ASBURY AUTOMOTIVE GROUP INC

Previous wording

•our ability to execute our initiatives and other strategies;

Current wording

•our ability to execute our initiatives and other strategies; and

Previous wording

•our ability to leverage scale and cost structure to improve operating efficiencies across our dealership portfolio; and

Current wording

•our ability to leverage scale and cost structure to improve operating efficiencies across our dealership portfolio.

Previous wording

Many of these factors are beyond our ability to control or predict, and their ultimate impact could be material. Moreover, the factors set forth under "Item 1A. Risk Factors" and other cautionary statements made in this report should be read and considered as forward-looking statements subject to such uncertainties. Forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation to update any forward-looking statement contained herein.

Current wording

Many of these factors are beyond our ability to control or predict, and their ultimate impact could be material. Moreover, the factors set forth under "Item 1A. Risk Factors" and other cautionary statements made in this report should be read and considered as forward-looking statements subject to such uncertainties. Forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation to update any forward-looking statements contained herein.

Previous wording

We are one of the largest automotive retailers in the United States. As of June 30, 2024, through our Dealerships segment, we owned and operated 204 new vehicle franchises (155 dealership locations), representing 31 brands of automobiles, and 37 collision centers within 15 states. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which includes repair and maintenance services, replacement parts and collision repair services; and finance and insurance products. The finance and insurance products are provided by both independent third parties and TCA. The F&I products offered by TCA are sold through affiliated dealerships. For the six months ended June 30, 2024, our new vehicle revenue brand mix consisted of 29% luxury, 41% imports and 29% domestic brands. The Company manages its operations in two reportable segments: Dealerships and TCA. Amounts presented have been calculated using non-rounded amounts for all periods presented and therefore certain amounts may not compute.

Current wording

We are one of the largest automotive retailers in the United States. As of September 30, 2024, through our Dealerships segment, we owned and operated 202 new vehicle franchises (153 dealership locations), representing 31 brands of automobiles, and 37 collision centers within 14 states. Our stores offer an extensive range of automotive products and services, including new and used vehicles; parts and service, which includes repair and maintenance services, replacement parts and collision repair services; and finance and insurance products. The finance and insurance products are provided by both independent third parties and TCA. The F&I products offered by TCA are sold through affiliated dealerships. For the nine months ended September 30, 2024, our new vehicle revenue brand mix consisted of 29% luxury, 41% imports and 29% domestic brands. The Company manages its operations in two reportable segments: Dealerships and TCA. Amounts presented have been calculated using non-rounded amounts for all periods presented and therefore certain amounts may not compute.

Previous wording

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 one-time expenses related to our recovery efforts.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

•Consolidated revenue for the six months ended June 30, 2024 was $8.45 billion, compared to $7.32 billion for the prior year.

Current wording

•Consolidated revenue for the nine months ended September 30, 2024, was $12.68 billion, compared to $10.99 billion for the prior year.

Previous wording

•Consolidated gross profit for the six months ended June 30, 2024 was $1.48 billion, compared to $1.41 billion for the prior year.

Current wording

•Consolidated gross profit for the nine months ended September 30, 2024, was $2.20 billion, compared to $2.08 billion for the prior year.

Previous wording

•The increase in consolidated revenue and gross profit is primarily due to the effects of the Koons acquisition, offset by the negative impact of the CDK outage in June 2024 as well as 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.

Current wording

•The increase in consolidated revenue and gross profit is primarily due to the effects of the Koons acquisition, offset 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.

Previous wording

•Our capital allocation priorities were supported by the repurchase of 432,389 shares for $93.2 million during the six months ended June 30, 2024.

Current wording

•Our capital allocation priorities were supported by the repurchase of 826,340 shares for $182.1 million during the nine months ended September 30, 2024.

Previous wording

The Company's operating results for the three and six months ended June 30, 2024 include the results of the Koons dealerships acquired in the fourth quarter of 2023. Accordingly, the increases in revenue and gross profit for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 are largely a result of this acquisition. Additionally, during the three months ended June 30, 2024, we recorded asset impairments of $135.4 million related to franchise rights impairments for certain underperforming stores, limited primarily to one brand.

