What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-29 · 226 added, 196 removed, 683 unchanged (38% of the section changed)

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and finance and insurance products.

The finance and insurance products are provided by both independent third parties and TCA.

The finance and insurance products are provided by both TCA and independent third parties.

The F&I products offered by TCA are sold through affiliated dealerships.

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(ii) the sale of used vehicles to individual retail customers ("used retail") and to other dealers at auction ("wholesale") (the terms "used retail" and "wholesale" are collectively referred to as "used");

(iii) repair and maintenance services, including collision repair, the sale of automotive replacement parts, and the reconditioning of used vehicles (collectively referred to as "parts and service");

(iii) repair and maintenance services, collision repair, the sale of automotive replacement parts, and the reconditioning of used vehicles (collectively referred to as "parts and service");

and (iv) the arrangement of third-party vehicle financing and the sale of a number of vehicle protection products.

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We evaluate the results of our new and used vehicle sales based on unit volumes and gross profit per vehicle sold, our parts and service operations based on aggregate gross profit, and our F&I business based on F&I gross profit per vehicle sold.

Amounts presented have been calculated using non-rounded amounts for all periods presented and therefore certain amounts may not compute or tie to prior year financial statements due to rounding.

Amounts presented have been calculated using non-rounded amounts for all periods presented and therefore certain amounts may not compute due to rounding.

Our dealerships gross profit margin varies with our revenue mix.

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As a result, when used vehicle, parts and service, and F&I revenue increase as a percentage of total revenue, we expect our overall gross profit margin to increase.

However, recently, new vehicle gross profit margins have been above historical levels and higher than used vehicle gross margins as a result of inventory disruptions from supply chain issues.

However, during and after the COVID-pandemic, new vehicle gross profit margins have been above historical levels and higher than used vehicle gross margins as a result of inventory disruptions from supply chain issues.

Our TCA segment revenues, reflected in F&I revenue, net, are derived from the sale of various vehicle protection products including vehicle service contracts, GAP, prepaid maintenance contracts, and appearance protection contracts.

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We evaluate commissions paid to salespeople as a percentage of retail vehicle gross profit, advertising expense on a per vehicle retailed ("PVR") basis, and all other SG&A expenses in the aggregate as a percentage of total gross profit.

Commissions expense paid by TCA to our affiliated dealerships and reflected as F&I revenue in our Dealerships segment is eliminated in the TCA segment upon consolidation.

Commissions expense paid by TCA to our affiliated dealerships and reflected as F&I revenue in our Dealerships segment is eliminated in the consolidated financial statements.

Our continued organic growth is dependent upon the execution of our balanced automotive retailing and service business strategy, the continued strength of our brand mix, and the production and allocation of desirable vehicles from the automobile manufacturers whose brands we sell.

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In addition, our ability to sell certain new and used vehicles can be negatively impacted by a number of factors, some of which are outside of our control.

Manufacturers continue to be hampered by the lack of availability of parts and key components from suppliers which has impacted new vehicle inventory levels and availability of certain parts.

Certain manufacturers continue to be hampered by the lack of availability of parts and key components from suppliers which has impacted new vehicle inventory levels and availability of certain parts.

We cannot predict with any certainty how long the automotive retail industry will continue to be subject to these production slowdowns or when normalized production will resume at these manufacturers.

Recent Events

Pending acquisition

On February 14, 2025, the Company, through one of its subsidiaries, entered into a Purchase and Sale Agreement (the "Transaction Agreement") with various entities that comprise the Herb Chambers automotive group (the "Herb Chambers Dealerships").

Pursuant to the Transaction Agreement, the Company is expected to acquire substantially all of the assets, including all real property and businesses of the Herb Chambers Dealerships (collectively, the "Businesses") for an aggregate purchase price of approximately $1.34 billion, which includes $750 million for goodwill, and approximately $590 million for the real estate and leasehold improvements.

In addition, the Company will acquire new vehicles, used vehicles, service loaner vehicles, fixed assets, parts and supplies for a purchase price to be determined at the closing (the “Closing”) of the transactions set forth in the Transaction Agreement and will reimburse the Herb Chambers Dealerships for certain dealership construction and development costs incurred prior to the Closing.

The Businesses include 33 dealerships, 52 franchises and three collision centers.

Herb Chambers will retain ownership of the Mercedes-Benz of Boston dealership in Somerville, Massachusetts (the "MB Boston Dealership").

The Transaction Agreement includes certain restrictions and obligations regarding the sale of the MB Boston Dealership, including a put right obligating the Company to purchase the MB Boston Dealership during the five-year period following the Closing, absent certain circumstances.

The Company's acquisition of the Businesses is anticipated to close in the second quarter of 2025 and is subject to various customary closing conditions, including approval from the applicable automotive manufacturers.

Hurricanes Helene and Milton

In September 2024, Hurricane Helene affected our store operations in Florida, Georgia and South Carolina.

With Hurricane Helene, stores in the path of the storm closed their doors early and many remained offline even after the storm passed due to power outages.

Temporary store closures and reduced customer traffic in the days leading up to the storm and immediately afterwards resulted in fewer new and used vehicle unit sales along with lost business in fixed operations.

As previously disclosed, we estimated the impact of the storm on diluted earnings per share for the quarter ended September 30, 2024 to be between $0.07 and $0.09 per diluted share.

In October 2024, the size and path of Hurricane Milton placed it over a larger section of our store footprint and the damage to our dealership locations was more extensive.

A higher number of stores closed for a longer period compared to Helene.

Additionally, several locations experienced flooding, partial loss of vehicle inventories and extended power outages.

Other locations had varying degrees of wind and water damage preventing them from reopening in a timely manner.

As a result of Hurricane Milton, we incurred losses of $6.4 million, or $0.25 per diluted share during the quarter ended December 31, 2024.

Hurricanes Helene and Milton are not expected to have a continuing impact on the Company's operations and results in future periods.

Stop sale orders for certain Toyota, Lexus and BMW models

The stop sale orders for certain Toyota, Lexus and BMW models during the second half of 2024 impacted volumes on some of our most profitable and in-demand vehicles.

A stop sale order is a notification from a manufacturer or the National Highway Traffic Safety Administration that prohibits the sale or lease of a new or used vehicle due to a safety recall, defect or noncompliance.

The Toyota Grand Highlander and Lexus TX models have been popular vehicles with healthy gross profit margins.

Based on the pre-stop sale trends for these models, we estimated the impact from this event resulted in approximately 2,100 fewer new units sold during the second half of 2024.

As a result, we estimated the impact of the Toyota, Lexus and BMW stop sale orders to be between $0.48 and $0.52 per diluted share during the six months ended December 31, 2024.

The stop sale orders were subsequently lifted during the fourth quarter and are not expected to have a continuing impact on the Company's operations and results in future periods.

During June 2024, one of the Company’s vendors (CDK Global) experienced a cyber-incident impacting certain services provided to the Company and many other automotive retailers, including the Company’s sales, service, inventory, customer relationship management, and accounting functions.

Upon discovery of the incident, we took immediate precautionary steps to protect our systems.

Beginning on June 19, 2024, the outage affected all Asbury locations, with the exception of our Koons stores which utilize a different dealer management system.

All functions of CDK were not fully restored for us until July 8, 2024, with other plug-ins and bolt-on applications coming back online in the weeks thereafter.

The CDK outage had a negative impact on our financial results during the quarter ended June 30, 2024 as a result of fewer new and used vehicle sales, which also impacted our F&I business, a reduction in parts and service volumes and certain incremental expenses related to our recovery efforts.

As previously disclosed, we estimated the earnings per share for the quarter ended June 30, 2024 was negatively impacted between $0.95 and $1.15 per share, without taking into account any potential recoveries related to the incident.

The CDK Global cyber-incident is not expected to continue to impact the Company's operations and results in future periods.

We have cybersecurity insurance coverage of $15.0 million, with a $2.5 million deductible.

The timing of recovering some portion of our losses through insurance or other recoveries is difficult to predict.

The insurance recoveries we receive, if any, may not occur for several quarters or longer.

Jim Koons Acquisition

On December 11, 2023, the Company completed the acquisition of substantially all of the assets, including all real property and businesses of the Jim Koons Dealerships ("Koons") pursuant to a Purchase and Sale Agreement with various entities that comprise the Jim Koons automotive dealerships group (the "Koons acquisition") for an aggregate purchase price of approximately $1.50 billion, which includes $256.1 million of new vehicle floor plan financing and $103.8 million of assets held for sale related to Koons Lexus of Wilmington.

The acquisition was funded with borrowings under Asbury’s existing credit facility and cash on hand.

The Koons acquisition comprised 20 new vehicle dealerships and six collision centers.

