Q2 2024 Asbury Automotive Group Inc Earnings Call

Operator: Greetings and welcome to the Asbury Automotive Group Second Quarter 2024 Earnings Conference Call.

Operator: 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.

Greetings and welcome to the Asbury automotive group.

Speaker Change: Automotive group second quarter 2024 earnings conference call at this time, all participants are in a listen only mode. A brief question answer session will follow the presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this.

Operator: At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the 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.

Operator: A brief question and answer session will follow the 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.

Conference is being recorded it is now my pleasure to introduce your host Chris Reed, Vice President of Finance and Investor Relations. Thank you Sir you may begin.

Chris Reeds: It is now my pleasure to introduce your host, Chris Reeds. Spice President of Finance and Investor Relations. Thank you, sir. You may begin.

Chris Reeds: 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 Hult, 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.

Chris Reeds: Thanks, operator, and good morning. As noted, today's call is being recorded and will be available for replay later this afternoon.

Speaker Change: Thanks, operator, and good morning as noted today's call is being recorded and will be available for replay later this afternoon well.

Chris Reeds: 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.

Speaker Change: Welcome to Asbury automotive group's second quarter 2024 earnings call. The press release detailing Asbury second quarter results was issued earlier. This morning and is posted on our website at investors Dot Asbury auto dotcom.

Chris Reeds: 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.

Speaker Change: Participating with me today are David Hult, 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.

Chris Reeds: At the conclusion of our remarks, we will open 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 is subject to significant uncertainty. 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.

At the conclusion of our remarks, we will open up the call for questions and will be available later for any follow up questions.

Chris Reeds: 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-K. In our earnings release issued earlier today, we expressly disclaim any responsibility to update forward-looking statements.

Chris Reeds: 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 during 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 Hult. David

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 forecast and current expectations each of which are subject to significant uncertainties for information.

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.

Speaker Change: Presley disclaim any responsibility to update forward looking statements.

Chris Reeds: 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 reconciliation 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.

Speaker Change: 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.

Speaker Change: We have also posted an updated investor presentation on our website investors dot Asbury auto dot com, highlighting our second quarter results.

David Holt: It is my pleasure to hand the call over to our CEO, David Holt. David?

It is my pleasure to now hand, the call over to our CEO, David Hult David.

David Hult: Thank you, Chris. Good morning, everyone.

David Holt: Thank you, Chris.

David Hult: Thank you Chris Good morning, everyone welcome to our second quarter earnings call.

David Holt: 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 19, the outage affected all Asbury stores with the exception of our Coon stores, which utilize a different dealer management system. We received initial access to the DMS on July 1.

David Hult: 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 gift 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 19, the outage affected all Asbury stores, with the exception of our Kuhn stores, which utilized a different dealer management system. We received initial access to the DMS on July 1st.

David Hult: To start by thanking our team members.

David Hult: In our OEM and banking partners for their efforts to ensure we continue to deliver the highest possible guest experience.

The challenges associated with the CDK outage.

Speaker Change: Their resourcefulness and dedication help to ensure all store locations continue to sell and service vehicles, although certain levels of speed and efficiency were certainly impacted.

David Hult: However, all functions of CDK were not fully restored for us until July 8th, with other plug-ins and bolt-on applications coming back online in the weeks thereafter. Once CDK's 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.

Speaker Change: Beginning on June 19, the outage affected all Asbury stores with the exception of our kuehne stores, which utilize a different dealer management system.

Speaker Change: We received initial access to the D. M. S. On July 1st However, all functions of CDK will not fully restored for us until July eight.

David Holt: However, all functions of CDK were not fully restored for us until July 8. with other plugins and bolt-on applications coming back online in the weeks thereafter. One CDK service was 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.

Speaker Change: With other plug ins and bolt on applications coming back online in the weeks thereafter.

Speaker Change: One CDK services were restored team members across the country worked tirelessly to recreate transactional activity that occurred during the outage back into the Dms.

Speaker Change: Due to the length of the disruption the recovery process took approximately 12 days.

Speaker Change: To give you a sense of scale just within our parts and service business.

Speaker Change: Almost 100000 repair orders were recreated into C D K.

Speaker Change: For several years, we've talked about our disciplined investments in technology.

David Hult: 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.

Speaker Change: Designed to create a guest experience that is both more transparent and quicker.

David Holt: We designed the showroom map in our Quick 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 quick lane functionality was not impacted by CDK. Tools such as these, combined with the dedication of our team members and partners, helped 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 up-and-eye business.

Speaker Change: We designed the showroom map and are quickly tool to facilitate in person transactions that may have started online.

David Hult: 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, helped 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.

Speaker Change: During the outage. This application served as the primary way for us to facilitate the sale of vehicles since quickly and functionality was not impacted by CDK.

Speaker Change: Tools, such as these combined with the dedication of our team members and partners.

Speaker Change: To mitigate the impact of our financial performance from the CDK incident.

Speaker Change: For the quarter, we estimate this impact to be between 95 cents and one dollar and 15 cents in diluted earnings per share.

Speaker Change: From a combination of fewer new and used vehicle sales, which also impacted our F&I business.

David Holt: Our 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 previously mentioned estimate. Additionally, any recoveries we do receive may not occur for several quarters or longer.

David Hult: A reduction in parts and service volumes and certain one-time expenses related to our recovery effort. 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

Speaker Change: A reduction in parts and service volumes and certain one time expenses related to our recovery efforts.

Speaker Change: The likelihood of recovering some portion of this through insurance.

Speaker Change: Our other recoveries is difficult to predict.

Speaker Change: And is therefore not included in the previous mentioned an estimate.

Speaker Change: Additionally.

David Hult: 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 of $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.

Speaker Change: Any recoveries, we do receive may not occur for several quarters or longer.

David Holt: 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.

Speaker Change: I'd now like to turn our focus to the performance of our business, excluding the impact of the outage.

Speaker Change: 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.

Speaker Change: 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.

David Hult: 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%.

Speaker Change: And parts and service beyond the record quarter with total gross profit dollars. We saw a strong performance in same store results pacing at 8% growth going into June before finishing with 4% growth due to the CDK outage I.

David Holt: 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%. Our same-store adjusted SGNA as a percentage of gross profit was 64.4%, and 64.8% on an adjusted all-store basis. We delivered an adjusted operating margin of 5.6%. Our adjusted earnings per share was $6.40, and our adjusted EVADA 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.

Speaker Change: I am pleased with the performance and momentum of this business.

Speaker Change: Okay.

David Hult: Our same store adjusted SG&A as a percentage of gross profit was 64.4% and 64.8% on an adjusted all-store basis. We delivered an adjusted operating margin of 5.6%. 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.

Speaker Change: Now for our consolidated results for the quarter.

Speaker Change: We generated $4 2 billion in revenue.