Current wording

The Company's operating results for the three and nine months ended September 30, 2024 include the results of the Koons dealerships acquired in the fourth quarter of 2023. Accordingly, the increases in revenue and gross profit for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 are largely a result of this acquisition.

Previous wording

Total revenue during the second quarter of 2024 increased by $503.7 million (13%) compared to the second quarter of 2023, due to a $222.2 million (11%) increase in new vehicle revenue, a $200.7 million (18%) increase in used vehicle revenue, a $54.7 million (10%) increase in parts and service revenue and a $26.0 million (16%) increase in F&I, net revenue. During the three months ended June 30, 2024, gross profit increased by $17.6 million (2%) driven by a $47.9 million (16%) increase in parts and service gross profit and a $9.5 million (6%) increase in F&I gross profit partially offset by a $29.9 million (16%) decrease in new vehicle gross profit and a $9.8 million (14%) decrease in used vehicle gross profit. The increase in revenue and gross profit is largely attributable to the Koons acquisition and is offset by the negative impact of the CDK outage. 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, and a reduction in parts and service volumes.

Current wording

Total revenue during the third quarter of 2024 increased by $570.5 million (16%) compared to the third quarter of 2023, due to a $301.6 million (16%) increase in new vehicle revenue, a $183.0 million (16%) increase in used vehicle revenue, a $66.6 million (13%) increase in parts and service revenue and a $19.3 million (12%) increase in F&I, net revenue. During the three months ended September 30, 2024, gross profit increased by $44.5 million (7%) driven by a $46.0 million (16%) increase in parts and service gross profit and a $19.2 million (13%) increase in F&I gross profit partially offset by a $17.9 million (11%) decrease in new vehicle gross profit and a $2.7 million (4%) decrease in used vehicle gross profit. The increase in revenue and gross profit is largely attributable to the Koons acquisition; however, the gross profit increase was partially offset by the declining margins for new and used vehicles.

Previous wording

Income from operations during the second quarter of 2024 decreased by $187.2 million (65%) compared to the second quarter of 2023, primarily due to $135.4 million in asset impairments and a $68.0 million (17%) increase in SG&A expense, partially offset by $17.6 million (2%) increase in gross profit.

Current wording

Income from operations during the third quarter of 2024 decreased by $32.1 million (12%) compared to the third quarter of 2023, primarily due to a $74.8 million (19%) increase in SG&A expense, partially offset by $44.5 million (7%) increase in gross profit.

Previous wording

Total other expenses, net increased by $35.9 million (135%) during the second quarter of 2024 as compared to the second quarter of 2023, primarily as a result of a $20.2 million increase in floor plan interest expense and a $9.9 million decrease in gain on dealership divestitures. Income before income taxes decreased $223.1 million (85%) to $38.0 million for the three months ended June 30, 2024. Overall, net income decreased by $168.2 million (86%) during the second quarter of 2024 as compared to the second quarter of 2023.

Current wording

Total other expenses, net increased by $24.2 million (63%) during the third quarter of 2024 as compared to the third quarter of 2023, primarily as a result of a $22.3 million increase in floor plan interest expense, partially offset by a $5.0 million increase in gain on dealership divestitures. Income before income taxes decreased $56.3 million (25%) to $169.7 million for the three months ended September 30, 2024. Overall, net income decreased by $42.9 million (25%) during the third quarter of 2024 as compared to the third quarter of 2023.

Previous wording

For the three months ended June 30, 2024, new vehicle revenue increased by $222.2 million (11%) due to a $132.2 million (17%) increase in import brands revenue and a $90.6 million (17%) increase in domestic brands revenue, partially offset by a $0.6 million decrease in luxury brands revenue. Same store new vehicle revenue decreased by $112.9 million (6%) primarily driven by a $82.1 million (15%) decrease in domestic brands revenue, a $19.8 million (3%) decrease in luxury brands revenue and an $11.0 million (1%) decrease in import brands revenue.

