Greetings. Welcome to the Asbury Automotive Group Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief Q&A session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Villasana, Senior Vice President and Chief Legal Officer. Thank you, sir. You may begin. Thank you, operator. Good morning. As noted, today's call is being recorded and will be available for replay later this afternoon. Welcome to Asbury Automotive Group's Second Quarter 2023 Earnings Call. The press release detailing Asbury's second quarter results was issued earlier this morning and is posted on our website at investors.asburyauto.com. Participating with me today are David Hult, our President and Chief Executive Officer, Dan Clara, our Senior Vice President of Operations, and Michael Welch, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open 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. Forward-looking statements or statements other than those which are historical in nature, which may include financial projections, forecasts, and current expectations, each of which are subject to significant uncertainties. For information regarding certain of the risks that may cause actual results to differ materially from these statements, please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2022, any subsequently filed quarterly reports on Form 10-Q, and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures as defined under SEC rules, may be discussed on this call. As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website. We also have posted an updated investor presentation on our website, investors.asburyauto.com, highlighting our second quarter results. Now, it is my pleasure to hand the call over to our CEO, David Hult. David? Thank you, George, and good morning, everyone. Welcome to our second quarter earnings call. I'm proud of the team's performance in Q2. Our strong cost discipline and continued work to maximize our gross profit streams generated strong results this quarter. We've also been opportunistic, utilizing our strong cash flow from operations for share repurchases. We repurchased over 1 million shares year to date, with 960,000 of those shares repurchased in the second quarter alone for $190 million. Within this current macro environment, we are well-positioned due to our diversified business model, our strong balance sheet, our focus on profitability, and our North Star to be the most guest-centric automotive retailer. Now, I'll turn to our consolidated results for the second quarter of 2023. We delivered $3.7 billion in revenue, had a gross profit margin of 19.1%. Our adjusted SG&A as a percentage of gross profit was 57%, generating an adjusted operating margin of 7.8%. Our adjusted EBITDA was $307 million, and adjusted EPS was $8.95. Looking forward, we are optimistic about the future of automotive retail. We operate in an environment where the average age of the car is 12.5 years, the highest it's ever been. While start levels have been trending higher, they're still well below historical levels. The combination of older cars, complexity of new cars, and the transition to EVs enables consistent growth within our parts and service business. With our strong balance sheet and robust liquidity, we are looking to deploy capital through opportunistic share buybacks and acquisitions. We continue to aggressively pursue acquisitions that will be accretive to Asbury. We are disciplined stewards of capital. We are strategic when the capital allocation opportunities arise, such as our recent share repurchase activity. Again, I'm pleased with the second quarter results, especially with regards to our expense management. We have been and continue to be thoughtful operators with an eye towards efficiency and strong profitability, while integrating over 50 stores from our acquisitions. Finally, I would like to extend a thank you to my fellow team members for a terrific first half of 2023. I'll now hand the call over to Dan to discuss our operating performance. Dan? Thank you, David. Good morning, everyone. I would also like to say thank you to all our team members for their hard work, dedication, and commitment to be the most guest-centric automotive retailer. Moving to same-store performance, which includes dealerships and TCA, unless stated otherwise. Starting with new vehicles. Our new vehicle inventory ended the quarter at $766 million, which represents a 32-day supply. There was significant variation among brands and models. Our new vehicle revenue grew 8% year-over-year. New average gross profit per vehicle was $4,832. New vehicle gross margin was 9.5% this quarter. Turning to used vehicles. Used retail revenue and unit volume were both down 15% compared to prior-year quarter. Used retail gross profit per vehicle was $2,085 for the quarter. Our used vehicle inventory ended the quarter at $358 million, which represents a 35-day supply. Shifting to F&I. We delivered an F&I PVR of $2,369, which is a slight decrease of $42 compared to the prior year quarter. In the second quarter, our total front-end yield per vehicle was $5,959, a decrease of $605. Moving to parts and service. Our parts and service business revenue increased 6% in the quarter. Customer pay revenue also grew 6%. We expanded its gross profit by 6%. As a reminder, when we acquired LHM, we stated that full integration would take five years. We are now in year