Miller Acquisition

On December 17, 2021, the Company completed the acquisition of the businesses of the Larry H.

Miller ("LHM") Dealerships and TCA (collectively, the "LHM acquisition"), thereby acquiring 54 new vehicle dealerships, seven used cars stores, 11 collision centers, a used vehicle wholesale business, the real property related thereto, and the entities comprising the TCA business for an aggregate purchase price of $3.48 billion.

The purchase price was financed through a combination of cash, debt, including senior notes, real estate facilities, new and used vehicle floor plan facilities and the proceeds from the issuance of common stock.

Financial Highlights

Highlights related to our financial condition and results of operations include the following:

• Consolidated revenue for the year ended December 31, 2023 decreased to $14.80 billion, compared to $15.43 billion for the prior year.

• Consolidated gross profit for the year ended December 31, 2023 decreased to $2.76 billion, compared to $3.10 billion for the prior year.

• The decrease in consolidated revenue and gross profit is primarily due to lower used vehicle and F&I revenue.

Additionally, lower gross profit was driven by lower gross profit per vehicle sold for both new and used vehicles as margins continue to shift downward from the historic highs in recent years.

• Consolidated revenue for the year ended December 31, 2024 increased to $17.19 billion, compared to $14.80 billion for the prior year.

• Consolidated gross profit for the year ended December 31, 2024 increased to $2.95 billion, compared to $2.76 billion for the prior year.

• The increase in consolidated revenue and consolidated gross profit is primarily due to the effects of the Koons acquisition and growth in parts and services gross profit.

This increase was offset by lower gross profit per vehicle sold for both new and used as margins continue to shift downward from the historic highs in recent years.

• The effects of dealership divestitures also impacted consolidated revenue and gross profit.

During the year ended December 31, 2023, we sold one franchise (one dealership location) in Austin, Texas.

During 2022, we completed sixteen divestitures that contributed $683 million in revenue for the year ended December 31, 2022.

Four of the divestitures closed in the first quarter, three in the second quarter, and nine in the fourth quarter of 2022.

During the year ended December 31, 2024, we divested five franchises (five dealership locations).

These divested dealerships contributed $121.2 million of revenue during the year ended December 31, 2024.

• Our capital allocation priorities were supported by share repurchases of approximately 830,297 million shares for $183.0 million during the year ended December 31, 2024.

• On October 20, 2023, we entered into a fourth amended and restated credit agreement with Bank of America, as administrative agent, and the other lenders party thereto (the "2023 Senior Credit Facility').

The 2023 Senior Credit Facility increased our borrowing capacity from $2.55 billion to $2.80 billion and extended the maturity date to October 20, 2028.

CONSOLIDATED RESULTS OF OPERATIONS

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As such, for the following discussion, same store amounts consist of information from dealerships for identical months in each comparative period, commencing with the first full month we owned the dealership.

Additionally, amounts related to divested dealerships are excluded from each comparative period.

During 2022, the Company completed sixteen divestitures that contributed $683 million in revenue for the year.

Four of the divestitures closed in the first quarter, three in the second quarter, and nine in the fourth quarter of 2022.

Additionally, amounts related to divested dealerships are excluded from each comparative period for same store reporting.

The Company's full year results for 2024 include the results of the Koons dealerships acquired in the fourth quarter of 2023.

Accordingly, the significant increases in revenue, gross profit and income from operations for 2024 compared to 2023 are largely a result of this acquisition.

The Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

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Depreciation and amortization 75.0 67.7 7.3 11 %

Asset impairments 117.2 — 117.2 NM

Other operating income, net — (4.4) 4.4 (100) %

Asset impairments 149.5 117.2 32.3 28 %

INCOME FROM OPERATIONS 835.6 953.5 (117.9) (12) %

OTHER (INCOME) EXPENSES:

Floor plan interest expense 9.6 8.4 1.3 15 %

Floor plan interest expense 89.9 9.6 80.2 NM

Other interest expense, net 179.1 156.1 23.0 15 %

Gain on dealership divestitures, net (13.5) (207.1) 193.6 NM

Total other expenses (income), net 152.2 (46.5) 198.8 NM

Gain on dealership divestitures, net (8.6) (13.5) 4.9 (36) %

Total other expenses, net 260.3 152.2 108.1 71 %

INCOME BEFORE INCOME TAXES 575.3 801.3 (226.0) (28) %

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SG&A EXPENSES AS A PERCENTAGE OF GROSS PROFIT 64.0 % 58.7 %

Total revenue during 2023 decreased by $631.2 million (4%) compared to 2022, due to a $782.8 million (15%) decrease in used vehicle revenue, a $120.8 million (15%) decrease in F&I revenue, offset by a $265.1 million (4%) increase in new vehicle revenue and a $7.3 million increase in parts and service revenue.

The $344.8 million (11%) decrease in gross profit during 2023 was the result of a $141.0 million (17%) decrease in new vehicle gross profit, an $89.2 million (25%) decrease in used vehicle gross profit, a $2.1 million decrease in parts and service gross profit and a $112.5 million (15%) decrease in F&I gross profit.

Total revenue during 2024 increased by $2,385.9 million (16%) compared to 2023, due to a $1,219.0 million (16%) increase in new vehicle revenue, an $803.9 million (18%) increase in used vehicle revenue, a $273.2 million (13%) increase in parts and service revenue and an $89.8 million (13%) increase in F&I revenue.

The $192.8 million (7%) increase in gross profit during 2024 was the result of a $200.6 million (17%) increase in parts and service gross profit and a $73.4 million (11%) increase in F&I gross profit, partially offset by a $62.6 million (9%) decrease in new vehicle gross profit and an $18.6 million (7%) decrease in used vehicle gross profit.

Our total gross profit margin decreased 146 basis points from 18.6% in 2023 to 17.2% in 2024.

Income from operations during 2023 decreased by $319.1 million (25%) compared to 2022, primarily due to a $344.8 million (11%) decrease in gross profit and a $117.2 million increase in asset impairments, partially offset by a $146.0 million (8%) decrease in selling, general, and administrative expenses.

Total other expenses (income), net increased by $198.8 million from income of $46.5 million in 2022 to $152.2 million of expenses in 2023, primarily due to a $193.6 million decrease in gain on dealership divestitures, a $3.9 million (3%) increase in other interest expense, net and a $1.3 million (15%) increase in floor plan interest expense.

Income from operations during 2024 decreased by $117.9 million (12%) compared to 2023, primarily due to a $271.2 million (17%) increase in selling, general and administrative expenses and a $32.3 million (28%) increase in asset impairments, partially offset by a $192.8 million (7%) increase in gross profit.

Total other expenses, net increased by $108.1 million (71%) from expenses of $152.2 million in 2023 to $260.3 million of expenses in 2024, primarily due to an $80.2 million (NM) increase in floor plan interest expense, a $23.0 million (15%) increase in other interest expense, net and a $4.9 million (36%) decrease in gain on dealership divestitures, net.

As a result, income before income taxes decreased by $226.0 million (28%) to $575.3 million in 2024.

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New vehicle gross margin 5.5 % 7.8 % (2.3) %

During 2023, new vehicle revenue increased by $265.1 million (4%) when compared to 2022, as a result of a 5% increase in revenue per new vehicle sold partially offset by a 1% decrease in new vehicle unit sales.

Same store new vehicle revenue increased by $500.6 million (7%) as a result of a 4% increase in revenue per new vehicle sold and a 3% increase in new vehicle units sold.

New vehicle gross profit decreased by $141.0 million (17)% in 2023 when compared to 2022, as a result of a 16% decrease in gross profit per new vehicle sold and a 1% decrease in unit volumes.

Same store new vehicle gross profit decreased by $114.0 million (14%) in 2023, as a result of a 16% decrease in gross profit per new vehicle sold partially offset by a 3% increase in unit volumes.

During 2024, new vehicle revenue increased by $1,219.0 million (16%) when compared to 2023, as a result of a 16% increase in new vehicle unit sales.

Same store new vehicle revenue increased by $28.5 million driven by an increase in same store revenue per new vehicle sold from $51,251 for the year ended December 31, 2023 to $51,484 for the year ended December 31, 2024.

New vehicle gross profit decreased by $62.6 million (9%) in 2024 when compared to 2023, as a result of a 21% decrease in gross profit per new vehicle sold partially offset by a 16% increase in unit volumes.

Same store new vehicle gross profit decreased by $149.9 million (22%) in 2024 as a result of a 22% decrease in gross profit per new vehicle sold.

Same store new vehicle gross margin decreased 205 basis points to 7.2% in 2024.

The decrease in our new vehicle gross profit margin was primarily attributable to the easing of new vehicle inventory constraints which softened the historically high new vehicle margins seen in recent years.