Speaker Change: At a gross profit margin of 17, 2%.

Speaker Change: Our same store adjusted SG&A as a percentage of gross profit.

Speaker Change: Was 64, 4% and.

Speaker Change: And 64, 8% on an adjusted all store basis.

Speaker Change: We delivered an adjusted operating margin of five 6%.

Speaker Change: Our adjusted earnings per share was $6.40.

Speaker Change: Adjusted EBITDA was $236 million.

Speaker Change: During the quarter, we repurchased 193000 shares for 43 million.

Speaker Change: And another 160000 shares for $36 million, so far in the third quarter.

Speaker Change: This brings our year to date total through August 1st.

Speaker Change: Two 592000 shares for.

Speaker Change: For $130 million.

David Holt: 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.

David Hult: Our approach to capital allocation is a continuous process, and we're constantly evaluating the optimal balance between acquisitions, organic investments, and share repurchase. 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.

Speaker Change: Our approach to capital allocation is a continuous process and we're constantly evaluating the optimal balance between acquisitions and organic investments and share repurchases.

Speaker Change: We are committed to prioritizing the most strategic and accretive use of capital and we will continue to be opportunistic in pursuing attractive avenues for growth.

Speaker Change: Effective capital allocation also extends to managing the makeup of our existing portfolio.

David Holt: 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 gastentric automotive retailer.

Speaker Change: In the second quarter, we divested two Nissan stores, and we'll continue to monitor opportunities to make other changes throughout the year.

David Hult: 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.

Speaker Change: Now before I hand, the call over to Dan.

Dan Clara: 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 guest centric automotive retailer.

Dan Clara: Now, Dan will discuss our operation performance.

Dan Clara: Now Dan will discuss our operation performance and.

Dan Clara: Dan? Thank you, Dan.

Dan Clara: Thank you, David. And good morning, everyone.

Dan Clara: Thank you Dave.

Dan Clara: Good morning, everyone. First, I'd like to extend my gratitude for our team members navigating this unprecedented situation and by going above and beyond to serve our guests through this time. Your perseverance, agility, and patience are greatly appreciated. During the CDK outage, we utilized our omnichannel platform, Clicklane, to serve as a transactional software tool, allowing us to sell vehicles in the effective stores. We retailed more than 15,200 sales through Clicklane in the quarter, with over 8,000 occurring in June. Clicklane is often thought of as an online-only tool. However, we used a showroom-out functionality within Clicklane to facilitate in-store sales.

Dan Clara: And good morning, everyone.

Dan Clara: First, I'd like to extend my gratitude for our team members navigating this unprecedented situation and going above and beyond to serve our guests through this time. Your perseverance, agility, and patience are greatly appreciated. During the CDK outage, we utilized our omni-channel platform, ClickLane, to serve as a transactional software tool, allowing us to sell vehicles in the affected stores. We facilitated more than 15,200 sales through ClickLink in the quarter, with over 8,000 occurring in June. ClickLink is often thought of as an online-only tool.

Dan Clara: First I'd like to extend my gratitude for our team members in navigating this unprecedented situation and by going above and beyond to serve our guests through this time your perseverance agility and patients is greatly appreciate it.

Dan Clara: During the CDK outage, we utilized our omnichannel platform click lane to serve as a transactional software tool.

Dan Clara: Allowing us to sell vehicles in the effect of the stores.

Dan Clara: We retailed more than 15200 and sales through Cleveland in the quarter with over 8000 occurring in June.

Speaker Change: <unk> is often thought of as an online only tool. However, we used a showroom out functionality within click lane to facilitate in store sales.

Dan Clara: However, we use the showroom app functionality within ClickLink to facilitate in-store sales. Now, moving to same-store performance, which includes dealerships and TCA, unless stated otherwise, and to help quantify the impact of the disruption on our pace, I will provide some metrics of our April and May performance, starting with new vehicles. During the period of April and May, we were flat on unit growth.

Dan Clara: Now, moving to same-store performance, which includes dealerships and TCA unless stated otherwise, and to help quantify the impact of the disruption on our pace, I will provide some metrics of our April and May performance. Starting with new vehicles, in the period of April and May, we were flat on a unit growth. Same-store revenue and unit volume for the full quarter decreased 6%. With varying results among the brands in our portfolio. New average gross profit per vehicle was $3,649, roughly in line with our expectations for the path of new gross profit per unit this year. New vehicle gross margin was 7.1%.

Dan Clara: Same store revenue and unit volume for the full quarter decreased 6%, with varying results among the brands in our portfolio. New average gross profit per vehicle was $3,649, roughly in line with our expectations for the path of new gross profit per unit this year. New vehicle gross margin was 7.1%. Our same store new day supply was 74 days at the end of June compared to 53 days at the end of May due to the CDK outage. Turning to Used Vehicles.

Dan Clara: Now moving to our same store performance, which includes the dealerships and TCA unless stated otherwise and to help quantify the impact of the disruption on our pace I will provide some metrics of our April and May performance.

Dan Clara: Starting with new vehicles.

Dan Clara: In the period of April and May we were flat on a unit growth.

Dan Clara: Same store revenue and unit volume for the full quarter decreased 6%.

Dan Clara: With Varian results among the brands in our portfolio.

Dan Clara: New average gross profit per vehicle was $3649.

Dan Clara: Roughly in line with our expectations for the path of new gross profit per unit this year.

Dan Clara: New vehicle gross margin was seven 1%.

Dan Clara: Our same store new day supply was 74 days at the end of June, compared to 53 days at the end of May due to the CDK average.

Dan Clara: Our same store New day supply was 74 days at the end of June compared to 53 days at the end of May due to the CDK outage.

Dan Clara: Turning to use vehicles. Second quarter unit volume decreased 2% versus last year. A percentage in line with the first quarter. However, going into June, we were up 1% in volume. Our same store use day supply was 39 days at the end of the quarter, slightly higher than our historical average driven by the CDK incident. For reference, at the end of May, our day supply was 31 days for same store used.

Dan Clara: Turning to used vehicles.

Dan Clara: Second quarter unit volume decreased 2% versus last year, a percentage in line with the first quarter. However, going into June, we were up 1% in volume. Our same-store use-day supply was 39 days at the end of the quarter, slightly higher than our historical average driven by the CDK index. For reference, at the end of May, our day supply was 31 days for same-store use.

Dan Clara: Second quarter U unit volume decreased 2% versus last year.

Dan Clara: A percentage in line with the first quarter, however, going into June we were up 1% in ballroom.

Dan Clara: Our same store used day supply was 39 days at the end of the quarter.

Dan Clara: Likely higher than our historical average driven by the CDK incident for.

Dan Clara: For reference at the end of May our day supply was 31 days for our same store used.

