Asbury Automotive Group Q4 2025 Asbury Automotive Group Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Asbury Automotive Group Inc Earnings Call
Operator: Greetings, and welcome to the Asbury Automotive Group Q4 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Chris Reeves, Vice President of Finance and Treasurer. Please go ahead.
Operator: Greetings, and welcome to the Asbury Automotive Group Q4 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Chris Reeves, Vice President of Finance and Treasurer. Please go ahead.
Speaker #1: welcome Greetings and to the Asbury Automotive Group fourth quarter 2020 Earnings Call . At this time , all participants are in listen only mode .
Speaker #1: A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press Star Zero on your telephone keypad.
Speaker #1: As reminder , this conference is being recorded . It is now my Chris introduce , Vice Reeves President pleasure to of Finance and Treasurer .
Chris Reeves: ... 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 Q4 2025 Earnings Call. The press release detailing Asbury's Q4 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 Chief Operations Officer, and Michael Welch, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open the call up for questions and 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.
Chris Reeves: ... 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 Q4 2025 Earnings Call. The press release detailing Asbury's Q4 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 Chief Operations Officer, and Michael Welch, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open the call up for questions and 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.
Speaker #2: Thanks . . Operator And good morning . As noted , today's call is being and will be available for recorded replay later this afternoon .
Speaker #2: Welcome to the Asbury Automotive Group fourth quarter 2020 earnings call. The press release detailing Asbury's fourth quarter results was issued earlier this morning and is posted on our website at the investors section.
Speaker #2: Participating with me today are David Holt , our president and chief executive Officer . Daniel Clara . Our chief operations officer . And Michael Welch , our senior vice president and chief financial officer .
Speaker #2: At the conclusion of our remarks, we will call up for questions and be open for any follow-up questions available later.
Chris Reeves: 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 upcoming Form 10-K for the year ended December 31, 2025, any subsequently filed quarterly reports on Form 10-Q, and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website. Comparisons will be made on a year-over-year basis unless we indicate otherwise.
Chris Reeves: 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 upcoming Form 10-K for the year ended December 31, 2025, any subsequently filed quarterly reports on Form 10-Q, and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call.
Speaker #2: Before we must begin , we remind you that the discussion during the is likely today call 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 .
Speaker #2: Each of which are subject to significant For uncertainties . information regarding certain risks that may cause of the actual materially differ from these statements , please see our filings with the SEC from time to including our upcoming form 10-K for the year ended December 31st , results to 2025 .
Speaker #2: Any time, filed quarterly reports on Form 10-Q and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements.
Chris Reeves: 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. Comparisons will be made on a year-over-year basis unless we indicate otherwise. We have also posted an updated investor relations presentation on our website, investors.asburyauto.com, highlighting our fourth quarter results. It is now my pleasure to hand the call over to our CEO, David Hult. David?
Speaker #2: In addition , certain non-GAAP measures defined under SEC rules may be discussed on this required by . As provide we SEC reconciliations call of any such financial non-GAAP measures to the most directly GAAP measures our website .
Chris Reeves: We have also posted an updated investor relations presentation on our website, investors.asburyauto.com, highlighting our fourth quarter results. It is now my pleasure to hand the call over to our CEO, David Hult. David?
Speaker #2: Comparisons will be made on a year over year basis , unless we on indicate otherwise . We applicable have also posted an updated investor relations presentation on our website .
Speaker #2: Investors Asbury Automotive Group , highlighting our fourth quarter results . It is now pleasure to my call over to our CEO , David Holt .
David Hult: Thank you, Chris, and good morning, everyone. Welcome to our Q4 Earnings Call. As I said in our earnings release, 2025 was a productive year for Asbury. We grew the size of our business, both in terms of revenue and in the geographic areas of the country in which we operate, acquiring $2.9 billion in revenue. More importantly, the composition of our portfolio continued to improve through strategic divestitures. Because of the discipline in running our business, we were ahead of where we thought we would be from a leverage perspective at 3.2 times, versus our forecast of 3.5 times. We deployed $186 million in CapEx and continued our share repurchase efforts, buying back $50 million in shares for the quarter and $100 million for the full year.
David Hult: Thank you, Chris, and good morning, everyone. Welcome to our Q4 Earnings Call. As I said in our earnings release, 2025 was a productive year for Asbury. We grew the size of our business, both in terms of revenue and in the geographic areas of the country in which we operate, acquiring $2.9 billion in revenue. More importantly, the composition of our portfolio continued to improve through strategic divestitures. Because of the discipline in running our business, we were ahead of where we thought we would be from a leverage perspective at 3.2 times, versus our forecast of 3.5 times. We deployed $186 million in CapEx and continued our share repurchase efforts, buying back $50 million in shares for the quarter and $100 million for the full year.
Speaker #2: David hand the .
Speaker #3: Thank you . good morning , Chris , and Welcome everyone . to our fourth quarter earnings call . As I said in our earnings release , 2025 was a productive year for Asbury .
Speaker #3: grew the We our size of business in terms of both and in the revenue country in which areas of the geographic operate . 2.9 billion in revenue .
Speaker #3: More importantly , the composition of our Acquiring portfolio continued to improve through strategic divestitures because of the discipline in running our business . We were ahead of where we thought we would be from a leverage .
Speaker #3: perspective At 3.2 times . our Versus forecast of 3.5 times . We deployed 186 million in and CapEx repurchase share efforts , buying back 50 million in shares for the quarter and 100 million for the full .
David Hult: We transitioned 15 additional stores onto Tekion during the quarter, ending the year with 38 stores operating on our new DMS. Managing our portfolio and allocating capital to areas that generate the greatest returns for the business and our shareholders has long been a core pillar of Asbury's strategic plan, and I am proud of the team's efforts to both grow the company and maintain our focus on expense control. Moving into 2026, we are confident these collective investments and the strength of our team position us to win, delivering value to our guests and returns to our shareholders. Next, I'd like to highlight some same-store operating metrics for the quarter. New vehicle sales volume were a reflection of prior year post-election surge.
David Hult: We transitioned 15 additional stores onto Tekion during the quarter, ending the year with 38 stores operating on our new DMS. Managing our portfolio and allocating capital to areas that generate the greatest returns for the business and our shareholders has long been a core pillar of Asbury's strategic plan, and I am proud of the team's efforts to both grow the company and maintain our focus on expense control. Moving into 2026, we are confident these collective investments and the strength of our team position us to win, delivering value to our guests and returns to our shareholders. Next, I'd like to highlight some same-store operating metrics for the quarter. New vehicle sales volume were a reflection of prior year post-election surge.
Speaker #3: year transitioned We 15 additional onto during the stores Tecuan quarter , ending the 38 stores operating on our new DMs , managing our portfolio , and allocating areas that generate the capital to greatest returns for the our business and shareholders long been a core pillar , has of Asbury's strategic plan , and I am proud of the efforts to both grow the company and maintain our focus on expense team's .
Speaker #3: Moving into 2026 . confident these collective investments and the strength We are team win , delivering value to our guests and our shareholders .
Speaker #3: I'd like to Next , highlight some same store operating metrics for the quarter . New vehicle sales returns to reflection of prior year post-election surge vehicles continued on new to .
David Hult: PVRs on new vehicles continued to normalize, and we reiterate our view that new vehicle profitability will eventually stabilize in the $2,500 to 3,000 dollar range. In used vehicles, we are beginning to see the results of our efforts to improve our performance, and while volumes continue to reflect a supply-constrained environment, gross profit rose 6% year-over-year, with used vehicle retail PVRs up 18%. On the ground, we noticed a pullback in consumer spending in parts and service. However, we are optimistic about the outlook and positioning of our fixed operations business. Later in the call, Dan will provide additional details on our operational performance. Our same-store adjusted SG&A, as a percentage of gross profit, was up 162 basis points versus prior year, reflecting the impact of lower new vehicle profitability.
David Hult: PVRs on new vehicles continued to normalize, and we reiterate our view that new vehicle profitability will eventually stabilize in the $2,500 to 3,000 dollar range. In used vehicles, we are beginning to see the results of our efforts to improve our performance, and while volumes continue to reflect a supply-constrained environment, gross profit rose 6% year-over-year, with used vehicle retail PVRs up 18%. On the ground, we noticed a pullback in consumer spending in parts and service. However, we are optimistic about the outlook and positioning of our fixed operations business. Later in the call, Dan will provide additional details on our operational performance. Our same-store adjusted SG&A, as a percentage of gross profit, was up 162 basis points versus prior year, reflecting the impact of lower new vehicle profitability.
Speaker #3: view that new vehicle reiterate our profitability will eventually stabilize in PVR the 2500 to $3000 range used in vehicles . We are to see the results of our efforts to improve our beginning performance volumes continue to supply constrained environment , gross .
Speaker #3: profit rose 6% year over year used vehicle with reflect the retail PVR And while 18% on the ground . We a pullback in consumer spending in service parts and .
Speaker #3: We are optimistic about the outlook and positioning of our fixed operations business. Later, Dan will provide additional details on our operational performance.
Speaker #3: Our same store adjusted as a SG&A percentage of gross profit was up 162 basis points versus year prior , reflecting the impact of lower new vehicle profitability We .
David Hult: We remain committed to operating our business in the most efficient way possible and will continue to adjust our cost structure as business conditions change. Moving to capital allocation. We divested 4 stores in the quarter and are on track to divest another 9 stores by the end of Q1. These 13 transactions, collectively representing $750 million of annualized revenue, are at attractive multiples and will further accelerate our path to reducing our leverage, giving us additional flexibility to pursue share repurchases. We expect to continue our repurchasing activity in 2026, the pace of which will be dictated by our share price, leverage profile, economic conditions, and trade-offs with strategic tuck-in acquisition opportunities. And now for our consolidated results for Q4.
David Hult: We remain committed to operating our business in the most efficient way possible and will continue to adjust our cost structure as business conditions change. Moving to capital allocation. We divested 4 stores in the quarter and are on track to divest another 9 stores by the end of Q1. These 13 transactions, collectively representing $750 million of annualized revenue, are at attractive multiples and will further accelerate our path to reducing our leverage, giving us additional flexibility to pursue share repurchases. We expect to continue our repurchasing activity in 2026, the pace of which will be dictated by our share price, leverage profile, economic conditions, and trade-offs with strategic tuck-in acquisition opportunities. And now for our consolidated results for Q4.
