In the 2023 Full Year Results Presentation, Aston Martin Lagonda Global Holdings PLC (AML.L) showcased a year of substantial financial growth and outlined optimistic plans for the future.
Executive Chairman Lawrence Stroll highlighted an 18% increase in year-on-year revenue and a strengthened gross margin. The launch of the new DB12 and plans for an ultra luxury SUV and a mid-engine hybrid supercar were key highlights.
Looking ahead, Aston Martin aims for positive free cash flow in the latter half of 2024 and anticipates high-single digit volume growth along with significant profit and EBITDA increases.
Key Takeaways
- Aston Martin achieved an 18% revenue increase to £1.6 billion in 2023.
- Gross margin improved to 39.1%, with a target of around 40% for new models.
- The company reported a net debt of £814 million and a net leverage ratio of 2.7x.
- DBX707 SUV sales were strong, accounting for 71% of total SUV wholesales.
- Aston Martin plans to refinance its outstanding debts in the first half of 2024.
- The DB12 has been sold out until the end of the third quarter of 2024.
- Aston Martin is expanding its retail strategy with new showrooms in Tokyo and London.
Company Outlook
- Aiming for positive free cash flow in the second half of 2024.
- Anticipating high-single digit percentage growth in volumes for 2024.
- Planning around £350 million investment in new product development in 2024.
- Expects significant growth in gross profit and EBITDA in the second half of 2024.
Bearish Highlights
- Increase in net debt to £814 million.
- Customer deposits expected to decline as certain delivery programs conclude.
- A slight disappointment in Q4 cash flow, attributed to timing issues.
Bullish Highlights
- Record financial growth with enhanced gross margin.
- Strong performance of the DBX707 SUV model.
- Successful launch and sell-out of the DB12.
- Confidence in exceeding previous sports car volume levels.
Misses
- No specific details provided on overall order intake and order book status.
Q&A Highlights
- DB12 in full production, with the first year's production of Valhalla sold out.
- Refinancing plans are on track without considering equity.
- Plug-in hybrids to be introduced before full battery electric vehicles.
- Focused on a portfolio of ICE, PHEV, and BEV vehicles until the mid-2030s.
Aston Martin's 2023 financial results and future projections paint a picture of a luxury car manufacturer on the rise. With a clear strategy for product innovation, a focus on electrification, and a commitment to luxury retail expansion, Aston Martin is steering towards a prosperous and sustainable future. The company's emphasis on maintaining a high gross margin and its plans for debt refinancing further reflect a prudent approach to financial management. As Aston Martin gears up for new model launches and continues to attract a younger consumer base through its Formula One team, investors and enthusiasts alike will be watching closely to see if the company can maintain its momentum and achieve its ambitious targets.
Full transcript - None (AMGDF) Q4 2023:
Lawrence Stroll: Good morning. Thank you for joining the Aston Martin Lagonda 2023 Full Year Results Presentation and Q&A. I'm Lawrence Stroll, Executive Chairman. I'm pleased to welcome alongside me today Amedeo Felisa, Chief Executive Officer; and Doug Lafferty, Chief Financial Officer. The historic year of our 110th anniversary 2023 marked an important crossroads for Aston Martin Lagonda, an opportunity to reflect on our rich heritage and progress to date, while it's accelerating forward in our vision for the company to be the most desirable ultra luxury British performance brand. It's now almost four years since I became Executive Chairman. As I outlined other Capital Markets Day in June 2023, we have made tremendous progress within that time. We have transformed our iconic global brand, reinvigorated our product portfolio, and improved our balance sheet supported by our long-term strategic partners. As a high performance car enthusiast myself, I take immense personal pride in the collection of stunning new models we've introduced to our community of owners and enthusiast around the world. We've combined Aston Martin's renowned for timeless design and Savile Row craftsmanship with the very best performance engineering and latest technology. In 2023, Aston Martin delivered significant financial and strategic progress. This has been driven by continued execution of our growth, strategy and demand for ultra luxury, high performance vehicles. We have created one of the strongest and most exciting product portfolios in our segment. Leveraging all the skills and knowledge from across the business, we're benefiting for our continued investment in product innovation. Infusing ultra luxury with high performance, our brand position sets us apart as a truly unique business, while investment in people and leadership, which Amedeo will discuss shortly, positions us strongly for accelerated growth in the future. As we reviewed 2023, it's clear this has been a year of growth for Aston Martin. Supported by a rich mix of sales, we have taken average selling prices to record levels with 18% year-on-year revenue growth. This resulted in a significantly enhanced gross margin, continuing progress towards our long-standing target of around 40% gross margin in 2024, which Doug will take you through in more details. The two graphs showing ASP and gross margin improvements since I took over as Executive Chairman in 2020 highlight the significant progress we have made. We are benefiting from our commitment to ensuring all new models have a minimum 40% gross margin. Our journey of product transformation reached an important strategic milestone in 2023, as we commenced delivery of DB12, the first of our next generation of front end gen sports cars. Launched to tremendous excitement nine months ago, we continue to receive positive acclaim. DB12 has been named Car of the Year by the Robb Report magazine and confirmed by Autocar magazine as the true Super GT, toppling Italy's finest in a group test. The model has driven reappraisal of Aston Martin amongst new audiences, while it's at the same time engaging our loyal customers. Specialists continue to play a significant role, demonstrating the company's unique ability to operate at the very highest levels of the luxury automotive segment. This included Aston Martin Valkyrie, along with the first Valkyrie Spiders, the production of the DBR22 and the 110th anniversary celebration Valour. The DBS770 Ultimate, the most powerful production Aston Martin ever, was unveiled in January 2023, with the entire run sold out before production commenced. We’re also continuing to explore the experience for demand for the world's most powerful ultra luxury SUV, DBX707, which has added more industry awards to its collection and enjoys strong visibility as the official FIA Medical Car of F1. We continue to invest in establishing Aston Martin as an ultra luxury high performance brand, supercharged by our continued involvement in the pinnacle of motorsport, Formula One, proving to bring our brand to New Orleans and drive heightened consideration of our products. Just last weekend, the latest season of Drive to Survive was released globally, featuring Aston Martin in episode one. The most watched show on Netflix (NASDAQ:NFLX) in more than 40 countries, this series prominently brings our brand and products to millions of viewers. Capitalizing on the prevailing trend of personalization within the realm of luxury goods, our Q by Aston Martin bespoke division has helped to increase options revenue, while it's providing the tailored service our clients are seeking. The key landmark in that ultra luxury retail strategy was achieved in June 2023 as we open our first global flagship Q New York, on one of the most prominent corners of midtown Manhattan. Aligned with our renewed corporate identity, the new showroom brings the highest levels of our Q by Aston Martin bespoke service to North America for the very first time providing the most sophisticated luxury specification experience available anywhere in the world. 