Q3 2026 Asbury Automotive Group Inc Earnings Call

October 27, 2026

Operator: Greetings. Welcome to Asbury Automotive Group Q3 2026 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 during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Parin Patel, Vice President of Finance and Treasurer. Thank you. You may begin.

Operator: Greetings. Welcome to Asbury Automotive Group Q3 2026 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 during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Parin Patel, Vice President of Finance and Treasurer. Thank you. You may begin.

Speaker #1: Greetings. Welcome to ASBURY AUTOMOTIVE GROUP Q4, 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Speaker #1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Parin Patel, Vice President of Finance and Treasurer.

Speaker #1: Thank you. You may begin.

Parin Patel: 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 Q3 2026 earnings call. The press release detailing Asbury's Q3 results was issued earlier this morning and is posted on our website at investors.asburyauto.com. Participating with me today are Dan Clara, our President and Chief Executive Officer, and Michael Welch, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open up the call for questions and will be available later for any follow-up questions. Before we begin, we must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements then those which are historical in nature, which may include financial projections, forecast, and current expectations, each of which are subject to significant uncertainties.

Speaker #2: 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 Q4, 2026 earnings call.

Speaker #2: 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 Dan Clara, our president and chief executive officer, and Michael Welch, our senior vice president and chief financial officer.

Speaker #2: At the conclusion of our remarks, we will open up the call up for questions and will be available later for any follow-up questions. Before we begin, we must remind you that the discussion during the call today is likely to contain forward-looking statements.

Speaker #2: statements in those which are historical in nature which may include financial projections for and current expectations, each of which are subject to significant uncertainties.

Parin Patel: For information regarding certain of the risks that may cause actual results to differ materially from these statements, please see our filings with the SEC from time to time, including our Form 10-K for the year ended 31 December 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 in the SEC, 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. We have also posted an updated investor presentation on our website, investors.asburyauto.com, highlighting our Q3 results.

Speaker #2: For information regarding certain of the risks that may cause actual results to defer materially from these statements, please see our filings with the SEC from time to time including our form 10-K for the year ended December 31, 2025.

Speaker #2: 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 as may be discussed on this call.

Speaker #2: As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website.

Speaker #2: Comparisons will be made on a year-over-year basis unless we indicate otherwise. We have also posted an updated investor presentation on our website. Investors.asburyauto.com highlighting our third quarter results.

Parin Patel: Now it is my pleasure to hand over the call to our President and CEO, Dan Clara. Dan?

Speaker #2: And now it is my pleasure to hand over the call to our president and CEO, Dan Clara. Dan.

Dan Clara: Thank you, Pareen, and good morning, everyone. Welcome to our Q3 earnings call. I am pleased to share that we have reached a defining milestone. Every active Asbury store is now operating on Tekion, our single modern technology platform. After several years of planning and execution, we now run the entire company on one system, giving us a common foundation to operate more efficiently, make decisions faster, and serve our guests. This milestone is one part of a broader strategy anchored in our five pillars, which aligns the organization on operational excellence within the following five priorities: growing new vehicle market share, driving profitable volume growth in used vehicles, reestablishing consistent growth in customer pay gross profit, disciplined management of SG&A, and leveraging technology.

Speaker #3: Thank you, Parin. And good morning, everyone. Welcome to our third quarter earnings call. I am pleased to share that we have reached a defining milestone.

Speaker #3: Every active ASBURY store is now operating on Techyard, our single modern technology platform. After several years of planning and execution, we now run the entire company on one system, giving us a common foundation to operate more efficiently and make decisions faster and so this milestone is one part of a broader strategy, anchored in our five pillars which aligns the organization on operational excellence within the following five priorities: growing new vehicle market share, driving profitable volume growth in used vehicles, reestablishing consistent growth in customer pay gross profit, discipline management of SG&A, and leveraging technology.

Dan Clara: On the technology pillar, we converted 47 stores to Tekion in Q3, our largest single quarter ever, and completed the final 10 dealerships in October. Our longest tenured Tekion stores in Georgia and at Koons are giving us an early read on the platform's impact. In Q3, customer pay gross profit grew 7% versus the total company same-store being flat. Total fixed ops gross grew 5% versus total company same-store down 2%. Units per salesperson increased 4%, and gross profit per technician improved by 9%, both outpacing the rest of the company. As we have shared before, it takes time for team members to build the muscle memory that comes with a new platform before taking it to another level.

Speaker #3: On the technology pillar, we converted 47 stores to Techyard in the third quarter, our largest single quarter ever, and completed the final 10 dealerships in October.

Speaker #3: Our longest tenure Techyard stores in Georgia and at Koons are giving us an early read on the platform's impact. In the third quarter, customer pay gross profit grew 7% versus the total company's same store being flat.

Speaker #3: Total fixed ops gross grew 5% versus total company's same store down 2%. Units per salesperson increased 4% and gross profit per technician improved by 9%.

Speaker #3: Both outpacing the rest of the company. As we have shared before, it takes time for team members to build the muscle memory that comes with a new platform before taking it to another level.

Dan Clara: These stores have had the time, and we believe the same opportunity exists across the rest of our stores to improve efficiency, enhance the guest experience, and drive value for our shareholders. This was a major lift for our organization. Our store teams learned a new system while continuing to sell, service, and care for our guests every day. Our support teams worked alongside them at every step. I am grateful to them and to our partners at Tekion for getting us across the finish line. With the conversion behind us, the time and resources we dedicated to implementation can now go back into running and growing the business. Our teams have done the hard work. Now it is time to put the technology to work. It has been a busy few months for our teams.

Speaker #3: This stores have had the time and we believe the same opportunity exists across the rest of our stores to improve efficiency, enhance the guest experience, and drive value for our shareholders.

Speaker #3: This was a major lift for our organization. Our store teams learned a new system while continuing to sell service and care for our guests every day.

Speaker #3: And our support teams worked alongside them at every step. I am grateful to them and to our partners at Techyard for getting us across the finish line.

Speaker #3: With the conversion behind us, the time and resources we dedicated to implementation can now go back into running and growing the business. Our teams have done the hard work.

Speaker #3: Now it is time to put the technology to work. It has been a busy few months for our teams. In addition to converting 47 stores to Techyard in the third quarter, we also implemented TotalCare Auto to our 30-plus herb chamber stores.

Dan Clara: In addition to converting 47 stores to Tekion in Q3, we also implemented TotalCare Auto to our 30-plus Herb Chambers stores, which completed our TCA rollout to all of Asbury. Now I will speak to our operational results on a same-store basis, unless otherwise noted. I will note that our Herb Chambers stores are included in same-store results for August and September only. Starting with new vehicles. Our new vehicle business continued to perform in line with our expectations this quarter. On an all-store basis, new PBRs were $2,949, down 6% sequentially. These PBRs are well within the range where we expect them to remain going forward. Same-store new units were down 8% against a tough prior year comparison, as we were lapping the expiration of federal and state BEV tax credit eligibility in 2025.

Speaker #3: Which completed our TCA rollout to all of ASBURY. And now I will speak to our operational results on a same-store basis unless otherwise noted.

Speaker #3: I will note that our herb chamber stores are included in same-store results for August and September only. Starting with new vehicles, our new vehicle business continued to perform in line with our expectations this quarter.

Speaker #3: On an all-store basis, new PVRs were 2,949, down 6% sequentially. These PVRs are well within the range where we expect them to remain going forward.

Speaker #3: Same-store new units were down 8% against a tough prior year comparison. As we were lapping the expiration of federal and state BEV tax credit eligibility in 2025.

Dan Clara: The sharp decrease in EV volume accounted for 5% of this 8% change year-over-year, mostly driven by Colorado, which had robust state EV incentives last year. We closed the quarter with a well-managed inventory position of 53 days supply, in line with Q2 and setting us up well for Q4. Next, turning to used vehicles. Our used vehicle business continued to build momentum this quarter, and we are encouraged by the progress. Used retail gross profit grew 3% over last year, and we grew used retail PBR by 10% to $1,777, reflecting our focus on growing volume profitably. Our strategy and retailing process improvements are taking hold and driving a stronger pre-owned business. On an all-store basis, our used retail volume increased 4.5% over Q2.

Speaker #3: The sharp decrease in EV volume accounted for 5% of this 8% change year over year. Mostly driven by Colorado, which had a robust state EV incentives last year.

Speaker #3: We closed the quarter with a well-managed inventory position of 53 days supply. In line with the second quarter and setting us up well for the fourth quarter.

Speaker #3: Next, turning to used vehicles. Our used vehicle business continued to build momentum this quarter. And we are encouraged by the progress. Used retail gross profit grew 3% over last year.

Speaker #3: And we grew used retail PVR by 10% to 1,777, reflecting our focus on growing volume profitably. Our strategy in retailing process improvements are taking hold and driving a stronger pre-owned business.

Speaker #3: On an all-store basis, our used retail volume increased 4.5% over the second quarter. With our disciplined processes in place, we anticipate used volume to increase on a year-over-year basis as we move into the fourth quarter.

Dan Clara: With our disciplined processes in place, we anticipate used volume to increase on a year-over-year basis as we move into Q4. We ended the quarter with a 41-day supply, keeping us well-positioned heading into Q4. Moving to F&I. Our F&I business performed well at the dealership level this quarter, where F&I PBR was up year-over-year. On a reported basis, F&I PBR was $2,177, down $19 from the prior year. That decline was driven entirely by the non-cash TCA deferral, which represented $138 of impact. Excluding the TCA deferral, our F&I PBR was $2,453, up $119 year-over-year. Our front-end yield per vehicle was $4,583 in Q3. Next, parts and service. Our customer pay revenue was up 2%, with gross profit flat year-over-year. Warranty gross profit was down 1%. Overall, parts and service was not where we wanted it to be.

