Good day, and thank you for standing by. Welcome to the Aston Martin Lagonda First Quarter Results 2021 Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer I must advise you that this conference is being recorded today on Thursday, May 6, 2021. I would now like to hand the conference over to your first speaker today, Tobias Meurs.
Please go ahead.
Thanks very much. Good morning, welcome everyone, and thanks for joining us this morning for Martin Lagonda's Q1 results call. I'm Tobias Mosseo, and I'm joined this morning by Ken Greager, our CFO. I hope you have had the chance to read our results release that went out this morning. The release, along with accompanying slides, are on the Investor Relations section of our website as usual.
Before we open up the line for Q and A, Ken and I will make a few introductory comments. First, Ken, I would like to hand over to you for
the numbers. Thanks, Tobias, and good morning, everyone. Q1 was a significant improvement year on year, Which was good to see, largely, of course, driven by the volume with the Launch of the DBX, which wasn't there last year, with wholesales of 13 53 units in the quarter. The volume wasn't the only improvement. We also saw improvements in cost, and we also saw improvements in The level of incentive spending and therefore the net revenue.
Revenues were GBP 224,000,000 that did have the benefits of Stronger pricing dynamics or lower incentives primarily with the core average selling price being circa £149,000
per unit, a
little bit of strong mix, geographic mix in there with China coming in. But Actually, one of the big factors was the year on year was the lower retail financing support as we completed now the destocking process. Adjusted EBITDA was $21,000,000 with a 9% margin, reflecting the improved grid Trading some initial cost saving benefits through the headcount reductions and very much in line with our expectations. There's an operating loss of $15,000,000 reflecting the depreciation and amortization increase as guided due to the Standard range with obviously the DDX coming in. One thing that was I was very pleased to see was positive free cash flow of 24,000,000 That included a working capital inflow of almost $50,000,000 which was driven largely by improvements in receivables, on payables and continued work to control inventory through the quarter.
So all of that was good to see. Obviously, we have capital expenditures, about $50,000,000 in the quarter, a little bit below the quarterly run rate, but we do expect to catch up Through the year. So and also our interest expenses paid in Q2 and Q4. So Q1 does benefit by not having had that interest expense, but nonetheless, still pleased to see the positive cash flow. We finished the quarter with £575,000,000 of cash on the balance sheet.
That obviously includes the almost £80,000,000 of proceeds from the Place the bonds placing that we did in February, but good to end the quarter with Significant liquidity that gives us that continues to give us the runway to execute our business plan over the next couple of years.
And in terms of outlook for the full year,
we have guided that our expectations remain unchanged. We have remain unchanged. We have updated the net interest guidance to reflect foreign exchange rates. But other than that, We are still talking about 6,000 units plus of wholesale volume And mid teens EBITDA margin for the full year and CapEx in the range $250,000,000 to $275,000,000
I'm sorry. And at that point, back to Tobias. Thanks, Kian. Yes, we're very pleased with our Tremont, our trading was in line with expectations, but marked substantial improvement in regards to last year. So we have also continued to make progress And the execution of our business transformation through Project Horizon, so very important demand and supply, Dealer inventory stock for sports cars and GTs is cleared out, slightly earlier than we planned.
So we're done with that So the destock journey is over now. I'm probably not going to talk anymore about that. We're encouraged with the continuing growth of the order bank, The visibility which is given for us for sports, GT and DBX is really encouraging. In March, we A lot of it started the Formula 1 season, which really was a boost for the brand awareness. And as well, we have the Vantage Safety car and the U.
S. As a medical
car, we launched the first of our new vehicles planned for the next couple of years, the full advantage for Maligna vision, Our office improved horsepower and performance with unique badging and styling. And we're very pleased because The initial order bank, what we have built for that car is More than we expected at the moment. So it's really good and we have very perfect reviews from some customers and interest
Regarding the operational excellence of our plant, we
have taken action to improve the performance of our manufacturing In both sites, Gayden and Sandeta. For example, just Gayden moved to the single line operation by moving down Stations from 70 to 23 stations, from 400 cars almost by August last year, down to Almost 100 cars in the process to optimize the sense of getting to a similar approach now. And St. Afton, where we're going to move or St. Afton is going to serve with a new paint shop there And our page for all cars, both Sport Cars, GT and VX.