2024 has already proven to be another significant and exciting one for the brand with the highly anticipated arrival of our new products. This includes the completion of our thrilling lineup of new generation front engine sports cars with the recent unveiling of Vantage receiving significant excitement from dealers, customers and international media. I hope you enjoy seeing the promotional video with Fernando Alonso at the start of this presentation. Boosted by the addition of over 150 brake horsepower, this is the fastest and most driver focused Vantage in the famous nameplates 74 year history, a model which represents our commitment to delivering a thrilling driving experience and integrating the very best in motorsport technologies. Joining Vantage and DB12 later this year, we will reveal a new flagship sports car to complete our front engine portfolio, replacing DBS. Continuing our highly desirable Specials program, we have an incredible mid-engine hybrid supercar on the horizon in the Valhalla. Prototype testing has already taken place and we're currently on course to enter production before the end of this year, marking a key step in our electrification program. Critical to the success of our electrification strategy is a supply agreement with Lucid Group (NASDAQ:LCID), a world-leading electric vehicle technologies company. The long-term relationship will help propel our first battery electric vehicles, as the company develops alternatives to the internal combustion engine. Recognizing changes in our market, we will operate a blended drive train approach between 2025 and 2030, including PHEV and BEV with a clear plan to have a lineup of electric sports cars and SUVs. And finally, we look forward to continued expansion of our ultra luxury retail strategy in 2024. This will include opening to our new showroom at the Peninsula Hotel in Tokyo, and building on the success of Q New York, a second flagship in London, with a high profile location now identified. These and other advancements will support the delivery of the company's near and medium term financial targets, including achieving positive free cash flow generation in the second half of 2024, as we unleash the power of our brand and continue our growth trajectory. And with that, I would like to hand over to Amedeo.
Amedeo Felisa: Thank you, Lawrence, and good morning everyone. Before introducing that for the financial, I would like to provide some insight on the operational progress we made as an organization in 2023. We are led by one guiding principle, no one builds an Aston Martin on their own. And I believe that significant progress we have made in 2023 demonstrate the strong speed of collaboration. As Lawrence said, 2023 was a landmark year for us with multiple portfolio transformation. Demonstrating our operational progress, we have successfully delivered [Indiscernible] model to the market. The majority will reach well in line with our initial production plan. Commercially, the successful launch of DB12 has reinforced the market opportunity we saw in our new positioning and set the basis for our future product direction. Media and customer feedback about the design, performances and driving dynamics of the car has been incredible. Whilst incredible proud of the step up made with DB12, the ramp up of the production was lower than expected, as it was temporarily affected by supplier readiness and integration of the new E architecture that support the fully redeveloping infotainment system. That said, the process of resolving this initial production orders has provided valuable learnings. Particularly we are positioned as well for the future modern launches as we embrace our culture of operational improvement, mitigate the supply chain risk and focus on quality, in line with our ultra luxury position. I am pleased by the continuous improvement and action we have taken to align the business for the future direction. As a business, we are supporting and developing our people, while delivering success with model allows us to drive our growth ambition. In 2033, we are strengthening our team with expertise in important areas such as software supply chain, we have expanded our commitment to training, investing in electrification scale, and in-house capability to complement our landmark supply agreement with Lucid Group and strong temporary technology partners. Our investment in people goes far beyond new highs. In 2023, we formalized new company values and our commitment to become a great place to work. This runs alongside the completion of the first phase of renovation of our Gaydon headquarters. We have also expanded employee engagement program, including through the introduction of our first all employee share plan, giving colleague a sense of ownership of our business. And we expanded our Racing Green sustainability strategy with updated targets related to carbon emission and biodiversity. Following last year progress, let me now look to our future operational goals. At our Capital Market Day in June 2023, I had planned four areas of mid and long-term priorities for Aston Martin. Our supplier; working with supplier as partners ensuring the readiness and commitment to support our product innovation and the ramp up of new models and critically further strengthening relations with our key strategic supplier including Mercedes Benz (ETR:MBGn), Lucid and Geely. Manufacturing; driving continuous improvement in our product launch program, whilst at the same time skilling teams to support our electrification transition and targeting zero accident across our facilities. People; attracting and retain the best talent as we target Great Place to Work certification and uplift female representation in leadership position. Sustainability; continuing our journey to net zero and maximum energy efficiency. There are priorities that our entire organization are engaged with and focus on, as we drive the future growth and vision at Aston Martin. I will now hand over to Doug to take you through the financial result of the outlook.