Current wording

For the three months ended September 30, 2024, new vehicle revenue increased by $301.6 million (16%) due to a $135.2 million (18%) increase in import brands revenue, a $108.5 million (21%) increase in domestic brands revenue and a $57.9 million (10%) increase in luxury brands revenue. Same store new vehicle revenue decreased by $7.6 million, driven by a $69.5 million (14%) decrease in domestic brands revenue, partially offset by a $39.9 million (7%) increase in luxury brands revenue and a $22.0 million (3%) increase in import brands revenue.

Previous wording

For the three months ended June 30, 2024, new vehicle gross profit and same store new vehicle gross profit decreased by $29.9 million (16%) and $54.1 million (29%), respectively. Same store new vehicle gross margin for the three months ended June 30, 2024 decreased 239 basis points to 7.1%. A similar decrease was seen in new vehicle gross profit margins, as reported. 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. Additionally, the CDK outage had a negative impact on our new vehicle revenue and gross profit during the quarter ended June 30, 2024 as a result of fewer new vehicle sales.

Current wording

For the three months ended September 30, 2024, new vehicle gross profit and same store new vehicle gross profit decreased by $17.9 million (11%) and $40.8 million (24%), respectively. Same store new vehicle gross margin for the three months ended September 30, 2024 decreased 219 basis points to 6.9%. A similar decrease was seen in new vehicle gross profit margins, as reported. 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.

Previous wording

The seasonally adjusted annual rate ("SAAR") for new vehicle sales in the U.S. during the six months ended June 30, 2024 was approximately 15.5 million which increased as compared to approximately 15.3 million during the six months ended June 30, 2023. The increase in SAAR period over period reflects higher inventory supply coupled with continued consumer demand for new vehicles. However, we continue to be impacted by the significant variation in new vehicle days supply among brands and models.

Current wording

The seasonally adjusted annual rate ("SAAR") for new vehicle sales in the U.S. during the three months ended September 30, 2024, was approximately 15.6 million which increased as compared to approximately 15.5 million during the three months ended September 30, 2023. The increase in SAAR period over period reflects higher inventory supply coupled with continued consumer demand for new vehicles. We also continue to be impacted by the significant variation in new vehicle days supply among brands and models.

Previous wording

Used vehicle revenue increased by $200.7 million (18%) compared to the same period of the prior year, primarily due to a $153.9 million (15%) increase in used vehicle retail revenue and a $46.9 million (50%) increase in used vehicle wholesale revenue. Same store used vehicle revenue decreased by $64.2 million (6%) largely due to a $75.0 million (7%) decrease in used vehicle retail revenue, partially offset by a $10.8 million (12%) increase in used vehicle wholesale revenue. Total used vehicle retail unit sales increased by 22% due to the Koons acquisition while same store retail used vehicle unit sales decreased by 2% during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Revenue per used vehicle retailed have continued to contract as seen in the second quarter of 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 lack of inventory availability, especially in vehicles with lower mileage. For the three months ended June 30, 2024, total Company and same store used vehicle retail gross profit margins decreased by 166 basis points and 139 basis points, respectively, as compared to the three months ended June 30, 2023. Decreases in used vehicle gross margins, on both a total Company and same store basis, was largely driven by a tighter market for used vehicles during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Current wording

Used vehicle revenue increased by $183.0 million (16%) compared to the same period of the prior year, due to a $131.6 million (13%) increase in used vehicle retail revenue and a $51.3 million (54%) increase in used vehicle wholesale revenue. Same store used vehicle revenue decreased by $72.7 million (7%), largely due to a $84.6 million (8%) decrease in used vehicle retail revenue, partially offset by a $12.0 million (13%) increase in used vehicle wholesale revenue. Total used vehicle retail unit sales increased by 16% due to the Koons acquisition while same store used vehicle retail unit sales decreased by 6% during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Revenue per used vehicle retailed has continued to contract as seen in the third quarter of 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 lack of inventory availability, especially in vehicles with lower mileage. For the three months ended September 30, 2024, total Company and same store used vehicle retail gross profit margins decreased by 100 basis points and 83 basis points, respectively, as compared to the three months ended September 30, 2023. Decreases in used vehicle gross margins, on both a total Company and same store basis, was largely driven by a tighter market for used vehicles during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Previous wording