Dan Clara: Shifting to FNI. We earned an FNI PBR of $2,124 in the quarter. As expected, the deferred revenue headwind of TCA is starting to be more pronounced. It contributed $169 of the $255 decrease in the FNI PBR number year by year. We continue to expect this headwind to be impactful throughout 2024. In the first quarter, our total front-end yield per vehicle was $4,807.

Dan Clara: Shifting to F&I, we earned an FNI PBR of $2,124 in the quarter. As expected, the Deferred Revenue Headwind of TCA is starting to be more pronounced. It contributed $169 of the $255 decrease in the F&I PVR number year-over-year. And we continue to expect this headwind to be impactful throughout 2024.

Dan Clara: Shifting to F&I.

Dan Clara: We earned an F&I P D R <unk> $2124 in the quarter.

Dan Clara: As expected the deferred revenue headwind of TCA is starting to be more pronounced.

Dan Clara: It contributed $169 or the $255 decrease in the F&I PBR number year over year.

Dan Clara: And we continue to expect this headwind to be impactful throughout 2024.

Dan Clara: In the first quarter, our total front-end yield per vehicle was $4,807. Moving to parts and servers, as David mentioned earlier, we were very happy with the record performance of our parts and service. Our parts and service gross profit going into June was pacing at 8% year-over-year before ending the quarter at 4%. For the quarter, we earned a gross profit margin of 58.7%, an expansion of 314 basis points versus the prior

Dan Clara: In the first quarter, our total front end yield per vehicle was $4807.

Dan Clara: Moving to Parts and Service. As David mentioned earlier, we were very happy with the record performance of our parts and service business. Our parts and service gross profit going into June was facing at 8% year-to-year. Before ending the quarter, up 4%. For the quarter, we earned a gross profit margin of 58.7%, an expansion of 314 basis points versus prior year quarter, despite weather issues in several of our markets and the impact from the CDK incident.

Dan Clara: Moving to parts and service.

Dan Clara: As David mentioned earlier, we were very happy with the record performance of our parts and service business our.

David Hult: Our parts and service gross profit going into June was pacing at 8% year over year.

David Hult: Before ending the quarter up 4%.

Dan Clara: For the quarter, we earned a gross profit margin of 58, 7% an expansion of 314 basis points versus prior year quarter.

Dan Clara: Despite weather issues in several of our markets and the impact of the CDK event, I'd like to give some color on our performance in some of the revenue buckets and how the CDK outage impacted our business. Within our customer pay repair order revenue, we were pacing up 10% at the end of May, ending the quarter up 4%. In warranty, we were up 17% before ending the quarter up 7% in revenue. The CDK outage was particularly significant for a wholesale part in Columbus.

Speaker Change: Weather issues in several of our markets and the impact from the seed occasion.

Dan Clara: I like to give some color on our performance in some of the revenue buckets and how the CDK outage impact that our business. Within our customer pay repair order revenue, we were pacing up 10% at the end of May and in the quarter up 4%. In warranty, we were up 17% before ending the quarter up 7% in revenue. The CDK outage was particularly significant for a wholesale parts and collective business. Wholesale parts was flat through May before ending down 7%. The months of June had an $8 million decrease year-to-year or 21%. Collision was down 6% in the first two months, and it finished a quarter down 11%.

Speaker Change: I'd like to give some color on our performance and some of the revenue buckets and how the CDK outage impacted our business.

Dan Clara: Within our customer pay repair order revenue, we were pacing up 10% at the end of May.

Dan Clara: And in the quarter up 4%.

Dan Clara: In warranty.

Dan Clara: We were up 17% before ending the quarter up 7% and revenue.

Dan Clara: The CDK outage was particularly significant for our wholesale parts and collision business.

Dan Clara: Wholesale parts were flat through May before ending down 7%. The month of June had an $8 million decrease year over year, or 21%. Collision was down 6% in the first two months, and it finished a quarter down 11%. Despite the challenges in June, we saw great progress among our team members and stores in the West, which, as a cohort, outperformed the portfolio of our Eastern stores on the same store base. I will now hand the call over to Michael to discuss our financial performance.

Dan Clara: Wholesale parts was flat through may before ending down 7%.

Dan Clara: The months of June had an $8 million decrease year over year or 21%.

Dan Clara: Collision was down 6% in the first two months and it finished the quarter down 11%.

Dan Clara: Despite the challenges in June, we saw great progress among our team members and stores in the West, which has a cohort outperform the portfolio of our Eastern stores on a same-store basis.

Dan Clara: Despite the challenges in June we saw great progress among our team members in stores in the west.

Speaker Change: Which is a cohort outperformed the portfolio of our eastern stores on a same store basis.

Michael Welch: I will now hand a call over to Michael to discuss our financial performance. Michael?

Dan Clara: I will now hand, the call over to Michael to discuss our financial performance Michael.

Michael Welch: Thank you, Dan. First off, I would like to echo what Dan and David said about our team members going above and beyond to keep the business operating during a challenging time. Truly inspirational work by all involved. Our financial results were clearly impacted by the CDK outage, but broadly speaking, we were pleased with our two key results through mid-June and expect performance to normalize now that we have three more recovery efforts.

Michael Welch: Thank you, Dan. First off, I would like to echo what Dan and David said about our team members going above and beyond to keep the business operating during a challenging time; truly inspirational work by all involved. Our financial results were clearly impacted by the CDK outage, but broadly speaking, we were pleased with our 2Q results through mid-June and expect performance to normalize now that we are through our recovery efforts. I will now walk us through a more detailed financial overview of the quarter.

Michael Welch: Thank you Dan first off I would like to Echo, what Dan and David said about our team members going above and beyond to keep the business operate during a challenging time truly is.

Michael Welch: Inspirational work by all involved.

Michael Welch: Our financial results were clearly impacted by the CDK outage, but broadly speaking we were pleased with our two two results through mid June.

Speaker Change: Performance to normalized that'll be of three of our recovery efforts.

Michael Welch: I will now walk us to a more detailed financial review of the quarter. Overall, adjusted net income was 236 million dollars, and adjusted EPS was $6.40 for the quarter. Adjusted net income for the signed quarter of 2024 excludes net of tax, $101.3 million of non-cash acid impairments, gained on the bestures at $2.7 million, and losses related to hail damage at $2.3 million. Adjusted net income for the second quarter of 2023 excluded net of tax, gained on the bestures of $10.2 million, gained on legal settlements of $1.4 million, and losses related to hail damage at $3.2 million.

Speaker Change: I'll now walk us through a more detailed financial overview of the quarter.

Michael Welch: Overall adjusted net income was $236 million, and adjusted EPS was $6.40 for the quarter. Adjusted net income for the second quarter of 2024 excludes net of tax $101.3 million of non-cash asset impairments, gain on divestitures of $2.7 million, and losses related to hill damage of $2.3 million. Adjusted net income for the second quarter of 2023, excluded net tax gain on divestiture of $10.2 million, gain on legal settlements of $1.4 million, and losses related to hail damage of $3.2 million.