Actions Such as these are driving efficiency and improving client performance, that's for sure. This is all underscored by our commitment to quality, which is now embedded as well in our company reward Under the go to market segment of our strategy, we have made chances for our team, including bringing as We experienced luxury Audi Expert, the lead dealer operations here in Gaiden, a new head of Europe as well as President of Europe. And so we expand and strengthen our deal network as well on that note. For example, recently we appointed a new dealership in Germany and then more to follow, so another 2, 3 dealerships in Europe to follow Because we have certain opportunities here. Finally, within portfolio strategy and site planning, we have We located the whole assembly, which is part of the project in Horizon as well, for all the remittance, like an Aston Martin battery or the V12 speeds, it's gated.
So we consolidated all sports car manufacturing sites. We have more than 1, it was almost 3, In one location now here in Gayden in the main plant. With these special programs on track for delivery of this year as well as planned. As we said in the statement this morning, today's results underpin our confidence in delivering our exciting growth plans to transform Aston Martin And create a world class self sustaining luxury automaker. With that, we will be happy to take your questions now.
Back to you, operator. Thanks very much.
Thank Your first question comes from the line of Charles Caudigot from Redburn. Please ask your question.
Good morning and thanks for taking my questions. I just had 2, please. So the first, the core ASP is now back up to £149,000 Given the destocking is now complete and that the DBX made up 55% of wholesales in Q1, which I guess is Probably fairly typical of future periods. Should we assume that the core ASP now stabilizes At this level or at least until perhaps you reach the refresh of the front engine cars in a couple of years' time? And then my second question, I appreciate you stopped reporting retail sales figures.
But given the importance of the model, Can you just give us an idea on how many retail sales of the DBX you had in Q1 in comparison to the 600 in Q4? Or maybe just Web retail sales totaled more or less than the 746 wholesales. Thank you.
Let me talk about the ASP. Yes, we're really pleased with the ASP in Q1. It's fair to say it definitely does reflect Couple of the factors that you described with DBX coming in and DBX, we don't have any incentives with that car. It also reflects the fact that year on year, the level of retail incentives on sports cars is about half the level it was Last year, so in the same quarter last year. So those factors helped.
There's also some help from foreign exchange. The euro was Favorable in the Q1 and a couple of other factors. I don't necessarily say we see 149,000 Every quarter because I think the movements in foreign exchange and some movements in market mix may soften that a bit. But overall, pleased with the number and we'd be confident that the ASP will continue To show that year on year improvements versus last year, So almost our expectation is on a more robust level from that one. And Q1 was Q1 is very high spot.
Volume retail numbers and wholesale numbers are aligned now.
This is part of the journey,
and we finished our destock processes or project regarding the sports cars. So wholesale and retail is aligned similar to PBX. We keep our projection for the full year with 6,000 plus Wholesale, which is almost 50% DDX car and 50% sportsGT car line. So we keep that
Up and
running as the projection for that year. And retail is aligned to that foreseen number. That's the strategy of the company. Okay. Thank you.
Your next question comes from the line of George Carlias from Goldman Sachs.
Yes. Good morning, everyone, and thanks for taking my questions. The first question I had was on the working capital. Obviously, a good result there and good for free cash flow. And it looks like The quality was good as well with lower inventories and lower receivables.
Is there still scope to bring these down from today's level? Or do you think relative to sales volumes, this is the kind of level we should think about going forward? And then the second question I had was Just again on the ASPs. I was just interested to know, are you seeing an increase in option uptake by your customers? And is that helping with your ASPs?
One of your competitors gives a mid- to high teen revenue contribution from what they describe as personalization. Are you able to give us any insight into what kind of percentage of the ASP comes from customer selected variable options? Thank you.