Speaker #3: And we ended the quarter with a 41-day supply keeping us well positioned heading into the fourth quarter. Moving to F&I. Our F&I business performed well at the dealership level this quarter, where F&I PVR was up year over year.

Speaker #3: On a reported basis, F&I PVR was 2,177, down 19 from the prior year. But that decline was driven entirely by the non-cash TCA deferral, which represented 138 of impact.

Speaker #3: Excluding the TCA deferral, our F&I PVR was 2,453, up 119 year over year. Our front-end yield per vehicle was 4,583 in the third quarter.

Speaker #3: Next, parts and service. Our customer pay revenue was up 2% with gross profit flat year over year. Warranty gross profit was down 1%. Overall, parts and service was not where we wanted it to be, but now with a heavy lift of rolling out a new DMS behind us, we are optimistic in our ability to get back to consistent growth while delivering an exceptional guest experience.

Dan Clara: Now, with a heavy lift of rolling out a new DMS behind us, we are optimistic in our ability to get back to consistent growth while delivering an exceptional guest experience. Quickly, on operational efficiencies, our same-store adjusted SG&A, as a percentage of gross profit, was 67% in the quarter. With the Tekion conversion now complete, we believe our SG&A can reach the low 60% range by the end of 2027, driven by efficiency gains as our teams become more productive on the platform. As we enter Q4, I am encouraged by what I see. Our used business has improved for several quarters in a row. With our Tekion rollout now behind us, our teams can turn their full attention to serving our guests and executing our five-pillar strategy. We will remain disciplined in allocating capital.

Speaker #3: And quickly, on operational efficiencies. Our same-store adjusted SG&A, as our percentage of gross profit was 67% in the quarter. With the Techyard conversion now complete, we believe our SG&A can reach the low 60% range by the end of 2027.

Speaker #3: Driven by efficiency gains as our teams become more productive on the platform. As we enter the fourth quarter, I am encouraged by what I see.

Speaker #3: Our used business has improved for several quarters in a row. And with our Techyard rollout now behind us, our teams can turn their full attention to serving our guests and executing our five-pillar strategy.

Speaker #3: We will remain disciplined in allocating capital. Our priority is to bring net leverage below three times. We believe we are well positioned to finish the year strongly and look forward to one platform to achieve our goals in 2027.

Dan Clara: Our priority is to bring net leverage below three times. We believe we are well-positioned to finish the year strong and look forward to one platform to achieve our goals in 2027. Most of all, I want to thank our team members. They took on one of the largest changes in our company's history and delivered it while keeping our guests at the center of everything we do. We are now positioned to see the benefits of their hard work. Before I pass to Michael, one additional item worth noting. In early October, the FTC administrative proceeding against the company was dismissed. The outcome is consistent with our long-held view that our F&I sales practice have been and continue to be sound, lawful, and in compliance with applicable regulations.

Speaker #3: Most of all, I want to thank our team members. They took on one of the largest changes in our company's history. And delivered it while keeping our guests at the center of everything we do.

Speaker #3: We are now positioned to see the benefits of their hard work. And before I pass to Michael, one additional item worth noting. In early October, the FTC administrative proceeding against the company was dismissed.

Speaker #3: The outcome is consistent with our long-held view that our F&I sales practice have been and continue to be sound, lawful, and in compliance with applicable regulations.

Dan Clara: We remain focused on serving our guests with the integrity and transparency that we have always defined how we do business. With that, I will now hand the call over to Michael to discuss our financial results for the quarter.

Speaker #3: We remain focused on serving our guests with the integrity and transparency that we have always defined how we do business. And with that, I'll now hand the call over to Michael to discuss our financial results for the quarter.

Michael Welch: Thank you, Dan, and good morning, everyone. I will start with our high-level financial results for Q3. We generated $4.4 billion in revenue, earned a gross profit of $732 million, and gross profit margin of 16.6%, and we delivered an adjusted operating margin of 4.9%. Our adjusted net income was $111 million, our adjusted EBITDA was $218 million, and adjusted EPS was $6.16 for the quarter. In addition, the non-cash deferral headwind due to TCA this quarter was $0.69 per share. Our adjusted EPS would have been $6.85 without the deferral impact. Adjusted net income for Q3 2026 excludes net of tax, $6 million related to the Tekion implementation expenses, $1 million related to duplicate DMS-related expenses, and $1 million related to the net gain on divestitures. Adjusted SG&A as a percentage of gross profit on an all-store basis was 67.4%.

Speaker #2: Thank you, Dan. And good morning, everyone. I'll start with our high-level financial results for the third quarter. We generated 4.4 billion in revenue, earned a gross profit of 732 million, and gross profit margin of 16.6%.

Speaker #2: And we delivered an adjusted operating margin of 4.9%. Our adjusted net income was 111 million. Our adjusted EBITDA was 218 million. And adjusted EPS was $6.16 for the quarter.

Speaker #2: In addition, the non-cash deferral headwind due to TCA this quarter was 69 cents per share. Our adjusted EPS would have been $6.85 without the deferral impact.

Speaker #2: Adjusted net income for the third quarter, 2026, excludes net of tax. $6 million related to the Techyard implementation expenses. $1 million related to duplicate DMS-related expenses.

Speaker #2: And $1 million related to the net gain on divestitures. Adjusted SG&A is a percentage of gross profit on an all-store basis was 67.4%. This reflected the peak of our Techyard conversions with 47 stores converting in the quarter and a number of stores still early in the adoption.

Michael Welch: This reflected the peak of our Tekion conversions, with 47 stores converting in the quarter and a number of stores still early in the adoption. We expect SG&A leverage to improve in Q4, with cost savings continuing into 2027. Next, the adjusted tax rate for the quarter was 24.5%. We estimate our effective tax rate for the full year to be approximately 24.8%. TCA generated $5 million of pre-tax income in Q3 versus $14 million in the prior year. The negative non-cash deferral impact for the quarter net of tax was about $12 million, compared to $4 million in Q3 2025. TCA's rollout to Chambers Group has been completed, and now all Asbury platforms are enabled with this differentiated asset. As previously noted, we are assessing the next phase for TCA following its full rollout. We generated $525 million of adjusted operating cash flow year-to-date.

Speaker #2: We expect SG&A leverage to improve in the fourth quarter with cost savings continuing into 2027. Next, the adjusted tax rate for the quarter was 24.5%.

Speaker #2: We estimate our effective tax rate for the full year to be approximately 24.8%. TCA generated $5 million of pre-tax income in the third quarter.

Speaker #2: Versus $14 million in the prior year. The negative non-cash deferral impact for the quarter, net of tax, was about $12 million compared to $4 million in third quarter 2025.

Speaker #2: TCA's rollout to Chambers Group has been completed and all Asbury platforms are enabled with this differentiated asset. As previously noted, we are assessing the next phase for TCA following its full rollout.

Speaker #2: We generated $525 million of adjusted operating cash flow year to date, excluding the real estate purchases we spent $190 million on capital expenditures in the first three quarters of this year.

Michael Welch: Excluding the real estate purchases, we spent $190 million in capital expenditures in the first three quarters of this year. We are updating our view for the full year CapEx in 2026 to be approximately $275 million. Adjusted free cash flow was $336 million through the end of September. We ended the quarter with $1 billion of liquidity comprised of floor plan offset accounts, availability on both our used line and revolving credit facility, and cash excluding cash at TotalCare Auto. Our transaction-adjusted net leverage ratio was 3.5x at the end of Q3. Our target of 3x remains a priority for us, and we plan to reach it by mid-2027. Driving operational excellence and reducing leverage is our focus. Once there, we will look for opportunities for share buybacks and tuck-in acquisitions. With that, this concludes our prepared remarks.

Speaker #2: We are updating our view for the full-year capex in 2026 to be approximately $27 million. Our $275 million adjusted pre-cash flow was $336 million through the end of September.

Speaker #2: We ended the quarter with $1 billion liquidity comprised of floor plan offset accounts, availability on both our used line and revolving credit facility, and cash excluding cash at total care audit.

Speaker #2: Our transaction adjusted net leverage ratio was 3.5 times at the end of the third quarter. Our target of three times remains a priority for us and we plan to reach it by mid-2027.

Speaker #2: Driving operational excellence and reducing leverage is our focus. Once there, we will look for opportunities for share buybacks and Techyard acquisitions. And with that, this concludes our prepared remarks.

Michael Welch: We will now turn the call over to the operator and take your questions. Operator?

Speaker #2: We will now turn the call over to the operator and take your questions. Operator?

Operator: Thank you. 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 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jeff Lick with Stephens Inc. Please proceed.

Speaker #1: Thank you. 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.

Speaker #1: You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker #1: Our first question is from Jeff Lick with Stevens Inc. Please proceed.

Jeff Lick: Good morning. Thanks for taking my question, and congrats on getting the Tekion installation out of the way. Dan and Michael, I was wondering if maybe you could just You've given some Tekion stats in terms of SG&A of the stores that are starting to see the benefit or productivity of technicians or salespeople. I was wondering if you could just break apart a little bit more what the Tekion stores look like versus the non-Tekion stores, and then what the rollout or when we'll start to see the benefit of the stores that were still within that call it that 6 to 12-month timeframe of installation.

Speaker #4: Good morning. Thanks for taking my question. And congrats on getting the Techyard installation out of the way. Dan and Michael, I was wondering if maybe you could just you've given some Techyard stats in terms of SG&A of the stores that are starting to see the benefit or productivity of technicians or salespeople.

Speaker #4: I was wondering if you could just break apart a little bit more what the Techyard stores look like versus the non-Techyard stores and then what the rollout or when we'll start to see the benefit of the stores that were still within the call it that 6 to 12-month time frame.