Doug Lafferty: Thank you, Amedeo, and good morning all. To complete today's full year results presentation, I'll take you through our financial performance for the year, before spending some time on our 2024 guidance, our medium-term outlook, which remain unchanged. As Lawrence and Amedeo have discussed, 2023 was a landmark year for the transformation of our portfolio. This has also been reflected in our financial performance as we made significant progress towards our near and medium-term financial targets. Importantly, this includes progress towards achieving our long-standing positive free cash flow inflection point in the second half of 2024. As shown on the 2023 financial summary slide, we have delivered continuous improvements since 2020 with a positive trajectory across our whole sales, revenues and adjusted EBITDA. This demonstrates the impact of our evolving product portfolio, continual operational improvements and ultra luxury high performance brand strategy outlined earlier in the presentation. Starting at the top of the slide, total wholesales increased by 3% to 6620 units, driven by a 14% growth in sport and GT models. Revenue increased by 18% year-on-year to 1.6 billion pounds, which reflects the continued execution of our growth strategy and enriched product portfolio with increased options revenue helping to drive our average selling prices to record levels. Adjusted EBITDA of 306 million pounds increased by 61%, delivering 490 basis points of year-on-year margin expansion, primarily driven by 42% increase in gross profits. Q4 was a record EBITDA quarter for Aston Martin at 175 million pounds, a 58% increase year-on-year. Q4 performance reflected the expected growth in sports and GT models, with the production ramp up of DB12, supported by specials volumes, including Aston Martin Valkyrie Spiders, DBR22 and Valour models. Looking at the full year wholesales and ASP is in more detail. The split of our wholesales is shown on the left hand side of the slide. Sports and GT volumes represented 53% of the mix, supported by deliveries of DBS770 Ultimate and DB12, despite the slight delays incurred to the initial production ramp up. It is worth noting that due to the timing of DB12 deliveries in December, total wholesale volumes were temporarily ahead of retail volumes. Prior to the initial delays, retailers across the portfolio were ahead of wholesales for the year and following the unwinding of this position early in 2024, we expect to see retails outpace wholesalers again going forward, aligned with our demand-led luxury retail strategy. Moving to SUV wholesales. We're delighted that the DBX707 is now clearly established as the benchmark in the ultra luxury SUV segment. DBX707 volumes increased by 25% in 2023 and represented 71% of SUV wholesales, up from 52% in the prior year with this dynamic benefiting ASPs and margin. This demand underpins the next phase of the models evolution, as the DBX707 will become the sole SUV model marketed in 2024. We expect this to further support our margin expansion. Overall SUV volumes were down 9% year-on-year, reflecting the portfolio transition and the previously-mentioned elevated Q4 2022 wholesales following disruptions earlier in 2022. As I've also mentioned, the overall contribution from our special models were strong this year. This comprised a mature cadence of Aston Martin Valkyries, including the first Aston Martin Valkyrie Spiders, as well as DBR22 and initial Valour deliveries. This demonstrates the company's unique ability to operate at the very highest levels of the luxury automotive segment, attracting both new customers and collectors to the brand. On the right hand side of the slide is wholesale average selling price, which was again one of the highlights of the year. Both core and total ASP has reached record highs reflecting our enhanced product portfolio, supported by the repositioning of and investment in the Aston Martin brand over the last four years with our ASPs achieving a CAGR of 14% over that period. In the year, core ASP was 188,000 pounds, an increase of 6% year-on-year, driven by strong pricing dynamics and favorable mix from DBS770 Ultimate, DBX707, V12 Vantage Roadster and the new DB12. Total ASP of 231,000 pounds for the year increased 15%, also reflected the Specials program I've mentioned. We are addressing the growing demand for unique personalized products in the ultra luxury market, which drove increased options revenue in 2023, further supporting our ASPs and margin progression, which I'll come on to shortly. Moving on to the geographical split on the next slide. As you can see, wholesale volumes remained well balanced across all regions in 2023, reflecting our global demand, which is strengthened by our strategic marketing activities and relationship with the Aston Martin Formula One team. The Americas and EMEA, excluding the UK, were our largest regions in 2023, collectively representing 61% of overall wholesales, primarily driven by strong demand for DBX707, DBS 770 Ultimate and DB12. We also grew volumes in the UK by 3% year-on-year, driven by demand for our sports and GT models. Finally, APAC volumes declined 20% year-on-year, but excluding China these were up 12% year-on-year, driven by DBX707 and DBS770 Ultimate volumes. In China, volumes decreased by 47% compared to 2022. This was driven by a combination of market dynamics and the lapping of 2022s peak in DBX straight six volumes. China continues to be a market where we see significant opportunity for long-term growth and we're excited to bring a new portfolio of products to this market. Moving to gross margin, this remains a key building block of our future ambitions and financial targets with, as Lawrence mentioned, our commitment to ensuring all new models achieve a minimum 40% gross margin. 