Asbury Automotive Group Inc Q4 2025 Earnings Call Transcript

Asbury Automotive Group Inc (NYSE: ABG) Q4 2025 Earnings Call dated Feb. 05, 2026

Presentation

Operator

Greetings and welcome to the Asbury Automotive Group fourth quarter 2025 earnings call. this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press Star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Chris Reeves, Vice President of Finance and Treasurer. Please go ahead.

Chris Reeves — Vice President of Finance and Investor Relations

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 fourth quarter 2025 earnings call. The press release detailing Asbury’s fourth quarter results was issued earlier this morning and is posted on our website@investors.asburyauto.com participating with me today are David Holt, our President and Chief Executive Officer, Dan Clara, our Chief Operations Officer and Michael Welch, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open the call up for questions and be available later for any follow up questions.

Before we begin, we must remind you that the discussion during the call today is likely to contain forward looking statements. Forward looking statements are statements other than those which are historical in nature, which may include financial projections, forecasts and current expectations, each of which are subject to significant uncertainties. For information regarding certain of the risks that may cause actual results to differ materially from these statements, please see our filings with the SEC from time to time, including our upcoming Form 10K for the year ended December 31, 2025, any subsequently filed quarterly reports on Form 10Q and our earnings release issued earlier today.

We expressly disclaim any responsibility to update forward looking statements. In addition, certain non GAAP financial measures as defined under SEC rules may be discussed on this call as required by applicable SEC rules. We provide reconciliations of any such non GAAP financial measures to the most directly comparable GAAP measures on our website. Comparisons will be made on a year over year basis unless we indicate otherwise. We have also posted an updated investor relations presentation on our website investors.asburyauto.com highlighting our fourth quarter results. It is now my pleasure to hand the call over to our CEO, David Hult.

David Hult — COO & EVP

David thank you Chris and good morning everyone. Welcome to our fourth quarter earnings call. As I said in our earnings release, 2025 was a productive year for Asbury. We grew the size of our business both in terms of revenue and in the geographic areas of the country in which we operate, acquiring 2.9 billion in revenue. More importantly, the composition of our portfolio continued to improve through strategic divestitures because of the discipline in running our business, we were ahead of where we thought we would be from a leverage perspective at 3.2 times versus our forecast of 3.5 times.

We deployed 186 million in CapEx and continued our share repurchase efforts, buying back 50 million in shares for the quarter and 100 million for the full year. We transitioned 15 additional stores onto Techyon during the quarter, ending the year with 38 stores operating on our new BMs. Managing our portfolio and allocating capital to areas that generate the greatest returns for the business and and our shareholders has long been a core pillar of Asbury’s strategic plan and I am proud of the team’s efforts to both grow the company and maintain our focus on expense control. Moving into 2026, we are confident these collective investments and the strength of our team position us to win, delivering value to our guests and returns to our shareholders.

Next, I’d like to highlight some same store operating metrics for the quarter. New vehicle sales volume were a reflection of prior year post election surge. PVRs on new vehicles continue to normalize and we reiterate our view that new vehicle profitability will eventually stabilize in the 2,500 to $3,000 range in used vehicles. We are beginning to see the results of our efforts to improve our performance and while volumes continue to reflect a supply constrained environment, gross profit rose 6% year over year with used vehicle retail PVRs up 18%. On the ground, we noticed a pullback in consumer spending in parts and service.

However, we are optimistic about the outlook and positioning of our fixed operations business. Later in the call, Dan will provide additional details on our operational performance. Our same store adjusted SGA as a percentage of gross profit was up 162 basis points versus prior year, reflecting the impact of lower new vehicle profitability. We remain committed to operating our business in the most efficient way possible and we’ll continue to adjust our cost structure as business conditions change. Moving to capital allocation, we divested four stores in the quarter and are on track to divest another nine stores by the end of the first quarter.