Speaker #4: Of installation.

Dan Clara: Jeff, good morning. Thank you for the question. Yes, as I stated, the customer pay gross profit grew 7% in the Koons and the Georgia stores, and the reason why I'm focusing on that is consistent with what we have been stating in the past, which is it takes 6 months for the muscle memory to kick in, and those stores have definitely been in the 6-month timeframe. So we're excited what we see. I will give you a little bit more color as well. When you look at ROs per advisor per day, we're seeing about a 9% increase. When you look at dollars per technician, we're seeing about a high single-digit growth to a low double-digit growth. And then from a unit per salesperson standpoint, we're seeing about a mid-single digit improvement from an efficiency standpoint.

Speaker #3: Yeah. Good morning. Thank you for the call. Thank you for the question. Yes. As I stated, the customer pay gross profit grew 7% in the Koons and the Georgia stores.

Speaker #3: And the reason why I'm focusing on that is consistent with what we have been stating in the past, which it takes six months for the muscle memory to kick in.

Speaker #3: And those stores have definitely been in the six-month time frame. So we're excited what we see. I will give you a little bit more color as well.

Speaker #3: When you look at RO spread advisor per day, in the we're seeing about a 9% increase. When you look at dollars per technician, we're seeing about a high single-digit growth to a low double-digit growth.

Speaker #3: And then from a unit per salesperson standpoint, we're seeing about a mid single-digit improvement. From an efficiency standpoint, as I stated at the beginning of the call, we rolled 47 stores in the quarter.

Dan Clara: As I stated at the beginning of the call, we rolled 47 stores in the quarter, so it is going to take us 6 months to get the muscle memory in those stores to be able to see the efficiencies that I just mentioned. We are very excited with what we see, the hard work that the team members have put together alongside our partner, Tekion, and excited for the future. As you stated at the beginning, appreciate your congrats. It has been a heavy lift, but excited that it is behind us.

Speaker #3: So it's going to take us six months to get the muscle memory in those stores. To be able to see the efficiencies that I just mentioned, but we are very excited with what we see the hard work that the team members have put together alongside our partner Techyard.

Speaker #3: And excited for the future. And as you stated at the beginning, I appreciate your congrats. It's been a heavy lift, but excited that it is behind us.

Michael Welch: Jeff, just one more thing on that. From an SG&A percentage of gross perspective, we were down 329 basis points in the quarter on a same-store basis. The two groups, Koons and Georgia, who have been on the longest, one of those platforms was actually improved on an SG&A percentage of gross basis. The other one was with the decline in PBRs, it was down or it increased on an SG&A percentage of gross basis, but about a third of what the rest of the company did. We are seeing the impact on SG&A as well. It is a two-sided coin. It is a gross profit item, so it helps on the gross profit, but also helps on the efficiency. We are seeing that on the SG&A side, percentage of gross of those two markets as well.

Speaker #5: And Jeff, just one more thing on that. From an SG&A percentage of gross perspective, we were down 329 basis points in the quarter on the same store basis.

Speaker #5: The two groups, Koons and Georgia, who have been on the longest, one of those platforms was actually improved on an SG&A percentage of gross basis.

Speaker #5: And the other one was with the decline in PBRs, it was down or increased on an SG&A percentage of gross basis, but about a third of what the rest of the company did.

Speaker #5: So we are seeing the impact on SG&A as well. And so it's a two-sided coin. It's a gross profit item. So it helps on the gross profit.

Speaker #5: But it also helps on the efficiencies. And so we're seeing that on the SG&A side percentage of gross of those two markets as well.

Jeff Lick: In terms of just the store composition, what is the number of stores that at this point you would say they were in the Tekion beneficiary column versus the Tekion, "Hey, we are still working through it," or it is a net drag on productivity and SG&A measures?

Speaker #4: In terms of just the store composition, what's the number of stores that at this point you'd say they were in the Techyard beneficiary column versus the Techyard, "Hey, we're still working through it.

Speaker #4: Or it's a net drag-on productivity and SG&A measures."

Dan Clara: Yeah. So Jeff, if I look at the Koons and the Georgia markets, we are probably talking 35 to 40 stores that have reached the 6-month threshold that is crucial for us to see that muscle memory kick in.

Speaker #3: Yeah. So Jeff, if I look at the Koons and the Georgia markets, we're probably talking 35 to 40 stores. That have reached the six-month threshold that is crucial for us to see that muscle memory kick in.

Jeff Lick: Okay. And just one last quick one for you, Michael. Could you talk about the dynamic of SG&A as it is obviously a little more noticeable when the GP dollars come from service and parts. Is there a bit of a double whammy impact on SG&A in terms of getting better? Because obviously not only is Tekion going to help your SG&A in general, but it helps your service and parts gross as well. Can you talk about that a little bit?

Speaker #4: Okay. I just want everyone one last quick one for you, Michael. The dynamic of could you talk about the dynamic of SG&A as a it's obviously a little more noticeable when the GP dollars come from service and parts?

Speaker #4: Can you kind of get is there a bit of a double whammy impact on SG&A in terms of getting better? Because obviously, not only is Techyard going to help your SG&A in general, but it helps your service and parts gross as well.

Speaker #4: Can you talk about that a little bit?

Michael Welch: Yeah, 100%. That is really our focus as we get back to being able, we are growing gross profit again, coming out of Tekion, the goal is to be productive with our people and so don't put the cost back in that go with that gross profit growth. So that is really where the focus is. It is some cost cuts, some benefits for AI. It is really getting back to growing gross profit and maintaining the cost structure to go with that. So if we are trying to chase reducing gross profit, it is just hard to get that SG&A number. So it is 2 pieces. And when we talk about low 60s, I would say half of that comes from gross profit growth and the other half comes from true SG&A saves.

Speaker #3: Yeah. 100%. That's really our focus is as we get back to be able we're growing gross profit again. Coming out of Techyard, the goal is to be productive with our people and so don't put the cost back in to go with that gross profit growth.

Speaker #3: And so that's really what the focus is. It's some cost cuts, some benefits for AI, but it's really getting back to growing gross profit and maintaining the cost structure to go with that.

Speaker #3: So if we're trying to chase reducing gross profit, it's just hard to get that SG&A number. So it's two pieces. And we talk about low 60s.

Speaker #3: I'd say half of that comes from gross profit growth and the other half comes from true SG&A saves.

Jeff Lick: Great. Thanks very much for taking my questions. Best of luck in Q4.

Speaker #4: Great. Thanks very much for taking my questions. Best of luck in Q4.

Michael Welch: Thank you.

Speaker #3: Thank ank you.

Operator: Our next question is from Rajat Gupta with JPMorgan. Please proceed.

Speaker #1: Our next question is from Rajat Gupta with JP Morgan. Please proceed.

Rajat Gupta: Great. Thanks for taking the question. Just on the metrics you provided on the Koons and the Georgia stores, that is just on a same-store basis versus last year, Q3, correct? Just to clarify.

Speaker #2: Great. Thanks for taking the question. Just on the metrics you provided, on the Koons and the Georgia stores, that is just on the same store basis versus last year third quarter, correct?

Speaker #2: Just to clarify.

Michael Welch: Correct.

Speaker #3: Correct.

Rajat Gupta: If you look at it on a dollar basis, pre-Tekion versus post-Tekion seasoning, are those metrics still higher year-over-year, or you are still working through more progress for those stores on the parts and services side? I have a quick follow-up. Thanks.

Speaker #2: And if you look at it on a dollar basis, pre-Techyard versus post-Techyard seasoning, I mean, are those metrics still higher year over year, or we're still working through more progress for those stores on the parts and services side?

Speaker #2: And I have a quick one. Thanks.

Michael Welch: Yeah. Parts and service is higher. We think there is still room to go. We are seeing, if you think about the layers, Koons is farther ahead than Georgia because it has been on it longer. As we see the stores work through the system, we are seeing those kind of improvements. Dan can hit on those pieces because we have some Florida just got over the six-month mark at the very end of the quarter. There are some numbers there that we are seeing. We are starting to see it on Florida at the very end of the quarter as well.

Speaker #3: Yeah. Parts and services higher. We think they're still room to go. And we are seeing if you think about the layers, Koons is farther ahead than Georgia because it's been on it longer.

Speaker #3: And so as we see the stores work through the system, we are seeing those kind of improvements and they can kind of hit on those pieces because we have some Florida just kind of got over the six-month mark at the very end of the quarter.

Speaker #3: And so there's some numbers there that we're seeing. We're starting to see it on Florida at the very end of the quarter as well.

Dan Clara: Yeah, Rajat, good morning. On Michael's comment, just to give you a few more numbers on what we saw at the end of September from a fixed operations gross profit. Florida, which just hit the mark, was up 3%. I will give you Koons as well, which I have already mentioned before, but Koons just for September was up 9%, and Georgia was up 7%. So that gives you a pretty good indication of the efficiencies and the gains that we are getting once the muscle memory takes place.

Speaker #3: Yeah. Rajat, good morning. On the Michael's comment, just give you a few more numbers on what we saw at the end of September from a fixed operations gross profit.

Speaker #3: Florida, which just hit the mark, was up 3%. I'll give you Koons as well, which I've already mentioned. Before, but Koons just for September was up 9%.

Speaker #3: And then Georgia was up 7%. So that gives you a pretty good indication of the efficiencies and the gains that we're getting once the muscle memory takes place.

Rajat Gupta: Understood. That is helpful. Then, just on TCA, I know in the past, there has been some chatter around maybe potentially disentangling that from the company. I am curious, as you have spent more time evaluating if the business needs to be core and in-house, what has been the outcome? Do you still think TCA is better as an in-house captive or a hybrid model would serve us better? Thanks.

