Asbury Automotive Group(US:ABG)2021-04-27 23:46Financial Data and Key Metrics Changes - The company reported record adjusted EPS of $4.68, up 160% year-over-year [9] - Total revenue for the quarter increased by 36% year-over-year, while total gross profit rose by 40% [10] - Adjusted net income increased by 161% to $90.7 million, with adjusted EPS up 160% compared to the prior year [19] - SG&A as a percentage of gross profit improved by 880 basis points to 62.7% [9][18] Business Line Data and Key Metrics Changes - New unit sales increased by 24%, and used unit sales rose by 16%, with margin expansion in both segments [10] - Average gross profit per new vehicle was up $640, or 39% from the prior year [12] - Used vehicle gross margin was 8.1%, up 100 basis points from the prior period, representing an average gross profit per vehicle of $1,943 [13] Market Data and Key Metrics Changes - Total new vehicle inventory was $527 million, with days supply at an all-time low of 34 days, down 71 days from the prior year [13] - Parts and service revenue increased by 18% year-over-year, indicating a recovery as drivers returned to the road [10][14] Company Strategy and Development Direction - The company is focused on a five-year plan while maintaining a disciplined approach to capital allocation and acquisitions [11][22] - The launch of Clicklane, a complete online car buying and selling platform, is a key part of the company's omnichannel strategy [15][16] - The company aims to maintain a strong acquisition pipeline while being disciplined in its approach to potential deals [11][41] Management's Comments on Operating Environment and Future Outlook - Management noted that inventory levels are expected to remain low, but they anticipate receiving more inventory in May compared to April [26][37] - The company is optimistic about the growth potential in parts and service as the economy opens up [22] - Management expressed confidence in maintaining margins despite supply chain challenges [26][37] Other Important Information - The company experienced an estimated $5 million gross profit impact due to store closures from a winter storm [55] - The effective tax rate for Q1 2021 was 22.3%, compared to 19.1% in 2020 [20] Q&A Session Summary Question: Expectations on inventory tightness and maintaining GPUs and SG&A expense ratio - Management acknowledged the fluid situation regarding inventory and expressed confidence in maintaining margins while anticipating more inventory in May [26] Question: Impact of semiconductor shortage on different brands - Management indicated that all brands are affected, but domestic brands are more impacted than others [28] Question: Proportion of used vehicles sourced internally versus auctions - Over 50% of used vehicles are sourced from trades, with auction prices at an all-time high and availability scarce [30] Question: Differential in customer pay and warranty service revenue - Management explained that warranty service revenue is down due to recalls and other factors, while customer pay service is recovering strongly [32] Question: Performance of Clicklane and its impact on sales - Management noted that Clicklane has contributed to incremental sales and is seeing strong metrics, including higher credit scores and down payments [44][75] Question: Future advertising and investments for Clicklane - Management plans to allocate several million dollars for marketing Clicklane and will test the product in new markets [79][81] Question: Acquisition strategy and market opportunities - Management emphasized a disciplined approach to acquisitions, focusing on long-term value rather than short-term revenue [41][70]