The decrease in our new vehicle gross profit margin was primarily attributable to the continued easing of new vehicle inventory constraints which softened the historically high new vehicle margins seen in recent years.

The seasonally adjusted annual rate ("SAAR") for new vehicle sales in the U.S.

during the year ended December 31, 2024 was approximately 15.8 million which increased as compared to approximately 15.4 million during the year ended December 31, 2023.

The increase in new vehicle sales revenue on a same store basis for the year ended December 31, 2023 over the same period in the prior year is primarily attributable to an increase of $2,118 of revenue per new vehicle sold and an increase of 3,845 in new vehicle units sold.

The increase in new vehicle sales revenue on a same store basis for the year ended December 31, 2024 over the same period in the prior year is primarily attributable to an increase of $234 of revenue per new vehicle sold, while new vehicle units sold remained relatively flat for the year ended December 31, 2024 as compared to the same period in the prior year.

The increase in SAAR period over period reflects higher inventory supply, including fleet, coupled with continued consumer demand for new vehicles.

However, we continue to be negatively impacted by the significant variation in new vehicle days supply among brands and models.

We ended the year with approximately 43

days of supply of new vehicle inventory which reflects an increase from 26 days of supply as of December 31, 2022 but remains well below historical levels.

However, we continue to be negatively impacted by the significant variation in new vehicle

days supply among brands and models.

We ended the year with approximately 49 days of supply of new vehicle inventory which reflects an increase from 43 days of supply as of December 31, 2023 but remains well below historical levels.

Used Vehicle—

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Used vehicle retail gross margin 5.2 % 6.2 % (1.0) %

Used vehicle revenue decreased by $782.8 million (15%), due to an $811.3 million (17%) decrease in used vehicle retail revenue, partially offset by a $28.5 million (8%) increase in used vehicle wholesale revenue.

Used vehicle revenue increased by $803.9 million (18%), due to a $588.4 million (15%) increase in used vehicle retail revenue and a $215.5 million (54%) increase in used vehicle wholesale revenue.

Same store used vehicle revenue decreased by $140.5 million (3%) due to a $211.2 million (5%) decrease in used vehicle retail revenue, partially offset by a $70.7 million (19%) increase in used vehicle wholesale revenue.

Used vehicle revenues and unit volume have continued to

contract during 2023, along with margins on both an all store and same store basis.

Used vehicle revenues and unit volume have continued to contract during

2024, along with margins on both an all store and same store basis.

Used vehicle revenue and unit volumes have been negatively impacted by the affordability headwinds and lack of inventory availability, especially in vehicles with lower mileage.

In 2023, total Company and same store used vehicle retail gross profit margins decreased 100 and 102 basis points, respectively, to both 6.2%.

In 2024, total Company and same store used vehicle retail gross profit margins decreased 122 and 101 basis points, respectively, to 5.0% and 5.2%.

We attribute the decreases in used vehicle retail gross profit margin to a softening in the used vehicle market, which was at record highs in 2021 and, to a lesser extent 2022, as a result of new vehicle inventory shortages initially caused by COVID-19 disruptions followed by supply chain issues.

We believe that our used vehicle inventory continues to be well-aligned with current consumer demand, with approximately 37 days of supply as of December 31, 2024.

This level of days of supply is in line with our historic targeted range of 30 to 35 days.

Parts and Service—

For the year ended December 31, 2024, we are presenting "Collision" as a separate line item within parts and service gross profit.

In periods ending prior to June 30, 2024, "Collision" was included within "Customer pay".

We reclassified the corresponding amounts for the year ended December 31, 2023 to conform to current year presentation.

For the Year Ended December 31, Increase

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Warranty 186.7 148.3 38.4 26 %

Collision 128.6 123.5 5.1 4 %

Wholesale parts 77.5 78.7 (1.2) (2) %

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Warranty 166.3 145.0 21.3 15 %

Collision 114.2 122.3 (8.1) (7) %

Wholesale parts 74.8 77.1 (2.3) (3) %

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* Reconditioning and preparation represents the gross profit earned by our parts and service departments for internal work performed and is included as a reduction of Parts and service cost of sales within the accompanying consolidated statements of income upon the sale of the vehicle.

The $7.3 million increase in parts and service revenue was due to a $6.3 million increase in customer pay revenue and a $10.2 million (4%) increase in warranty revenue, partially offset by a $9.2 million (2%) decrease in wholesale parts revenue.

The $273.2 million (13%) increase in parts and service revenue was due to a $185.6 million (17%) increase in customer pay revenue, a $65.7 million (24%) increase in warranty revenue, a $15.3 million (3%) increase in wholesale parts revenue and a $6.6 million (2%) increase in collision revenue.

Same store parts and service revenue increased $35.9 (2%) from $2.03 billion in 2023 to $2.06 billion in 2024.

The increase in same store parts and service revenue was due to a $72.1 million (6%) increase in customer pay revenue, a $19.8 million (8%) increase in warranty revenue and a $10.7 million (2%) increase in wholesale parts revenue.

Parts and service gross profit, excluding reconditioning and preparation, increased by $5.1 million (1%) to $936.6 million and same store gross profit, excluding reconditioning and preparation, increased by $47.6 million (5%) to $928.1 million.

The $47.6 million increase in same store gross profit, excluding reconditioning and preparation, is primarily due to a $33.8 million (5%) increase in customer pay gross profit, an $11.3 million (8%) increase in warranty gross profit, and a $2.5 million (3%) increase in wholesale parts gross profit.

As a result of the shortage of new vehicle inventory, many customers have elected to keep their current vehicles longer which has generated additional customer pay and wholesale parts gross profit for the parts and service departments.

The increase in same store parts and service revenue was due to a $42.7 million (4%) increase in customer pay revenue and a $33.0 million (12%) increase in warranty revenue, partially offset by a $15.6 million (4%) decrease in wholesale parts revenue and a $24.2 million (9%) decrease in collision revenue.

Parts and service gross profit, excluding reconditioning and preparation, increased by $167.4 million (18%) to $1.10 billion and same store gross profit, excluding reconditioning and preparation, increased by $55.4 million (6%) to $968.2 million.

The $55.4 million increase in same store gross profit, excluding reconditioning and preparation, is primarily due to a $44.5 million (8%) increase in customer pay gross profit and a $21.3 million (15%) increase in warranty gross profit, partially offset by an $8.1 million (7%) decrease in collision gross profit and a $2.3 million (3%) decrease in wholesale parts gross profit.

As a result of the shortage of new vehicle inventory in recent years, coupled with inflationary headwinds, many customers have elected to keep their current vehicles longer which has generated additional customer pay gross profit for the service departments.

In addition, the increasing complexity of vehicles due to advanced systems is increasing the frequency of recalls resulting in an increase in warranty gross profit.

We continue to focus on increasing our customer pay parts and service revenue over the long-term by improving the customer experience, providing competitive benefits to our technicians, capitalizing on our dealership training programs and upgrading equipment.

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Finance and insurance, net per vehicle sold $ 2,181 $ 2,325 $ (144) (6) %

F&I revenue, net decreased by $120.8 million (15%) in 2023 when compared to 2022 primarily as a result of an 8% decrease in new and used retail unit sales and a 7% decrease in F&I per vehicle retailed.

F&I revenue, net increased by $89.8 million (13%) in 2024 when compared to 2023 primarily as a result of a 17% increase in new and used retail unit sales, partially offset by a $107 (5%) decrease in F&I per vehicle retailed.

On a same store basis, F&I revenue, net decreased by $30.3 million (5%) in 2024 when compared to 2023 primarily as a result of a 1% decrease in new and used retail unit sales and a $144 (6%) decrease in F&I per vehicle retailed.

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The method for recognizing revenue is assigned based on contract type and expected claim patterns.

Premium revenues are supplemented with investment gains or losses and income earned associated with the performance of TCA's investment portfolio.

During the year ended December 31, 2023, TCA generated $138.3 million of revenue, consisting primarily of earned premium and $15.7 million from the investment portfolio.

Premium revenues are supplemented with investment gains or

losses and income earned associated with the performance of TCA's investment portfolio.

During the years ended December 31, 2024 and 2023, TCA generated $120.6 million and $138.3 million, respectively, of revenue, consisting primarily of earned premium and $17.8 million and $15.7 million, respectively, from the investment portfolio.

Direct expenses incurred for the acquisition of F&I contracts on which revenue has not yet been recognized have been deferred and are amortized over the related contract period.

During the year ended December 31, 2023, TCA recorded $37.9 million of cost of sales consisting primarily of claims expense, after the elimination of claims paid to affiliated dealerships.

Commissions expense paid by TCA to our affiliated dealerships and reflected as F&I revenue in our Dealerships segment is eliminated in the TCA segment upon consolidation.