Speaker #2: Understood. That's helpful. And then just on TCA, I know in the past, there's been some chatter around maybe potentially disentangling that from the company.

Speaker #2: I'm curious, as you've spent more time evaluating if the business needs to be core and in-house, what's been what's been the outcome? Do you still think TCA is better as an in-house captive, or a hybrid model would serve it better?

Speaker #2: Thanks.

Michael Welch: We really love the TCA business. We love what it does for us long term and the cash flow that it provides. Also just owning the guest experience all the way through the cycle. But, once we get it fully rolled out, fully to all the groups, we have to evaluate, keep it as is, grow it through other channels outside our dealerships, or to your point flip it out to have it be an outside company, to kind of get rid of the accounting noise. We are still in the evaluation phase of that. Again, we love the business, love what it does for us, love the cash flow. Very solid business for us. But, just again, trying to think through the next steps for that company.

Speaker #3: I mean, we really love the TCA business. We love what it does for us long-term and the cash flow that it provides. And so and also just owning the guest experience all the way through the cycle.

Speaker #3: But once we get it fully we've rolled it out fully to all the groups. We have to evaluate keep it as is. Grow it through other channels outside our dealerships.

Speaker #3: Or to your point, flip it out to have it be an outside company to kind of get rid of the accounting noise. We're still in the evaluation phase of that.

Speaker #3: Again, we love the business, love what it does for us, love the cash flow. Very, very solid business for us. But just again, trying to think through the next steps for that company.

Dan Clara: Rajat, one thing I would like to add to Michael's comment is, to his point, we love the business. When you think about the cash flow that it generates, it is also one part of the business that does not require heavy CapEx or any CapEx for that matter. So we really like what it generates from a cash flow standpoint. But as Michael mentioned, those are the three options on the table that we are always analyzing.

Speaker #3: And Rajat, one thing I'd like to add to Michael's comment is to his point, we love the business. And when you think about the cash flow that he generates, it is also one part of the business that does not require heavy capex or any capex for that matter.

Speaker #3: So we really like what he generates from a cash flow standpoint. But as Michael mentioned, those are the three options on the table that we are always analyzing.

Rajat Gupta: Understood. Thanks for the color, and good luck. I will jump back in queue.

Speaker #2: Understood. Thanks for the color and good luck, Jim. Thank you.

Michael Welch: Thank you.

Speaker #3: Thank you.

Operator: Our next question is from Glenn Chin with Seaport Research Partners. Please proceed.

Speaker #1: Our next question is from Glendon with Seaport Research Partners. Please proceed.

Glenn Chin: Good morning. Thank you, and congrats on completing the rollouts of both Tekion and TCA. I am glad to see all the benefits starting to come through. First, can you tell us what you saw with the consumer in the quarter? There was a lot of noise and chatter of volatility. I am glad to see that parts and service still grew same store, but margins compressed a bit. Can you tell us what happened there?

Speaker #5: Good morning. Thank you. And congrats on completing the oil outs of both Techyard and TCA. I'm glad to see all the benefits starting to come through.

Speaker #5: First, just on can you tell us what you saw with the consumer in the quarter? There was a lot of noise and chatter of volatility.

Speaker #5: And I mean, glad to see that parts and service still grew. Same store, but margins compressed a bit. Can you tell us what happened there?

Dan Clara: Yes. I will start with the last question, margin compression in the fixed operations. That is a product of what I just mentioned, the 6 months that it takes of muscle memory to be developed as we roll out Tekion. To be more specific, think about this. You just got used to, you are used for 20, 30 years as an advisor to process customers one way under CDK. Your world is turned upside down. You are learning a new system. You have five, six customers waiting for you. The path of least resistance, which I do not blame team members to take, they start discounting just to make sure that we take care of the guests. As that muscle memory starts to come in, the discounts start to go away, then the margin starts to stabilize and get back to its normal course. Not concerned about that.

Speaker #3: Yes. I'll start with the last question. Margin compression. And fixed operations. That is a product of what I just mentioned, the six months that it takes of muscle memory to be developed as we roll out Techyard.

Speaker #3: And to be more specific, think about this. You just got used to you're used for 20, 30 years as an advisor. To process customers one way, under CDK, your world has turned upside down.

Speaker #3: You're learning a new system. You have five, six customers waiting for you. The path of least resistance, which I don't blame team members, to take in, they start discounting just to make sure that we take care of the guests.

Speaker #3: As that muscle memory starts to come in, the discounts start to go away. And then the margin starts to stabilize and get back to its normal course.

Speaker #3: So not concerned about that. That's going to get back to normal and we're already seeing the progress being made. On the first part of the question on consumer affordability, I will tell you that we saw from a customer pay standpoint, we measure both I mean, we'll measure all of them.

Dan Clara: That is going to get back to normal, and we are already seeing the progress being made. On the first part of the question on consumer affordability, I will tell you that we saw from a customer pay standpoint, we measure both. We will measure all of them. We measure BEV, plug-in hybrid, and internal combustion, and the dollars per tickets have stayed flat. In some cases, they have gone up a little bit here and there. That gives us good indication that things are working properly, and the consumer is still spending money with us. I will tell you that on a customer paid traffic, our customer paid traffic for the quarter, meaning the repair order count, was down 1.9%. I think I have answered your question. If you have any other follow-ups, happy to take them as well.

Speaker #3: We measure Bev, plug-in hybrid, and internal combustion. And the dollars per tickets have stayed flat. In some cases, they've gone up a little bit here and there.

Speaker #3: So that gives us good indication that things are working properly. And the consumer is still spending money with us. I will tell you that on a customer pay traffic or customer pay traffic for the quarter, meaning the repair order count, was down 1.9%.

Speaker #3: But I think I've answered your question. If you have any other follow-ups, happy to take them as well.

Michael Welch: Glenn, one other thing on the margin. Internals is highly accretive to the gross margin on parts and service because there is no revenue for it. It is just all gross profit. As we continue to grow the used car business, especially in Q4 into 2027, that will also help the fixed ops margin as we get that used car volume back through and get that recon work through the fixed op side.

Speaker #6: Glendon, one of the things on the margin, internals, is highly agreed to the gross margin on parts and service because there's no revenue for it.

Speaker #6: It's just all gross profit. As we continue to grow the used car business, especially in the fourth quarter and in the 2027, that will also help the fixed ops margin as we get that used car volume back through and get that recon work through the fixed ops side.

Glenn Chin: Okay, very good. Thanks for all the color. Just on used, good to see the progress there, the improvement in comps. Can you just tell us what we might expect going forward, just with respect to the balance between volume versus GPUs?

Speaker #5: Okay. Very good. Thanks for all the color. And then just on use, I mean, good to see the progress there. The improvement in comps.

Speaker #5: Can you just tell us what we might expect going forward just with respect to the balance between volume versus GPUs?

Dan Clara: Yes. At the end, I cannot remember when it was, it might have been May or June, but we announced that our strategy was shifting. For years, we had been protecting gross profit and not chasing the volume. As a reminder, we shifted that strategy in May because we knew that these returns were coming and it was a good time to start going after a little bit of the volume while protecting the profitability of the used car department. When you think about 70% to 75% of our cars that we retail come from either trade-ins or acquisitions from guests or loaner cars. That puts us in a pretty good place to continue to grow that business. Then about 15% to 20% of them come from acquisition at the auction, which we have made the concerted effort to go after to grow the volume.

Speaker #3: Yes. We've at the end, I cannot remember when it was. It might have been May or June, but we announced that our strategy was shifting for years.

Speaker #3: We had been protecting gross profit and not chasing the volume. And as a reminder, we shifted that strategy in May because we knew that these returns were coming and it was a good time to start going after a little bit of the volume while protecting the profitability of the used car department.

Speaker #3: So when you think about about 70 to 75 percent of our cars that we retail come from either it is trade-ins, or acquisitions from guests, or loaner cars.

Speaker #3: That puts us in a pretty good place to continue to grow that business. And then about 15, 20 percent of them come from acquisition at the auction, which we have made the concerted effort to go after to grow the volume.

Dan Clara: I will tell you that we are fully committed to growing the volume while protecting the gross profit, and we expect in Q4 to be ahead year over year compared to last year.

Speaker #3: So I will tell you that we are fullly committed to growing the volume while protecting the gross profit. And we expect in the fourth quarter to be ahead year over year compared to last year.

Glenn Chin: Okay. Very good. Thanks, gentlemen. Good luck.

Speaker #5: Okay. Very good. Thanks, gentlemen. Good luck.

Dan Clara: Thank you.

Speaker #3: Thank you.

Operator: Our next question is from Alex Perry with Bank of America. Please proceed.

Speaker #1: Our next question is from Alex Perry with Bank of America. Please proceed.

Alex Perry: Hi. Thanks for taking our questions here. Just wanted to follow up on the last question, actually. Just on the customer pay RO count being down, I think you said 2%. Do you think there is share loss happening to cheaper independents for some of the P&S work given some of the affordability constraints on the consumer right now? Are you seeing any sort of evidence of work deferrals given some of the affordability challenges? Thanks.

Speaker #7: Hi. Thanks for taking our questions here. Just wanted to follow up on the last question, actually. So just on the customer pay, RO count being down, I think you said 2%.

Speaker #7: Do you think there is share loss happening to cheaper independents for some of the P&S work given some of the affordability constraints on the consumer right now?

Speaker #7: Are you seeing any sort of evidence of work deferrals given some of the affordability challenges? Thanks.

