Asbury Automotive Group Inc.

Company Overview

Business Model: ASBURY AUTOMOTIVE GROUP, INC. is a Fortune 500 franchised automotive retailer in the United States. The Company operates 223 new vehicle franchises across 171 dealership locations, 39 collision centers, and Total Care Auto, Powered by Asbury ("TCA"), its finance and insurance ("F&I") product provider. The Company offers a comprehensive range of automotive products and services, including new and used vehicles, parts and service (vehicle repair, maintenance, replacement parts, and collision repair), and F&I products (vehicle financing arrangements, extended service contracts, guaranteed asset protection, and prepaid maintenance). The business model emphasizes a diversified mix of products, services, brands, and geographic locations to mitigate reliance on any single manufacturer or customer preference shift, supported by an omni-channel platform for customer engagement and market share growth.

Market Position: ASBURY AUTOMOTIVE GROUP, INC. is one of the largest franchised automotive retailers in the U.S., operating in 15 states. The Company's new vehicle revenue brand mix for the year ended December 31, 2025, was 40% imports, 32% luxury, and 28% domestic brands. Key manufacturers contributing to new vehicle revenue include Toyota Motor Sales, U.S.A., Inc. (30%), Ford Motor Company (14%), American Honda Motor Co., Inc. (10%), Stellantis N.V. (8%), General Motors Company (7%), Mercedes-Benz USA, LLC (7%), and Hyundai Motor America (6%). The Company leverages its scale to achieve competitive operating margins by centralizing back-office functions and reducing costs through national vendor relationships. It competes in a highly competitive industry with other franchised dealerships, non-franchised dealers, rental companies, internet-based brokers, and independent service centers.

Recent Strategic Developments:

• Acquisitions: On July 21, 2025, the Company completed the acquisition of substantially all assets of The Herb Chambers Companies for approximately $1.76 billion. This acquisition added 33 dealerships, 52 franchises, and three collision centers, expanding the Company's footprint in the northeast region of the United States. In December 2023, the Company acquired Jim Koons Automotive Companies for approximately $1.50 billion, adding 20 new vehicle dealerships and six collision centers, expanding into the greater Washington-Baltimore region.
• Divestitures: During the year ended December 31, 2025, the Company divested 24 franchises (15 dealership locations) for an aggregate purchase price of approximately $566.5 million, resulting in a pre-tax gain of $80.2 million. This follows the divestiture of five franchises in 2024 and one in 2023.
• Technology Investment: The Company is investing in technologies and partnering with software platform vendors to enhance the customer experience and drive operational efficiency. A key initiative is the transition to Tekion, a cloud-based dealer management system, from CDK, with 38 stores transitioned as of December 31, 2025.
• TCA Expansion: The Company is integrating TCA's F&I product offerings across its dealership portfolio, completing the rollout in its Florida market and the Jim Koons platform during 2025, with plans to complete the rollout to the Herb Chambers platform in 2026.

Geographic Footprint: As of December 31, 2025, ASBURY AUTOMOTIVE GROUP, INC. owned and operated in 15 states: Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Maryland, Massachusetts, Missouri, New Mexico, Rhode Island, South Carolina, Texas, Utah, and Virginia. The corporate headquarters is in Atlanta, Georgia, with an additional corporate office in Texas. TCA's operations are located in leased office space in Utah.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 17.1% (2025) vs. 17.2% (2024)
• Operating Margin: 4.8% (2025) vs. 4.9% (2024)
• Net Margin: 2.7% (2025) vs. 2.5% (2024)

Investment in Growth:

• Capital Expenditures: $205.3 million (2025)
• Strategic Investments: The Herb Chambers Companies acquisition for approximately $1.76 billion in 2025.

Business Segment Analysis

Dealerships

Financial Performance:

• Revenue from external customers: $17,672.9 million (2025)
• Segment Operating Income: $780.8 million (2025)
• Capital Expenditures: $205.3 million (2025)
• Key Growth Drivers: The Herb Chambers acquisition significantly contributed to revenue and gross profit growth. Growth in parts and services gross profit also drove performance. This was partially offset by lower gross profit per new vehicle sold as margins normalized from historical highs.