Let
me take the working capital. Yes, really pleased, really pleased actually with the working capital improvements we saw in Q1, which is On the back of also working capital improvements we saw in the back end of last year, They've perhaps come a little bit quicker this year. It's part of our plan for this year, and they've come a little bit quicker in Q1. I think it reflects on the receivable side, it reflects some of the benefits of Having a stronger position, as Tabitha was just saying, with retail in mind with wholesale and cars and dealers not having cars in stock Oh, so long. So they end up paying the cars a bit quicker.
We also had put in a new receivables Financing arrangement for the dealers, which came into effect in the quarter. So that will continue to support Keeping those receivables very much under control through the year. So I look forward to that. And on the inventory side, there's always a bit more you can do in inventory. We'll always have cars in transit to markets, Of course, that will ebb and flow a bit depending on the volume, but some of the work we've been doing internally in the business, there's still Reduction in fleet inventory and there's reduction in inventory and work in progress in factories, which We still expect to see some benefit from Q2.
So I think the big bits of the working capital improvements probably happens. But going forward, we definitely look to optimize and keep this under control, Recognizing that it will always ebb and flow a bit because of volume and production timing.
On the operational side, we cleaned our guidance so far. So what we still not there's still a path to go Because our stock inventory in our warehouse is still not at the point. The more optimization to do with Project Horizon, So that's Galen and then Sandeep. That journey started now. So over the course of
the year, we see a further ongoing improvement on that Regarding our operations side. And although we don't give specific figures on options, uptake And the proportion, it is an important part of the revenue stream for us. It was slightly positive year on year In the quarter, so that's been a positive development and definitely something we want to build on going forward.
As I'll add on that, It is given. If you move away from wholesale and company stocked cars and you move to a more retail loaded Order intake, you move up, but that's given by nature kind of. If you're more retail oriented, You have a higher option take rate. That's the problem of the standard company always was more linked in company stock and dealer stock. This is not good.
Having more retail orders, you see a natural uplift on options.
Your next question comes from the line of Agnes Trede from Citi.
Hi, good morning. It's Angus from Citi. My first question is back on the high ASP numbers. You clearly called out lower incentive figures. Are we perhaps Well, are you perhaps a little bit disappointed with the EBITDA drop through on that?
I mean, are there any costs in the Q1 that we should be So OpEx costs going through that perhaps weighed on the operating leverage there that you could call out. And then secondly, please could you provide an update on where we stand on specials, particularly how we're getting on with the Valkyrie And any renegotiation of deposits on the Valhalla, please?
I mean, the short answer is no, we weren't disappointed in The Q1, the EBITDA performance was in line, in fact, slightly ahead of our internal Expectations on the back of volume that was in line with our expectations. So very much we felt Very much we felt that we were pleased with the performance. And there is in the quarter, if you look at the year on year bridge On Slide 5, for EBITDA in the quarter compared to Q1 of last year, you can see the you can obviously see the benefits of The volume, you can see the benefits of the net pricing, which is largely the lower incentives year on year. You can also see the benefits of lower Net operating expense is about $8,000,000 in the quarter lower in Q1 than the same quarter a year ago. So overall, we were pleased with how it went.
Like green specials, Well, as you know, this year is very loaded on the second half of the year regarding our projection. But Mercury is doing good. Yes, it's still a challenging journey, but there's no signal that we're not going to achieve our targets and over the course of the second half of the year, Nothing at all. So we do revenues every week. And I just drove it from Gaten to Silverstone, And it works.
It was really good. And Valhalla dumping was not a question. There is no significant move back and forth. So we We're going to present the new Valhalla to our customer in the next 2 months. And I'm really very optimistic that we gained traction back on that program.
And your next question comes from the line of Thomas Biffon from Kepler Cheuvreux.
I guess it's me. It's Thomas Besson at Kepler Cheuvreux. I must have not articulated properly, I guess. I have three questions, please. First, could you give us a bit more color on the order bank By model, in terms of, I don't know, maybe in months of sales or units, however you want, And by region, the second question, is it possible to have some comments on the evolution of ASPs For sports cars, I mean, you mentioned lower incentives.
