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    ABG
    Earnings call· Mar 2026(Q1 FY26)

    ASBURY AUTOMOTIVE GROUP Q1 FY26 earnings call ABG

    Apr 28, 2026 Source

    Executive summary

    Asbury Automotive Group Q1 FY26 — Tekion Transition and Strategic Portfolio Optimization

    Asbury Automotive Group navigated a complex Q1 FY26 marked by significant Tekion DMS conversions and strategic portfolio optimization through divestitures. While severe weather and the DMS transition temporarily impacted volumes and efficiency, management remains confident in the long-term benefits of the technology platform and the strategic capital allocation decisions. The company is balancing debt reduction and share repurchases, anticipating improved financial performance in the latter half of the year as Tekion efficiencies materialize.

    Highlights

    5

    • Strategic divestiture of 10 dealerships and a collision center, representing approximately $600 million in annualized revenue, used to repurchase 678,000 shares and reduce debt.

    • Used vehicle PVR increased 16% YoY to $1,847 on an all-store basis, marking the second consecutive quarter of progress.

    • March saw adjusted same-store SG&A in the low 60s, indicating a rebound from weather impacts.

    • Customer pay and warranty gross profit in Parts & Service grew 4% in March, with April trending similarly.

    • Over 50% of stores are now running on Tekion, on track for full conversion by Fall, with early efficiency gains observed (e.g., Koons dealerships saw gross dollars per technician up 21% YoY).

    Concerns

    5

    • Q1 results reflect an expected decrease in volumes, with new vehicle units down approximately 4,300 on a same-store basis due to moderated consumer demand, severe weather, and Tekion transition disruption.

    • Parts and Service had a challenging quarter, with same-store gross profit slightly down YoY, attributed to winter storms and temporary disruption from DMS transition.

    • Adjusted SG&A as a percentage of gross profit on a same-store basis was 66.9%, higher than expected due to $2 million in legal expenses and severe weather headwinds.

    • New vehicle PVR on an all-store basis was down $177 YoY, indicating a moderation towards normalized profitability levels.

    • The non-cash deferral impact from TCA negatively affected adjusted EPS by $0.26 per share.

    Guidance & targets

    7
    CategoryTargetConfidence
    Effective tax rate
    approximately 25%
    medium materiality
    High
    Capital expenditures
    approximately $250 million
    medium materiality
    High
    Capital expenditures
    approximately $250 million
    medium materiality
    High
    Fixed operations gross profit growth
    mid-single-digit rates
    medium materiality
    Medium
    Tekion DMS conversion
    fully converted
    high materiality
    High
    TCA implementation
    complete rollout across all platforms
    medium materiality
    High
    Adjusted SG&A as a percentage of gross profit
    mid-60s range
    medium materiality
    Medium

    Operational metrics

    39
    Revenue
    $4.1 billion
    Q1 FY26

    Consolidated revenue.

    Gross profit margin
    17.7%up 22 bps
    Q1 FY26

    Consolidated gross profit margin.

    Adjusted operating margin
    5%
    Q1 FY26
    Adjusted EPS
    $5.37
    Q1 FY26

    Adjusted EPS for the quarter. Excludes net of tax, net gain on divestitures of $94 million, $5 million related to Tekion implementation expenses, $3 million of weather-related losses and $1 million related to duplicate DMS related expenses.

    Adjusted EBITDA
    $207 million
    Q1 FY26
    New vehicle PVR
    $3,371down $177 YoY
    Q1 FY26

    Includes positive impact of Chambers platform.

    New vehicle PVR sequential change
    down $73sequentially
    Q1 FY26
    New gross profit per vehicle
    $3,061
    Q1 FY26
    Used vehicle PVR
    $1,847up 16% YoY
    Q1 FY26
    Used retail gross profit per unit
    $1,828up 12% YoY
    Q1 FY26

    Second consecutive quarter of progress in growing GPUs, sequential increases in 6 out of last 7 quarters.

    F&I PVR
    $2,307
    Q1 FY26
    Total front-end yield per vehicle
    $4,806
    Q1 FY26
    Front-end yield per vehicle
    $4,921up $70 YoY
    Q1 FY26
    Adjusted net income
    $102 million
    Q1 FY26
    Weather impact on gross profit
    $19 million
    Q1 FY26

    Estimated impact on consolidated gross profit.

    Weather impact on EPS
    $0.56
    Q1 FY26

    Estimated impact on EPS.

