybe even a little bit.

No better than that. You know, how should we think about those 2 metrics going forward in a normal state?

It's a great question, John it and I'll try and answer as best I can. You know, it's as we sit here today, I think we're different company than we were pretty COVID-19 both in the expenses that we cut in the brand mix that we have being almost 50% luxury. But I think post COVID-19 to use that term 22 and forward will float. Well above our past margins, pre COVID-19, and we see opportunities with sgna going forward to our

Agitation of our sales online. So while margins, may fall back a little bit, not back to where they were, but lower than where they are today. We believe these upside and expense down the road. So we think we're in a very healthy position to still create strong returns, Louis DNA, and great, operating margin

Okay, and then just lastly on The Five-Year Plan. I mean, you're saying you're running ahead, you know, if we strip out the the pressures of market dynamics, the moment, you know, it's hard to, you know, disagree with and you seem like you're probably running, you know, an execution basis. Well ahead of playing clicklane is is firing fairly well. I mean, you know, how do you think about reassessing your The Five-Year Plan? And, you know, maybe giving us an update or where do you think that will ultimately land? I mean, how should we think about that? Because that's, you know, now,

you know, just given your performance not necessarily time but just given how well you performed, it seems a little dated

You know, it is a fair point but I would also respectfully. Say patience is tough in these markets, we're only 6 months in. I would say, depending upon how the chips fall in the MAA side. The next few months that could certainly warrant and update. Our same store revenue is probably best to reassess that when we hit the 12-month period, we're well ahead of that 2 billion Target at this point in time. But we also don't want to get too far ahead of our skis and let 12.

Normalized to kind of see where we're at. But to your point, I

And where we sit here today. What we have under Loi. What? We're looking at the potential there too far. Exceeded is there, but I really don't want to get ahead of ourselves because it's not in the bank so to speak.

Gotcha. Okay, thank you very much, guys. I appreciate it.

Thank you. Thank you, thank you. Our next question comes from Adam Jonas, with Morgan Stanley.

Hey, everybody can hear me?

Sure Ken. Good morning. Oh, great, great, great. I might have missed this. Did you actually disclosed how many units were sold on clicklane?

No Adam, we didn't but I'll tell you it was just under forty 5 hundred units in the quarter. Okay, thanks for that. And and I don't know of the 4500, how many would you say? Were kind of fully like, digitally fulfilled kind of sorry. I'm sorry to use the word but carvana asked if you will and I know they're not, you know what I mean? Like the, what you would describe as the most digitally fulfilled of the 4500. Yeah. So

What we called that number different than pushstart because pushstart was more of a semi completed online and completed in the store that the foot. And I'm going to use the rounded of 4500. They work a hundred percent completed online, in the sense of it was paid for signed up when we pull credit on clicklane, they're hard. Pulls on the credit, they're instant approvals are real. The payoffs are done in the signage, through DocuSign now, if they pick a lender and they sign up everything in DocuSign, and it's a lender that

Except DocuSign then we're you know we're presenting some new documents on delivery. If the bank accepts DocuSign it's all said and done and payment online is be us. Our stripe relationship that we have so they're all completed online. There's nothing additional coming in. If they start on clicklane and then they come in the store and finish it, that is not a clicklane sale to us.

All right, appreciate the call David and just finally Dave from your experience. What can you say about the parts and service profile or the the revenue derived, you know, from parts of the service and maintenance etcetera on an on the Eevee's coming into your bey's. Versus the IC e equivalent vehicle. I didn't know if there was, you know, I realize the numbers are still small.

All, but the parks are get, you know, the park is growing geometrically, and you'll get more and more of these units. I'm just curious what color you can give us sure. Every quarter, we kind of looked at service in 3 different buckets and we can't control warranty and internal is what it is. So we focused on customer pay. So from that standpoint, the 3 buckets are combustible engine hybrid cars. And then EV or complete electric cars, right? Net in this is going to change. But, right now, it's the last few quarters. It's

Consistent that the highest dollar spent on.

Vehicles. And I think it's first generation technology. There's a lot of software, glitches, glitches, and issues with that. We think that will change over time. But we're also of the belief that our service retention will go up double digits because that consumer will have to come back for us for service because of the complexity with the vehicle. So we're very excited and bullish on electric vehicles and where we're going. We're already working on them and our Collision Center. We certainly were touring last week and so are we?