Product Portfolio:

• New Vehicle Sales:
  • Revenue: $9,496.2 million (+7% YoY)
  • Gross Profit: $621.9 million (-3% YoY)
  • Units Sold: 181,204 (+5% YoY)
  • Gross Profit per New Vehicle Sold: $3,432 (-7% YoY)
  • Gross Margin: 6.5% (down 0.7 percentage points YoY)
  • Same Store New Vehicle Revenue: $8,636.1 million (+4% YoY)
  • Same Store New Vehicle Units Sold: 166,625 (+3% YoY)
  • Same Store Gross Profit per New Vehicle Sold: $3,342 (-11% YoY)
  • Same Store Gross Margin: 6.4% (down 0.8 percentage points YoY)
  • New vehicle inventory days of supply: Approximately 52 days as of December 31, 2025 (up from 49 days in 2024).
• Used Vehicle Sales:
  • Revenue: $5,225.4 million (flat YoY)
  • Gross Profit: $259.1 million (+6% YoY)
  • Retail Units Sold: 143,126 (-5% YoY)
  • Retail Gross Profit per Used Vehicle Retailed: $1,672 (+10% YoY)
  • Retail Gross Margin: 5.3% (up 0.3 percentage points YoY)
  • Same Store Used Vehicle Revenue: $4,757.7 million (-4% YoY)
  • Same Store Used Vehicle Retail Units Sold: 131,615 (-7% YoY)
  • Same Store Retail Gross Profit per Used Vehicle Retailed: $1,660 (+7% YoY)
  • Same Store Retail Gross Margin: 5.3% (up 0.2 percentage points YoY)
  • Used vehicle inventory days of supply: Approximately 38 days as of December 31, 2025.
• Parts and Service:
  • Revenue: $2,506.8 million (+6% YoY)
  • Gross Profit: $1,472.5 million (+9% YoY)
  • Gross Margin: 58.7% (up 1.4 percentage points YoY)
  • Same Store Revenue: $2,286.4 million (+3% YoY)
  • Same Store Gross Profit: $1,343.4 million (+5% YoY)
  • Same Store Gross Margin: 58.8% (up 1.1 percentage points YoY)
  • Sub-segment Breakdown:
    • Customer Pay Gross Profit: $781.6 million (+10% YoY)
    • Warranty Gross Profit: $226.4 million (+21% YoY)
    • Collision Gross Profit: $126.4 million (-2% YoY)
    • Wholesale Parts Gross Profit: $77.5 million (flat YoY)
• Finance and Insurance, net:
  • Revenue: $770.6 million (+1% YoY)
  • Gross Profit: $718.1 million (+1% YoY)
  • Gross Profit per Vehicle Sold: $2,214 (+1% YoY)
  • Same Store Revenue: $715.7 million (-2% YoY)
  • Same Store Gross Profit per Vehicle Sold: $2,224 (-1% YoY)

Market Dynamics: The Dealerships segment benefits from a diversified brand portfolio and geographic presence. New vehicle sales were influenced by higher inventory supply and increased consumer demand, including for new electric vehicles before federal tax credits expired in September 2025. Used vehicle sales faced affordability headwinds and inventory availability challenges, particularly for lower mileage vehicles, but improved sourcing and disciplined execution led to higher gross profit margins. Parts and service revenue benefited from customers retaining vehicles longer due to inventory shortages and inflationary pressures, and from increasing vehicle complexity leading to more warranty work.

Total Care Auto, Powered by Asbury (TCA)

Financial Performance:

• Revenue: $91.1 million (-24% YoY)
• Cost of Sales: $52.5 million (-3% YoY)
• Gross Profit: $38.6 million (-42% YoY)
• Segment Operating Income: $79.8 million (2025)
• Key Growth Drivers: TCA's revenue is primarily from earned premiums on F&I products and investment income. The decrease in revenue and gross profit is primarily due to lower earned premium and investment portfolio performance.
• Investment Portfolio: Generated $20.7 million in investment income and other gains/losses in 2025, compared to $17.8 million in 2024.

