Ladies and gentlemen, good day and welcome to the Asbury Automotive Group First Quarter 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Karen Reid. Please go ahead.

Thanks, David, and good morning everyone. As David mentioned, today's call is being recorded and will be available for replay later this afternoon. Welcome to Asbury Automotive First Quarter 2021 Earnings Call. I'm Karen Reid, Asbury's new Treasurer, and Head of Investor Relations. I look forward to engaging with our analysts and our investor community. The press release detailing Asbury's first quarter results was issued earlier this morning and is posted on our website at asburyauto.com. Participating with me today are David Hult, our President and Chief Executive Officer; PJ Guido, our Chief Financial Officer; and Dan Clara, our Senior Vice President of Operations. At the conclusion of our remarks, we will open up the call for questions, and I will be available later for any follow-up questions that you may have. Before we begin, we must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature, including those statements relating to the duration and contemplated impact of the COVID-19 pandemic on our business and financial performance, the impact of the chip shortage, as well as the financial projections and expectations about our products, markets and growth. All forward-looking statements are subject to significant uncertainties and actual results may differ materially from those suggested by these statements, including potential impacts from the COVID-19 pandemic and the semiconductor chip shortage on us, our industry and our customers, suppliers, vendors, and business partners. For information regarding certain of the risks that may cause actual results to differ, please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2020, any subsequently filed quarterly reports on Form 10-Q, and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website. We have also posted an updated investor presentation on our website asbury.com highlighting our first quarter results. It is now my pleasure to hand the call over to our CEO, David Hult.

Thank you, Karen. We are excited to have you on our team. Welcome to our first quarter earnings call. We have just reported record adjusted EPS of $4.68, up 160% over the prior year. SAAR continues to recover from prior year lows despite supply chain disruptions due to the chip shortage and COVID. The strong demand in the face of lower days supply helped us deliver a strong gross margin of 17.5%, an expansion of 60 basis points versus the first quarter of last year. We've also stayed disciplined in managing expenses, resulting in SG&A as a percentage of gross profit of 62.7%, an 880 basis point improvement versus prior year. Of note, this result includes an estimated $0.22 negative EPS impact from the winter storm experienced in February that caused us to close stores in several markets along with some structural damage. Our total revenue for the quarter was up 36% year-over-year, and total gross profit was up 40%. Showing strong signs of recovery, new unit sales were up 24%, and used unit sales were up 16% with margin expansion in both segments. Total F&I revenue was up 25%, while revenue from parts and service was up 18% from last year. We saw signs of growth in parts and service over this past quarter as drivers are returning to the road. Our balance sheet remains strong due to our performance in cash flow. Our pro forma adjusted net leverage ended this quarter at 1.7 times. This leverage level will allow us to maintain a more active acquisition pipeline and grow our business by strategically deploying capital. A couple of additional comments regarding performance. We achieved an adjusted operating margin of 6.1%, up 180 basis points over last year, and we successfully launched Clicklane, which Dan will discuss further. Regarding acquisitions, it is a very active market and we are engaged in many conversations, but remain disciplined in our approach. We are confident we will find deals that make sense for Asbury. Looking forward, we are focused on our five-year plan while we continue our disciplined approach to operating our business and allocating capital to its highest returns. Finally, I would like to thank all the hardworking men and women who showed up every day throughout the past year with a positive attitude and a commitment to serving our guests. Once again, you delivered great results for our company. I will now hand the call over to Dan to discuss our operating performance.