Basically, I'd like you to comment on the ability to price up these products This was kind of the sale period that took place over 18 months and that's done now, if I understand correctly. And then lastly, I think there have been comments about the 1st battery electric vehicle from Aston in 2025. I'd like you, if it's possible, to comment on that to confirm the timing and confirm if the technology comes from Mercedes or whether it's in Theurgy comes from Mercedes or whether it requires some specific investments and
Okay. Hopefully, I kept everything in mind. OldenBank, Very comfortable with Ola Bank Q3, all call lines, for us, very comfortable and really good. Second question was the ASP
and opportunity price ASP
is yes, we should see a recovery of ASP in sports costs. That's just due to the reason that we cleared out the stock. And now that it's a demand driven order situation, We see an increased share of retail orders in our order income per week. Just the Formula 1 addition is very surprising in regards to retail in a positive way, absolutely. So all of these things are helpful for recovery in AST, and I think we're going to see a more robust AST and for sure over the whole year.
And this is the future for the company. Price increase in sports cars, Formula 1 addition is a good example. It is an increased pricing for formula 1 addition. You have to consider always that we are facing a bit of overage an aged generation of sports cars. Anyway, what we see as order intake from the customer side is more than promising.
That's more than we thought. So yes, what we're working on is module 2022 So that's in the final definition. And there's some room for improvement. And we bring a new configurator to market, which is an exceptional customer journey, which I think gives us an opportunity to Get to higher option take rates and things like that, but it's a bit too early to discuss that in detail. And the last question was on spare time.
We have a big focus on electrification and electric drive. It is given that all mid engine programs for Hiala and Thank you. It's going to be plug in hybrid. We're going to have the first EVX as a plug in hybrid in 'twenty three. The launch of the derivative of BDX this year, which is an SOP in September, Which is given, so there's nothing what's going to hold us back.
It's a mild hybrid. That's not a plug in, it's a mild hybrid. For plug and hybrid, the whole hybridization and electrification journey starts in 'twenty three. And after 'twenty three, there's no car launch anymore without electrification. The purely electric driven cars and the battery driven car, that's mid Of that, the case, we have to achieve that.
And it's clear for us. And yes, we're in discussion with the proceeds is what we're going to do there. But there is more than one platform Yes, I have to consider it. But yes, it's a clear journey, and I think it's mandatory for us to have that Electric drive, next generation sports car, yes, it is going to be fully electric That's mandatory. That is a must for us.
And then it's a glide path into 2030 When you increase your portfolio in electric drive cars and you decrease your electrified or standard ICE driven cars,
Thank you.
You're welcome.
Your next question comes from the line of Horst Schneider from Bank of America.
Yes. Good morning and thanks for taking also my question. Just have got a few left. I remember to the last call that we had on the full year 2020 results where you said that you were steering away a little bit volumes From the U. K, I think you were referring to the DBX just because some dealers were still closed.
I'm just interested to know How that is developing now since the dealers, they have opened up in the UK. So how do you expect your sales in the UK going forward, not just DBX, but in general? Should we expect a major uplift maybe as of Q2 already? And then the last one, it's again a question related to the I just want to know what is the feedback that you're getting from some countries On the high emissions that your car still produce. So when we look, for example, at a country like China, where the BEV seems getting More and more important, what's the feedback from the customer that you're getting there?
I mean, is that holding the people back to buy the DBX? Or you think with the PHEV, the sales could be much, much stronger? Just some color on that would be appreciated. Thank you.
U. K. Is in a recovery mode at the moment. So we did right when we transformed orders Into other regions, it was absolutely the right thing to do. Now U.
K. Is in a recovery mode, and we see good improvement at the moment. And probably I hope that it's going to last for everybody. It's similar for us than for other brands. So I think Hopefully, we can catch up with the whole year projection for this year in U.
K. But anyhow, other regions are stronger than we expected. So It's okay. It's good. We do a lot of things we've done in DBX.
We performed 3 weeks of test drive or we are in the middle of 4 weeks of test drives in Millbrook and on the growing ground, the conversion we see there from these is really promising. So it's a good journey for Now in U. K. Back again.