Product Portfolio:

• Major product lines and services: Extended vehicle service contracts, prepaid maintenance contracts, guaranteed asset protection (GAP), key replacement contracts, paintless dent repair contracts, appearance protection contracts, tire and wheel, and lease wear and tear contracts.
• New product launches or major updates: Rollout of TCA's service offerings was completed in the Florida market and the Jim Koons platform during 2025, with plans to complete the rollout to the Herb Chambers platform in 2026.

Market Dynamics: TCA's profitability is influenced by incurred claims expense and the performance of its investment portfolio, which can be affected by interest rate volatility. The product mix of F&I products sold also impacts gross profit margins.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $99.9 million (432,752 shares) in 2025.
• Dividend Payments: No dividends paid since 2008.
• Future Capital Return Commitments: As of December 31, 2025, the Company had remaining authorization to repurchase up to an additional $175.9 million of its common stock.

Balance Sheet Position:

• Cash and Equivalents: $40.4 million (consolidated) as of December 31, 2025.
• Total Debt: $3,593.4 million (excluding floor plan notes payable, debt issuance costs, and debt premium) as of December 31, 2025.
• Net Cash Position: Not explicitly stated, but implies a net debt position.
• Credit Rating: Not disclosed.
• Debt Maturity Profile (as of December 31, 2025, in millions):
  • 2026: $479.2
  • 2027: $42.4
  • 2028: $610.2
  • 2029: $837.7
  • 2030: $482.9
  • Thereafter: $1,135.8

Cash Flow Generation:

• Operating Cash Flow: $775.2 million (2025) vs. $671.2 million (2024).
• Free Cash Flow: Not explicitly defined or calculated in the filing.
• Cash Conversion Metrics: Adjusted cash flow provided by operating activities was $651.4 million in 2025, a decrease of $37.0 million from $688.4 million in 2024.

Operational Excellence

Production & Service Model: ASBURY AUTOMOTIVE GROUP, INC. operates an omni-channel platform designed to engage customers and increase market share through digital innovation, complementing its physical dealership network. The Company focuses on providing a high level of customer service and a low-friction experience throughout the vehicle ownership lifecycle. Its parts and service operations benefit from skilled manufacturer-trained and certified technicians, factory-approved replacement parts, and competitive pricing. Collision repair centers are strategically positioned to source original equipment manufacturer parts from franchised dealerships.

Supply Chain Architecture: The Company relies exclusively on vehicle manufacturers for its new vehicle and maintenance/replacement parts inventory. These manufacturers, in turn, depend on third-party suppliers for parts and key components. This reliance exposes the Company to risks from production and supply disruptions.

Facility Network:

• Manufacturing: Not applicable, as the Company is a retailer.
• Research & Development: Not explicitly detailed as separate facilities, but R&D focus is on technology investments and partnerships with software platform vendors.
• Distribution: The Company operates 171 franchised dealership locations and 39 collision repair centers across 15 states. The corporate headquarters is owned in Atlanta, Georgia, and a corporate office is maintained in Texas. TCA's operations are in leased office space in Utah.

Operational Metrics:

• New Vehicle Inventory: Approximately 52 days of supply as of December 31, 2025, an increase from 49 days as of December 31, 2024, but still below historical levels.
• Used Vehicle Inventory: Approximately 38 days of supply as of December 31, 2025.

Market Access & Customer Relationships

Go-to-Market Strategy: The Company employs an omni-channel platform to interact with customers, integrating digital capabilities with its physical dealership network. This strategy aims to provide enhanced speed and transparency in buying options. Distribution Channels:

• Direct Sales: Primarily through its network of franchised dealerships.
• Digital Platforms: Focus on online channels and mobile applications to attract customers.

Customer Portfolio: The Company serves a diverse customer base across 15 states, offering a wide range of automotive products and services. Its strategy emphasizes establishing long-term relationships through exceptional customer service and referrals. Customer Concentration:

• Top Manufacturer Revenue Contribution (2025 New Vehicle Sales):
  • Toyota Motor Sales, U.S.A., Inc. (Toyota and Lexus): 30%
  • Ford Motor Company (Ford and Lincoln): 14%
  • American Honda Motor Co., Inc. (Honda and Acura): 10%
  • Stellantis N.V. (Chrysler, Dodge, Jeep, Ram and Fiat): 8%
  • General Motors Company (Chevrolet, Buick and GMC): 7%
  • Mercedes-Benz USA, LLC (Mercedes-Benz, Smart and Sprinter): 7%
  • Hyundai Motor America (Hyundai): 6%