These 13 transactions, collectively representing 750 million of annualized revenue, are at attractive multiples and will further accelerate our path to reducing our leverage, giving us additional flexibility to pursue share repurchases. We expect to continue our repurchasing activity in 2026, the pace of which will be dictated by our share price, leverage profile, economic conditions and trade offs with strategic tuck in acquisition opportunities. And now for our consolidated Results for the fourth quarter, we generated a fourth quarter record of $4.7 billion in revenue at a gross profit of $793 million. Also a fourth quarter record, a gross profit margin of 17% and expansion of 31 basis points.

We delivered an adjusted operating margin of 5.4% and our adjusted earnings per share was $6.67. Our adjusted EBITDA was 250 million. I am proud of what the team accomplished in 2025 and with the foundational investments we’ve made in our business. I’m excited about the path ahead for 2026. Now Dan will discuss our operational performance in more detail. Dan.

Dan Clara — Senior Vice President of Operations

Thank you David and good morning everyone. I would like to start off with with a thank you to the team for the positive momentum going into this year as we undertook a number of growth objectives in 2025. Thank you. Looking back at the fourth quarter we increased our same store used gross profit thanks to our continued progress and execution by our team members. We also rolled out Techyon to an additional 15 stores during the quarter and in January added eight more stores which brings our current count to 46 or more than 25% of our portfolio.

And on an all store basis we can see the positive lift from the Chambers Group in our new and used PBRs. And now I’m going to provide some updates on our same store performance which includes dealerships and TCA on a year over year basis unless stated otherwise. Starting with new vehicles, same store revenue year over year was down 6% which followed the sore contraction of 5%. We faced a tough comfortable from last year’s post election surge and the pull forward effect of demand earlier in the year. We did see some disruptions in our D.C. market.

As expected, new average gross profit per vehicle was $3,135, a slight decrease sequentially as import brand PBRS gave some ground but were offset by the seasonal strength in luxury across all brands. Our same store new day supply was 49 days at the end of December versus 58 days at the end of the third quarter. All three segments were at lower day supply versus the previous quarter led by several luxury brands in the domestics through 2026. We will manage our business based on what we’re seeing in our markets and execute accordingly. Turning to used vehicles, fourth quarter total used gross profit was up 6% year over year.

Used retail gross profit per unit was up 18% at $1,749, a $271 increase over the prior year and a $198 increase over our reported third quarter 2025 number, our same store used DSI was 35 days at the end of the quarter in line with our DSI at the end of the third quarter shifting to F and I, we earned an F and I PBR of $2,335. The non cash deferral impact of TCA was $105. So without the year over year impact the PBR would have been $2,440. We plan to implement TCA to the CHAMBER stores by year end to complete our rollout across all platforms.

And finally in the fourth quarter our total front end yield per vehicle was $4,897 $259 sequentially. Now moving to parts and service, our same store parts and service gross profit was up 2% year over year. When looking at our customer pay and warranty performance, customer pay gross profit was up 3% with warranty gross profit higher by 6%. We lapped tough double digit comps in both customer pay and warranties which in 2024 were up 13% and up 26% respectively. For the quarter we generated a gross profit margin of 58.1% an expansion of 13 basis points on an all store basis.

This was a record fourth quarter for our parts and service business as total revenue grew 12% to $658 million. We remain optimistic about the trends we see supporting the long tail of parts and and service operations. The average age of the car on the road combined with the increasing complexity of technology and vehicles positions us to reap the benefits of this large addressable market. We believe we’re well positioned to unlock meaningful efficiencies as we navigate in our journey to becoming the most guest centric automotive retailer. Enabled by the hard work of our team members and continued investment in technology.

Thank you. And with that I will now hand the call over to Michael to discuss our financial performance. Michael?