    Adjusted SG&A as percentage of gross profit
    66.9%
    Q1 FY26

    Higher than expected due to weather headwinds.

    Adjusted SG&A as percentage of gross profit
    low 60s
    March 2026

    Indicates improvement after weather impact.

    Adjusted tax rate
    25.1%
    Q1 FY26
    TCA pretax income
    $15 million
    Q1 FY26
    TCA negative noncash deferral impact
    $7 million
    Q1 FY26
    Capital expenditures
    $46 million
    Q1 FY26
    Liquidity
    $1.2 billion
    Q1 FY26 end
    Transaction adjusted net leverage ratio
    3.2x
    Q1 FY26 end
    Diluted share count
    approximately 18.6 million
    Q1 FY26 end

    Before adjusting for any future buybacks.

    Gross dollars per technician growth
    21%YoY
    March
    Average productivity per service advisor growth
    16%
    March
    Support cost decrease
    5%
    March

    At the same time as productivity gains.

    New vehicle day supply
    54 days
    Q1 FY26 end (March)

    Considered healthy and supportive of resilient gross profit per unit.

    Used vehicle DSI
    30 daysdown from 35 days at Q4 FY25 end
    Q1 FY26 end
    Customer pay gross profit growth
    4%
    March 2026

    April trending similar to March.

    Warranty gross profit growth
    3%
    March 2026

    April trending similar to March.

    Weather impact on new vehicle sales
    500 units
    Q1 FY26

    Estimated impact from weather-related closures.

    Weather impact on used vehicle sales
    500 units
    Q1 FY26

    Estimated impact from weather-related closures.

    Weather impact on fixed revenue
    $13 million
    Q1 FY26

    Estimated impact from weather-related closures.

    New car sales unit decline
    approximately 4,300 unitsYoY
    Q1 FY26

    Represents the unit decline on a same-store basis.

    New vehicle revenue
    down 9%YoY
    Q1 FY26
    Used gross profit
    up 1%sequentially
    Q1 FY26
    Parts & Service gross profit
    down slightlyYoY
    Q1 FY26

    Due to slowdowns associated with winter storms and Tekion transition.

    Industry KPIs

    7
    MetricValueDetails
    Sg a OPEX ratio66.9%%
    Comparable salesdown 9%%
    Store count growth10 dealerships and 1 collision center divested
    Gross margin drivers17.7%%
    Net debt to adjusted EBITDA3.2xx
    Share buyback capital return$147 millionUSD
    Inventory position markdown risk54 daysdays

    Deals & partnerships

    1
    UndisclosedDivestiture of 10 dealerships and 1 collision center, and termination of 7 franchises (Alfa Romeo and Maserati brands).Generated $600 million in annualized revenue (estimated)

    Divested 10 dealerships and a collision center at attractive multiples, representing approximately $600 million in annualized revenue. Terminated 7 franchises, including Alfa Romeo and Maserati brands. Combined, these stores generated an estimated annualized revenue of $625 million.

    Risks & headwinds

    6
    Temporary disruption in store operations and elevated integration costs due to Tekion DMS transition.Peak in Q2 and Q3 2026, with efficiencies taking 4-6 months to materialize per store.

    Costs related to integration and temporary disruption will remain elevated as team members become fully acclimated. Stores are slightly less efficient in the first 2 months of operating in the new DMS.

    Mitigation: Management believes short-term headwinds are outweighed by long-term benefits in efficiency, productivity, and cost reduction. Dedicated training and support for team members.

    Expected decrease in volumes due to moderated consumer demand.Q1 FY26 and continuing into Q2 FY26.

    New vehicle volumes were down. New car sales slowdown into April. Same-store new vehicle revenue down 9% YoY.

    Mitigation: Focus on maximizing per unit profitability (e.g., used vehicle strategy). Monitoring consumer behavior.

    Impact from severe winter weather across multiple weekends and nearly all markets.Q1 FY26 (January and February particularly rough).

    Estimated $19 million impact on gross profit and $0.56 impact on EPS. Approximately 500 units lost sales in new and used vehicles (same-store). $13 million impact on same-store fixed revenue.

    Mitigation: Weather is behind us; March and April showed recovery.

    Monitoring consumer behavior in light of ongoing geopolitical events and high oil/gasoline prices.Ongoing.

    Not yet quantified for impact on buying habits, but potential for shift if war lingers.

