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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.07pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.04pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.17pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+9
litigation+5
investigations+3
against+3
adverse+2
Positive rising
able+2
improve+2
profitability+2
successful+1
despite+1
Risk Factors (Item 1A)
9,066 words
Item 1A. Risk Factors
The following risks have had or in the future could have a material adverse effect on our business and results of operations.
Market and Industry Risks
Availability and demand for and pricing of our products and services may be adversely impacted by economic conditions, financial developments including rising inflation, high energy prices, increasing interest rates, a potential recessionary environment and other factors.
The automotive retail industry, and especially vehicle unit sales, is influenced by general economic conditions, particularly consumer confidence, the level of personal discretionary spending, interest rates, exchange rates, fuel prices, technology and business model changes, new OEM entrants, supply conditions, consumer transportation preferences, unemployment rates and credit availability. Consumer spending can be materially and adversely impacted by periods of economic uncertainty or by consumer concern about manufacturer viability. Increased tariffs may increase inflation, which would likely result in interest rates not decreasing as fast as expected and consumer demand declining as a result of increased costs of vehicle ownership.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
impairments+5
challenges+4
restructuring+2
collision+2
disruption+2
Positive rising
outperformed+4
effective+2
improved+2
improve+2
efficiency+1
MD&A (Item 7)
9,728 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with Part I, including the matters set forth in Item 1A. Risk Factors, and our Consolidated Financial Statements and notes thereto included elsewhere in this Form 10-K. Refer to Item 1. Business — General for an overview of our operations. Additionally, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2024 compared to fiscal year 2023.
Overview
Our operating results reflect the combined performance of each of our interrelated business activities. Historically, various facets of our business have been directly or indirectly impacted by a variety of supply/demand factors, including vehicle inventories, government trade policies, consumer confidence, consumer transportation preferences, discretionary spending levels, availability and affordability of consumer credit, new vehicle introductions and innovations, manufacturer incentives, weather patterns, fuel prices, inflation and interest rates. For example, during periods of sustained economic downturn or significant supply/demand imbalances, new vehicle sales may be negatively impacted as consumers tend to shift their purchases to used vehicles. Some consumers may their purchasing decisions altogether, electing instead to continue to maintain and repair their existing vehicles. In such cases, however, we believe the new vehicle sales impact on our overall business is mitigated by our ability to offer other products and services, such as used vehicles and parts, as well as maintenance, repair and services. In addition, our ability to expediently adjust our cost structure in response to changes in new vehicle sales volumes also tempers any impact of such sales volume changes.
The global economy has experienced elevated levels of inflation in recent years. In response to higher than historical average inflationary pressures and challenging macroeconomic conditions, the U.S. Federal Reserve (“the Federal Reserve”), along with other central banks, including in the U.K., maintained interest rates at elevated levels throughout 2023. In 2024, inflation began to return to historical norms. As a result, during the year ended December 31, 2024 (“Prior Year”), the Federal Reserve and the Bank of England lowered their interest rates by 100 and 50 basis points, respectively, and during the Current Year, further lowered their interest rates by 75 and 100 basis points, respectively, in an effort to stimulate economic activity and reduce unemployment. The impact of the lowering of interest rates on the levels of inflation and unemployment in the U.S., U.K. and Europe is uncertain. In Europe, rising energy costs as a result of supply disruptions and increased winter demand for heating could place strain on our suppliers’ ability to maintain current production levels of vehicles and vehicle parts. Across the European Union, these energy constraints could result in nations or region s enacting emergency energy related policies, limiting energy availability for manufacturers. The impact of these macroeconomic developments on our operations cannot be predicted with certainty.
Inflation, increased energy costs and a prolongedrecession could adversely impact our operations, the operations of our suppliers and customer demand for our vehicles, parts and services. The risk of slower future interest rate cuts or the maintenance of interest rates at current elevated levels could have a material adverse impact on our interest expense and ability to obtain financing through the debt markets, as well as consumers’ ability to obtain financing for the purchase of new and used vehicles. Refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk for additional analysis regarding our interest rate sensitivity.
A significant portion of our vehicles purchased by customers are financed. Tightening of the credit markets, increases in interest rates and credit conditions have and may continue to decrease the availability or increase the costs of automotive loans and leases and adversely impact our new and used vehicle sales and margins. In particular, if sub-prime finance companies apply further higher credit standards or if there is a further decline in the overall availability of credit in the sub-prime lending market, the ability of some consumers to purchase vehicles and F&I products could be even more limited, which could have a material adverse effect on our business and results of operations.
In addition, local economic, competitive and other conditions affect the performance of our dealerships. Our results of operations depend substantially on general economic conditions and spending habits in those regions of the U.S. and U.K. where we maintain our operations.
While EV sales grew in prior years, EV demand began to stabilize in 2025 in the U.S. Consumers continue to express concerns with respect to access to charging infrastructure, affordability and battery range, which may limit broader adoption of EVs. If EV demand remains uncertain while OEMs continue to shift product strategies and production plans, there could be a material adverse effect on our business and results of operations. In addition, President Donald Trump issued a series of executive orders since taking office in January 2025, including an executive order eliminating the EV mandate and the OBBBA, which was signed into law in July 2025, eliminates multiple credits previously made available for new and used EVs. Significant shifts to increase or decrease EV demand could have material impacts on the operations of our OEM partners, which could lead to a material adverse effect on our dealership business and our results of operations. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders and the OBBBA.
The U.K. government has established mandated targets for the sale of new zero emissions vehicles with increasing targets in future years. The government targets established for 2026 are higher than those previously required in 2025 and are expected to further challenge new vehicle sales in 2026 and beyond. These EV mandates could impact our vehicle manufacturers’ production mix and volumes, which in turn may impact our new vehicle sales and results of operations. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding the EV mandate.
Existing and potential new trade policies, such as tariffs, could adversely affect our operations, costs and business.
President Donald Trump has issued a series of executive orders since taking office in January 2025, including executive orders regarding tariffs. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders, including those related to tariffs.
While the possibility exists for delays, reductions or exemptions of the automotive and reciprocal tariffs, the potential impacts of the tariffs described above remain uncertain and may cause a significant impact on the affordability of our products as well as the future mix of and demand for vehicles provided by our manufacturers, as well as alter the mix of supply and demand for used vehicles. To the extent any such tariffs remain in place for a sustained period of time, or in the event a global or domestic recession results therefrom, the disposable income of our customers could be significantly reduced, which may result in our customers deciding to delay new or used vehicle purchases or vehicle maintenance and repairs, or forego them entirely, each of which could adversely affect our results of operations and financial condition. Additionally, reciprocal tariffs, tariffs on steel, aluminum, copper and other materials and the elevated tariffs against China could negatively impact business or consumer sentiment, demand for our products, our manufacturers’ global supply chains and the U.S. or global economy generally. Manufacturers’ supply chain dependencies and production facility locations vary (and planned facility locations may, in response to threatened tariffs and trade barriers, be changed), and as a result, certain manufacturers could be impacted more significantly by the imposition of tariffs than others.
Additional actions taken by the U.S. that restrict or could impact the economics of trade — including additional tariffs, trade barriers and other similar measures — could have the potential to further disrupt existing supply chains and trigger retaliatory efforts by other countries, including the imposition of tariffs, raising taxation, setting foreign exchange or capital controls, or establishing embargoes, sanctions, or other import/export restrictions, thereby negatively impacting our business, both directly and indirectly. These developments, or the possibility that more of them could occur, may materially create or increase business uncertainty and could adversely affect the global economy and stability of global financial markets, potentially reducing trade and depressing economic activity, including demand for our products. Such changes in international trade policies may result in direct impacts to our business or indirectly to our customers or suppliers through increased costs, changes in business prospects or operating results, which could adversely affect our financial condition. The extent of such impacts cannot be predicted at this time.
Deterioration in market conditions or changes in our credit profile could adversely affect our operations and financial condition.
We rely on the positive cash flow we generate from our operations and our access to the credit and capital markets to fund our operations, growth strategy and return of cash to our shareholders through share repurchases and dividends. Changes in the credit and capital markets, including market disruptions, limited liquidity and interest rate fluctuations, may increase the cost of financing or restrict our access to these potential sources of future liquidity. Our continued access to liquidity sources on favorable terms depends on multiple factors, including our operating performance and credit ratings. Our debt securities currently are rated just below investment-grade and a downgrade of this rating likely would negatively impact our access to the debt markets and increase our cost of borrowing. Disruptions in the debt markets or any downgrade of our credit ratings could adversely affect our operations and financial condition and our ability to finance acquisitions or return cash to our shareholders. We can make no assurances that our ability to obtain additional financing through the debt markets will not be adversely affected by economic conditions or that we will be able to maintain or improve our current credit ratings.
Our floorplan notes payable, mortgages and other debt are benchmarked to SOFR, which can be highly volatile as a result of changing economic conditions. Although we utilize derivative instruments to partially mitigate our exposure to interest rate fluctuations, significant increases in SOFR or other variable interest rates could have a material adverse impact on our interest expense due to the significance of our debt and floorplan balances. Refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk for additional analysis regarding our interest rate sensitivity.
We are subject to risks associated with our dependence on manufacturer business relationships and agreements.
The success of our business is dependent on vehicle manufacturers on whom we rely exclusively on for our new vehicle inventory. Our ability to sell new vehicles is dependent on a vehicle manufacturer’s ability to produce and allocate to our dealerships an attractive, high quality and desirable product mix at the right time in order to satisfy customer demand.
Manufacturers generally support their franchisees by providing direct financial assistance in various areas, including, among others, incentives, floorplan assistance and advertising assistance. Certain of our OEM partners, including Toyota, have recently announced their intention to reduce these forms of dealership financial assistance in order to improve their profitability. If our OEM partners reduce or eliminate such incentives or increase the prices of their products, it could negatively impact consumer demand for new vehicles and adversely affect our sales volumes and profitability. Additionally, a discontinuation or material change in our manufacturers’ warranty and incentive programs could adversely affect our business. Manufacturers also provide product warranties and, in some cases, service contracts to customers. Our dealerships perform warranty and service contract work for vehicles under manufacturer product warranties and service contracts, and we bill the manufacturer directly, as opposed to invoicing the customer. In addition, we rely on manufacturers for various financing programs, OEM replacement parts, training, up-to-date product design, development of advertising materials and programs and other items necessary for the success of our dealerships.