Michael Welch — Senior Vice President & Chief Financial Officer

Thank you Dan. And good morning to our team members, analysts, investors and other participants on the call. For our financial performance in the fourth quarter, adjusted net income was $129 million. Adjusted EPS was $6.67 for the quarter. In addition, the non cash deferral headwind due to TCA this quarter was $0.31 per share. Our adjusted EPS would have been $6.98 without the deferral impact. Adjusted net income for the fourth quarter 2025 excludes net of tax, non cash asset impairments of $87 million, net gain on divestitures of $26 million, 5 million related to the Techion implementation expenses $3 million related to the non cash fixed asset write offs and $1 million professional fees related to the acquisition of of Herb Chambers Automotive Group.

We divested four stores in the quarter which generated an estimated annualized revenue of $150 million. Adjusted SGA as a percentage of gross profit on a same store basis came in at 64.1%. We feel confident in our ability to manage overall cost over the next few quarters as we progress the techion implementation across our stores and navigate normalizing new vehicle unit profitability. The adjusted tax rate for the quarter was 25.8%. We estimate the full year 2026 effective tax rate to be approximately 25.5%. TCA generated $12 million of pre tax income in the fourth quarter. The negative non cash deferral impact for the quarter was $8 million.

Our updated TCA slide in our presentation reflects the rollout to chambers due in 2026, the disposal of our held for sale assets and revised SAR estimates based on external forecasts. Now moving back to our Results, we generated $651 million of adjusted operating cash flow during 2025. Excluding real estate purchases. We spent $186 million in capital expenditures this year. The assets we sold and haven’t held for sale allow us to avoid some low return capex to deploy cash for more strategic capital decisions. We anticipate approximately $250 million in CapEx spend for both 2026 and 2027. Adjusted free cash flow was $465 million for the year.

We ended the year with $927 million of liquidity comprised of floor plan offset accounts, availability on both our use line and revolving credit facility, and cash Excluding the cash at Total Care Auto, our transaction adjusted net leverage ratio was 3.2 times at the end of the year. Our results were better than expected from a leverage standpoint which we believe gives us room to continue with our path of disciplined strategic capital decisioning. And finally, before I finish our prepared remarks on behalf of everyone, I want to thank our team members for their hard work in 2025 and we look forward to 2026 with that.

This concludes our prepared remarks. We will now turn the call over to the operator to take questions. Operator.

Question & Answers

Operator

Thank you. We’ll now be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star2 to remove your question from the queue. For participants using speaker Equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is from Jeff Lick with Stevens Inc.

Jeffrey Lick

Good morning, everyone. Thanks for taking the question. This is made for David and Daniel. Kind of pack a few questions into one. I guess if you look at 2025 as your base year, obviously there’s like three or four years inside of that year. You know, as you now look at 20, 26 lapping tariffs, lapping the EV credit, you got lease returns potentially. Maybe there’s, you know, you guys have highlighted some more GPU normalization. If you could just kind of give us a little roadmap to, you know, how you see things playing out and maybe, you know, if you could give some granularity in terms of the first half and the second half just to kind of the qualitative path of travel, what we should look for as the year progresses.

David Hult — COO & EVP

Thanks, Jeff. This is David. I’ll start, and Dan can jump in if he wants. I think we’re forecasting to go slightly backwards in Saar, but Saar’s an overall number that includes fleet and wholesale, and I think it’s going to vary by brands. We have a lot of Stellantis stores that were, you know, percentage of our business that were challenging for us in 25. All brands are cyclical, and we believe Stellantis will come back. So hopefully that’ll turn into a tailwind for us in 26. You know, we have over 50 stores now in the Northeast. January has been ridiculously tough with weather, so it’s been a challenge starting off the year, and we’ve even had a challenging weather in the Southeast as well.

I would say the first half will probably be a little bit more of a struggle, and the second half should start to free up a little bit. I don’t know that the tariffs have fully settled across all brands. There’s still movement on pricing, and it’s yet to be known what incentives will look like in the future. We’re optimistic about our parts and service business and where that’s headed. We’ve had a lot of distractions in 25 between the acquisition and rolling out. Techeon now having a third of the company on Techeon and the rest of the company being rolled out by the fall.