As we continue to integrate TCA, we expect a rollout of TCA products to our remaining stores by the end of 2024.

During the years ended December 31, 2024 and 2023, TCA recorded $54.4 million and $37.9 million, respectively, of cost of sales consisting primarily of claims expense paid to affiliated dealerships.

Commissions expense paid by TCA to our affiliated dealerships and reflected as F&I revenue in our Dealerships segment is eliminated upon consolidation.

As we continue to integrate TCA, we currently expect a rollout of TCA products in our Florida market during the first quarter of 2025 and the Koons platform in the second quarter of 2025;

however, no assurance can be given that the rollout will be completed within the timeframe contemplated.

With the ownership of TCA, while the combined profitability of the transaction is higher, the timing of revenue and cost recognition is deferred and amortized over the life of the contract.

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Same store SG&A expense as a percentage of gross profit increased 528 basis points from 58.3% in 2023 to 63.5% in 2024.

The increase in SG&A as a percentage of gross profit is primarily the result of lower gross profits for 2023 when compared to 2022.

The increase in SG&A as a percentage of gross profit is primarily the result of higher cost in personnel and other categories in SG&A expense partially offset by higher gross profits for 2024 as compared to 2023.

SG&A expense for the year ended December 31, 2024 includes $7.1 million of expense related to hail damage and $6.4 million of expense related to Hurricane Milton.

SG&A expense for the year ended December 31, 2023 includes $4.3 million of expense related to hail damage, a $3.6 million gain from the sale of real estate and $4.1 million of professional fees related to the Koons acquisition.

SG&A expense for the year ended December 31, 2022 includes $2.7 million of professional fees related to acquisition due diligence.

Asset Impairments —

During the year ended December 31, 2023, we recognized asset impairment charges of $117.2 million as compared to no impairment charges during the year ended December 31, 2022.

The asset impairment charges resulted from our annual franchise rights impairment tests and the classification of certain asset disposal groups as held for sale which resulted in additional franchise rights and goodwill impairment charges.

During the year ended December 31, 2024, we recognized asset impairment charges of $149.5 million as compared to $117.2 million of impairment charges during the year ended December 31, 2023.

The asset impairment charges resulted from our interim and annual franchise rights impairment tests and the classification of certain asset disposal groups as held for sale which resulted in additional franchise rights and goodwill impairment charges.

Floor Plan Interest Expense —

Floor plan interest expense increased by $1.3 million (15%) to $9.6 million during 2023 compared to $8.4 million during 2022 due to less cash held in the floor plan offset account in December 2023 as a result of funding the Koons acquisition.

Floor plan interest expense increased by $80.2 million to $89.9 million during 2024 compared to $9.6 million during 2023 due to less cash held in the floor plan offset account during the year ended December 31, 2024 as a result of funding the Koons acquisition in December 2023.

Other Interest Expense —

Other interest expense increased $23.0 million (15%) from $156.1 million in 2023 to $179.1 million in 2024.

The increase is primarily due to higher loaner payable interest expense driven by higher loaner vehicle balances, as well as interest expense on our revolving credit agreement in December 2023.

Gain on Dealership Divestitures —

During the year ended December 31, 2023, we sold one franchise (one dealership location) in Austin, Texas.

The increase is primarily due to higher loaner payable interest expense driven by higher loaner vehicle balances, as well as interest expense on our revolving credit agreement during the year ended December 31, 2024.

Gain on Dealership Divestitures, Net —

During the year ended December 31, 2024, we sold 1 Lexus franchise (1 dealership location) in Wilmington, Delaware due to OEM requirements in connection with the Koons acquisition, 1 Nissan franchise (1 dealership location) in Denver, Colorado, 1 Nissan franchise (1 dealership location) in Atlanta, Georgia, 1 Chevrolet franchise (1 dealership location) in Atlanta, Georgia and 1 Honda franchise (1 dealership location) in Spokane, Washington.

The Company recorded a pre-tax gain totaling $8.6 million, which is presented in our accompanying consolidated statements of income as a gain on dealership divestitures, net.

During the year ended December 31, 2023, we sold 1 franchise (1 dealership location) in Austin, Texas.

The Company recorded a pre-tax gain totaling $13.5 million.

During the year ended December 31, 2022, we sold one franchise (one dealership location) in St.

Louis, Missouri, three franchises (three dealership locations) and one collision center in Colorado, two franchises (two dealership locations) in Spokane, Washington, one franchise (one dealership location) in Albuquerque, New Mexico and 11 franchises (nine dealership locations) and two collision centers in North Carolina.

The Company recorded a net pre-tax gain totaling $207.1 million.

Income Tax Expense —

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Our effective tax rate increased 40 basis points from 24.8% in 2023 to 25.2% in 2024.

The increase in our effective tax rate was primarily due to lower income before taxes and our acquisition and divestiture activity.

The increase in our effective tax rate was primarily due to our acquisition and divestiture activity.

Stores acquired are located in relatively high tax rate states while the stores divested are located in relatively low or no tax rate states.

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CONSOLIDATED RESULTS OF OPERATIONS

The Company's full year results for 2022 include the results of the dealerships acquired in the fourth quarter of 2021.

Accordingly, the significant increases in revenue, gross profit and income from operations for 2022 compared to 2021 are largely a result of these acquisitions.

We assess the organic growth of our revenue and gross profit on a same store basis.

We believe that our assessment on a same store basis represents an important indicator of comparative financial performance and provides relevant information to assess our performance.

Additionally, amounts related to divested dealerships are excluded from each comparative period for same store reporting.

During 2022, the Company completed sixteen divestitures that contributed $683 million in revenue for the year.

The Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

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Depreciation and amortization 67.7 69.0 (1.3) (2) %

Asset impairments 117.2 — 117.2 NM

Other operating income, net — (4.4) 4.4 (100) %

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Gain on dealership divestitures, net (13.5) (207.1) 193.6 NM

Total other (income) expenses, net (46.5) 94.1 (140.6) NM

Total other expenses (income), net 152.2 (46.5) 198.8 NM

INCOME BEFORE INCOME TAXES 801.3 1,319.1 (517.8) (39) %

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SG&A EXPENSES AS A PERCENTAGE OF GROSS PROFIT 58.7 % 56.9 %

Total revenue during 2022 increased by $5.60 billion (57%) compared to 2021, due to a $2.43 billion (49%) increase in new vehicle revenue, a $1.88 billion (57%) increase in used vehicle revenue, a $891.4 million (75%) increase in parts and service revenue and a $391.9 million (97%) increase in F&I revenue.

The $1.20 billion (63%) increase in gross profit during 2022 was the result of a $353.5 million (72%) increase in new vehicle gross profit, a $64.9 million (22%) increase in used vehicle gross profit, a $430.8 million (60%) increase in parts and service gross profit and a $349.2 million (87%) increase in F&I gross profit.

Our total gross profit margin increased 75 basis points from 19.3% in 2021 to 20.1% in 2022.

Income from operations during 2022 increased by $480.8 million (61%) compared to 2021, primarily due to a $1.20 billion (63%) increase in gross profit, partially offset by a $689.4 million (64%) increase in selling, general, and administrative expenses and a $27.1 million (65%) increase in depreciation and amortization expenses.

Total other (income) expenses, net decreased by $140.6 million (149%) from expense of $94.1 million in 2021 to $46.5 million of income in 2022, primarily due to a $199.1 million increase in gain on dealership divestitures, partially offset by a $58.3 million increase in other interest expense, net, and a $0.2 million increase in floor plan interest expense.

As a result, income before income taxes increased by $621.4 million (89%) to $1.32 billion in 2022.

The $156.5 million (95%) increase in income tax expense was primarily attributable to the 89% increase in income before taxes and a 70 basis point increase in the 2022 effective tax rate.

Overall, net income increased by $464.9 million (87%) from $532.4 million in 2021 to $997.3 million in 2022.

DEALERSHIPS SEGMENT

Our total gross profit margin decreased 147 basis points from 20.1% in 2022 to 18.6% in 2023.

As a result, income before income taxes decreased by $517.8 million (39%) to $801.3 million in 2023.

The $123.0 million (38%) decrease in income tax expense was primarily attributable to the 39% decrease in income before taxes, partially offset by a 41 basis point increase in the 2023 effective tax rate.

Overall, net income decreased by $394.8 million (40%) from $997.3 million in 2022 to $602.5 million in 2023.

For the Year Ended December 31, Increase

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New vehicle gross margin 7.8 % 10.0 % (2.2) %

New vehicle revenue increased by $2.43 billion (49%), as a result of a 38% increase in new vehicle unit sales and a 9% increase in revenue per new vehicle sold.

Same store new vehicle revenue decreased by $407.8 million (9%) as a result of a 18% decrease in new vehicle units sold offset by a 10% increase in revenue per new vehicle sold.