Our stores. We start a lot of EV cars in there for maintenance so we think we're well positioned then I think over time the dollars will come down but, you know, they still need brakes batteries. Excuse me, breaks and everything else tires that go along with them. You have these. We have actually already replaced some of those batteries. So when I brought that up with it is true, but the oil change and that sense combustible engine cars are made. So well nowadays there really isn't a whole lot of break down.

And there's really no money to be made in oil changes.

I appreciate the extra color there. Maybe I going to slip 1 more in our, the oems that are using franchises to distribute. Evie's, are they coming to you with a bit more stringent? You know, if you want to be the authorized retailer of Hummer or electric Corvette or whatever it might be,

That you need to make investments in people and Technology diagnostic software Etc at the at the, at the point of service and sale in order to get authorized, are you kind of seeing that I would imagine that could play to your advantage to versus a lot of the mom and pops?

We do is do that and we've made a lot of Investments already and will continue to make more Investments, both in physical training and Equipment. But naturally, that would be a requirements from the oems, as you'd expect, I mean, if if they're, if you're going to have the opportunity to sell the vehicle, you certainly have to be trained and have the equipment to work on the car as well.

Thank you very much.

Thank you. Our next question comes from JPMorgan.

Good morning. Thanks for taking the question. Just had a follow-up question on clicklane. You know the 30,000 units that you mention you know for the full year 2021 you know if we exclude clicklane you know units you know from the overall business with with this with the same storage units, still be up for 2021. Just trying to get a sense of

You know how much of the units being sold in clicklane is incremental, do you know what your existing business would have done either way? And I had a follow-up. Thanks.

Yeah, it's been stated in the script 93% of the clicklane customers were new to Asbury. So, we hadn't told them a vehicle before, you know, we think that number will change over time. It's, but it's a new tool, and it's 4,500 sales in the quarter. I can tell you in the quarter, it was growing at a little bit over, 20 percent a month from from April to May and made a June, and we're continuing to see that growth in July, so it's just a logical.

A full transactional.

They're not soft balls on credits. There's no issues with the lending. We do have 35, but only about 18 of them, have instant decisioning and only a dozen of them are steps accepting, DocuSign. So still we have progress to go there, but between instance, decisioning and the banks that do except DocuSign, it's a very seamless transaction and logically, if you can do the transaction 1450 minutes at home, have it delivered to your house? Why would you sit in the showroom?

Or 2 hours and I would tell you, you know, for the for lack of a better term nationally in the quarter, the country opened up traffic and everything got back to normal yet. The home deliveries went up 15% over the prior quarter 65% so we certainly see the benefit in our consumers are seeing the benefit in the tool.

Guidance that 30,000 argued that you hit portfolio for clicklane your new and used combined. I mean on a Runway basis it seems like almost 15% of your units overall and all of that is incremental to to the business basically or it is majority of that. And the in-store business can also grow simultaneously. Is that, is that correct?

It is it is very you know again this this tool is new so does the 93% stick for the next 3 quarters. The next 3 years I couldn't give guidance on that, I would just logically say that tool is going to continue to grow as awareness gets out there and they'll certainly be incremental sales. It's a little challenging right now with low day supply to see what you could really sell. It's hard to sell something online, you don't have and you have the sophisticated sales professionals that we have in the store that are

Irr selling deep into the pipeline meaning. Well, before these cars arrive,

Great, thanks for the color there. And just, I just had a question and, you know, just the employee had count, you know, just following up on the sgna. Productivity question. What's the what's the current employee count? The company could do the reminders, you know, including Parkways Where Do We Stand today? Taking into account like some of the layoff they had last year.

We're just over 80.300 Associates currently on staff.

Got it, got it. That's helpful and just 1 last 1 and parts and services. You know really nice recovery here you know in the second quarter customer page particular you know you you mentioned last month around and parts supply shortages you know which was holding warranty. Could you give us a sense where we are there? You know, how do you see that coming back? And we expect this kind of growth rate, then you saw on the to your account

This is either continue here in the third quarter as well. Thanks sure. We absolutely expect the parts and service numbers continued into the third quarter that we're currently seeing. You know, some of it is you know people have been Sheltering in place for a year and they're just catching up on maintenance from the car sitting and some of it is planning trips for the summer and doing different things like that. So we anticipate a very strong summer for parts and service as far as the parts business. Again the OEM to doing a really great job, it's hit or miss

We certainly do have some parts issues with some Brands, but overall, I wouldn't say it's material.