2023 saw us make a significant improvement of 650 basis points towards our long standing target of around 40% with a gross margin of 39.1% for the year. This reflects the benefits of our ongoing portfolio transformation, which drove favorable pricing dynamics as well as product mix and volume growth. As you can see on the slide, our core range gross margin performance was the largest driver of the overall improvement, contributing approximately 450 basis points year-on-year. We improve our mix towards DBS770 Ultimate, DB12 and DBX707, as I described earlier. As we continue to deliver our next generation of sports cars, we expect gross margin from the core range to continue improving. Limited edition high margin specials are also an important part of our overall strategy and these drove approximately 360 basis points of year-on-year improvements to overall gross margin, with Aston Martin Valkyries, including Aston Martin Valkyrie Spider, Valour, and DBR22 deliveries in 2023. As mentioned, for our strategic focus on addressing the demand for luxury personalization, we delivered increased options revenue, which further supported our margin improvements. These positive improvements were partially offset by general inflationary impacts on higher manufacturing logistics and other costs and foreign exchange headwinds. On this slide, you can see our adjusted EBITDA, which increased by 61% year-on-year to 306 million pounds, with a margin expansion of 490 basis points to 18.7%. The biggest positive drivers with a strong pricing dynamics mix and options revenue growth. This was, as you can see, partially offset by foreign exchange headwinds, general inflationary impacts on the cost base and our ongoing planned investment in the brand through marketing activities to support our future growth, leading to a 26% increase in adjusted operating expenses. During the year, we also recognize 11 million pounds due to the positive revaluation of our investment in AMR GP Holdings Limited. In the table on the right hand side, and as previously guided, depreciation and amortization increased year-on-year, driven by the timing of our Specials program deliveries, as well as accelerated amortization of capitalized development costs ahead of the launch of our next generation sports cars. Our adjusted operating loss reduced to 80 million pounds from 118 million pounds, despite the 25% increase in D&A. Net adjusted financing expense decreased significantly versus 2022 to 92 million pounds, influenced by the positive 61 million pounds non-cash FX revaluation of our US dollar denominated debt. Finally, adjusting items including ERP implementation costs, one-off legal expenses, movements in the fair value of outstanding warrants and financing expenses associated with the transactions we concluded during the year. Now looking at our capital expenditure, cash flow and balance sheet. Capital expenditure in 2023 totaled 397 million pounds, as we continue to invest in our future product pipeline, including our electrification program, which will deliver significant future benefits to the company. As we announced in June 2023, we entered into a new strategic supply arrangement with Lucid Group and made our initial technology access payment of 27 million pounds in Q4 2023. Excluding this, our CapEx was in line with our initial guidance. Free cash outflow increased to 360 million pounds, including a 63 million pounds outflow in Q4. We guided a Q3 to positive free cash flow in the fourth quarter. However, due to the timing of DB12 and Valour deliveries at the end of the year, we did miss this target with the year-on-year receivables increase of 82 million pounds. We saw the related receivables unwind in January this year. As shown on the slide, we also increased our CapEx by 111 million pounds for the reasons I just outlined and this was also reflected in our free cash flow in 2023. At the end of 2023, our net debt position increased to 814 million pounds, whilst we reduced our net leverage ratio to 2.7 times. I will return to our net debt position shortly after providing some further color on free cash flow. Starting with the loss before tax, and adding back D&A and other items, including tax cash paid, resulted in 231 million pounds of cash generation. Working capital was an 86 million pound outflow, an increase from a 15 million pound outflow in 2022. This was primarily driven by the 82 million pounds increase in receivables, resulting from the timings of the delivery of DB12 and Valour in December 2023, as I mentioned, those related receivables unwinding in January 2024. This was partially offset by a decrease in inventories of 12 million pounds due to reduce work in progress and finished goods and a 51 million pounds increase in payables due to high production in December 2023. As we delivered Specials throughout the year, and in particular, during Q4, the balance of deposits held reduced by 66 million pounds. After CapEx, as I previously described, and net interest payments of 109 million pounds, our free cash outflow for the year was 360 million pounds. We expect this to materially improve in 2024, as we execute on our new model deliveries, helping us to reach the positive free cash flow inflection point in the second half of the year. Turning to cash and debt. We ended the year with 392 million pounds of cash, reflecting the free cash outflow as I've described, partly offset by the proceeds from August's placing and proceeds from the new shares issued to Geely. As previously guided, we also redeemed a portion of the outstanding secondly notes in November 2023. As described earlier, net debt increased to 814 million pounds. However, due to the strong EBITDA performance, our net leverage ratio at the end of 2023 reduced to 2.7 times from 4 times at the end of 2022. We continue to focus on our mid-term deleveraging targets. Now looking ahead to our 2024 guidance, which remains unchanged. We expect 2024 to deliver another year of significant strategic and financial progress. We remain on track to substantially achieve our 2024, 2025 targets in 2024. Driven by continued strong demand for our products, and boosted by the next generation sports car launches advantage and our final front engine sports car, the flagship DBS replacement later in the year. In terms of volumes, in 2024, we expect to deliver high-single digit percentage growth, driving enhanced profitability and EBITDA with gross margin further improving to achieve our long standing target of around 40%. This combination of volume growth and margin enhancement is expected to deliver EBITDA margin expansion continuing into the low 20s. Important to note is the profile of 2024, which is predominantly driven by the launch timings and ramp up of the next generation sports cars. We expect wholesale volumes to be heavily weighted to the second half of the year and for that to result in significant growth in gross profit and EBITDA in the second half as compared with the prior year. Further to this, we expect that our continued capital investment