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Asbury Automotive Group Announces Record Third Quarter 2021 Financial Results

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·12 min read
In this article:
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  • Third quarter EPS of $7.54 per diluted share, up 52% over prior year EPS

  • Third quarter adjusted EPS of $7.36 per diluted share (a non-GAAP measure), up 80% over prior year adjusted EPS

  • Third quarter revenue increased 30% and gross profit increased 43% over prior year quarter

  • Third quarter SG&A as a percentage of gross profit decreased 550 bps over prior year to 56.0%, while adjusted SG&A decreased 580 bps to 55.3%

DULUTH, Ga., October 26, 2021--(BUSINESS WIRE)--Asbury Automotive Group, Inc. (NYSE: ABG), one of the largest automotive retail and service companies in the U.S., reported record net income for the third quarter 2021 of $147.0 million ($7.54 per diluted share). This result compares to net income of $96.2 million ($4.96 per diluted share) in the prior year quarter.

The financial measures discussed below include both GAAP and adjusted (non-GAAP) financial measures. Please see reconciliations for our non-GAAP metrics included in the accompanying financial tables.

"This quarter, though the supply of new inventory remained constrained, our teams continued to excel and achieved record third quarter levels in revenue, operating margins, SG&A as a percentage of gross profit, net income, and EPS. We are trending well on our same store pillar of our five-year growth plan," said David Hult, Asbury’s President and Chief Executive Officer. "In addition, on our M&A pillar, we announced the upcoming transformative acquisition of the Larry H. Miller Dealerships and Total Care Auto, Powered by Landcar, with annualized revenues of approximately $5.7 billion. Along with other acquisitions, both closed and under contract, of an additional $900 million, in 2021, we expect to close on acquisitions totaling $6.6 billion in annualized revenue. Overall, we are tracking to surpass our strategic five-year plan."

The Company reported adjusted net income (a non-GAAP measure) for the third quarter 2021 of $143.6 million ($7.36 per diluted share) compared to $79.2 million ($4.08 per diluted share) in the prior year quarter.

Net income for the third quarter 2021 was adjusted for acquisition expenses of $3.5 million ($0.13 per diluted share) and gain on divestiture of $8.0 million ($0.31 per diluted share).

Net income for the third quarter 2020 was adjusted for a $24.7 million ($0.96 per diluted share) gain on a dealership divestiture, $1.3 million ($0.05 per diluted share) of acquisition related costs and a $0.7 million ($0.03 per diluted share) real estate related charge.

The Company reported total revenue for the third quarter of $2.4 billion, up 30% from the prior year period; total revenue on a same-store basis was up 16% from the prior year period.

Third Quarter 2021 Operational Summary

Total Company vs. 3rd Quarter 2020:

  • Revenue increased 30%

  • Gross profit increased 43%

  • Gross margin increased 180 bps to 20%

  • New vehicle unit volume increased 1%; new vehicle revenue increased 18%; gross profit increased 108%

  • Used vehicle retail unit volume increased 36%; used vehicle retail revenue increased 62%; gross profit increased 59%

  • Finance and insurance revenue and gross profit increased 24%

  • Parts and service revenue and gross profit increased 25%; customer pay revenue and gross profit increased 30%

  • Adjusted SG&A as a percentage of gross profit fell to 55.3%, a decrease of 580 bps

  • Operating income increased 69%

  • Operating margin increased 190 bps to 8.4%; adjusted operating margin increased 190 bps to 8.5%

  • Adjusted EPS increased 80% to $7.36

Same store vs. 3rd Quarter 2020:

  • Revenue increased 16%

  • Gross profit increased 28%

  • Gross margin increased 190 bps to 20.1%

  • New vehicle unit volume decreased 7%; new vehicle revenue increased 5%; gross profit increased 83%

  • Used vehicle retail unit volume increased 27%; used vehicle retail revenue increased 47%; gross profit increased 45%

  • Finance and insurance revenue and gross profit increased 18%

  • Parts and service revenue and gross profit increased 10%; customer pay gross profit increased 12%

Liquidity and Leverage

As of September 30, 2021, the company had approximately $780 million of liquidity (including cash of $331 million, floorplan offset accounts of $47 million, $190 million under our new floor plan facility that is able to be converted to our revolver, and availability under our used vehicle floorplan line and revolver of $209 million). The company’s adjusted net leverage ratio was 1.2x at quarter-end.

Earnings Call

Additional commentary regarding the third quarter results will be provided during the earnings conference call on Tuesday, October 26, 2021, at 10:00 a.m. ET. The conference call will be simulcast live on the internet and can be accessed by logging onto www.asburyauto.com/company/investor-relations. A replay will be available on this site for 30 days.

In addition, live audio of the call will be accessible to the public by calling (800) 353-6461 (domestic), or (334) 323-0501 (international); passcode – 5585333. Callers should dial in approximately 5 to 10 minutes before the call begins.