For the three months ended June 30, 2024, used vehicle retail gross profit margins decreased from 6.5% to 4.8% and 6.5% to 5.1% respectively, for all stores and on a same store basis when compared to the same period of the prior year. Used vehicle retail gross profit decreased $9.4 million (14%) for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 and decreased $17.8 million (27%) on a same store basis for the same periods. On a total company basis our gross profit per used vehicle retailed decreased $618 (30%), and on a same store basis, our gross profit per used vehicle retailed decreased $532 (26%) when compared to the prior year period which was primarily driven by decreases in used vehicle market prices. Additionally, the CDK outage had a negative impact on our used vehicle revenue and gross profit during the quarter ended June 30, 2024 as a result of fewer used vehicle sales.

Current wording

For the three months ended September 30, 2024, used vehicle retail gross profit margins decreased from 5.9% to 4.9% and 5.9% to 5.0% respectively, for all stores and on a same store basis when compared to the same period of the prior year. Used vehicle retail gross profit decreased $3.7 million (6%) for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 and decreased $12.6 million (21%) on a same store basis for the same periods. On a total company basis our gross profit per used vehicle retailed decreased $361 (19%), and on a same store basis, our gross profit per used vehicle retailed decreased $300 (16%) when compared to the prior year period, which was primarily driven by decreases in used vehicle market prices.

Previous wording

For the three months ended June 30, 2024 and 2023, we are presenting "Collision" as a separate line item within parts and service gross profit. In prior periods, "Collision" was included within "Customer pay". We reclassified the corresponding amounts for the three months ended June 30, 2023 to conform to current year presentation.

Current wording

For the three months ended September 30, 2024 and 2023, we are presenting "Collision" as a separate line item within parts and service gross profit. In periods prior to June 30, 2024, "Collision" was included within "Customer pay." We reclassified the corresponding amounts for the three months ended September 30, 2023 to conform to current year presentation.

Previous wording

The $54.7 million (10%) increase in parts and service revenue was primarily due to a $40.7 million (15%) increase in customer pay revenue, a $13.1 million (20%) increase in warranty revenue, a $1.0 million (1%) increase in wholesale parts revenue, partially offset by a $0.1 million decrease in collision revenue. Same store parts and service revenue decreased by $9.9 million (2%) to $510.8 million during the three months ended June 30, 2024 from $520.6 million during the three months ended June 30, 2023. The decrease in same store parts and service revenue was due to an $8.0 million (7%) decrease in wholesale parts revenue, a $7.5 million (11%) decrease in collision revenue, partially offset by a $4.6 million (7%) increase in warranty revenue and a $1.0 million increase in customer pay revenue. Consumers are owning a vehicle for longer periods of time due to various factors, including the higher cost of vehicles, higher interest rates, as well as the vehicle inventory constraints experienced in the automotive industry in recent years.

Current wording

The $66.6 million (13%) increase in parts and service revenue was primarily due to a $47.9 million (18%) increase in customer pay revenue, a $15.8 million (22%) increase in warranty revenue, a $2.5 million (2%) increase in wholesale parts revenue and a $0.4 million (1%) increase in collision revenue. Same store parts and service revenue increased by $5.5 million (1%) to $524.7 million during the three months ended September 30, 2024 from $519.1 million during the three months ended September 30, 2023. The increase in same store parts and service revenue was due to a $10.8 million (4%) increase in customer pay revenue and a $7.5 million (10%) increase in warranty revenue, partially offset by a $7.7 million (11%) decrease in collision revenue and a $5.0 million (5%) decrease in wholesale parts revenue. Consumers are owning a vehicle for longer periods of time due to various factors, including the higher cost of vehicles, higher interest rates, as well as the vehicle inventory constraints experienced in the automotive industry in recent years.

Previous wording

For the six months ended June 30, 2024, total parts and service gross profit increased by $99.9 million (17%) to $674.0 million, and same store total parts and service gross profit increased by $26.3 million (5%) to $594.7 million when compared to the same period of the prior year. The all store increase is primarily due to the Koons acquisition, while the same store increase is primarily a result of increased customer pay and warranty volume and reconditioning and preparation, which is in line with the increasing trend of aged vehicles.