Dan Clara: Yep. Morning, Alex. On the work deferrals, the measurements that I had when I compare what we call declined work from our customers, I have not seen an increase in that. So that gives us some level of comfort that nothing is changing materially. On the first question in regards to maybe a loss of share, I will tell you that it is more than a fair question, but when you look at the average miles that are coming through our shop at 70,000 miles, I would argue that we do a pretty good job of retaining that guest after the manufacturer's warranty expires. The 1.9%, like anything, I would not make a big deal about it. It is seasonality.

Speaker #3: Yep. Morning, Alex. On the work deferral, the measurements that I had when I compare what we call declined work from our customers, I have not seen an increase in that.

Speaker #3: So that gives us some level of comfort that nothing is changing materially. On the first question in regards to maybe a loss of share, I'll tell you that it's more than a fair question.

Speaker #3: But when you look at the average miles that are coming through our shop at 70,000 miles, I would argue that we do a pretty good job of retaining that guest after the manufacturer's warranty expires.

Speaker #3: The 1.9%, like anything, I would not make a big deal about it. It is seasonality. Obviously, when you roll 47 stores in Techyard, in the quarter, and I can't stress it enough, the heaviest lift of the entire rollout of Techyard, you will see an impact in traffic because people's muscle memory gets lost.

Dan Clara: Obviously, when you roll 47 stores in Tekion in the quarter, and I cannot stress it enough, the heaviest lift of the entire rollout of Tekion, you will see an impact in traffic because people's muscle memory gets lost. They do not move as fast. The efficiency is not there. But that will all come, as we have proven, after six months of the muscle memory kicking back in.

Speaker #3: They don't move as fast. The efficiency is not there. But that will all come as we have proven after six months of the muscle memory kicking back in.

Alex Perry: That's really helpful. My follow-up was just on the FTC enforcement actions. What impact are those enforcement actions having on your business? Did you have to take advertised prices up at all? Do you think it's impacting your used volume sales? What do you think happens to some of those doc fees? Do you think they get dropped over time? How do you think this all plays out? Thanks.

Speaker #7: That's really helpful. And then my follow-up was just on the FTC and enforcement actions. Can you what impact are those enforcement actions sort of having on your business?

Speaker #7: Did you have to take advertised prices up at all? Do you think it's impacting your used volume sales? And then what do you think happens to some of those dock fees?

Speaker #7: Do you think they get dropped over time? Or how do you think this all sort of plays out? Thanks.

Dan Clara: Yeah. The impact that we've had is more of a level playing field. We've always done things the legal, ethical way, full transparency. As a reminder, when the FTC came with this Notification at the beginning of the year, Asbury did not receive a letter because we have always been compliant. In some of our major markets such as Georgia, Colorado, and Massachusetts, it was already state law to have that doc included in the price. So we've been operating under those circumstances for years. As far as what does it do, I think that it is great for the industry. I think that being transparent, no hidden charges is what the consumer deserves. It level sets the playing field for all of us out there. So I view this as very positive.

Speaker #3: Yeah. On the impact that we've had is more of a level playing field. We've always done things the legal, ethical way. Full transparency. As a reminder, when the FTC came with this, notification at the beginning of the year, as we did not receive a letter because we have always been compliant.

Speaker #3: And some of our major markets, such as Georgia, Colorado, and Massachusetts, it was already state law to have that dock fee included in the price.

Speaker #3: So we've been operating under that under those circumstances for years. As far as what does it do, I think that it is great for the industry.

Speaker #3: I think that being transparent no hidden charges is what the consumer deserves. It level sets the playing field for all of us out there.

Speaker #3: So I view this as very positive. It will continue to enhance the guest experience and those that don't want to abide are going to be left behind.

Dan Clara: It will continue to enhance the guest experience, and those that don't want to abide are going to be left behind.

Alex Perry: That's really helpful. Best of luck going forward.

Speaker #7: That's really helpful. Best of luck going forward.

Speaker #3: Thank you.

Operator: Our next question is from Michael Ward with Citigroup. Please proceed.

Speaker #1: Our next question is from Michael Ward with Citigroup. Please proceed.

Michael Ward: Thanks very much. Good morning, everyone. First thing, could you put some numbers on the BEV sales year over year?

Speaker #8: Thanks very much. Good morning, everyone. First thing, could you put some numbers on the BEV sales year over year?

Dan Clara: I am sorry, you cut off a little bit. On the electric sales? Or what?

Speaker #3: Sorry, you cut off a little bit on the electric sales.

Michael Ward: Yeah, you mentioned that was about half of the new unit decline. So could you put some actual numbers on the number of BEV units you sold last year and then this year?

Speaker #8: Yes. You mentioned that was about half of the new unit declined. So could you put some actual numbers on the number of BEV units you sold last year and then this year?

Dan Clara: Yeah. I can do that for you. In Q3 2026, my electric vehicles were 2.1% of the total units sold. I will tell you that from a year-over-year basis, we were down 76% in EV sales Q3 2025 versus Q3 2026.

Speaker #3: Yeah. So I have the yes, I can do that for you. In Q3 of 2026, my electric vehicles were 2.1% of the total units sold.

Speaker #3: I will tell you that from a year-over-year basis, we were down 76% in EV sales Q3 of '25 versus Q3 of '26.

Michael Ward: Okay. I always thought the BEV profitability was lower than ICE. With that decline, you would expect to see a little stronger new vehicle gross than we saw. Was there something else in there in the quarter? Was there a sell-down on some of the late models that kind of compressed gross that maybe turns as we go into Q4 and into the H1?

Speaker #8: Okay. And now, I always thought the BEV profitability was lower than ICE. So with that decline, you would expect to see a little stronger gross new vehicle gross than we saw.

Speaker #8: Was there something else in there in the quarter? Was there a sell-down or some late models that kind of compressed gross that maybe turned as we go into 4Q and into the first half?

Dan Clara: It is a great question, an excellent point. You are correct. The PBR in ICE is higher than EV. I will tell you that what impacted the drop in PBR quarter-over-quarter, it really came down from imports. We are seeing additional pressure with some of the OEMs, Hyundai being one of them. Then, obviously, you can see at the domestic side of the equation as well, we still continue to have headwinds with Stellantis. Although I will tell you that from an inventory management standpoint, we have really put ourselves in a good position. We have reduced about 1,000 units from what we used to carry on floor plan expense with Stellantis. Our ordering is at a much higher level from a turn rate standpoint.

Speaker #3: Yeah. It's a great question. An excellent point. You are correct. The PBR in ICE is higher than EV. I will tell you that what impacted the drop in PBR quarter over quarter it really came down from imports.

Speaker #3: We're seeing additional pressure with some of the OEMs Hyundai being one of them. And then obviously, you can see at the domestic side of the equation as well.

Speaker #3: We still continue to have headwinds with us, Stellantis, although I will tell you that from an inventory management standpoint, we have. Really put ourselves in a good position.

Speaker #3: We have reduced about 1,000 units from what we used to carry on floor plan expense with Stellantis, our ordering is it is at a much higher level from a turn rate standpoint.

Dan Clara: So really excited to see what I am seeing out of those Stellantis stores that we are set up for a better quarter and as we move into 2027.

Speaker #3: So really excited to see what I'm seeing out of the Stellantis stores that we are set up for a better quarter and as we move into 2027.

Michael Ward: Thank you. Very good color. I appreciate that. Lastly on Tekion, because I know we have hit it hard, but I think it is important. The muscle memory that you talked about a third of the stores just got converted in October. Some of that muscle memory lags. From November, December, and into the H1, we should start to see some pretty good benefits, particularly since you have a good track record behind it. Is that the right way to look at it?

Speaker #8: Thank you. Very good color. I appreciate that. And just lastly on Techyard because I know we've hit it hard, but I think it is important the muscle memory that you talked about.

Speaker #8: So about a third of the stores just got converted in October. So some of that muscle memory lags. But then from November, December, and into the first half, we should start to see some pretty good benefits.

Speaker #8: Particularly since you have a good track record behind it. Is that the right way to look at it?

Dan Clara: Yeah, I think you are looking at it right. I would just say that it will be more into the tail end of Q1, beginning of Q2. Listen, nobody is more anxious and wants to get the benefits of all the hard work than us. We do know after rolling out 157 dealerships, that it does take 6 months for the muscle memory to kick in. We are just going to be there continuing to train, mentor, and develop our team members to provide the best guest experience.

Speaker #3: Yeah. I think you're looking at it right. I would just say that it'll be more into the tail end of Q1, beginning of Q2.

Speaker #3: Listen, nobody's more anxious and wants to get the benefits of all the hard work than us. But we do know after rolling out 157 dealerships that it does take six months of the muscle memory to kick in.

Speaker #3: And we're just going to be there continuing to train mentor and develop our team members to provide the best guest experience.

Michael Ward: Well, I really appreciate it. Thanks very much.

Speaker #8: I really appreciate it. Thanks very much.

Dan Clara: Thank you.

Speaker #3: Thank you.

Operator: Our next question is from Rob Saltzman with UBS. Please proceed.

Speaker #1: Our next question is from Rob Sussman with UBS. Please proceed.

Rob Saltzman: Hey, team. Thanks for the time. You mentioned that you expect to exit that low 60% range on SG&A gross end of Q4. That is the exit rate. How are you thinking about the trajectory of that metric into 2027, assuming a stable operating environment? What could that number look like maybe in the back half of 2026 after that 6-month transition period you mentioned starts to abide after the large Q3 rollout? Thanks.

Speaker #5: Hey, team. Thanks for the time. So you mentioned that you expect to exit that low 60% range on estimated gross band of Q4. So if that's the exit rate, how are you thinking about the trajectory of that metric into 2027, assuming a stable operating environment?

Speaker #5: And then what could that number look like maybe in the back half of '26 after that six-month transition period you mentioned starts to abide after the large Q3 rollout?