Speaker #3: Committed to remain operating our business in the most efficient way possible and will continue to adjust our cost structure as business conditions change.
Speaker #3: Moving to capital allocation. We divested four stores in the quarter and are on track to divest another nine stores by the end of the first quarter.
Speaker #3: These 13 transactions collectively representing annualized revenue , are at attractive multiples and will further accelerate our path to reducing our leverage , giving us additional flexibility to pursue , share repurchases .
Speaker #3: We expect to continue our repurchasing activity in 2026 . The will be pace of which dictated by our share price leverage profile , economic conditions , and offs with trade strategic tuck acquisition in opportunities .
David Hult: We generated a Q4 record of $4.7 billion in revenue at a gross profit of $793 million, also a Q4 record, a gross profit margin of 17%, an expansion of 31 basis points. We delivered an adjusted operating margin of 5.4%, and our adjusted earnings per share was $6.67. Our adjusted EBITDA was $250 million. I'm proud of what the team accomplished in 2025, and with the foundational investments we've made in our business, I'm excited about the path ahead for 2026. Now, Dan will discuss our operational performance in more detail. Dan?
David Hult: We generated a Q4 record of $4.7 billion in revenue at a gross profit of $793 million, also a Q4 record, a gross profit margin of 17%, an expansion of 31 basis points. We delivered an adjusted operating margin of 5.4%, and our adjusted earnings per share was $6.67. Our adjusted EBITDA was $250 million. I'm proud of what the team accomplished in 2025, and with the foundational investments we've made in our business, I'm excited about the path ahead for 2026. Now, Dan will discuss our operational performance in more detail. Dan?
Speaker #3: now for our And consolidated results for the fourth quarter , we fourth quarter generated record of $4.7 billion in revenue at a gross profit 793 million .
Speaker #3: a Also , fourth quarter record of , a gross profit margin of 17% , and expansion of points 31 basis . We delivered an adjusted operating margin of 5.4% in our adjusted earnings per was $6.67 , our adjusted EBITDA was am 250 million .
Speaker #3: proud of what accomplished in the team I 2025 , and with the foundational investments we've made in our about the I'm excited path business , ahead for 2026 .
Dan Clara: Thank you, David, and good morning, everyone. I would like to start off with a thank you to the team for the positive momentum going into this year as we undertook a number of growth objectives in 2025. Thank you. Looking back at the fourth quarter, we increased our same-store used gross profit, thanks to our continued progress and execution by our team members. We also rolled out Tekion to an additional 15 stores during the quarter, and in January, added eight more stores, which brings our current count to 46, or more than 25% of our portfolio. And on an all-store basis, we can see the positive lift from the Chambers group in our new and used PVRs. And now, I'm going to provide some updates on our same-store performance, which includes dealerships and TCA on a year-over-year basis, unless stated otherwise.
Dan Clara: Thank you, David, and good morning, everyone. I would like to start off with a thank you to the team for the positive momentum going into this year as we undertook a number of growth objectives in 2025. Thank you. Looking back at the fourth quarter, we increased our same-store used gross profit, thanks to our continued progress and execution by our team members. We also rolled out Tekion to an additional 15 stores during the quarter, and in January, added eight more stores, which brings our current count to 46, or more than 25% of our portfolio. And on an all-store basis, we can see the positive lift from the Chambers group in our new and used PVRs.
Speaker #3: Dan Now , will discuss our operational performance in more detail . Dan .
Speaker #4: Thank you , David , and good morning , . I would like to start off a thank with you to the team for the everyone positive momentum going this into year .
Speaker #4: As we undertook a of growth objectives in 2025 . Thank you . Looking back at the fourth quarter , we increased our same store gross , used profit .
Speaker #4: Thanks to our continued progress and execution by our team members . We also rolled out tech to an additional 15 stores during the quarter and in added eight more stores , brings our which current count to 46 or more than 25% of our portfolio .
Speaker #4: And on an all store basis , we can see the positive lift from the chambers Group in our new and pvrs used . And now I'm going to provide some updates on our same store performance , includes dealerships which and TCA year over year basis .
Dan Clara: And now, I'm going to provide some updates on our same-store performance, which includes dealerships and TCA on a year-over-year basis, unless stated otherwise. Starting with new vehicles. Same-store revenue year-over-year was down 6%, which followed a sharp contraction of 5%. We faced a tough comparable from last year's post-election surge and the pull-forward effect of demand earlier in the year. We did see some disruptions in our DC market, as expected. New average gross profit per vehicle was $3,135, a slight decrease sequentially, as import brand PVRs gained some ground, but were offset by the seasonal strength in luxury. Across all brands, our same-store new day supply was 49 days at the end of December, versus 58 days at the end of Q3.
Dan Clara: Starting with new vehicles. Same-store revenue year-over-year was down 6%, which followed a sharp contraction of 5%. We faced a tough comparable from last year's post-election surge and the pull-forward effect of demand earlier in the year. We did see some disruptions in our DC market, as expected. New average gross profit per vehicle was $3,135, a slight decrease sequentially, as import brand PVRs gained some ground, but were offset by the seasonal strength in luxury. Across all brands, our same-store new day supply was 49 days at the end of December, versus 58 days at the end of Q3. All three segments were at lower day supply versus the previous quarter, led by several luxury brands in the domestics.
Speaker #4: Unless stated on a otherwise . Starting with new vehicles store revenue year over , same year was which down 6% , followed sore contraction the of 5% .
Speaker #4: faced a We year's comparable from last surge post-election pull of and the demand earlier in the year forward . We did see some disruptions in our DC market as expected , new gross average profit per vehicle was $3,135 .
Speaker #4: A slight decrease sequentially as import brand Pvrs gave gave some ground , but were offset by the in strength luxury across seasonal all brands .
Speaker #4: same store new de supply was 49 days at the end of December versus 58 days at the end of the third quarter . All three segments were lower day supply at versus the previous led by several luxury brands quarter , and the domestics .
Dan Clara: All three segments were at lower day supply versus the previous quarter, led by several luxury brands in the domestics. Through 2026, we will manage our business based on what we're seeing in our markets and execute accordingly. Turning to used vehicles. Q4 total used gross profit was up 6% year-over-year. Used retail gross profit per unit was up 18% at $1,749, a $271 increase over the prior year, and a $198 increase over our reported Q3 2025 number. Our same-store used DSI was 35 days at the end of the quarter, in line with our DSI at the end of the third quarter. Shifting to F&I. We earned an F&I PBR of $2,335. The non-cash deferral impact of TCA was $105.
Dan Clara: Through 2026, we will manage our business based on what we're seeing in our markets and execute accordingly. Turning to used vehicles. Q4 total used gross profit was up 6% year-over-year. Used retail gross profit per unit was up 18% at $1,749, a $271 increase over the prior year, and a $198 increase over our reported Q3 2025 number. Our same-store used DSI was 35 days at the end of the quarter, in line with our DSI at the end of the third quarter. Shifting to F&I. We earned an F&I PBR of $2,335. The non-cash deferral impact of TCA was $105.
Speaker #4: Through we will manage our 2026 , business based on what we're seeing in our markets and execute accordingly . Turning to used vehicles , fourth quarter used total gross profit was up 6% year over year .
Speaker #4: retail gross Used profit per unit up 18% was at $1,749 , a $271 increase over the prior year , and a our over $198 increase third quarter 2025 number .
Speaker #4: Our same store used DSI was 35 days at the end of the quarter . In line with our at DSI the end of the third quarter .
Speaker #4: Shifting to FNI , we earned an FNI , PVR of $2,335 . The non-cash deferral impact of TCA $105 . So year over year without the impact , have the been $2,440 .
Dan Clara: So without the year-over-year impact, the PVR would have been $2,440. We plan to implement TCA to the Herb Chambers stores by year-end to complete our rollout across all platforms. And finally, in the Q4, our total front-end yield per vehicle was $4,897, up $259 sequentially. Now, moving to parts and service. Our same-store parts and service gross profit was up 2% year-over-year. When looking at our customer pay and warranty performance, customer pay gross profit was up 3%, with warranty gross profit higher by 6%. We lapped tough double-digit comps in both customer pay and warranty, which in 2024 were up 13% and up 26%, respectively.
Dan Clara: So without the year-over-year impact, the PVR would have been $2,440. We plan to implement TCA to the Herb Chambers stores by year-end to complete our rollout across all platforms. And finally, in the Q4, our total front-end yield per vehicle was $4,897, up $259 sequentially. Now, moving to parts and service. Our same-store parts and service gross profit was up 2% year-over-year. When looking at our customer pay and warranty performance, customer pay gross profit was up 3%, with warranty gross profit higher by 6%. We lapped tough double-digit comps in both customer pay and warranty, which in 2024 were up 13% and up 26%, respectively.
Speaker #4: We plan implement TCA to the to chamber stores by year end to complete our rollout across all platforms . And finally , fourth quarter , in the total our end front yield per was vehicle $4,897 , up $259 sequentially .
Speaker #4: tough double digit comps in both customer pay and warranty , which in were up and 13% 2024 up 26% , respectively . For the quarter , we gross profit margin of 58.1% , an expansion of 13 basis generated a on an all store basis .
Dan Clara: For the quarter, we generated a gross profit margin of 58.1%, an expansion of 13 basis points. On an all-store basis, this was a record fourth quarter for our parts and service business, as total revenue grew 12% to $658 million. We remain optimistic about the trends we see supporting the long tail of parts and service operations. The average age of the car on the road, combined with the increasing complexity of technology in vehicles, positions us to reap the benefits of this large addressable market. We believe we're well-positioned to unlock meaningful efficiencies as we navigate in our journey to becoming the most guest-centric automotive retailer, enabled by the hard work of our team members and continued investment in technology. Thank you. And with that, I will now hand the call over to Michael to discuss our financial performance.