New vehicle gross profit increased by $353.5 million (72%) , as a result of a 25% increase in gross profit per new vehicle sold and a 38% increase in unit volumes.

Same store new vehicle gross profit increased by $31.2 million (7%) in 2022, as a result of a 30% increase in gross profit per new vehicle sold partially offset by a 18% decrease in unit volumes.

Same store new vehicle gross margin increased 179 basis points to 11.7% in 2022, primarily as a result of supply challenges for much of 2022 caused by a global semi-conductor shortage which led to manufacturer production challenges.

We finished 2022 with a 26 days of supply of new vehicle inventory which is below our targeted days supply primarily as a result of these manufacturer production challenges.

Same store new vehicle revenue increased by $500.6 million (7%) as a result of a 4% increase in revenue per new vehicle sold and a 3% increase in new vehicle units sold.

New vehicle gross profit decreased by $141.0 million (17%) in 2023 when compared to 2022, as a result of a 16% decrease in gross profit per new vehicle sold and a 1% decrease in unit volumes.

Same store new vehicle gross profit decreased by $114.0 million (14%) in 2023, as a result of a 16% decrease in gross profit per new vehicle sold partially offset by a 3% increase in unit volumes.

Same store new vehicle gross margin decreased 228 basis points to 9.2% in 2023.

The seasonally adjusted annual rate ("SAAR") for new vehicle sales in the U.S.

during the year ended December 31, 2023 was approximately 15.4 million which increased as compared to approximately 13.7 million during the year ended December 31, 2022.

The increase in SAAR period over period reflects higher inventory supply, including fleet, coupled with continued consumer demand for new vehicles.

However, we continue to be negatively impacted by the significant variation in new vehicle days supply among brands and models.

We ended the year with approximately 43 days of supply of

new vehicle inventory which reflects an increase from 26 days of supply as of December 31, 2022 but remains well below historical levels.

Used Vehicle—

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Used vehicle retail gross margin 6.2 % 7.2 % (1.0) %

Used vehicle revenue increased by $1.88 billion (57%), due to a $1.77 billion (58%) increase in used retail revenue and a $108.6 million (42%) increase in used vehicle wholesale revenue.

Same store used vehicle revenue increased by $148.7 million (5%) due to a $226.9 million (8%) increase in used vehicle retail revenue, partially offset by a $78.1 million (34%) decrease in used vehicle wholesale revenue.

In 2022, total Company and same store used vehicle retail gross profit margins both decreased 139 and 224 basis points to 7.2% and 6.4%, respectively.

We attribute the decreases in used vehicle retail gross profit margin to a softening in the used

vehicle market, which was at record highs in 2021 as a result of new vehicle inventory shortages caused by semiconductor supply chain issues and COVID-19 disruptions.

Same store used vehicle revenue decreased by $513.7 million (11%) due to a $554.6 million (12%) decrease in used vehicle retail revenue, partially offset by a $40.8 million (12%) increase in used vehicle wholesale revenue.

Used vehicle revenues and unit volume have continued to contract during 2023, along with margins on both an all store and same store basis.

Used vehicle revenue and unit volumes have

been negatively impacted by the affordability headwinds and lack of inventory availability, especially in vehicles with lower mileage.

In 2023, total Company and same store used vehicle retail gross profit margins decreased 100 and 102 basis points, respectively, to both 6.2%.

We believe that our used vehicle inventory continues to be well-aligned with current consumer demand, with approximately 32 days of supply as of December 31, 2023.

This level of days of supply is in line with our historic targeted range of 30 to 35 days.

Parts and Service—

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The $923.3 million (78%) increase in parts and service revenue was due to a $568.1 million (70%) increase in customer pay revenue, a $270.2 million (143%) increase in wholesale parts revenue and a $85.0 million (47%) increase in warranty revenue.

Same store parts and service revenue increased $102.6 million (5%) from $1.96 billion in 2022 to $2.06 billion in 2023.

The increase in same store parts and service revenue was due to a $108.7 million (15%) increase in customer pay revenue and a $26.8 million (17%) increase in wholesale parts revenue, partially offset by a $9.1 million (6%) decrease in warranty revenue.

The $57.5 million increase in same store gross profit, excluding reconditioning and preparation, is primarily due to a $60.1 million (15%) increase in customer pay gross profit and a $3.2 million (11%) increase in wholesale parts gross profit, partially offset by a $5.7 million (7%) decrease in warranty gross profit.

$47.6 million increase in same store gross profit, excluding reconditioning and preparation, is primarily due to a $33.8 million (5%) increase in customer pay gross profit, an $11.3 million (8%) increase in warranty gross profit and a $2.5 million (3%) increase in wholesale parts gross profit.

Finance and Insurance, net—

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(Dollars in millions, except for per vehicle data)

Finance and insurance, net $ 670.9 $ 402.7 $ 268.2 67 %

Finance and insurance, net revenue $ 676.2 $ 797.0 $ (120.8) (15) %

Finance and insurance, net gross profit $ 638.2 $ 750.7 $ (112.5) (15) %

Finance and insurance, net per vehicle sold $ 2,304 $ 2,480 $ (177) (7) %

Finance and insurance, net $ 403.0 $ 362.7 $ 40.4 11 %

Finance and insurance, net revenue $ 667.3 $ 761.7 $ (94.4) (12) %

Finance and insurance, net gross profit $ 629.4 $ 715.5 $ (86.1) (12) %

Finance and insurance, net per vehicle sold $ 2,308 $ 2,527 $ (219) (9) %

F&I revenue, net increased by $268.2 million (67%) in 2022 when compared to 2021 primarily as a result of a 41% increase in new and used retail unit sales and an 18% increase in F&I per vehicle retailed.

On a same store basis F&I revenue, net increased by $40.4 million (11%) in 2022 when compared to 2021 primarily as a result of a 24% increase in F&I per vehicle retailed, partially offset by a 11% decrease in new and used retail unit sales.

During 2022 we continued to benefit from a favorable consumer lending environment, which allowed more of our customers to take advantage of a broader array of F&I products and our continued focus on improving the F&I results at our lower-performing stores through our F&I training programs.

F&I revenue, net decreased by $120.8 million (15%) in 2023 when compared to 2022 primarily as a result of an 8% decrease in new and used retail unit sales and an 7% decrease in F&I per vehicle retailed.

On a same store basis F&I revenue, net decreased by $94.4 million (12%) in 2023 when compared to 2022 primarily as a result of a 4% decrease in new and used retail unit sales and a 9% decrease in F&I per vehicle retailed.

The financial results of the TCA segment, after dealership eliminations, are as follows:

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(Dollars in millions)

Finance and insurance, revenue $ 126.0 $ 2.3 $ 123.7 NM

Finance and insurance, cost of sales $ 46.3 $ 3.6 $ 42.7 NM

Finance and insurance, gross profit $ 79.8 $ (1.3) $ 81.0 NM

Finance and insurance, revenue $ 138.3 $ 126.0 $ 12.3 10 %

Finance and insurance, cost of sales $ 37.9 $ 46.3 $ (8.4) (18) %

Finance and insurance, gross profit $ 100.4 $ 79.8 $ 20.7 26 %

TCA offers a variety of F&I products, such as extended vehicle service contracts, prepaid maintenance contracts, GAP, appearance protection contracts and lease wear-and-tear contracts.

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Premium revenues are supplemented with investment gains or losses and income earned associated with the performance of TCA's investment portfolio.

During the year ended December 31, 2022, TCA generated $126.0 million of revenue, consisting primarily of earned premium partially offset by a loss of $8.0 million in the investment portfolio.

During the year ended December 31, 2023, TCA generated $138.3 million of revenue, consisting primarily of earned premium and $15.7 million from the investment portfolio.

Direct expenses incurred for the acquisition of F&I contracts on which revenue has not yet been recognized have been deferred and are amortized over the related contract period.

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(Decrease) % of Gross

Profit (Decrease) Increase

Profit Increase (Decrease)

2023 % of Gross

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SG&A expense as a percentage of gross profit increased 182 basis points from 56.9% in 2022 to 58.7% in 2023.

Same store SG&A expense as a percentage of gross profit decreased 35 basis points from 57.2% in 2021 to 56.9% in 2022.

The decrease in SG&A as a percentage of gross profit is primarily the result of higher gross profits earned across our Dealerships segment, as well as maintaining expense discipline, particularly in personnel costs, with enhanced productivity of our team members.

Depreciation and Amortization Expense —

The $27.1 million (65%) increase in depreciation and amortization expense during 2022 compared to 2021, was primarily the result of depreciation associated with dealership acquisitions during 2021 and additional assets placed into service during 2022.

Same store SG&A expense as a percentage of gross profit increased 173 basis points from 56.8% in 2022 to 58.5% in 2023.

