Asbury Automotive Group (NYSE:ABG) Q1 2026 Earnings Call

0:00 Greetings, and welcome to the Asbury Automotive Group First Quarter twenty twenty six Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Reeves, Vice President of Finance and Treasurer. Thank you, sir. You may begin. Thanks, operator, and good morning. As noted, today's call is being recorded and will be available for replay later this afternoon. Welcome to the Asbury Automotive Group's first quarter twenty twenty six earnings call. The press release detailing Asbury's first quarter results was issued earlier this morning and is posted on our website at investors.asburyauto.com.

0:55 Participating with me today are David Hult, our President and Chief Executive Officer Dan Clara, our Chief Operating Officer and Michael Welch, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open up the call 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 ks for the year ended 12/31/2025, any subsequently filed quarterly reports on Form 10 Q and our earnings release issued earlier today.

1:53 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. Comparisons will be made on a year over year basis unless we indicate otherwise. We have also posted an updated investor presentation on our website investors.asburyauto.com highlighting our first quarter results. It is my pleasure to now hand the call over to our CEO, David Hult. David? Thank you, Chris, and good morning, everyone. Welcome to our first quarter earnings call. Our first quarter results highlighted efforts to transform our business by optimizing our portfolio and successfully migrating to Techeon.

2:46 Today, over 50% of our stores are running on Techeon. We remain on track and anticipate to be fully converted by the fall of this year, after which time we expect to begin fully realizing the cost and efficiency benefits enabled by the new technology platform. The first and second quarter of this year represent the peak in terms of number of stores making the transition. As a result, costs related to integration and temporary disruption to store operations will also remain elevated as team members become fully acclimated to the new technology. Michael will provide additional color behind the transition and its impact on our financial performance. The first quarter also showcased a number of capital allocation decisions, which position Asbury for future success, while also returning capital to our shareholders.

3:46 We divested 10 dealerships and a collision center at attractive multiples, representing approximately $600,000,000 in annualized revenue. Dollars 147,000,000 of the proceeds went towards repurchasing 678,000 shares of our stock, with the rest directed towards reducing our debt. In our view, our trading price undervalues the earning potential of the company, and we took advantage of this price to value dislocation to accelerate our repurchase activity. Moving on to our first quarter twenty twenty six operational performance. Our results reflect the expected decrease in volumes as consumer demand moderated from last year's tariff driven spike in sales.

4:36 More challenging weather was also a factor, as was the temporary disruption for the stores going through the Techeon conversion. While new vehicle volumes were down, gross profit on a per unit basis held up well. On an all store basis, new vehicle PVRs were down just $73 sequentially and $177 on a year over year basis, an indication profitability is beginning to approach normalized levels. Similarly, used vehicle PVRs on an all store basis was $18.47 dollars which is up sequentially 516% year over year as the team continues execute our strategy to maximize per unit profitability.

5:29 Parts and service had a more challenging quarter driven by a variety of factors including weather, a more cautious consumer and temporary disruption from our DMS transition. That said, we still expect fixed operations gross profit to grow at mid single digit rate over time. And now for our consolidated results for the first quarter. We generated $4,100,000,000 in revenue, had a gross profit of $727,000,000 a gross profit margin of 17.7%, an expansion of 22 basis points. We delivered an adjusted operating margin of 5%. Our adjusted earnings per share was $5.37 and our adjusted EBITDA was $2.00 7,000,000 Before I hand the call over to our incoming Chief Executive Officer, Dan Clara, I want to take a moment to thank our team members for helping to make Asbury Automotive the company that it is today.

6:35 Together, we have transformed our organization from a regional player to one with national scale in highly desirable markets, a balanced portfolio, and a leader in technology focused investments. It has been an honor and a privilege to serve as a steward of this business for the past eight point five years, and I know our best days are ahead with Dan running the company. Dan, I will hand things over to you to discuss our operational performance in more detail. Good morning, everyone. Thank you, David, for the kind words. I feel I can speak for everyone here in saying that Asbury would not be as strong as it is today without your vision for growth and seeing the potential in this company.

7:23 We all wish you the best in your next role as Executive Chairman. And now moving on to the quarter, I would also like to thank the team members for handling the challenges that were thrown at them this quarter, including severe winter weather in nearly all our markets and across multiple weekends. Our teams have been working diligently to make the transition to Tech Yeon a smooth process and we are pleased with the early progress our stores are making. Changing the DMS is a complex endeavor for any dealership group, let alone one of our size, but it is necessary in order to elevate the guest experience and enhance our capabilities for strong operational performance. As an example, we converted the Coons dealerships last summer and they are starting to show the power of the software.