Vehicle manufacturers may be adversely impacted by economic downturns or recessions, significant declines in the sales of their new vehicles, increases in interest rates, adverse fluctuations in currency exchange rates, declines in their credit ratings, reductions in access to capital or credit, labor strikes or similar disruptions (including within their major suppliers), supply shortages, rising raw material costs, rising employee benefit costs, adverse publicity that may reduce consumer demand for their products, including due to bankruptcy, product defects, litigation, ability to keep up with technology and business model changes, poor product mix or unappealing vehicle design, governmental laws and regulations, natural disasters, including fires such as that at a major U.S. aluminum production facility in 2025, cybersecurity incidents or other adverse events. In particular, all of our OEMs are investing material amounts to develop electric and autonomous vehicles. These investments could cause financial strain on our OEMs or fail to deliver attractive vehicles for customers, which could lead to adverse impacts on our business. The OEMs have been and could continue to be impacted by disruptions to the economy, lower than anticipated EV adoption, higher supply chain costs than emerging EV manufacturer competitors, delays in increasing factory production, labor negotiations, parts shortages, including semiconductor chips, and other disruptions. Since 2024, a number of OEMs have announced write-offs of certain of their EV investments or scaled down electrification plans as EV demand slows, further contributing to the uncertainty of the EV market outlook and the long-term viability and profitability of OEM’s. These and other risks could materially adversely affect the financial condition of any manufacturer and impact its ability to profitably design, market, produce or distribute new vehicles, which in turn could have a material adverse effect on our business, results of operations and financial condition.
Since 2024, the majority of our manufacturers’ production increased, driving an improvement in vehicles days’ supply. Our new vehicle days’ supply of inventory was approximately 46 days as of December 31, 2025, as compared to 44 days and 37 days for the years ended December 31, 2024 and 2023, respectively. It is impossible to predict with certainty when normalized production will resume at these manufacturers. If our manufacturers’ production remains at current reduced levels or in some cases continues to decline, diminishing our ability to meet the immediate needs of our customers, the production shortage could have a material adverse impact on our financial and operating results.
Additionally, President Donald Trump issued a series of executive orders since taking office in January 2025, including executive orders regarding tariffs. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders. Many manufacturers of vehicles, parts and supplies are dependent on imported products and raw materials in their production. Any significant increase in existing tariffs on such goods and raw materials, or implementation of new tariffs, could increase production costs for OEM’s that would then be passed on to consumers, potentially leading to higher vehicle prices and reduced demand, which in turn could adversely affect our profits on the vehicles we sell. Additionally, the tariffs and other market developments could potentially cause our current OEMs to lose market share to emerging EV-only OEMs. Market share losses could not only impair our sales and profits but lead to potential impairments.
In addition, we may face increased competition in the markets in which we operate from vehicle manufacturers not currently represented in our dealership portfolio, including emerging Chinese automotive manufacturers. In the U.K., Chinese-branded vehicles have increased their share of new vehicle sales in recent periods, growing from approximately 8% in 2024 to approximately 13% in 2025. These manufacturers often compete aggressively on price and have expanded their offerings, including electric and hybrid vehicles, which may appeal to certain customer segments. While Chinese automotive brands currently have a limited presence in the U.S., similar competitive dynamics could develop over time. Increases in market share by new manufacturers, such as Chinese automotive brands, in either the U.K. or the U.S., could reduce demand for the vehicles we sell, increase competitive pressure on pricing and margins and adversely affect new vehicle sales volumes at our dealerships. These factors could have a material adverse effect on our business, results of operations and financial condition.
If we are unable to enter into new franchise agreements with manufacturers in connection with dealership acquisitions or maintain or renew our existing franchise agreements on favorable terms, our operations may be significantly impaired.
We are dependent on our relationships with manufacturers, which exercise a great degree of influence over our operations through the franchise and similar agreements. These agreements may be terminated or not renewed by the manufacturer for a variety of reasons, including network consolidation plans, any unapproved changes of ownership or management, sales and customer satisfaction performance deficiencies and other material breaches of the franchise agreements. For example, in 2023, in the U.K., an OEM disclosed a five-year plan to reduce the number of partners in its dealer network. That plan may require us to dispose of, or close, up to 16 of our dealerships. Correspondingly, the plan may require us to purchase dealerships adjacent to our territories. In the U.S., manufacturers may also have a right of first refusal if we seek to sell dealerships. We also cannot guarantee that the terms of any renewals will be as favorable to us as our current agreements. Although we are generally protected in the U.S. by automotive dealership franchise laws requiring “good cause” be shown for such termination, if such an instance occurs, we cannot guarantee that the termination of the franchise will not be successful.
A manufacturer may also limit the number of its dealerships that we may own overall or in a particular geographic area. From time to time, we have not met all of the manufacturers’ requirements to make acquisitions and have received requests from manufacturers to dispose of certain of our dealerships. In the event one or more of our manufacturers sought to prohibit future acquisitions or imposed requirements to dispose of one or more of our dealerships, our acquisition and growth strategy could be adversely affected. Furthermore, if current manufacturers or future manufacturers are not required to conduct their business in accordance with state franchise laws and thereby circumvent the current dealer-network to sell directly to the customer, our results of operations may be materially and adversely affected.
Substantial competition in automotive sales, F&I and services could adversely impact our sales and our margins.
The automotive retail industry is highly competitive. Within our markets we are subject to competition from franchised automotive dealerships and other businesses as it relates to new and used vehicles, F&I and parts and service. The internet has become a significant part of the advertising and sales process in our industry. Customers are using the internet to compare prices for new and used vehicles, automotive repair and maintenance services, finance and insurance products and other automotive products. If we are unable to effectively use the internet to attract customers to our own online channels and mobile applications, and, in turn, to our stores, our business, financial condition, results of operations and cash flows could be materially adversely affected. The use of social media by consumers increases the speed and extent that information and opinions can be shared, and negative posts or comments on social media about the Company or any of our dealerships could damage our reputation and brand names, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We also face competition in arranging financing for our customers’ vehicle purchases from a broad range of financial institutions. Additionally, we do not have any cost advantage in purchasing new vehicles from vehicle manufacturers, and our franchise agreements do not grant us the exclusive right to sell a manufacturer’s product within a given geographic area. Subject to state laws in the U.S. that are generally designed to protect dealers, a manufacturer may grant another dealer a franchise to start a new dealership near one of our locations, or an existing dealership may move its dealership to a location that would more directly compete against us. The location of new dealerships near our existing dealerships could have a material and adverse effect on our operations and reduce the profitability of our existing dealerships. Increased competition can adversely impact our sales volumes and margins as well as our ability to acquire dealerships.
Please see Item 1. Business — Competition for further discussion of competition in our industry.
If we are unable to acquire and successfully integrate new dealerships into our business, the growth of our revenues and earnings could be adversely affected.
Growth in our revenues and earnings partially depends on our ability to acquire new dealerships and successfully integrate those dealerships into our existing operations. We cannot guarantee that we will be able to identify and acquire dealerships in the future. In addition, we cannot guarantee that any acquisitions will be successful or on terms and conditions consistent with past acquisitions. Restrictions imposed by our manufacturers, as well as covenants contained in our debt instruments, may directly or indirectly limit our ability to acquire additional dealerships. As competition for acquisitions increases that may result in fewer acquisition opportunities available to us and/or higher acquisition prices, and some of our competitors may have greater financial resources than us.
In addition, acquisitions involve a number of particular risks, including, among other things:
• incurring significantly higher capital expenditures and operating expenses;
• failing to obtain manufacturers’ consents to acquisitions of additional franchises;
• failing to integrate the operations and personnel of the acquired dealerships;
• entering new markets with which we are not familiar;
• incurring undiscovered liabilities at acquired dealerships, generally, in the case of stock acquisitions;
• disrupting our ongoing business;
• failing to retain key personnel of the acquired dealerships;
• failing to implement or improve controls and policies and information systems (“IT”);
• impairing relationships with employees, manufacturers and customers; and
• incorrectly valuing acquired entities.
The integration process for acquisitions requires us to expand the scope of our operations and financial and other systems. Our management devotes a substantial amount of time and attention to the process of integrating the operations of acquired dealerships into our business.
If any of these factors limit our ability to successfully integrate acquired dealerships into our operations or on a timely basis, our expectations regarding future results of operations, including certain revenue and expense synergies expected to result from acquisitions, might not be met. As a result, we may not be able to realize the expected benefits that we seek to achieve from the acquisitions. In addition, we may be required to spend additional time or money on integration that otherwise would be spent on the development and expansion of our business, including efforts to further expand our product portfolio.
Vehicle manufacturers may alter their distribution models.
Certain vehicle manufacturers have adopted an agency model for distribution of vehicles in the U.K. after collaborating with various automotive retailers and conducting pilot programs. In addition, other vehicle manufacturers serving the U.K. and U.S. markets have announced plans to explore an agency model for selling new vehicles. Under an agency model, our franchised dealerships receive a fee for facilitating the sale of a new vehicle to a customer but no longer record the vehicle sales price as revenue, record vehicles in inventory or incur floorplan interest expense, as has been historical practice. Agency models adopted by vehicle manufacturers have resulted in reduced revenues, as we act as an agent of the vehicle manufacturer, receiving a commission for each sale and other expense fee support. We have not experienced a material negative or positive impact to the U.K. gross margin and consolidated results of operations as a result of the change to the agency model. Notwithstanding this fact, we cannot predict the actions of other manufacturers and whether the agency models proposed by them will have the same terms and conditions as those currently in effect. The agency model, if adopted by additional manufacturers, would reduce revenues with only the facilitation fee recorded as revenue. The other impacts to our U.K. and the U.S. segments and consolidated results of operations remain uncertain until such time as vehicle manufacturers provide additional details regarding their specific agency model plans. We are uncertain if agency models will be widely adopted in the U.K. or U.S.