Thank you, David, and good morning everyone. My remarks will pertain to our same store performance compared to the first quarter of 2020. Looking at new vehicles. Based on current market conditions, we are focused on being opportunistic with our inventory and improving gross profit to maximize returns. Our new average gross profit per vehicle was up $640 per car or 39% from the prior year period. All segment margins were up significantly from the prior year period. Factoring in the acquisition of Park Place, luxury represented 45% of our total revenue, up from 34% in the first quarter of 2020, driving our all-store new vehicle PVRs up $1,114 or 67%. At the end of March, our total new vehicle inventory was $527 million and our days supply was at an all-time low of 34 days, down 71 days from the prior year. Some of our brands were below 20-day supply during the quarter and experienced major challenges due to the lack of inventory. With no clear understanding of when production will return to normal levels, we expect that the days supply to remain low throughout the remainder of the year. Turning to used vehicles. Our gross margin was 8.1%, up 100 basis points from the prior period, representing an average gross profit per vehicle of $1,943. As a result of our performance, our gross profit was up 36%. Our used vehicle inventory ended March at $193 million, which represents a 27-day supply, down 15 days from the prior year. We remain focused on sourcing inventory that will generate a fair return. Turning to F&I. Our strong consistent and sustainable growth in F&I delivered an increase of $114 to $1,798 per vehicle retail from the prior year quarter. In the first quarter, our front-end yield per vehicle increased $637 per vehicle to a first quarter record of $3,932. Turning to parts and service. Our parts and service revenue increased 1% in the quarter with business exceeding pre-COVID numbers in March. We continue to see this trend thus far in April. And now, I would like to provide an update on our omnichannel initiatives. In December, we launched Clicklane, which is the latest evolution in our omnichannel strategy that we began more than five years ago. We are excited to announce that we have completed the rollout of Clicklane to all stores in this quarter. As a reminder, Clicklane is a complete transactional tool that allows for a true online car buying and selling experience. It fills many of the gaps that exist with online automotive retail platforms currently on the market, which are basically lead generators and unable to fully complete an online transaction. Features that are unique to Clicklane include penny-perfect trading values and loan payoffs, real payment figures based on local taxes and fees, a loan marketplace, which now includes more than 30 lenders, VIN-specific finance and insurance products customized to the vehicle and consumer, the ability to sign all documents online via DocuSign, the in-tool service and collision appointment scheduler, and we just added parts and accessories. Although Clicklane just fully launched in all stores, we have some promising initial metrics to share. Average down payment is more than double our in-store average. F&I PVR is 17% higher when compared to our stores. Nearly 50% of customers chose to take delivery at home. Credit scores on average are higher than our stores. On average, nine out of ten customers that apply for a loan are approved through Clicklane. 50% of transactions had a payoff with their trade. Trades taken through Clicklane that were retailed are averaging higher for end-to-end PVRs when compared to our stores. Trades through Clicklane are turning in less than 15 days. We are certainly excited about these early indicators. And finally, I would like to take this opportunity to express appreciation to all of our teammates in the field for their continued focus on the guest experience, their commitment to continuous improvement, and the perseverance. I will now hand the call over to PJ to discuss our financial performance.

