Thank you, operator, and good morning. As noted, today's call is being recorded and will be available for replay later this afternoon. Welcome to Asbury Automotive Group's Second Quarter 2023 Earnings Call. The press release detailing Asbury's second quarter results was issued earlier this morning and is posted on our website at investors.asburyauto.com. Participating with me today are David Hult, our President and Chief Executive Officer; Dan Clara, our Senior Vice President of Operations; and Michael Welch, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open the call up for questions and will be available later for any follow-up questions. Before we begin, we must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature, which may include financial projections, forecasts, and current expectations, each of which are subject to significant uncertainties. For information regarding certain of the risks that may cause actual results to differ materially from these statements, please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2022, any subsequently filed quarterly reports on Form 10-Q and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website. We also have posted an updated investor presentation on our website, investors.asburyauto.com highlighting our second quarter results. Now it is my pleasure to hand the call over to our CEO, David Hult. David?

Thank you, George, and good morning, everyone. Welcome to our second quarter earnings call. I'm proud of the team's performance in Q2. Our strong cost discipline and continued work to maximize our gross profit streams generated strong results this quarter. We've also been opportunistic utilizing our strong cash flow from operations for share repurchases. We repurchased over 1 million shares year-to-date, with 960,000 of those shares repurchased in the second quarter alone for $190 million. Within this current macro environment, we are well positioned due to our diversified business model, our strong balance sheet, our focus on profitability and our North Star to be the most guest-centric automotive retailer. Now I'll turn to our consolidated results for the second quarter of 2023. We delivered $3.7 billion in revenue at a gross profit margin of 19.1%. Our adjusted SG&A as a percentage of gross profit was 57%, generated an adjusted operating margin of 7.8%. Our adjusted EBITDA was $307 million, and adjusted EPS was $8.95. Looking forward, we are optimistic about the future of automotive retail. We operate in an environment where the average age of our cars is 12.5 years, the highest it's ever been. While SAAR levels have been trending higher, they are still well below historical levels. The combination of older cars, complexity of new cars, and the transition to EVs enables consistent growth within our parts and service business. With our strong balance sheet and robust liquidity, we are looking to deploy capital through opportunistic share buybacks and acquisitions. We continue to aggressively pursue acquisitions that will be accretive to Asbury. We're disciplined stewards of capital. We are strategic when the capital allocation opportunities arise, such as our recent share repurchase activity. Again, I'm pleased with the second quarter results, especially with regards to our expense management. We have been and continue to be thoughtful operators with an eye towards efficiency and strong profitability while integrating over 50 stores from our acquisitions. Finally, I would like to extend a thank you to my fellow team members for a terrific first half of 2023. I'll now hand the call over to Dan to discuss our operating performance. Dan?

Thank you, David, and good morning, everyone. I would also like to say thank you to all our team members for their hard work, dedication and commitment to be the most guest-centric automotive retailer. Now moving to same-store performance, which includes dealerships and TCA unless stated otherwise. Starting with new vehicles. Our new vehicle inventory ended the quarter at $766 million, which represents a 32-day supply. There was significant variation among brands and models. Our new vehicle revenue grew 8% year-over-year. New average gross profit per vehicle was $4,832. New vehicle gross margin was 9.5% this quarter. Turning to used vehicles. Used retail revenue and unit volume were both down 15% compared to the prior year quarter. Used retail gross profit per vehicle was $2,085 for the quarter. Our used vehicle inventory ended the quarter at $358 million, which represents a 35-day supply. Shifting to F&I. We delivered an F&I PVR of $2,369, which is a slight decrease of $42 compared to the prior year quarter. In the second quarter, our total front-end yield per vehicle was $5,959, a decrease of $605. Moving to Parts and Service. Our Parts and Service business revenue increased 6% in the quarter. Customer pay revenue also grew 6%, and we expanded its gross profit by 6%. As a reminder, when we acquired LHM, we stated the full integration would take 5 years. We are now in year 2, and we're implementing significant changes from a process and systems perspective. This significant degree of change does have an effect on our operations. This quarter, we saw that the average repair order of the battery EVs was over 1.5 times higher than the average internal combustion vehicle dollars per RO. For reference, today, about 95% of our ROs are internal combustion vehicles. While the proportion of EVs we service is much smaller than internal combustion cars, the number of ROs for EVs has increased sequentially since Q2 of 2022. As the market prepares for increased penetration of EVs, we feel our parts and service business is in a strong position for growth to accommodate these vehicles for years to come. Now turning to Clicklane. Please note that for Clicklane, we are reporting on an all-store basis. We set another all-time record of over 11,400 vehicles through Clicklane in the second quarter, a 74% increase year-over-year and a 6% increase over the previous best, which was last quarter. 16% of our second quarter new and used retail sales were powered by Clicklane. We're pleased to see that 48% of Clicklane sales in Q2 were new vehicles and 52% were used. We generated $500 million in Clicklane revenue for the quarter, and we are now tracking to approximately $2.1 billion in revenue in 2023, slightly behind our original estimate for the year. Moving on to some KPIs for the second quarter. Total front-end PVR of $3,333 and an F&I PVR of $2,408, which equates to $5,740 of total front-end yield. The average Clicklane customer credit score was 717, which is higher than the average credit score at our stores. 91% of those that applied were approved for financing, of which 78% of those customers received instant approval, while the remaining customers require some offline assistance. 74% were lender finance sales and 26% were cash sales. The average distance of a Clicklane delivery from our dealerships was 44 miles, a natural increase from prior quarters as the western states utilize the convenience that Clicklane has to offer. Once again, I would like to thank our teams for providing a high level of service, which defines us and drives us to constantly do the right thing. I will now hand the call over to Michael to discuss our financial performance. Michael?