Building is back at this point as a company.

Great, thanks.

Thank you, take care.

Thank you. Our next question. Comes from Stephanie more with truest

Hi, good morning, thank you for the question.

Good morning.

I wanted to touch on the your clicklane platform again. And if you could kind of give us an update on where we stand and marketing, the platform in your existing territories, as well. As some of your plans to expand the platform into some territories that are not legacy as free market. So any update there would be helpful. Thank you.

Stephanie right now and I'm sure it's the same for all up. Here's I don't think anyone is spending a tremendous amount of dollars on marketing simply because the inventories are so light, your marketing just come you can't sell. So I think we'll keep those the marketing dollars governed right now and until we can see inventory, return to your point about entering a market on the preowned side that we don't currently occupy brick-and-mortar in. We absolutely intend to do that, that

Part of our omni-channel approach. That is part of our SGA benefit. We think we can do it more efficient faster and retain more dollars by doing it this way. I would say somewhere towards the end of the year, beginning, or next year, you'll see us enter into New Markets on the preowned side.

Great, thank you so much and that's it for me.

Thank you. Thank you. And next question comes from Bret Jordan with Jefferies.

Hey, good morning, guys.

Clicklane could you talk about I guess, 93% new customers. Can you talk about geographic reach now? How far are you sending these cars out? And I guess he's at 65% home delivery. You know is there a Dixie cup Circle that you're working in that you can't go outside of and I guess the same kind of question on new vehicles is there any restriction as far as selling cars in markets where you don't own franchises?

Morning Brad. Great question to appoint them in 65% of our consumers, or are electing to take delivery at home. We're not advertising outside of our primary area for a lack of a better term. We stay in and abide by all the OEM rules when it comes down to that, we have seen the vast majority of our in home. Deliveries that we're seeing is taking

I would say probably around a 50-mile radius, but we have seen deliveries that have for lack of a better term that have gone from Greenville South Carolina to Texas and you know, from Georgia to Florida. So we have seen that as well in several locations. I would tell you but just to follow up on that you know being a franchisee. We if we have a Toyota store in Atlanta, we can't Market Toyota is in Chicago.

Ooh, or New York.

However, we spend a lot of money optimizing our sites and if people find us no other states and they choose to buy a car from us and ship it up, we certainly do that. But we're very much adhere to our relationship and our policies with the manufacturer. What do you think? I guess you have an average distance that your buyer is coming in from for the clicklane.

Yeah, I would say the quarter and no, others have courted, some long distances. We're under 75 miles is 80% of our business and we actually think that's a great thing because we don't want to just sell the car. Carvana is model is great selling the car, making some money in the front and back with the parts and service businesses really worth that. So in a perfect world to us is doing that transaction online locally and have them do the maintenance with us.

And then 1 final question, I guess I'm the used inventory. Could you give us the percentage? I guess that you're sourcing in-house versus auction.

Yeah, absolutely bread. So the less than 10 percent of the cars that we acquired in, Q2, were acquired at the auction, the the rest of it. Like I said, the vast majority of it comes from, from trade least, turn in loaner cars, and also, positions at the store level, through consumers. And I would tell you, that's a credit to the other general managers. In our stores, in the used-car managers.

Covid. We've been very disciplined and not buying more than 10% of our cars from oxygen. You get in that bidding process, you walk away with cars. No 1 paid more than you, you know, margin nowadays is about the acquisition price. So there are tremendously talented at sourcing, local Vehicles, direct from consumers and trade-ins in the service drives and loaner cars, and other things, which is getting us to healthy margins that we're seeing

Thank you.

Thank you. Our next question comes from Ryan sigdahl with Craig Hallam.

Morning guys and congrats on the strong results. Thank you. Just 1 follow-up question from us. So Asbury looking back 2 decades ago in the IPO. You have a similar number of stores, a few more today, but you spent, you've done a decent amount of rationalization divesting, adding kind of offsetting each other, I guess, 1, how do you feel about your current store based today? Is there more rationalization? That's needed. And then to given the

Hortense of scale and really a nationwide footprint and you mentioned kind of the close proximity. Even on clicklane for those customers, I guess, why not accelerate that m&a Cadence to really build scale faster. Thanks.