Dan Clara: For the quarter, we generated a gross profit margin of 58.1%, an expansion of 13 basis points. On an all-store basis, this was a record fourth quarter for our parts and service business, as total revenue grew 12% to $658 million. We remain optimistic about the trends we see supporting the long tail of parts and service operations. The average age of the car on the road, combined with the increasing complexity of technology in vehicles, positions us to reap the benefits of this large addressable market. We believe we're well-positioned to unlock meaningful efficiencies as we navigate in our journey to becoming the most guest-centric automotive retailer, enabled by the hard work of our team members and continued investment in technology.
Speaker #4: was a This record parts service and business , revenue grew 12% to $658 million . remain trends we see about the We long and of service tail optimistic .
Speaker #4: average age of the car The on the with the combined road , increasing complexity of vehicles technology and us to reap the , positions benefits large of this addressable market .
Speaker #4: believe we're well We positioned to unlock meaningful efficiencies as we navigate in our journey to becoming the most guest automotive centric retailer . Enabled by the team work of our members and continued investment in hard technology .
Dan Clara: Thank you. And with that, I will now hand the call over to Michael to discuss our financial performance. Michael?
Dan Clara: Michael?
Speaker #4: Thank you . And with that , will now now hand the call over to I discuss our financial performance . Michael .
Michael Welch: Thank you, Dan, and good morning to our team members, analysts, investors, and other participants on the call. For our financial performance in the fourth quarter, adjusted net income was $129 million. Adjusted EPS was $6.67 for the quarter. In addition, the non-cash deferral headwind due to TCA this quarter was 31 cents per share. Our adjusted EPS would have been $6.98 without the deferral impact. Adjusted net income for the fourth quarter of 2025 excludes net of tax, non-cash asset impairments of $87 million, net gain on divestitures of $26 million, five million related to the Tekion implementation expenses, $3 million relates to the non-cash fixed asset write-offs, and $1 million professional fees related to the acquisition of Herb Chambers Automotive Group.
Michael Welch: Thank you, Dan, and good morning to our team members, analysts, investors, and other participants on the call. For our financial performance in the fourth quarter, adjusted net income was $129 million. Adjusted EPS was $6.67 for the quarter. In addition, the non-cash deferral headwind due to TCA this quarter was 31 cents per share. Our adjusted EPS would have been $6.98 without the deferral impact. Adjusted net income for the fourth quarter of 2025 excludes net of tax, non-cash asset impairments of $87 million, net gain on divestitures of $26 million, five million related to the Tekion implementation expenses, $3 million relates to the non-cash fixed asset write-offs, and $1 million professional fees related to the acquisition of Herb Chambers Automotive Group.
Speaker #5: Dan , morning to Thank you . members , analysts , investors and and good other call participants financial performance in fourth quarter . Adjusted on the net income the was $129 million .
Speaker #5: Adjusted EPs was $6.67 for the quarter . In addition , the non-cash deferral headwind due to quarter was $0.31 per Our TCA this share .
Speaker #5: adjusted EPs would have been $6.98 without the deferral impact . Adjusted net the fourth of 2025 . quarter net of tax , non-cash asset net gain on impairments $87 million , income for 5 million related to the implementation expenses .
Speaker #5: $3 million related to non-cash asset write fixed offs and fees $1 million professional acquisition related to the of Herb Chambers Automotive Group quarter , which .
Michael Welch: We divested 4 stores in the quarter, which generated an estimated annualized revenue of $150 million. Adjusted SG&A as a percentage of gross profit on same store basis came in at 64.1%. We feel confident in our ability to manage overall cost over the next few quarters as we progress the Tekion implementation across our stores and navigate normalizing new vehicle unit profitability. The adjusted tax rate for the quarter was 25.8%. We estimate the full year 2026 effective tax rate to be approximately 25.5%. TCA generated $12 million of pre-tax income in the fourth quarter. The negative non-cash deferral impact for the quarter was $8 million.
Michael Welch: We divested 4 stores in the quarter, which generated an estimated annualized revenue of $150 million. Adjusted SG&A as a percentage of gross profit on same store basis came in at 64.1%. We feel confident in our ability to manage overall cost over the next few quarters as we progress the Tekion implementation across our stores and navigate normalizing new vehicle unit profitability. The adjusted tax rate for the quarter was 25.8%. We estimate the full year 2026 effective tax rate to be approximately 25.5%. TCA generated $12 million of pre-tax income in the fourth quarter. The negative non-cash deferral impact for the quarter was $8 million.
Speaker #5: generated an estimated divested four stores in the revenue annualized of $150 million , adjusted SG&A as a profit on a same store basis came of gross We in at We feel 64.1% .
Speaker #5: ability to confident our percentage costs over the next overall and as progress , the Technion quarters , we implementation across our stores and navigate normalizing new vehicle unit profitability , the rate for adjusted tax the was 25.8% .
Speaker #5: estimate We the full 20 2026 effective tax rate to be quarter year approximately TCA generated 25.5% . $12 million of pre-tax fourth quarter .
Michael Welch: Our updated TCA slide in our presentation reflects the rollout to Chambers during 2026, the disposal of our held-for-sale assets, and revised SAR estimates based on external forecasts. Now, moving back to our results. We generated $651 million adjusted operating cash flow during 2025. Excluding real estate purchases, we spent $186 million in capital expenditures this year. The assets we sold and having held for sale allow us to avoid some low return CapEx to deploy cash for more strategic capital decisions. We anticipate approximately $250 million in CapEx spend for both 2026 and 2027. Adjusted free cash flow was $465 million for the year.
Michael Welch: Our updated TCA slide in our presentation reflects the rollout to Chambers during 2026, the disposal of our held-for-sale assets, and revised SAR estimates based on external forecasts. Now, moving back to our results. We generated $651 million adjusted operating cash flow during 2025. Excluding real estate purchases, we spent $186 million in capital expenditures this year. The assets we sold and having held for sale allow us to avoid some low return CapEx to deploy cash for more strategic capital decisions. We anticipate approximately $250 million in CapEx spend for both 2026 and 2027. Adjusted free cash flow was $465 million for the year.
Speaker #5: in the income negative impact deferral The Our for the TCA sign , our presentation rollout to was $8 million . chambers The during 2026 .
Speaker #5: disposal held for of our sale assets and our estimates external reflects the forecasts based on . Now moving back to our generated we operating cash flow $651 million for just results , during 2025 , excluding real estate purchases .
Speaker #5: We spent $186 million in capital year expenditures this assets we and for sale haven't held allowed us to avoid some low return CapEx to deploy more cash from strategic capital decisions anticipate .
Speaker #5: approximately $250 million in CapEx for 2026 and 2027 , adjusted free cash flow We was $465 million for the year . We sold with ended the $927 million of liquidity , year plan accounts , availability on both our used line and credit facility , and cash , excluding the revolving Total Care auto cash to .
Michael Welch: We ended the year with $927 million of liquidity, comprised of floor plan offset accounts, availability on both our used line and revolving credit facility, and cash, excluding the cash of Total Care Auto. Our transaction adjusted net leverage ratio was 3.2 times at the end of the year. Our result, our results were better than expected from a leverage standpoint, which we believe gives us room to continue with our path of disciplined strategic capital decisioning. And finally, before I finish our prepared remarks, on behalf of everyone, I want to thank our team members for their hard work in 2025, and we look forward to 2026. With that, this concludes our prepared remarks. We will now turn the call over to the operator to take questions. Operator?
Michael Welch: We ended the year with $927 million of liquidity, comprised of floor plan offset accounts, availability on both our used line and revolving credit facility, and cash, excluding the cash of Total Care Auto. Our transaction adjusted net leverage ratio was 3.2 times at the end of the year. Our result, our results were better than expected from a leverage standpoint, which we believe gives us room to continue with our path of disciplined strategic capital decisioning. And finally, before I finish our prepared remarks, on behalf of everyone, I want to thank our team members for their hard work in 2025, and we look forward to 2026. With that, this concludes our prepared remarks. We will now turn the call over to the operator to take questions. Operator?
Speaker #5: transaction Our adjusted net leverage ratio was 3.2 times of the at the end All results were better than expected from leverage a standpoint , which we believe gives us room to continue path our disciplined , of with our strategic capital .
Speaker #5: Decisioning . And finally , before our I finish remarks prepared to thank of everyone members for their team hard 2025 , and we look forward work in our to 2026 with that .
Speaker #5: on behalf operator to take call over questions . Operator .
Operator: Thank you. We'll 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 your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, one moment please, while we poll for questions. Thank you. Our first question is from Jeff Licht with Stephens Inc.
Operator: Thank you. We'll 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 your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, one moment please, while we poll for questions. Thank you. Our first question is from Jeff Licht with Stephens Inc.
Speaker #1: We'll now be conducting a and question session . If you to the would like to ask a question , press star one on your telephone keypad .
Speaker #1: A confirmation tone will indicate in the question please Thank you . from the your question queue . press For star two to remove participants using speaker pick up necessary to equipment may be the handset star keys .
Speaker #1: One moment, pressing the please. Before our first question. Our first question is from Jeff Lick with Inc. Stephens.
Jeff Licht: Good morning, everyone. Thanks for taking the question. This is, maybe for David and Daniel, you know, kind of pack a few questions into one. I guess if, you know, if you look at 2020, you know, 2025 as your base year, obviously there's like three or four years inside of that year. You know, as you now look at 2026, lapping tariffs, lapping the EV credit, you got lease returns, potentially, maybe there's, you know, you guys have highlighted some more GPU normalization.
Jeff Lick: Good morning, everyone. Thanks for taking the question. This is, maybe for David and Daniel, you know, kind of pack a few questions into one. I guess if, you know, if you look at 2020, you know, 2025 as your base year, obviously there's like three or four years inside of that year. You know, as you now look at 2026, lapping tariffs, lapping the EV credit, you got lease returns, potentially, maybe there's, you know, you guys have highlighted some more GPU normalization.
Speaker #6: Good morning, everyone. Thanks for the question. This is maybe for David or Daniel. You know, kind of pack a few in one.
Speaker #6: I guess if you look at questions into 2025, as your base year, obviously there's like three or four quarters inside of that year.
Speaker #6: You know , as you now look at 2026 , lapping , lapping the EV credit , you got lease returns potentially . Maybe you guys there's you know , have highlighted some more GPU normalization .