Vehicle technology advancements and changes in consumer vehicle ownership preferences could adversely affect our new and used vehicle sales volumes, parts and service revenues and results of operations.
Vehicle technology advancements are occurring at an accelerating pace. These include driver assist functionality, autonomous vehicle development and rideshare and vehicle co-ownership business models. Many in the automotive industry believe that in the near future vehicles will be available to the automotive consumer at low usage costs, which may entice many vehicle owners, particularly in larger, highly populated areas, to abandon individual car ownership in favor of multiple co-ownership ride-sharing opportunities. Increased popularity in the ride-sharing subscription business model could adversely affect our new and used vehicle sales volumes, parts and service revenues and results of operations.
Operational Risks
We rely on third-party vendors and suppliers for key components of our business.
Many components of our business, including data management, key operational processes and critical customer systems, are provided by or licensed from various third-party vendors and suppliers. In addition, we also rely on third-party vendors to supply key products and services to us and our customers. One or more of these third-party vendors or suppliers may experience financial distress, technology challenges, cybersecurity incidents, staffing shortages or liquidity challenges, file for bankruptcy protection, go out of business, or suffer other disruptions in their business, each of which could affect their ability to serve us and our customers. For example, in June 2024, CDK Global LLC (“CDK”) experienced a cybersecurity event, which resulted in service outages on CDK’s dealers’ systems including our CDK DMS. If any of our vendors or suppliers fail to deliver their products or services for any reason, our business and results of operations and financial condition could be materially and adversely impacted.
A failure of any of our IT or those of our third-party service providers or a cybersecurity incident, including loss or unauthorized access of confidential information or PII about our customers or employees, could negatively affect our business, operations and financial condition.
We depend on the efficient operation of our IT and those of our third-party service providers and rely on IT at our dealerships in all aspects of our sales and service efforts, as well as in the preparation of our consolidated financial and operating data. All of our dealerships currently operate on two DMSs, one DMS for the U.S. and one DMS for the U.K. Additionally, in the ordinary course of business, we receive significant PII about our customers and our employees. PII is primarily collected at our dealerships and through our digital platform via an online DMS. A cybersecurity attack to obtain such information could be caused by malicious insiders and third parties using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, malware, fraud, trickery, or other forms of deception. Although companies across all industries are affected by malicious efforts to obtain access to PII, the automotive dealership industry has been a particular target of identity thieves. The techniques used by cyber attackers change frequently and may be difficult to detect. We have implemented security measures that are designed to detect and protect againstcyberattacks, as well as policies governing the deletion of PII, to limit the information exposed to a potential cyberattack.
Despite these measures and any additional measures we may implement or adopt in the future, our facilities and systems, and those of our third-party service providers, have been and are vulnerable to security breaches, computer viruses, malware, lost or misplaced data, programming errors, scams, ransomware, burglary, human errors, acts of vandalism, misdirected wire transfers or other events. If an unauthorized party is successful in obtaining trade secrets, PII, confidential, or otherwise protected information of our dealerships, our customers or our employees or in disrupting our operations through a cyberattack, the attack could result in loss of revenue, increase the costs of doing business, harm our competitiveness, reputation or customer or vendor relationships, satisfaction or loyalty. In addition, security breaches and other security incidents could expose us to a risk of loss or exposure of this information, which could result in potential liability, investigations, regulatory fines, penalties for violation of applicable laws or regulations, costs related to remediation or the payment of ransom, and litigation including individual claims or consumer class actions, administrative, civil or criminalinvestigations or actions, any of which could have a material adverse effect on our business, results of operations or financial condition. Likewise, our business could be significantly disrupted if (i) the DMS fails to integrate with other third-party IT, customer relations management tools or other software, or to the extent that any of these systems become unavailable to us or fail to perform as designed for an extended period of time or (ii) our relationship with our DMS providers or any other third-party provider deteriorates.
Despite ongoing efforts to improve our ability to protect data from compromise, we may not be able to protect all of our data across our diverse systems and third-party vendors. For example, during the quarter ended June 30, 2024, we were informed of a cybersecurity incident experienced by CDK, which resulted in service outages on CDK’s dealers’ systems (the “CDK Incident”). CDK provides clients in the automotive industry, including our dealerships in the U.S., with a software as a service platform used by dealerships in managing customer relationships, sales, financing, service, inventory and back-office operations. In response to the CDK Incident, we immediately activated our cyber incident response procedures and proactively took measures to protect and isolate our systems from CDK’s platform. All of our U.S. dealerships continued to conduct business using alternative processes until CDK’s dealers’ systems were fully back online. We also do not believe that the CDK Incident resulted in a breach of any PII about our customers or employees. Our dealerships in the U.K. do not use CDK’s dealers’ systems and were therefore not impacted by the CDK service outage. As a consequence, we do not expect the CDK Incident to have a material impact on our overall financial condition or on its ongoing results of operations. However, if we, or any of our third-party services providers were to experience a material cybersecurity event, our business and results of operations and financial condition could be materially and adversely impacted.
A cybersecurity breach, including loss of confidential information or a breach of PII about our customers or employees, could negatively affect operations and result in high costs.
In the ordinary course of business, we receive significant PII about our customers and our employees. A cybersecurity attack to obtain such information could be caused by malicious insiders and third parties using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery, or other forms of deception. Although many companies across many industries are affected by malicious efforts to obtain access to PII, the automotive dealership industry and overall retail industry have been a particular target of identity thieves. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. We have implemented security measures that are designed to detect and protect againstcyberattacks, as well as policies governing the deletion of PII, to limit the information exposed to a potential cyberattack.
Despite these measures and any additional measures we may implement or adopt in the future, our facilities and systems, and those of our third-party service providers, have been and are vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, scams, ransomware, burglary, human errors, acts of vandalism, misdirected wire transfers or other events. If an unauthorized party is successful in obtaining trade secrets, PII, confidential, or otherwise protected information of our dealerships, our customers or our employees or in disrupting our operations through a cyberattack, the attack could result in loss of revenue, increase costs of doing business, negatively affect customer satisfaction and loyalty, and expose us to negative publicity. In addition, security breaches and other security incidents could expose us to a risk of loss or exposure of this information, which could result in potential liability, investigations, regulatory fines, penalties for violation of applicable laws or regulations, costs related to remediation or the payment of ransom, and litigation including individual claims or consumer class actions, administrative, civil or criminalinvestigations or actions, any of which could have a material adverse effect on our business, results of operations or financial condition.
Further, advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security or other developments may result in a compromise or breach of the technology we use to safeguard confidential, personal, or otherwise protected information. As the breadth and complexity of the technologies we use continue to grow, including as a result of the use of mobile devices, cloud services, open-source software, social media and the increased reliance on devices connected to the internet, the potential risk of security breaches and cybersecurity attacks also increases. Despite ongoing efforts to improve our ability to protect data from compromise, we may not be able to protect all of our data across our diverse systems and third-party vendors. Our efforts to improve security and protect data result in increased capital and operating costs.
In addition, we are subject to numerous laws and regulations designed to protect the information of clients, customers, employees and other third parties that we collect and maintain. See Item 1. Business — Governmental Regulations for information on our risks related to compliance with such laws and regulations.
Our insurance does not fully cover all of our operational risks, and changes in the cost of insurance or the availability of insurance could materially increase our insurance costs or result in a decrease in our insurance coverage.
The operation of automobile dealerships is subject to a broad variety of risks. While we have insurance on our real property, comprehensive coverage for our vehicle inventory, general liability insurance, workers’ compensation insurance, employee dishonesty coverage, cybersecurity breach insurance, employment practices liability insurance, pollution coverage and errors and omissions insurance in connection with vehicle sales and financing activities, we are self-insured for a portion of our potential liabilities. We purchase insurance policies for worker’s compensation, liability, auto physical damage, property, pollution, employee medical benefits and other risks consisting of large deductibles and/or self-insured retentions.
In certain instances, our insurance may not fully cover an insured loss depending on the magnitude and nature of the claim. Additionally, changes in the cost of insurance or the availability of insurance in the future could substantially increase our costs to maintain our current level of coverage or could cause us to reduce our insurance coverage and increase the portion of our risks that we self-insure.
The insurance companies that underwrite our insurance require that we secure certain of our obligations for self-insured exposures with collateral. Our collateral requirements are set by the insurance companies and, to date, have been satisfied by posting surety bonds, letters of credit and/or cash deposits. Our collateral requirements may change from time to time based on, among other things, our total insured exposure and the related self-insured retention assumed under the policies. We are subject to potential premium cost fluctuations with the annual renewal of these programs.
Natural disasters and adverse weather events can disrupt our business and may adversely impact our results of operations, financial condition and cash flows.
Some of our dealerships are concentrated in states and regions in the U.S. and U.K., in which actual or threatened natural disasters and severe weather events (such as hurricanes, earthquakes, snowstorms, flooding, tornados and hailstorms) have in the past, and may in the future, disrupt our dealership operations. A disruption in our operations can adversely impact our business, results of operations, financial condition and cash flows. In addition to business interruption, the automotive retailing business is subject to substantial risk of property loss due to the significant concentration of property value at dealership locations. Natural disasters and severe weather events have in the past, and may in the future, impair the value of our dealership property and other assets. Although we have, subject to certain limitations and exclusions, substantial insurance, including business interruption insurance, we may be exposed to uninsuredlosses that could have a material adverse effect on our business, results of operations and financial condition. Additionally, should we suffer significant losses in a short period of time, we run the risk that our premiums and/or deductibles could increase, which could adversely affect our business.
Risks associated with our international operations could have a material adverse effect on our business, results of operations and financial condition.
We have operations in the U.K. and as a result, we may face political and economic risks and uncertainties with respect to our international operations. These risks may include, but are not limited to:
• legal uncertainties, timing delays and expenses associated with tariffs, labor matters, import or export licenses and other trade barriers;
• transparency issues in general and, more specifically, the U.S. Foreign Corrupt Practices Act of 1974, as amended, the U.K. Bribery Act and other anti-corruption compliance laws and issues;
• inability to obtain or preserve franchise rights in the foreign countries in which we operate;
• fluctuations in foreign currency translations within our financial statements driven by exchange rate volatility; and
• infrastructure challenges associated with the U.K.’s transition to EVs.