in new product developments to support our growth strategy will total around 350 million pounds in 2024 and for this to be relatively evenly spread across the year. As I've mentioned, we expect free cash flow to materially improve in 2024 and to achieve our targeted inflection point for positive free cash flow generation in the second half of the year, driven by the timing of wholesale volumes. Finally, in line with our Q3 2023 results announcement, we expect to refinance our outstanding debts in the first half of 2024. We are in the advanced stages of preparation and look forward to launching this process in due course. Our medium-term outlook for 2027, 2028, on the right hand side of the slide, remains unchanged. So to close and as Lawrence and Amedeo have outlined, with our portfolio, brand and operations, 2024 will be another significant year for Aston Martin's growth. We thank all the teams that have supported the business to deliver the objectives this year and will continue to focus on ensuring we deliver value to all of our stakeholders. Thank you and I'll now hand back to Lawrence before the operator begins the Q&A session.
Lawrence Stroll: Thank you, Doug and Amedeo. To conclude, in 2023, Aston Martin delivered significant strategic milestones and further financial progress. Joining DBX707, the best performance SUV in the luxury segment and now the highly acclaimed DB12 and Vantage move us another step closer to having the newest and the strongest product portfolio in our segment. With a completely refreshed product rage, our showrooms are being transformed. With 60% customers new to the brand, we are not just driving reappraisal of Aston Martin, but are welcoming new franchise inquiries and investment from our dealer partners. These innovations, along with operational advancements, will support the delivery of the company's near and medium-term financial targets, which remain unchanged. This includes achieving our targeted inflection point for positive free cash flow generation in the second half of 2024. I could not be more excited about the future, as we further unleash the power of the breath, and to continue our growth trajectory. And on that, I would like to open for questions.
Operator: [Operator Instructions] Our first question today comes from George Galliers from Goldman Sachs. George, your line is open. Please go ahead.
George Galliers: Thank you and thank you for taking my questions. I wanted to ask three questions if I may. The first one is related to volumes. The top end of your guidance for this year suggests volumes of somewhere between 7000 and 7300 units. Could you give us some insight into the anticipated split between the models that you see for this year? And also, although you've said it will be heavily weighted to the second half, could you also help us a little bit in better understanding the distribution by quarter? Second question I had was with respect to the new Vantage. Looking back at the DB12, I know many journalists are comparing the interior quality to a Bentley and similarly the performance and driving dynamics have been very well received by mainstream media. Are you content that the media praise is sufficiently converting into consumer interest and ultimately orders? And have there been any lessons learned from the DB12 introduction that are going to result in you doing something differently with the Vantage in order to maximize consumer impressions? And then finally, maybe for Doug, just with regards to customer deposits, they still form a substantial part of your net cash balance. In terms of treasury and liquidity management, are you content with this setup? Do you have a target max threshold of the amount of cash liquidity, which should be covered [Phonetic] by customer deposits? Thank you.
Lawrence Stroll: It is Lawrence, I'll take the first two. So firstly, DB12 got off to the greatest launch that we've ever had in our 111 year history with thousands of customer orders before anyone ever saw or touched the car based on the launch that happened in April in the south of France before the Monaco Grand Prix. We've never had a launch with that level of customer retail tagged orders of the thousands. Then, as you rightly point out, when the journalist got to drive the cars, it got critically acclaimed as the best front engine sports car probably ever made in the world, so that's a hell of a statement comparing to our competitors in other parts of the world, and I'm sure you've seen the magazine articles. So before we get into interior with the driving dynamics of the car that were so impressive, DB12 really took a giant step from DB11 in terms of driving dynamics, in terms of horsepower, and what you're talking about in terms of our new interiors. So it really focused on delivering the Super GT, we were looking for super performance, outperforming our competitors with the greatest newest touchscreen HMI interior. So we couldn't have been happier with the reception by the automotive world. The customer's orders backed that up and we are now ramping up, as you know, our next car Vantage, which we launched last Monday, is a trilogy of cars at Silverstone with our Formula One car at our GT3 racecar. Same level of excitement is the new Vantage versus the predecessor model, far superior 650 horsepower, new vehicle driving dynamics, new dampers, new suspensions, and again, new interiors. Always the biggest complaint in the previous models was our interiors were dated, so we've addressed that and took it to a new level. And ultimately, later in the year, you'll see our DBS replacement, which will be our most exciting front engine sports car flagship. If you look at our history, George, on a full run rate on all of our predecessors, DB11 predecessor Vantage and DBS, on a full run rate, we make, had made about 6000 front engine sports cars, not counting SUV and not counting Specials. Our estimation is because those vehicles are so far superior than the predecessors, and because Aston Martin has such a higher level of consumer awareness in the last three years, and because the products are superior, and 60% of our customers are new, and the spillover of Formula One, we see on the full year run rate, much more than 6000 cars for all these new front engine sports cars, should easily be able to surpass the volume as we did with the predecessors. The media praise I addressed. I think the next question was for you, Doug.