Speaker #5: Thanks.

Michael Welch: Just to clarify, we expect to be in the low 60s by the end of 2027. We will get a little bit better in Q4 and then kind of progress through it as we go through next year. To Dan's point, kind of two Qs when we start getting most of the stores into that 6-month window. You will see it in the back half of the year next year when we get kind of fully on. Again, it is both a combination of increasing the gross profit, which will help the SG&A and making sure we get the cost out that will help the SG&A. It is both these, but it is low 60s by the end of 2027 is the goal.

Speaker #3: Just to clarify, we expect to be in the low 60s by the end of '27. So we'll get a little bit better in fourth quarter and then kind of progress through it as we go through next year.

Speaker #3: And to Dan's point, kind of two Qs when we start getting most of the stores into that six-month window. So you'll see it in the back half of the year next year when we get kind of fully on.

Speaker #3: And again, it's both a combination of increasing the gross profit, which we're hopefully SG&A, and making sure we get the cost out that will help the SG&A.

Speaker #3: So it's both pieces, but it's low 60s by the end of '27. It's the goal.

Rob Saltzman: Thanks. Just one follow-up would just be, obviously SG&A, but any sort of high-level thoughts on the business here into 2027? How are you thinking about the trajectory and kind of how are you thinking about the rest of the business heading into next year? Maybe just some early high-level puts and takes you guys are thinking about as you start to plan.

Speaker #5: Thanks. And then just one follow-up, would just be obviously SG&A, but any sort of high-level thoughts on the business here into 2027? How are you thinking about the trajectory and kind of how are you thinking about the rest of the business heading into next year?

Speaker #5: It would just some early high-level puts and takes you guys are thinking about as you start to plan.

Michael Welch: Yeah, it is really hard right now. It feels like from a new vehicle perspective, it is probably going to be similar in terms of volume. PBRs, we have said kind of $2,750 to $3,000 is kind of where we see the range, and we are kind of in that range now. I think that is kind of a range for next year. Used cars, we talked about we are going to push on the volume side of the equation. PBRs should kind of be in the range that they are at now. We are in that $1,750 range. F&I from a TCA perspective, we will see some continued headwinds into next year. We think the dealerships will have some improvements in F&I, but TCA will kind of offset that and make, I will call it F&I, a little bit of a drag next year.

Speaker #3: Yeah. It's really hard right now. We're still it feels like from a new vehicle perspective, it's probably going to be similar in terms of volume.

Speaker #3: PBRs, we said kind of 2750 to 3,000 is kind of where we see the range. And we're kind of in that range now. So I think that's kind of a range for next year.

Speaker #3: Used cars, we talked about we're going to push on the volume side of the equation. PBRs should kind of be in the range that they're at now.

Speaker #3: So we're in that 1750 range. F&I from a TCA perspective, what we'll see some continued headwinds in the next year. And so we think the dealerships will have some improvements in F&I, but TCA will kind of offset that and make I'll call it F&I a little bit of a drag next year.

Speaker #3: And then fixed ops, we think we can get back to growing fixed ops and then mid-single-digit range. Next year. And that will put SG&A kind of in that it will move throughout the year, but by the end of the year in that low 60s.

Michael Welch: Fixed ops, we think we can get back to growing fixed ops in that mid-single digit range next year, and that will put SG&A kind of in that. It will move throughout the year, but by the end of the year in that low 60s. Starting off mid-60s and then kind of working its way down.

Speaker #3: But starting off, mid-60s and then kind of working its way down.

Rob Saltzman: Thanks, Dan. Appreciate the time.

Speaker #5: Thanks, team. Appreciate the time.

Operator: Our next question is from Daniela Haigian with Morgan Stanley. Please proceed.

Speaker #1: Our next question is from Daniela Halligan with Morgan Stanley. Please proceed.

Daniela Haigian: Thank you. I think that was a really helpful overview of thoughts into next year. I will kind of step back and ask more of a macro question. Have you seen any change in consumer behavior, whether that is trade down or substitution from new into used or deferring some service work? I know we have talked a little bit about this, but any greater sensitivity than you have seen in prior quarters?

Speaker #2: Thank you. I think that was a really helpful overview of thoughts into next year. I'll kind of step back and ask more of a macro question.

Speaker #2: Have you seen any change in consumer behavior? Whether that's trade down or substitution from new into used or deferring some service work? I know we've talked a little bit about this, but any greater sensitivity than you've seen in prior quarters?

Dan Clara: Good morning, Daniela. Yes, we have seen a little bit of a change. I think, the longer that it goes with the high gas prices that we have, I mentioned this in the last earnings call, that based on prior history, it takes about 6 months for consumers to decide whether they are going to get rid of the gas guzzlers or not. We are starting to see a little bit more of that. Ironically, they are trading from a big SUV V8 or what have you, into still an SUV, but maybe in this case, a hybrid SUV that affords them the size but still a much better miles per gallon. Then from a decline services, I mentioned this earlier. Based on what I track, I have not seen a drop in decline services. Staying pretty consistent. So, I am not seeing a change there from a consumer behavior.

Speaker #3: Yeah. Good morning, Daniela. Yes. We've seen a little bit of a change I think the longer that it goes with the high gas prices that we have.

Speaker #3: I mentioned this in the last earnings call that based on prior history, it takes about six months for consumers to decide whether they're going to get rid of the gas gusters or not.

Speaker #3: And we're starting to see a little bit more of that ironically they're trading for from a big SUV V8 or what have you into still an SUV, but maybe in this case, a hybrid SUV that affords them the size but still a much better miles per gallon.

Speaker #3: And then from a decline surface, I mentioned this earlier, based on what I track, I have not seen a drop in decline services staying pretty consistent.

Speaker #3: So I'm not seeing a change there from a consumer behavior.

Daniela Haigian: Thank you. That is very helpful. Then on the used vehicle side, you said pushing volumes more. Is that a function of more off-lease supply coming online, so now you have more access to trade-ins, or are you seeing greater competition to try and access those volumes?

Speaker #2: Thank you. That's very helpful. And then on the used vehicle side, you said pushing volumes more. Is that a function of more off-lease supply coming online?

Speaker #2: So now you have more access to trade-ins, or are you seeing greater competition to try and access those volumes?

Dan Clara: It is more about tweaking the way that we appraise cars, improving our look to book. Which basically what that means is if I appraised 100 cars, how many did I trade for? It is a metric that we pay close attention to, working with our great operators on improving that metric. Then obviously taking full advantage of the cars that we can buy through the service drive with the internal processes that we have.

Speaker #3: Yeah. It's more about tweaking the way that we approach cars, improving our look to book, which basically what that means is if I appraised 100 cars how many did I trade for?

Speaker #3: It's a metric that we take close attention to working with our great operators on improving that metric. And then obviously taking full advantage of the cars that we can buy through the service drive with the internal processes that we have.

Daniela Haigian: Great. Thank you very much.

Speaker #2: Great. Thank you very much.

Operator: Our next question is from John Babcock with Barclays. Please proceed.

Speaker #1: Our next question is from John Babcock with Barclays. Please proceed.

John Babcock: Morning, and thanks for taking my questions. Firstly on the used vehicle market, it generally sounds like the wholesale market has been pretty soft there. What impact did that have on the GPs? Also if you can just broadly talk about what is driving that would be helpful.

Speaker #5: Good morning. And thanks for taking my questions. Just firstly on the used vehicle market, it generally sounds like the wholesale market's been pretty soft there.

Speaker #5: What impact did that have on the GPUs? And also if you can just broadly talk about what's driving that, that would be helpful.

Speaker #3: Yeah. It didn't have much of an impact on our PBR. As I mentioned before, 75% to 80% of our inventory comes from it comes from trade-ins, loaner cars, and cars that we acquire internally.

Dan Clara: It did not have much of an impact on our PBR. As I mentioned before, 75% to 80% of our inventory comes from trade-ins, loaner cars, and cars that we acquire internally. I will tell you that it is a metric that I measure every single week. It is how much PBR do we make on a car that we traded in versus a car that we bought at the auction. The one thing that is guaranteed when you buy a car at the auction is you are the one that paid the most money for the car because you are the last one standing with your arm up. So naturally, your PBR is not going to be the same, but we normally make about 50% less than we make on a car that we trade in. But there is a benefit.

Speaker #3: I will tell you that it is a metric that I measure every single week. And it is how much PBR do we make on a car that we traded in versus a car that we bought at the auction.

Speaker #3: The one thing that is guaranteed when you buy a car at the auction is you're the one that paid the most money for the car because you're the last one standing with your arm up.

Speaker #3: So naturally, your PBR is not going to be the same. But we normally make about 50% less than we make on a car that we trade in.

Speaker #3: But there's a benefit. You get the internal gross profit. You get another unit in operation. You get to certify the car. And then you get also the opportunity to protect the investment by offering the vehicle service contract or any of the other products that we offer.

Dan Clara: You get the internal gross profit, you get another unit in operation, you get to certify the car, and then you get also the opportunity to protect the investment by offering the vehicle service contract or any of the other products that we offer.

John Babcock: All right. Thanks for that. Next on M&A, I was wondering if you might be able to talk about what you are seeing in the market right now, both in terms of prospects and valuations, also when we should expect you to get more active there.

Speaker #5: All right. Thanks for that. And then next on M&A, I was wondering if you might be able to talk about what you're seeing in the market right now, both in terms of prospects and valuations and also when we should expect you to get more active there.

Speaker #3: Yeah. Like Michael and I stated earlier, our number we have two major priorities right now. Our number one priority is operational excellence. Now that the rollout is behind us.