Speaker Change: Overall, adjusted net income was $236 million and adjusted EPS was $6 40 for the quarter.

Speaker Change: Adjusted net income for the second quarter 2024 excludes net of tax $101 $3 million of noncash asset impairments.

Dan Clara: On divestitures of $2 $7 million and losses related to hail damage for $2 $3 million.

Speaker Change: Yeah.

Speaker Change: Adjusted net income for the second quarter of 2023 excluded net of tax gain on divestiture of $10 $2 million gain on legal settlements of $1 $4 million in losses related to hail damage to a $3 $2 million.

Michael Welch: Adjusted SG&A's percentage of gross profit came in at 64.8% through and by higher compensation, third party of interspin, elevated advertising expenses, and other miscellaneous costs. We've always been disciplined with cost control, and we will look for opportunities to bring that down through targeted expense reductions that do not come at the expense of growth. We now expect SG&A's percentage of gross profit to be in the mid-60s for the remainder of the year. The adjusted tax rate for the quarter was 25.3%, and we still estimate our tax rate for the full year 2024 to be approximately 25%.

Michael Welch: Adjusted SG&A's percentage of gross profit came in at 64.8%, driven by higher compensation, third-party vendor spend, elevated advertising expenses, and other miscellaneous costs. We've always been disciplined with cost control, and we will look for opportunities to bring that down through targeted expense reductions that do not come at the expense of growth.

Speaker Change: Adjusted SG&A as a percentage of gross profit came in at 64, 8% driven by higher compensation third party vendor spend elevated advertising expenses.

Speaker Change: And other miscellaneous costs, we've always been disciplined cost control and we will look for opportunities to bring that down through targeted expense reductions that do not come at the expense of growth.

Michael Welch: We now expect SG&A's percentage of gross profit to be in the mid-60s for the remainder of the year. The adjusted tax rate for the quarter was 25.3%, and we still estimate our tax rate for the full year 2024 to be approximately 25%. TCA generated $21.6 million of pre-tax income in the second quarter and $41 million, year-to-date. We anticipate full year results to be between $65 and $80 million on a pre-tax basis. We have delayed the rollout of TCA to Florida and Kunz but plan to offer TCA across these markets later this year.

Speaker Change: We now expect SG&A as a percentage of gross profit to be in the mid sixties for the remainder of the year.

Speaker Change: The adjusted tax rate for the quarter was 25, 3% and we still estimate our tax rate for the full year of 2024 to be approximately 25%.

Michael Welch: TCA generated $21.6 million of pre-tax income in the second quarter, and $41 million year-to-date. We anticipate four-year results to be between 65 and 80 million on a pre-tax basis. We have delayed the rollout TCA to Florida and Cunons, but plan to offer TCA across these markets later this year. We generated $193 million of adjust operating cash flow in the second quarter, and $402 million through the end of June. This is slightly higher than our typical cash flow in the second quarter due to the timing of payments impacted by CDK. For the quarter, we repurchased $43 million in shares, and $103 million year-to-date through August 1st.

Speaker Change: TCA generated $21 $6 million of pre tax income in the second quarter.

Speaker Change: $41 million.

Speaker Change: Year to date, we anticipate full year results to be between 65 and $80 million on a pretax basis.

Speaker Change: We have delayed the rollout you say to Florida, and kittens, but plan to offer TCA across these markets later this year.

Michael Welch: We generated $193 million of adjusted operating cash flow in the second quarter, and $402 million through the end of June. This is slightly higher than our typical cash flow in the second quarter due to the timing of payments impacted by CDK. For the quarter, we repurchased $43 million in shares and $103 million year-to-date through August 1st. Excluding real estate purchases, we spent $65 million on capital expenditures year-to-date, and we anticipate full year spend to be approximately $200 to $250 million. Free cash flow was $154 million for the quarter. $337,000,000 here today.

Speaker Change: We generated $193 million of adjusted operating cash flow in the second quarter and.

Speaker Change: $402 million through the end of June this is slightly higher than our typical cash flow in the second quarter due to timing of payments impacted by CDK.

Speaker Change: For the quarter, we repurchased $43 million in shares.

Speaker Change: 103 million year to date through August 1st.

Michael Welch: Excluding real estate purchases, we spent $65 million on capital expenditures year-to-date, and we anticipate full-year spend to be approximately $200 to $250 million. Free cash flow was $154 million for the quarter, and $337 million year-to-date. We ended the quarter with $806 million of liquidity, comprised of four plan offset accounts, available on both our used and revolving credit facility, and cash, excluding cash at Total Care audit. Our pro forma adjusted net leverage was 2.7 times at the end of June, replucking our share repurchase activity, which we used as a compelling use of capital during a period of time where we're focused on integrating our recent acquisitions.

Speaker Change: Excluding real estate purchases, we spent $65 million in capital expenditures year to date, and we anticipate full year spend to be approximately $200 million to $250 million.

Speaker Change: Free cash flow was $154 million for the quarter.

Speaker Change: $337 million year to date.

Michael Welch: We ended the quarter with $806 million of liquidity. Unprized Floor Plan Offset Accounts, available on both our Used and Revolving Credit Facility and Cash, excluding cash and total fare audits. Our pro-forma adjusted net leverage was 2.7 times at the end of June, reflecting our share repurchase activity, which we view as a compelling use of capital during a period of time when we're focused on integrating our recent activities. We are committed to creating opportunities in our capital allocation approach across share purchases, buybacks, M&A, and organic investment opportunities.

Speaker Change: We ended the quarter with $806 million of liquidity comprised of floor plan offset accounts available on both our used and revolving credit facility and cash excluding cash of total corrado.

Speaker Change: Our pro forma adjusted net leverage was two seven times at the end of June reflecting our share repurchase activity, which we view as a compelling use of capital during a period of time, where we're focused on integrating our recent acquisitions, we are committed to creating opportunities in our capital allocation approach across share purchase buybacks.

Michael Welch: We are committed to creating opportunities in our capital allocation approach across share purchase, buybacks, M&A, and organic investment opportunities. Opportunities.

Speaker Change: M&A and organic investment opportunities.

Michael Welch: Finally, I would like to, again, thank our team members for their focus on the guest experience and our growth strategy. Thank you.

Michael Welch: Finally, I would like to again thank our team members for their focus on the guest experience and our growth strategy. Thank you. This concludes our prepared remarks. We will now turn the call over to the operator to take your questions.

Speaker Change: Finally, I would like to again, thank our team members for their focus on the guest experience and our growth strategy. Thank you.

Unknown Executive: This concludes the repair remarks.

Speaker Change: This concludes our prepared remarks, we will now turn the call over to the operator to take your questions operator.