Doug Lafferty: Yeah, sure. So George, I'll take the third question. I think the answer is no, there's no maximum threshold target or anything like that, when it comes to the balance of customer deposits. Obviously, it's something which has been fairly consistent in the business over the last few years. What I would say is that the trend of balances held and the ratio has been trending down over the last few years, I would expect deposits balance to further decline during this year, as we conclude deliveries of the Valkyrie program and the Valour, but over time, I suspect there'll be a bit of ebbing and flowing depending on exactly what kind of Specials we're bringing into the program, how quickly we turn those around. So, for example, on the DBR22 deposits collected cars delivered within the same year and obviously on other programs, the deposit profile will be slightly different. But there's no particular target we're working to, but obviously, it's on our minds that we need to manage that in the context of overall.
George Galliers: Great, thank you. And may I just follow up just in terms of the distribution of the volumes on a quarterly basis for this year. Can you give any insight there above and beyond the heavily weighted to new age commentary?
Doug Lafferty: So I don't think we're going to go into quarterly, George, but obviously, we've guided to the heavyweights into the second half of the year. And I think clearly that's by virtue of the fact that we just launched the Vantage, so that will sort of commence its ramp up now. It will run up slowly in Q2 and then it will be running more at its rate in Q3 and Q4. And so one might assume that the first quarter is going to be DB12 and DBX predominantly and then we'll really hit our stripes in the second half of the year. So that's how I'd encourage you to think about just the profile of the delivery of the business this year. I think Specials will be delivered across the course of the year and then, of course, the final next generation sports car comes later in the year. So that's how I think you should probably think about the profile.
George Galliers: Right, thank you very much.
Operator: The next question comes from Henning Cosman from Barclays. Henning, your line is open. Please go ahead.
Henning Cosman: Yeah, good morning. Thank you for taking my questions and congratulations on the execution in Q4. I also have three questions, if I may. The first one perhaps on orders; order intake and order book. You haven't given us the disclosure this time that you have done in recent releases, so, I was hoping for a bit more color there, specifically, perhaps on the DB12. Is that sold out now for 2024? And if you could maybe have a bit of an indication on what order books look like model-by-model as you have done in previous releases? That's the first question. The second question is on RPU trajectory. It look very good on that slide there with this continuous improvement especially also in the core ASP. Is it fair to assume further rising ASPs or RPUs versus 2023 and if you could give us a bit of a perhaps building blocks of that, how to think about like-for-like pricing mix? There were, as Doug pointed out, of course, quite a few limited series with the Ultimate and the V12 Vantage. So what that could look like against that, what one would think is a fairly tough comp? And then finally, perhaps third question on the underlying unit and RPU assumptions for 2027, 2028. If you could give us a sort of rough split how you see those units between SUV, sports GT, Valhalla, Specials, Limited Series, just roughly through to -- or indeed in 2027, 2028, so we have something to extrapolate towards, that'd be great. Thank you so much.
Lawrence Stroll: It's Lawrence. I'll take the first two. DB12, as I mentioned, on the last call when we launched the car in the Cannes Film Festival prior to Monaco Grand Prix, we had taken several thousand customer orders at launch. Those were the cars that we pretty much delivered, and are delivering, but pretty much delivered in the third and fourth quarter of last year. We are currently sold out on DB12 to the end of the third quarter of this year. We should be sold out to the end of the year and even into next year quite comfortably. The reason we aren't is we've been delaying -- dealers have just received -- the third, fourth week of December, beginning of January, they just received their dealer demonstrators. So we have a pipeline of customers waiting to test drive globally through the next weeks. So we feel comfortably that certainly by end of March, we will be sold out for the end of the year. Had demos would have been on time, would have been sold out already today, but as I say, we're sold out through third quarter. On the other models, we only launched Vantage on Monday of last week. I can tell you the excitement through the press to see some of the articles, headlines, the Porsche (ETR:P911_p) 911 beater, Aston Martin sports cars to new levels, so we're getting the same level of response from the automotive journalist at level of excitement that we received from our DB12 Super Tourer to now our Vantage sports car obviously after a different segment of the market. And of course, we will have our DBS replacement coming at the end of this year. As I said on the last call, Henning, historically, we ran 6000 front engine sports cars when you put all the volumes together on the predecessors for each car. These cars are far superior, the ASPs are more expensive. The option intakes are much greater. The consumer awareness to the brand to the Formula One due to the new product portfolio is much higher and 60% of the customers are new. So, in total, we see far exceeding the previous volumes for the predecessors once we're at full run rate for each car. In addition, DBX707 gained 23% in 2023, quite a substantial number. Those still -- the hardest or one of the hardest in luxury, high performance, we took over 20% share of luxury high performance market in only three years I think is quite a great statistic. So it keeps remaining 23% ahead of 2023 and we will keep that same momentum and you know we're going to have a refresh of DBX707 coming out very shortly that will keep that volume trajectory upwards. So what's very exciting is for all the dealers within the next few weeks, they're going to have all brand new product, all brand new sports cars, brand new SUV. Well, how are we coming brand new? So unlike some of our other competitors that are selling three, four or five year old product in our showrooms, we will be the only ones that will have every product absolutely brand new, which is what we've been working so hard on the last three years to be able to deliver, we've now reached that point.