Dan Clara: Like Michael and I stated earlier, we have two major priorities right now. Our number one priority is operational excellence now that the rollout is behind us. The second priority is with the operational excellence comes additional EBITDA and free cash flow. We want to go ahead and pay down the debt to get below 3 times.

Speaker #3: The second priority is with the operational excellence comes additional EBITDA and free cash flow. We want to go ahead and pay down the debt to get below three times in the M&A.

Dan Clara: In the M&A, I have been seeing some deals still hitting the market. As you can see, those deals, I am sure that you see what they are bringing. I would like to expand a little bit on this one, because I would say that the private market transactions in our industry, they continue to show the value that buyers place on high-quality dealership portfolios. We believe that Asbury stacks up very well with a strong mix of luxury and import franchises. We have very attractive markets and very valuable owned real estate. I cannot stress it enough, we own over 80% of our real estate. We have TCA, which gives us with a nice growing streams, which we believe the market does not give us full credit for that business.

Speaker #3: I've been seeing some deals still hit in the market. As you can see, those deals I'm sure that you are that you see what they're bringing.

Speaker #3: And I like to expand a little bit on this one. Because I would say that the private market transactions in our industry, they continue to show the value that buyers place on high-quality dealership portfolios.

Speaker #3: We believe that Asbury stacks up very well with a strong mix of luxury and import franchises. We have very attractive markets. And very valuable on real estate.

Speaker #3: And I can't stress it enough. We own over 80% of our real estate. And we have TCA, which gives us with a nice growing streams, which we believe the market does not give us full credit for that business.

Dan Clara: Therefore, when you put all that together, we believe our current share price does not reflect the underlying value of the business that we are seeing in some of these private markets deals that are going out there.

Speaker #3: So therefore, when you put all that together, we believe our current share price does not reflect the underlying value of the business that we're seeing in some of these private markets deals that are going out there.

John Babcock: Okay. Then just last question quickly. You mentioned operational excellence, and obviously you have the Tekion benefits rolling through next year. Could you maybe talk about what other opportunities you have here to help take costs out on the SG&A line or just broadly to help improve volumes within the business?

Speaker #5: Okay. And then just last question quickly. You mentioned operational excellence. And obviously, you have the Tekion benefits rolling through next year. Could you maybe talk about what other opportunities you have here to help take costs out on the SG&A line and/or just broadly to help improve volumes within the business?

Michael Welch: Yeah. So on the SG&A side, not only the Tekion just makes us more efficient, but also just a lot of the stuff going on with AI really helps us with those efficiencies as well, and being able to automate some functions with that technology. Tekion allows us the ability to deploy that AI easier. But really, this sounds bad, but we have been devoting a lot of our resources to getting Tekion rolled out. So being able to deploy all those resources back into the five pillars, where it is growing new vehicles, growing fixed ops, growing used cars, like that focus and not being, I will not say distracted, but just we have been having to put a lot of resources towards just the rollouts. That is just going to allow us to push the volume on the gross profit growth.

Speaker #3: Yeah. So on the SG&A side, not only the Tekion just makes us more efficient, but also just a lot of stuff going on with AI.

Speaker #3: Really helps us with those efficiencies as well. And being able to automate some functions with that technology. And Tekion allows us the ability to deploy that AI easier.

Speaker #3: But really, it's we've been almost this sounds bad, but we've been devoting a lot of our resources to getting Tekion rolled out. And so being able to deploy all those resources back into the five pillars where it's growing new vehicles, growing fixed ops, growing used cars, that focus and not being I won't say distracted, but just we've been having to put a lot of resources towards just the rollouts.

Speaker #3: That's just going to allow us to push the volume on the gross profit growth. And that's really if we get back to growing gross profit and solid numbers and keep the expenses lean, that has a big benefit on the SG&A number.

Michael Welch: That is really, if we can get back to growing gross profit and solid numbers and keep the expenses lean, that has a big benefit on the SG&A number, or SG&A percentage of gross number.

Speaker #3: Our SG&A percentage of gross number.

John Babcock: Okay. Very helpful. Thank you.

Speaker #5: Okay. Very helpful. Thank you.

Operator: Our next question is from David Whiston with Morningstar. Please proceed.

Speaker #1: Our next question is from David Winston with Morningstar. Please proceed.

David Whiston: Thanks. Good morning. Could you just talk a bit about what effect, if any, interest rates and negative equity is having, both for buying used and new vehicles and for making additional purchases in the service lane?

Speaker #6: Thanks. Good morning. Could you just talk a bit about what effect, if any, interest rates and negative equity is having both for buying used and new vehicles and for making additional purchases in the service lane?

Dan Clara: Yeah. I will tell you that the biggest impact that I have seen, or the one that comes up the most is negative equity. We are starting to see cars that were sold during the pandemic that are starting to come in. So there is that negative equity that is definitely impacting some brands more than others. From an interest rate perspective, I have not seen a major shift. Although, I am curious to see when OEMs are going to start supporting more leasing just because of the affordability, that it allows somebody to get a newer car for less of a monthly payment.

Speaker #3: Yeah. I will tell you that the biggest impact that I have seen or the one that comes up the most is negative equity. There's we're starting to see cars that were sold during the pandemic that are starting to come in.

Speaker #3: And so there is that negative equity that definitely impacting some brands more than others. From an interest rate perspective, we I've not seen a major shift although I'm curious to see when OEMs are going to start supporting more leasing just because of the affordability that it allows somebody to get a newer car for less of a monthly payment.

David Whiston: Then on the brands where it is having an issue, are you losing those sales? Are you able to figure something out?

Speaker #6: Then on the brands where it is having an issue, are you losing those sales? Are you able to figure something out?

Dan Clara: Listen, it is hard to tell because, as you know, it is based on the consumer credit. If the consumer credit is, call it 700-plus FICO score, your loan-to-value is going to be a lot more flexible. You can put that deal together, depending on how much negative equity we are talking about. But that is on a case-by-case scenario. In some cases, if you have somebody that maybe is subprime, or does not have a lot of down payment, yeah, you do miss that deal or always try to find a solution. Is there a car that came out, a loaner car that maybe puts you in a better book position that you can trade them out of it? We explore every option available for us.

Speaker #3: Listen, it's hard to tell because as you know, it is based on the consumer credit. If the consumer credit is it's call it 700-plus FICO score.

Speaker #3: Your loan-to-value is going to be a lot more flexible. You can put that deal together depending on how much negative equity we're talking about.

Speaker #3: But that's on a case-by-case scenario. And in some cases, if you have somebody that maybe is subprime or does not have a lot of down payment, yeah, you do miss that deal or always try to find a solution is there a car that came out a loaner car that maybe puts you in a better book position that you can trade them out of it and we explore every option available for us.

David Whiston: On the balance sheet, you talked about wanting to do some tuck-in acquisitions, but also paying down debt to get the leverage ratio to your target. Would the tuck-in deals involve touching the credit line, or would it be entirely internally funded without debt?

Speaker #6: And then on the balance sheet, you talked about wanting to do some talking acquisitions, but also paying down debt. To get the leverage ratio to your target, so with the talking deals, involve touching the credit line or would it be entirely internally funded without debt?

Michael Welch: Well, our first priority is getting the leverage down. At the current share price, it would be share buybacks, and then tuck-in acquisitions would be the last of what we use the capital for. But the goal is in the future, we should be able to do tuck-in acquisitions. We should be able to do share buybacks and tuck-in acquisitions with our free cash flow. We want to get back to that below 3x just to have the optionality when something comes up to be able to go after it. Right now, we are just a little limited in terms of where the leverage is.

Speaker #3: Well, our first priority is getting the leverage down. And then at the current share price, it'd be share buybacks. And then talking acquisitions would be the last of what we use the capital for.

Speaker #3: But the goal is in the future, we should be able to do talking acquisitions well, we should be able to do share buybacks and talking acquisitions with our free cash flow.

Speaker #3: We want to get back to that below three times just to have the optionality when something comes up to be able to go after it.

Speaker #3: Right now, we're just a little limited in terms of where the leverage is.

David Whiston: Okay, thank you.

Speaker #6: Okay. Thank you.

Operator: Our next question is from Ryan Sigdahl with Craig-Hallum Capital Group. Please proceed.

Speaker #1: Our next question is from Ryan Seagal with Craig Hallam Capital Group. Please proceed.

Ryan Sigdahl: Hey, good morning, guys. Two clarifications for us or follow-ons, but on the doc fees, I appreciate the more transparent approach relative to many of your peers, but curious on it from an absolute standpoint, if you expect doc fees to go lower from here for Asbury, or if you think most of that is already built in at this moment. Maybe just talk to the GPU 3,000 from a new standpoint normalization, and if doc fees impact that from here.

Speaker #5: Hey, good morning, guys. To clarifications for us or follow-ons, but on the doc fees, I appreciate the more transparent approach relative to many of your peers.

Speaker #5: But curious on it from an absolute standpoint, if you expect doc fees to go lower from here for Asbury or if you think most of that is already built into at this moment.

Speaker #5: And then maybe just talk to the GPU 3,000 from a new standpoint, normalization, and if doc fees impact that from here.

Dan Clara: Yeah. I don't expect doc fees to go down. Our approach has always been very simple with doc fees. We've never wanted to be the highest in the markets that we operate. We've always been in the middle, for lack of a better term. So we're positioned the right way. Don't expect that to go down. We'll continue to obviously to operate with full transparency. The second part of the question, can you please remind me?

Speaker #3: Yeah. I don't expect doc fees to go down. Our approach has always been very simple with doc fees. We've never wanted to be the highest in the markets that we operate.

Speaker #3: We've always been in the middle. For lack of a better term. So we're positioned the right way. Don't expect that to go down. And we'll continue to obviously to operate in the with full transparency.