Jeff Licht: If you could just kind of give us a little roadmap to, you know, how you see things playing out, and maybe, you know, if you could give some granularity in terms of the first half and the second half, just to, you know, kind of the qualitative path of travel, you know, what we should look for as, as the year progresses.
Jeff Lick: If you could just kind of give us a little roadmap to, you know, how you see things playing out, and maybe, you know, if you could give some granularity in terms of the first half and the second half, just to, you know, kind of the qualitative path of travel, you know, what we should look for as, as the year progresses.
Speaker #6: If you could give us a little to how roadmap you just kind of see things playing out . give some granularity of the in terms first half And maybe the kind just and the second half , of the qualitative of what we travel , for path should look as , as progresses .
David Hult: Thanks, Jeff. This is David. I'll start and Dan can jump in if he wants. You know, I think we're forecasting to go slightly backwards in SAR, but SAR is an overall number that includes, you know, fleet and wholesale, and I think it's gonna vary by brands. We have a lot of Stellantis stores that were, you know, a percentage of our business that were challenging for us in 2025. All brands are cyclical, and we believe Stellantis will come back, so hopefully that'll turn into a tailwind for us in 2026. You know, we have over 50 stores now in the Northeast. January's been ridiculously tough with weather, so it's been a challenge starting off the year, and we've even had a challenging weather in the Southeast as well.
David Hult: Thanks, Jeff. This is David. I'll start and Dan can jump in if he wants. You know, I think we're forecasting to go slightly backwards in SAR, but SAR is an overall number that includes, you know, fleet and wholesale, and I think it's gonna vary by brands. We have a lot of Stellantis stores that were, you know, a percentage of our business that were challenging for us in 2025. All brands are cyclical, and we believe Stellantis will come back, so hopefully that'll turn into a tailwind for us in 2026. You know, we have over 50 stores now in the Northeast. January's been ridiculously tough with weather, so it's been a challenge starting off the year, and we've even had a challenging weather in the Southeast as well.
Speaker #6: the year
Speaker #3: We have a lot of Stellantis stores that were, you know, a percentage of our business that were challenging for us going into '25.
Speaker #3: us All brands are and cyclical believe Stellantis will come back . hopefully that will we turn into a tailwind for us , and I in 26 .
Speaker #3: So, you know, we have over 50 stores now in the Northeast. January has been ridiculously tough with its weather. The challenge has been a tough start to the year.
David Hult: I would say the first half will probably be a little bit more of a struggle, and the second half should start to free up a little bit. I don't know that the tariffs have fully settled across all brands. There's still movement on pricing, and, and it's yet to be known what incentives will look like in the future. We're optimistic about our parts and service business, and, and where that's headed. We've had a lot of distractions in 2025 between, you know, the acquisition and rolling out Tekion. Now, having a third of the company on Tekion and the rest of the company being rolled out by the fall, we think that's gonna really bode well for us, not only from a cost perspective, but an efficiency perspective going into 2027. We will have some headwind in 2026, paying for both DMSs.
David Hult: I would say the first half will probably be a little bit more of a struggle, and the second half should start to free up a little bit. I don't know that the tariffs have fully settled across all brands. There's still movement on pricing, and, and it's yet to be known what incentives will look like in the future. We're optimistic about our parts and service business, and, and where that's headed. We've had a lot of distractions in 2025 between, you know, the acquisition and rolling out Tekion. Now, having a third of the company on Tekion and the rest of the company being rolled out by the fall, we think that's gonna really bode well for us, not only from a cost perspective, but an efficiency perspective going into 2027.
Speaker #3: And we've even had challenging weather in the Southeast as well. I would say the first half will probably be a little bit more of a struggle, and the second half should start to free up a little. I don't know that the tariffs fully have across all brands.
Speaker #3: There's movement on still and and pricing it's yet to known what incentives will look like in the future optimistic about our service business and where that's headed .
Speaker #3: . We've distractions in 25 between , you know , the had a lot of acquisition and rolling out tech on now company on having a third of the tachyon and the rest of the company being rolled out by fall .
David Hult: We will have some headwind in 2026, paying for both DMSs. As you can imagine, when you transition a store into a new DMS, other than the excessive cost for a period of time, there's a transition getting everyone comfortable with the software and efficient on it. So we think all this blocking and tackling and the heavy lifting we're doing is gonna pay dividends going into the future. For us, we probably got, you know, 5, 6, 7 months of bumpiness and distraction of going through all of it, but we know the outcome will be very beneficial for Asbury.
Speaker #3: We think that's going the to really bode well for us , not a cost only from efficiency perspective , but perspective . Going an we will into 27 , have some headwind in 26 , paying for both DMs .
David Hult: As you can imagine, when you transition a store into a new DMS, other than the excessive cost for a period of time, there's a transition getting everyone comfortable with the software and efficient on it. So we think all this blocking and tackling and the heavy lifting we're doing is gonna pay dividends going into the future. For us, we probably got, you know, 5, 6, 7 months of bumpiness and distraction of going through all of it, but we know the outcome will be very beneficial for Asbury.
Speaker #3: And as you can imagine , when you when you transition a store DMs other cost for a period of excessive time , than the there's a everyone transition getting comfortable at the software and efficient on it .
Speaker #3: So we think all this blocking and tackling and the heavy lifting we're doing is going to pay dividends going into the future for us .
Speaker #3: We probably got , five , six , you know , seven months of bumpiness and of going through all of it . But distraction very outcome will be beneficial for the we know Asbury .
Jeff Licht: And then maybe just a quick... Hi, Daniela. Thank you.
Jeff Lick: And then maybe just a quick... Hi, Daniela. Thank you.
Michael Welch: No, go ahead. Go ahead, Jeff. Sorry.
Dan Clara: No, go ahead. Go ahead, Jeff. Sorry.
Jeff Licht: No, go ahead. No, go ahead.
Jeff Lick: No, go ahead. No, go ahead.
Michael Welch: I was just gonna add to David's comments on when you think about from a used car standpoint what we're expecting in the second half with lease turnings coming in. You can see the results of our renewed strategy and execution by the team.
Dan Clara: I was just gonna add to David's comments on when you think about from a used car standpoint what we're expecting in the second half with lease turnings coming in. You can see the results of our renewed strategy and execution by the team.... so we are very confident that it is working, and that has paved the the way, for lack of a better term, to when that influx of inventory coming in, that we can pull that lever and execute accordingly, while still remaining disciplined to maximizing the gross profit per unit.
Speaker #6: Maybe just a quick hi , Thank you .
Speaker #6: Daniel .
Speaker #4: Go Go ahead . Jeff .
Speaker #6: No . Go ahead . No
Speaker #6: . just going
Speaker #4: I was to David's on comments the you think when from a used car standpoint , what we're expecting in the second half with lease earnings coming in , you can see the results of our renewed execution by the strategy and team .
Dan Clara: ... so we are very confident that it is working, and that has paved the the way, for lack of a better term, to when that influx of inventory coming in, that we can pull that lever and execute accordingly, while still remaining disciplined to maximizing the gross profit per unit.
Speaker #4: So we are very confident that it is working, and that has paved the way, for lack of a better term, to when that influx of inventory comes in, we can pull that lever and execute accordingly.
Jeff Licht: And then just a quick follow-up, I mean, because your, you know, your GPUs are still, you know, north of that 2,500 to 3,000 kind of settling range you've talked about. I guess, where do you see, you know—let's say, you get to the middle of that range, 2,750. Where does that come from? How does that decline in GPU manifest itself? Is that more inventory, you know, finally getting 3 million units on the ground? Is that because Toyota gives a little back? I'm just curious, you know, what—because you guys have been pretty steadfast to that 2,500 to 3,000 mark. I'm just curious, where do you see that further adjustment to come?
Jeff Lick: And then just a quick follow-up, I mean, because your, you know, your GPUs are still, you know, north of that 2,500 to 3,000 kind of settling range you've talked about. I guess, where do you see, you know—let's say, you get to the middle of that range, 2,750. Where does that come from? How does that decline in GPU manifest itself? Is that more inventory, you know, finally getting 3 million units on the ground? Is that because Toyota gives a little back? I'm just curious, you know, what—because you guys have been pretty steadfast to that 2,500 to 3,000 mark. I'm just curious, where do you see that further adjustment to come?
Speaker #4: While still remaining coming in maximizing the gross unit per . profit
Speaker #6: then just a quick follow up , And I mean , because GPUs your are still , you know , north of that 2500 to 3000 kind of settling range .
Speaker #6: talked You've about , I guess , where do you see let's say , you know , you get into the middle range 2750 .
Speaker #6: Where does that come from ? How does that decline in GPU manifest itself ? Is that more inventory you'll in finally get 3 million units on the ground ?
Speaker #6: Is that because Toyota gives a little back? I'm just curious, because you guys have been pretty steadfast to that $2,500 to $3,000.
David Hult: It's a great question, Jeff. You know, I think as long as the inventory stays somewhat balanced the way they are, we kind of look at our brand mix, and the way the incentives have been tracking. With the divestitures we've had and the several that are coming, you know, our percentage of luxury goes up, you know, from 32% to probably about 36%, which benefits us overall. You know, I would say if the SAR was going to stretch and the inventories were going to grow, that puts the most pressure on margins. But where most OEMs are predicting a flat or a little bit backwards year, we don't anticipate sitting on a high day supply.
David Hult: It's a great question, Jeff. You know, I think as long as the inventory stays somewhat balanced the way they are, we kind of look at our brand mix, and the way the incentives have been tracking. With the divestitures we've had and the several that are coming, you know, our percentage of luxury goes up, you know, from 32% to probably about 36%, which benefits us overall. You know, I would say if the SAR was going to stretch and the inventories were going to grow, that puts the most pressure on margins. But where most OEMs are predicting a flat or a little bit backwards year, we don't anticipate sitting on a high day supply.
Speaker #6: Mark . I'm just where do you see curious , that further to ?
Speaker #6: come It's a
Speaker #3: question , great Jeff know , . You I as think long as as the inventory stays somewhat balanced the way they are , we kind of look at our brand mix and the way the been incentives have tracking with the we've divestitures had in several that are coming .