Doug Lafferty: And Henning, it is Doug. I'll take the second question on -- we refer to it, on the ASP. So, really, really pleased with last year, particularly seeing growth on the on the total ASP in the business was fantastic. That was driven by some pure pricing, a lot of mix. So, Lawrence was just talking about the transition and very obviously that benefits our ASPs, we were pleased with the progress that we've made from a personalization and options take point of view, and hope to see that continue to grow as we come through this year. And I think you mentioned that yourself, the mix of specials that we've seen in the year. So I'm expecting us to continue on the same path in 2024, driven by those same featuring items. So, as we bring the new Vantage, as we bring the final next generation sports car, and as we look at pricing relative to what we're bringing to the market, I think we'll continue to move in a positive direction on ASP. And fundamentally, if you look at our gross margin delivery, across last year, we came pretty close to hitting that 40% number that was talked about a long time and as we've guided we expect to achieve that 40% this year, facilitated [Indiscernible].
Henning Cosman: Okay, I guess I'll take Lawrence's comments for the 6000 exceeding on the front engine portfolio plus the 707, I take that as an indication for 2027, 2028 as well, right.
Doug Lafferty: Yeah, I think that's probably a good place to think about it. I think we expect to see consistent volume growth in this business out to that sort of 2027, 2028 period. And the 6000 sports cars that Lawrence mentioned, I think is still waiting or famous sports cars over DBX.
Lawrence Stroll: I think you're looking at a 6000, 4000 kind of ratio, plus the Specials on top of that would be a very fair estimation.
Operator: Next question comes from Christoph Laskawi from Deutsche Bank. Chris, your line is open, please go ahead.
Christoph Laskawi: Good morning. Thank you for taking my question. The first one is a follow up a bit on what you just said on the options for the DB12 versus, for example, the DB11? Could you give us a rough estimate of the options as percent of ASP for that model and how it changed in the new model versus the old one? And the second question will be, just from a cash generation, and you're planning to be free cash flow positive in H2 2024. Thinking ahead, after that, should we expect always the seasonality very weighted to H2 also in cash or do you think you can reach a relatively sustainably quarter-by-quarter positive free cash flow after that? Thank you.
Doug Lafferty: Okay, so I think both of those are for me. So on the first one on options and personalization, as I said, we're really pleased with the progress that we're making. So if I look at the contribution to ASP on the core range over the course of last year, that improved by 200 basis points. That percentage is now over 15% for the first time in this business. So we're making good progress on our journey to improving our ASPs and driving up gross margins through that part of the profile of the delivery of the cars in personalization terms. And, of course, that's supported by the things that Lawrence has alluded to earlier, in terms of transforming the dealerships, and ensuring that the brand is represented appropriately, dealerships, our flagship stores in New York and others that will be opening, so that all adds towards the benefit in that regard. As to free cash flow, so, yes, we intend for the inflection point to be in the second half of this year and for that to be the point at which we turn sustainable free cash flow positive. So, over the course of the last couple of years, we've had a heavy skew to, let's say, the second half of the year in particular Q4. We know the reasons why that were in 2022 and 2023. We've talked about the reasons why that phenomenon occurs in 2024, given the transition of the portfolio to, quite frankly, what's going to be a super good lineup of cars by the time we meet the end of the year, and we believe that that will stand as a really good step moving into 2025 with really positive momentum in this business to deliver sustainably free cash flow positive and hopefully a bit more of a steady cadence in terms of what the quarters [Phonetic] deliver from 2025 onwards.
Christoph Laskawi: Thank you. And then from 2025 onward would also be the case on earnings, I guess. Is the case, okay?
Doug Lafferty: Yeah, look, the intention is to have a much more stable delivery and cadence. And I think once we've got all the cars launched, and we're running at the appropriate rates in the factories, there's no reason to believe there should be serious discrepancies between what we deliver in the year, of course, given the high margin profile of some of the Specials and they also -- you might experience some peaks and troughs as regard to that, but from a core portfolio point of view, I'd like to think that we can have a decent delivery by performance.
Christoph Laskawi: Okay, thank you.
Operator: Next question comes from Daniel Roeska from Bernstein. Daniel, your line is open, please go ahead.