We may fail to meet analyst and investor expectations, which could cause the price of our stock to decline.
Our common stock is traded publicly, and various securities analysts follow our financial results and frequently issue reports on the Company which include information about our historical financial results as well as their estimates of our future performance. These estimates are based on their own opinions and are often different from management’s estimates or expectations of our business. If our operating results are below the estimates or expectations of public market analysts and the expectations of our investors, our stock price could decline, adversely affecting, among other things, our access to capital and investor confidence in management and those charged with governance.
Legal, Regulatory and Compliance Risks
Regulatory requirements to reduce emissions in response to climate change, as well as changes in consumer demand towards fuel-efficient vehicles, and shifts in product offerings by manufacturers to meet such demand could adversely affect our new and used vehicle sales volumes, parts and service revenues and our results of operations.
Volatile fuel prices have affected and may continue to affect consumer preferences in connection with the purchase of our vehicles. Rising fuel prices result in consumers being less likely to purchase larger, more expensive vehicles, such as sports utility vehicles or luxury automobiles, and more likely to purchase smaller, less expensive and more fuel-efficient vehicles. Conversely, lower fuel prices could have the opposite effect. Sudden changes in customer preferences make maintenance of an optimal mix of large and small vehicle inventory a challenge. Further increases or sharp declines in fuel prices could have a material adverse effect on our business and results of operations.
Changes in fuel prices, changes in customer preferences, government support, improvements in EVs and more EV options have increased the customer demand for more fuel-efficient vehicles and EVs. Significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that have or may be imposed on vehicles and automobile fuels could adversely affect demand for certain vehicles, annual miles driven or the products we sell. However, vehicle fuel economy standards, and the ability of federal and state agencies to set fuel economy standards, have recently been subject to significant uncertainty. In August 2025, the EPA issued a proposed rule to rescind the “Endangerment Finding,” which underpins the majority of the EPA’s GHG regulations, and all GHG emission standards for light-duty, medium-duty, and heavy-duty vehicles and engines. We cannot predict whether such efforts will ultimately be successful. Moreover, in December 2025, NHTSA published a proposed rule to amend the fuel economy standards for light-duty vehicles for model years 2022 to 2031. The proposed rule rolls back future model year fuel economy targets, reduces annual increases and removes the consideration of the availability of alternative fuel technology, including EVs, from the fuel economy targets, though the substance and timing of the final rule is uncertain. However, any future standards that result in stricter fuel economy standards could significantly increase our costs of operation as well as reduce our volume of business. Representatives of the U.K. government have committed to a ban on the sale of new gasoline and diesel cars after 2030, with all new cars and vans required to be fully zero-emission by 2035, although proposals have since been made to rescind or dramatically scale back the ban. These and similar proposals may have a significant impact on the future mix of vehicles provided by our manufacturers. Any future impact of these regulations on our operations cannot be predicted with certainty.
With a potential increase in demand by consumers for EVs, and the former Biden administration’s support for such actions, certain manufacturers announced plans to increase production of fuel-efficient vehicles and EVs. As more EVs potentially enter the market, and internal combustion or diesel engine vehicle production is reduced, it will be necessary to adapt to such changes by selling and servicing these units effectively in order to meet consumer demands and support the profitability of our dealerships. We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to EV and other technologies that minimize emissions. If maintenance costs of EVs were to substantially decrease, this could have a material adverse effect on our parts and service revenues. If consumer demand increases for fuel efficient vehicles or EVs and our manufacturers are not able to adapt and produce vehicles that meet the customer demands or we are unable to align with the manufacturers of these vehicles, such events could adversely affect our new and used vehicle sales volumes, parts and service revenues and our results of operations. However, incentives for EVs have recently been subject to significant change and uncertainty. President Donald Trump issued a series of executive orders since taking office in January 2025, including an executive order eliminating the EV mandate and the OBBBA eliminates multiple credits previously made available for new and used EVs. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders and the OBBBA.
Additionally, in October 2023, the Governor of California signed the Climate Corporate Data Accountability Act (“CCDAA”) and Climate-Related Financial Risk Act (“CRFRA”) into law. The CCDAA requires both public and private U.S. companies that are “doing business in California” and that have a total annual revenue of $1 billion to publicly disclose and verify, on an annual basis, Scope 1, 2 and 3 GHG emissions, with reporting required on or before August 10, 2026. The CRFRA requires the disclosure of a climate-related financial risk report (in line with the Task Force on the Climate-related Financial Disclosures recommendations or equivalent disclosure requirements under the International Sustainability Standards Board’s climate-related disclosure standards) every other year for public and private companies that are “doing business in California” and have total annual revenue of $500 million. Reporting under both laws was to begin in 2026. However, both laws are currently subject to legal challenges and on November 18, 2025, the U.S. Court of Appeals for the Ninth Circuit enjoined the implementation of the CRFRA, leaving the deadline for the initial report under the CRFRA unclear. Although the outcome of the legal challenges are uncertain at this time, finalization and implementation may result in additional costs to comply with these disclosure requirements, as well as increased costs of and restrictions on access to capital for us or our customers.
Increased attention to sustainability matters may adversely impact our business, reputation and access to capital.
We face increased attention and evolving expectations from investors, regulators and other stakeholders regarding sustainability matters, including climate change, environmental and social impacts, and voluntary or mandatory climate disclosures. Increased demand for alternative forms of energy may increase costs, reduce demand for our products, and contribute to increased investigations and litigation, any of which could adversely our business. Increased attention to climate change and environmental conservation, for example, may result in demand shifts for our products and additional governmental investigations and private litigationagainst us. In some cases, liability or regulatory action may be pursued without regard to our causation of, or contribution to, the asserted harm. While we may participate in various sustainability frameworks and certification programs, we cannot guarantee that such participation or certification will achieve intended outcomes or improve perceptions of our products or business.
Voluntary sustainability disclosures may be based on expectations, assumptions or hypothetical scenarios that are uncertain, subject to change and difficult to verify over long time horizons. Such expectations, assumptions or hypothetical scenarios are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established approach to identifying, measuring, and reporting on many sustainability matters. Additionally, while we may also announce various voluntary sustainability targets, such targets are often aspirational and may be subject to change depending on changed circumstances, methodologies, business forecasts or other factors. We may not be able to meet or make progressagainst such targets in the manner or on such a timeline as initially contemplated, including, but not limited to as a result of unforeseen costs or technical difficulties associated with achieving such results. Despite these aspirational goals, we may receive pressure from investors, lenders, or other groups to adopt more aggressive climate or other sustainability-related goals, but we cannot guarantee that we will be able to pursue or implement such goals, in whole or in part, because of potential costs or technical or operational obstacles.
Certain public statements regarding sustainability matters are subject to increasing regulatory, litigation and political scrutiny, including allegations of “greenwashing” or challenges from so-called “anti-ESG” constituencies, which could result in investigations, enforcement actions, litigation or reputational harm. Additionally, certain employment or business practices and social initiatives are the subject of scrutiny by both those calling for the continued advancement of such policies, as well as those who believe they should be curbed, including government actors. The complex regulatory and legal frameworks applicable to such initiatives continue to evolve. As a result, we may face increased litigation risks from private parties and governmental authorities related to our sustainability efforts. Such sustainability-related matters may also impact our customers or suppliers, which may adversely impact our business, financial condition, or results of operations.
Changes to laws and regulations could adversely impact our operations and financial condition.
New laws and regulations at the state and federal level may be enacted which could materially adversely impact our business. For example, in December 2023, the FTC adopted new regulations for automotive dealers that would prohibit a wide range of current industry-accepted sales practices with regard to sales and advertising of our vehicles and products, require an extensive series of both oral and written disclosures to be made at the initial contact in regard to the sale price of vehicles, financial terms and voluntary protection products, mandate the posting of certain pricing and other information on dealer websites, and impose burdensome recordkeeping requirements. While the proposed rule has been vacated, California has adopted its version which captures some of the disclosure and transparency goals of the FTC. Our failure to adhere to these new rules or similar future regulations could subject the Company to significant monetary and other penalties or require us to make adjustments to our products and services, any or all of which could result in lost revenues, increased expenses and substantial adverse publicity. These changes, if adopted as proposed, may lead to longer transaction times for the sale of vehicles, complicate the transaction process, decrease customer satisfaction, and impose recordkeeping burdens on our employees, among other effects. If these regulations were to be enacted, it could have an adverse effect on our business and profitability. Future legislation and regulations and changes in existing legislation and regulations, or interpretations thereof, could cause additional expenditures, tax liabilities, restrictions and delays in connection with our current business as well as future projects, the extent of which cannot be predicted.
We are subject to automotive and other laws and regulations, which, if we are found to have violated, may adversely affect our business and results of operations.
A number of laws and regulations applicable to automotive companies affect our business and conduct, including, but not limited to, our sales, operations, financing, insurance, advertising and employment practices. Other rules such as franchise laws and regulations, consumer protection laws and other extensive laws and regulations apply to new and used motor vehicle dealers. Additionally, in every jurisdiction in which we operate, we must obtain various permits and licenses in order to conduct our business. Any failure to comply with these laws and regulations may result in administrative, civil or criminalpenalties, the imposition of investigatory remedial obligations or the limitations on certain aspects of our operations.
Refer to Item 1. Business — Governmental Regulations for further discussion of automotive and other laws and regulations impacting our business.
Operational risks associated with environmental, health, and safety laws and regulations may expose us to significant costs and liabilities.
Our business activities in the U.S. and U.K. are subject to stringent federal, state and local laws, regulations and other controls governing specific health and safety criteria to address worker protection, the release of materials into the environment or otherwise relating to environmental protection. These laws, regulations and controls may impose numerous obligations upon our operations including the acquisition of permits to conduct regulated activities, the imposition of restrictions on where or how to manage or dispose of used products and wastes, the occurrence of capital expenditures to limit or prevent releases of such material and the imposition of substantial liabilities for pollution resulting from our operations or attributable to former operations. Our compliance with these regulations may expose us to significant costs and liabilities.