Current wording

For the three months ended September 30, 2024, total parts and service gross profit increased by $46.0 million (16%) to $337.1 million and same store total parts and service gross profit increased by $10.6 million (4%) to $298.1 million when compared to the same period of the prior year. The all store increase is primarily due to the Koons acquisition and reconditioning and preparation, while the same store increase is primarily a result of increased customer pay and warranty volume, which is in line with the increasing trend of aged vehicles.

Previous wording

F&I revenue, net increased by $26.0 million (16%) during the second quarter of 2024 when compared to the second quarter of 2023, as a result of a 16% increase in total retail units sold offset by a $212 (9%) decrease in F&I per vehicle retailed.

Current wording

F&I revenue, net increased by $19.3 million (12%) during the third quarter of 2024 when compared to the third quarter of 2023, as a result of a 16% increase in total retail units sold offset by a $63 (3%) decrease in F&I per vehicle retailed.

Previous wording

On a same store basis, F&I revenue, net decreased by $7.7 million (5%) during the second quarter of 2024 when compared to the second quarter of 2023, as a result of a 5% decreasein total retail units sold and an 11% decrease in F&I per vehicle retailed. We are seeing slightly lower penetration rates in our F&I products as customers look for ways to manage lower monthly payments in a high interest rate environment. Additionally, 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 affected our F&I business.

Current wording

On a same store basis, F&I revenue, net decreased by $12.2 million (7%) during the third quarter of 2024 when compared to the third quarter of 2023, as a result of a 3% decreasein total retail units sold and a 5% decrease in F&I per vehicle retailed. We are seeing slightly lower penetration rates in our F&I products as customers look for ways to manage lower monthly payments in a high interest rate environment.

Previous wording

Revenue generated by TCA is earned over the period of the related product contract. 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 three months ended June 30, 2024, TCA generated$37.7 million ofrevenue, consisting primarily of earned premiums and $4.4 million investment income from the investment portfolio.

Current wording

Revenue generated by TCA is earned over the period of the related product contract. 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 three months ended

Previous wording

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 three months ended June 30, 2024, TCA recorded $17.7 million of cost of sales consisting primarily of claims expense. 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.

Current wording

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 three months ended September 30, 2024, TCA recorded $14.2 million of cost of sales consisting primarily of claims expense. 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.

Previous wording

As we continue to integrate TCA, we expect a rollout of TCA products to our remaining stores by the end of 2024. With the ownership of TCA, while the combined profitability of the transaction is higher, the timing of revenue and cost recognition isdeferred and amortized over the life of the contract. We expect that this rollout will result in lower F&I revenue and gross profit over the next two to three years due to the change in how these contracts are earned.

Current wording

As we continue to integrate TCA, we expect a rollout of TCA products to our remaining stores in 2025. With the ownership of TCA, while the combined profitability of the transaction is higher, the timing of revenue and cost recognition isdeferred and amortized over the life of the contract. We expect that this rollout will result in lower F&I revenue and gross profit over the next two to three years due to the change in how the revenue from these contracts are earned.

Previous wording

SG&A expense as a percentage of gross profit increased 792 basis points from 57.3% for three months ended June 30, 2023 to 65.2% for three months ended June 30, 2024, while same store SG&A expense as a percentage of gross profit increased 778 basis points to 64.9% over the same period in 2024. The increase in SG&A expense as a percentage of gross profit on a total company basis during the three months ended June 30, 2024 is primarily the result of higher cost in personnel and other categories in SG&A expense partially offset by higher gross profits for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase in SG&A as a percentage of gross profit on the same store basis during the three months ended June 30, 2024 is primarily the result of lower gross profits for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 . On a total company basis, SG&A expense increased by $68.0 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 primarily due to the Koons acquisition in December 2023. Additionally, during the three months ended June 30, 2024 and 2023, we incurred $3.1 million and $4.3 million, respectively, of losses related to hail damage at certain dealerships.