Thank you, Dan. To our investors, analysts, team members, and other participants on the call, good morning. I would like to provide some financial highlights for our company. For additional details on our financial performance for the quarter, please see our financial supplement in our press release today and our investor presentation on our website. Overall, adjusted net income was $188 million and adjusted EPS was $8.95 for the quarter. Adjusted net income for the second quarter of 2023 excludes net of tax gains of $11.6 million related to a $10.2 million gain on the sale of a dealership, and $1.4 million gain from a legal settlement. Adjusted net income also excludes a $3.2 million loss due to hail damage. These items decreased the 2023 second quarter diluted EPS by $0.40. Adjusted net income for the second quarter of 2022 excludes losses net of tax of $21.5 million or $0.97 per diluted share related to the losses on the sale of dealerships and a collision center. Our effective tax rate for the same quarter of 2023 was 24.8%, in line with the second quarter of 2022. We estimate our tax rate for the full year of 2023 at 24.9%. Excluding real estate purchases, we spent $41 million on capital expenditures year-to-date. We expect full year 2023 CapEx to be $185 million as we continue to roll out planned CapEx related to our 2021 acquisitions. Of this $185 million, about $20 million is related to the replacement of leased properties. Year-to-date, TCA made $51 million of pretax income. We are still on track to deploy TCA into the rest of our stores by the end of 2023. Due to the deferral, the income associated with the store rollouts in our larger states, we had conservatively expected TCA to generate $25 million of pretax income for 2023. The amortization of higher deferral from prior years replaced by a lower deferral in the current year due to lower unit sales in 2023 has increased TCA's income above our previous expectations. We now expect pretax income for TCA for 2023 to be $75 million. For the same quarter in 2023, we generated $174 million of adjusted operating cash flow, driven by a robust business model. As David mentioned earlier, we repurchased 960,000 shares for $190 million in the quarter. In June, we also prepaid our 2013 BofA mortgage for $24 million. Our pro forma adjusted net leverage was 1.7 times at the end of June, reflecting the use of cash to repurchase shares. Our balance sheet remains strong as we ended the quarter with approximately $1.6 billion of liquidity, comprised of cash, excluding cash to total care auto, floor plan offset accounts and availability on both our used line and revolving credit facility. Finally, I would like to join David and Dan by thanking our Asbury team members. Thank you for your dedication to superior service and delivering strong results. This concludes our prepared remarks. We will now turn the call over to the operator and take your questions.

Maybe one actually on the expense side of the P&L. I thought SG&A growth was really impressive in the quarter, actually stepping down sequentially. Can you talk about just what drove the leverage? Is it savings from Clicklane? Is it some of the divestitures you guys have done? And then maybe taking a step back, what opportunities still remain to optimize SG&A to growth, understanding there will be some deleverage just as GPU normalizes?

Thank you for the question, Daniel. For many years, we have been leading the peer space in SG&A, and we strive to operate as efficiently as possible. Moving forward, we believe there are opportunities to further reduce our expenses over the next couple of years. In the second quarter, we maintained healthy margins, which helped keep our SG&A in check. Over the next 12 to 18 months, as we focus on software efficiencies and productivity, we see potential for improvement. Clicklane is showing some growth, comprising just over 16% of our sales and growing steadily. As it continues to expand, we expect to benefit from lower expenses. However, currently, we are not seeing any benefits from an expense perspective with Clicklane under our current compensation structure.