8:13 For that specific group in March, we saw gross dollars per technician up 21% year over year and average productivity per service advisor up 16%. We are seeing efficiencies extend beyond the service day as support costs in the stores decreased by 5% at the same time. And now I'm going to provide some updates on our same store performance which includes dealerships and TCA on a year over year basis unless stated otherwise. Starting with new vehicles, same store revenue year over year was down 9%. While we believe the winter weather impacted sales activity, we are also monitoring consumer behavior in light of ongoing geopolitical events.

8:59 New gross profit per vehicle was $3,061 as luxury maintained GPUs in line with the prior year and import and domestic moderated as expected. On an all store basis which includes the positive impact of the Chambers platform new gross profit per unit was $3,271 only down $177 year over year. Across all brands our same store new day supply was a healthy fifty four days at the end of March which we believe support resilient gross profit per unit. Turning to used vehicles, first quarter total used gross profit was up 1% sequentially. Used retail gross profit per unit was up 12% at $18.28 dollars a $2.00 $1 increase over the prior year and a $79 increase over our reported fourth quarter twenty twenty five number.

9:59 Our efforts in use continue to pay off. This represented our second consecutive quarter of progress in growing GPUs. We have seen sequential increases in GPUs in six out of the last seven quarters, thanks to our teams executing more consistently. We anticipate the pool of used vehicles will increase through the year aided by lease return activity, which can give us the opportunity to increase volume and maintain this level of PVR. Finally, our same store used DSI was thirty days at the end of the quarter, down from thirty five days at the end of the fourth quarter. Shifting to F and I. We earned an F and I PVR of $2,307 The non cash deferral impact of PCA was $45 So without the year over year impact the PVR would have been $2,351 We are on track to implement TCA in the chamber stores by year end, which will complete our rollout across all our platforms.

11:03 And finally in the first quarter our total front end yield per vehicle was $4,806 On an all store basis our front end yield was up $70 year over year at $4,921 Now moving to parts and service. Our same store parts and service gross profit was down slightly year over year due to slowdowns associated with the winter storms. In addition it is also important to note that when we convert stores to Techeon there is a short term effect of adjusting to the new software at the store level. We believe it takes about four to six months to overcome the muscle memory of the legacy software and start to see efficiencies take hold like those I mentioned earlier.

11:49 Now going back to the quarter's results, customer pay gross profit was up 1% with warranty gross profit higher by 3%. During the month of March, we generated 4% growth for both customer pay and warranty grosses, which was encouraging to see. April to date is trending similar to March. Overall, we believe our stores are well positioned for the extended period of growth within parts and service supported by the aging car park and increased vehicle complexity. Before I pass the call to Michael, I want to thank the team again for your hard work to deliver a guest centric experience and striving for improvement to unlock further performance. And with that, I will now hand the call over to Michael to discuss our financial performance. Michael?

12:38 Thank you, Dan, and good morning to our team members, analysts, investors, other participants on the call. For our financial performance in the first quarter, adjusted net income was $102,000,000 Adjusted EPS was $5.37 for the quarter. In addition, the non cash deferral headwind due to TCA this quarter was $0.26 per share. Our adjusted EPS would have been $5.63 without the deferral impact. Adjusted net income for the first quarter twenty twenty six excludes net of tax net gain on divestitures of $94,000,000 $5,000,000 related to Techeon implementation expenses, dollars 3,000,000 of weather related losses, and $1,000,000 related to the duplicate DMS related expenses.

13:28 In our consolidated results, we estimate that the weather impacted gross profit by $19,000,000 and EPS by $0.56 As stated in our press release this morning, during the quarter, we divested 10 dealerships and terminated seven franchises, which included exiting the Alfa Romeo and Maserati brands. Combined these stores generated an estimated annualized revenue of $625,000,000 Adjusted SG and A as a percentage of gross profit on a same store basis came in at 66.9%, which includes $2,000,000 related to legal expenses for a specific matter. In March, we saw adjusted same store SG and A in the low 60s. So we believe the SG and A number would have been more solidly within our expectations for mid 60s range without the severe weather headwinds.