two. We're implementing significant changes from a process and systems perspective. This significant degree of change does have an effect on our operations. This quarter, we saw that the average repair order of battery EVs was over one and a half times higher than the average internal combustion vehicle dollars per RO. For reference, today, about 95% of ROs are internal combustion vehicles. While the proportion of EVs we service is much smaller than internal combustion cars, the number of ROs for EVs has increased sequentially since Q2 of 2022. As the market prepares for increased penetration of EVs, we feel our parts and service business is in a strong position for growth to accommodate these vehicles for years to come. Turning to Clicklane. Please note that for Clicklane, we are reporting on an all-store basis. We set another all-time record of over 11,400 vehicles through Clicklane in the second quarter, a 74% increase year-over-year and a 6% increase over the previous best, which was last quarter. 16% of our second quarter new and used retail sales were powered by Clicklane. We're pleased to see that 48% of Clicklane sales in Q2 were new vehicles and 52% were used. We generated $500 million in Clicklane revenue for the quarter, and we're now tracking to approximately $2.1 billion in revenue in 2023, slightly behind our original estimate for the year. Moving on, onto some KPIs for the second quarter. Total front-end PVR of $3,333 and an F&I PVR of $2,408, which equates to $5,740 of total front-end yield. The average Clicklane customer credit score was 717, which is higher than the average credit score at our stores. 91% of those that applied were approved for financing, of which 78% of those customers received instant approval, while the remaining customers required some offline assistance. 74% were lender finance sales and 26% were cash sales. The average distance of a Clicklane delivery from our dealerships was 44 mi, a natural increase from prior quarters as the western states utilize the convenience that Clicklane has to offer. Once again, I would like to thank our teams for providing a high level of service, which defines us and drives us to constantly do the right thing. I will now hand the call over to Michael to discuss our financial performance. Michael? Thank you, Dan. To our investors, analysts, team members, and other participants on the call, good morning. I would like to provide some financial highlights for our company. For additional details on our financial performance for the quarter, please see our financial supplement in our press release today and our investor presentation on our website. Overall, adjusted net income was $188 million, adjusted EPS was $8.95 for the quarter. Adjusted net income for the second quarter of 2023 excludes net of tax, gains of $11.6 million, related to a $10.2 million gain on the sale of a dealership, and $1.4 million gain from a legal settlement. Adjusted net income also excludes a $3.2 million loss due to hail damage. These items decreased 2023 second quarter diluted EPS by $0.40. Adjusted net income for the second quarter of 2022 excludes losses, net of tax of $21.5 million, or $0.97 per diluted share, related to the losses on the sale of dealerships and a collision center. Our effective tax rate for the second quarter of 2023 was 24.8%, in line with the second quarter of 2022. We estimate our tax rate for the full year of 2023 at 24.9%. Excluding real estate purchases, we spent $41 million on capital expenditures year to date. We expect full year 2023 CapEx to be $185 million as we continue to roll out planned CapEx related to our 2021 acquisitions. Of this $185 million, about $20 million is related to replacement of lease properties. Year to date, TCA made $51 million of pre-tax income. We are still on track to deploy TCA into the rest of our stores by the end of 2023. Due to the deferral of the income associated with the store rollouts in our larger states, we had conservatively expected TCA to generate $25 million of pre-tax income for 2023. The amortization of higher deferral from prior years replaced by lower deferral in the current years, due to lower unit sales in 2023, has increased TCA's income above our previous expectations. We now expect pretax income for TCA for 2023 to be $75 million. For the second quarter of 2023, we generated $174 million of adjusted operating cash flow, driven by a robust business model. As David mentioned earlier, we repurchased 960,000 shares for $190 million in the quarter. In June, we also prepaid our 2013 B of A mortgage for $24 million. Our pro forma adjusted net leverage was 1.7 times at the end of June, reflecting the use of cash to repurchase shares. Our balance sheet remains strong as we ended the quarter with approximately $1.6 billion of liquidity, comprised of cash, excluding cash from Total Care Auto, floorplan offset accounts, and availability on both our use line and revolving credit facility. Finally, I would like to join David and Dan by thanking our Asbury team members. Thank you for your dedication to superior service and delivering strong results. This concludes our prepared remarks. We will now turn the call over to the operator and take your questions. Operator? Thank you. We will now be conducting our Q&A session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Daniel Imbro with Stephens. Please proceed with