Asbury Automotive Group Reports Record Third Quarter 2022 Financial Results

Asbury Automotive Group, Inc. (NYSE: ABG) (the “Company”), one of the largest automotive retail and service companies in the U.S., reported record third quarter 2022 net income of $205 million ($9.23 per diluted share), an increase of 39% from $147 million ($7.54 per diluted share) in the prior year quarter. Third quarter 2022 adjusted net income, a non-GAAP measure, increased 43% year-over-year to $205 million ($9.23 per diluted share) compared to adjusted net income of $144 million ($7.36 per diluted share) in third quarter 2021.

“This quarter, our team navigated a challenging macro environment, including the impact of Hurricane Ian, to drive strong results. With our great team members across the country, the right brands, and the right locations, we delivered for our shareholders and showcased the resiliency of our business model,” said David Hult, Asbury’s President and Chief Executive Officer. “We are pleased with the momentum of our growth and our ability to maintain our disciplined cost strategy, while strengthening our balance sheet.”

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

There were no adjustments to net income in the third quarter 2022.

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

Third Quarter 2022 Operational Summary

Total company vs. 3^rd Quarter 2021:

• Revenue of $3.9 billion, an increase of 61%
• Gross profit increased 60%
• Gross margin decreased 10 bps to 19.9%
• New vehicle unit volume increased 47%; new vehicle revenue increased 59%; gross profit increased 60%
• Used vehicle retail unit volume increased 40%; used vehicle retail revenue increased 52%; gross profit increased 22%
• Finance and insurance (F&I) per vehicle retailed (PVR) increased 30%
• Parts and service revenue increased 80%; gross profit increased 64%
• Adjusted SG&A as a percentage of gross profit increased to 57.1%, an increase of 180 bps
• Operating income and adjusted operating income increased 56% and 53%, respectively
• Operating margin decreased 20 bps to 8.1% and adjusted operating margin decreased 40 bps to 8.1%
• EPS increased 22% to $9.23; adjusted EPS increased 25% to $9.23

Same store (dealership only) vs. 3^rd Quarter 2021:

• Revenue decreased 3%
• Gross profit decreased 2%
• Gross margin expanded 10 bps to 20.0%
• New vehicle unit volume decreased 16%; new vehicle revenue decreased 7%; new vehicle gross profit decreased 4%
• Used vehicle retail unit volume decreased 10%; used vehicle retail revenue was flat; used vehicle retail gross profit decreased 30%; used to new ratio increased to 120%
• F&I PVR increased 18%
• Parts and service revenue increased 12%; gross profit increased 10%; customer pay gross profit increased 16%
• Adjusted SG&A as a percentage of gross profit increased to 55.8%, an increase of 50 bps

Clicklane metrics:

• Over 6,800 vehicles sold, an all-time record and an increase of 13% over prior year quarter
• Over 92% of transactions were customers incremental to Asbury Automotive
• 41% of Clicklane sales had a trade-in and, of those with payoffs, 100% utilized the payoff tool
• Total front-end PVR of $3,450 and F&I PVR of $2,093, resulting in total front-end yield of $5,543
• Conversion rate more than double that of traditional internet leads and growing sequentially
• 95% of deliveries within a 20-mile radius of an Asbury dealership
• Average transaction time of ~8 minutes for cash deals and ~14 minutes for financed deals
• Clicklane now has been fully rolled out to all dealerships

Liquidity and Leverage

As of September 30, 2022, the Company had cash and floorplan offset accounts of $537 million (which excludes $98 million of cash at TCA) and availability under the used vehicle floorplan line and revolver of $636 million for a total of approximately $1.2 billion in liquidity. The Company’s adjusted net leverage ratio was 1.9x at quarter end, compared to 2.7x at the end of 2021 and 2.1x at the end of the second quarter 2022.

Earnings Call

Additional commentary regarding the third quarter results will be provided during the earnings conference call on Thursday, October 27, 2022, at 10:00 a.m. ET.

The conference call will be simulcast live on the internet and can be accessed by logging onto https://investors.asburyauto.com. 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 (866) 580-3963 (domestic) or +1 (786) 697-3501 (international); confirmation code – 9193183. 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 (866) 595-5357; passcode – 9193183.

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 five-year plan to increase revenue and profitability strategically through organic and acquisitive growth as well as their innovative Clicklane digital vehicle purchasing platform, with its guest-centric approach as Asbury’s constant North Star. Asbury currently operates 148 dealerships, consisting of 198 franchises, representing 31 domestic and foreign brands of vehicles. Asbury also operates seven stand-alone used vehicle stores, 34 collision repair centers, an auto auction, a used vehicle wholesale business and an F&I product provider. 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, and prepaid maintenance.

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, objectives, projections regarding Asbury's financial position, liquidity, results of operations, cash flows, leverage, market position and dealership portfolio, revenue enhancement strategies, operational improvements, projections regarding the expected benefits of Clicklane, management’s plans, projections and objectives for future operations, scale and performance, integration plans and expected synergies from acquisitions, capital allocation strategy, business strategy and expectations of our management with respect to, among other things: changes in general economic and business conditions, including increases in interest rates and rising fuel prices, any impact of COVID-19 on the automotive industry in general, the automotive retail industry in particular and our customers, suppliers, vendors and business partners; our relationships with vehicle manufacturers; our ability to maintain our margins; operating cash flows and availability of capital; capital expenditures; the amount of our indebtedness; the completion of any future acquisitions and divestitures; future return targets; future annual savings; general economic trends, including consumer confidence levels, interest rates, inflation, and fuel prices; and automotive retail industry trends. 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, our inability to realize the benefits expected from recently completed transactions; our inability to promptly and effectively integrate completed transactions and the diversion of management’s attention from ongoing business and regular business responsibilities; our inability to complete future acquisitions or divestitures and the risks resulting therefrom; any impact from the 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, acts of war or other incidents and the shortage of semiconductor chips and other components, which may adversely impact supply from vehicle manufacturers and/or present retail sales challenges; 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, including changes in automotive state franchise laws, adverse results in litigation and other proceedings, and Asbury's ability to execute its strategic and operational strategies and initiatives, including its five-year strategic plan, 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. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this press release. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Disclosure and Reconciliation, Same Store Data and Other Data

In addition to evaluating the financial condition and results of our operations in accordance with GAAP, from time to time management evaluates and analyzes results and any impact on the Company of strategic decisions and actions relating to, among other things, cost reduction, growth, and profitability improvement initiatives, and other events outside of normal, or "core," business and operations, by considering certain alternative financial measures not prepared in accordance with GAAP. These measures include "Pro forma adjusted leverage ratio," "Adjusted income from operations," "Adjusted net income," "Adjusted operating margins," "Adjusted EBITDA" and "Adjusted diluted earnings per share ("EPS")." Further, management assesses the organic growth of our revenue and gross profit on a same store basis. We believe that our assessment on a same store basis represents an important indicator of comparative financial performance and provides relevant information to assess our performance at our existing locations. Same store amounts consist of information from dealerships for identical months in each comparative period, commencing with the first month we owned the dealership. Additionally, amounts related to divested dealerships are excluded from each comparative period. Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not be comparable to similarly titled measures used by other companies. As a result, any non-GAAP financial measures considered and evaluated by management are reviewed in conjunction with a review of the most directly comparable measures calculated in accordance with GAAP. Management cautions investors not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. In their evaluation of results from time to time, management excludes items that do not arise directly from core operations, or are otherwise of an unusual or non-recurring nature. Because these non-core, unusual or non-recurring charges and gains materially affect Asbury's financial condition or results in the specific period in which they are recognized, management also evaluates, and makes resource allocation and performance evaluation decisions based on, the related non-GAAP measures excluding such items. In addition to using such non-GAAP measures to evaluate results in a specific period, management believes that such measures may provide more complete and consistent comparisons of operational performance on a period-over-period historical basis and a better indication of expected future trends. Management discloses these non-GAAP measures, and the related reconciliations, because it believes investors use these metrics in evaluating longer-term period-over-period performance, and to allow investors to better understand and evaluate the information used by management to assess operating performance.

Same store amounts consist of information from dealerships for identical months in each comparative period, commencing with the first month we owned the dealership. Additionally, amounts related to divested dealerships are excluded from each comparative period.

Amounts presented herein have been calculated using non-rounded amounts for all periods presented and therefore certain amounts may not compute or tie to prior presentation due to rounding.