With a potential increase in demand by consumers for EVs, we may incur costs and liabilities to sell and service EVs, including, but not limited to, personal protective equipment for employees, capital expenditures for specialized tools and equipment, service shop space and battery storage costs. However, incentives related to EVs have recently been subject to change and uncertainty. President Donald Trump issued a series of executive orders since taking office in January 2025, including executive orders eliminating the EV mandate and impacting environmental regulations, and the OBBBA eliminates multiple credits previously made available for new and used EVs. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders and the OBBBA.
Additionally, vehicle manufacturers in the U.S. and U.K. are subject to varying guidelines, laws and regulations adopted by their applicable governmental and administrative agencies, which include GHG emissions and CAFE standards in the U.S. Such standards may affect our manufacturers’ ability to produce cost effective vehicles, which may have a material adverse effect on our sales.
Refer to Item 1. Business — Governmental Regulations for further discussion of environmental regulations impacting our business.
Risks Related to Accounting Matters
The impairment of our goodwill and/or indefinite-lived intangibles could have a material adverse effect on our results of operations.
We assess goodwill and other indefinite-lived intangibles for impairment on an annual basis, or more frequently when events or circumstances indicate that an impairment may have occurred. Performance issues at individual dealerships, as well as adverse retail automotive industry and economic trends, increase the risk of an impairment charge, which could have a material adverse impact on ou r results of operations. During the year ended December 31, 2025, we recorded $93.0 million of goodwill impairments. No goodwill impairments were recorded during the years ended December 31, 2024 and 2023 . During the years ended December 31, 2025, 2024 and 2023, we recognized $91.1 million , $28.2 million and $25.1 million , respectively, of intangible franchise rights impairment. We may be required to record impairment charges if market and industry conditions deteriorate to such a level whereby the fair value of our reporting units, individually, is less than the carrying value of the corresponding reporting unit. We are subject to several market and industry risks as outlined elsewhere herein this Item 1A. Risk Factors, which could have a material adverse impact on our cash flows. We cannot accurately predict the amount and timing of any additional impairment charge at this time; however, any such impairment charge could have an adverse effect on our results of operations. Refer to Note 12. Intangible Franchise Rights and Goodwill within our Notes to Consolidated Financial Statements for further discussion of impairment.
New accounting guidance or changes in the interpretation or application of existing accounting guidance could adversely affect our financial performance.
The implementation of new SEC rules and regulations and accounting standards could require certain systems, internal processes and controls and other changes that could increase our operating costs, and result in changes to our financial statements.
U.S. GAAP and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business involve many subjective assumptions, estimates and judgments by our management. Changes in these rules or their interpretation or in underlying management assumptions, estimates or judgments could significantly change our reported or expected financial performance. The outcome of such changes could include litigation or regulatory actions which could adversely affect our financial condition and results of operations.
Our internal controls and procedures may fail or be circumvented.
Management has designed and implemented, and periodically reviews and updates, our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. While we have not experienced a material failure of our internal controls, any system of controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Any failure or circumvention of our controls and procedures, or failure to comply with regulations related to controls and procedures, could have a material adverse effect on our business, results of operations and financial condition.
delay
collision
negative
Recent Events
Changes in trade policy, tariffs and other governmental actions during the Current Year introduced additional uncertainty for the automotive industry. On November 4, 2025, President Donald Trump issued an executive order directing federal agencies to modify the U.S. tariff schedules for designated Chinese-origin goods under an existing bilateral arrangement. While we do not directly import vehicles or parts from China, tariff changes may affect OEM pricing for vehicles, components, and accessories sourced from Chinese suppliers. We are monitoring subsequent agency actions to evaluate any impact on vehicle and parts costs. Effective November 1, 2025, a proclamation under Section 232 imposed 25% tariffs on imported medium- and heavy-duty trucks and parts. It also granted a 3.75% production credit through 2030 for vehicles and engines assembled in the U.S. The measure is expected to affect vehicle costs, sourcing, and production decisions across the automotive industry, particularly for companies involved in the distribution and sale of medium- and heavy-duty vehicles. Separately, effective retroactive to August 7, 2025, an order implementing the U.S.–Japan Agreement generally set a 15% duty on automobiles and auto parts from Japan, adjusted for existing tariff rates, replacing higher additional duties previously applied to these products.
Effective June 23, 2025, the U.S.–U.K. Economic Prosperity Deal established an annual quota allowing 100,000 U.K.-made vehicles to enter the U.S. at a total 10% tariff, with imports above the quota subject to 25%. It also set a 10% total tariff on U.K.-origin parts for use in U.K.-made vehicles imported into the U.S. On March 26, 2025, a separate Section 232 action imposed a 25% tariff on imported automobiles and certain parts. Subsequent U.S. Department of Commerce procedures provided partial relief for United States-Mexico-Canada Agreement-qualifying vehicles and allowed manufacturers with U.S. assembly operations to apply for offsets on parts tariffs. Although a federal appeals court in August 2025 limited certain emergency tariff authorities, the Section 232 automobile tariffs remained in effect. Collectively, the effects of these executive orders, proclamations and related actions on our results of operations cannot be predicted at this time.
On December 10, 2025, the Federal Reserve lowered interest rates by 25 basis points in an effort to stimulate the labor market and economic activity, following earlier reductions in September and October. On December 18, 2025, the Bank of England lowered interest rates by 25 basis points, following earlier reductions in February, May, and August 2025. These interest rate cuts may improve vehicle affordability for consumers, however, the impact on our results of operations cannot be predicted with certainty at this time.
On October 10, 2025 and November 20, 2025, additional fires occurred at a major U.S. aluminum production facility, following an initial fire in September 2025. These incidents caused significant damage to the facility, and as a result, the timing of the plant’s return to full production capacity is uncertain. The facility supplies several OEMs, including Ford, Toyota and Jeep, and the disruption is anticipated to affect the production of certain aluminum-intensive vehicle models. Certain OEMs have indicated they are working with alternative aluminum suppliers to mitigate the impact of the fire. In response to these supply constraints, Ford temporarily suspended production of certain SUV models, and additional impacts to truck production may occur if aluminum shortagespersist. While the ultimate impact on our new vehicle supply remains uncertain, these disruptions could result in reduced vehicle availability, which may adversely affect our results of operations.
On September 2, 2025, Jaguar Land Rover (“JLR”) disclosed that it had experienced a significant cybersecurity incident that resulted in the temporary shutdown of certain production facilities and information technology systems. This disruption has led to delays in new vehicle deliveries, reduced availability of certain models and interruptions in certain parts supply. JLR accounted for approximately 3.6% of our total consolidated revenues during the Current Year. We cannot predict with certainty the expected total impact of the incident on our results of operations at this time and will continue to monitor developments closely.
In the U.K., the FCA is reviewing the historic use of discretionary commission arrangements in motor finance. On August 1, 2025, the Supreme Court of the United Kingdom issued its judgment in the Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd cases. The Supreme Court of the United Kingdom ruled that dealers do not generally owe fiduciary duties but confirmed that, in some cases, commission arrangements that were not properly disclosed to customers could be treated as creating an unfair relationship under the Consumer Credit Act. On August 3, 2025, the FCA announced it will consult in October 2025 on a possible industry-wide redress scheme for affected consumers. If adopted, the scheme could be finalized such that compensation payments may begin in 2026. The FCA also confirmed that firms will not be required to issue final responses to related customer complaints until after December 4, 2025. The outcomes of the FCA’s review, any redress scheme and related proceedings remain uncertain.
On July 4, 2025, H.R. 1, the OBBBA, was signed into law. For the automotive industry, the bill provides consumers with a tax deduction for the interest on loans for certain U.S.-assembled vehicles. The bill also eliminates federal EV tax credits for vehicles purchased or leased after September 30, 2025. Additionally, the OBBBA reinstates 100% bonus depreciation for qualified property placed in service after January 19, 2025. This provision allows for immediate expensing for income tax purposes of the full cost of eligible tangible assets, including certain machinery, equipment and building improvements. The impact of the OBBBA on our results of operations cannot be predicted with certainty at this time.
The U.K. government has established mandated targets for the sale of new zero emissions vehicles with increasing targets in future years. On April 6, 2025, the U.K. Prime Minister announced planned changes to the EV mandate, which aim to allow carmakers more flexibility in reaching their goal to phase out internal combustion engine vehicles. The plan increases flexibility of the mandate through 2030, allowing more EVs to be sold in later years as demand increases. Further, the plan allows for the continued sale of hybrid vehicles, which can be operated by both internal combustion and batteries, through 2035 to help ease the transition. As of July 16, 2025, U.K. car manufacturers can apply for Electric Car Grants, which will discount eligible new EVs for consumers at the point of sale. Certain manufacturers urged the U.K. government to provide additional flexibility in the mandate, citing consumer demand, infrastructure limitations and the cost of compliance as potential barriers to meet future targets. Further, as of December 2025, U.K. political leaders have issued proposals to rescind the ban on gasoline and diesel-powered vehicles.
Additionally, on June 12, 2025, President Donald Trump signed resolutions revoking California’s authority to enforce certain regulations it previously set forth, including Advanced Clean Cars II, which imposes stricter emissions limits for vehicles than the federal standards and requires nearly all new car sales to be zero-emission by 2035. California and ten other states set to implement Advanced Clean Cars II-like rules sued the EPA and President Donald Trump and are seeking to enjoin the resolutions. The legal challenges remain ongoing. The impact of these changes on our vehicle mix and results of operations cannot be predicted with certainty at this time. Further, on August 1, 2025, the EPA issued a proposed rule to rescind the “Endangerment Finding,” which underpins the majority of the EPA’s GHG regulations, and all GHG emission standards for light-duty, medium-duty, and heavy-duty vehicles and engines. We cannot predict whether such efforts will ultimately be successful.
