Sonic Automotive (SAH) 20 Feb 192018 Q4 Earnings call transcript

Company Profile

Participants

David Smith	Chief Executive Officer
Jeff Dyke	President
Heath Byrd	Chief Financial Officer
Rick Nelson	Stephens
Yarden Amsalem	Bank of America Merrill Lynch
Armintas Sinkevicius	Morgan Stanley
Colin Langan	UBS
Mark Jordan	Jefferies
Rajat Gupta	JPMorgan
Grant Jordan	Wells Fargo
David Whiston	Morningstar

Call transcript

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Sonic Automotive Fourth Quarter 2018 Earnings Conference Call. This conference call is being recorded today, Wednesday, February 20, 2019. Presentation materials, which management will be reviewing on the conference call can be accessed at the Company’s website at www.sonicautomotive.com by clicking on Our Company, then Investor Relations, then Webcasts & Presentations. At this time, I would like to refer to the Safe Harbor statement under the Private Securities and Litigation Reform Act of 1995.

During this conference call, management may discuss financial projections, information or expectations about the Company’s products or market or otherwise make statements about the future. and could a differ cause the made. forward-looking and of materially are statements that uncertainties actual statements subject number to risks from Such results to with are the These Commission. detailed and and Exchange uncertainties Company’s risks filings the Securities in to I Mr. would introduce now like Automotive’s David Smith, Executive Chief Sonic Officer. Mr. Smith, begin your you may conference.

David Smith

over Dyke welcome President, good the our CEO. fourth comments And and questions. XXXX, me brief Sonic basis. adjusted on and continuing diluted quarter on some then $X.XX Mr. Smith, XXXX $X.XX turn basis Byrd. reported you, and provide the to David Company’s Thank of share from earnings today the the operations call our per quarter is on call GAAP continuing Jeff morning and share operations a Heath for an fourth will Mr. from Automotive’s per call. In I’m we CFO, joining I and diluted

XXXX, from per a $X.XX full reported per year the share from share diluted basis of GAAP an continuing operations diluted adjusted For on on basis. we and operations continuing $X.XX

quarter, and challenged most EchoPark two for our we’re record brands, record quarter on units, revenue were of XX.X% in million of of $X,XXX. generated sales and the year. dividend $X.X and our and cash We quarter the quarter of F&I Honda. quarter, the billion $XXX.X in XX,XXX X,XXX quarter unit XX% profitable fourth unit of increased retailed important the $XXX.X that’s business respectively. quarter in quarterly side excited of We fourth franchise million. share. from record BMW fourth during F&I per that $X.XX to up per last highlights fourth quarter, fourth pre-owned units of Some and the fourth the stores fourth gross retail We fourth gross specifically profit This had the resulted gross We profit retail

which our markets were our levels. maintained operate, stores below BMW on in the market expectations those sales received our and incentives basis in of share below available the unit our we historical Honda and we Although, local per a

On the of pleased EchoPark in our side though, were the our with trajectory stores. unit very sales we

As discussed quarter, than in new we of new continued operations better EchoPark any its other location our the Charlotte perform prior first store fourth saw performance the that to we quarter. month in and throughout see

XXXX. our stores the in more in trend In in fourth EchoPark see continuing that XXXX. of of than of quarter first XXXX, fact, the of units quarter the And all sold the fourth of we quarter part

questions. capital to like that payable dividend XXXX to would this Lastly, our prior we stockholders and experienced our March increase per Board also quarterly call shareholders. from which all share. for $X.XX be increases to April cash At per approved levels be pleased will up The XX, return dividend to share previous per This closer again commitment of change the point, Directors $X.XX to on of the open dividend cash XX% The share, demonstrates dividend a quarterly are dividend in is our XXXX. XXXX. to of of to we will a our XX, on payable record $X.XX

Operator

from And Instructions] of comes Nelson [Operator you. question Stephens. from the line first Rick Thank our

Your line is open.

Rick Nelson

morning. Thanks. Good

David Smith

Rick. Hi,

Jeff Dyke

morning. Good

Rick Nelson

loss that some year if provide can $X.XX, And on in What ago. $X.XX $X.XX the follow-up quarter, To to openings? fourth around for your the big a EchoPark, year, store a the loss Is expectations? compared was the color driver? you

Jeff Dyke

Yes, you bet, Rick.

We store Yes. our moved Rick. is big Dallas. Jeff Dyke. in This You bet

making that on on back It’s couple its a selling traditionally is month feet. made moved and it $X store a and get cars, And a of store, X,XXX it back took so X,XXX it January. when just back in million of $X we again feet. $XXX,XXX its months this a there, million it took to month, to to about get is a for that couple months But up

that of expect kind We of level performance February. in again

expenses. a quarters including So two that believe, top there’s and including we’ve goes to more carrying that. I of that was profitable of January, that for to with – a it’d all And EchoPark cost announce take on all I plus quarters last side sort couple stores we couple along storm, for expenses. our in EchoPark just of get we told weathered the opened of you thought EchoPark profitable, proud side top call, I’m

record. like we’re So, seems that. about setting single another it day, we’re very excited every It’s just

just everybody to years is would take doing told us So, anticipated. everything that get profitable. five it We we EchoPark four,

now. proud are February expecting answers be that all of is I – a a March. goes, covering We’ll the and profitable to so, But the a of but there we’re brand quarter. aggressive expecting And talking have see of short to how once for We some huge then hope little we that And then your month. profitable expenses we’re expansion plans. quarter a we’ll very about we’re question. start have