Geographic Revenue Distribution: The Company operates in 15 states: Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Maryland, Massachusetts, Missouri, New Mexico, Rhode Island, South Carolina, Texas, Utah, and Virginia. The Herb Chambers acquisition expanded the Company's presence in the northeast region, and the Jim Koons acquisition expanded into the greater Washington-Baltimore region.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The automotive retail and service industry is highly competitive, driven by factors such as price, service quality, location, and vehicle selection. It is a cyclical industry, with sales significantly influenced by general economic conditions, consumer confidence, credit availability, fuel prices, and employment levels. The industry is experiencing shifts due to increasing online shopping and the emergence of electric vehicle manufacturers employing direct-to-consumer sales models.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Other Franchised Dealerships: Compete within their respective regions for new vehicle sales, parts, and service.
• Non-Franchised Automotive Dealerships: Compete for used vehicle sales.
• Regional and National Vehicle Rental Companies: Compete for used vehicle supply and resale.
• Internet-based Vehicle Brokers (e.g., Carvana): Compete for used vehicle sales to consumers through online models.
• Service Center and Parts Supply Chain Stores: Compete in parts operations.
• Independent Service and Repair Shops: Compete for collision and non-warranty repair and maintenance services, though increasing vehicle technology complexity may favor franchised dealerships.

Emerging Competitive Threats:

• Electric Vehicle Manufacturers (e.g., Tesla, Rivian): These companies are increasingly permitted to sell vehicles directly to consumers in several states, circumventing traditional state automotive franchise laws, which could provide a competitive advantage.

Competitive Response Strategy: The Company relies on its advertising, merchandising, sales expertise, service reputation, strong local branding, and strategic dealership locations. It is actively investing in digital channels and omni-channel applications to attract and retain customers in the evolving market. The Company also emphasizes its ability to use factory-approved replacement parts and skilled manufacturer-trained technicians for parts and service.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: The Company's performance is sensitive to general economic conditions, including inflation, interest rates, employment levels, consumer confidence, and fuel prices. Inflation can increase operating costs and reduce demand. Rapid changes in fuel prices can shift consumer preferences, impacting sales of certain vehicle types. Changes in U.S. trade policy, including tariffs, can increase inventory acquisition and carrying costs, potentially reducing demand. Technology Disruption: The automotive industry is undergoing long-term change with the development of electric, battery-powered, hybrid, and autonomous vehicles. If manufacturers cannot adapt to changing consumer demand for these vehicles, or if significant resources shift away from traditional models, it could adversely affect new and used vehicle sales, parts and service revenue, and F&I business. Customer Concentration: A significant portion of new vehicle sales is derived from a limited number of automotive manufacturers (e.g., Toyota Motor Sales, U.S.A., Inc. (30%), Ford Motor Company (14%)). Adverse conditions affecting these manufacturers could materially impact the Company's business.

Operational & Execution Risks

Supply Chain Vulnerabilities: Disruptions in the production and delivery of new vehicles and parts from manufacturers, due to supplier issues, natural disasters, or other events, can materially affect revenue, especially new vehicle sales and related higher-margin products. Acquisition Integration: The Company faces risks in successfully integrating acquired businesses, such as The Herb Chambers Companies and Jim Koons Automotive Companies, including significant capital expenditure, operational disruption, personnel integration challenges, and failure to realize expected benefits and synergies. Information Systems Failure: Dependence on efficient operation of information systems, including the dealer management system (DMS), poses a risk. The ongoing transition from CDK to Tekion DMS involves significant difficulty, potential management distraction, and short-term productivity losses. Cybersecurity Incidents: The Company is exposed to cybersecurity threats, including data breaches involving personally identifiable information (PII) of customers and employees. Such incidents could disrupt operations, impact sales, lead to claims, negative publicity, and increased costs.