Current wording

SG&A expense as a percentage of gross profit increased 680 basis points from 58.2% for the three months ended September 30, 2023 to 65.0% for the three months ended September 30, 2024, while same store SG&A expense as a percentage of gross profit increased 657 basis points to 64.5% over the same period in 2024. The increase in SG&A expense as a percentage of gross profit on a total company basis during the three months ended September 30, 2024 is primarily the result of higher cost in personnel and other categories in SG&A expense partially offset by higher gross profits for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase in SG&A as a percentage of gross profit on the same store basis during the three months ended September 30, 2024 is primarily the result of lower gross profits for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. On a total company basis, SG&A expense increased by $74.8 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 primarily due to the Koons acquisition in December 2023. Additionally, during the three months ended September 30, 2024 and 2023, we incurred $4.0 million and no losses, respectively, related to hail damage at certain dealerships.

Previous wording

Floor plan interest expense increased by $20.2 million to $21.0 million during the three months ended June 30, 2024 as compared to $0.8 million for the three months ended June 30, 2023 due to less cash held in the floor plan offset account during the three months ended June 30, 2023.

Current wording

Floor plan interest expense increased by $22.3 million to $22.3 million during the three months ended September 30, 2024 as compared to no floor plan interest expense for the three months ended September 30, 2023 due to less cash held in the floor plan offset account during the three months ended September 30, 2024.

Previous wording

Other interest expense increased $5.8 million (15%) during the three months ended June 30, 2024 from $39.3 million during the three months ended June 30, 2023 to $45.1 million. This increase was primarily due to a $6.3 million increase in our credit facility interest expense, $1.2 million increase in loaner payable interest expense driven by higher loaner vehicle balances as well as a $0.8 million decrease in interest income, partially offset by a decrease of $1.0 million in mortgage interest expense and a decrease of $0.9 million in amortization of capitalized interest expense.

Current wording

Other interest expense increased $7.0 million (18%) during the three months ended September 30, 2024 from $38.7 million during the three months ended September 30, 2023 to $45.7 million. This increase was primarily due to a $7.2 million increase in our credit facility interest expense and a $1.0 million increase in loaner payable interest expense driven by higher loaner vehicle balances, marginally offset by a decrease of $0.6 million in amortization of capitalized interest expense.

Previous wording

The $54.9 million (85%) decrease in income tax expense was primarily the result of a $223.1 million (85%) decrease in income before income taxes. Our effective tax rate for the three months ended June 30, 2024 was 26.1% compared to 24.8% in the prior comparative period, which differed from the U.S. statutory rate primarily due to the favorable effects of the windfall component of equity compensation, a discrete item, and unfavorable effects of various permanent tax adjustments such as executive compensation. We estimate our effective tax rate for the year ended December 31, 2024 at 25.0%.

Current wording

The $13.4 million (24%) decrease in income tax expense was primarily the result of a $56.3 million (25%) decrease in income before income taxes. Our effective tax rate for the three months ended September 30, 2024 was 25.6% compared to 25.1% in the prior comparative period, which differed from the U.S. statutory rate primarily due to the favorable effects of the windfall component of equity compensation, a discrete item, and unfavorable effects of various permanent tax adjustments such as executive compensation. We estimate our effective tax rate for the year ended December 31, 2024 at 25.4%.

Previous wording

Total revenue for the six months ended June 30, 2024 increased by $1,122.6 million (15%) compared to the six months ended June 30, 2023, due to a $518.8 million (14%) increase in new vehicle revenue, a $431.1 million (19%) increase in used vehicle revenue, a $129.5 million (12%) increase in parts and service revenue and a $43.2 million (13%) increase in F&I, net revenue. The $71.4 million (5%) increase in gross profit during the six months ended June 30, 2024 was driven by a $99.9 million (17%) increase in parts and service gross profit and a $32.4 million (10%) increase in F&I, net gross profit, partially offset by a $46.0 million (13%) decrease in new vehicle gross profit and a $15.0 million (10%) decrease in used vehicle gross profit. The increase in revenue and gross profit is largely attributable to the Koons acquisition and is offset by the negative impact of the CDK outage. 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, and a reduction in parts and service volumes.