Got it. And then maybe shifting to the new side of the business. Inventory built a couple of days, but you maintained GPUs nicely despite the domestic exposure. Can you just talk about GPU trends maybe through the quarter? And were there any notable weak spots within the portfolio's profitability?

I would tell you, to your point on the domestics, we're back to what I would call a normal day supply of domestic vehicles. We're pretty close to it. And we're still well over a car. I think all of our peers and ourselves have been talking about it, we're not going to go back to '19 levels. And we certainly don't see that any time in our near future. We think our folks in the stores are doing a really great job at ordering the right inventory and maximizing the gross profit per transaction. We anticipate, as we sit here today, that to continue into the near future.

Perfect. And then last one for me. Maybe on the balance sheet, Michael, wrapping up. You guys deployed more cash from ops towards buyback, but it does still sound like there's an appetite for M&A. Can you talk about what you're looking for in a target? Are you looking to expand your brand mix with certain OEMs? And then I know today, TCA is not a use of cash. But when we look at those longer-term targets, is there going to need to be any cash infusion to get there? Or is that going to be self-funding from its own cash?

I will address the TCA question first and then David will answer the acquisition question. Regarding TCA, previously, customers paid us at the dealership, we retained a portion of that income as cash for the dealership, and they allocated the rest to a third-party provider. The cash that finances TCA comes from our customers. We retain part of it at the dealership level for operating purposes, share buybacks, and acquisitions. The remainder is allocated to the investment bucket at TCA. Therefore, there is no need for us to spend cash to support that; it is all driven by our customers.

From the acquisition standpoint, we divested 1 store in the quarter, and it was mainly due to logistics. It was a market where we only had 1 store. We couldn't find acquisitions in that market that were going to strengthen that market. So we decided to sell that 1 store, and we also avoided a large CapEx project in doing that. So we thought it was the best use of cash. We're very focused on portfolio management, the brands that we have and where the stores sit within which states. We are aggressively in conversations with acquisitions now. We've seen a lot. Obviously, we haven't announced anything because we haven't been able to land something that meets our criteria in the states and brands that we want. We're hopeful with our current conversations that something will come together. But as you know, these things take time and you just have to play them out.

I wanted to ask about parts and service. It's interesting what you've mentioned regarding your experience with EVs so far. From what we've heard on the GM call about the $790 million charge for the Bolt recall, it seems there will be significant opportunities for warranty or repair work on EVs, possibly much higher than what you typically see with internal combustion vehicles. What are your expectations in this area? Will there be a need for a substantial capital investment in the service base to prepare for this? Additionally, in a more traditional sense, how much backlogged service work do you believe remains as people start returning to complete the necessary maintenance?

John, this is Dan. Before I answer your question, I want to correct something: the customer pay repair orders for electric vehicles were 1.5 times higher compared to internal combustion vehicles. Now, regarding your first question about the requirements for EVs and the necessary infrastructure or investment, a significant amount of technician training is essential. Technicians often go to local original equipment manufacturers for training, either outside or within the market, and they also need the right equipment. Additionally, considerable investment is being made in charging stations for these vehicles. As we transition to more EVs, it's important that we can serve customers who are purchasing these cars and ensure they are fully charged, whether in our service departments or while preparing them for delivery. Regarding pent-up demand, the average age of our parked cars is 12.5 years, indicating that consumers are indeed keeping their cars longer. Thus, the pent-up demand remains, and we expect it to have a positive impact on us in the near future.

And just to add some color to the sales, it may come up later, but I'll just mention it now, we're still sitting at a point where 30% of our vehicles are presold.

That's very helpful. But I just want to go back to the same-store performance in parts and service. Given the pent-up demand and the developments with electric vehicles, do you believe that a mid-single-digit growth rate for same-store sales is a reasonable expectation in the near term for parts and service? It seems quite stable and is moving in that direction, so I’m interested in your perspective on this.

We really do. I think up until 2030 and maybe beyond, parts and service is going to be pretty strong. It was a bumpy quarter for us with parts and service. We have a lot going on with all our acquisitions out West, integrating new software and changing processes. So that takes a period of time in toll in your business that you can become efficient with it. But we definitely think mid- to high single-digit numbers are certainly very conservative for the foreseeable future.

Okay. And then just lastly, on floor plan interest expense. I mean, obviously, great performance there. You guys are managing the growth very well with, I guess, a lot of hedging instruments. Can you just explain to what's going on there and how successful you think you'll be of mitigating the rate rise along with the actual unit rise over time as the industry recovers.