We think that’s going to really bode well for us, not only from a cost perspective, but an efficiency perspective. Going into 27, we will have some headwind in 26, paying for both DMSs, and as you can Imagine when you transition a store into a new dms. Other than the excessive cost for a period of time, there’s a transition getting everyone comfortable with the software and efficient on it. So we think all this blocking and tackling and the heavy lifting we’re doing is going to pay dividends going into the future for us. We probably got five, six, seven months of bumpiness and distraction of going through all of it.

But we know the outcome will be very beneficial for Asbury. Maybe just a quick. I did. Thank you. Go ahead, Jeff. Sorry. No, go ahead.

Dan Clara — Senior Vice President of Operations

I was just going to add to David’s comments on the. When you think about, from a used car standpoint, what we’re expecting in the second half with lease turnings coming in, you can see the results of our renewed strategy and execution by the team. So we are very confident that it is working and that has paved the way, for lack of a better term, when that influx of inventory coming in that we can pull that lever and execute accordingly while still remaining disciplined to maximizing the gross profit per unit.

Jeffrey Lick

And then just a quick follow up, I mean, because your GPUs are still north of that 2,500 to 3,000 kind of settling range you’ve talked about, I guess. Where do you see, you know, let’s say you get into the middle of that range, 2750, where does that come from? How does that decline in GPU manifest itself? Is that more inventory, you know, finally getting 3 million units on the ground, Is that because Toyota gives a little back? I’m just curious, you know what, because you guys have been pretty steadfast to that 2500 to 3000 mark, I’m just curious, where do you see that further adjustment to come?

David Hult — COO & EVP

It’s a great question, Jeff. You know, I think as long as the inventories stay somewhat balanced the way they are, we kind of look at our brand mix in the way the incentives have been tracking. With the divestitures we’ve had and the several that are coming, you know, our percentage of luxury goes up, you know, from 32 to probably about 36%, which benefits us overall. You know, I would say if the sour was going to stretch and the inventories were going to grow, that puts the most pressure on margins. But where most OEMs are predicting a flat or a little bit backwards year, we don’t anticipate sitting on a high day supply.

Now the winter months, you tend to sit on a high day supply because you’re coming off a busy fourth quarter and things, things slow down. But that should normalize over the next quarter or two. I think we’re conservative in our approach when we give estimates of 25,000 to 3,000 based upon our brand mix. But it’s also difficult to predict the future. I think the biggest thing that’s going to govern the volume this year is what we’ve all been talking about is the high cost of sale. You know, for new we’re over 52,000 in the quarter and you know, that’s a strong stretch.

So when people are stretching into purchasing, it tends to put pressure on margins as well to try and consummate the deal. Dan, I don’t know if you have anything you want to add?

Dan Clara — Senior Vice President of Operations

No, nothing to add.

Jeffrey Lick

Well, thank you for taking my question and best of luck in 2026. Thank you, Jeff.

Operator

Our next question is from Rajat Gupta with JP Morgan.

Rajat Gupta

Hey, thanks for taking the question and just wanted to follow up on parts and service. The customer pay growth was a little weaker than we would have expected. I understand the warranty comps, I know you mentioned it had a tough comp. But I also felt 4Q24 had some easy comparison 4Q23 because of the DMS transition. So I’m curious if the customer pay number is satisfactory to you. I mean is there more opportunity there? Any sense you can give us around the outlook for 26? Have a quick follow up. Thanks.

Dan Clara — Senior Vice President of Operations

Good morning Rajat, this is Dan. No, we’re not satisfied with the customer pay growth just as it is with used cars. We have a renewed strategy in fixed operations that we feel very confident in executing. When you look at the age of the car on the road and then you look at all the technology enhancement that is coming with the new product. We know and we’re ready to take advantage of that part of the market. So our, our forecast remains the same as it’s been in the mid single digit in customer pay like we have been talking about over the last few quarters.