While the possibility exists for delays, reductions, or exemptions of the automotive and reciprocal tariffs, the potential impacts of the tariffs described above, as well as the reaction of the OEMs to such tariffs, remain uncertain and could significantly increase the price of our products as well as the future mix and demand for vehicles provided by our manufacturers. Additionally, reciprocal tariffs, tariffs on steel, aluminum, copper and other materials, and the elevated tariffs against China and other countries could negatively impact the global economy, demand for our products and our manufacturers’ global supply chains. Our manufacturers’ supply chain dependencies and production facility locations vary by OEM, and as a result, certain manufacturers, vehicle models, vehicle model variations and parts could be affected more significantly by the imposition of tariffs than others. We will continue to monitor the impact of the Trump Administration’s policies and the response of U.S. trading partners on our results of operations in future periods.
Critical Accounting Estimates
The preparation of our financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. Below are the accounting policies and estimates that have been determined to be critical to our business operations and the understanding of our results of operations.
Goodwill and Intangible Franchise Rights
We are organized into two geographic segments, the U.S. segment and the U.K. segment. Each segment represents a reporting unit for the purpose of assessing goodwill for impairment. In addition to goodwill, we have identifiable intangibles in the form of rights under our franchise agreements with manufacturers, which are recorded at an individual dealership level.
We evaluate goodwill and intangible franchise rights for impairment annually as of October 31, or more frequently if events or circumstances indicate possible impairment has occurred. We have the option of performing a qualitative assessment of impairment to determine whether any further quantitative assessment for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually and may vary by reporting unit. If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required.
During the Current Year, we recorded a goodwill impairment charge of $93.0 million based on a triggering event during the three months ended September 30, 2025 primarily related to the challenging U.K. economy, impacting our financial performance. For our October 31, 2025 annual goodwill impairment test, we elected to perform a quantitative test on the U.K. reporting unit and a qualitative test on the U.S. reporting unit. Based on the tests performed for the U.S. and U.K. reporting units in the fourth quarter of 2025, no further impairments of goodwill were recorded during the Current Year. No goodwill impairments were recorded on any reporting units during the Prior Year. T he quantitative goodwill impairment test is dependent on management estimates and assumptions used to determine the fair value of our reporting units. Refer to Note 12. Intangible Franchise Rights and Goodwill within our Notes to Consolidated Financial Statements for further discussion of goodwill, including management’s use of estimates and assumptions.
During the Current Year, non-cash impairment charges of $91.1 million were recorded for intangible franchise rights. In the Prior Year, impairment charges of $28.2 million were recorded for intangible franchise rights. As our intangible franchise rights are tested for impairment at the dealership level, any impairments are specific to the performance and outlook of the respective dealership.
We will continue to monitor the challenging macroeconomic and industry conditions in the U.K. Further erosion in the macroeconomic environment, additional margin compression, or increases to our operating costs in the U.K. may require us to re-assess the value of our goodwill and intangible franchise rights associated with our U.K. reporting unit, which could result in additional material impairment charges in future periods.
Refer to Note 12. Intangible Franchise Rights and Goodwill within our Notes to Consolidated Financial Statements for further discussion of our intangibles, including fair value assumptions.
Results of Operations
The “same store” amounts presented below include the results of dealerships and corporate headquarters for the identical months in each comparative period, commencing with the first full month in which we owned the dealership. Amounts related to divestitures are excluded from each comparative period, ending with the last full month in which we owned the dealership. Same store results provide a measurement of our ability to grow revenues and profitability of our existing stores and also provide a metric for peer group comparisons. For these reasons, same store results allow management to accurately manage and monitor the underlying performance of the business and is also useful to investors.
We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. Our primary foreign currency exposure is to the GBP. We believe providing constant currency information provides valuable supplemental information regarding our underlying business and results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period reported results for entities reporting in currencies other than USD using comparative period exchange rates rather than the actual exchange rates in effect during the respective periods. The constant currency performance measures should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP. Additionally, we caution investors not to place undue reliance on non-GAAP measures, but also to consider them with the most directly comparable U.S. GAAP measures. Our management also uses constant currency and adjusted cash flows from operating, investing and financing activities in conjunction with U.S. GAAP financial measures to assess our business, including communication with our Board of Directors, investors and industry analysts concerning financial performance. We disclose these non-GAAP measures and the related reconciliations because we believe investors use these metrics in evaluating longer-term period-over-period performance. These metrics also allow investors to better understand and evaluate the information used by management to assess operating performance.
Certain amounts in the financial statements may not compute due to rounding. All computations have been calculated using unrounded amounts for all periods presented.
Retail new and used vehicle units sold include new and used vehicle agency units sold under agency arrangements with certain manufacturers in the U.K. The agency units and related revenues are excluded from the calculation of the average sales price per unit sold for new and used vehicles due to their net presentation within revenues as only the sales commission is reported in revenues for dealerships operating under an agency arrangement. The agency units and related net revenues are included in the calculation of gross profit per unit sold.
The following tables summarize our operating results on a reported basis and on a same store basis for the Current Year, as compared to the Prior Year.
Reported Operating Data — Consolidated
(In millions, except unit data)
For the Years Ended December 31,
Increase/ (Decrease)
% Change
Currency Impact on Current Period Results
Constant Currency % Change
Revenues:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total revenues
Gross profit:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total gross profit
Gross margin:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
Total gross margin
Units sold:
Retail new vehicles sold
Retail used vehicles sold
Wholesale used vehicles sold
Total used
Average sales price per unit sold:
New vehicle retail
Used vehicle retail
Gross profit per unit sold:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
F&I PRU
Other:
SG&A expenses
SG&A as % gross profit
Floorplan expense:
Floorplan interest expense
Less: floorplan assistance (1)
Net floorplan expense
(1) Floorplan assistance is included within Gross profit — New vehicle retail sales above and Cost of sales — New vehicle retail sales in our Consolidated Statements of Operations.
Same Store Operating Data — Consolidated
(In millions, except unit data)
For the Years Ended December 31,
Increase/ (Decrease)
% Change
Currency Impact on Current Period Results
Constant Currency % Change
Revenues:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total revenues
Gross profit:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total gross profit
Gross margin:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
Total gross margin
Units sold:
Retail new vehicles sold
Retail used vehicles sold
Wholesale used vehicles sold
Total used
Average sales price per unit sold:
New vehicle retail
Used vehicle retail
Gross profit per unit sold:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
F&I PRU
Other:
SG&A expenses
SG&A as % gross profit
NM — Not Meaningful
Reported Operating Data — U.S.
(In millions, except unit data)
For the Years Ended December 31,
Increase/(Decrease)
% Change
Revenues:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total revenues
Gross profit:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total gross profit
Gross margin:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
Total gross margin
Units sold:
Retail new vehicles sold
Retail used vehicles sold
Wholesale used vehicles sold
Total used
Average sales price per unit sold:
New vehicle retail
Used vehicle retail
Gross profit per unit sold:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
F&I PRU
Other:
SG&A expenses
SG&A as % gross profit
Same Store Operating Data — U.S.
(In millions, except unit data)
For the Years Ended December 31,
Increase/(Decrease)
% Change
Revenues:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total revenues
Gross profit:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total gross profit
Gross margin:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
Total gross margin
Units sold:
Retail new vehicles sold
Retail used vehicles sold
Wholesale used vehicles sold
Total used
Average sales price per unit sold:
New vehicle retail
Used vehicle retail
Gross profit per unit sold:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
F&I PRU
Other:
SG&A expenses
SG&A as % gross profit
U.S. Segment — Year Ended December 31, 2025 compared to 2024
Revenues
Total revenues in the U.S. during the Current Year increased $853.9 million, or 5.4%, as compared to the same period in the Prior Year, driven by higher same store revenues and the acquisition of stores.
Total same store revenues in the U.S. during the Current Year increased $714.9 million, or 4.6%, as compared to the Prior Year, driven by higher revenues across all business lines.
New vehicle retail same store revenues outperformed the Prior Year, driven by more units sold, coupled with higher pricing. This outperformance reflects the resiliency of demand. We ended the Current Year with a U.S. new vehicle inventory supply of 44 days, one day higher than the Prior Year.
Used vehicle retail same store revenues outperformed the Prior Year, driven by higher pricing, coupled with more units sold. This outperformance reflects the resiliency of demand and supply dynamics of the used vehicle market caused by Prior Year’s vehicle inventory shortages. We ended the Current Year with a U.S. used vehicle inventory supply of 29 days, consistent with the Prior Year. Used vehicle wholesale same store revenues outperformed the Prior Year, driven by more units sold, coupled with higher pricing.
Parts and service same store revenues outperformed the Prior Year, driven by increases in customer pay, warranty and wholesale revenues, partially offset by a decrease in collision revenues. Customer pay repair order count and dollars per repair order increased compared to the Prior Year. We are strategically reducing our collision footprint and repurposing a portion of that space to traditional service capacity, which we expect to increase returns from the higher margin service business. In addition, we continue to invest in our aftersales capacity by expanding existing dealership facilities or when we undertake new construction of dealerships. Same store technician headcount increased through our continued technician recruiting and retention efforts, providing greater capacity to meet increased demand.
F&I same store revenues outperformed the Prior Year, primarily driven by improved penetration rates across most product offerings, coupled with higher same store new and used vehicle units sold and improved income per contract from financing, vehicle service contracts (“VSC”), hazard and dent product offerings. In addition, we have made investments in virtual finance operations, which are contributing to improved product penetration.
Gross Profit
Total gross profit in the U.S. during the Current Year increased $129.0 million, or 4.8%, as compared to the Prior Year, driven by higher same store gross profit and the acquisition of stores.
Total same store gross profit in the U.S. during the Current Year increased $105.7 million, or 4.0%, as compared to the Prior Year, driven by increases in parts and service, F&I and used vehicle wholesale, partially offset by decreases in new and used vehicle retail gross profit.
New vehicle retail same store gross profit underperformed the Prior Year, driven by a decrease in new vehicle retail same store gross profit per unit sold, partially offset by an increase in units sold. Gross profit per unit sold continues to moderate towards pre-COVID levels, facing pressure from affordability concerns of consumers due to rising costs of vehicles from OEMs and relatively high consumer interest rates.
Used vehicle retail same store gross profit underperformed the Prior Year, primarily driven by lower same store gross profit per unit sold, partially offset by higher same store used vehicle retail units sold. Gross profit per unit sold continues to face pressure from affordability concerns of consumers due to rising vehicle acquisition costs and relatively high consumer interest rates. Used vehicle wholesale same store gross profit outperformed the Prior Year, driven by an increase in same store gross profit per unit sold, coupled with an increase in same store units sold.