your question. Hey, good morning, everybody. Thanks for taking our questions. Good morning. David, I want to start actually on the expense side of the P&L. I thought SG&A gross was really impressive in the quarter, actually stepping down sequentially. Can you talk about just what drove the leverage? Is it savings from Clicklane? Is it some of the divestitures you guys have done? Maybe taking a step back, what opportunities still remain to optimize SG&A gross, understanding there will be some deleverage just as GPU is normalized? Thank you for the question, Daniel. You know, we've always, you know, for a lot of years now, we've led the peer space with SG&A. We try and operate as efficiently as we can. We do think, going forward, we have opportunities to lower our expense a little bit more over the next couple of years. I think part of it in the quarter, too, we maintain pretty healthy margins, which certainly kept SG&A in check as well. I would think for the next, you know, 12-18 months, as we're working on our software efficiencies and productivity, there's opportunities for us to improve. Clicklane is growing a little bit. It's a little bit over 16% of our sales. It's growing at a consistent pace, but as that picks up, there will be tailwinds with expense there. Right now, there are really no benefits from an expense standpoint with Clicklane, the way we're compensating today. Got it. Then maybe shifting to the new side of the business. You know, inventory built a couple of days, you maintained GPUs nicely despite the domestic exposure. Can you just talk about GPU trends maybe through the quarter? Were there any notable weak spots within the portfolio's profitability? You know, I would tell you, to your point on the domestics, you know, we're back to what I would call a normal day supply of domestic vehicles, or pretty close to it, and we're still well over $4,600 a car. You know, I think all of our peers and ourselves have been talking about it. We're not gonna go back to 2019 levels, and we certainly don't see that anytime in our near future. We think our folks in the stores are doing a really great job at ordering the right inventory and maximizing the gross profit per transaction. We anticipate, as we sit here today, that, you know, that's a continuance in the near future. Perfect. Last one for me. Maybe on the balance sheet, Michael, wrapping up. You guys deployed more cash from ops towards buyback, but it does still sound like there's an appetite for M&A. Can you talk about what you're looking for in a target? Are you looking to expand your brand mix with certain OEMs? I know today, TCA is not a use of cash, but when we look at those longer-term targets, is there gonna need to be any cash infusion to get there, or is that gonna be self-funding from its own cash? I'll take the TCA question first, then let David take the acquisition question. On TCA, you know, if you think about it, before TCA, the customer paid us at the dealership. We kept a percentage of that income and kept it as cash to the dealership, then took the rest of the cash and sent it off to a third-party provider. All that cash that kind of funds TCA is from our customers, and so we're just taking the cash from the customers. Part of it stays at the dealership level, you know, we can use for operating purposes, share buybacks, acquisitions. The rest of it goes into the investment bucket at TCA, there's no cash that we have to come out of pocket to support that. It's all customer driven. From the acquisition standpoint, you know, we divested one store in the quarter, and it was mainly due to logistics. It was a market where we only had one store. We couldn't find acquisitions in that market that were gonna strengthen that market, so we decided to sell that one store, and we also avoided a large CapEx project in doing that. We thought it was the best use of cash. We're very focused on portfolio management, the brands that we have and where the stores, you know, sit within which states. We are aggressively in conversations with acquisitions now. We've seen a lot. Obviously, we haven't announced anything because we haven't been able to land something that meets our criteria in the states and brands that we want. We're hopeful with our current conversations that, you know, something will come together. As you know, these things take time, and you just have to play them out. Perfect. Well, I appreciate all the color this morning. Best of luck. Thank you. Our next question comes from the line of John Murphy with Bank of America. Please proceed with your question. Good morning, guys. I just wanted to ask about parts and service. You had some very interesting comments about your experience with EVs so far, and what we've, you know, heard just from on the GM call, the $792 million charge they took for the Bolt recall. It seems like there's gonna be opportunity for warranty work or repair work on EVs that might be far higher, as you were saying, five times on the ROs versus the average IC vehicle. Yeah, what are you expecting there? Is there, you know, a big capital investment that needs to go on in the service base to get ready for that? Also, maybe conversely, just in a more traditional sense, I mean, how much pent-up, you know, service work do you think there still is, do people, you know, finally come back and actually are doing the work they need to do