Operator: We will now turn the call over to the operator to take your questions. Operator. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 2. One moment, please, while we pull for questions. Our first question comes from John Murphy with Bank of America. Please proceed with your question.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.

Speaker Change: Ms using speaker equipment, it may be necessary to pick up your handset before pressing the star one.

Operator: One moment, please slowly pull for a question.

Speaker Change: One moment, please while we poll for questions.

John Murphy: Our first question comes from John Murphy with Bank of America. Please proceed with your question.

Speaker Change: Our first question comes from John Murphy with Bank of America. Please proceed with your question.

John Murphy: Good morning, guys. Maybe just a first simple question on the CDK situation. David, as you think about sort of the catch-up here as the system has normalized through the course of July, how much catch-up do you think there will be as we think of sort of the different verticals of new, used, and parts and service?

David Holt: Good morning, guys. Maybe just a first simple question on CDK situation. As you think about the catch up here as the system has normalized through the course of July, how much catch up do you think there will be as we think of the different verticals of new, used, and parts and service?

John Murphy: Hi, Good morning, guys, maybe just a first simple question on on C. D on the CDK situation.

Speaker Change: David as you think about sort of the catch up here as the system is normalize through the course of July how much catch up do you think they're there there will be as we think of sort of the different verticals of new used in parts and service.

David Holt: Hi, John.

David Hult: Hey, John, it's David. You know, over half our competitors aren't on CDK, and they were functioning as normal. And you can see it in the month-end performance; when you can see the local market activity, you can almost pick out who was on CDK and who had a different DMS. So I think people tend to go out and make their purchases and don't tend to wait, while some will wait depending upon the product.

David Hult: Hey, John It's David you know over half our competitors aren't on C. D K and they were functioning as normal and you can see it in the month and performance. When you can see the local market activity you can almost pick who was on CDK and who had a different tms.

David Holt: It's David. Over half our competitors are not on CDK, and they were functioning as normal. You could see it in the month-end performance when you could see the local market activity. You could almost pick who was on CDK and who had a different DMS. I think people tend to go out and make their purchases and don't tend to wait, while some will wait depending upon the product. Parts and services, you miss those opportunities to sell the hours. You don't get those hours back. So I don't think there's going to be a lot coming into the quarter.

Speaker Change: I think you know people tend to go out and make their purchases and don't tend to wait while some will wait depending upon the product parts and services you know you Miss those opportunities to sell the hours you don't get those hours back.

David Hult: Parts and services. You missed those opportunities to sell the hours; you don't get those hours back. So I don't think there's gonna be a lot coming in the quarter. Having said that, probably the second half of July is when we got back to what I would call normal operations, and we've seen a very steady increase in our parts and service gross profit and also transactional revenue grow nicely in July compared to July of the previous year.

Speaker Change: So I don't think there's going to be a lot coming into the quarter, having said that you know probably the second half of July is when we got back to what I would call normal operations and we've seen a very steady increase in our parts and service gross profit profit and also transactional revenue grow nicely and in <unk>.

David Holt: Having said that, probably the second half of July is when we got back to what I would call normal operations. And we've seen a very steady increase in our parts and service growth profit, and also transactional revenue grow nicely in July compared to July prior year. Okay, that's helpful.

Speaker Change: Ally compared to July of prior year.

Speaker Change: Yeah.

David Hult: Okay, that's helpful. And then just a second question on parts and service. I mean, you know, it's running really hot because of previous CDK disruption. I mean, if you think about the forward, you know, the second half of the year and going into 2025, it's sort of that mid to high single-digit same store sales number, a number that you think is reasonably achievable. I mean, you got dented pretty hard here in June.

Speaker Change: Okay. That's helpful. And then just a second question on parts and service I mean, you know it was running really hot previous CDK disruption I mean, as you think about before you know it was second half of the year and going into 2025 and sort of that mid to high single digit same store sales number a number that you think is is reasonably achievable, meaning you got dented pretty hard here.

David Holt: And then just a second question on parts and service. I mean, you know, it's running really hot, pretty CDK disruption. I mean, as you think about the forward, you know, it was second half of the year and going into 2025. It's sort of that made the high single digit same store sales number. A number that you think is reasonably achievable. I mean, you got dented pretty hard here in June. Yeah, absolutely. We will certainly be that and probably closer to the high single-digit numbers. Okay.

Speaker Change: In June.

David Hult: Yeah, absolutely. We will certainly be that and probably closer to the high single-digit numbers.

Speaker Change: Yeah, absolutely, we will certainly be that and probably closer to the high single digit numbers.

David Hult: Okay, and then just lastly, I mean, Click Lane sounded like it was a pretty good Band-Aid sort of redundancy system, but is there any thought about what you're going to do with sort of the reliance on CDK going forward? Could it be an incremental investment in Click Lane to make that actually even more robust than it already is? Or, you know, what is the kind of longer-term thought process here?

David Holt: And then just lastly, I mean, Click Lane sounded like it was a pretty good bandaid sort of redundancy system. But is there any thought about what you're going to do? What sort of reliance on CDK going forward? Could it be an incremental investment in click lane to make that actually, even even more robust than it already is, or I mean, what is kind of the longer term thought process here? Yeah, it's a great question, John. And that's when something catastrophic like this happens other than, you know, come up with quick solutions to fix that you think about going forward.

Speaker Change: Okay, and then just lastly, I mean quickly and sounded like it was a pretty good band aid sort of redundancies system, but is there any thought about what you're going to do what's sort of the reliance on CDK going forward could it be a incremental investment in click lean to make that actually.

Speaker Change: Even even more robust than it already is or I mean, what what is kind of the longer term thought process here.

David Hult: It's a great question, John, and actually, when something catastrophic like this happens, other than, you know, coming up with quick solutions to fix it, you think about going forward. You know, every dealership needs a dealer management system, and they're all capable, as we've seen with other industries, of dealing with cyber attacks that are coming. ClickLane's intention was always built to be a stand-alone transactional tool online, and we think it's served its purpose really well.

Speaker Change: Yeah, It's a great question, John and you actually see when something catastrophic like this happens other than you know come up with quick solutions to fix that you think about going forward.

David Holt: You know, every dealership needs a deal management system. And they're all capable, as we've seen with other industries, with cyber attacks that are coming. Click lanes intention was always built to be a standalone transactional tool online. And we think it served itself really well. It can print all the documents, even the documents where some states require wet signatures, but it's not an accounting or DMS system. So we still need an outlet to plug into. It's functioned on its own. It did all the transactions; it handled the leasing, it handled the financing, it handled the signatures, but it's still all those deals had to be re-created back into the DMS system.

Speaker Change: You know every dealership needs of dealer management system.

Speaker Change: And they are all capable of as we've seen with other industries with cyber attacks that are coming click claims intention was always built to be a standalone transactional tool online and we think it served itself really well.