Daniel Roeska: Good morning, gentlemen. Lawrence, two for you to start. You just mentioned 2024 is the year where we can see all the models kind of next to each other. What are your key to do items for the team in Gaydon, as you think about the upcoming week to ensure kind of smooth production in 2024. And maybe secondly, more strategically, you've worked with Lucid for a while now and I just want to ask what surprised you or asking you a different way, any additional ideas and opportunities you've uncovered when you think about the technology that's about to come to Aston? And then Doug, do you expect to miss on free cash flow in Q4 to influence the negotiations for the debt refinancing? And maybe very bluntly, can you answer with yes or no whether that refinancing will include any equity this year? So kind of just a question whether there's an equity raise among that debt refinancing as well. Thanks.
Lawrence Stroll: On the first question, on 2024 production, we are extremely confident. We like every other OEM had our challenges on HMI software at the initial launch of DB12. Those challenges are now well behind us and we're moving on and building clean cars. Like again, every other OEM, new HMI is an ongoing process, it's has a life of its own. There will constantly be upgraded deliveries over the air, as we get more feedback from customers of what they're looking for. In these vehicles, we made our own Aston Martin, interiors are not taken previous as we've had Mercedes type of interiors, so we could customize to our Aston Martin to attend to our customer needs. So with the software issues now comfortably behind us, we've never had any hardware issues or any manufacturing issues, we are beyond extremely confident to deliver on the 2024 production plan. You should also be aware that the new DBX has the same infotainment, the new Vantage has the same infotainment, the new DBS replacement has the same infotainment, so what we experienced once, thankfully, we don't have to experience for each individual car. So, answer your question, super duper confident. Second on Lucid, we are in the same place we described last time. We confirm that Lucid still has the best high performance power train from a technology point of view that's most suitable to personalize to an Aston Martin personalization for our needs. That is still exactly on track and on plan. We will have a portfolio of BEV vehicles currently in plan; we will have four in total. What's changed slightly since really we all had this last conversation? We feel more immediate consumer demand for a PHEV plug in hybrid before we go to full BEV. I don't think we're the only ones feeling that. I think the market is feeling that and we have addressed that and we will be coming out with a couple of very important plug in hybrids before we launch our full BEV. So we'll have a full complement of ICE, PHEV and BEV to last us well into the mid 2030s.
Doug Lafferty: Yeah, Daniel, so I’ll pick up the last question, obviously. Yeah, look, talking about Q4, yeah, we delivered a good Q4. I think somebody else mentioned earlier, it was a strong delivery that we needed to do. I was a little bit disappointed with the cash. Obviously we said that we were targeting free cash flow positive for Q4 but ultimately it was a timing thing only. So we received the cash that you can see evident in the receivables balance at the end of Q4 in early January, so it is timing only. As regards to the refinancing, more we or our advisors who we're working with believe that that does anything to diminish the confidence that we have in launching the refinancing in due course. So, I think the answer to that question is no. And then the answer to your yes or no question is, we're not currently considering equity as part of the refinancing.
Daniel Roeska: Great, very clear. Thanks, Doug.
Operator: For our final question, we'll go to the line of Michael Tyndall from HSBC. Michael, your line is open. Please go ahead.
Michael Tyndall: Yeah, hi there. It is Mike Tyndall from HSBC. Thanks for taking my questions. Just two if I may. One on DB12, I wonder if you could say, are you running now at full production rate on DB12? And then the second question is more around the Specials. I'm just wondering what the hurdle is for Specials in 2024? Because Q4 looked like it was a very strong performance. What's the cadence as we go through 2024 on the Special side? But thanks.
Lawrence Stroll: Yes, I can confirm DB12 is now in full production rate, it has been for several weeks. So the answer to that question is yes.
Michael Tyndall: Great.
Doug Lafferty: Hi, it is Doug, Mike. On the Specials, we had a strong Q4 for the Specials with delivery of DBR22s, the initial delivery of the Valours and the Valkyries. And obviously, as we've moved through 2023, I think the mix of the Specials improved and that's going to continue in 2024. So you know, the finalization of delivery of Valkyries are all with a similar sort of mixed profile, the inclusion of the Spiders where the first deliveries of those took place in the second half of 2023, so that will continue to assist the mix. And then we've still got the majority of the Valours to deliver and we'll continue with our Specials program, as we move through the year. So, a really rich mix of Specials, again, in 2024, contributing to all of the things that we talked about earlier in terms of margin improvement and the considerable improvement in the financial performance of the business through the course of this year in the second half.
Michael Tyndall: Got it. If I could just have one quick follow up. Valhalla, when do you think you'll open the order books for that?
Lawrence Stroll: The order books have been opened. We've already have sold more than our whole first year's production, so first year's production is all sold out. We will start delivering the car early next year.
Michael Tyndall: Got it. Thank you.
Lawrence Stroll: Yeah, I think we're done with questions. I'd like to thank everybody. Obviously, very exciting times. The years of very hard work are now bearing the fruits of all that labor with all these fantastic new cars, complete new lineup and being marketed by our fantastic, exciting Formula One team has transformed his business as well to a new consumer 60% new, to a younger consumer, a car enthusiast consumer, which is what Aston Martin is all about. And being able to blend that luxury we've always had with high performance really is a unique model in high performance, luxury OEMs. I think we're unique in that space. I hope everybody watched the Grand Prix this weekend in Bahrain and cheers for us, so thank you. We hope we answered all your questions.
Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.
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