Financial & Regulatory Risks

Indebtedness: The Company has substantial outstanding debt ($3.59 billion as of December 31, 2025) and floor plan notes payable ($2.03 billion). Debt service obligations and covenants in debt and lease agreements could restrict financial flexibility, limit additional borrowing, or trigger cross-defaults if violated. Interest Rate Increases: A significant portion of debt is at variable rates, making the Company exposed to interest rate increases. A 100 basis point increase in market interest rates would increase annual interest expense by approximately $26.2 million. Rising rates can also depress consumer demand for vehicles due to higher financing costs. Consumer Financing Availability: The majority of vehicle purchases are financed. Reductions in credit availability or increased costs of credit, particularly from subprime lenders, could lead to a decline in vehicle sales. Regulatory & Compliance Risks: The Company operates in a highly regulated industry, subject to federal, state, and local laws concerning sales, F&I, consumer protection, environmental, and employment practices. Violations could result in sanctions, fines, or license suspension. The Federal Trade Commission (FTC) has initiated an administrative proceeding against the Company and some dealerships regarding alleged violations of the FTC Act and Equal Credit Opportunity Act related to add-on products, with an uncertain outcome.

Geopolitical & External Risks

Geographic Dependencies: Operations are subject to risks of doing business outside the United States and importing merchandise, including import duties, exchange rates, trade restrictions, and political/socio-economic conditions in other countries. Trade Relations: New quotas, duties, tariffs, or other trade restrictions could increase inventory acquisition and carrying costs, impacting profitability and demand for imported vehicles and parts.

Innovation & Technology Leadership

Research & Development Focus: ASBURY AUTOMOTIVE GROUP, INC. strategically invests in technologies and partners with leading software platform vendors. The focus is on developing applications that provide omni-channel buying options, enhance speed and transparency for guests, and drive a more efficient guest experience at a lower cost to serve. Core Technology Areas:

• Dealer Management Systems (DMS): The Company is actively transitioning its dealerships from CDK, an existing DMS provider with a fragmented architecture, to Tekion, a cloud-based DMS with a unified solution. This transition is expected to facilitate technology enhancements and operational efficiencies. As of December 31, 2025, 38 stores had transitioned to Tekion.
• Omni-channel Platforms: Development of digital capabilities to integrate with the physical dealership network, providing a low-friction customer experience.

Intellectual Property Portfolio: The filing does not provide specific details on the Company's intellectual property portfolio, patent strategy, licensing programs, or IP litigation.

Technology Partnerships:

• Strategic Alliances: The Company partners with leading software platform vendors, including Tekion, for its DMS transition.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company believes its executive management team has extensive experience in the auto retail sector and leverages experience from all positions. Local management of dealership operations is emphasized, with general managers responsible for operations, personnel, and financial performance. The Company focuses on attracting, hiring, retaining, and developing top talent, including internal and manufacturer-specific training programs and an online career path tool.

Board Composition: The filing refers to the Proxy Statement for detailed information on Board composition, independence, expertise areas, and committee structure.

Human Capital Strategy

Workforce Composition: As of December 31, 2025, ASBURY AUTOMOTIVE GROUP, INC. employed approximately 15,000 full-time and part-time employees. None of these employees were covered by collective bargaining agreements. Employees are distributed across the 15 states where the Company operates. Talent Management:

• Acquisition & Retention: The Company focuses on attracting, hiring, and retaining top talent, including partnering with local colleges and trade schools for apprenticeship and internship programs.
• Retention Metrics: Not explicitly disclosed, but the Company invests significant resources in training and development.
• Employee Value Proposition: Offers competitive compensation and benefits, including health, dental, and vision benefits, 401(k) match, up to 4 weeks of paid time off, paid pregnancy and parental leave, disability and accident insurance, employer-paid life insurance, and an annual scholarship program. The Company also offers equity awards to frontline employees to foster ownership and commitment to long-term success.

Diversity & Development:

• Diversity Metrics: The Company strives to create a welcoming and inclusive workplace for team members from diverse backgrounds and experiences.
• Development Programs: Launched a training curriculum for all store positions in 2022 and guest experience training for all employees in 2024. Offers an online career path tool and supports manufacturer-specific technician certifications.
• Culture & Engagement: The "Asbury Cares" program supports community partner organizations, offering full-time employees 40 hours of paid time off annually for volunteering. A partnership with HBCU Change has contributed over $1.95 million to Historically Black Colleges and and Universities since May 2021.