Thank you, Dan, and good morning everyone. I'd like to provide some financial highlights which mark yet another record quarter for our company. For additional details on our financial performance for the quarter, I would refer you to our financial supplement in our press release dated today, April 27th, 2021. Overall, compared to the first quarter of last year, total revenue was 36% higher than last year. Gross margin expanded by 60 basis points to 17.5%, driven by our focus on maximizing gross profit in a market where demand continues to outweigh supply. Moving down the P&L, we saw SG&A as a percent of gross profit decrease by 880 basis points to 62.7%. We estimate that SG&A would have been approximately 100 basis points lower, absent the impact on gross profit and expenses of the winter storm that resulted in store closures in several markets and also caused damage to a few of our Texas stores. Our actions to manage gross profit and control expenses resulted in a record first quarter adjusted operating margin of 6.1%, an increase of 180 basis points above the same period last year. Adjusted net income increased 161% to $90.7 million, and adjusted EPS increased by 160% versus the prior year period, maintaining our momentum coming out of 2020. Net income for the first quarter 2021 was adjusted for the following pre-tax items: gain on legal settlements of $3.5 million or $0.14 per diluted share; gain on real estate sales of $1.1 million or $0.03 per diluted share; and real estate-related charges of $1.8 million or $0.07 per diluted share. Net income for the first quarter of 2020 was adjusted for pre-tax items totaling $20.4 million or $0.79 per diluted share. For specific details on 2020 adjustments, please reference this morning's press release. Our effective tax rate was 22.3% for the first quarter 2021 compared to 19.1% in 2020. Floor plan interest expense for the quarter decreased by $4.1 million over the prior year quarter, driven primarily by lower inventory levels and lower LIBOR rates. With respect to capital deployed this quarter, we spent approximately $17 million on store improvements in real estate and we repaid approximately $14 million of debt. As a result of our operational performance, our balance sheet remains in a very strong position, and we ended the quarter with approximately $550 million of liquidity comprised of cash floor plan offset accounts and availability on both our used line and revolving credit facility. Also at the end of the quarter, our pro forma adjusted net leverage ratio stood at 1.7 times, well below our targeted leverage range of 3.0 times. As we look forward to the remainder of 2021, we anticipate similar conditions to what we have seen the last few quarters. Inventories are likely to remain low and there will be continued opportunity to drive gross margin. Overall, as we did in Q1, we are still planning to a $16 million SAAR environment, but we'll keep our business nimble and flexible with an emphasis on gross margin and SG&A expense management. One shift worth noting is that as the economy opens up more, we expect to see higher growth and a bigger contribution from our parts and service business. With regard to our five-year plan, we are only one quarter into it but are off to a great start. Our Clicklane platform is up and running across all our stores. Our same-store sales revenue in Q1 was a strong 18%, and we are building an active acquisition pipeline to pursue those deals that make the most sense for Asbury. As we progress, we will provide regular updates on the five-year plan and how we are delivering. In closing, I would also like to thank our teams across the business who continue to work tirelessly during this unprecedented time to ensure our current and long-term success. This concludes our prepared remarks. We will now turn the call over to the operator and take your questions.

Thank you, everyone. Our first question comes from Rick Nelson with Stephens.

Thanks a lot. Good morning. So it sounds like you're expecting inventory to remain tight here. Do you think you can maintain these GPUs and the SG&A expense ratio in an environment like this? And because their potential issues here at 34 days of supply now, where do you see that going to potentially become even more problematic?

This is David. It's a fluid situation and a great question. As we sit here today, we received far fewer cars in April than we anticipated. However, looking ahead to May, we expect to receive more inventory than we did in April. Based on our current inventory and what we expect for May, which may change, we believe we are well positioned to deliver the necessary units while maintaining our margins. It's challenging to predict further out due to uncertainties with the chip shortage and inventory flow. Nevertheless, we are confident in our position for April and our expectations for May.

Thanks for that color, David. Are there brands that are more impacted by the semiconductor shortage than others, or how have those looked across the spectrum?

Good morning, Rick. This is Dan. Yes, listen, every brand is definitely impacted, but I would say domestics are more impacted than some of the other ones that we're seeing out there.

Got you. Thanks. I'm curious on the used side of the house, what proportion of vehicles are you sourcing internally and what proportion are you going to auction and what do you see going on in the auction market nowadays?

Yeah, Rick, another great question. So we source over 50% of our cars come in from the trading perspective, auction prices, as you can imagine, are at an all-time high and the availability continues to be scarce at the auction.

In parts and service, it was quite a differential customer pay same-store up 3%, warranty down 13%. Curious what's driving that differential and PL outlook for those two drivers to service and parts.

Rick, this is David. The warranty did have some issues with the brand and what's going on with recalls and everything. So across the board, import domestic luxury which is down everywhere in warranty, don't read much into that. I mean that kind of pops up and down and will continue to do that throughout the year. We're really excited about customer pay when you think about it. We probably had close to 40% of our stores at one point or another closed down in February. So we were dramatically impacted in February, not only with sales but in parts and service. March came back so strong, it was actually ahead of '19 pace numbers. And as we sit here in April, we're experiencing the same. So, the customers are back on the road, the service business is back. We always had a laddering collision coming back, and now collision is back as well. So while we're feeling it on the variable side with some shortages with inventory, thankfully Parts and Service is picking up on that. And just to go back and touch on what Dan said about the used cars and acquisitions with 50% coming from trades. Our other resources are buying directly from consumers off-lease vehicles from the manufacturers, certainly within our service drive and loaner car fleet. So we got a certainly a tight day supply, but we think it's one that the inventory turns quickly and we're creating great margins with it.