Speaker #3: The second part of the question, can you please remind me? Oh, new vehicle PBR. Yeah, at 3,000. For several quarters, we've been talking about our projection of anywhere between 2750 to 3,000.

Ryan Sigdahl: The vehicle.

Dan Clara: Oh, new vehicle PBR. Yeah. At $3,000. For several quarters, we have been talking about our projection of anywhere between $2,750 to $3,000. You can see that actually, I believe new car PBR sequentially, quarter over quarter, went up $6 a car, if I remember correctly. So I believe that we are stabilizing there, and it fits well within the range that Michael and I have been talking about. The one thing that is important to consider here is, it does not mean that it is going to be a flat line. There is going to be ups and downs, seasonality, OEMs, incentives and what have you. But I think that target that you see is pretty much what we are seeing moving forward.

Speaker #3: You can see that actually, I believe new car PBR sequentially quarter over quarter went up $6 a car, if I remember correctly. So I believe that we're stabilizing there and if it's well within the range that Michael and I have been talking about it.

Speaker #3: The one thing that is important to consider here is it doesn't mean that it's going to be a flat line. There's going to be ups and downs seasonality OEMs incentives and what have you.

Speaker #3: But I think that that target that you see is pretty much what we're seeing moving forward.

Ryan Sigdahl: Appreciate that. Maybe just click on SG&A to gross profit. Appreciate the commentary and kind of glide path from mid-60s to low 60s exiting next year. But are you willing to say at least directionally if you think 2028 and beyond, you can go below the low 60s if it is kind of a linear improvement from there? Thanks.

Speaker #5: Appreciate that. Then maybe just quick one on SG&A to gross profit. Appreciate the commentary and kind of glide path from mid-60s to low-60s exiting next year.

Speaker #5: But are you willing to say at least directionally if you think 28 and beyond, you can go below the low-60s if it's kind of a linear improvement from there?

Speaker #5: Thanks.

Michael Welch: Well, so I guess we are going to take it in stages. We have all the AI and Tekion stuff that gets us into the low 60s. There are some things we are looking at in terms of, I will call it the digital vehicle transaction. Depending on where that goes, that could give us the ability to kind of push it below 60%. But I would not say that is a linear path. That is more of a next step path, and we just got to kind of figure out how that works with the software and the consumer and kind of how the consumer wants to behave online and digital type transactions. So that is below 60s with that new phase of digital vehicle sales transactions.

Speaker #3: Well, so I guess we're going to take it in stages. So we have if I was the AI and techie on stuff that gets us into the low-60s, there's some things we're looking at in terms of I'll call it the digital vehicle transaction.

Speaker #3: And depending on where that goes, that could give us the ability to kind of push it below 60%. But that's I wouldn't say that's a linear path.

Speaker #3: That's more of a next step path. And we just got to kind of figure out how that works with the software. And the consumer and kind of how the consumer wants to behave on online and digital-type transactions.

Speaker #3: So that's a below-60s with that new phase of digital vehicle sales, transactions.

Ryan Sigdahl: Reasonable to assume kind of a low 60s is the right run rate kind of in the outyears now?

Speaker #5: So reasonable to assume kind of a low-60s is the right run rate kind of in all ears?

Michael Welch: Yeah. Again, until we kind of cross the bridge on. We are hoping 2028, 2029, but we got to do some homework and feel it out on how the consumer reacts to that, and test it before we pull the trigger on that. But yeah, I think low 60s until we can make that change.

Speaker #3: Yeah. Again, until we kind of cross the bridge on I mean, we're hoping 28, 29, but we got to do some homework and feel it out on how the consumer reacts to that and test it before we pull the trigger on that.

Speaker #3: But yeah, I think low-60s until we can make that change.

Ryan Sigdahl: Helpful. Appreciate it. Thanks. Good luck, guys.

Speaker #5: Helpful. Appreciate it. Thanks. Good luck, guys.

Michael Welch: Cheers.

Speaker #3: Thank you, guys.

Operator: Our next question is from Rajat Gupta with JPMorgan. Please proceed.

Speaker #1: Our next question is from Rajat Gupta with JP Morgan. Please proceed.

Rajat Gupta: Hey, thanks for taking the follow-up. I just wanted to follow up on parts and services. I think you talked about getting back to mid-single digit range at some point next year. Are you already starting to see some signs of turnaround in Q4 here from down 2% same store in Q3? Do you think you are going to be back in positive territory here in Q4? Just trying to understand the path towards that mid-single digit range. Is it market-driven? Is it Tekion productivity driven? Then I have a very quick follow-up. Thanks.

Speaker #6: All right. Thanks for taking the follow-up. I just wanted to follow up on parts and services I think you talked about getting back to mid-single digit range at some point next year.

Speaker #6: Are you already starting to see some signs of turnaround in the fourth quarter here from down 2%, same store in the third quarter? Do you think you're going to be back in positive territory here in the fourth quarter?

Speaker #6: Just trying to understand the path towards that mid-single digit range. Is it market-driven? Is it taking on productivity-driven? And then I have a very quick follow-up.

Speaker #6: Thanks.

Michael Welch: Just a reminder, 47 stores went live this quarter. Q4 will still have an impact for those stores. Q4 is still in the heavy piece of Tekion. So I just wanted to put that out there right there, and I will let Dan kind of answer the rest of it. But Q4 is still a pretty heavy Tekion impacted quarter, just because of the amount of stores that went live this quarter.

Speaker #3: So just reminder, 47 stores went live this quarter. Fourth quarter, we'll still have an impact for those stores. We're still in the I'll call it fourth quarter is still in the heavy piece of techie on.

Speaker #3: So I'll kind of I just want to put that out there right there and I'll let Dan kind of answer the rest of it.

Speaker #3: But fourth quarter is still a pretty heavy techie on impacted quarter. Just because of the amount of stores that went live this quarter.

Dan Clara: Agree with Michael. Rajat, just to give you more color again, yes, we are seeing progress, in the stores or the markets that have been under Tekion for six months or more. Just as I repeated earlier, Florida, which just crossed a six-month target, the market was up 3% in September. That is just for the month of September. Then Georgia was up for the month of September, 6.6%. So very encouraged by what we see. But I cannot stress it enough, please do not forget that we rolled out 47 stores in Q3. All those stores are not going to be in the six-month threshold that we require and that we have seen the progress being made until end of Q1. So you will see progress in Q4, meaning in the stores that continue to roll into the six-month threshold.

Speaker #4: Agree with Michael. And Rajat, just to give you more cover again, on yes, we're seeing progress in the stores or the markets that have been under techie on for six months or more.

Speaker #4: And just as I repeated earlier, Florida, which just crossed a six-month target, the market was up 3%. In September, that's just for the month of September.

Speaker #4: And then Georgia was up for the month of September, 6.6%. So very encouraged by what we see. But I can't stress it enough. Please don't forget that we rolled out 47 stores in the third quarter.

Speaker #4: All those stores are not going to be in the six-month threshold that we require and that we have seen the progress being made. Until end of Q1.

Speaker #4: So you will see progress in Q4, meaning in the stores that continue to roll into the six-month threshold. But we're not going to realize the full benefit of this as we go until we go into the end of Q1 and Q2 of 2027.

Dan Clara: But we are not going to realize the full benefit of this until we go into the end of Q1 and Q2 of 2027.

Rajat Gupta: Understood. Then just on F&I, we have been hearing at least from some private dealers that warranty attach rates are just taking a bit of a hit given affordability pressures. I am curious if you are observing any of that at your stores. How do you think F&I progresses, excluding obviously the TCA accounting noise? Just from a core basis, what is your view there? Thanks.

Speaker #6: Understood. And then just on F&I, we have been hearing at least from some private dealers that warranty attach rates and are just taking a bit of a hit given affordability pressures.

Speaker #6: I'm curious if you're observing any of that. At your stores, how do you think F&I progresses, excluding obviously the TCA accounting noise? Just on a core basis, what's your view there?

Speaker #6: Thanks.

Michael Welch: Yeah. We have seen a little bit of a drop in terms of our mix of the products versus the financing side of the equation. But this quarter, we still grew F&I PBR at the store level. Excluding the TCA deferral, we grew at $119. So we are still able to grow the F&I number. We have the headwind of TCA deferral going through there. But we are still seeing nice progress at the store level on the F&I side. So we have not seen a decrease on PBRs at the store level.

Speaker #3: Yeah. So we have seen a little bit of a drop in terms of our mix of the products versus the financing side of the equation.

Speaker #3: But this quarter, we still grew F&I PBR at the store level, excluding the TCA deferral. We grew at 119. So we're still able to grow the F&I number.

Speaker #3: We have the headwind of TCA deferral going through there. But we're still seeing nice progress at the store level on an F&I side. So we haven't seen a decrease on PBRs at the store level.

Rajat Gupta: Understood. That is very helpful. Great. Thanks for answering the questions again, and good luck.

Speaker #6: Understood. That's very helpful. Great. Thanks for getting the questions again, and good luck.

Michael Welch: Thank you.

Speaker #3: Thank you.

Dan Clara: This concludes today's call. Thank you very much, and we look forward to seeing you after Q4.

Speaker #4: This concludes today's call. Thank you very much. And we look forward to seeing you after Q4.

Operator: Thank you for your participation. You may now disconnect your lines.

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Q3 2026 Asbury Automotive Group Inc Earnings Call

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Asbury Automotive Group

ABG

Earnings

Q3 2026 Asbury Automotive Group Inc Earnings Call

Tuesday, October 27th, 2026 at 2:00 PM

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Asbury Automotive Group

Earnings

Q3 2026 Asbury Automotive Group Inc Earnings Call

ABG

Tuesday, October 27th, 2026 at 2:00 PM

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