David Hult: It can print all the documents, even the documents where some states require wet signatures, but it's not an accounting or DMS system. So we still need an outlet to plug it into. It functioned on its own, it did all the transactions, it handled the leasing, it handled the financing, it handled the signatures, but still, all those deals had to be recreated back into the DMS system. So unfortunately, our industry, and I don't see a workaround, you know, we need a deal management system or an accounting system, if you will, to aggregate the data. Okay.

Speaker Change: It can print all the documents, even the documents where some states require wet signatures, but it's not an accounting or Dms system. So we still need an outlet to plug into our it function on its own that did all the transactions and handle the leasing and handle the financing.

Speaker Change: Handled the signatures, but its still all of those deals had to be recreated back into the Dms system.

David Holt: So, unfortunately, our industry, and I don't see it work around, you know, we need a deal of management system or an accounting system, if you will, to aggregate the data.

Speaker Change: So unfortunately, our industry and I don't see it work around.

Speaker Change: You know, we need to deal with management system or an accounting system. If you will to aggregate the data.

John Murphy: Okay, all right, thank you very much, guys.

David Hult: Okay, all right. Thank you very much, guys.

Speaker Change: Okay, Alright, thank you very much guys. Thank.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Rajat Gupta: Our next question comes from Rajat Gupta, JP Morgan.

Rajat Gupta: Our next question comes from Rajat Gupta with J.P. Morgan. Please proceed with your question.

Speaker Change: Our next question comes from Russia.

Speaker Change: J P. Morgan. Please proceed with your question.

Rajat Gupta: Please proceed with your question. Great, but thanks for taking the question. I have to just follow up on John's question earlier on from the Department of Arts and Services. You know, there's a high single-digit expectation going forward. Was that like a revenue number or a gross profit number? And can you give us a sense of, you know, what drove the strong gross margin expansion in the second quarter in parts and services as well? Was that just mix or was it just more pricing drop through? Is it curious if we could unpack that a little bit and have a quick follow?

Rajat Gupta: Great. Thanks for taking the time to answer the question. I had just a follow-up on John's question earlier on parts and services. The high single-digit expectation going forward, was that like a revenue number or a gross profit number? And could you give us a sense of, you know, what drove the strong gross margin expansion in the second quarter in parts and services as well? I mean, was that just mix, or was that just more pricing drop-through? Just curious if you could unpack that a little bit and have a quick follow-up. Sure.

Speaker Change:

Speaker Change: Great. Thanks for taking the question I just to follow up on John's question on parts and services the high single digit expectation going forward.

Speaker Change: Like a revenue number or a gross profit number.

Speaker Change: And and can you give us a sense of you know what drove the strong.

Speaker Change: Gross margin expansion.

Speaker Change: Second quarter in parts and services as well to me was that just mix or was that just more pricing drop through there. Just curious if you could unpack that a little bit then I have a quick follow up.

Dan Clara: Sure, the high single digits, thank you for clarifying that. We tend to focus on gross profit more than revenue because that's what ultimately pays the bill, so that's that high single-digit piece of it. You know, as far as the margin increase is concerned, it's a combination of a few things. We're big into wholesale parts, but revenue and gross profit, which bring down your margins, missing $8 million in wholesale parts sales in the quarter was a massive impact and would have put us close to total revenue flat year over year on a same store basis.

David Holt: Sure, the high single digits. Thank you for clarifying that. We tend to focus on gross profit more than revenue because that's what ultimately pays the bill. So that's that high single digit piece of it. You know, as far as the margin increase, it's a combination of a few things. We're a large into wholesale parts revenue and gross profit, which bring down your margins. Missing $8 million in wholesale parts sales in the quarter was a massive impact and would have put us close to total revenue flat year over year on a same store basis. So that was a little bit of a tale when picking up the margin with the lack of wholesale sales in collision.

Speaker Change: Sure the high single digits.

Speaker Change: Thank you for clarifying that we tend to focus on gross profit more than revenue.

Speaker Change: Because that's what ultimately pays the bills. So that's that's that high single digit piece of it.

Speaker Change: As far as the margin increase it's a combination of a few things where a large into wholesale parts revenue.

Speaker Change: Revenue and gross profit, which bring down your margins.

Speaker Change: Missing $8 million in wholesale parts sales in the quarter was a massive impact and would have put us close to the total revenue flat year over year on a same store basis. So that was a little bit of a tailwind picking up the margin with a lack of wholesale sales and collision. We have so many collision outlets in the reverse you know a lot of the transactional work didn't happen there because.

Dan Clara: So that was a little bit of a tailwind picking up the margin with the lack of wholesale sales in collision. We have so many collision outlets in the reverse, you know; a lot of the transactional work didn't happen there because they were waiting on parts as well.

David Holt: We have so many collision outlets in the reverse; you know, a lot of the transaction work didn't happen there because they were waiting on parts as well. So those two were certainly part of the indication as to why the gross margin went up. But it's also on our end, you know. The last 90 days we've been very focused on raising our margin within our service business alone. We saw a nice incremental growth across all our brands and all our markets. And we're doing everything we can to make sure that sticks going forward.

Speaker Change: They were waiting on parts as well.

Dan Clara: So those two were certainly part of the indication as to why the gross margin went up. But it's also on our end, you know. In the last 90 days, we've been very focused on raising our margin within our service business alone. We saw a nice incremental growth across all our brands and all our markets. And we're doing everything we can to make sure that sticks going forward.

Speaker Change: So those two were certainly part of the indication as to why the gross margin went up but it's also on our end. The last 90 days, we've been very focused on raising raising our margin within our service business alone.

Speaker Change: We saw a nice incremental growth across all our brands in all our markets and we're doing everything we can to make sure that's fixed going forward.

Rajat Gupta: Got it. That's that that's helpful clarification.

Dan Clara: Got it, got it. That's helpful clarification. And then, you know, the mid-60s SG&A to gross expectation for the remainder of the year. What kind of GPU assumptions on the new and new side underlie that forecast? Can you give us some color there?

Speaker Change: Got it got it that's that's helpful clarification.

Michael Welch: And then, you know, the mid 60s, SG&A to gross expectation for the remainder of the year. What kind of GPU assumptions, you know, when you and you side underlie, you know, that forecast, you're going to give us some color there. Thank you. Yeah, for the GPUs, we expect new vehicle to continue to come down throughout the remainder of the year. Kind of the glide path we've been on, and then use vehicles for probably stay in the current environment. We don't see a lot of things that are going to change in the used vehicle market to raise those PVRs, at least the remainder of this year.

Speaker Change: The mid sixteens SG&A to gross our expectation for the remainder of the year.

Speaker Change: What kind of GPU assumptions.

Speaker Change: New and used side underlie that.

Speaker Change: About forecast.

Speaker Change: Give us some color there. Thank you.