Great. And I would like to sneak one more in here about April. You talked about the inventory challenges, how do sales look and GPUs? Are they continuing to be elevated?

Yeah, just what you've seen in the first quarter results, we're experiencing that as we sit here today in April as well.

Good morning, everyone. I have a question about inventory. Both your company and the rest of the industry have successfully turned inventory faster without significantly affecting sales. While there have been some limitations, it hasn’t been a major issue. At what inventory level do you think you might start facing supply constraints that could affect customer delivery? Also, we know that some less desirable vehicles linger in inventory. Do you believe that you and the industry have successfully cleared out many of these vehicles, and now are only left with high-demand vehicles that sell quickly?

It's a great question. And again it's such a fluid situation and you don't have a long runway to look over the next 90 days at what's coming. So my comments that I'm going to make are based on sitting here today. Our perception is we're going to receive almost double the inventory in May that we received in April. I can tell you sitting here today, if we receive the same inventory levels in May that we received in April, we would struggle to get to the new unit sales that we need to get to. So, no insight to June at this point, but we're confident where we're sitting in April and we're confident with May assuming we receive the production that we were told we're going to receive. As it relates to the hot selling products as you point to, the OEMs are really great at this. And while the chip shortage is there, they've really been shifting their production to the faster selling vehicles. So to your point about some of the dogs that sit out there, I'm sure there are a few strays every now and then. But it's really very light inventory and it's moving pretty quickly. The demand is very high, which is obviously, you can see everyone's benefiting from in the margins, and I can't see it slowing down anytime soon. Because it's also with people coming back there is going to be a pent-up demand on the fleet side as well.

Yeah, it's pretty encouraging. Okay. And then just second question, Park Place obviously was a big acquisition, but you guys didn't even mention it much in the quarter. Just curious, it sounds like the integration is going very smoothly because there's no noise about it. So I mean that's a good sign. And given that it appears to be going so well, you've got a $5 billion target over your five-year plan. Could you get more aggressive on acquisitions? I mean, some of your peers are talking about that kind of number almost on an annual basis, or doing that almost on an annual basis. I mean is there an opportunity to get more aggressive and even larger than what you're targeting at the moment?

Yeah, it's a great question, John. I'll touch on Park Place real quick. The largest acquisition in Asbury's history from a dollar standpoint, but from a meaning standpoint and really setting us up for who we want to be. I mean we look at Park Place as the crown jewel in the automotive industry. The professionals that we have there, the general managers, the senior team that runs the business there is everything we thought it was and more, but it takes a lot of communication and care to make sure things go smoothly, and we're looking at the long-term relationships and run. So very, very excited about what we're seeing there and it kind of shows in our total numbers compared to the same-store. So that'll continue to progress and the relationship is great and acquisition transition is going great at this point. As it relates to acquisitions, in the time that I've been with the company, we've never had more conversations going on than what we have now. Everyone one month, their price is based off COVID numbers. I don't think that that's in the shareholders' best interest to buy every acquisition based on COVID numbers and there has to be some discipline and common sense regarding the numbers. So while we feel the need to want to acquire things right now, we're not going to go outside our structure because it's about the long game and doing the right thing with the shareholders' equity. So we'll stay disciplined. We know deals will come our way. We like a lot of the conversations that we're in now. There aren't any deals being announced that we haven't looked at, but we're really not just into acquiring revenue. We really want to make sure it's revenue that is meaningful for the company for five, ten years from now. And we're not just buying at a moment in time when the earnings and multiples are very high.

