10-K: Asbury Automotive Group Reports Full Year 2023 Results, Announces Strategic Outlook Update

Asbury Automotive Group's 2023 results show a decrease in consolidated revenue and gross profit, driven by lower used vehicle and F&I revenue, alongside a strategic outlook update targeting $30 billion or more in revenue by 2030.

Summary

• Asbury Automotive Group reported a decrease in consolidated revenue for the year ended December 31, 2023, to $14.80 billion, compared to $15.43 billion for the prior year.
• Consolidated gross profit for the year ended December 31, 2023, decreased to $2.76 billion, compared to $3.10 billion for the prior year.
• The decrease in revenue and gross profit is primarily attributed to lower used vehicle and F&I revenue, as well as reduced gross profit per vehicle sold for both new and used vehicles.
• The company completed the acquisition of the Jim Koons Automotive Companies on December 11, 2023, for approximately $1.50 billion.
• In February 2024, the Company announced an update to their strategic outlook targeting revenue of $30 billion or more by 2030.
• The Company repurchased approximately 1,316,167 million shares for $258.1 million during the year ended December 31, 2023.
• The Company's adjusted net leverage ratio was 2.5x at December 31, 2023, compared to 1.7x at December 31, 2022.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the results show a decline in revenue and profit, the company is taking steps to improve its performance through acquisitions and strategic initiatives. The company is also targeting revenue of $30 billion or more by 2030.

Positives

• The company completed the acquisition of Jim Koons Automotive Companies, expanding its geographic presence.
• Asbury is targeting revenue of $30 billion or more by 2030.
• The company repurchased shares, indicating a belief in its value.
• The company's adjusted net leverage ratio was 2.5x at the end of 2023.

Negatives

• Consolidated revenue decreased by 4% in 2023.
• Consolidated gross profit decreased by 11% in 2023.
• Used vehicle and F&I revenue declined.
• Gross profit per vehicle sold decreased for both new and used vehicles.
• The company recognized asset impairment charges of $117.2 million associated with manufacturer franchise rights and goodwill.

Risks

• The automotive retail industry is sensitive to unfavorable changes in general economic conditions.
• Adverse conditions affecting vehicle manufacturers could negatively impact Asbury's business.
• Substantial competition in automobile sales and services may have a material adverse effect on results of operations.
• Technological advances, including electrification of vehicles and adoption of autonomous vehicles in the long-term, could have a material adverse effect on our business.
• Our outstanding indebtedness, ability to incur additional debt and the provisions in the agreements governing our debt, and certain other agreements, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
• A failure of any of our information systems or those of our third-party service providers, or a data security breach with regard to personally identifiable information ('PII') about our customers or employees, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
• Our dealership operations and facilities are subject to extensive governmental laws and regulations.
• Our TCA business is subject to a wide range of federal, state, and local laws and regulations, some of which we may not have previously been subject.

Future Outlook

The company is targeting revenue of $30 billion or more by 2030, focusing on balanced capital allocation, same-store revenue growth, and strategic transactions.

Management Comments

• The document does not contain direct quotes from management, but it does outline the company's mission and vision to be the most guest-centric automotive retailer.
• Management believes that their cash position and borrowing capacity, combined with current and expected future cash generation capability, provides financial flexibility to reinvest in the business, acquire dealerships, and repurchase stock.

Industry Context

The automotive retail industry is highly competitive, with factors such as price, service, location, and selection playing key roles. The industry is also subject to seasonal variations and economic conditions.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or competitors.
• However, it mentions that the automotive retail and service industry is highly competitive with respect to price, service, location, and selection.
• The document also notes that the company competes with other franchised dealerships, used vehicle retailers, and internet-based vehicle brokers.

Legal Proceedings

• The company is involved in discussions with the FTC regarding allegations of violating the FTC Act and the ECOA in connection with the sale of add-on products.

Stakeholder Impact

• Shareholders may be concerned about the decrease in revenue and profit, but encouraged by the company's strategic initiatives.
• Employees may be affected by changes in operations and potential cost-cutting measures.
• Customers may benefit from the company's focus on providing a high level of customer service.
• Suppliers may be affected by changes in the company's purchasing patterns.

Next Steps

• Continue to integrate TCA's service offerings across the full dealership portfolio, expected to be completed in 2024.
• Execute on the strategic plan to achieve revenue of $30 billion or more by 2030.
• Continually evaluate additional opportunities to drive revenue growth while maintaining a disciplined approach to capital allocation.

Key Dates

Keywords

automotive retail, financial results, acquisitions, dealerships, revenue, gross profit, used vehicles, new vehicles, F&I, Asbury Automotive Group