14:21 As Dan mentioned, there are some frictional costs associated with changing our DMS that will take time to work out. In the short term, the stores are slightly less efficient in the first two months of operating in the new DMS. In months four to six, we see the stores become more efficient. It is encouraging to see our team members lean into the tool and embracing the operational platform can provide. Overall, we believe any short term headwinds are outweighed by the benefits to come. Before we move on, I will note that the one time implementation costs at the stores and the cost of duplicate software have been adjusted out of our non GAAP SG and A numbers as shown in our press release this morning. Next, the adjusted tax rate for the quarter was 25.1%.

15:08 We also estimate the full year 2026 effective tax rate to be approximately 25%. TCA generated $15,000,000 of pre tax income in the first quarter. The negative non cash deferral impact for the quarter was $7,000,000 We generated $166,000,000 of adjusted operating cash flow during the quarter. Excluding real estate purchases, we spent $46,000,000 on capital expenditures in the first quarter and still anticipate approximately two fifty million dollars of CapEx spend for both 2026 and 2027. Adjusted free cash flow was $120,000,000 for the first quarter. We ended the quarter with $1,200,000,000 of liquidity comprised of floorplan offset accounts, availability on both our used line and revolving credit facility and cash excluding cash of Total Care Auto.

16:00 Our transaction adjusted net leverage ratio was 3.2 times at the end of the first quarter. As David mentioned, we took opportunities to optimize our portfolio through strategic transactions. Our divestitures in the quarter also reduced our CapEx burden, further allowing us to deploy cash to higher return options. The proceeds of the divestitures combined with a robust cash flow in our business allowed us to balance our capital allocation priorities, both reducing our debt level and repurchasing 678,000 shares. Our diluted share count is approximately 18,600,000 shares before adjusting for any future buybacks. And finally, before we open to Q and A, I would like to thank David for his years of valuable leadership.

16:46 David guided Asbury through a new level of growth and instilled the team focused and guest centric culture that makes Asbury what it is today. And with that, this concludes our prepared remarks. We'll now turn the call over to the operator and take your questions. Operator? Thank you. We will now be conducting a question and answer session. Session. You. Our first question comes from the line of Jeff Licht with Stephens. Please proceed with your question.

17:39 Good morning. Thanks for taking my question. And David, just want to extend my thanks and you'll be missed. But since we've got you, I was wondering if, look, 1Q was obviously a pretty noisy quarter on a variety of fronts, weather being one of the most. I wonder if you can maybe just give a state of the union of kind of where we are for yourselves and in the industry in 2Q, just thinking about new and then new has some implications for used and then obviously service and parts was a little lumpy. I mean, you did mention it was up in March. But just kind of where do you think things stand now that the tax refund season is over? And obviously, we're not going to be getting any more the rest of this year? Sure, Jeff. I'll take a shot and Dan can jump in.

18:27 January and February were really rough for us from a weather perspective when we got far behind the eight ball at that point. Before the weather started hitting in mid January, we were actually pacing well the first half of January and then once we got hit with all the weather we kind of didn't recover. March was a good sign for us. Last March and April were extremely strong with the tariff presales for lack of a better term, but we really bounced back. And to Michael's comment, being in the low 60s for SG and A from March was a telltale sign for us. We see the same going into April, very difficult to predict much beyond that with what's going on with the war and gasoline prices and other things and how long that lingers. One would think the longer that lingers, the more impactful that's going to be on our business.

19:15 We're definitely feeling the slowdown. It's not all the same by brand, but we're still seeing a slowdown in new car sales into April as well. And just take top level, we're essentially back about 4,300 units or so in the quarter on new on a same store basis. Roughly you're going to take in 2,300 to 2,500 trade ins on those 4,000 and you're going to retail 80% of those cars. So there's a chunk of pre owned that we normally have internally to sell that we don't have. So it'll be a balancing act the next few quarters if new doesn't pop back where we're going to source vehicles. But I think parts and services is going to bounce back nicely and continue to grow as the year goes on.

20:02 It does take us four to six months with Techeon to get the muscle memory right in the stores. It doesn't matter the market or the brand, it's just human behavior takes time. But once you get past that six month window, you can really start to see some efficiencies as to why, you know, we would make this change in the DMSs. We do believe it makes our folks more efficient and more productive while certainly lowering our costs at the same time. I don't if there's anything you want to add. I think you covered it more. Nothing to add. And then just a quick follow-up for Dan maybe is, you know, as you I wonder if you could just give us one thing with Techeon where you look at it and say, you it manifests itself in, you know, financial benefit where you say, you know what, we're making the right decision here. Yeah, It might be a little noisy for four to six months, but when you start to look at our P and L a year or two years from now, we made the right decision. Was wondering if there's one thing you could highlight.