Okay. And then the last question that all kind of weave together with that, I mean quickly you gave us some metrics which were helpful. But very curious what kind of geographic reach or extension in your reach that is giving you if you can tell us sort of early days and even with that, what kind of market share gains you may be seeing in your existing markets because of the ease of transaction for the consumer.

Sure. It's a great question. And keep in mind, every store in the company has it, but some stores were rolled out in the last week of the quarter. We're seeing the luxury customers really take advantage of the tool. We're seeing the import customers really take advantage of the tool, seeing it a little bit on the domestic side, but I think we're really hurting with inventory on the domestic side which is making it difficult, you can't purchase what you don't have. With Push Start, we were seeing 70%, 80% used, and 20%, 30% new. It's about a 60/40 split used to new right now. And we're certainly obviously acquiring a lot of customers with sales transactions that we never did business with before. We're shipping a lot of vehicles. But I think that is somewhat normal as well right now with low day supply and people really looking for their vehicles. I think the key metrics to really focus on, it's not a lead generation to transactional tool. Most people's tools are seeing a lot of subprime and are struggling to get the financing. Our average credit score so far in Clicklane is higher than the store average. Nine out of ten people are getting financed. Double the cash being put down on a Clicklane consumer compared to in-store. These are very strong metrics that say strong creditworthy people are buying these cars online, trading vehicles with payoffs, and taking delivery of them at home. And I can't emphasize enough, it's just started. So this is only going to build incrementally over time. And we believe we're the first in this space to have a full transactional tool, not a lead generation, not a piece of the sale, a full transactional tool, which puts us in the driver's seat for really growing the tool. And like I said, we launched the Dallas store at the end of the quarter, we've already launched Parts and Accessories on it now as well. So we're going to continue to innovate with this tool and we're going to get better each and every month. And we'll certainly continue every quarter to share the information what we're seeing. But it's very, very promising.

And sorry, David, if I can follow-up on that. So if we think about Clicklane and your acquisition strategy, I mean you could argue that this digital overlay means that you might not need to make as many acquisitions and you have a much farther reach so you can gain market share that way, or conversely, some are arguing that you need to build a greater national network to really leverage the digital overlay. Which way do you think it is? How do you approach the marriage of the two?

Hey, John, it's an excellent question, and look there is more than one way to climb a mountain, but from our perspective is brick and mortar is permanent and it's expensive. And if the transaction happens online, then it's really just a supply chain delivery. I've used this example before so I used it again. As we sit here today, we currently don't have any stores in Phoenix. If we chose to put a ring around the city of Phoenix with 5.5 million population and start marketing Clicklane, no differently than Carvana we could start doing transactions within that marketplace, which would create much higher SG&A numbers than what we're currently doing without that brick and mortar. So we will continue to build out our markets, but because of the tool that we have and our ability to move vehicles around, we absolutely do not believe we have to be in every market to do business in each segment of the country.

Good morning, guys, thanks for taking my questions.

Good morning.

Just one quick follow-up on Clicklane. So looking at the Clicklane website, also looking at the Asbury website, seems very similar between the two. Curious if you plan to run kind of side-by-side websites there or if you plan to consolidate those at any point in the future.

Sure, Ryan. As a reminder, with the franchise stores, all the OEMs require us to use certain vendors for our websites. So we certainly have to stick to those policies. Clicklane will continue to grow, and depending upon whether we have franchise stores in that market or not, it will grow in different ways. When I talked about the launch in the parts and accessory piece, because we didn't want it to be a distraction during the purchase of the vehicle and people accessorizing the car, we actually put it in the back end of Clicklane. So after the consumer purchases the vehicle and we PDF them their DocuSign documents, they have access to the back end of the tool for service and parts and collision. That's where they have the ability to accessorize it as well. So we have a roadmap. We're not done innovating this tool. And we have a long way to go from where we see it. But being the first with the lending marketplace and a full transactional tool and the only one out there in the market right now being able to do payoffs, we think we are at a competitive advantage and now we just need to scale our product and get the word out there to consumers about the ease of doing business with us.

