Asbury Automotive Group Inc

Good day and welcome to the Asbury Automotive Group Q1 2022 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Karen Reed. Please go ahead.

Thanks, Mary, and good morning, everyone. As noticed, today's call is being recorded and will be available for replay later this afternoon. Welcome to Asbury Automotive Group's first quarter 2022 earnings call. The press release detailing Asbury's first quarter results was issued earlier this morning and is posted on our website at AsburyAuto.com. Participating with me today are David Holt, our President and Chief Executive Officer, Dan Clara, our Senior VP of Operations, and Michael Welch, our Senior VP and Chief Financial Officer. At the conclusion of our remarks, we will open the call up for questions, and I will be available later for any follow-up questions that you may have. Before we begin, we must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature, which may include financial projections, forecasts, and current expectations, each of which are subject to certain uncertainties. For information regarding certain of the risks that may cause actual results to differ materially from these statements, please see our filings with the SEC from time to time including our Form 10-K for the year ended December 2021 and any subsequently filed quarterly reports on Form 10-Q and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures, as defined under SEC rules, may be discussed on this call. As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable gap measures on our website. We've also posted an updated investor presentation on our website, AsburyAuto.com, highlighting our first quarter results. It is now my pleasure to hand the call over to our CEO, David Holtz. David?

Thank you, Karen, and good morning, everyone. Welcome to our first quarter earnings call. Our first quarter results were an all-time record for any quarter in Asbury's history. We continued to experience strong consumer demand, although our ability to meet this demand was constrained by very low new vehicle inventory. For the quarter, we grew adjusted EBITDA by $195 million to $336 million, and adjusted EPS from $4.68 to $9.27. an increase of 98 percent. We delivered 8.2 percent adjusted operating margin, up 210 basis points. We increased revenue by $1.7 billion to $3.9 billion and increased gross profit by $409 million to $792 million. We drove F&I gross profit per vehicle to a record 2481. up $742. It continues to have a disciplined approach around SG&A, resulting in a decline of 520 basis points from the prior year's first quarter. This was the first full quarter reflecting all of our 2021 acquisitions under the ASBRI umbrella, and the strategic fit is clear. We are excited about our team and our ability to execute on our 25 plan. We see tremendous opportunity ahead of us as we roll out Clicklane to all acquired dealerships and integrate TCA into the legacy Asbury stores. Due to our record performance and strong cash flow, our balance sheet remains strong. Our adjusted operating cash flow for the first quarter was $406 million, an increase of $290 million over the first quarter of 2021. Our net leverage ended this quarter at 2.2 times. During the quarter, we repurchased $200 million of our stock, which completed our share repurchase authorization. As we announced in our earnings release this morning, our Board of Directors has approved a new 200 million share repurchase authorization. Our near-term priority is to continue to integrate our recent acquisitions and use our strong free cash flow to lower our net debt level and return cash to shareholders through opportunistic share repurchases. At the same time, we'll continue to monitor the M&A market as we believe there are potential opportunities that would enhance our already strong dealership portfolio. Due to the strong pace of acquisitions last year, we exceeded our five-year acquisition target in the first year of the plan. Today, we will be providing an update to our strategic growth plan that I will briefly discuss later in the call. We continue to operate in an unusual macro environment, and experience strong demand across all of our revenue streams. We do not anticipate a meaningful recovery in inventory levels in 2022 and believe these levels are unlikely to fully normalize until 2023. In these unusual times, our industry has benefited, which is reflected in our first quarter results and demonstrates the value and the resilience of the franchise model. We look forward to continuing to deliver strong results for our shareholders, be outstanding partners with our OEMs to steward their great brands, and offer an environment where our team members can thrive while providing the most gas-centric experience in automotive retail.