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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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Good morning, everyone. Thank you for joining us for Aston Martin Lagonda's Q1 2023 Results Call. I hope you've had a chance to read the results that we released this morning. The release along with the accompanying slides on the IR section of our website as usual.
Before I take your questions, I'll make a few introductory comments about our first quarter results, which are in line with expectations and the guidance we gave at our full year results call back in March. Consistent with my comments then, we continue to expect the profile of 2023 to be shaped by the timing of new product launches in both core and specials with a significant acceleration in our financial performance in the second half.
As you will have seen in this morning's results release, we remain on track to commence deliveries of the first of the next-generation sports cars in Q3. Production engagement started in early Q2, and we look forward to sharing more on this later in May.
Coming back to Q1 in some more detail. Aligned with our strategy, retail has outpaced wholesales as we continue to see strong demand across the portfolio. The current range of sports cars are essentially sold out for the year with DBX orders now to the end of Q3. Wholesale increased by 9% year-on-year to 1,269 primarily driven by strong DBX deliveries. Overall DBX volumes increased by 59%, led by the DBX 707, which represented more than 70% of DBX volumes in the quarter.
As expected, GT Sports volumes were lower due to the ongoing transition of sports car sales ahead of the imminent launch of our first next-generation sports car. Revenue of ₤296 million increased by 27% year-on-year, benefiting from favorable mix towards the DBX-707 and B12 Vantage, higher volumes and strong pricing dynamics in the core portfolio. This was reflected in our core ASP of ₤180,000 in the quarter, an increase of 19% compared to Q1 2022.
In addition, we delivered 18 Valkyries in Q1, up from 14 in Q1 2022, which drove total ASP to ₤213,000, an increase of 18% year-over-year. Gross margin of 34.4% increased by 300 basis points sequentially, but was lower year-on-year. This was primarily due to higher manufacturing and logistics costs as well as mix effects within specials, which more than offset higher year-over-year core gross margin growth.
Adjusted EBITDA of ₤30 million increased by 24% year-over-year, primarily driven by higher revenue and gross profit, partially offset by higher operating expenses, including reinvestments into brand and marketing activities as well as inflationary impacts on our general costs. Adjusted EBITDA of 10% was consistent with the prior year period.
The adjusted operating loss of ₤48 million reflects D&A increasing year-on-year as guided, driven by higher Aston Martin Valkyrie deliveries and the continuing accelerated amortization and capitalized development costs ahead of next-generation of sports cars starting this year.
Free cash outflow of ₤118 million was also aligned with our outlook and included ₤86 million of capital expenditure in the period. Working capital was an outflow in Q1, largely driven by higher inventory levels of ordered vehicles at the end of the quarter as well as initiatives to improve production and supply chain resilience ahead of upcoming vehicle launches.
Finally, we finished the quarter with a cash position of ₤408 million, which included a ₤50 million repayment of our revolving credit facility during the quarter. In terms of our outlook for the year, our guidance remains unchanged. And alongside Amedeo and the team, I'm focused on ensuring we execute our plans, which should provide us with strong momentum as we head into 2024.
With that, I'd be happy to take your questions.
[Operator Instructions] We will now take the first question. It comes from the line of Jose Asumendi from J.P. Morgan. Please go ahead. Your line is open.
Many thanks. Jose from J.P. Morgan. Just two questions, please. First one, could you comment with regards to the pricing momentum and the additional opportunities you have to continue to improve pricing on a quarterly basis and into 2024 and how does this relate to the product launches? And second, could you comment please on CapEx for '23, where do you stand on the CapEx guidance and the confidence to hit the CapEx target as well as the sequential decline in 2024? Thank you.
Thanks Jose. Good morning. Yes, look, I think with pricing, we're happy with the momentum that we've got is solid. We expect pricing to support our gross margin growth going forward. And as we've stated several times, all of the next-generation sports cars carry that 40% target on gross margin, and with that will come price increases. I think as we look to this year, we've got the remainder of the V12 Vantage to deliver. We've also got the DBS 770 ultimate. And of course, we've talked about the specials in the range being the DBR22, obviously, the Valkyrie and then the 110th anniversary special that we expect to start delivering in the back end of the year.
So I think we've got good momentum on pricing in 2023, which should see us running into 2024. And as I said, with the next-generation sports car launch is imminent, we expect that to be accretive. Your question on CapEx. Look, we're not changing our guidance on CapEx for 2023, all the statements that we made at our full year results. So CapEx expectations are in line with what we said at that stage, so around ₤370 million for 2023, which, again, we expect to be the peak. And then from sort of 2024 onwards, we know what we've got to deliver.
So this year is about bringing the next-generation sports cars to the market, finalizing really our CapEx investment on the majority of the ICE vehicles going forward. And then we really commenced the transition, and that's how we see CapEx evolving over the next few years. And I think we'll be able to provide some more detail on that in due course.
Thank you.