21:00 Think, Jeff, good morning. I think I covered it. Just one example of several that we're seeing earlier today. When you think about the efficiencies that the new software brings when you look at the gross dollars per technician being up 21% at Koons and the average productivity per service advisor up 16% and then you add the fact that support cost has also decreased, it's a pretty nice mix and aligned with what we expected. And then to put icing on the cake, the guest experience is definitely improved upon by the ease of using the technology, the ability to enhance how fast a guest can be served.

21:54 So we believe that it definitely gives us a competitive advantage that we need for the future and it is definitely the right thing to do. Well thanks very much and I'll let someone else jump in. Thank you. Our next question comes from the line of Rajat Gupta with JPMorgan. Please proceed with your question. Great. Thanks for taking the questions. And then David, best of luck and hope to catch up at some point again. Wanted to just follow-up on some of the first quarter results, especially around the new car units and even used car, you know, 11% same store decline and the 12% in news, is there any way to break up how much of it was weather, how much of it was just the taking on productivity and then how much of it was market?

22:54 Any way to parse that out would be helpful. And I have a quick follow-up on SG and A. Yeah, Rajat, good morning. This is Dan. I'll start it. When you look at the weather impact I'm talking about from a same store basis, we believe the snow closure in Q1 affected us somewhere in the 500 car range and similarly in used car volume. And then when you go down to the fixed revenue as well obviously that had a tremendous impact somewhere on a same store basis somewhere around a $13,000,000 impact. So it was significant impact and as you know when we have weather related issues it's not just the day that we're closed it's the days leading up to with all the media frenzy that happens and the days after the fact recovering.

23:55 David was in the Northeast at that time and as you know the Northeast was hit pretty severely and there were piles and piles of snow so it was definitely a big impact but glad that it's behind us and glad that March showed that we are directionally correct and glad that April is similar to March so that we can continue to build on the momentum. And how much do you think you lost due to like just the KQN rollout in 1Q? You know because you'll probably close the store for like a day and like the Mondays. I'm curious if that had any meaningful impact on the units. I know it probably impacted services, but anything on the units that you could flag?

24:44 So, yeah, on the, I don't have the exact number, Michael, we have not shared that number. But you bring up an excellent point because when we roll out the Tech Yacht stores, we go through the conversion Saturday and Sunday and we close operations on that Monday. So that is definitely a day that we lose from being able to serve our guests. And then Tuesday we reopen but again that's a completely new system. We're much slower than what we used to be until we develop that muscle memory that like I explained earlier it takes between four to six months to get back to the efficiency levels. Got it. Got it. And just to clarify in Mike's comments on SG and A on the call, on the prepared remarks, I think you mentioned mid-60s excluding the weather headwinds.

25:35 Just want to make sure we heard that correctly. And is it mid-60s even excluding some of the productivity losses from the DMS transition? I'm curious like what's a good steady state number post stage If you did not have weather, if you did not have DMS transition, what would have been a good steady state SG and A to gross number in the quarter? Yes, I think based on the March results that we saw that were in the low 60s, I think mid 60s without the weather would have been the right for the first quarter. So we're still comfortable in that mid 60s range going forward. And then some point in the back half of the year as we start to see the tech yacht efficiencies come through. Don't know if that's fourth quarter or where that shakes out, but sometimes we'll start seeing an approach towards the mid-60s as we get the techie on efficiencies running through the system.

26:27 Got it. Just a final one on buybacks. Given the fact that you're ramping up buybacks here, why EBITDA is coming down. I'm curious, is this just you taking a view on the benefits of the Tekion rollout and the benefits you might see into 2027 and beyond that's giving you that confidence given like the cyclical backdrop still looks a bit choppy here? So curious, like just thinking around the buybacks ramping up. Thanks. So a couple of things in there. In the first quarter, we disposed of the stores and so we used those proceeds buy additional shares in the quarter. But also, as the share price continue to dislocate and get low levels and attractive prices for us, we took a view that we need to take advantage of that stock price. We do think the back half of this year and into '27, the EBITDA comes up dramatically with tech yon roll up behind us. And so we're kind of trying to balance the leverage ratio and the share buybacks. And if the share price is low, we're going to lean in a little bit on share buybacks.

27:41 Understood. Great. Thanks. Thanks for taking the questions and and get back in queue. Our next question comes from the line of Glenn Chin with Seaport Research. Please proceed with your question. Good morning. Thank you. Just another follow on related to Techeon. Can you just confirm for us sort of the contour of the Techeon impact throughout the year? Do the costs and inefficiencies from the transition peak in 2Q? No. So if you think about just the stack up effect, have first quarter was pretty heavy rollouts.