A conference call replay will be available two hours following the call for seven days and can be accessed by calling (888) 203-1112 (domestic), or (719) 457-0820 (international); passcode – 5585333.

About Asbury Automotive Group, Inc.

Asbury Automotive Group, Inc. (NYSE: ABG), a Fortune 500 company headquartered in Duluth, GA, is one of the largest automotive retailers in the U.S. In late 2020, Asbury embarked on a 5‑year plan to strategically increase revenue and profitability through organic and acquisitive growth as well as their innovative Clicklane digital car purchasing platform, with its guest-centric approach as Asbury’s constant North Star. Asbury currently operates 92 dealerships, consisting of 115 franchises, representing 31 domestic and foreign brands of vehicles. Asbury also operates 25 collision repair centers. Asbury offers an extensive range of automotive products and services, including new and used vehicles; parts and service, which includes vehicle repair and maintenance services, replacement parts and collision repair services; and finance and insurance products, including arranging vehicle financing through third parties and aftermarket products, such as extended service contracts, guaranteed asset protection debt cancellation, prepaid maintenance, and credit life and disability insurance.

For additional information, visit www.asburyauto.com.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical fact, and may include statements relating to goals, plans, market conditions and projections regarding Asbury's financial position, liquidity, results of operations, market position and dealership portfolio, the expected benefits of Clicklane, and other initiatives and future business strategy, including the expected terms or timeline of currently anticipated or recently completed acquisitions or dispositions, such as the LHM acquisition, the anticipated cost savings, run-rate synergies, revenue enhancement strategies, operational improvements and other benefits of such currently anticipated or recently completed acquisitions or dispositions. These statements are based on management's current expectations and beliefs and involve significant risks and uncertainties that may cause results to differ materially from those set forth in the statements. These risks and uncertainties include, among other things, the impact of the ongoing COVID-19 pandemic on our industry and business, market factors, Asbury's relationships with, and the financial and operational stability of, vehicle manufacturers and other suppliers, acts of God or other incidents and the shortage of semiconductor chips, which may adversely impact supply from vehicle manufacturers and/or present retail sales challenges, any event or circumstance that could give rise to the termination of the LHM acquisition, including the failure to obtain necessary manufacturer and regulatory approvals; the ability to consummate the LHM acquisition and other pending acquisitions on the terms or timeline currently contemplated or at all; the ability to successfully integrate the LHM business or other acquisitions in our existing operations and the diversion of management’s attention from ongoing business and regular business responsibilities; the effects of increased expenses or unanticipated liabilities incurred as a result of the LHM acquisition and other pending acquisitions; the disruption from the LHM acquisition and other acquisitions, making it more difficult to maintain relationships with customers or suppliers; risks associated with Asbury's indebtedness and our ability to comply with applicable covenants in our various financing agreements, or to obtain waivers of these covenants as necessary; risks related to competition in the automotive retail and service industries, general economic conditions both nationally and locally, governmental regulations, legislation, adverse results in litigation and other proceedings, and Asbury's ability to execute its five-year strategic plan, IT initiatives and other operational strategies, Asbury's ability to leverage gains from its dealership portfolio, Asbury's ability to capitalize on opportunities to repurchase its debt and equity securities or purchase properties that it currently leases, and Asbury's ability to stay within its targeted range for capital expenditures. There can be no guarantees that Asbury's plans for future operations will be successfully implemented or that they will prove to be commercially successful.

These and other risk factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements are and will be discussed in Asbury's filings with the U.S. Securities and Exchange Commission from time to time, including its most recent annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

ASBURY AUTOMOTIVE GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data)

(Unaudited)

For the Three Months Ended

September 30,

Increase

(Decrease)

%

Change

2021

2020

REVENUE:

New vehicle

$

1,129.5

$

957.9

$

171.6

18

%

Used vehicle:

Retail

823.7

507.4

316.3

62

%

Wholesale

55.3

62.1

(6.8)

(11)

%

Total used vehicle

879.0

569.5

309.5

54

%

Parts and service

297.1

237.2

59.9

25

%

Finance and insurance, net

100.4

80.8

19.6

24

%

TOTAL REVENUE

2,406.0

1,845.4

560.6

30

%

GROSS PROFIT:

New vehicle

126.0

60.6

65.4

108

%

Used vehicle:

Retail

68.7

43.3

25.4

59

%

Wholesale

3.5

5.9

(2.4)

(41)

%

Total used vehicle

72.2

49.2

23.0

47

%

Parts and service

181.4

145.3

36.1

25

%

Finance and insurance, net

100.4

80.8

19.6

24

%

TOTAL GROSS PROFIT

480.0

335.9

144.1

43

%

OPERATING EXPENSES:

Selling, general and administrative

268.7

206.5

62.2

30

%

Depreciation and amortization

10.7

9.8

0.9

9

%

Other operating (income) expense, net

(0.4)

0.5

(0.9)

(180)