Current wording

Total revenue for the nine months ended September 30, 2024 increased by $1,693.1 million (15%) compared to the nine months ended September 30, 2023, due to a $820.4 million (15%) increase in new vehicle revenue, a $614.1 million (18%) increase in used vehicle revenue, a $196.1 million (13%) increase in parts and service revenue and a $62.5 million (12%) increase in F&I, net revenue. The $116.0 million (6%) increase in gross profit during the nine months ended September 30, 2024 was driven by a $145.9 million (17%) increase in parts and service gross profit and a $51.6 million (11%) increase in F&I, net gross profit, partially offset by a $63.8 million (12%) decrease in new vehicle gross profit and a $17.6 million (8%) decrease in used vehicle gross profit. The increase in revenue and gross profit is largely attributable to the Koons acquisition; however, the gross profit increase is partially offset by declining new and used vehicle margins.

Previous wording

Income from operations during the six months ended June 30, 2024 decreased by $200.9 million (36%), compared to the six months ended June 30, 2023, primarily due to a $135.4 million increase in franchise rights impairment and a $133.6 million (16%) increase in SG&A expense and a $3.4 million (10%) increase in depreciation and amortization expense, partially offset by a $71.4 million (5%) increase in gross profit.

Current wording

Income from operations during the nine months ended September 30, 2024 decreased by $233.0 million (28%), compared to the nine months ended September 30, 2023, primarily due to a $208.3 million (17%) increase in SG&A expense, a $135.4 million increase in franchise rights impairment and a $5.3 million (10%) increase in depreciation and amortization expense, partially offset by a $116.0 million (6%) increase in gross profit.

Previous wording

Total other expenses, net increased by $64.8 million (100%), primarily as a result of a $42.4 million increase in floor plan interest expense, an increase of $12.6 million (16%) in other interest expense, net and a $9.9 million (73%) decrease in gain on dealership divestitures, recorded during the six months ended June 30, 2024 when compared to the same period of the prior year. Income before income taxes decreased $265.8 million (53%) to $233.9 million for the six months ended June 30, 2024. Overall, net income decreased by $202.5 million (54%) during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

Total other expenses, net increased by $89.1 million (86%), primarily as a result of a $64.7 million increase in floor plan interest expense, an increase of $19.5 million (17%) in other interest expense, net and a $4.9 million (36%) decrease in gain on dealership divestitures, recorded during the nine months ended September 30, 2024 when compared to the same period of the prior year. Income before income taxes decreased $322.1 million (44%) to $403.6 million for the nine months ended September 30, 2024. Overall, net income decreased by $245.5 million (45%) during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Previous wording

For the six months ended June 30, 2024, new vehicle revenue increased by $518.8 million (14%) as a result of a 15% increase in new vehicle units sold. Same store new vehicle revenue decreased by $125.7 million (3%) as the result of a 3% decrease in new vehicle units sold.

Current wording

For the nine months ended September 30, 2024, new vehicle revenue increased by $820.4 million (15%) as a result of a 15% increase in new vehicle units sold. Same store new vehicle revenue decreased by $132.7 million (2%) as the result of a 3% decrease in new vehicle units sold.

Previous wording

For the six months ended June 30, 2024, new vehicle gross profit and same store new vehicle gross profit decreased by $46.0 million (13%) and $94.8 million (26%), respectively. Same store new vehicle gross margin for the six months ended June 30, 2024 decreased 232 basis points to 7.5% driven by the continued easing of new vehicle inventory constraints which softened the historically high new vehicle margins seen in recent years.

Current wording

For the nine months ended September 30, 2024, new vehicle gross profit and same store new vehicle gross profit decreased by $63.8 million (12%) and $135.3 million (26%), respectively. Same store new vehicle gross margin for the nine months ended September 30, 2024 decreased 228 basis points to 7.3% driven by the continued easing of new vehicle inventory constraints which softened the historically high new vehicle margins seen in recent years.