Thank you. We will now take the next question. It comes from the line of Christoph Laskawi from Deutsche Bank. Please go ahead. Your line is open.
Very good morning and thank you for taking my questions. The first one, also a bit on pricing. Just a comment on the ASP sequential development compared to Q4. If you could comment on the geo mix impact and product mix impact. That will be helpful. And then the next block on the volumes of the sports and GT models. You said essentially the rest of the old ones is sold out. How should we think about the ramp down of those volumes?
Is it reasonable to assume a decline roughly in the same magnitude as seen with Q1? And how long will the phase out last in the end for the model that is then launched next quarter and being delivered in Q3, and is there a specific target order book that you would have for those models in the sense that you would like to see 6 to 9 months or 12 months even that you're trying to build or any comment on that, again, would be helpful. Thanks.
Okay. Thank you, Christoph. On the -- on pricing, yes, I think the question was sequentially Q4 last year versus Q1 this year. We are marginally down sequentially. So I think it was 184 in Q4 and 108 in Q1. The impact there is FX essentially. So there's no real mix impact or regional impact within the sequential numbers there on our ASP.
With regard to phasing and the sports cars, so yes, look, we are all really excited. We are literally on the verge of launching the first car as is clear with Q1. And as we've sort of stated previously, we are managing that transition of old sports cars out and new sports cars in. There'll be a sort of regular cadence of launches over the course of the next 12 months that we'll see the entire range of sports cars refreshed. And I'd remind you that is 6 models, so a Coupe and Volante of each model.
And yes, I think your point on should we expect Q2 to look a little bit like Q1? With the GT Sports performance looking similar, I suspect that's probably a reasonable assumption. And then we would expect strong growth in the second half driven by those next-generation sports car launches. So everyone here is really excited about the prospect of getting the cars launched. We've been working on them for the last couple of years. We expect demand to be very strong once the cars are released.
Your question on order bank, do we have something in target, something in mind? I guess the first thing is to make sure that we sell out of the car for this year as quickly as we can, which we expect will be the case. And then to build the order book thereafter with what we expect to be a very, very strong offering across the three models.
So I think watch this space. But hopefully, by the time we get to talk to each other later in the year, we'll have more news on how the vehicles have been received, not only by the media, but also by -- and the first customers. So it's an exciting moment for the company and one that's been building for the last couple of years. So we're nearly there.
Thank you. And just one follow-up question is, production has already been starting and prototyping was done, I think, earlier in the year as well. Any signs that we should expect a quality led ramp-up as you had for the DBX as well? Or is it running a bit smoother this time around? Thank you.
Look, what I would say is last year, we obviously suffered some issues with supply chain and logistics disruption predominantly around the ramp-up of the DBX707. And I think we've said previously, there's been a lot of focus here internally on improving some of our processes and working closely with our supply chain partners. So from a proactive company perspective, we're certainly trying to manage that ramp-up in say, a more orderly process.
And at this point, I'm certain around a wooden table, I'll touch words. So far, things are coming together, and we would expect to be being able to meet our ramp-up curve for the first of the next-generation sports cars with a high degree of quality and a high degree of certainty on the product that we are delivering to the customers. So hopefully learned lessons from last year.
We hope that the supply chain continues to prove to be more robust to enable us to meet the ramp up. But as I said before, this year is all about executing our plans and predominantly in the second half of the year. So we've got to get it right and the organization is fully focused on doing so.
Very clear. Thank you.
Thank you. We will now take the last question. It comes from the line of Philippe Houchois from Jefferies. Please go ahead. Your line is open.
Yes, good morning. Thank you for taking the question. I've got a couple. One is the -- I was looking at your OpEx line in the P&L is quite volatile from one quarter to the next. I know the volatility and depreciation is unusual, but it's specific to Aston linked to the production of specials, et cetera, so I can understand that. But if I look at the other OpEx, a year-ago was $60 million. This is $71 million, it was $54 million in the last quarter. I'm just trying to understand what drives that quarter-to-quarter to explain that volatility.
Yes, sure. So look, in OpEx, as we've said previously, obviously sits in there, our marketing expenses and so on. This year, we are increasing and continuing to invest behind the brand. So you'll see OpEx increasing in line with that profile. And also, we've obviously experienced quite a lot of inflation over the last year, which is meaning that OpEx is on the rise.
And then with regards to the D&A, obviously, as our CapEx increases year-over-year, we'll incur some more depreciation and amortization charges. And as we've previously explained as well, we are currently in this phase of accelerating out some of the prior investment on the current range of sports cars as we bring the new sports car to the market.
Right. And is there any volatility caused by the payments you make for the F1 team. And on that front, I was just wondering -- I know the two are separate, but how can you monetize your success in F1 for the Aston Martin brand? How do you see that opportunity?