out there? Hi, John, good morning. This is Dan. Just before I answer your question, just a correction, the EV ROs, customer pay ROs was 1.5 compared to. Got it. Okay. Um. Sorry about that. Just want to make that correction. No, no problem. First question, as far as the EV and any infrastructure or investment that is required, yes, you know, there, it does require, and I'll start first with the technician training, tremendous amount of training that goes into that, where technicians go to the local OEMs outside of the market or in a lot of the cases inside the market, but then also got to have the proper equipment. As you can imagine, a tremendous amount of infrastructure being invested in the charging stations for these vehicles. As we see that a transition, we need to make sure that not only service the guests that are acquiring the cars, but also that we're able to fully charge them while they're in our service departments or while we are prepping them for delivery, for lack of a better term. As far as the pent-up demand, you see the average age of a parked car is 12.5 years. So definitely. We also see some consumers keeping cars longer, based on those numbers. The pent-up demand is still there, and we feel that in the near future will continue to positively impact us. Just to add some color to the sales, it'll probably come up later, but I'll just mention it now. We're still sitting at a point where, you know, 30% of our vehicles are pre-sold. That's very helpful. I'm just sorry, back to the parts and service, same store. I mean, is this the kind of thing that, with this pent-up demand and what's going on with EVs, that you think sort of a mid-single digit growth rate on a same-store sales basis is reasonable, sort of in the near term for parts and service to assume? I mean, it seems like it's pretty sticky, and it's, you know, it's trending there, but I'm just curious what your view is on that. Yeah, we really do. You know, I think, you know, up until 2030 and maybe beyond, parts and service is going to be pretty strong. It was a bumpy quarter for us with parts and service. We have a lot going on with all our acquisitions out west, integrating new software, and changing processes. That takes a period of time and toll on your business so you can become efficient with it. We definitely think, you know, mid to high single-digit numbers are certainly very conservative for the foreseeable future. Okay. Just lastly, on floorplan interest expense, I mean, obviously, great performance there. You guys are managing the growth very well with, I guess, a lot of hedging instruments. Can you just explain to us what's going on there and how successful you think you'll be at mitigating, you know, the rate rise along with the actual, you know, unit rise over time as the industry recovers? Yeah. On the floorplan side, most of that's just the floorplan offset account. We negotiated the ability to put, you know, to basically offset 100% of the floorplan. All the excess cash we have right now is parked against that floorplan balance. It's not hedging, it's just, you know, use of cash to offset the balance. Okay, that's very helpful. Thank you very much, guys. Thank you, John. Thank you. As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from line of Rajat Gupta with JP Morgan. Please proceed with your question. Great. Thanks for taking the question. I just wanted to follow up on the previous question on new car GPUs. Curious if you could give us a sense of, you know, how your electric vehicle mixes today, both in terms of unit sales and inventory? Was there an outsized impact from, you know, a moderation in grosses on those EVs relative to IC that had an impact in the quarter? If that was the case, you know, when do we expect it to flush out of the system and get back to a more normal level? Thanks. I have a follow-up. Good morning, Rajat, this is Dan. I'll address your last question first, and then if I forget one, please remind me. What we're seeing with the EVs from a pricing standpoint and also from a margin standpoint, yes, it does have an impact, you know, when you see the supply and demand. I will tell you the biggest impact that we see is the level of support from, you know, the tax credits that might be available out there. When the tax credits are readily available for those cars, that inventory moves at a much faster pace. You know, the need for discounting is not as much needed as when the credit is not there. We see that in different pockets of that we operate, both positively impacted and then negatively impacted. Can you remind me what your second question was, please? Just like, is there a way to quantify, like, what the GPU impact was from electric vehicles? Any color on, like, just the day supply of EVs versus IC today in your inventory on the ground? Yes. Raj, this is David. I would tell you that the gross profits, when you look at our PVRs that we put in the tables, they're pretty much similar to what you see there. It does vary by model, or by brand, I should say, but our luxury stores with their EVs, they're moving pretty well, and the gross profits are, you know, pretty close to what the combustible engine gross profits are. And with some of the midline imports, same scenario. Some of the brands, you know, with Hyundai and Mercedes, as two examples with vehicles, we're doing a nice job at turning that