David Hult — COO & EVP

Rajat, this is David. I would add, you know, in previous quarters and I think it’s the case for our peers but I’m not confident. You know, the growth in parts and service has been more top heavy on dollars than actual cars coming through the service drive or repair orders. And I made the comment in my remarks the traffic counts were okay and normal for us and based upon that we should have been higher on the dollars. We saw less dollars being spent per the consumer. So it wasn’t so much the traffic that took a hit as much as it did what the consumers were willing to Spend and as you can see, because I think we have it in our IR deck when we talk about how much we’re generating per ticket compared to combustible engine is over $550.

You know, these numbers keep going up, which is great, but it also puts a limit a little bit on customers. But I was shocked to see the pullback in October, November with the dollars being spent. It rebounded in December. In January, starting off, the dollars are pretty good again. So I can’t explain what happened in October and November. The biggest headwind we have in January is the traffic between because of all the weather.

Rajat Gupta

Got it. Any preview on the renewed strategy for parking services that you can give us going forward?

David Hult — COO & EVP

You know, I would tell you Rajat, the biggest thing is there’s a massive difference between our current TMS and techeon and there’s a learning curve there. And you know, our original stores that went on it a year ago are performing better than most of our stores in our company because of the efficiencies and benefits of the software. But when these stores transition to the new software and you know, now we’re up to over 40 stores, it takes them a few months. We actually become less efficient for the first couple months as they’re trying to get used to the software and work out the kinks.

So we’ll finish the Techyon rollout late in the fall. I look at 27 as a really efficient, productive year for us that you’ll notice in both our production with Techyon, but our cost control with Techyon as well.

Rajat Gupta

Understood, understood, that’s helpful. And maybe just a follow up question maybe for Mike around the leverage. Good to see the progress there. I believe you do have a few more divestitures in the pipeline that you’re looking to execute. Any updates date on that and how soon can you get below three times? Is it earlier than 26? Any timeline around that would be helpful. And then just related to that, how should we think about free cash flow deployment priorities as well in 26? Thanks.

Michael Welch — Senior Vice President & Chief Financial Officer

Yeah. So from A, we talked about the nine divestitures that we have out there that will close in first quarter and that will free up some cash to get our leverage down some more. So we think here kind of by the summer we’ll be below 3x. The only caveat to that would be with where our share price is. We think there’s some opportunities to deploy some cash for share buybacks. And so our goal is still to get below three times by the end of the year. And if we can do that and buy some shares back along the way.

We’ll kind of balance that as we go throughout the year. But if we just took the cash from the disposals and the free cash flow and put that toward the leverage, we’d be able to get there by the summer of this year.

Rajat Gupta

Understood. Great. Thanks for all the color and good luck and best of luck, David. Dan, thanks.

David Hult — COO & EVP

Thank you, Rajat.

Operator

Our next question is from Glenn Chin with Seaport Research Partners.

Glenn Chin

Good morning. Thanks folks. Can you just clarify for us the.

Jeffrey Lick

Path forward for Techeon, how many more storage you have to transition? It sounds like it’ll be done by fall of this year and then to what extent you will incur these double expenses for running two DNSs simultaneously.

Dan Clara — Senior Vice President of Operations

Good morning Glenn. This is Dan. So we have 125 more stores to roll out. We have eight more going out being rolled out this weekend and then another eight following the following week. But you know, like David stated, will be done by the third quarter of this year. As far as the expense, I’ll let Michael give clarity on that.

Michael Welch — Senior Vice President & Chief Financial Officer

Yeah, so once we roll out a store, you have to kind of, you know, you can’t cancel it right away. You have to kind of roll it out, make sure everything’s working, all the data comes across, and then we can go cancel the other products. So there’s a couple months of duplicated cost in there when we roll it out. So the first half of this year you’ll see kind of a hit on SGA for this duplicated cost plus the implementation fees. By the time we get to kind of mid year, we’ll roll over. And the savings from Techeon will more than offset the duplicate cost.