So no, there's no volatility with regards to OpEx in relation to the partnership agreement between ourselves and the Formula 1 team, that's stable. But monetizing it, look, I think with everybody here again is thrilled with the start the teams made to the season. It's incredibly impressive, and that can only be good for us as any sponsor or any partner to a Formula 1 team would want success on the track. And clearly, we are starting to see that. How do we monetize it? Well, I think it's all about amplifying the brand and by amplifying the brand in a sport, which is growing and booming in particular, in some of the markets where we expect to see strong growth as well. That can only be to our benefit.
I think we referenced last year in relation to the F1 addition of the Vantage, just how many of the customers who are acquiring that car were new to the brand. And we believe a lot of that resonates through the association with Formula 1. We are also -- we are continuing the relationship with the safety car and the medical car. And the DBX707 is now the medical car on track at various Formula 1 events through the season. So the association is growing. I think the Formula 1 team having strong results on the track is only going to be good for us from a PLC point of view.
Okay. Thank you very much.
Thank you. We will now take the next question. It comes from the line of George Galliers from Goldman Sachs. Please go ahead. Your line is open.
Yes, good morning and thank you for taking my questions. Just a couple from me. The first one was just on the DBX. It looks like the volumes were around obviously 670 units during the quarter. If I look back, this is obviously below Q3 and Q4 last year, but it's kind of consistent with Q2 last year. I mean, is this kind of more indicative of the run rate, the quarterly run rate you expect for the DBX going forward, given, I believe, second half of last year did have some catch up from the vehicles in transit that hadn't been delivered in the first half of the year. And if it is, does that therefore mean that kind of a full year run rate of the DBX of something in the region of 2,750 units, is the right way to think about the volume on the DBX on a forward-looking basis?
The second question I had was just with respect to the new models, and I know you're being quite cautious in terms of what you're revealing at the moment. But is the right way to think about this as one model to be unveiled every quarter starting this quarter with that product going into production roughly 8 weeks later. Is that kind of the right thought process with regards to the timing?
The third question I had was just on the other gross margin improvement in the bridge. If you could just give us any insight into what was in there, that would be great. And then finally, just with respect to financing, can you just remind us of what percentage of your cars are purchased on finance where you actually have visibility on that? Thank you.
Hi, George, a couple turn it to four. Good morning. Okay, so let me try and deal with the one on new launches first. So yes, look, I appreciate everyone's patience on this. But I think we've tried to explain previously why we are perhaps not sort of giving everybody the running road on what exactly is going to unfold. But I think that's been to our benefit. And we've got to think about this from a commercial perspective as well. And obviously, the order book remains very strong on the current range of sports cars. And I think that's a testament to the way that we are approaching the new launches.
So look, I think what I will say, George, is the first launch will happen at the end of this month. Then there'll be a regular cadence from there. Obviously, as we stated earlier on, we started production earlier in the year ahead of that launch, and we expect the first customer deliveries of that car to commence in Q3. So if you think about the fact that we've got to bring 6 models to the market effectively in the course of the next 12 months or so, then you'll get an idea of cadence. But I'm not going to go into more specifics or confirm exactly sort of launch timings or more specific cadence than that. But I hope that helps.
Second question on the DBX. No, we will expect to see growth versus the Q1 numbers. So we expect the DBX to continue to grow during the course of this year. I think above the numbers that you quote certainly. And what I would also say on the DBX is we are seeing very strong mix demand on the 707. So 70% or over 70% of the volumes that we delivered in the first quarter were 707 and more than 70% of the order bank that we currently have on the DBX relates to the 707. So strong mix within a growing volume.
Your third question, I think was on gross margin and what sits within other on the gross margin walk. So I think you've got parts and a bit of FX in there, but it's not too material, George. So I think other non-vehicle sales, spare parts sales and a bit of FX, which is driving that slight sort of deviation from the rest of the core gross margin. But there's not a lot moving. There's not really anything specific to call out. It's bits and pieces rounding to that sort of 1%. Remind me the final question, sorry.
Yes. The final one was just to the extent you have visibility, what percentage of your customers do you believe are buying cars on finance at this point?
Yes. No problem. So yes, on financing, I think there's some variance across the regions, as you'd expect. And I think the U.S. is normally has the highest penetration of customers buying cars through financing. But I think on average, we are around about just over a third. We do, however, tend to see that when we launch new models that attracts cash buyers. I don't think we will deviate too far from that sort of ratio of just over a third. But obviously, over the course of the next 12 months or so, we are bringing a lot of new cars to the market, new product launches. And historically, we've seen those attract high cash buyers.
Great. Thank you.
Thank you. There are no further questions at this time. I would like to hand back over to Doug Lafferty for closing remarks.
Okay. Thank you, everybody. I hope that was a useful Q&A, and please keep posted. There will be news coming out shortly, obviously, with regards to the next-generation sports car launch and with regards to the Capital Markets Day that we discussed back at our full year results in March. So we look forward to connecting to you again shortly. And if there's any follow-up questions, then please do feel free to reach out.