28:28 2Q has a decent amount of rollouts and then we go kind of handle the West in 3Q. And so just the stack of all the stores, if you think about that four to six month window, it'll probably peak in 3Q. At some point, call it sometime in 4Q, we should be able to flip over the we have more stores that are past the four to six months. I would say the peak of it's going to be very late 2Q and the 3Q is kind of where the people be. Okay, very good. And then I understood that you're going to adjust out sort of the explicit costs from Techeon. Those timeline around those, Michael, is also same? Or is that different?

29:14 No, it should be similar 2Q and 2Q probably has a few less stores in it and 3Q has a few more. So just from an implementation cost perspective, it'll be in a similar ballpark to 1Q, but maybe a little lighter in 1Q and similar in 3Q when you compare it to 1Q. Okay, very good. And then I think Dan you mentioned in your prepared remarks as well as last quarter just hesitation around the consumer with respect to parts and service. Can you just any further elaboration on that, if you will? Yes, Glenn, good morning. We saw a pullback as you mentioned in Q4, going into Q1, there's a lot of uncertainties going on out there.

30:05 So I would say that it is somewhat consistent but keep in mind there's a new war that has started that is with oil prices at an all time high is just keeping people on more of the defensive side of it. But again when I go back into my remarks earlier today it's encouraging to see what we saw in April customer pay up and seeing the same trend going into April. I'm sorry, in March going into April. Okay, very good. Thank you. That's it for me. David, well, miss you. Good luck with everything and your new position.

30:50 Thank you. Our next question comes from the line of Alex Perry with Bank of America. Please proceed with your question. Hi, thanks for taking my questions here. I guess just first, I wanted to double click a little bit more on sort of the current state of demand with where gas have gone and just the impact to consumer confidence. On the new vehicle side, when did you start to see the slowdown? Is that more sort of an April comment? And is that just on new, are you seeing any impact to mix yet in terms of the mix of vehicles that consumers are buying? And what are you sort of seeing on used? Yeah, on the new car, it really goes back to I mentioned this on the fourth quarter, there was we didn't really get the pop for a lack of a better term than we get in December.

31:50 January, as David mentioned earlier today, the first half of January before we got hit with the weather, were facing okay and then we just never recovered from the weather. So from a Nucor perspective I will tell you that really after the weather never recovered, February about the same, in March the same trend continued. From a mix you know typically when you see gas prices hit the levels where we are right now it usually takes five to six months for consumers to start really changing their buying habits. We have not seen that and what I mean by that is a consumer that is going to trade in a Chevy Tahoe for a Honda Civic or what have you. We have not seen that, but, the longer the water goes, I think the closer we're gonna be getting to see a shift in consumer behavior, but we're not there yet.

32:46 And from a used car standpoint, you know, the the demand of used cars is there, especially with the the difference in the in the cost of sale between a new and used car. When you factor in all the the the items that have gone up insurance rates, the average cost of maintaining a car, when you look at all that the demand is definitely there for used cars. We strategically have made the decision to not chase the volume and to maximize the gross profit. And as we showed in Q4 we were heading gross profit. Q1 when you look at March again even though we were backwards in volume our gross profit was ahead year over year for used cars.

33:34 So we believe strongly that that is the right strategy to continue to execute and as the availability of used cars become readily available as we move throughout the year, then we can pull that lever while still protecting the margins that we have delivered over the last few quarters. Got you. That makes a lot of sense. And then I guess I just wanted to ask a little bit more on the parts and service trend. If we think about comps from here, I think you mentioned them rebounding earlier in the call. Is that primarily a factor of just getting past the weather impact? Is there something you're seeing in terms of sort of delayed effect from people that would have came in the first quarter starting to come in?

34:29 Like can you just maybe talk about how you think about the parts and services and what sort of drives that rebound? Yeah, the parts and service we've always been saying mid single digits. We have a we've developed a very strategic plan to go and grow our fixed operations meaning parts and service and no different than what we've done with used cars. It's about the execution. When you think about and you can see it on the IR deck the average miles coming through our shop are continuing to be in that 70,000 mile range. So that gives us a lot of stability that we are retaining the guests and obviously that we have the opportunity to continue to maintain those cars for those customers. And the last factor that I see tremendous potential is growing the CPRL count and really focusing on what we call the cycle time. How fast can we serve our guests which is also one of the benefits that I mentioned earlier of going to Tech Yacht. The faster we get that guest in and out the higher the retention and the higher propensity for that customer to come back and do business with us and the more throughput that we can push through our service departments.