Speaker #3: You know , our percentage of luxury goes to from 32 up , you know , about which benefits us 36% , . You know , I would say if the SA was going to stretch in the inventories were going to grow , puts the that pressure most on margins overall we're most OEMs are or a flat predicting a little bit backwards We don't year .
David Hult: Now, the winter months, you tend to sit on a high day supply because you're coming off a busy Q4 and things slow down, but that should normalize over the next quarter or two. I think we're conservative in our approach, when we give estimates of 25 to 3,000 based upon our brand mix, but it's also difficult to predict the future. I think the biggest thing that's going to govern the volume this year is what we've all been talking about, it's the high cost of sale. You know, for new, we're over $52,000 in the quarter, and you know, that's a stretch. So when people are stretching into purchasing, it tends to put pressure on margins as well to try and consummate the deal. Dan, I don't know if you have anything you want to add.
David Hult: Now, the winter months, you tend to sit on a high day supply because you're coming off a busy Q4 and things slow down, but that should normalize over the next quarter or two. I think we're conservative in our approach, when we give estimates of 25 to 3,000 based upon our brand mix, but it's also difficult to predict the future. I think the biggest thing that's going to govern the volume this year is what we've all been talking about, it's the high cost of sale. You know, for new, we're over $52,000 in the quarter, and you know, that's a stretch. So when people are stretching into purchasing, it tends to put pressure on margins as well to try and consummate the deal. Dan, I don't know if you have anything you want to add.
Speaker #3: sitting high day on a now , the winter months , you tend to sit on a high day supply coming off busy things slow fourth quarter and a down .
Speaker #3: But that should normalize over the next quarter or two. I think we're conservative in our approach when we give estimates at 2,500 to 3,000 based upon our mix and brand, but it's also difficult to predict the future.
Speaker #3: I think that's going biggest thing to the govern the volume this year is what we've all been talking about . It's the high of sale .
Speaker #3: cost You know , for new . We're over 52,000 in the quarter . And , you know , that's a stretch . So when people are stretching into purchasing tends to pressure on , it as well to deal consummate the put want to anything you .
Speaker #3: cost You know , for new . We're over 52,000 in the quarter . And , you know , that's a stretch . So when people are stretching into purchasing tends to pressure on , it as well to deal consummate the put want to anything you . know if you have And I add
Dan Clara: No, nothing to add. Thanks.
Dan Clara: No, nothing to add. Thanks.
Jeff Licht: Well, thank you for taking my question, and best of luck in 2026.
Jeff Lick: Well, thank you for taking my question, and best of luck in 2026.
David Hult: Thank you, Jeff.
David Hult: Thank you, Jeff.
Speaker #3: .
Speaker #4: , nothing to add . Thank No you
Speaker #4: .
Speaker #6: Well , thank you for question taking my and best of luck in 2026 .
Operator: Our next question is from Rajat Gupta with J.P. Morgan.
Operator: Our next question is from Rajat Gupta with J.P. Morgan.
Speaker #3: Thank you Jeff .
Rajat Gupta: Hey, thanks for taking the question. You know, just wanted to follow up on parts and service. You know, the customer pay growth was a little weaker than we would have expected. I understand the warranty comps. I know you mentioned, like, it had a tough comp, but I also felt Q4 of 2024 had some easy compares from Q4 of 2023 because of the DMS transition. So I'm curious if the customer pay number is satisfactory to you. I mean, is there more opportunity there? Any sense you can give us around the outlook for 2026? I have a quick follow-up. Thanks.
Rajat Gupta: Hey, thanks for taking the question. You know, just wanted to follow up on parts and service. You know, the customer pay growth was a little weaker than we would have expected. I understand the warranty comps. I know you mentioned, like, it had a tough comp, but I also felt Q4 of 2024 had some easy compares from Q4 of 2023 because of the DMS transition. So I'm curious if the customer pay number is satisfactory to you. I mean, is there more opportunity there? Any sense you can give us around the outlook for 2026? I have a quick follow-up. Thanks.
Speaker #1: Our next question is Rajat Gupta with J.P. Morgan.
Speaker #7: Hey , thanks for taking the question . Just wanted to on parts and follow up service . You know , the pay growth customer was a little was weaker than we would have expected .
Speaker #7: I understand the warranty comes . I know you mentioned had a tough comp , but I also fourth quarter felt of 24 had some it easy comparisons from fourth quarter of the DMs I'm curious transition .
Speaker #7: 23 because of if the customer So pay number is satisfactory to you . I mean , is there more opportunity there ? Any sense you can give us around the outlook for 26 ?
Dan Clara: Yes. Good morning, Rajat. This is Dan. No, we're not satisfied with the customer pay growth. We just as it is with used cars, we have a renewed strategy in fixed operations that we feel very confident in executing. When you look at the age of the car on the road, and then you look at all the technology enhancement that is coming with the new product, we know, and we're ready to take advantage of that part of the market. So our forecast remains the same as it's been in the mid-single digits in customer pay, like we have been talking about over the last few quarters.
Dan Clara: Yes. Good morning, Rajat. This is Dan. No, we're not satisfied with the customer pay growth. We just as it is with used cars, we have a renewed strategy in fixed operations that we feel very confident in executing. When you look at the age of the car on the road, and then you look at all the technology enhancement that is coming with the new product, we know, and we're ready to take advantage of that part of the market. So our forecast remains the same as it's been in the mid-single digits in customer pay, like we have been talking about over the last few quarters.
Speaker #7: Have a quick follow-up. Thanks.
Speaker #4: Good morning . This is
Speaker #4: Dan . we're No , not satisfied with the with the customer pay growth . . Yeah . just as it is used cars .
Speaker #4: We have a with renewed strategy in operations that very we feel confident in executing there . When you look at the age of the of on the the car road and the look at all then you technology enhancement that is coming with the new product know , and we're to , we ready to take advantage of part of the that market .
Speaker #4: So our forecast remains the same—been in the digits in customer pay, like we have been mid-single talking about over the last few quarters.
David Hult: Rajat, this is David. I would add, you know, in previous quarters, and I think it's the case for our peers, but I'm not confident. You know, the growth in parts and service has been more top-heavy on dollars than actual cars coming through the service drive or repair orders.
David Hult: Rajat, this is David. I would add, you know, in previous quarters, and I think it's the case for our peers, but I'm not confident. You know, the growth in parts and service has been more top-heavy on dollars than actual cars coming through the service drive or repair orders.
Speaker #4: .
Speaker #3: is David . I would Rajat , this add previous in quarters and I think it's a case for our peers , but I'm not the confident .
Speaker #3: You know , growth in parts and service has more top heavy on than actual cars coming through the dollars service driver been repair orders .
Rajat Gupta: Right.
Rajat Gupta: Right.
David Hult: And I made the comment in my remarks. The traffic counts were okay and normal for us, and based upon that, we should have been higher on the dollars. We saw less dollars being spent per the consumer. So it wasn't so much the traffic that took a hit as much as it did what the consumers were willing to spend. And as you can see, because I think we have it in our IR deck, you know, when we talk about, you know, how much we're generating per ticket, you know, a combustible engine is over $550. You know, these, these numbers keep going up, which is great, but it also puts a limit a little bit on customers. But I was shocked to see the pullback in October, November with the dollars being spent. It rebounded in December.
David Hult: And I made the comment in my remarks. The traffic counts were okay and normal for us, and based upon that, we should have been higher on the dollars. We saw less dollars being spent per the consumer. So it wasn't so much the traffic that took a hit as much as it did what the consumers were willing to spend. And as you can see, because I think we have it in our IR deck, you know, when we talk about, you know, how much we're generating per ticket, you know, a combustible engine is over $550. You know, these, these numbers keep going up, which is great, but it also puts a limit a little bit on customers. But I was shocked to see the pullback in October, November with the dollars being spent. It rebounded in December.
Speaker #3: I made the And comment in my remarks , the traffic counts were okay normal for and . And us based upon that , we should have been higher on the dollars .
Speaker #3: We saw less dollars being spent were per the consumer . So it wasn't so much the traffic that took a hit as much as it did what the consumers were willing to spend .
Speaker #3: you can And as see , because I think we have it in our deck , you know , when we talk about , you know , how much we're generating per ticket , you know , Combustible engine is over $550 , you know , these these numbers keep going up , which is great .
Speaker #3: But it also puts a limit , a little bit on customers . But I was shocked to see the pullback in and November with October the dollars being spent .
David Hult: In January, starting off, the dollars are pretty good again. So, I can't explain what happened in October and November. The biggest headwind we have in January is the traffic because of all the weather.
David Hult: In January, starting off, the dollars are pretty good again. So, I can't explain what happened in October and November. The biggest headwind we have in January is the traffic because of all the weather.
Speaker #3: It rebounded in December and January, starting off the R dollars pretty good again, so I can't explain what October and November happened.
Rajat Gupta: Got it. Any preview, you know, on the renewed strategy for parts and services that you can give us going forward?
Rajat Gupta: Got it. Any preview, you know, on the renewed strategy for parts and services that you can give us going forward?
Speaker #3: The in biggest January headwind is the traffic . Because the of all weather we have .
Speaker #7: Got any preview ? You on the renewed strategy for parking us can give going services that you forward ?
David Hult: You know, I would tell you, Rajat, the biggest thing is there's a massive difference between our current DMS and Tekion, and there's a learning curve there. And you know, our original stores that went on it a year ago are performing better than most of our stores in our company because of the efficiencies and benefits of the software. But when these stores transition to the new software, and you know, now we're up to over 40 stores, it takes them a few months. We actually become less efficient for the first couple of months as they're trying to get used to the software and work out the kinks. So we'll finish the Tekion rollout late in the fall.
David Hult: You know, I would tell you, Rajat, the biggest thing is there's a massive difference between our current DMS and Tekion, and there's a learning curve there. And you know, our original stores that went on it a year ago are performing better than most of our stores in our company because of the efficiencies and benefits of the software. But when these stores transition to the new software, and you know, now we're up to over 40 stores, it takes them a few months. We actually become less efficient for the first couple of months as they're trying to get used to the software and work out the kinks. So we'll finish the Tekion rollout late in the fall.