The increase in SG&A as a percentage of gross profit is primarily the result of lower gross profits for 2023 when compared to 2022.

SG&A expense for the year ended December 31, 2022 includes $2.7 million of professional fees related to acquisition due diligence.

Asset Impairments —

During the year ended December 31, 2023, we recognized asset impairment charges of $117.2 million as compared to no impairment charges during the year ended December 31, 2022.

Floor Plan Interest Expense —

Floor plan interest expense increased by $0.2 million (2%) to $8.4 million during 2022 compared to $8.2 million during 2021.

Other Interest Expense —

Other interest expense increased $3.9 million (3%) from $152.2 million in 2022 to $156.1 million in 2023.

The increase is due to having a full year of interest expense in 2022 in connection with acquisition-related financing that we entered into during the fourth quarter of 2021.

The increase is primarily due to higher loaner payable interest expense driven by higher loaner vehicle balances, as well as interest expense on our revolving credit agreement in December 2023.

Gain on Dealership Divestitures —

During the year ended December 31, 2023, we sold one franchise (one dealership location) in Austin, Texas.

The Company recorded a pre-tax gain totaling $13.5 million.

During the year ended December 31, 2022, we sold one franchise (one dealership location) in St.

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The Company recorded a net pre-tax gain totaling $207.1 million.

During the year ended December 31, 2021, we sold one franchise (one dealership location) in the Charlottesville, Virginia market.

The Company recorded a pre-tax gain totaling $8.0 million.

Income Tax Expense —

The $156.5 million (95%) increase in income tax expense was the result of a $621.4 million (89%) increase in income before income taxes.

The $123.0 million (38%) decrease in income tax expense was primarily the result of a $517.8 million (39%) decrease in income before income taxes.

Our effective tax rate increased 41 basis points from 24.4% in 2022 to 24.8% in 2023.

The increase in our effective tax rate was primarily due to the apportionment of income to states with higher tax rates we began doing business in as a result of the acquisitions made during the fourth quarter of 2021.

The increase in our effective tax rate was primarily due to lower income before taxes and our acquisition and divestiture activity.

Stores acquired are located in relatively high tax rate states while the stores divested are located in relatively low or no tax rate states.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2023, we had total available liquidity of $459.8 million, which consisted of cash and cash equivalents of $32.5 million (excluding $13.2 million held by TCA), available funds in our floor plan offset accounts of $95.2 million million and $332.1 million of availability under our revolving credit facility.

As of December 31, 2024, we had total available liquidity of $827.7 million , which consisted of cash and cash equivalents of $38.9 million (excluding $30.5 million held by TCA), available funds in our floor plan offset accounts of $116.7 million million and $486.0 million of availability under our revolving credit facility and $186.1 million of availability under our used vehicle floor plan facility.

The borrowing capacities under our revolving credit facility and our used vehicle revolving floor plan facility are limited by borrowing base calculations and, from time to time, may be further limited by our required compliance with certain financial covenants.

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Revolving Credit Facility — A $500.0 million Revolving Credit Facility for, among other things, acquisitions, working capital and capital expenditures, including a $50.0 million sub-limit for letters of credit.

As of December 31, 2023, we converted $389.0 million of availability from the New Vehicle Floor Plan Facility (as defined below) back to the Revolving Credit facility resulting in $346.1 million in borrowing capacity.

In addition, as of December 31, 2023, we had $14.0 million in outstanding letters of credit, resulting in $332.1 million of borrowing availability.

We began the year with no amounts drawn on our revolving credit facility.

During the year ended December 31, 2023, we had borrowings of $329.0 million and $329.0 million in repayments, resulting in no outstanding borrowings as of December 31, 2023.

As of December 31, 2024, we had $14.0 million in outstanding letters of credit, resulting in $486.0 million of borrowing availability.

We began the year wit h no am ounts drawn on our revolving credit facility.

During the year ended December 31, 2024, we had borrowings of $1.21 billion and $1.21 billion in repayment s, resulting in no outstanding borrowings as of December 31, 2024.

New Vehicle Floor Plan Facility — A $1.93 billion New Vehicle Floor Plan Facility which allows us to transfer cash as an offset to floor plan notes payable.

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Used Vehicle Floor Plan Facility — A $375.0 million Used Vehicle Floor Plan Facility to finance the acquisition of used vehicle inventory and for working capital and capital expenditures, as well as to refinance used vehicles.

We began the year with no amounts drawn on our Used Vehicle Floor Plan Facility.

During the year ended December 31, 2023, we had additional borrowings of $547.1 million and $240.0 million in

repayments resulting in $307.1 million outstanding borrowings as of December 31, 2023.

We did not have any borrowing capacity under the Used Vehicle Floor Plan Facility based on our borrowing base calculation as of December 31, 2023.

We began the year with $307.1 million amounts drawn on our Used Vehicle Floor Plan Facility.

During the year ended December 31, 2024, we had additional borrowings of $376.4 million and $582.8 million

in repayments resulting in $100.7 million outstanding borrowings as of December 31, 2024.

We had $186.1 million borrowing capacity under the Used Vehicle Floor Plan Facility based on our borrowing base calculation as of December 31, 2024.

Subject to compliance with certain conditions, the 2023 Senior Credit Agreement provides that we have the ability, at our option and subject to the receipt of additional commitments from existing or new lenders, to increase the size of the facilities by up to $750.0 million in the aggregate without lender consent.

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In addition, we are able to re-designate any amounts moved to the New Vehicle Floor Plan Facility or the Used Vehicle Floor Plan Facility back to the Revolving Credit Facility.

As of December 31, 2022, $389.0 million of availability under the Revolving Credit Facility was re-designated to the New Vehicle Floor Plan Facility.

We re-designated this amount to take advantage of the lower commitment fee rates on the New Vehicle Floor Plan Facility when compared to the Revolving Credit Facility.

On May 25, 2022, the Company and certain of its subsidiaries entered into the fourth amendment to the 2019 Senior Credit Facility with Bank of America, as administrative agent, and the other lenders party thereto, to replace the benchmark reference rate of LIBOR to Secured Overnight Financing Rate ("SOFR").

See Note 14 "Debt" for further details.

In addition to the payment of interest on borrowings outstanding under the 2023 Senior Credit Facility, we are required to pay a quarterly commitment fee on total unused commitments thereunder.

I n addition to the payment of interest on borrowings outstanding under the 2023 Senior Credit Facility, we are required to pay a quarterly commitment fee on total unused commitments thereunder.

The fee for unused commitments under the Revolving Credit Facility is between 0.15% and 0.40% per year, based on the Company's total lease adjusted leverage ratio, and the fee for unused commitments under the New Vehicle Facility Floor Plan and the Used Vehicle Floor Plan Facility is 0.15% per year.

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There is no further borrowing availability under the 2018 Wells Fargo Master Loan Facility.

On and with effect from

June 1, 2022, certain of our subsidiaries entered into an amendment to our 2018 Wells Fargo Master Loan Agreement to replace the benchmark reference rate of LIBOR to SOFR.

On and with effect from June 1, 2022, certain of our subsidiaries entered into an amendment to our 2018 Wells Fargo Master Loan Agreement to replace the benchmark reference rate of LIBOR to SOFR.

See Note 14 "Debt" for further details.

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There is no further borrowing availability under the 2015 Wells Fargo Master Loan Facility.

On and with effect from June 1, 2022, certain of our subsidiaries entered into an amendment to our 2015 Wells Fargo Master Loan Agreement to replace the benchmark reference rate of LIBOR to SOFR.

On and with effect from June 1, 2022, certain

of our subsidiaries entered into an amendment to our 2015 Wells Fargo Master Loan Agreement to replace the benchmark reference rate of LIBOR to SOFR.

See Note 14 "Debt" for further details.

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Restricted payments generally include items such as dividends, share repurchases, unscheduled repayments of subordinated debt, or purchases of certain investments.

Subject to our continued compliance with a consolidated fixed charge coverage ratio and a maximum consolidated total lease adjusted leverage ratio, in each case as set out in the Indentures, restricted payments capacity additions (or subtractions if negative) equal to a base level plus the cumulative amount of (i) 50% of our net income (as defined in the 2023 Senior Credit Facility) plus (ii) 100% of any cash proceeds we receive from the sale of equity interests minus (iii) the dollar amount of share purchases made and dividends

paid during the defined measurement periods, subject to certain exceptions.

In the event that our Consolidated Total Leverage Ratio does (or would) exceed 3.0 to 1.0, the 2023 Senior Credit Facility and the Indentures would then also allow for restricted payments under mutually exclusive parameters, subject to certain exclusions.

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Any repurchases will be subject to applicable limitations in our debt or other financing agreements that may be in existence from time to time.