Great. And then you mentioned the used versus new mix, it is higher on the used side on Clicklane. Do you think that's purely a function of inventory availability right now or do you think over time used will stay stronger online as far as the mix goes?

Yeah. It's an excellent question. It's hard to say. I mean, we were close to 80% with Push Start and a 60-40 to us is very promising. We're selling $100,000 Land Rovers on the tool new, and we're selling pre-owned that way as well. It's kind of hard to judge when your inventories are still low whether someone would transact that way or not. We believe no differently than technology in any other space, as the consumers become more comfortable and the tool to actually get out there more often, we believe that these numbers are going to double every year as far as used, because the convenience factor and transparency is second to none, and it's what the space has been craving for for years. And seeing their F&I results, to be 17% higher per vehicle on Clicklane compared to the actual stores is extremely promising.

Last one for me, you mentioned you quantified the EPS impact from weather in Texas and closures there, is there a way you can quantify what the impact was to same-store sales?

Sure. We estimated that the overall impact on growth, split evenly between sales and service, was approximately $5 million in gross profit. Our Texas stores, including the Park Place and McDavid Dealer Groups, were closed for almost an entire week. Additionally, our Plaza Group in Indiana and Crown Group were closed for a full day. Therefore, we project that the total impact on gross profit is around $5 million. Furthermore, we also faced about $1 million in damage at two of our stores in Texas, the Lexus Plano stores, which we had to account for. Lastly, we provided guaranteed pay to all our associates in those areas for the duration of the store closures, resulting in an extra $800,000 in compensation expenses.

Great, thanks guys, good luck.

Thank you.

Thank you. Our next question comes from Adam Jonas with Morgan Stanley.

Hey everybody. Thanks so much for sharing those KPIs around Clicklane, that's really great. I wanted to focus on one point where you mentioned that over 50% preferred or chose home delivery. Is that correct? Is that what you said?

Yes, correct.

Okay. Can you tell us how many units that was in the quarter?

Yeah, Adam, we’re not sharing that information at this time because we’re currently opening 90 new stores, but I can tell you that the number is increasing every week.

So, when can we expect to start seeing that information? The KPIs were impressive, but I'm having trouble finding the relevant slide in your presentation, and it's crucial that the KPIs remain consistent. While we can go through the transcripts and discuss this further with you later, it would be helpful to include it in the presentation. As a suggestion, when will we begin to see more formal unit volume data that we can use to track digital comparisons both sequentially and eventually year-on-year?

I appreciate your enthusiasm for the numbers. As I mentioned, we launched in stores during the last week of the quarter. I believe it's reasonable to get a full quarter's results before we discuss it further. By that time, we'll gladly share that information.

Thanks, David. I have one more question. Auto companies are beginning to look into direct-to-consumer insurance. Even traditional companies are starting to engage in this area. For example, GM is partnering with OnStar, and Tesla is exploring this option on their own but may eventually take it on completely. I'm curious about your thoughts on this. Do you think it aligns with the evolving digital landscape of auto retail? If manufacturers decide to bypass third-party insurance providers, it seems logical since vehicles can function as both the actuary and the agent. How do you think this will impact your role in the finance and insurance sector? Thank you.

That's a great question, and while I don't want to go into detail about our innovation efforts, I can say that for many years, dealerships have referred insurance business to other locations. It seems logical to think that in the future, this could evolve into a one-stop shopping experience where everything is available in one place. However, I prefer not to discuss specifics at this moment, but it's a valid point that having it all together makes sense.

Good morning, thanks for taking the question. I just had a question on the used vehicle unit growth. You talked about the overall $5 million gross profit impact overall for the company. I mean suggest something like two to three points of unit growth impact, am I close on that? And then just relatedly obviously pretty strong numbers year-over-year and on a two-year basis, but still seems to be lagging, some of the peers that have reported recently. Are you satisfied with the performance there? Do you think there is more you could do in terms of sourcing or the mix of the vehicles that you're selling to grow that business even faster, and I had a follow-up. Thanks.