36:00 Perfect. That's really helpful. Best of luck going forward. Our next question comes from the line of John Babcock with Barclays. Please proceed with your question. Hey, good morning and thanks for taking my questions. I guess just first of I was wondering if you could talk about Herb Chambers, how the integration is going there and if there's anything new to share on that front? And then also if you can just remind us when you're planning on implementing Techeon into that business? Her chambers integration is going well. We are very happy with the talent, the people. We got some great team members, great stores and what they have built together is impressive and now is up to all of us to work together as a team to take it to the next level.

36:53 Techeon rollout at Chambers started last month. We've already converted I think we have 22 stores, 22 or 24 stores call it in the 20 range with the rest of the stores I think we have eight more that are going to be converting in the month of May or June I'm sorry in the month of June. So by June chambers will be completely converted to Tech Yacht. Okay, thanks for that. And the next question just on GPUs because you do break it out across luxury imports and also domestic. And it seems like quarter over quarter there was pretty good stability in luxury and imports, but domestic was down a decent bit. Is there anything we should take note of from those trends or?

37:43 The biggest impact that I'm seeing on domestic side is we still have the headwinds of Stellantis. We are well aware of it. We're focusing on performing better with Stellantis getting that inventory turned and maximizing the gross profit. But it really the biggest impact in the domestic was our Stellantis stores. Okay. And then just my last question, just I was wondering if you could share how much if any shares you bought back in April? Yeah, any shares we would have bought back in April would have been disclosed as part of the press release. So we did our share buybacks early on the quarter took advantage of some share prices then.

38:35 So that all those all those shares were kind of purchased January through March. Okay, sounds good. Thank you. Our next question comes from the line of Bret Jordan with Jefferies. Please proceed with your question. Hey, good morning. On the Stellantis, are you seeing any improvement in the trend? I mean, it seems as if maybe they're making some product adjustments or maybe pricing adjustments. Are you seeing any traction there? Or is it pretty much the same? From a high level, there are changes being made that make total sense and it is a step in the right direction.

39:21 But it's a double edged sword because when they make those changes, I'll give you an example, adjust the pricing for the new models coming in while we still have the same model that is a year older that is more expensive than the new model coming in. And so that is where there is some pressure to the margins to be able to make sure that we liquidate that old inventory under the old pricing structure to make room for the new decisions that the management team is making. Okay. And then I guess on the parts and service side of the business, you had a pretty hard warranty comp year over year. Could you sort of talk about what you're seeing? Are there any major warranty programs that are popping up that might give you some tailwinds in volumes in the balance of this year?

40:08 Yeah, we had some big warranty comps. I'll tell you one of the I wouldn't say surprises but one of the I guess obstacles that we faced is one of our import OEMs had a major decrease in warranty issues last quarter which obviously warranty is something that we don't control. So we happily service the customers when they come in but it's really outside of our control. Moving forward we've seen some of the domestics that have issued some recalls and some additional warranty work, but it's hard to tell. Like I said, warranty is important. I pay attention to it, but I cannot control it. That's why our focus is always on the customer pay.

40:58 We'll just happily serve the guests when the OEMs have any warranty issues. Great. Thank you. Our next question comes from the line of Ryan Sigdahl with Craig Hallum. Please proceed with your question. Hey. Thanks. This is Matthew Robb on for Ryan. Just wanna go back to the new GPUs, maybe putting a finer point there. We've talked in the past about settling out in that 2,500 to 3,000 range. You're at 3,002 and 71, feels like inventory is pretty rational and you're certainly getting the benefit of the Herb Chambers mix. Mean, at this point, is there any reason why GPUs can't settle out near the higher end of that range? And if you have any expectation for new GPUs for 2026, whether it's a year end number or quarter over quarter decline through the rest of the year, that'd be great.

41:51 Matt, thank you. Great question. And I agree with you. I think for the last several quarters, we've been talking about 2,500 or 3,000. We believe now that that number is moderating and it is closer to that 3,000 range. So to your point, excellent question. Thank you. We have no further questions at this time. Mr. Hull, I'd like to turn the floor back over to you for closing comments. Thank you, operator. We appreciate everyone joining our first quarter earnings call, and the team here looks forward to discussing our second quarter results in the future. Have a great day.

42:39 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.