On May 26, 2023, our Board of Directors announced that it authorized a new $250.0 million share repurchase authorization (the "New Share Repurchase Authorization"), which replaced our previous share repurchase authorization for the repurchase of our common stock in open market transactions or privately negotiated transactions or in other manners as permitted by federal securities laws and other legal and contractual requirements.

On May 15, 2024, the Company announced that its Board of Directors approved an increase of $256.2 million in the Company's common share repurchase authorization to $400 million (the "New Share Repurchase Authorization"), for the repurchase of our common stock in open market transactions or privately negotiated transactions or in other manners as permitted by federal securities laws and other legal and contractual requirements.

The extent that the Company repurchases its shares, the number of shares and the timing of any repurchases will depend on general market conditions, legal requirements and other corporate considerations.

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government enacted the Inflation Reduction Act (the "IRA") into law.

The IRA, among other things, implements a 1% excise tax on share repurchases, which takes effect in tax years beginning after December 31, 2022.

In 2023, we recorded a total of $2.5 million excise tax on our share repurchases.

The IRA, among other things, im plements a 1% excise tax on share repurchases, which takes effect in tax years beginning after December 31, 2022.

In 2024, we recorded a total of $1.7 million exci se tax on our share repurchases.

Contractual Obligations

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As a result, we believe that it is important to understand the relationship between the cash flows of all of our floor plan notes payable and new vehicle inventory in order to understand our working capital and operating cash flow and to be able to compare our operating cash flow to that of our competitors (i.e., if our competitors have a different mix of trade and non-trade floor plan financing as compared to us).

In addition, we include all floor plan borrowings and repayments in our internal

operating cash flow forecasts.

In addition, we include all floor plan borrowings and repayments in our internal operating cash flow forecasts.

As a result, we use the non-GAAP measure "Adjusted cash flow provided by operating activities" (defined below) to compare our results to forecasts.

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Adjusted cash flow provided by operating activities includes borrowings and repayments of floor plan notes payable non-trade and used floor plan notes payable borrowing base changes.

Adjusted cash flow provided by operating activities may not be comparable to similarly titled measures of other companies and should not be considered in isolation, or as a substitute for analysis of our operating results in accordance with GAAP.

Adjusted cash flow provided by operating activities may not be comparable to similarly titled measures of other companies and should not be considered in isolation, or as a substitute for

analysis of our operating results in accordance with GAAP.

In order to compensate for these potential limitations we also review the related GAAP measures.

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Operating Activities—

Net cash provided by operating activities totaled $313.0 million, $696.0 million, and $1.16 billion for the years ended December 31, 2023, 2022, and 2021, respectively.

Net cash provided by operating activities totaled $671.2 million, $313.0 million, and $696.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Adjusted cash flow provided by operating activities totaled $688.4 million, $705.3 million, and $987.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.

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• decrease in $86.6 million in net income and non-cash adjustments to net income;

• $144.1 million decrease related to sale volume and the timing of collection of accounts receivable and contracts-in-transit during 2023 compared to 2022;

• $100.9 million decrease related to the change in accounts payable and accrued liabilities;

• $24.8 million related to a decrease in inventory, net of floor plan notes payable, including both trade and non-trade, excluding offset and including used vehicle borrowing base changes adjusted for acquisitions and divestitures.

The decrease in our adjusted cash flow provided by operating activities, was partially offset by:

• $118.1 million decrease related to the change in other current assets, net;

• $69.4 million decrease related to sale volume and the timing of collection of accounts receivable and contracts-in-transit during 2024 compared to 2023;

• $8.2 million decrease in other long term assets and liabilities, net.

• $1.3 million decrease related to the change in operating lease liabilities.

The $281.7 million decrease in our adjusted cash flow provided by operating activities for the year ended December 31, 2023 compared to the year ended December 31, 2022, was primarily the result of the following:

• decrease of $192.4 million in net income and non-cash adjustments to net income;

• $144.1 million related to sale volume and the timing of collection of accounts receivable and contracts-in-transit during 2023 compared to 2022;

• $210.9 million related to the decrease in other current assets, net;

• $2.6 million increase in other long term assets and liabilities, net and

• $1.3 million related to the change in operating lease liabilities.

The decrease in our adjusted cash flow provided by operating activities, was partially offset by:

• $155.2 million related to an increase in inventory, net of floor plan notes payable, including both trade and non-trade, excluding offset and including used vehicle borrowing base changes adjusted for acquisitions and divestitures;

• $114.4 million increase related to the change in accounts payable and accrued liabilities;

The $354.9 million increase in our adjusted cash flow provided by operating activities for the year ended December 31, 2022 compared to the year ended December 31, 2021, was primarily the result of the following:

• increase of $431.9 million in net income and non-cash adjustments to net income;

• $126.7 million related to an increase in inventory, net of floor plan notes payable, including both trade and non-trade, excluding offset and including used vehicle borrowing base changes adjusted for acquisitions and divestitures;

• $16.2 million increase in other long term assets and liabilities, net.

The increase in our adjusted cash flow provided by operating activities, was partially offset by:

• $53.2 million related to sale volume and the timing of collection of accounts receivable and contracts-in-transit during 2022 compared to 2021;

• $126.6 million related to the change in other current assets, net;

• $114.4 million related to the change in accounts payable and accrued liabilities.

• $4.8 million related to the change in operating lease liabilities.

Investing Activities—

Net cash used in investing activities totaled $1.68 billion and $3.92 billion for the year ended December 31, 2023 and 2021, respectively, compared to net cash provided by investing activities of $464.7 million for the year ended December 31, 2022.

Net cash used in investing activities totaled $137.2 million and $1.68 billion for the years ended December 31, 2024 and 2023, respectively, compared to net cash provided by investing activities of $464.7 million for the year ended December 31, 2022.

Cash flows from investing activities relate primarily to capital expenditures, acquisitions, divestitures, and the sale of property and equipment.

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The sources of the purchase price included borrowings under Asbury’s existing credit facility and cash on hand.

On December 17, 2021, we completed the acquisition of LHM and TCA for a total purchase price of approximately $3.48 billion.

The sources of the purchase price included 2029 Notes, 2032 Notes, 2021 Real Estate Facility, proceeds from our common stock offering, new floorplan notes payable trade and non-trade, used vehicle floorplan notes payable, payables to Seller and cash.

In addition to these acquisitions, during the year ended December 31, 2021, we acquired the assets of 11 franchises (10 dealership locations) in the Denver, Colorado market and three franchises (one dealership location) in the Indianapolis, Indiana market for a combined purchase price of $485.7 million.

We funded these acquisitions with an aggregate of $455.1 million of cash, and $9.6 million of floor plan borrowings for the purchase of the related new vehicle inventory.

In aggregate, these acquisitions included purchase price holdbacks of $21.0 million for potential indemnity claims made by us with respect to the acquired franchises.

In addition to the acquisition amounts above, we released $1.0 million of purchase price holdbacks related to current and prior year acquisitions during the year ended December 31, 2021.

During the year ended December 31, 2023, the Company sold one franchise (one dealership location) in Austin, Texas for proceeds of $30.7 million.

During the year ended December 31, 2023, we sold one franchise (one dealership location) in Austin, Texas for proceeds of $30.7 million.

During the year ended December 31, 2022, we sold one franchise (one dealership location) in St.

Louis, Missouri, three franchises (three dealership locations) and one collision center in Denver, Colorado, two franchises (two dealership locations) in Spokane, Washington, one franchise (one dealership location) in Albuquerque, New Mexico and 11 franchises (nine dealership locations) and two collision centers in North Carolina for proceeds of $701.2 million.

During the year ended December 31, 2021, we divested one franchise (one dealership location) in the Charlottesville, Virginia for proceeds of $21.3 million.

Proceeds from the sale of assets, unrelated to a dealership divestiture, were $6.5 million and $16.3 million for the years ended December 31, 2024 and 2023, respectively.

W did not have any proceeds from the sale of assets, unrelated to a dealership divestitures in 2022.

During the years ended December 31, 2023, 2022, and 2021, we purchased $195.2 million, $202.2 million and $1.1 million of debt securities and $41.4 million and $1.1 million of equity securities in December 31, 2022 and 2021, respectively.

We did not purchase any equity securities in 2023.

During the years ended December 31, 2023, 2022, and 2021, we also received proceeds of $60.3 million, $69.7 million, and $0.8 million from the sale of debt securities and $51.8 million, $50.3 million and $0.4 million, from the sale of equity securities, respectively.

We did not have any proceeds from the sale of assets, unrelated to a dealership divestitures in 2022.

During the years ended December 31, 2024, 2023, and 2022, we purchased $165.0 million, $195.2 million and $202.2 million of debt securities and $41.4 million of equity securities in December 31, 2022.