Speaker #3: You know, I would tell you the biggest thing is there's a massive difference between our current DMs and Tachyon, and there's a learning curve there.
Speaker #3: And , you know , our original stores that went on it a year ago are performing better than of our stores and the because of efficiencies and benefits of the software .
Speaker #3: But when these company stores are transitioning to the new software, and, you know, now we're up to over 40 stores, it takes them a few months.
Speaker #3: We actually are most efficient for the first couple months as they're trying to get used to the software and work out the kinks. So, we'll finish the rollout year on in the fall, late.
David Hult: I look at 27 as a really efficient, productive year for us, that you'll notice in both our production with Tekion, but our cost control with Tekion as well.
David Hult: I look at 27 as a really efficient, productive year for us, that you'll notice in both our production with Tekion, but our cost control with Tekion as well.
Speaker #3: Look at '27 as a productive, efficient year for us—that shows up in both our production with Tachyon, but your cost yield really with Tachyon as well.
Rajat Gupta: Understood. Understood. That's helpful. And maybe just a follow-up question, you know, maybe for Mike around the leverage. Good to see the progress there. I believe you do have a few more divestitures in the pipeline, that you're looking to execute. You know, any update on that? And you know, how, how soon can you get to below 3 times? You know, is it earlier than 2026? You know, any timeline around that, that would be helpful. And then just related to that, how should we think about, you know, you know, free cash flow deployment, priorities as well in 2026? Thanks.
Rajat Gupta: Understood. Understood. That's helpful. And maybe just a follow-up question, you know, maybe for Mike around the leverage. Good to see the progress there. I believe you do have a few more divestitures in the pipeline, that you're looking to execute. You know, any update on that? And you know, how, how soon can you get to below 3 times? You know, is it earlier than 2026? You know, any timeline around that, that would be helpful. And then just related to that, how should we think about, you know, you know, free cash flow deployment, priorities as well in 2026? Thanks.
Speaker #7: Understood , understood . That's helpful . And maybe just a follow up question . You know me from Mike around the leverage to see the progress there .
Speaker #7: believe you do I have a few more divestitures in the pipeline that you're looking to execute . Any update on that . ? And how Good soon can you get below three times , you know , earlier than 26 ?
Speaker #7: is it Any timeline that would be around helpful . And just then related to that , how should we think about , you know , you know , free cash flow priorities as deployment well .
Michael Welch: Yeah. So from a you know, we talked about the nine divestitures that we have out there, that will close in Q1, and that will free up some cash to get our leverage down, some more. So we think, you know, kind of by the summer, we'll be below three times. The only caveat to that would be, you know, with where our share price is, we think there's some opportunities to, you know, deploy some cash for share buybacks. And so our goal is still to get below three times by the end of the year. And if we can do that and buy some shares back along the way, we'll kind of balance that as we go, throughout the year.
Michael Welch: Yeah. So from a you know, we talked about the nine divestitures that we have out there, that will close in Q1, and that will free up some cash to get our leverage down, some more. So we think, you know, kind of by the summer, we'll be below three times. The only caveat to that would be, you know, with where our share price is, we think there's some opportunities to, you know, deploy some cash for share buybacks. And so our goal is still to get below three times by the end of the year. And if we can do that and buy some shares back along the way, we'll kind of balance that as we go, throughout the year.
Speaker #7: In 26 .
Speaker #5: Yeah . Thanks . So from a you know , we talked about the divestitures that we have out there close in that will first quarter .
Speaker #5: And free up some that will our leverage cash to get some more . So we think about the summer will be three times .
Speaker #5: The only caveat to that would be, you know, with where our share price is, we think there's some opportunities to deploy some cash for share buybacks.
Speaker #5: And so our goal is still to get below three times by the end of the year . we can And if that and buy some shares back along way , the we'll kind of as we go throughout the year .
Michael Welch: But if we just took the cash from the disposals and the Free Cash Flow and put that toward the leverage, we'd be able to get there by kind of the summer of this year.
Michael Welch: But if we just took the cash from the disposals and the Free Cash Flow and put that toward the leverage, we'd be able to get there by kind of the summer of this year.
Speaker #5: But just took the cash from the disposals and the free cash flow and put that toward the leverage , we'd be able to get there by the summer of this year .
Rajat Gupta: Understood. Great. Thanks for all the color, and good luck, and, you know, best of luck, David, Dan. Thanks.
Rajat Gupta: Understood. Great. Thanks for all the color, and good luck, and, you know, best of luck, David, Dan. Thanks.
Michael Welch: Thank you, Rajat.
David Hult: Thank you, Rajat.
Speaker #7: Understood . Great . Thanks for all the color and good and best of luck . David . Dan , thanks .
Operator: Our next question is from Glenn Chin with Seaport Research Partners.
Operator: Our next question is from Glenn Chin with Seaport Research Partners.
Speaker #7: luck Thank
Speaker #3: you . Richard .
Glenn Chin: Good morning. Thanks, folks. Can you just clarify for us the path forward for Tekion? How many more stores you have to transition? It sounds like it'll be done by fall of this year. And then, to what extent you will incur these double expenses for running two DMSs simultaneously?
Glenn Chin: Good morning. Thanks, folks. Can you just clarify for us the path forward for Tekion? How many more stores you have to transition? It sounds like it'll be done by fall of this year. And then, to what extent you will incur these double expenses for running two DMSs simultaneously?
Speaker #1: Our next question is from Glenn Chen with Research Seaport.
Speaker #1: Our next question is from Glenn Chen with Research Partners
Speaker #8: Good morning . Thanks , folks . Can you just clarify the forward path for tachyon ? How many more stories do you have to transition ?
Speaker #8: It sounds like it'll be done by for us fall of then to what this year . And are extent you ? Will incur double expenses these for running two dmss simultaneously ?
Michael Welch: Good morning, Glenn. This is Dan. So we have 125 more stores to roll out. We have 8 more going out, being rolled out this weekend and then another 8 following the following week. But, you know, like David stated, we'll be done by the Q3 of this year. As far as the expense, I'll let Michael give clarity on that. Yeah, so once we, you know, roll out a store, you have to kind of, you know... You can't cancel it right away. You have to kind of roll it out, make sure everything's working, all the data comes across, and then we can go cancel the other products. So there's a couple months of duplicated cost in there when we roll it out.
Dan Clara: Good morning, Glenn. This is Dan. So we have 125 more stores to roll out. We have 8 more going out, being rolled out this weekend and then another 8 following the following week. But, you know, like David stated, we'll be done by the Q3 of this year. As far as the expense, I'll let Michael give clarity on that.
Speaker #4: Good morning . Glenn , this is Dan . So we have 125 more stores to roll out . We about have eight more going out , being rolled out weekend , and this then another eight following the week .
Speaker #4: But you know , like following David stated , we'll be done by the by the of year this . As far as the the expense , I'll let Michael give clarity on .
Michael Welch: Yeah, so once we, you know, roll out a store, you have to kind of, you know... You can't cancel it right away. You have to kind of roll it out, make sure everything's working, all the data comes across, and then we can go cancel the other products. So there's a couple months of duplicated cost in there when we roll it out.
Speaker #4: that
Speaker #5: So so once we roll out a store , you have to kind of , you know can't cancel it You have to right away .
Speaker #5: kind of roll it out , , you make sure everything's working , all the data comes across , and then we can go cancel the other products .
Michael Welch: So the first half of this year, you'll see kind of a hit on SG&A for this duplicated cost, plus the implementation fees. By the time we get to kind of mid-year, we'll roll over, and the savings from Tekion will more than offset the duplicated costs. So it's, you know, I'll call it a front half hit to SG&A, and then a back-half benefit to SG&A. And then to David's point, when we get to 2027, the efficiencies that we're gonna see from it, you'll start seeing those as well. So it's, you know, that's kind of the pace is duplicate costs first half, savings from the software in the second half, and then those efficiencies will come in during 2027.
Michael Welch: So the first half of this year, you'll see kind of a hit on SG&A for this duplicated cost, plus the implementation fees. By the time we get to kind of mid-year, we'll roll over, and the savings from Tekion will more than offset the duplicated costs. So it's, you know, I'll call it a front half hit to SG&A, and then a back-half benefit to SG&A. And then to David's point, when we get to 2027, the efficiencies that we're gonna see from it, you'll start seeing those as well. So it's, you know, that's kind of the pace is duplicate costs first half, savings from the software in the second half, and then those efficiencies will come in during 2027.
Speaker #5: So there's a months of duplicated couple of in there . When we roll it out . So the you'll see first half of this year kind of SGA for this duplicated a hit cost .
Speaker #5: On Plus, the implementation fees get to... By the time we get to mid-year, we'll roll over, and the Tachyon will, more than the savings from, offset the costs.
Speaker #5: So it's , you know , I'll call it duplicated cost SGA and then a back half benefit to of SGA . And then to David's point , we get to 27 .
Speaker #5: efficiencies that we're going to see from it . You'll start seeing well . So it's you know , that's kind of the pace is duplicating costs .
Speaker #5: First half of savings from the software. The second half and efficiencies will come in, then those during 2027.
Glenn Chin: Okay. But then, Michael, to clarify, it looks like you adjusted it out for the dual expense. You adjusted it out this quarter?
Glenn Chin: Okay. But then, Michael, to clarify, it looks like you adjusted it out for the dual expense. You adjusted it out this quarter?
Speaker #8: Okay . But then Michael to
Michael Welch: No.
Michael Welch: No.
Glenn Chin: I guess-
Glenn Chin: I guess-
Michael Welch: We only adjusted out the implementation costs, the cost of having to pay to do the implementations. And then also in Q3 and Q4 of 2025, because of the SOX requirements from internal controls around the Tekion software, we had a pretty heavy lift on just, you know, I'll call it auditors and all those type of, you know, IT folks, third parties, to help us get over the hump with the initial year of SOX compliance on Tekion. So those, those Tekion costs is heavy, heavy SOX control and then the implementation cost. We have not been adjusting out the duplicated cost of the software.