It's a great, it's a great question. You know, we're 1 of the smaller companies and you know, there's only so much Capital deploy deploy and so much leverage that were willing to take on the other thing that I would say and just doing this for 35 years and mostly is an operator running and integrating stores that people above me of purchase it's a lot easier to buy things than it is to run it. We think that were the healthiest that we've ever been from a brand mixed. We really like the platform

that we have the states that we do business in and the leadership that we have in the fields because that's where the results are happening. And not happening here, we're disciplined, we're going to be thoughtful. We do have the 400 million under Ella, why we are looking at more, but we're also not getting enticed by just the revenue number. We're really saying, is this going to be a good part for us going forward? And is this something that we can integrate well into our system and continue the synergies that we have, we have the highest operating margins and lowest sgna in the space and we're proud of that and we're not

Biggest and we think we can keep those 2 credits as we continue to grow the company thoughtfully.

As far as expanding in every Market everywhere, I don't know that that's our goal. It truly isn't our goal is to kind of falak of a better term skate to where the puck is going not. Every Market is, may be ideal or perfect for us, we want to grow thoughtfully. In the markets, we want to be in and be dense and have meaningful relationships with our consumers through service retention and market share within the markets, we do business. Then you'll see US expand the new States for sure. But the go

goal isn't to be in every state.

De Lorraine. That's it for me. Thanks, guys. Just had the 1 good luck. Thank you. Thank you. Thank you. We will take our last question from David whiston with morning, sir equity research, thanks. Good morning. Well, um, I guess first on you're talking about how great DocuSign is and I certainly agree with you. But as of today, there still states that require a wet signature

Oh, absolutely. Especially on the DMV side, there's actually only a couple states that are digital on the DMV, and there's many more in process right now. But you know, the bulk of your documents are more to do with lending and the vehicle and trading vehicle itself. So there are some documents to your point that we have to redo the way. We've designed clicklane, regardless of what the state requirements, are every single possible form is in clicklane.

In in every single form is time through. DocuSign, there's 2 main reasons for that even though we're redoing them 1. We want the customers visualization to go through the entire process and see all the documents. No, surprises on delivery, for lack of a better term and then their awareness of the transaction, the numbers that take place. So, when we go to the, again, 60 Parts in a time, when we're delivering the vehicle at the home, it's a very smooth transition to the few signatures that we may need in some cases, 1 or 2 or in other cases.

Maybe 6 it just really depends upon the state but to us, you know, it's the experience, people create the experience software creates the convenience and that's where we're focused.

Okay. So any any document that does require a wet signature you just when you actually see the customer regardless of where the customer is that's when they actually physically sign that piece of paper correct? Yeah so if there's a again if Georgia requires a wet signature on a DMV form, they're signing that form on DocuSign so they can visually see it but then when we show up, they're going to assign that DMV form again with a wet signature.

Okay. Yeah, that makes sense on the 65% home delivery. Was that just clicklane or the entire company?

That was just clicklane. Okay, it was single digits for the regular store.

Okay. And the by, the ministration is talking about possibly raising a federal tax rate, I know you're in between CFOs, but can you comment at all of federal statutory increase would be a one-for-one increase in your own tax rate?

Really haven't looked at that yet to be honest with David, so I couldn't comment on it, okay. And I guess just

1 more question on the domestic GPU over 4,000 a unit. Obviously, it's probably inflated a bit due to the, the inventory situation, but it was there just a total. Massive Decline. And discounting this quarter or is mix playing a role there too.

It's you know it's a the margins that we're seeing it's all related to the a lot of it is related to the to the lack of inventory. When you know it's a supply and demand equation and the level of discounting that you were seeing right now is just because again, just a simple supply and demand equation

But I'd also tell you it's a little deceiving because those numbers could actually be higher our lack of truck inventory. On the domestic side is significant and that's really harboring or governing our sales if you will on that side. But if you go post free COVID-19, scuse me. We've always had a healthy, a generally healthy. PVP, VR is on our domestic vehicles.

And speaking of trucks.

Yeah, I mean there's been a lot of a lot of positive reaction as you would imagine. You know, there is also not only excitement from the consumers, but also within the stores that represent that, that's that that truck, we're excited about the Eevee's that are coming, we've had the opportunity to drive and see a lot of them, and some really impressive vehicles, coming down the road, so, exciting times. Yeah, I agree. Thank you.

Thank you very much. This concludes today's discussion. We appreciate your participation and we look forward to speaking with you. In October, have a great day.