We did not purchase any equity securities in 2024 or 2023.

During the years ended December 31, 2024, 2023, and 2022, we also received proceeds of $149.8 million, $60.3 million, and $69.7 million from the sale of debt securities respectively and $51.8 million and $50.3 million, from the sale of equity securities in 2023, and 2022, respectively.

We did not have any proceeds from the sale of equity securities in 2024.

Financing Activities—

Net cash provided by financing activities totaled $1.18 billion and $2.93 billion for the years ended December 31, 2023 and 2021, respectively.

Net cash used in financing activities totaled $1.10 billion year ended December 31, 2022.

Net cash used in financing activities totaled $510.3 million and $1.10 billion for the years ended December 31, 2024 and 2022, respectively.

Net cash provided by financing activities totaled $1.18 billion for the year ended December 31, 2023.

During the years ended December 31, 2024, 2023, and 2022, we had non-trade floor plan borrowings of $9.45 billion, $8.39 billion, and $7.41 billion, respectively.

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During the year ended December 31, 2024, 2023 and 2022, we borrowed $1,213.5 million, $329.0 million, and $330.0 million, and repaid $1,213.5 million, $329.0 million and $499.0 million, respectively, on our revolving line of credit.

In addition, during the years ended December 31, 2023 and 2021, we had non-trade floor plan borrowings of $256.1 million and $214.5 million respectively, related to acquisitions.

In addition, during the years ended December 31, 2023, we had non-trade floor plan borrowings of $256.1 million, related to acquisitions.

The majority of our floor plan notes are payable to parties unaffiliated with the entities from which we purchase our new vehicle inventory, with the exception of floor plan notes payable relating to the financing of new Ford and Lincoln vehicles.

We did not have any acquisitions in 2022.

We did not have any dealership acquisitions in 2024 and 2022.

During the years ended December 31, 2024, 2023, and 2022, we made non-trade floor plan repayments of $9.66 billion, $7.06 billion, and $7.89 billion, respectively.

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During 2023, we did not have any floor plan repayments associated with dealership divestitures.

During the year ended December 31, 2021, we received proceeds from borrowings totaling $2.27 billion.

We did not have any proceeds from borrowings in 2023 and 2022.

Repayments of borrowings totaled $71.4 million, $126.0 million and $106.2 million, for the years ended December 31, 2024, 2023, and 2022, respectively.

During the years ended December 31, 2022, and 2021, we received net proceeds from the issuance of common stock totaling $1.4 million and $666.9 million, respectively.

We did not have any net proceeds from the issuance of common stock in 2023.

During the year ended December 31, 2023 and 2022, we repurchased 1,316,167 and 1,635,030 shares of our common stock under our Repurchase Program for a total of $258.1 million and $297.0 million and 48,262 and 56,024 shares of our common stock for $11.4 million and $9.2 million from employees in connection with a net share settlement feature of employee equity-based awards, respectively.

We did not have any share repurchases in 2021.

During the year ended December 31, 2022, we received net proceeds from the issuance of common stock totaling $1.4 million.

We did not have any net proceeds from the issuance of common stock in 2024 or 2023.

During the year ended December 31, 2024, 2023, 2022 we repurchased 830,297, 1,316,167 and 1,635,030 shares of our common stock under our Repurchase Program for a total of 183.0 million and $258.1 million and $297.0 million and 46,941, 48,262 and 56,024 shares of our common stock for $10.2 million, $11.4 million and $9.2 million from employees in connection with a net share settlement feature of employee equity-based awards, respectively.

Off Balance Sheet Arrangements

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Goodwill represents the excess cost of an acquired business over the fair market value of its identifiable assets and liabilities.

We have determined, based on how we integrate acquisitions into our business, how the components of our business

share resources and interact with one another, and how we review the results of our operations, that we have several geographic market-based operating segments.

We have determined the dealerships in each of our operating segments are components that are aggregated into several geographic market-based reporting units for the purpose of testing goodwill for impairment, as they (i) have similar economic characteristics, (ii) offer similar products and services (all of our franchised dealerships offer new and used vehicles, parts and service, and arrange for third-party vehicle financing and the sale of insurance products), (iii) have similar customers, (iv) have similar distribution and marketing practices (all of our dealerships distribute products and services through dealership facilities that market to customers in similar ways) and (v) operate under similar regulatory environments.

We have determined, based on how we integrate acquisitions into our business, how the components of our business share resources and interact with one another, and how we review the results of our operations, that we have several geographic region-based operating segments.

We have determined the dealerships in each of our operating segments are components that are aggregated into geographic region-based operating segments which are also our reporting units for the purpose of testing goodwill for impairment, as they (i) have similar economic characteristics, (ii) offer similar products and services (all of our franchised dealerships offer new and used vehicles, parts and service, and arrange for third-party vehicle financing and the sale of insurance products), (iii) have similar customers, (iv) have similar distribution and marketing practices (all of our dealerships distribute products and services through dealership facilities that market to customers in similar ways) and (v) operate under similar regulatory environments.

Our TCA segment also represents a reporting unit for the purpose of testing goodwill for impairment.

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If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required.

As a result of our annual franchise rights impairment tests as of October 1, 2023, we identified several dealerships with franchise rights carrying values that exceeded their fair values due to the underperformance of certain stores, limited primarily to two brands, and an increase in discount rates.

As a result, we recorded non-cash impairment charges totaling $73.1 million during the year ended December 31, 2023 reflected in asset impairments within our consolidated statements of income.

For certain stores, the fair value of the franchise rights equals the carrying amount.

In connection with a change in reporting units in our Dealerships segment, we performed quantitative impairment tests of goodwill for the affected reporting units as of October 1, 2023, both before and after the change in reporting units.

The results of our quantitative goodwill impairment tests related to certain reporting units indicated that the fair value of these reporting units exceeded their carrying values.

Based on the underperformance of certain stores, we performed quantitative impairment tests in the second quarter of 2024 and as of our annual impairment testing date, October 1, 2024.

The results of the quantitative impairment testing identified that the carrying values of certain of our franchise rights intangible assets exceeded their fair value by $134.1 million and $14.1 million for the three months ended June 30, 2024 and December 31, 2024, respectively.

In total, we recognized a $148.2 million pre-tax non-cash impairment charge related to our franchise rights intangible assets during the year ended December 31, 2024.

In connection with a change in reporting units in our Dealerships segment, we performed qualitative and quantitative impairment tests of goodwill for the affected reporting units as of October 1, 2024, both before and after the change in reporting units.

For all reporting units, for which a qualitative or quantitative impairment test was performed as of October 1, 2024, the fair values exceeded their carrying amounts.

We believe that the fair value of our reporting units is substantially in excess of its carrying amount, except for the Arizona and Utah reporting units, which exceeded their carrying amounts by less than 5% as of October 1, 2023.

The goodwill balance for the Arizona and Utah reporting units as of December 31, 2023 was $204.4 million and $197.8 million, respectively.

In December 2023, certain dealerships met the held for sale criteria and the assets and liabilities associated with these dealerships were reclassified as assets held for sale and liabilities associated with assets held for sale in our consolidated balance sheets.

As a result, we evaluated the disposal groups to ensure their recording at the lower of their carrying value or fair value less costs to sell.

The quantitative impairment tests of each disposal group included a comparison of the estimated fair value to the carrying value of the disposal group less costs to sell.

The Company determined the estimated fair value of each disposal group based on the estimated sales proceeds less cost to sell.

As a result of this analysis, we recorded asset impairment charges of $44.1 million.

These asset impairment charges are reflected in asset impairments in our consolidated statements of income.

Since the resulting impairment charges and the decision to dispose of these dealerships represented a triggering event for goodwill, we performed quantitative impairment tests of goodwill for the affected reporting units in December 2023.

The results of our quantitative goodwill impairment tests for the affected reporting units indicated that the fair value of these reporting units exceeded their carrying values.

In total, we recognized asset impairments of $117.2 million during the year ended December 31, 2023.

No franchise rights or goodwill impairments were identified in 2022 or 2021.

We believe that the fair value of our reporting units is substantially in excess of its carrying amount.

We also recorded a goodwill impairment charge of $1.3 million during the year ended December 31, 2024 related to one dealership that met the assets held for sale criteria in June 2024.

The quantitative impairment test of the disposal group included a comparison of the estimated fair value to the carrying value of the disposal group less cost to sell.

This asset impairment charge is reflected in asset impairments in our consolidated statements of income.

In total, we recognized asset impairments of $149.5 million and $117.2 million during the years ended December 31, 2024, and 2023, respectively.

No franchise rights or goodwill impairments were identified in 2022.

We continue to monitor developments related to macroeconomic conditions and the performance of our stores and reporting units.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis