Aston Martin Lagonda Global Holdings plc

Good morning, everybody. Adrian Hallmark here with the team in Gaydon, and thank you for joining us today. It's great to be back with you. It's incredible. It's been already 60 days of intense learning and a lot of good experiences since I joined Aston Martin, and I'm really excited about the growth potential that we see before us for this iconic brand. We continue to deliver against our commitments on product launches, and the latest version of which is, of course, Vanquish, which we launched in September. Successfully completing the most diverse and dynamic portfolio of products in Aston's history, and certainly we believe the freshest and most dynamic in the world today in our segment. We expect initial customer deliveries of Vanquish to start before the year end. Context, this launch is the sixth last leading product that Aston has launched in the past 16 months. And that activity has fully reinvigorated the product range, which I feel demonstrates the team's unique talent and entrepreneurial spirit. And it's an achievement that few companies have made in the past. I'm also pleased to say that the first media reviews of our V12 flagship Vanquish have been published in the last 48 hours. And we've had overwhelming positive feedback from international automotive media. and they validate our claim that we've delivered segment-leading products that can beat the competition. In the words of one leading automotive magazine, Vanquished, Vanquish is the best ever Aston Martin, full stop. So with our new all-core product portfolio, we finally aligned Aston Martin's immense brand power with world-class technology and positioned ourselves firmly in the white space that the company has successfully identified to be the ultra-luxury, high-performance British brand. My priority going forward is on maximizing the incredible commercial potential of the brand and these new models, ensuring that they reach the market efficiently, further strengthen our order book, and create the opportunity for customers to fully personalize their products and their experiences. As I've spoken about before, the reason for this is very simple. mid-term 40% gross margin aspiration as being the limit for Aston Martin. Neither is the 30% adjusted EBITDA margin. I believe in the mid-term we must go beyond this and perform like other luxury contemporaries in order that we can truly achieve positive cash on a sustainable basis. We'll drive profitability through both the intense approach to cost management and business quality, achieve a more balanced delivery, production, and logistics profile on all of our core models. It's something I look forward to discussing with you more in our full year results in February. Our order book now extends well into quarter 125 across all model lines, and that's something I expect to strengthen further as our new models finally hit the streets for demonstrations and events around the world in quarter four and in quarter one 2025. These new products are a true step up from their predecessors and experiencing them firsthand is crucial to understand what our brand stands for and to engage with our target customers. We're already seeing an uplift in regional sales activities and test drive activities which will continue as I mentioned over the coming months. In our September update, I highlighted two external risk factors that impacted the company's performance in 2024. Continued volatility in global supply chains and macroeconomic challenges, particularly in China, something that other OEMs have also suffered from. I just want to give you a short update on our situation in regard to those two factors. First, as I continue my 60-day deep dive operational review of the business. I place great emphasis in stabilizing both the production output and the future product plans. For example, the reduction in volume that we announced last month allows us to drive further operational efficiencies, deliver higher quality launches, and maintain a more balanced supply and demand going into 2025. This is evident by retails to date continuing to significantly outpace wholesales, and that will continue through the year end. We've experienced no further changes in our supply chains since we last spoke, with the supply of components into production consistent with our revised plans. The number of cars that we're reworking is radically reducing, and by the year end, we should be in a great position from a work in progress standpoint. This revised plan will allow us to mitigate further risks in 2025. Secondly, when it comes to markets, Doug, myself, and other members of the executive have spent the last two weeks visiting first China and then the US, where we have the opportunity to meet the local teams, local dealers, local customers, and strategic partners to get a full appraisal of where we stand operationally and strategically in these two crucial markets. If we start with China, it's clear that there's been a significant downgrade in expectations in China over the past couple of years. We've suffered that too, especially with the DBX-707 model. As we look forward with all the stimulus packages that are being announced in China, we are expecting the second half of 2025 to show positive signs. In the meantime, we have a clear plan. develop the business operationally without over-investing, and get ready for a bigger push as we head towards half two and as the market evolves. We still have a strong business opportunity in China, but the acceleration, we believe, will be in half to 25. And that's already baked into our plans for this year and our forecast for next. Needless to say, our U.S. market holds the biggest untapped growth opportunity and is not suffering the same downturn or restrictions as China. So we continue to grow and we will continue to double down our efforts on demand creation and customer engagement in the US under beta. As you can see from the improved financial and operational performance in quarter three this year compared to the previous period, it's demonstrating that our strategies effectiveness is on track And we're on track also to hit a full year 24 revised guidance. We also remain ruthlessly focused on achieving our previously communicated targets for 2025, including a more balanced delivery profile for the full year across all models. And we look forward to delivering a significant quarter four business for Aston Martin in 2024. On that note, I'll now hand over to Doug to talk through some of the financials before welcoming your questions. Thank you very much.

Thanks Adrian. Good morning everybody and thanks for joining us on what I know is going to be a busy morning for all of us. It was just over four weeks ago when we last spoke providing an update to our four-year guidance and expectations for 2024. Today's Q3 results are in line with our revised guidance and we remain on track to deliver the four-year 2024 guidance. Q3 represented the first of two significant quarters for us in 2024. start to benefit from the launch of the new Vantage and DVX-707 models. Sales of these vehicles commenced towards the end of Q2 2024, and the wrap-up in volumes has increased through Q3, hitting a high in September 2024. It was running at this heightened production rate in September that triggered a need to adjust subsequent production plans, as we were no longer able to mitigate component shortages from various suppliers. I'm pleased to confirm that since we made the necessary line rate adjustments, production has been much smoother, and both the end of September and October have been in line with our revised plans. Despite the revised guidance, which mostly impacted our Q4 plans, our Q3 financial performance was largely improved compared with the same period in the prior year. This was driven by the continued rollout of our next generation vehicles, with wholesale volumes up 14%, revenue up 8%, and gross profits increased by 7%, with a broadly stable gross margin of 36.8%. Partly as a result of the delays experienced in production and the associated operational inefficiencies, EBITDA for Q3 was flat versus the prior year, whilst our adjusted operating loss and loss before tax both improved as DNA and net finance costs decreased compared with Q3 2023. Cash and available facilities increased by 64 million in Q3 to £311 million, reflecting the circa £135 million private debt placing we completed in August 2024, partially offset by the Q3 free cash outflow of £81 million, which was, as guided, materially lower than both Q1 and Q2. Year-to-date 2024 free cash outflow was £394 million, broadly in line with our plans at the start of the year, reflecting the portfolio transition as volume growth had been and remains weighted to the second half of the year as a result we've delivered a sequentially improving free cash flow trend quarter on quarter through the year improving trend is expected to continue into q4 despite the impact of the ongoing deposit balance unwind related to the timing of specials deliveries and the half-yearly interest payment of just under £80 million. Given the expected significant improvement in free cash outflow in Q4, we expect liquidity at the end of 2024 to remain around £300 million. It's worth pointing out that as at September 30, 2024 year to date, the deposit balance outflow was £123 million, significantly higher than the £1 million outflow for the comparative period last year. Neither this deposit unwind dynamic or interest payment will impact the business in Q1 2025 as we start to deliver a more balanced production profile to support our targeted free cash flow generation during 2025. Finally, and to reiterate, we have the right strategy in place to realize the significant long-term growth and value creation potential of this business. Underpinned by our ability to design and deliver a class-leading portfolio of both core and and limited edition specials, we remain fully focused on achieving our previously communicated targets for 2025. This will coincide with our aim to smooth the cadence of wholesale volumes over the coming quarters and drive improved profitability through growth and revenue generation, whilst also focusing on the cost and quality optimization opportunities described by Adrian. With that, I'll hand back over to the operator so we can take some questions in the time we have remaining.

Thank you. If you'd like to ask a question on today's call, please press star followed by one on your telephone keypad now tuned to the queue. Remember, parents, to ask a question. Please ensure you are unmuted locally. And our first question comes from George Gallias from Goldman Sachs. George, your line is open. Please go ahead.