Michael Welch: We only adjusted out the implementation costs, the cost of having to pay to do the implementations. And then also in Q3 and Q4 of 2025, because of the SOX requirements from internal controls around the Tekion software, we had a pretty heavy lift on just, you know, I'll call it auditors and all those type of, you know, IT folks, third parties, to help us get over the hump with the initial year of SOX compliance on Tekion. So those, those Tekion costs is heavy, heavy SOX control and then the implementation cost. We have not been adjusting out the duplicated cost of the software.
Speaker #8: adjusted it out the the dual adjusted it expansion . out . You This quarter . I
Speaker #5: only
Speaker #5: out the implementation . We only adjust guess . We out the implementation costs . The cost of having to pay to do the implementations and then also in third and quarter of 25 , because of the requirements internal controls around the from tech .
Speaker #5: Software , we had a heavy pretty lift on you just , it those type of , auditors know , , folks . it Third parties to over the with the initial year of compliance on tachyon .
Speaker #5: Sox and all those those know , I'll call The Sox Heavy So . And then control cost . We have not been adjusting out the the duplicated cost of the software .
Glenn Chin: Okay. So it sounds like we should expect it to hit even adjusted numbers in the first half. And can you quantify for us how much that might be?
Glenn Chin: Okay. So it sounds like we should expect it to hit even adjusted numbers in the first half. And can you quantify for us how much that might be?
Speaker #8: Okay . So it sounds like should we to expect it hit
Speaker #8: even numbers in the adjusted quantify for us how much that might ?
Michael Welch: We have not quantified that number, but we can, we'll work on that for Q1 to give you guys an insight into Q1. It wasn't that material for Q4 because we didn't roll out a ton of stores, and we only rolled them out at the very end of December. But in Q1, we'll kind of give you how much that, you know, how much of an impact that was.
Michael Welch: We have not quantified that number, but we can, we'll work on that for Q1 to give you guys an insight into Q1. It wasn't that material for Q4 because we didn't roll out a ton of stores, and we only rolled them out at the very end of December. But in Q1, we'll kind of give you how much that, you know, how much of an impact that was.
Speaker #5: Well , we have not quantified that number , we
Speaker #5: First quarter, to give you guys an insight into the first one, that wasn’t that material for fourth quarter because we rolled out a ton of stores, and we only at the very end rolled them out in December.
Glenn Chin: Okay. Yeah, that would be helpful. Thank you. Okay, and David, will you be on future earnings calls?
Glenn Chin: Okay. Yeah, that would be helpful. Thank you. Okay, and David, will you be on future earnings calls?
Speaker #5: give you how kind of quarter , we'll much that , you know , of an implementation impact that .
Speaker #5: was Okay . how much
Speaker #8: Yeah , that would helpful . Thank you be And . , will Okay . you be on David future earnings calls .
David Hult: You know, I think I'll be on the next earnings call, and that'll probably be it for me.
David Hult: You know, I think I'll be on the next earnings call, and that'll probably be it for me.
Glenn Chin: Okay, very good. Well, hope you're doing well there.
Glenn Chin: Okay, very good. Well, hope you're doing well there.
Speaker #3: think I I'll be on the next call . earnings And probably be me that'll okay .
David Hult: I appreciate it. Thank you.
David Hult: I appreciate it. Thank you.
Glenn Chin: All right. That's it for me. Thank you.
Glenn Chin: All right. That's it for me. Thank you.
Speaker #8: good . Well doing well , hope you're And I Very
Michael Welch: Thank you.
Operator: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our next question is from John Babcock with Barclays.
Operator: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our next question is from John Babcock with Barclays.
Speaker #3: appreciate it . .
Speaker #8: That's it for me. Thank you. Thank you. Right. All right. That's all.
Speaker #1: As a you'd like reminder , if to ask a question , please press keypad telephone Our next . is from John Babcock . Babcock Barclays question .
John Babcock: ... Thanks for taking my question. I did want to ask. I know it's still early in the Tekion rollout here, but with some of the first stores that were put on the system, are you starting to see benefits, or is it still too early to tell?
John Babcock: ... Thanks for taking my question. I did want to ask. I know it's still early in the Tekion rollout here, but with some of the first stores that were put on the system, are you starting to see benefits, or is it still too early to tell?
Speaker #9: Hi . Thanks for
Speaker #9: taking question . did want to I know I it's still ask . with tech rollout here , but with some of the on the first stores that were put are you starting to see benefits or still too early is it to tell
Dan Clara: Yeah. Good morning, John. This is Dan. Yeah, we had the first four stores where we rolled it out, they were here in Atlanta, and we are seeing the benefits from an efficiency standpoint, from a productivity standpoint, from a guest experience standpoint. And then, you know, you can also see the flexibility that it gives us because it is a cloud-based DMS. When you're talking about enhancing technology and AI in conjunction with our internal development team, you get rid of all the bolt-ons, and it's a lot easier to enhance the technology to improve the guest experience and efficiencies across the store. So yes, we are-
Dan Clara: Yeah. Good morning, John. This is Dan. Yeah, we had the first four stores where we rolled it out, they were here in Atlanta, and we are seeing the benefits from an efficiency standpoint, from a productivity standpoint, from a guest experience standpoint. And then, you know, you can also see the flexibility that it gives us because it is a cloud-based DMS. When you're talking about enhancing technology and AI in conjunction with our internal development team, you get rid of all the bolt-ons, and it's a lot easier to enhance the technology to improve the guest experience and efficiencies across the store. So yes, we are-
Speaker #9: ? Yeah
Speaker #4: the first we rolled we They were in in and we seeing the benefits from an standpoint from productivity standpoint , from a guest standpoint experience a .
Speaker #4: And Dan . But
Speaker #4: you know , then , can also you the flexibility that it gives see us is a because it based When you're DMs . about talking enhancing and in conjunction with development team , you all the our internal and it's a lot easier to get rid of technology , AI to experience .
David Hult: John, I'm sorry, Dan. John, one thing I would add, you know, every store we roll out, technicians don't like change. They hate the new software. It's a lot of key changes and difficult. But if you went back to the original four stores, they would tell you they wouldn't work at a store that didn't have Tekion. So it makes the employees more productive, increases the transparency between departments, and it also increases the transparency with consumers, which you can visually share with them. So there's a lot of benefits. There's cost savings for sure, but there's productivity benefits as well. You know, human behavior takes a little while to change and get used to a new software and new language, for lack of a better term.
David Hult: John, I'm sorry, Dan. John, one thing I would add, you know, every store we roll out, technicians don't like change. They hate the new software. It's a lot of key changes and difficult. But if you went back to the original four stores, they would tell you they wouldn't work at a store that didn't have Tekion. So it makes the employees more productive, increases the transparency between departments, and it also increases the transparency with consumers, which you can visually share with them. So there's a lot of benefits. There's cost savings for sure, but there's productivity benefits as well. You know, human behavior takes a little while to change and get used to a new software and new language, for lack of a better term.
Speaker #4: And improve the guest across the store . So yes , we are . efficiencies
Speaker #4: one .
Speaker #3: sorry . John ,
Speaker #3: one thing I would , you know add , every we store , technicians change . don't like They hate the new software . It's a key they And changes .
Speaker #3: it didn't have employees more productive . It transparency between . So departments increases the . it also with transparency consumers , which you can visually share with them .
Speaker #3: So there's a lot of benefits . There's cost savings for sure productivity benefits as well . You know , human behavior little while to takes a change and to a new software , a new language for lack of a early adopting stores that we .
David Hult: But the early adopting stores that we have are really running efficiently well on it. Costs are lower, productivity is up, which is everything we anticipated.
David Hult: But the early adopting stores that we have are really running efficiently well on it. Costs are lower, productivity is up, which is everything we anticipated.
John Babcock: Okay, thanks. And then just next question. I was wondering if you could talk about the, how, you know, just broadly, how the demand environment feels right now, both for new and used, if there's any discrepancy between the two. Just generally want to get a sense for what you're hearing from the dealerships.
John Babcock: Okay, thanks. And then just next question. I was wondering if you could talk about the, how, you know, just broadly, how the demand environment feels right now, both for new and used, if there's any discrepancy between the two. Just generally want to get a sense for what you're hearing from the dealerships.
Speaker #3: have are efficiently . Well , it . better on lower , up , is which is everything we .
Speaker #3: have are efficiently . Well , it . better on lower , up , is which is everything we anticipated
Speaker #9: . And then just I was next question . could talk wondering if you
Speaker #9: . And then just I was next question . could talk wondering if you about how , broadly how you know , the demand now , right both for feels new and two just want to get a sense for generally what you're hearing from the dealerships .
Dan Clara: Yeah, John, I'll start, and David can add if he wants to. I'll tell you, you know, for January, the beginning of January was good until we got hit by the weather. And so that, you know, that pullback that we saw October, November, was not there the first few weeks in January. But after the weather hit us, it impacted us pretty big because, you know, that storm came in through Texas, and it basically just followed our path of where we have stores all the way to the Northeast.
Dan Clara: Yeah, John, I'll start, and David can add if he wants to. I'll tell you, you know, for January, the beginning of January was good until we got hit by the weather. And so that, you know, that pullback that we saw October, November, was not there the first few weeks in January. But after the weather hit us, it impacted us pretty big because, you know, that storm came in through Texas, and it basically just followed our path of where we have stores all the way to the Northeast.
Speaker #4: , John ,
Speaker #4: start . And I'll David , can if he wants to , I'll tell you , you know , for for of January was good was , got hit by the beginning the that , you know , pullback that that we saw October , was not November first few weeks in there the January after the .
Speaker #4: hit us weather it impacted pretty us pretty big . Because you storm came in through know , that Texas and basically just followed our path of where where we have all the way stores to the northeast we .
John Babcock: Okay. Thanks for the call. That's all I have.
John Babcock: Okay. Thanks for the call. That's all I have.
Dan Clara: Thank you.
Dan Clara: Thank you.
Speaker #9: Okay . call . That's all I have .
Operator: Our next question is from Ryan Sigdell with Craig-
Operator: Our next question is from Ryan Sigdell with Craig-
Speaker #3: you .
Speaker #3: you .
Matthew Raab: Hey, great. Thanks. This is Matthew Robb on for Ryan. Just quick on TCA, it looks like the SAR assumptions were changed very slightly in 2026 and 2027, and then non-cash deferral was, you know, raised a little bit in, you know, through 2029. Just what drove that change? And just talk about where TCA stands today. Any color there would be great.