Parts and service same store gross profit outperformed the Prior Year, driven by increases in customer pay and warranty gross profit, partially offset by decreases in wholesale and collision gross profit. This reflects both the benefit of the strategic decision regarding our collision footprint as described above, and our focus on shop efficiency.
F&I same store gross profit outperformed the Prior Year, as described above for F&I same store revenues.
Total same store gross margin in the U.S. remained flat for the Current Year as compared to the Prior Year.
SG&A Expenses
SG&A as a percentage of gross profit increased 278 basis points and increased 182 basis points on an as reported and same store basis, respectively, compared to the Prior Year.
Total SG&A expenses in the U.S. during the Current Year increased $160.1 million, or 9.4%, as compared to the Prior Year. Total same store SG&A expenses in the U.S. during the Current Year increased $118.3 million or 6.9% as compared to the Prior Year, primarily driven by increased employee related costs, third-party services, unfavorable legal settlements and higher facility related expenses.
Reported Operating Data — U.K.
(In millions, except unit data)
For the Years Ended December 31,
Increase/ (Decrease)
% Change
Currency Impact on Current Period Results
Constant Currency % Change
Revenues:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total revenues
Gross profit:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total gross profit
Gross margin:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
Total gross margin
Units sold:
Retail new vehicles sold
Retail used vehicles sold
Wholesale used vehicles sold
Total used
Average sales price per unit sold:
New vehicle retail
Used vehicle retail
Gross profit per unit sold:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
F&I PRU
Other:
SG&A expenses
SG&A as % gross profit
Same Store Operating Data — U.K.
(In millions, except unit data)
For the Years Ended December 31,
Increase/ (Decrease)
% Change
Currency Impact on Current Period Results
Constant Currency % Change
Revenues:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total revenues
Gross profit:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
F&I, net
Total gross profit
Gross margin:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
Parts and service sales
Total gross margin
Units sold:
Retail new vehicles sold
Retail used vehicles sold
Wholesale used vehicles sold
Total used
Average sales price per unit sold:
New vehicle retail
Used vehicle retail
Gross profit per unit sold:
New vehicle retail sales
Used vehicle retail sales
Used vehicle wholesale sales
Total used
F&I PRU
Other:
SG&A expenses
SG&A as % gross profit
U.K. Segment — Year Ended December 31, 2025 compared to 2024
Retail new and used vehicle units sold include new and used vehicle agency units. The agency units and related revenues are excluded from the calculation of the average sales price per unit sold for new vehicles as only the sales commission is reported within revenues. The agency units and related net revenues are included in the calculation of gross profit per unit sold. The GBP to USD foreign currency exchange rate has fluctuated from £1 to $1.254 at December 31, 2024, to £1 to $1.346 at December 31, 2025, or an increase in the value of the GBP of 7.3%.
Revenues
Total revenues in the U.K. during the Current Year increased $1.8 billion, or 42.8%, as compared to the Prior Year, primarily driven by the acquisition of stores.
Total same store revenues in the U.K. during the Current Year increased $181.0 million, or 4.5%, as compared to the Prior Year, driven by outperformances across all lines of business except new vehicle retail. On a constant currency basis, same store revenues increased 1.3%, driven by outperformances across all lines of business except new vehicle retail.
New vehicle retail same store revenues, on a constant currency basis, underperformed the Prior Year, driven by fewer units sold, partially offset by higher pricing. The underperformance reflects the challenges within the broader U.K. new car market, from EV mandates and new vehicle market entrants. We ended the Current Year with a U.K. new vehicle inventory supply of 52 days, seven days higher than the Prior Year.
Used vehicle retail same store revenues, on a constant currency basis, outperformed the Prior Year, driven by more units sold and higher prices. We ended the Current Year with a U.K. used vehicle inventory supply of 55 days, 12 days lower than the Prior Year. Used vehicle wholesale same store revenues, on a constant currency basis, outperformed the Prior Year, primarily driven by an increase in wholesale used vehicle units sold.
Parts and service same store revenues, on a constant currency basis, outperformed the Prior Year, driven by an increase in customer pay and wholesale revenues, partially offset by a decrease in warranty revenues. We have invested in improvements to our U.K. customer contact center, streamlining operations to make scheduling appointments easier for customers, resulting in an increase in customer pay parts and service activity driving an increase in revenues as compared to the Prior Year.
F&I, net same store revenues, on a constant currency basis, outperformed the Prior Year, driven by higher income per contract from our retail finance fees, improved penetration rates on finance and VSC fees and higher used vehicle retail unit sales.
Gross Profit
Total gross profit in the U.K. during the Current Year increased $251.8 million, or 45.0%, as compared to the Prior Year, primarily driven by the acquisition of stores, changes in foreign currency exchange rates and improved same store performance.
Total same store gross profit in the U.K. during the Current Year increased $25.6 million, or 4.7%, as compared to the Prior Year. On a constant currency basis, total same store gross profit increased 1.6%, driven by increases in parts and service, F&I and used vehicle wholesale, partially offset by downward pressure on new and used vehicle retail margins.
New vehicle retail same store gross profit, on a constant currency basis, underperformed the Prior Year, primarily driven by general economic headwinds within the U.K. market, coupled with short-term supply challenges due to a cyberattackagainst an OEM partner during the second half of the Current Year.
Used vehicle retail same store gross profit, on a constant currency basis, underperformed the Prior Year, primarily due to macroeconomic factors as the U.K. economy continues to face challenges, including persistent inflation, elevated interest rates, rising energy costs and a slowdown in consumer spending.
Parts and service same store gross profit, on a constant currency basis, outperformed the Prior Year, driven by increases in parts and service same store revenues, as discussed above.
F&I same store gross profit, on a constant currency basis, outperformed the Prior Year, as described above in F&I same store revenues.
Total same store gross margin in the U.K. remained flat for the Current Year as compared to the Prior Year.
SG&A Expenses
SG&A as a percentage of gross pr ofit decreased 92 basis points on an as reported basis and increased 12 basis points on a same store basis, respectively, compared to the Prior Year.
Total SG&A expenses in the U.K. during the Current Year increased $206.2 million, or 43.4%, as c ompared to the Prior Year. Total same store SG&A expenses in the U.K. during the Current Year increased $22.1 million, or 4.9%, as compared to the Prior Year partially due to changes in foreign currency exchange rates. On a constant currency basis, total same store SG&A expenses increased 1.7%. These increases on a total same store basis were primarily driven by higher employee related costs, vehicle delivery and facility costs, offset by lower professional and legal fees, compared to the Prior Year.
Consolidated Selected Comparisons — Year Ended December 31, 2025 compared to 2024
The following table (in millions) and discussion of our results of operations are on a consolidated basis, unless otherwise noted.
For the Years Ended December 31,
Increase/ (Decrease)
% Change
Depreciation and amortization expense
Asset impairments
Restructuring charges
Floorplan interest expense
Other interest expense, net
Provision for income taxes
Depreciation and Amortization Expense
Depreciation and amortization expense for the Current Year was higher compared to the Prior Year, primarily driven by acquired property and equipment in our U.S. and U.K. segments, as we continue to strategically add dealership related real estate and facilities to our investment portfolio and make improvements to our existing facilities intended to enhance the profitability of our dealerships and improve the overall customer experience.
Impairment of Assets
During the Current Year, we recorded goodwill impairments of $93.0 million, compared to none in the Prior Year. During the Current Year, we recorded total impairments of intangible franchise rights of $91.1 million, consisting of $27.8 million in the U.K. segment , excluding impairments associated with restructuring charges, and $63.3 million in the U.S. segment. During the Prior Year, we recorded impairments of intangible franchise rights of $28.2 million, all of which were recorded in the U.S. segment.
We review long-lived assets including property and equipment for impairment at the lowest level of identifiable cash flows whenever triggering events suggest the carrying value of these assets may not be recoverable. During the Current Year, we recorded fixed asset impairments of $3.6 million in the U.S. segment and $7.4 million in the U.K. segment . During the Prior Year, no fixed asset impairments were recorded.
For previously impaired assets held for sale, we recognized a gain of $2.3 million during the Current Year, compared to an additional asset impairment of $4.8 million in the Prior Year.
Refer to Note 12. Intangible Franchise Rights and Goodwill and Note 10. Property and Equipment, Net within our Notes to Consolidated Financial Statements for further discussion of our assessment for impairments.
Restructuring Charges
During the Current Year, we recognized $ 28.4 million of restructuring charges, compared to $ 16.7 million in the Prior Year. Restructuring charges primarily consist of planned workforce realignment, strategic closing of certain facilities and systems integrations, among other efforts to increase operational efficiency and profitability related to the integration of Inchcape Retail with its existing U.K. operations. The Company anticipates implementing further restructuring plans in the U.K. in future periods to further optimize our operations and reduce costs.
Refer to Note 4. Restructuring within our Notes to Consolidated Financial Statements for further discussion of our restructuring plans.
Floorplan Interest Expense
Our floorplan interest expense fluctuates with changes in our outstanding borrowings and associated interest rates, which are based on SOFR, the U.S. prime rate or other benchmark rates. Outstanding borrowings largely fluctuate based on our levels of new and used vehicle inventory. To mitigate the impact of interest rate fluctuations, we employ an interest rate hedging strategy, whereby we swap variable interest rate exposure on a portion of our borrowings for a fixed interest rate.
For the Current Year, floorplan interest expense decreased $7.0 million, or 6.5%, as compared to the Prior Year, driven primarily by decreased floorplan interest rates compared to the Prior Year.
Refer to Note 7 . Financial Instruments and Fair Value Measurements within our Notes to Consolidated Financial Statements for additional discussion of interest rate swaps.
Other Interest Expense, Net
Other interest expense, net consists of interest charges primarily on our 4.00% Senior Notes, 6.375% Senior Notes, real estate related debt and other debt, partially offset by interest income.
