Yahoo Finance Asbury Automotive Group Inc (ABG) (Q1 2024) Earnings Call Transcript Highlights: Key Financial ...
Revenue: $4.2 billion in Q1 2024.
Gross Profit Margin: 17.9%.
SG&A as Percentage of Gross Profit: 62.5%.
Operating Margin: 6.3%.
Earnings Per Share (EPS): $7.21.
EBITDA: $259 million.
Share Repurchase: 240,000 shares for $50 million.
Net Income: $147.1 million.
Same-Store New Vehicle Performance: Revenue down 1%, unit volume flat, gross profit per vehicle $3,988, gross margin 7.8%.
Same-Store Used Vehicle Performance: Revenue down 4%, unit volume down less than 2% year-over-year, gross profit per vehicle $1,647.
F&I PVR: $2,218 in the quarter.
Parts and Service Gross Profit: Grew 6%, margin of 56.9%.
Free Cash Flow: $183 million for the quarter.
Total Liquidity: $712 million at quarter-end.
Capital Expenditures: $26 million in Q1, anticipated $200 million to $225 million for the full year.
Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you discuss the brand of the store sold per framework agreement and how framework agreements are evolving with your acquisition pace? A: David Hult, President and CEO of Asbury Automotive, explained that the divested store was a Lexus store. The company is limited to owning 8 Lexus stores in the U.S. due to framework agreements with manufacturers, which vary significantly. These agreements have not changed recently, and Asbury's current geographic locations and brand mix do not restrict growth, except for the number of Lexus stores.
Q: What is your expectation for the improvement in used vehicle supply, considering the low number of new vehicles sold in the past years? A: David Hult noted that the market is currently experiencing a significant depletion of vehicles due to reduced production during COVID-19. He anticipates that this year and next will be challenging, with potential normalization not occurring until early 2026.
Q: Given the 6% growth in parts and service, can we expect a continuation of this growth rate? A: Daniel Clara, SVP of Operations, confirmed that the 5% growth target in parts and service is realistic for 2024, supported by the integration of new acquisitions and easier comparisons in the second half of the year.
Q: How should we expect SG&A to gross profit ratio to trend, considering the current business dynamics? A: Michael Welch, CFO, mentioned that while new vehicle gross profit decline puts pressure on SG&A, the growth in fixed operations and cost management should stabilize the SG&A to gross profit ratio in the low 60s.
Q: Can you provide insights into the strategy adjustment in used vehicle sales and its early impact? A: David Hult discussed that the company has increased its external vehicle purchases to boost volume, which has put pressure on per vehicle revenue (PVR) but is beneficial for parts, service, and F&I. Daniel Clara added that despite a slight decrease in used PVR, the strategy to increase volume is showing positive signs in terms of internal gross profit and additional service opportunities.
Q: What are your capital allocation priorities between buybacks and M&A in the current market environment? A: David Hult stated that Asbury sees its stock as undervalued, making buybacks an attractive option. However, the company remains selective with M&A, focusing on acquisitions that are accretive and offer significant value, reflecting a strategic approach to capital deployment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