Matthew Raab: Hey, great. Thanks. This is Matthew Robb on for Ryan. Just quick on TCA, it looks like the SAR assumptions were changed very slightly in 2026 and 2027, and then non-cash deferral was, you know, raised a little bit in, you know, through 2029. Just what drove that change? And just talk about where TCA stands today. Any color there would be great.
Speaker #1: next question is from Our Ryan with Craig . . Hi
Speaker #10: Great . Thanks . This is Matthew Rob on for on for Ryan . Just quick on TCA . It looks like the SA assumptions were changed very slightly in 27 .
Speaker #10: And the non-cash 26 and deferral you bit in , you know , raised a little through what what drove that Thank
Michael Welch: Yeah, so on that one, we just looked at the, you know, third-party, kind of different, you know, your guys' assessments and the other third-party providers out there for their SAR projections. And, you know, most of the people were coming up, you know, 15.8, kind of 16.2, and we originally had that forecast in there based on those third parties at 15.7. So we just bumped it a little bit to 15.9 to reflect kind of the additional color out there from the third parties. And also the, you know, that's, that's what we use to kind of base our budget off of, for 2026 is that 15.9 number. So small adjustment there, just as kind of SAR projections came up a little bit during Q4.
Michael Welch: Yeah, so on that one, we just looked at the, you know, third-party, kind of different, you know, your guys' assessments and the other third-party providers out there for their SAR projections. And, you know, most of the people were coming up, you know, 15.8, kind of 16.2, and we originally had that forecast in there based on those third parties at 15.7. So we just bumped it a little bit to 15.9 to reflect kind of the additional color out there from the third parties. And also the, you know, that's, that's what we use to kind of base our budget off of, for 2026 is that 15.9 number. So small adjustment there, just as kind of SAR projections came up a little bit during Q4.
Speaker #10: And Hey . Okay ,
Speaker #10: Any color there would there's any Thanks for the be great .
Speaker #10: Any color
Speaker #5: So just looked on that one , we at the , you know , it third party kind of different . You know , guys's your
Speaker #5: assessments and But the Yeah third party providers out there for their SA other projections and of the people coming up , were you know , , eight , kind 15 of 16 , And we two .
Speaker #5: you know , most in there based on forecast seven . parties at 15 those third So we just bumped it a little 15 nine to reflect kind the bit to additional color out there productivity from the And just Yeah .
Speaker #5: of going to on Our roll them out then Chambers fourth quarter . will roll rollout on and on them out TCA . sometime to So summer probably this complete the rollout the .
Michael Welch: And the TCA, you know, we talked about it on the call earlier in our comments. Our last platform to roll out is Herb Chambers. We're going to roll them out on Tekion, and then following the Tekion rollout, we'll roll them out on TCA, so sometime this, you know, late summer, probably. And that will complete the rollout to all the stores, and then, you know, we'll be done with the kind of TCA rollout side of it.
Michael Welch: And the TCA, you know, we talked about it on the call earlier in our comments. Our last platform to roll out is Herb Chambers. We're going to roll them out on Tekion, and then following the Tekion rollout, we'll roll them out on TCA, so sometime this, you know, late summer, probably. And that will complete the rollout to all the stores, and then, you know, we'll be done with the kind of TCA rollout side of it.
Speaker #5: adjustment there . Just as kind of for SA came up a little projections bit during the And the TCA you know we talked about it on the earlier in our comments .
Matthew Raab: Understood. Thank you very much.
Matthew Raab: Understood. Thank you very much.
Speaker #5: stores to all . And we'll be done with kind of TCA rollout then it .
Operator: Our next question is from Daniela Hangen with Morgan Stanley.
Operator: Our next question is from Daniela Hangen with Morgan Stanley.
Speaker #10: you very much .
Daniela Hangen: Hi, thanks for taking the question. So, kind of on that point of adjusting SAR forecasts, we also saw the used. You made a comment about supply remains tight. What kind of assumptions are you baking in on affordability, what the consumer is facing this year, consumer credit availability, and how does that flow through into used? We definitely saw stronger used margin, and then a bit weaker on the volume side. So how does that play out into 2026 in your views?
Daniela Hangen: Hi, thanks for taking the question. So, kind of on that point of adjusting SAR forecasts, we also saw the used. You made a comment about supply remains tight. What kind of assumptions are you baking in on affordability, what the consumer is facing this year, consumer credit availability, and how does that flow through into used? We definitely saw stronger used margin, and then a bit weaker on the volume side. So how does that play out into 2026 in your views?
Speaker #1: question is from Daniella with Morgan Stanley Hagan
Speaker #1: .
Speaker #11: Hi . company
Speaker #11: taking the question . So kind of Thanks for on that of adjusting SA also we saw that used you made a comment about forecasts , tight remains .
Speaker #11: point Thank
Speaker #11: How
Speaker #11: into used ? We into definitely saw stronger used margin bit weaker on the volume side . So out how does that play into into 26 in your views .
Dan Clara: Yeah, Daniela, good morning. This is Dan. You know, we continue to stick to our strategy of not chasing volume and maximizing gross profit. There's several items that we have been executing on, really limiting the number of acquisitions through the auction and improving the number of cars that we take through the trades or that we purchase directly from our guests. And that is working well. That's where you see how we're maximizing the PBRs and the impact that it had in Q4. There, you know, the average cost of our used car being over $30,000 is definitely something that we're focused to bring down because we know that the lower the cost of sale, the faster that inventory turns.
Dan Clara: Yeah, Daniela, good morning. This is Dan. You know, we continue to stick to our strategy of not chasing volume and maximizing gross profit. There's several items that we have been executing on, really limiting the number of acquisitions through the auction and improving the number of cars that we take through the trades or that we purchase directly from our guests. And that is working well. That's where you see how we're maximizing the PBRs and the impact that it had in Q4. There, you know, the average cost of our used car being over $30,000 is definitely something that we're focused to bring down because we know that the lower the cost of sale, the faster that inventory turns.
Speaker #11: and then a
Speaker #4: morning . This is Dan . we You know Hello .
Speaker #4: strategy of Good chasing maximizing volume . gross And several . been executing There's items that we have on really number of of limiting the through the acquisitions auction .
Speaker #4: the number of cars that we take through the trades or purchase that we from from , from , from directly from our and that working guests well .
Speaker #4: That's Understood . And that will
Speaker #4: where you see how we're maximizing the and the impact that in the fourth quarter . it had There . the , the , the cost of our used car being over $30,000 is definitely that we're something bring we know down because that lower the the sale , the cost of faster that average turns and believe that the opportunity to as we do that we be on the second half of to the As Lee's and start to come in , we turn have better availability of flowing can really pull the then we lever the if of inventory is the lever there , we availability going inventory can pull after the still volume our strict discipline maintaining on the gross profit unit .
Dan Clara: We believe that the opportunity to do that is gonna be on the second half of the year. As lease turn-ins start to come in, we have better availability of inventory flowing, and then we can really pull the lever. If the availability of inventory is there, we can pull the lever of going after the volume while still maintaining our strict discipline on the gross profit per unit.
Dan Clara: We believe that the opportunity to do that is gonna be on the second half of the year. As lease turn-ins start to come in, we have better availability of inventory flowing, and then we can really pull the lever. If the availability of inventory is there, we can pull the lever of going after the volume while still maintaining our strict discipline on the gross profit per unit.
Daniela Hangen: Got it. Thank you. And then second is just on your EV outlook for the year. Obviously, there's a big deceleration following the removal of the tax credits. Do you believe your inventory levels here are sufficiently right-sized, or is there more room for that to play out?
Daniela Hangen: Got it. Thank you. And then second is just on your EV outlook for the year. Obviously, there's a big deceleration following the removal of the tax credits. Do you believe your inventory levels here are sufficiently right-sized, or is there more room for that to play out?
Speaker #11: Got it . Thank you . And and then
Speaker #11: Got it . of EV outlook for the year . big deceleration following the removal there's tax credits . of the Do believe your inventory levels here are sufficiently rightsized or is there room for that to more play out you ?
Dan Clara: I will tell you that overall, company-wide, I would like. I, I would say our EVs inventory is right-sized. We have pockets, specifically Colorado, where there was a high demand for EVs, that we have a little bit more inventory than I would like to. But overall, it's, it's been right-sized. You know, in Q4 2024, our EV sales were, like, 5% of the total sales, and in Q4 2025, it was about 2%. So and I would expect that to, to continue as we go into 2026.
Dan Clara: I will tell you that overall, company-wide, I would like. I, I would say our EVs inventory is right-sized. We have pockets, specifically Colorado, where there was a high demand for EVs, that we have a little bit more inventory than I would like to. But overall, it's, it's been right-sized. You know, in Q4 2024, our EV sales were, like, 5% of the total sales, and in Q4 2025, it was about 2%. So and I would expect that to, to continue as we go into 2026.
Speaker #4: tell Our next on Yeah . for stick to our
Speaker #4: I would that EVs wide , I overall is right size inventory
Speaker #4: was a high , but like to that we I would And , you know , right sized . in the fourth quarter of 24 , our EV sales were like total sales .
Speaker #4: in the fourth quarter of 25 , about 2% . So I and expect that it was would to 5% of the to continue as we go 26 .
Daniela Hangen: Thank you.
Daniela Hangen: Thank you.
Dan Clara: Thank you.
Dan Clara: Thank you.
Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to David Hult for any closing comments.
Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to David Hult for any closing comments.
Speaker #11: Thank you
Speaker #4: Thank you day closing
Speaker #4: .
Dan Clara: Thank you. We appreciate everyone joining our Q4 earnings call. We look forward to speaking with you after the Q1. Have a great day.
David Hult: Thank you. We appreciate everyone joining our Q4 earnings call. We look forward to speaking with you after the Q1. Have a great day.
Speaker #1: Thank you . There further questions at would like to turn the floor back this I comments .
Speaker #3: We you . appreciate everyone joining our fourth quarter earnings call . We look forward to with speaking
Speaker #3: you first quarter . after the Have a great . Thank .
Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