%

INCOME FROM OPERATIONS

201.0

119.1

81.9

69

%

OTHER EXPENSES (INCOME):

Floor plan interest expense

1.5

3.0

(1.5)

(50)

%

Other interest expense, net

14.8

12.9

1.9

15

%

Gain on dealership divestitures, net

(8.0)

(24.7)

16.7

68

%

Total other expenses (income), net

8.3

(8.8)

17.1

194

%

INCOME BEFORE INCOME TAXES

192.7

127.9

64.8

51

%

Income tax expense

45.7

31.7

14.0

44

%

NET INCOME

$

147.0

$

96.2

$

50.8

53

%

EARNINGS PER COMMON SHARE:

Basic—

Net income

$

7.62

$

5.01

$

2.61

52

%

Diluted—

Net income

$

7.54

$

4.96

$

2.58

52

%

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

19.3

19.2

0.1

Restricted stock

0.1

0.1

Performance share units

0.1

0.1

Diluted

19.5

19.4

0.1

ASBURY AUTOMOTIVE GROUP, INC.

KEY OPERATING HIGHLIGHTS (In millions, except per unit data)

(Unaudited)

For the Three Months Ended

September 30,

Increase

(Decrease)

%
Change

2021

2020

Unit sales

New vehicle:

Luxury

7,972

6,157

1,815

29

%

Import

13,491

13,818

(327)

(2)

%

Domestic

3,300

4,580

(1,280)

(28)

%

Total new vehicle

24,763

24,555

208

1

%

Used vehicle retail

27,761

20,464

7,297

36

%

Used to new ratio

112.1

%

83.3

%

2,880 bps

Average selling price

New vehicle

$

45,612

$

39,010

$

6,602

17

%

Used vehicle retail

29,671

24,795

4,876

20

%

Average gross profit per unit

New vehicle:

Luxury

$

7,551

$

4,613

$

2,938

64

%

Import

3,714

1,397

2,317

166

%

Domestic

4,758

2,817

1,941

69

%

Total new vehicle

5,088

2,468

2,620

106

%

Used vehicle retail

2,475

2,116

359

17

%

Finance and insurance, net

1,912

1,795

117

7

%

Front end yield (1)

5,618

4,103

1,515

37

%

Gross margin

New vehicle:

Luxury

11.8

%

8.2

%

360 bps

Import

10.9

%

4.7

%

620 bps

Domestic

9.7

%

6.5

%

320 bps

Total new vehicle

11.2

%

6.3

%

490 bps

Used vehicle retail

8.3

%

8.5

%

(20) bps

Parts and service

61.1

%

61.3

%

(20) bps

Total gross profit margin

20.0

%

18.2

%

180 bps

SG&A metrics

Rent expense

$

8.3

$

8.1

$

0.2

2

%

SG&A as a percentage of gross profit

56.0

%

61.5

%

(550) bps

SG&A, excluding rent expense as a percentage of gross profit

54.3

%

59.1

%

(480) bps

Adjusted SG&A as a percentage of gross profit

55.3

%

61.1

%

(580) bps

Operating metrics

Income from operations as a percentage of revenue

8.4

%

6.5

%

190 bps

Income from operations as a percentage of gross profit

41.9

%

35.5

%

640 bps

Adjusted income from operations as a percentage of revenue

8.5

%

6.6

%

190 bps

Adjusted income from operations as a percentage of gross profit

42.6

%

36.1

%

650 bps

Revenue mix

New vehicle

46.9

%

51.9

%

Used vehicle retail

34.3

%

27.4

%

Used vehicle wholesale

2.3

%

3.4

%

Parts and service

12.3

%

12.9

%

Finance and insurance

4.2

%

4.4

%

Total revenue

100.0

%

100.0

%

Gross profit mix

New vehicle

26.3

%

18.0

%

Used vehicle retail

14.3

%

12.8

%

Used vehicle wholesale

0.7

%

1.8

%

Parts and service

37.8

%

43.3

%

Finance and insurance

20.9

%

24.1

%

Total gross profit

100.0

%

100.0

%

(1) Front end yield is calculated as gross profit from new vehicles, used retail vehicles and finance and insurance (net), divided by combined new and used retail unit sales.

ASBURY AUTOMOTIVE GROUP, INC.

SAME STORE OPERATING HIGHLIGHTS (In millions)

(Unaudited)

For the Three Months Ended

September 30,

Increase

(Decrease)

%
Change

2021

2020

Revenue

New vehicle:

Luxury

$

371.3

$

334.5

$

36.8

11

%

Import

452.1

413.9

38.2

9

%

Domestic

162.4

192.6

(30.2)

(16)

%

Total new vehicle

985.8

941.0

44.8

5

%

Used Vehicle:

Retail

728.2

496.1

232.1

47

%

Wholesale

38.4

61.4

(23.0)

(37)

%

Total used vehicle

766.6

557.5

209.1

38

%

Parts and service

256.0

232.5