Dan Clara: For GPUs, we expect new vehicles to continue to come down throughout the remainder of the year, kind of the glide path that we've been on, and then used vehicles will probably stay in the current environment. We don't see a lot of things that are going to change in the used vehicle market to raise those PVRs, at least for the remainder of this year. So those are both kind of... You know, current GPUs are slightly lower for new vehicles in that forecast.

Speaker Change: Yeah on the for the Gpus, we expect new vehicle will continue to come down throughout the remainder of the year.

Speaker Change: Kind of the glide path, we've been on and then used vehicles will probably stay in the current environment.

Speaker Change: We don't see a lot of things that are going to change in the used vehicle market to raise those PV ours at least the remainder of this year. So those are both kind of you.

Michael Welch: So those are both kind of, you know, current GPUs are slightly lower for new vehicles in that work.

Speaker Change: Current Gpus are slightly lower for new vehicles in that forecast.

Rajat Gupta: Got it. That's helpful clarification. Thank you. I'll get back to you.

Speaker Change: Got it got it that's all.

Speaker Change: One clarification and.

Speaker Change: I'll get back in queue.

Speaker Change: Okay.

Ryan Sigdahl: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our next question comes from Ryan Sigdahl with Craig Hallem Capital Group.

Speaker Change: Yeah.

Operator: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Ryan Sigdahl with Craig Hallam Capital Group. Please proceed with your question.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Ryan <unk>: Our next question comes from Ryan <unk> with.

Speaker Change: Craig Hallum Capital Group. Please proceed with your question.

Ryan Sigdahl: Please proceed with your question.

David Holt: Hey, good morning, guys. Looking at slide 13, just to impact from CDK outage, nice slide there to show early versus end-of-quarter performance. But it shows my question as quickly and performed as a transactional software tool enabling in-store sales. I guess, can you walk through exactly kind of the burden or change to the end consumer or why so much sales were lost when you effectively had a band-aid software system that you could transact?

Ryan: Hey, good morning, guys.

Ryan Sigdahl: Looking at slide 13, Juicy Impact from CDK Outage, a nice slide there to show early versus end-of-quarter performance, but it shows, my question is, Quicklane performed as a transactional software tool enabling in-store sales. I guess, can you walk through exactly what kind of burden or change to the end consumer or why so much sales were lost when you effectively had a Band-Aid software system that you could transact?

Ryan <unk>: I'm looking at slide 13, just impact from C. D. K outage nice slide there to show early versus end of quarter performance, but.

Ryan: It shows my questions quickly and performed as a transactional software tool, enabling in store sales I guess can you walk through exactly kind of the the burden or change to the end consumer or why so much sales were lost when you effectively had a band aid software system that you could transact.

David Hult: Craig, I'll start and then Dan can jump in. I think the one time, this is my perception, a lot of folks look at simply the buckets of luxury, domestic, and import, and I think you really have to unpack what's going on within each brand itself. The market performance backwards in sales had more to do with our brand mix. We had brands that were up year over year in sales. You know, Stellantis is we have 155 dealerships. It's almost 15 percent of our rooftops.

David Holt: Craig, I'll start, and then Dan can jump in. I think the one time, or this is my perception, I think a lot of folks look at simply that the buckets of luxury, domestic, and import, and I think you really have to unpack what's going on within each brand itself. The market performance back within sales to us had more to do with our brand mix. We had brands that were up year-over-year in sales. Stellantis, we have 155 dealerships; it's almost 15% of our rooftops. It's all brands are cyclical, but it's struggling right now. When you look at our year-over-year decrease in unit sales and domestic, 100% of it is tight as Stellantis.

Ryan: Craig I'll start and then Dan can jump in.

Craig: I think the one time or this is my perception I think a lot of folks look at simply the buckets of luxury domestic and import and I think you really have to unpack, what's going on within each brand itself.

Ryan: Hmm.

Dan Clara: Market performance backwards and sales to us had more to do with our brand mix. We had brands are up year over year in sales.

Speaker Change: You know it's the Lantus is do we have 155 dealerships, it's almost 15% of our rooftops.

David Hult: And it's a, you know, all brands are cyclical, but it's very, it's struggling right now. And when you look at our year over year decrease in unit sales and domestically, 100% of it is tied to Stellantis. Also, on the import side with Nissan, it had a material impact on us as well. So even with the CDK outage, because of our brand mix, we're struggling a little bit with a couple of brands that we're a little bit heavier on as far as the percentage of our business. But again, all brands are cyclical, so while it's a headwind for us right now, it's going to be a tailwind in the future as they come back for us.

Speaker Change: And it's a you know it's all brands are cyclical, but it's very it's struggling right now and when you look at our year over year decrease in unit sales and domestic 100% of it is tied to the last.

David Holt: Also, in the import side with Nissan, it was a material impact on us as well. Even with we're struggling a little bit with a couple of brands that were a little bit heavier on as far as the percentage of our business. But again, all brands are cyclical, so while it's a headwind for us right now, it's going to be a tailwind in the future as they come back for us.

Speaker Change: Also in the import side with Nissan It was a material impact on us as well so even with the C. D. K outage because of our brand mix, we're struggling a little bit with a couple of brands that were a little bit heavier on as far as a percentage of our business, but again all brands is cyclical so while it's a headwind for US right now it's gonna be a tailwind.

Speaker Change: And in the future as they come back for US I think the transactional tool worked really well.

Dan Clara: I think the transactional tool worked really well. Where it lacked some function was in the API connections with some of the OEM financial arms. Some of them don't have their software as sophisticated as ours and don't have the ability for API connections, which makes it a little bit more challenging, especially with a couple of the European brands as it relates to leasing. So that really kind of slowed down the process. But, generally, I think that we performed well. All the Nissan volume, to me, had more to do with the brand mix than the outage. Dan, I don't know if you feel differently.

David Holt: I think the Transactual Tool worked really well. Where it lacked some function was with API connections with some of the OEM financial arms. Some of them don't have their software as sophisticated as ours and don't have the ability for API connections, which makes it a little bit more challenging, especially with a couple of European brands as it relates to leasing. So that really kind of slowed down the process. But generally, I think that we performed well; more than miss on volume to me had more to do with the brand mix than the outage. Then I don't know if you feel differently.

Ryan: Where it lacks some function, whereas with API connections with some of the OEM financial arms. Some of them don't have their software as sophisticated as ours and don't have the ability for API connections, which make it a little bit more challenging, especially with a couple of the European brands as it relates to leasing.

Speaker Change: That really kind of slowed down the process, but generally I think that we performed well more than Miss on volume to me had more to do with the brand mix than the outage then I don't know if you feel differently.

Dan Clara: Yes, I agree 100% with David. I do want to add, Ryan, that ClickLane as a transactional tool worked extremely well during the outage, but you can also, we cannot forget that most of our stores are operating under eLeads. And E-Leads was also affected by the CDK outage. And what that means is, the impact that that had on us is that the moment E-Leads went down, or our CRM, we had no visibility into any leads or deals that we were working prior to the outage.