Yeah. It's an excellent question. No, we're not satisfied and it's more than fair to say we're not performing at the level we should with pre-owned. It's hard to quantify, PJ talked about some of the markets that were closed but we literally had 40% of our stores closed. And while they were physically closed for a week, you know the hyper storms they closed down before and closed down after. So I would think it's probably fair to say looking at all the stores the markets that were closed for some periods of time and the effect on business, it had to be somewhere in the 4% to 6% range in volume, but it's really hard to quantify, it's really just a guess at that point. But to answer your question simplistically, we're not performing at the level we need to with pre-owned. We think in every other category, we're more than holding our own, and this is an area of opportunity for us, we need to get going.

That's really helpful. I want to follow up on the M&A environment. We've discussed the unreasonable earnings and the possibly inappropriate multiples in the current market. It seems that these gross margin tailwinds may continue for another year or perhaps until mid-2022 or later. When will you decide to begin deploying that capital since it has been six months since the announcement of the plan? In a year, it will be 18 months, and earnings could still appear elevated. Will you continue to hold cash on the balance sheet? I'm looking to understand how that capital might be deployed now and in the future. When would be the right time to move forward with your five-year plan? Thanks.

Hey Rajat, it's PJ. I'll start and then hand it off to David. It's been three months since we announced our plan in December. As we mentioned previously, we're very disciplined in our acquisition strategy. When evaluating an opportunity, we assess EBITDA multiples and the potential synergies we can achieve. We also consider the internal rate of return relative to our cost of capital, and we need to see a margin that allows us to execute an accretive deal. We are reviewing potential deals on a case-by-case basis and will continue to build our pipeline, but will only pursue those opportunities that are the best fit for Asbury.

And I'll just follow-up on that and talk about the two points. When you look at 2020, prior to 2020, a dealer was making $5 million annually. And then in COVID they started making $10 million and they want to work off to $10 million and they want a multiple that's higher than what the brand has ever run. That makes it difficult. While I agree with you the way margins and this space is going to be for the next year, and again it's one person's opinion, this isn't a forward-looking statement. But you have to think about '23 and '24, the amount of EVs that are going to be on the market, where the infrastructure is going to be for that in the country at that time, and where is supply and demand going to mix. So I don't think you can get caught up in the hype of just buying at a moment in time and you have to look out a few years to really see what the value and trend is going to be. And as what we talked about when we launched the five-year plan, which we have no doubt we'll hit it, that $5 billion doesn't all have to come in one year, it doesn't have to be $1 billion a year. We have to be disciplined. We've been doing this a long time. I’ve been in automotive for 35 years. There are always highs and lows. We're talking to more acquisitions today than we ever have since I've been employed here. So I think things will happen, but I think we should be judged in the long run by the acquisitions that we did and how accretive they were for the company, instead of just having nervous energy buying revenue and then maybe struggling with performance over time.

Got it, got it. That's really helpful. One last one, just following up on Clicklane. And I know you don't want to give out like the unit numbers, but had it not been for Clicklane, would you have grown slower than what you did in the first quarter? I'm just curious if it contributed to incremental volumes and not just replacing one for one. Thanks.

No, it's an excellent question. I can't emphasize this enough, we only had a few pilot stores operational in December. No other public group really has this full transactional tool available in all their stores. We rolled out the tool to 86 stores in two and a half months, so the number of stores is increasing week over week. There are significant incremental sales that we wouldn't have had before, and I mentioned this because prior to this, we weren't doing business with them. Adding 40 stores in the last three weeks of the quarter doesn't contribute a significant amount to the numbers. I can tell you that the numbers grow every week, and the transactions on the tool are increasing. We haven't optimized our marketing yet; we've just begun marketing efforts. Initially, we wanted to ensure that the tool was properly rolled out and functioning efficiently. It may sound simple since it's plug-and-play software, but considering the various counties and tax codes, it's important to take the time to ensure everything works perfectly. We want to provide users with a great experience. The timing estimates we shared from the pilot stores are still accurate, with transactions taking 14 minutes if financing is involved, and 8 minutes for cash payments. That speed is impressive and encouraging from our perspective. While it may change over time, we are sharing information as it becomes available. Fifty percent of users are opting for home delivery, which didn't occur during the peak of COVID with Push Start. We're excited about these developments. We're also noticing higher credit scores with Clicklane compared to Push Start, which is very encouraging. We'll discuss this in detail every quarter, but it’s not just about unit sales; the profile of the users engaging with this tool is what excites us the most.