So I’ll call it a front half hit to SG&A and then a back half benefit to SG&A and then to David’s point, when we get to 27, the efficiencies that we’re going to see from it, you’ll start seeing those as well. So it’s, you know, that’s kind of the pace is duplicated cost, first half, savings from the software, the second half and then those efficiencies will come in during 2027.

Glenn Chin

Okay, but then Michael, to clarify, it looks like you adjusted it out for the dual expense. You adjusted it out this quarter.

Michael Welch — Senior Vice President & Chief Financial Officer

I guess we only adjust out the, we only adjust out the implementation costs, the cost of having to pay to do the implementations. And then also in 3rd and 4th quarter of 25 because of the SOX requirements from internal controls around the techion Software we had a pretty heavy lift on just, I’ll call it auditors and all those type of IT folks third parties to help us get over the hump with the initial year of SOX compliance on techeon. So those techeon costs is heavy, heavy SOX control. And then the implementation cost, we have not been adjusting out the duplicated cost of the software.

Glenn Chin

Okay, so it sounds like we should expect it to hit even adjusted numbers in the first half. And can you quantify for us how much that might be?

Michael Welch — Senior Vice President & Chief Financial Officer

We have not quantified that number, but we can. We’ll work on that for first quarter. To give you guys an insight into the first quarter, it wasn’t that material for fourth quarter because we didn’t roll out a ton of stores and we only rolled them out the very end of December. But in first quarter, we’ll kind of give you how much that, you know, how much of an impact that was.

Glenn Chin

Okay. Yeah, that would be helpful. Thank you. Okay. And David, will you be on future earnings calls?

David Hult — COO & EVP

I think I’ll be on the next earnings call and that’ll probably be it for me.

Glenn Chin

Okay, very good. Well, hope you’re doing well there.

David Hult — COO & EVP

I appreciate it. Thank you.

Glenn Chin

All right, that’s it for me. Thank you.

Operator

As a reminder, if you’d like to ask a question, please press Star one on your telephone keypad. Our next question is from John Babcock with Barclays.

John Babcock

Thanks for taking my question. I did want to ask, I know it’s still early in the Techyon rollout here, but with some of the first stores that were put on the system, are you starting to see benefits or is it still too early to tell?

Dan Clara — Senior Vice President of Operations

Good morning, John. This is Dan. Yeah, we had the first four stores where we rolled it out. They were here in Atlanta. And we are seeing the benefits from an efficiency standpoint, from a productivity standpoint, from a guest experience standpoint. And then, you know, you can also see the flexibility that it gives us because it is a cloud based dms. When you’re talking about enhancing technology and AI conjunction with our internal development team, you get rid of all the bolt ons and it’s a lot easier to enhance the technology to improve the guest experience and efficiencies across the store.

So, yes, we are.

David Hult — COO & EVP

John 1. I’m sorry, Dan. John, one thing I would add. You know, every store we roll out, technicians don’t like change. They hate the new software. It’s a lot of key changes and difficult. But if you went back to the original four stores, they would tell you they wouldn’t work at a store that didn’t have Techyon. So it makes the employees more productive, increases the transparency between departments and it also increases the transparency with consumers which you can visually share with them. So there’s a lot of benefits. There’s cost savings for sure, but there’s productivity benefits as well.

You know, human behavior takes a little while to change and get used to a new software, new language for lack of a better term. But the early adopting stores that we have are really running efficiently. Well on it. Costs are lower, productivity’s up, which is is everything we anticipated.

John Babcock

Okay, thanks. And then just next question. I was wondering if you could talk about just broadly how the demand environment feels right now both for new and used. If there’s any discrepancy between the two. Just generally want to get a sense for what you’re hearing from the dealership.