Previous wording

The seasonally adjusted annual rate ("SAAR") for new vehicle sales in the U.S. during the three months ended June 30, 2024 was approximately 15.6 million which increased as compared to approximately 15.5 million during the three months ended June 30, 2023. The increase in SAAR period over period reflects higher inventory supply coupled with continued consumer demand for new vehicles but new vehicle sales volumes were tempered by the CDK cyber-security incident which impacted industry wide sales in the latter part of June. We also continue to be impacted by the significant variation in new vehicle days supply among brands and models.

Current wording

The seasonally adjusted annual rate ("SAAR") for new vehicle sales in the U.S. during the nine months ended September 30, 2024 was approximately 15.6 million which increased as compared to approximately 15.4 million during the nine months ended September 30, 2023. The increase in SAAR period over period reflects higher inventory supply coupled with continued consumer demand for new vehicles. However, we continue to be impacted by the significant variation in new vehicle days supply among brands and models.

Previous wording

Used vehicle revenue increased by $431.1 million (19%) due to a $323.6 million (16%) increase in used vehicle retail revenue and a $107.5 million (54%) increase in used vehicle wholesale revenue. Same store used vehicle revenue decreased by $85.1 million (4%) due to a $120.6 million (6%) decrease in used vehicle retail revenue, partially offset by a $35.5 million (18%) increase in used vehicle wholesale revenue. Total used vehicle retail unit sales increased by 21% due to the Koons acquisition while same store used vehicle retail unit sales decreased by 2% during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Revenue per used vehicle retailed have continued to contract as seen in the second quarter of 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 lack of inventory availability, especially in vehicles with lower mileage.

Current wording

Used vehicle revenue increased by $614.1 million (18%) due to a $455.2 million (15%) increase in used vehicle retail revenue and a $158.8 million (54%) increase in used vehicle wholesale revenue. Same store used vehicle revenue decreased by $155.8 million (5%) due to a $205.6 million (7%) decrease in used vehicle retail revenue, partially offset by a $49.8 million (18%) increase in used vehicle wholesale revenue. Total used vehicle retail unit sales increased by 19% due to the Koons acquisition while same store used vehicle retail unit sales decreased by 4% during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Revenue per used vehicle retailed has continued to contract as seen in the third quarter of 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 lack of inventory availability, especially in vehicles with lower mileage.

Previous wording

For the six months ended June 30, 2024, used vehicle retail gross profit margins decreased from 6.7% to 5.1% and 6.7% to 5.3%, respectively, for all stores and on a same store basis when compared to the same period of the prior year. Used vehicle retail gross profit decreased $15.1 million (11%) for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 and decreased $34.9 million (26%) on a same store basis for the same period. On a total company basis, our gross profit per used vehicle retailed decreased $556 (26%), and on a same store basis, our gross profit per used vehicle retailed decreased $516 (24%) when compared to the prior year period which was primarily driven by decreases in used vehicle market prices. Decreases in used vehicle gross margins, on both a total Company and same store basis, was largely driven by a tighter market for used vehicles during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

For the nine months ended September 30, 2024, used vehicle retail gross profit margins decreased from 6.4% to 5.1% and 6.4% to 5.2%, respectively, for all stores and on a same store basis when compared to the same period of the prior year. Used vehicle retail gross profit decreased $18.8 million (10%) for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 and decreased $47.3 million (24%) on a same store basis for the same period. On a total company basis, our gross profit per used vehicle retailed for the nine months ended September 30, 2024, decreased $491 (24%), and on a same store basis, our gross profit per used vehicle retailed decreased $442 (22%) when compared to the prior year period which was primarily driven by decreases in used vehicle market prices. Decreases in used vehicle gross margins, on both a total Company and same store basis, was largely driven by a tighter market for used vehicles during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

Previous wording

For the six months ended June 30, 2024 and 2023, we are presenting "Collision" as a separate line item within parts and service gross profit. In prior periods, "Collision" was included within "Customer pay". We reclassified the corresponding amounts for the six months ended June 30, 2023 to conform to current year presentation.

Current wording

For the nine months ended September 30, 2024, and 2023, we are presenting "Collision" as a separate line item within parts and service gross profit. In periods prior to June 30, 2024, "Collision" was included within "Customer pay". We reclassified the corresponding amounts for the nine months ended September 30, 2023 to conform to current year presentation.