Dan Clara: Yes, I agree 100% with David. I do want to add, Ryan, that Click Lane as a transactional tool worked extremely well during the outage. But you can also, we cannot forget that most of our stores are operating under elites. And elites was also affected on the CDK outage. And what means the impact that that had to us is the moment elites went down or CRM, we had no visibility to any leads or deals that we were working prior to the outage. We were in blank mode. So click lane allowed us to move forward. But we lost a lot of momentum from being able to follow up with our team member with our guests prior to the outage.

Speaker Change: Yes, I agree 100% with David I do want to add Ryan that click.

Speaker Change: Click lane as a transactional tool worked extremely well during the outage, but you can also where we cannot forget that most of our stores are operating under elite.

Speaker Change: And elite was also affected on the CDK outage and what it means what the impact that that had to US is the moment elites went down or or CRM. We had no visibility to any leads or deals that we were working prior to the outage we were in blank mode. So.

Dan Clara: We were in blank mode. So ClickLane allowed us to move forward, but we lost a lot of momentum from being able to follow up with our team members and our guests prior to the outage. And that also contributed to the lack of performance and Ryan's performance.

Ryan <unk>: Politically and allowed us to move forward, but we lost a lot of momentum from being able to follow up with our team member with Rguest prior to the outage and that also contributed to the to the lack of performance and Ryan just to follow up on that if he leaves as a CRM system. That's owned by CDK that we utilize.

David Holt: And that also contributed to the lack of performance. And Ryan, just to follow up on that, he leads the CRM system that's owned by CDK that we utilize. But I will say our development team internally quickly integrated with our third parties to create basically within our sandbox the ability for us to capture leads and respond to them. So a little bit of delay, but we were able to get back up on top.

David Hult: And Ryan, just to follow up on that, eLEADS is a CRM system that's owned by CDK that we utilize. But I will say our development team internally quickly integrated with our third parties to create, basically, within our sandbox the ability for us to capture leads and respond to them. So a little bit of a delay, but we were able to get back on top.

Speaker Change: I will say our development team internally quickly integrated with our third parties should create basically within our sandbox the ability for us to capture leads and respond to them. So a little bit of delay, but we were able to get back up on top.

Ryan Sigdahl: Great, then just for my follow-up, you guys are on path to trial, four stores on Techion.

Ryan Sigdahl: Great. And just for my follow-up, you guys are on a path to trial for stores on Techion. Curious if this changes kind of how you think about DMS, technology, server-based versus cloud-based, etc., going forward, and then anything on that timeline as well. And if you would like to comment on that legal battle between unlocking some of that data that's in the headlines, I would love to hear that as well. Thanks, Ryan.

Speaker Change: Great and then just for my follow up you guys are on a path to trial for stores on Turkey on curious if this changes kind of how you think about D. M S technology.

Ryan Sigdahl: Curious if this changes kind of how you think about DMS, technology, server base versus cloud base, et cetera, going forward and then anything on that timeline as well.

Speaker Change: Server based versus cloud based et cetera, going forward and then anything on that timeline as well and if you. If you would like to comment on that legal battle between unlocking some of that data that's in the headlines.

David Holt: And if you would like to comment on that legal battle between unlocking some of that data that's in the headlines, would love to hear that as well. Thanks, Ryan. I don't want to comment on ongoing legal issues. I would say we're excited about Techion. It is 100% cloud base. We will be more all eggs in one basket with them if you will, because we won't have nearly as many both on applications. But we view that as a positive deal from a transparency standpoint, with our guests and our team members being able to service our customers.

Speaker Change: I would love to hear that as well.

David Hult: Thanks, Ryan. I don't want to comment on ongoing legal issues. I would say we're excited about Techion because it is 100% cloud-based. We will be more all eggs in one basket with them, if you will, because we won't have nearly as many bolt-on applications. But we view that as a positive deal from a transparency standpoint with our guests and our team members being able to serve our customers. We intend, at this point, to launch the four stores and our shared service center in October and, hopefully, continue to roll out from there on, starting in early 2025.

Speaker Change: Thanks, Ryan I don't want to comment on an ongoing legal issues I would say we're excited about checking on.

Speaker Change: It is 100% cloud base, we will be more all eggs in one basket with them. If you will because we won't have nearly as many bolt on applications, but we view that as a positive deal from a transparency standpoint, with our guests and our team members being able to service our customers. We intend at this point to launch the four stores in our shared service.

Ryan Sigdahl: We intend at this point to launch the four stores and our shared service center in October and hopefully continue to roll out from there on starting in early 225. We're really comfortable and we've had great conversation with Techion on their cyber security and their sock one and sock two reporting what they do. But again, as we've seen with every industry in this day and age, unfortunately, everyone is subject to some kind of cyber attack. Great. Thanks, guys. Good luck. Thank you.

Speaker Change: Center in October and hopefully continue to roll out from there on starting in early 225, we're really comfortable and we've had great conversations with tachyon on their cyber security and their stock one and sorry to report and what they do.

David Hult: We're really comfortable, and we've had great conversations with Techion about their cybersecurity and their SOC 1 and SOC 2 reports and what they do. But again, as we've seen with every industry in this day and age, unfortunately, everyone is subject to some kind of cyber attack.

Speaker Change: But again as we've seen with every industry in this day and age. Unfortunately, everyone is subject to some kind of a cyber attack.

Speaker Change: Yeah.

Operator: Great. Thanks, guys. Good luck. As a reminder, if you would like to ask a question

Speaker Change: Great. Thanks, guys. Good luck. Thank you.

Operator: As a reminder, if you would like to ask a question, please press straw one on your telephone keypad. It appears that there are no further questions at this time.

Operator: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. It appears that there are no further questions at this time. I would now like to turn the floor back over to David Hult for closing comments. Thank you, operator. We appreciate everyone's participation today on the call, and we look forward to speaking with all of you

Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: It appears that there are no further questions at this time I would now like to turn the floor back over to David Hall for closing comments.

David Holt: Now would like to turn the floor back over to David Holt for closing comments. Thank you, operator. We appreciate everyone's participation today on the call, and we look forward to speaking with all of you at the end of the third quarter.

David Hult: Thank you, operator. We appreciate everyone's participation today on the call, and we look forward to speaking with all of you at the end of the third quarter. Have a great day and a wonderful weekend. Take care.

David Hall: Thank you operator, we appreciate everyone's participation today on the call and we look forward to speaking with all of you at the end of the third quarter.

David Holt: Have a great day and a wonderful weekend. Take care.

Speaker Change: Great day, and a wonderful weekend take care.

Speaker Change: Yeah.

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Speaker Change: Yeah.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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