inventory, and we feel the gross profits are very much in line with what you see with the rest of our combustible engine gross profits. Got it. Got it. That's, that's helpful color. Also following up on, you know, John's question on parts and services. You know, the first quarter to second quarter, you know, we saw some deceleration in the year-over-year rate. You talked about some of the operational integration impacts from LHM. Was that a driver of that deceleration, or was it like, this is where you had expected to land irrespective? Just curious, like, if there's any way to, you know, think about, like, why that decelerated, or was it, like, industry specific? Was it, was it company specific? Because some of your peers, like, have a higher number there, so. No, it's an excellent point. It's an excellent point. We certainly, most of the deceleration is with the conversion stores out west and changing software. I mean, we have a lot of tenured folks out there, hardworking people, that were used to doing things a certain way. When you go through some DMS changes that we've had and change the software that we're using in parts and service, which also changes processes at the same time, it has a cause and effect from a performance standpoint, and it takes a little bit. You know, it's probably foreseeable for the next quarter or two to see similar results. We're hoping right after that, we should be starting to see the efficiencies and folks getting used to the new software, and we'd be back to normal, if you will. Just when you think about it, you know, in that brief period of time between the Stevinson and Miller acquisition and the Arapahoe stuff, we almost doubled the company within 30 days. That was a significant size impact to our company as a whole, so there's a lot of transition that we're going through. Last year was more a year where we kept things sustained and didn't really go through a lot of conversions and change, and this is the year that we, you know, we've chose to really tackle that. Our folks out there are probably frustrated with us a little bit with some of the change and implementation of software, but once everyone gets used to it, we think we'll be at a much better place and more efficient out there, like our legacy stores are. Got it. Got it. Great, thanks for taking the two questions. I'll get back in queue for follow-ups. Thanks. Thank you. A final reminder, if you would like to ask a question, press star one on your telephone keypad. One moment while we re-poll for additional questions. Thank you. Our next question comes from the line of Bret Jordan with Jefferies. Please proceed with your question. Hey, good morning, guys. Good morning. Morning. Your comment on domestic GPUs still holding over $4,600, is there a lot of dispersion in the domestics? I mean, does that include Stellantis, where there is the highest inventory level, or are they all over $4,600? No, Bret, it's a good question, and Stellantis, as you can see, is our highest percent of domestic. Mm-hmm. It is our highest day supply as well. We're really pleasantly surprised. All three manufacturers are very similar to their PVRs, where they are. There's no huge disparity between any of the three. Okay, great. A sort of big-picture question on the five-year plan. You know, looking at it, obviously, a lot of talk about the integration plans for 2023, what's the biggest risk? Is it sort of a SAAR, supply-demand volume risk, or integration of acquired stores? I mean, it's sort of how do you bucket the challenges to the five-year plan? Yeah, I would say it's threefold. Finding the right acquisitions to make sure we can hit our target. That 5-year plan was based on a 17 SAAR, we haven't seen that for a while and may not see it for a little while as well. We think the conversion piece, you know, really differs. Miller was an anomaly because it was so large to take something like that on. Our prior acquisitions that were smaller were much easier to integrate, we don't see that as a big risk or an issue. It's really about finding the right acquisitions to add to what's getting back to a 17 million SAAR, I would think are the big ones. Being patient and consistent with Clicklane. We really think we have something there that we can build on. It continues to grow. It's a good percentage of our business, we wanna see that become a larger percentage of our business. We think that has great opportunity to grow as well. Okay, great. Just, you said 30% of the vehicles were pre-sold. Could you tell us what% were sold at MSRP? When you think about that, I don't have the exact percentage for you, but when you think about it, most of the pre-sold vehicles will be sold at or very close to MSRP. You think about our luxury and import, you know, almost 50% of the volume come from Lexus, Mercedes, Toyota and Honda. All those brands, we have a low day supply, so you could imagine that a lot of those vehicles are pre-sold in those lines, which are gonna garner, you know, high PVRs. Okay, great. Thank you. Yep. Thank you. We have no further questions at this time. Mr. Hult, I would now like to turn the floor back over to you for closing comments. Thank you, operator. We appreciate everyone's participation in today's call. We look forward to our next conversation after our third quarter earnings. Have a great day. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.