For the Current Year, other interest expense, net, increased $41.5 million, or 29.4%, as compared to the Prior Year. The increase in other interest expense, net during the Current Year was primarily attributable to the full year of interest expense on the 6.375% Senior Notes issued in 2024, as w ell as interest expense attributable to the Acquisition Line and other debt. Refer to Note 14. Debt within our Notes to Consolidated Financial Statements for additional discussion of our debt.
Provision for Income Taxes
Provision for income taxes from continuing operations during the Current Year decreased $35.3 million, or 21.9%, as compared to the Prior Year. During the Current Year and Prior Year, we recorded a tax provision from continuing operations of $126.2 million and $161.5 million, respectively. The year-over-year tax expense decrease was primarily due to lower pre-tax book income.
The 2025 effective tax rate o f 28.0% was higher than the 2024 effective tax rate of 24.5%. The tax rate increase was primarily due to the book impairment of goodwill in the U.K. reporting unit that is not deductible for income tax purposes in the Current Year.
We believe that it is more-likely-than-not that our deferred tax assets, net of valuation allowances provided, will be realized, based primarily on assumptions of our future taxable income, considering future reversals of existing taxable temporary differences.
For further discussion, please refer to Note 15. Income Taxes within our Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
Our liquidity and capital resources are primarily derived from cash on hand, cash temporarily invested as a pay down of our U.S. Floorplan Line and FMCC Facility levels (refer to Note 13. Floorplan Notes Payable within our Notes to Consolidated Financial Statements for additional information), cash from operations, borrowings under our credit facilities, working capital, dealership and real estate acquisition financing and proceeds from debt and equity offerings. We anticipate we will generate sufficient cash flows from operations, coupled with cash on hand and available borrowing capacity under our credit facilities, to fund our working capital requirements, service our debt and meet any other recurring operating expenditures.
Available Liquidity Resources
We had the following sources of liquidity available (in millions):
December 31, 2025
Cash and cash equivalents
Floorplan offset accounts
Available capacity under Acquisition Line
Total liquidity
Cash Flows
We arrange our new and used vehicle inventory floorplan financing through lenders affiliated with our vehicle manufacturers and our Revolving Credit Facility. In accordance with U.S. GAAP, we report floorplan financed with lenders affiliated with our vehicle manufacturers (excluding the cash flows from or to manufacturer-affiliated lenders participating in our syndicated lending group) within Cash Flows from Operating Activities in the Consolidated Statements of Cash Flows. We report floorplan financed with the Revolving Credit Facility (including the cash flows from or to manufacturer-affiliated lenders participating in the facility) and other credit facilities in the U.K. unaffiliated with our manufacturer partners, within Cash Flows from Financing Activities in the Consolidated Statements of Cash Flows. Refer to Note 13. Floorplan Notes Payable within our Notes to Consolidated Financial Statements for additional discussion of our Revolving Credit Facility.
However, we believe that all floorplan financing of inventory purchases in the normal course of business should correspond with the related inventory activity and be classified as an operating activity. As a result, we use the non-GAAP measure “Adjusted net cash provided by/used in operating activities” and “Adjusted net cash provided by/used in financing activities” to further evaluate our cash flows. We believe that this classification eliminates excess volatility in our operating cash flows prepared in accordance with U.S. GAAP. In addition, floorplan financing associated with dealership acquisitions and dispositions are classified as investing activities on an adjusted basis to eliminate excess volatility in our operating cash flows prepared in accordance with U.S. GAAP.
The following table reconciles cash flows on a U.S. GAAP basis to the corresponding adjusted amounts (in millions):
Years Ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities:
Change in Floorplan notes payable — credit facility and other, excluding floorplan offset and net acquisitions and dispositions
Change in Floorplan notes payable — manufacturer affiliates associated with net acquisitions and dispositions and floorplan offset activity
Adjusted net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities:
Change in cash paid for acquisitions, associated with Floorplan notes payable
Change in proceeds from disposition of franchises, property and equipment, associated with Floorplan notes payable
Adjusted net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash (used in) provided by financing activities:
Change in Floorplan notes payable, excluding floorplan offset
Adjusted net cash (used in) provided by financing activities
Sources and Uses of Liquidity from Operating Activities — Year Ended December 31, 2025 compared to 2024
For the Current Year, net cash provided by operating activities increased by $108.2 million as compared to the Prior Year. On an adjusted basis for the same period, adjusted net cash provided by operating activities increased by $16.2 million. The increase on an adjusted basis was primarily driven by a $206.7 million decrease in inventories and a $164.8 million increase in asset impairment charges, partially offset by a $173.0 million decrease in net income, a $162.0 million decrease in floorplan notes payable – manufacturer affiliates, and a $117.9 million decrease in accounts payable and accrued expenses.
Sources and Uses of Liquidity from Investing Activities — Year Ended December 31, 2025 compared to 2024
For the Current Year, net cash used in investing activities decreased by $611.3 million, as compared to the Prior Year. On an adjusted basis for the same period, adjusted net cash used in investing activities decreased by $616.5 million, primarily due to a $731.0 million decrease in acquisition activity, partially offset by a $79.9 million decrease in proceeds from disposition of franchises and property and equipment and a $24.9 million increase in purchases of property and equipment, including real estate.
Capital Expenditures
Our capital expenditures include costs to extend the useful lives of current dealership facilities, improve the customer experience, as well as to start or expand operations. In general, expenditures relating to the construction or expansion of dealership facilities are driven by dealership acquisition activity, new franchises being granted to us by a manufacturer, significant growth in sales at an existing facility, relocation opportunities or manufacturer imaging programs. We critically evaluate all planned future capital spending, working closely with our manufacturer partners to maximize the return on our investments.
For the Current Year, $270.0 million was used to purchase property and equipment.
Sources and Uses of Liquidity from Financing Activities — Year Ended December 31, 2025 compared to 2024
For the Current Year, net cash used in financing activities increased by $712.2 million, as compared to the Prior Year. On an adjusted basis for the same period, adjusted net cash used in financing activities increased by $625.4 million. The increase in net cash used in financing activities on an adjusted basis was primarily driven by a $654.3 million increase in net repayments of other debt, including real estate-related debt, the issuance of $500 million of 6.375% Senior Notes in the Prior Year, an increase in share repurchases of $393.2 million, and an increase in net repayments on our U.S. Floorplan line of $203.0 million (representing the net cash activity in our floorplan offset account). This was partially offset by a $1.1 billion increase in net borrowings on the Acquisition Line.
Credit Facilities, Debt Instruments and Other Financing Arrangements
Our various credit facilities, debt instruments and other financing arrangements are used to finance the purchase of inventory and real estate, provide acquisition funding and provide working capital for general corporate purposes.
The following table summarizes the commitment of our credit facilities as of December 31, 2025 (in millions):
As of December 31, 2025
Total
Commitment
Outstanding
Available
U.S. Floorplan Line (1)
Acquisition Line (2)
Total Revolving Credit Facility
FMCC facility (3)
GM Financial Facility (4)
Total U.S. credit facilities (5)
(1) The available balance at December 31, 2025, includes $504.2 million of immediately available funds. The remaining available balance can be used for vehicle inventory financing.
(2) The outstanding balance of $975.8 million is related to outstanding letters of credit of $11.8 million and $964.0 million in USD borrowings. The available borrowings may be limited from time to time, based on certain debt covenant calculations, and as a result, the outstanding balance plus available borrowings may not equal the total commitment.
(3) The available balance as of December 31, 2025, includes no immediately available funds. The remaining available balance can be used for Ford new vehicle inventory financing.
(4) The remaining available balance as of December 31, 2025, includes no immediately available funds. The remaining available balance can be used for General Motors new and loaner vehicle inventory financing.
(5) The outstanding balance excludes $641.5 million of borrowings with manufacturer-affiliates and third-party financial institutions for foreign and loaner vehicle financing not associate d with any of our U.S. credit facilities.
We have other credit facilities in the U.S. and the U.K. with third-party financial institutions, most of which are affiliated with the automobile manufacturers that provide financing for portions of our new, used and loaner vehicle inventories. In addition, we have outstanding debt instruments, including our 4.00% and 6.375% Senior Notes, as well as real estate related and other debt instruments. Refer to Note 14. Debt within our Notes to Consolidated Financial Statements for further information.
Covenants
Our Revolving Credit Facility, indentures governing our 4.00% and 6.375% Senior Notes and certain mortgage term loans contain customary financial and operating covenants that place restrictions on us, including our ability to incur additional indebtedness, create liens or to sell or otherwise dispose of assets and merge or consolidate with other entities. Certain of our mortgage agreements contain cross-default provisions that, in the event of a default of certain mortgage agreements and of our Revolving Credit Facility, could trigger an uncured default.
As of December 31, 2025, we were in compliance with the requirements of the financial covenants under our debt agreements. We are required to maintain the ratios detailed in the following table:
As of December 31, 2025
Required
Actual
Total adjusted leverage ratio
Fixed charge coverage ratio
Based on our position as of December 31, 2025, and our outlook as discussed within Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations to this Form 10-K, we believe we have sufficient liquidity and do not anticipate any material liquidity constraints or issues with our ability to remain in compliance with our debt covenants.
Refer to Note 13. Floorplan Notes Payable and Note 14. Debt within our Notes to Consolidated Financial Statements for further discussion of our debt instruments, credit facilities and other financing arrangements existing as of December 31, 2025.
Share Repurchases and Dividends
From time to time, our Board of Directors authorizes the repurchase of shares of our common stock up to a certain monetary limit and at a prescribed cost limit per share. On November 11 , 2025 , our Board of Directors increased the share repurchase authorization to $500.0 million. For the Current Year, 1,343,229 shares were repurchased, at an average price of $413.05 per share, for a total of $554.8 million, excluding excise taxes of $4.9 million. As of December 31, 2025, we had $378.7 million available under our current share repurchase authorization.
During the Current Year, our Board of Directors approved quarterly cash dividends per share on all shares of our common stock totaling $2.00 per share, which resulted in $25.3 million paid to common shareholders and $0.3 million to unvested RSA holders.
Future share repurchases and the payment of any future dividends are subject to the business judgment of our Board of Directors, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements, covenant compliance, changes in laws and regulations, current economic environment and other factors considered relevant.