On the floor plan side, most of it is related to the floor plan offset account. We have negotiated to offset 100% of the floor plan. Currently, all the excess cash we have is used to offset that floor plan balance. It's not hedging; it’s simply utilizing cash to reduce the balance.

I just wanted to follow up on the previous question on new car GPUs. Curious if you could give us a sense of how your electric vehicle mix is today, both in terms of unit sales and inventory? And was there an outsized impact from a moderation in on those EVs relative to IC that had an impact in the quarter? And if that were the case, when do we expect it to flush out of the system and get back to a more normal level? And I have a follow-up.

Rajat, this is Dan. I'll start by addressing your last question. We are observing the pricing and margin effects related to electric vehicles. Supply and demand do influence this, but the most significant factor we see is the availability of tax credits. When these credits are available, sales of those vehicles accelerate, and the need for discounts decreases when credits are absent. We notice varying impacts in different markets we operate in, both positive and negative. Can you remind me what your second question was?

Just like is there any way to quantify like what the GPU impact was from electric vehicles? And any color on like just the day supply of EVs versus IC today in your inventory on the ground?

Rajat, this is David. I would tell you that the gross profits when you look at our PVRs that we put in the tables, they're pretty much similar to what you see there. It does vary by model, or by brand, I should say, but our luxury stores with their EVs, they're moving pretty well, and the gross profits are pretty close to what the combustible engine gross profits are. And with some of the midline imports, same scenario; some of the brands with Hyundai and Mercedes as two examples, with vehicles, we're doing a nice job of turning that inventory and we feel the gross profits are very much in line with what you see with the rest of our combustible engine gross profits.

Got it. Got it. That's helpful color. And then also following up on John's question on parts and services. The first quarter to second quarter, we saw some deceleration in the year-over-year rate. You talked about some of the operational integration impacts from LHM, was that a driver of that deceleration? Or was it like this is where you had expected to land irrespective? Just curious if there's any way to think about why that decelerated or was it like industry-specific? Was it company-specific? Because some of your peers like have a higher number there.

It's a great observation. Most of the slowdown is related to the conversion stores in the West and the software changes. We have many long-serving, dedicated employees who are accustomed to doing things a certain way. The DMS changes we've implemented and the new software in parts and service have affected our processes, which in turn impacts performance. We may see similar results for the next quarter or two, but we anticipate that soon after, we’ll start noticing improvements as everyone acclimates to the new software, leading us back to normal operations. Considering the brief time between the Stevinson and Miller acquisition and the implementation, we nearly doubled the size of our company in just 30 days, which was a substantial change. There’s a lot of transition happening. Last year, we maintained stability without many conversions or changes, but this year we chose to address those challenges. Our team might feel some frustration with the software implementation changes, but once everyone adapts, we believe we will achieve greater efficiency similar to what our legacy stores experience.

Your comment on domestic GPU still holding up. Is there a lot of dispersion in the domestics? I mean, does that include Stellantis, where there is the highest inventory level or are they holding steady?

No, Bret, it's a good question. And Stellantis, as you can see, is our highest percent of domestic. It is our highest day supply as well. We're really pleasantly surprised. All three manufacturers are very similar to their PVRs where they are. So there's no huge disparity between any of the three.

Okay. Great. And then sort of a big picture question on the 5-year plan. Looking at it, and obviously, a lot of talk about the integration plans for '23. What's the biggest risk? Is it sort of a SAAR supply-demand volume risk or integration of acquired stores? I mean sort of how do you bucket the challenges to the 5-year plan?

Yes. I would say it's threefold: finding the right acquisitions to make sure we can hit our target. That 5-year plan was based on a $17 million SAAR. So we haven't seen that for a while. And may not see it for a little while as well. We think the conversion piece really differs. Miller was an anomaly because it was so large to take something like that on; prior acquisitions that were smaller were much easier to integrate. So we don't see that as a big risk or an issue. It's really about finding the right acquisitions to add to us getting back to a $17 million SAAR. I would think those are the big ones. And then being patient and consistent with Clicklane. We really think we have something there that we can build on. It continues to grow. It's a good percentage of our business, and we want to see that become a larger percent of our business. We think that has great opportunity to grow as well.

Okay. Great. You mentioned that 30% of the vehicles were presold. Can you share what percentage was sold at MSRP?

So when you think about that, I don't have the exact percentage for you. But when you think about it, most of the presold vehicles will be sold at or very close to MSRP. And you think about our luxury and import sections, almost 50% of the volume comes from Lexus, Mercedes, Toyota, and Honda. All those brands, we have a low day supply. So you could imagine that a lot of those vehicles are presold in those lines, which are going to garner high PVRs.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.