Asbury Automotive Group(US:ABG)2024-02-08 21:10Financial Data and Key Metrics Changes - For the full year of 2023, the company reported revenue of $14.8 billion with a gross profit margin of 18.6% and an adjusted operating margin of 7.3% [8] - Adjusted earnings per share (EPS) was $32.60, and adjusted EBITDA exceeded $1.1 billion [8] - The company generated adjusted net income of $146 million for Q4 2023, with an adjusted EPS of $7.12 [17] Business Line Data and Key Metrics Changes - Same-store new vehicle revenue grew by 10% in Q4 and 7% for the year, with new units volume increasing by 7% in Q4 and 3% overall [12] - Used retail revenue decreased by 12% for the quarter and full year, with unit volume down 10% in both periods [13] - Parts and Service revenue was $499 million, consistent with the prior year, and gross profit margin was 55.6% [15] - Clicklane reported a 32% growth in total retail units year-over-year, with new vehicle penetration increasing to 51% of total Clicklane units in Q4 [16] Market Data and Key Metrics Changes - The same-store new vehicle day supply was 43 days at the end of December, an increase of 7 days from September [11] - The company anticipates challenges in acquiring preowned vehicles in 2024 due to a limited pool of lease and rental fleets [13] Company Strategy and Development Direction - The company aims for disciplined capital allocation and plans to continue seeking acquisitions of high-quality operators in markets with strong demographics [9][10] - The strategic vision includes achieving $30 billion or greater in revenue, adapting to macro factors while maintaining a focus on growth [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting a strong January performance and a commitment to improving guest experience through technology integration [30] - The company expects 2024 to be impacted by deferred revenue headwinds from TCA, with pretax income anticipated to decrease [18] Other Important Information - The company repurchased 1.3 million shares for $258 million and ended the quarter with $460 million in liquidity [8][20] - The pro forma adjusted net leverage was 2.5x at the end of December, with a target to reduce it to approximately 2x by the end of 2024 [21] Q&A Session Summary Question: Long-term targets and Clicklane progress - Management acknowledged the challenges in Clicklane's growth but remains optimistic about its future contribution as consumer adoption increases [24][25] Question: Parts and Service performance expectations - Management indicated that improvements in Parts and Service are expected in Q1, driven by technology integration and training efforts [28][30] Question: Used vehicle inventory dynamics - Management noted a conservative approach to acquiring used vehicle inventory, emphasizing the need for a more aggressive stance moving forward [35][36] Question: SG&A performance and drivers - Management attributed the slight increase in SG&A to higher advertising costs and loaner vehicle expenses, with expectations for improvement in 2024 [37][39] Question: New vehicle GPU and OEM dynamics - Management reported that new vehicle gross profit margins varied by brand, with expectations for normalization in 2024 [41][43] Question: Tekion DMS platform benefits - Management highlighted the efficiencies expected from the Tekion platform, which will reduce the need for multiple software applications and improve customer experience [45][50] Question: Franchise and goodwill impairments - Impairments were primarily related to Stellantis and Nissan stores due to increased WACC from rising interest rates [68] Question: Debt profile and M&A strategy - Management clarified that cash flow generation allows for M&A and share buybacks, with plans to refinance existing debt rather than accumulate more [70][72]