And
regarding emissions, regarding fuel consumption, it's Almost like a few consumption. The situation is you have still many customers in China buying products like the DBX. It's an increasing segment, it's a growing segment, the luxurious segment, Especially the SUV Luxury segment is growing. Yes, you have to have an electric drive car there and the marketplace delays, 25, 26. That's crucial and that's important.
But feedback from customers is if you talk about customers, they bought the car. So they bought the car. So, do we have projections for DPX regarding emissions or something like that? It's hard to answer honestly. You see the segment, the segment is still growing.
PHEV, as you know, you need a range in China. I mean, you don't get any more The number played with PHEVs, so that changed in China. So yes, you still have Hi. And consider you have an increasing high West Pocket in China still. And that's going to I don't know how long they're going to last, but we are in a similar situation than many, many, many other manufacturers as well.
Well, we haven't cleared such engine parts for electric.
And last follow-up. If I want to order EDBX now, How long would I have to wait for that? It's still this 5, 6 months that you are booked out on the DBX?
Yes. So probably November.
All right. Okay. Thank you.
You're welcome.
Your next question comes from the line of Christophe Laskowiak from Deutsche Bank.
Hey, good morning and thank
you for taking my question. A bit of a follow-up really on the questions on the order book. The current visibility into Q3 obviously is encouraging. My question will be, is that essentially where you plan to be in terms of The order book and order awaiting time for the customer, let's put it that way. Or do you plan to push it out or increase it even a bit further?
And In that regard, where would you see the sweet spot for the order book and waiting times also when it comes to pricing the models
We are really comfortable with that situation at the moment. Is it really Added value, if you have way too useful a car, I'm not too sure about that. The customers are especially in the luxurious segment, They want to buy a car and they want to have a reasonable waiting time for that. And sometimes if they have to wait too long, they don't like it. It is hard to judge, yes.
We need kind of a proper order book, and we are comfortable with the order book as it is. We are really flexible now on the manufacturing side, and we can breathe easily, especially in sports cars. We're going to We can easily improve line or change our line rate by 3, 4, 5 vehicles per day without any different efficiency. So it's always a similar efficiency how we're going to run our lines now in future. And that makes a difference to the past.
So on order book, a waiting time of 6 months, 7, 8, 9 months, it depends as well from the segments. So likely, our customers waiting now for 2 years. In the mid engine program, if you have really engaging sophisticated product, We're going to wait for 12 months, 15, 16, 18 months. On the DBX, What we drive is customization and personalization, which is very important for us. Our new configurator is going to be benchmarked in the segment, How you can configure in a personalized way, in a very personalized way your personal DDX, That's a longer waiting time.
But I think 6, 9 months, AutoBank, Quite comfortable. And we're going to have an experiment with us with the BBX. So that's going to See what comes, but I think we're going to have a longer waiting time beginning of next year with PBX, I'm sure about.
Thank you. On the derivatives, do you already take orders for that? Or when you launch it in Q3, that's when that's the point where you really We'll take it out.
No, we're
going to take orders by, I think, September.
All right.
Thanks a lot.
Your next question comes from the line of Jose Asumendi from JPMorgan.
Good morning, Tobias and a couple of questions, please. I think the first one is, do you see an opportunity to create a bit more of So change in the geographical mix and use this COVID situation to the post COVID Transition Phase 2 to reduce a little bit more the dependence on the U. K. Market and sell more into Europe into U. S.
And China going forward? That'll be the first question. And second question, can you speak a little bit more about this sort of conceptual path to Free cash generation or cash generation in the company over maybe a 1 or 3 year view. Can you talk about the buckets of unit sales, EBITDA and then whether from a manufacturing perspective, whether more efficiency gains you can generate, which could improve structurally also the free cash flow of the company. Thank you.
Petra will answer the first and the third one probably. And the second one, I'll hand over to Ken. Structural changes in the regions, yes, we just appointed the new Head of Europe. There are many things going on. I'm not going to talk about that in detail because that's kind of a very sensitive topic, what we change in regions.