Environmental & Social Impact

Environmental Commitments: ASBURY AUTOMOTIVE GROUP, INC. is subject to a wide range of federal, state, and local environmental laws and regulations concerning discharges into water and air, storage of petroleum and chemicals, handling and disposal of wastes, and remediation of contamination. The Company believes its operations are in substantial compliance with applicable regulations and incurs costs and capital expenditures for compliance. Supply Chain Sustainability: Not explicitly detailed in the filing.

Social Impact Initiatives:

• Community Investment: Through its "Asbury Cares" program, the Company supports community partner organizations focused on building strong communities, enhancing education and youth development, improving health and wellness, and supporting veterans and military families.
• Product Impact: Not explicitly detailed in the filing.

Business Cyclicality & Seasonality

Demand Patterns: The automobile industry is historically subject to seasonal variations. Demand for new vehicles is generally highest during the second and third quarters of each year, leading to higher revenues and operating results during these periods. The Company typically experiences higher sales of luxury vehicles, which have higher average selling prices and gross profit per vehicle retailed, in the fourth quarter. Revenues and operating results can be significantly impacted by changing economic conditions, vehicle manufacturer incentive programs, or adverse weather events. Planning & Forecasting: The Company's management information systems are crucial for sales and service efforts, as well as financial and operating data preparation, which supports planning and forecasting.

Regulatory Environment & Compliance

Regulatory Framework: ASBURY AUTOMOTIVE GROUP, INC. operates in a highly regulated industry, requiring state licenses and compliance with numerous complex federal, state, and local laws. These regulations cover sales, operations, F&I, marketing, employment practices, consumer protection, privacy, anti-money laundering, environmental standards, vehicle emissions, and product recalls. The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) have regulatory authority over aspects of the business. Industry-Specific Regulations: State automotive franchise laws restrict competitors from relocating or establishing new stores of a particular vehicle brand within a specified market area. However, some electric vehicle manufacturers are permitted to sell directly to consumers, circumventing these laws. Trade & Export Controls: The Company's business involves the sale of imported vehicles and parts, subjecting it to risks from import duties, exchange rates, trade restrictions, and potential new quotas or tariffs imposed by the U.S. or other countries.

Legal Proceedings: The Company is currently involved in an administrative proceeding initiated by the FTC on August 16, 2024, alleging violations of Section 5 of the Federal Trade Commission Act and certain provisions of the Equal Credit Opportunity Act related to the sale of add-on products. The Company has filed a lawsuit against the FTC in the United States District Court for the Northern District of Texas, challenging the constitutionality of the administrative proceeding. The outcome of these matters is uncertain, and the Company is unable to reasonably predict the possible outcome or range of loss.

Tax Strategy & Considerations

Tax Profile: The Company's effective tax rate increased by 50 basis points from 25.2% in 2024 to 25.7% in 2025. This increase was primarily due to acquisition and divestiture activity, as acquired stores are located in relatively high tax rate states, while divested stores were in relatively low or no tax rate states. Geographic Tax Planning: The Company's tax expense is significantly influenced by state income taxes, with Massachusetts, Florida, and Virginia making up the majority of the state tax effect.

Insurance & Risk Transfer

Risk Management Framework: ASBURY AUTOMOTIVE GROUP, INC. utilizes self-insurance programs for most employee medical claims (with stop-loss insurance for large individual claims) and high-deductible insurance programs for workers' compensation, property, and general liability claims. Separate insurance policies are maintained for potential cyber and directors and officers exposures. Provisions for retained losses and deductibles are made based on periodic evaluations of estimated ultimate liabilities. Insurance Coverage: The Company is required to secure certain obligations for deductible reimbursements with collateral, which has been satisfied by surety bonds, letters of credit, and/or cash deposits. As of December 31, 2025, the Company had $25.2 million of letters of credit outstanding. Risk Transfer Mechanisms: The Company uses interest rate swap agreements to manage its exposure to fluctuations in interest rates, specifically regarding the SOFR rate. As of December 31, 2025, the Company had four such agreements, which qualify for cash flow hedge accounting treatment.