    Mitigation: Monitoring trends; historically takes 5-6 months for consumer buying habits to change due to gas prices.

    Headwind from Stellantis brand performance, impacting domestic GPU.Ongoing.

    Domestic GPU impacted.

    Mitigation: Focusing on performing better with Stellantis, getting inventory turn, and maximizing gross profit.

    Potential challenge in sourcing used vehicles if new car sales do not rebound, as fewer trade-ins will be available.Next few quarters.

    Roughly 2,300 to 2,500 trade-ins on 4,000 new units, with 80% retailed. A chunk of pre-owned normally available internally will be missing.

    Mitigation: Anticipate increased pool of used vehicles from lease return activity through the year.

    What to watch in Q2 FY26

    5

    Tekion efficiency gains

    Very late Q2 into Q3
    CurrentKoons dealerships seeing 21% tech productivity, 16% service advisor productivity, 5% support cost reduction. Overall, stores are slightly less efficient in first 2 months post-conversion.
    TargetOverall company-wide efficiency gains and cost reductions, with more stores moving past the 4-6 month adjustment window.

    Why it matters

    Tekion is a major investment and strategic initiative; realizing its promised efficiencies is critical for future profitability and operational leverage.

    I would say that the peak is going to be very late 2Q into 3Q is kind of where the peak will be.

    Q&A highlights

    6

    Asked for a "state of the union" on current demand trends for new and used vehicles, and parts & service, considering Q1's weather and Tekion impacts, and the end of tax refund season.

    David Hult noted January/February were rough due to weather, but March and April showed signs of recovery, with SG&A in the low 60s. He acknowledged a slowdown in new car sales continuing into April, and potential challenges in sourcing used vehicles if new sales don't rebound. He expressed confidence in Parts & Service bouncing back as Tekion efficiencies take hold.

    “January and February were really rough for us from a weather perspective... March was a good sign for us... We see the same going into April. Very difficult to predict much beyond that with what's going on with the war in gasoline prices and other things and how long that lingers.”

    asked by Jeffrey Lick · answered by David Hult

    2 min read6 chapters

    Detailed Narrative

    01

    Tekion DMS Transition and Impact

    The company is actively migrating to Tekion, with over 50% of stores converted and full conversion expected by Fall 2026. This transition, while necessary for elevating guest experience and enhancing operational capabilities, is causing temporary disruptions and elevated integration costs, particularly peaking in Q2 and Q3. Early results from converted Koons dealerships show significant efficiency gains, including a 21% increase in gross dollars per technician and a 16% rise in average productivity per service advisor, alongside a 5% decrease in support costs.

    02

    Strategic Portfolio Optimization

    Asbury divested 10 dealerships and a collision center, representing approximately $600 million in annualized revenue, and terminated 7 franchises, including Alfa Romeo and Maserati brands. These strategic transactions allowed the company to optimize its portfolio, reduce its CapEx burden, and deploy proceeds towards higher-return options, including debt reduction and share repurchases.

    03

    Capital Allocation and Shareholder Returns

    The company repurchased 678,000 shares for $147 million, leveraging the proceeds from divestitures and robust cash flow. Management views the current stock price as undervalued and is taking advantage of this dislocation to accelerate repurchase activity, balancing debt levels and shareholder returns. The diluted share count is approximately 18.6 million.

    04

    Q1 Operational Headwinds

    The first quarter was impacted by several factors, including moderated consumer demand, severe winter weather across nearly all markets, and temporary disruptions from the Tekion DMS transition. Weather alone is estimated to have impacted gross profit by $19 million and EPS by $0.56, and caused approximately 500 units of lost sales in both new and used vehicles on a same-store basis.

    05

    Used Vehicle Strategy and Performance

    Asbury's strategy in used vehicles focuses on maximizing per-unit profitability rather than chasing volume. This approach has led to sequential increases in used vehicle GPUs in 6 out of the last 7 quarters. The company anticipates an increasing pool of used vehicles through the year, aided by lease return activity, which is expected to provide opportunities for volume growth while maintaining profitability.

    06

    Parts & Service Growth Potential

    Despite a challenging Q1 due to weather and DMS transition, the company expects fixed operations gross profit to grow at mid-single-digit rates over time⏳. Management highlights the aging car park, increased vehicle complexity, and the efficiencies gained from Tekion (such as improved cycle time) as key drivers for long-term growth in this segment.

    AI-generated summary of the company’s earnings call. Not investment advice.