But you're going to face a serious change in all regions. Just Europe, we appointed the new Head of Europe. We're going to restructure Europe as a region. U. K, we have various new strong person.
He used to run Europe. He now take care about U. K, and he's really disconnected, and That's one of the reasons why we improved here. So there's a lot of things that we're going to take as an action. And there is a lot of room for improvement, We do so.
But it's tentative, so please My apologies that we are not talking detail about that. Efficiency in the company is key for us. It's absolutely key. And just now, I came in the company, we had 400 cars in the process in Gieden to build 12, 15 cars a day. Now we just have 100 cars in the process.
We had 70 assembly line stations, 70, 70. Now we have 23. We're going to have all cars in one paint shop in the future in Zendesk, which is the most efficient way to paint the cars because of paint shop, you have to run that full throttle. So we're going to shut down the paint shop in Gayden. We just bring all the special paints, which is crucial for us as a brand, We're going to do that in Gaitan.
So Gaitan is the hub of sports cars in the future. We brought in Vicory, which was a bespoke building before In a different manufacturing site, we brought in Ygrene into the main plant in Gayden. We brought in all the special manufacturing sites Into the location of cadence, everything is under one roof now. And there's more to come. We have some optimization program for Sunfafen as well That started.
4 weeks ago, if you would come to the company, probably you have been here before, but If you have been here before, you would see a huge, huge difference. This is the feedback that I receive from everyone. So it's a difficult thing logistics, inbound, outbound, nothing is untouched. Are we talking about an efficiency gain of 35% to 45% In summary, 50 percent of efficiency gain. We touched base on bill of material, on material cost as well, We saw almost not that simple because we have a long lasting contract with our suppliers, but as well we see some improvements there as well.
And we're working on a facelift of whole sports car generation. Even there, we see improvements by sourcing new parts, Which is we never thought that it's going to be that much, but it is a lot of fun. With that?
Yes. And on the medium term, The medium term vision, as we've talked about before, targets for $500,000,000 of EBITDA Circa $2,000,000,000 of revenue and supporting that 10,000 units or so of Volume. And the journey towards that has a number of pieces. And I think that was your question. In terms of volume, that's clear, Supported by refreshed sports cars and more derivatives on the DBX side giving us the opportunity to get towards that volume level.
And that volume, obviously, bringing the operating leverage with it to help improve the EBITDA margin as we move through time. So that's point number 1. Point number 2, clearly in terms of Net revenue position, we've made some big step forward this year compared to last year with the lower incentive spending on the sports I think as we look through time, there's more opportunity on that side. Refresh sports cars allow us again to move forward on the Net revenue side and a mix of derivatives of DBX also Allows the opportunity for improvement on the net revenue side. Also, Tabitha talked about the cost side, Where we've made some really big improvements, are making some big improvements this year on the manufacturing side.
Here, controlling what we can control in the factory, which will help through this year. And then as we go through time, material costs, yes, it takes a bit longer, but we plan and need to make improvements on the material cost side as And those things together are both structurally. To get $500,000,000 of EBITDA On revenue of $2,000,000,000 or so is an EBITDA margin 25% to 30% in that sort of range. Having that sort of EBITDA margin requires us to have a gross margin of circa 40%. Right now, in this quarter, the gross margin is right about 30%.
Q1 last year, the gross margin was 16%. So we're clearly on a journey towards that. But the building blocks that I just talked about in terms of volume and operating leverage, Further improvements in net revenue with lower incentives and better mix of fresh products And continued work on the cost side are the building blocks we need to improve that gross margin. We'll keep the The fixed cost of the business under very close control, and that's those are the building blocks towards that Medium term target that we've given and are standing by.
Thank you. Thank you very much. Very interesting. Thank you.
We have no further questions. Please continue.
So thanks very much for joining us this morning and for your interest. We are looking forward to keep you updated on our progress regarding Project Horizon and all our turnaround On growth strategy, with our report on the first half of the year results at
That does conclude our conference for today. Thank you for participating. You may all disconnect.