Got it, got it. Makes sense. Thanks for all the color, and good luck.

Absolutely. Thank you.

Thank you. Our last question comes from Stephanie Benjamin with Truist.

Hi, good morning.

Good morning.

We really appreciate all the additional information you provided on Clicklane. I understand that it was a significant effort to implement this across all your stores this quarter. How should we consider any additional advertising or investments as we progress through the year? Should we anticipate an increase as you aim to raise awareness in some of your markets? Is this something we should expect not only in-store but also locally to inform customers of their options?

Yes, Stephanie, that’s a great question. We have set aside several million dollars from now until the end of the year, distributing the funds based on unit sales, traffic counts, and population density. The numbers may adjust, but our strategy relies on inventory developments, which are difficult to forecast at this time. Our goal is to implement effective marketing initiatives that we believe will be beneficial. It's important to note that we are currently discussing first quarter data and trends are improving every week. We look forward to sharing more information in the future as it evolves. We have high hopes that our marketing will resonate well. Additionally, it's crucial to emphasize that this approach is different from other tools available in the market. It was developed using a chat platform, enabling us to guide users if they encounter any difficulties. Moreover, if they exit the tool, they can receive a link to return to their previous spot without starting over. This means we’re not only focused on direct sales but also on follow-ups to recover sales and bring customers back. We are diligently monitoring all key performance indicators and will share more data as we gather it.

Absolutely. And then just to follow up on that. When you speak to the incremental advertising, is that going to be just in your existing markets or will you also look to maybe you mentioned Phoenix as an example kind of entering a new market as well with some of these investments or advertising investments.

Sure, Stephanie, I'll say this. Our intent soon will be to test this product in markets we don't do business in. I really don't want to start talking about specifics, but it will be in short time that we experiment in markets where we don't currently do business. That is the fact.

Got it. Lastly, regarding acquisitions, you've noted that the market is quite active at the moment. I’m curious about your targets, especially in terms of luxury brand focus or geographic reach. Have there been any changes in your approach to these new opportunities that have recently emerged? I'm trying to understand what aspects of the M&A environment are most attractive to you at this stage.

No, it's a great question, Stephanie. Again, 35 years of doing this. Brand strengths come and go. Certain luxury brands are hotter than heck and years later they slow down and I think it's really about having a balanced portfolio. After doing the Park Place deal, we had a lot of conversations where dealers in other parts of the country wanted the same multiple that we paid Park Place. And I'll just pick a brand just for a conversation. If you have one luxury brand, the multiple is different, even though it's the same brand, whether you're talking, Massachusetts, California, Michigan or Texas or Florida, because the franchise laws are different within each individual state, seasonality of the business, density of population, business-friendly state or not. So we really spend a lot of time looking at each individual acquisition and where it sits within the market and do we think that this is a proper return for us. I mean, I've just recently had this conversation with someone else asking why we wouldn't offer them the same as what we paid for Park Place and I just simplistically said it's not Texas. I mean, it's a different market with different franchise laws. If one state has a franchise law no franchise within 15 miles, in another state it's five miles, I don't know how you don't factor that in when you're looking at the pricing.

Absolutely. That's really helpful. Well, I appreciate all the additional color today.

Thank you.

Thank you.

This concludes today's discussion. We appreciate your participation and we look forward to speaking with you all in the next quarter. Have a great day.