Dan Clara — Senior Vice President of Operations

Yeah, John, I’ll start and David can add if he wants to. I’ll tell you for January, the beginning of January was good until we got hit by the weather. And so that pullback that we saw, October, November was not there the first few weeks in January. But after the weather hit us, it impacted us pretty big because that storm came in through Texas and it basically just followed our path of where we, where we have stores all the way to the Northeast.

John Babcock

Okay, thanks for the call. That’s all I have.

David Hult — COO & EVP

Thank you.

Operator

Our next question is from Ryan Zegdel with Craig.

Matthew Robb

Hey, great, thanks. This is Matthew Robb on for Ryan. Just quick on tca looks like the SAR assumptions were were changed very slightly in 26 and 27 and then non cash deferral was raised a little bit through 2029. Just what drove that change. And just talk about where TCA stands today. Any color there would be great.

Michael Welch — Senior Vice President & Chief Financial Officer

Yeah so on that one we just looked at the third party kind of different your guys assessments and then other third party providers out there for their SAR projections. And you know most of the people were coming up, you know 158 kind of 162 and we originally had that forecast in there based on those third parties at 15 7. So we just bumped it a little bit to 159 to reflect kind of the additional color out there from the third parties. And also that’s what we use kind of to base our budget off of for 26 is that 159 number.

So small adjustment there just as kind of saw projections came up a little bit during the fourth quarter. And the tca, we talked about it earlier in our comments. Our last platform to roll out is Herb Chambers. We’re going to roll them out on Techyon and then following the techion rollout, we’ll roll them out on tca. So sometime this late summer probably and that will complete the rollout to all the stores and then we’ll be done with kind of TCA rollout side.

Operator

Understood. Thank you very much. Our next question is from Daniela Hagen with Morgan Stanley.

Daniela Haigian

Hi, thanks for taking the question. So kind of on that point of adjusting SAR forecasts, we also saw that used you made a comment about supply remains tight. What kind of assumptions are you baking in on affordability, what the consumer is facing this year, consumer credit availability and how does that flow through into used? We definitely saw stronger used margin and then a bit weaker on the volume side. So how does that play out into 26 in your view?

Jeffrey Lick

Yeah.

Dan Clara — Senior Vice President of Operations

Daniela, good morning. This is Dan. You know, we continue to stick to our strategy of not chasing volume and maximizing gross profit. There’s several items that we have been executing on really limiting the number of acquisitions through the auction and improving the number of cars that we take through the trades or that we purchase from directly from our guests. And that is working well. That’s where you see how we’re maximizing the PBRs and the impact that it had in the fourth quarter there. You know, the average cost of our used car being over $30,000 is definitely something that we’re focused to bring down because we know that the lower the cost of sale, the faster that inventory turns.

And we believe that the opportunity to do that is going to be on the second half of the year. As lease turnings start to come in, we have better availability of inventory flowing and then we can really pull the leverage. If the availability of inventory is there, we can pull the lever of going after the volume while still maintaining our strict discipline on the gross profit per unit.

Daniela Haigian

Got it, thank you. And then second is just on your EV outlook for the year. Obviously there’s a big deceleration following the removal of the tax credits. Do you believe your inventory levels here are sufficiently right sized or is there more room for that to play out?

Dan Clara — Senior Vice President of Operations

I will tell you that overall, company wide I would like, I would say our EVs inventory is right size there. We have pockets, specifically Colorado, where there was a high demand for EVs that we have a little bit more inventory than I would like to. But overall it’s been right size. And you know, in 4Q24, our EV sales were like 5% of the the total sales. And in 4Q25. It was about 2%. So I would expect that to continue as we go into 26.

Daniela Haigian

Thank you.

Dan Clara — Senior Vice President of Operations

Thank you.

Operator

Thank you. There are no further questions at this time. I would like to turn the floor back over to David Holt for any closing comments.

David Hult — COO & EVP

Thank you. We appreciate everyone joining our fourth quarter earnings call. We look forward to speaking with you after the first quarter. Have a great day.

Operator

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you again for your participation.