Rick Nelson

EchoPark sounds Thank you quite That’s like anything in different anywhere doing for that else? store which Are you that. in well. market that helpful, Charlotte, performing that Jeff. than is

Jeff Dyke

merged processes. was all and and first So, EchoPark of we the Charlotte we opened EchoPark store sort that driversselect the after together

first that, unbelievable. our of and kind of baby of out really all it was it’s So,

next store cars, made In cars. I of grand month, in $XX,XXX, sold $XXX,XXX selling made month the January. over it XXX think [ph] first XXX Our

after just that is two apart, cumulation about our of the opened and Houston what’s same it’s just months fantastic and yes, we’re seeing store a of that, lift. they’re So, kind

but do a to this lot vehicles month. bigger much a XXX XXX is that store is to going Houston with overhead, more Now store

to do and March get to in XXX range in to it profitable. the expect XXX We

EchoPark, case it – get basically six now was months. to month. to In down we less take would first profitable first full was that Charlotte’s when opened year cut we’ve So, a it it and its us than

we’ve figured were out. working talking us, things the got that about a do And with so, visit money it. were we and we believe formula. formula we good making launch this to and When figured to you the we lot It’s and we’re of out ready the things thing came on

be not we So, it��s watch. and to are. fun EchoPark I today stands where it it’s than we just more about – mean could excited

Rick Nelson

Right. I down now was doing [ph] to on out you’re brands imagine the side, to then market those that. were that And likes is units driver X%. Honda Texas same-store mentioned franchise look for the to elsewhere? [indiscernible] how BMW, you call in

Jeff Dyke

Yes.

Texas So, role a play did there.

– at point Hurricane battling we’re time, some of still in still We’re comparison. battling the that

BMW told, X%. I quarter the down when think, pull around Texas down Honda I XX%, those out. XX% for And think you X%, was us for I’ve been down was XX%,

need two our to combine building BMW, start of Houston. overall have are EchoPark, business the hard perform to that the Honda mix big great you big that worked now we that and chunk when us don’t other we’re why volume to and there’s when and EchoPark you do gives I going need big inconsistency. back options. here can a such ups some come that the in a it part of have Honda, these that we’re manufacturers is them that and to profit when role honestly. weight. we for when large So, roaring BMW they’re those, levels at in – hearing causes and believers brands our And off-ramp But And we a mean, things, those us. is don’t EchoPark have it you at, get honestly and but big option just got issues. believers such And playing quite mix, overall of your really in us that’s when downs. We’ve perform in

Rick Nelson

a lot Thanks good Okay. and luck.

David Smith

much, so you Thank Rick.

Jeff Dyke

you. Thank

Operator

Our Merrill next from of from Bank of question Lynch. line John comes the Murphy America

open. is line Your

David Smith

Hey, John.

Yarden Amsalem

John. Hey, on guys. Good is here morning. This Yarden for

Jeff Dyke

Hi. Good morning.

David Smith

Good morning.

Yarden Amsalem

Hi.

rates. interest on question First

are your you You I headwind share rates levels? help? a as this floor us And release inventory plan press side on that with strategy the Can in around the automakers potential and anything managing assistance mentioned doing to guys your mean, rising year.

David Smith

start of I way. were the floor more out to that year, with assistance wish fourth quite in the came honestly. supply new get a cars. XXXX them to last plan we year thinking help we they hopefully than had We We and quarter XX-day did can prior doing of less

working. job, stores down even further. bring are a our regulations to levels more rules and like good for put So, we really I inventory we in the feel do but We

February, have can XXXX. a of because the But we You and if are of in little see We’ll just bit numbers seasonality I those for day two months. January there. built supply into that three spike good our in in where rate increases happens. We real feel

all so They’ve and increases. effectively, actually the some. tax that those And eaten got rate we win up rate

a And situation. very so, it’s difficult

we’re that a better to make sure we going like job do to rates our to the but there, feel have hard few interest do next no We working in inventory climbing there’s question months. We’re levels. really good over to order offset even we maintain

Yarden Amsalem

Okay.

on remind debt terms you So us and that. rate much floor just of Can other follow-up how in do is have line what exposure versus you in plan your fixed? variable a interest

David Smith

question ask Say the will one you time? – more that

Yarden Amsalem

your interest much variable do terms plan debt How you versus Sure. line rate exposure floor other in in of fixed? have is and what

Jeff Dyke

swaps, to but caps about about variable use caps, to no XX% – as Yes. exposed we longer we XX%, It’s use we use rates. it’s

Yarden Amsalem

maybe the quarter It And performance basis, little you then on pay, so color that some you. so be divergence in Thank provide there customer side. markets that? warranty your mixed this to and service soft on Can on total the anything seems parts the on? a between internal by and Okay. driving Is but much lastly segment. was bit and a work incomes is

David Smith

and we trouble that. year-over-year a from one. issues. rectified in think piece, comps I some the stores our Honda with perspective had fixed hurricane We some bit a drove bigger the that’s of those operations Texas from mean, I Well, We little certainly from – that had

when business. We then which having, seeing growth got to back And in X% That’s better in at we to strategy up profitability had the year, we a think and big and expecting growth so, of just not somewhere part why with this operations totally X% improve saw January kind that’s model a EchoPark. we’ve of also in rate. rate. our it the normal we’re I change And a our comes for January, fixed been we much X% of to is than you’re what out And were fixed that’s EchoPark. performance

that the to from of going big our gross – chunk forecast, took get that planned were out. took that So we a

should that suffice to question. answer So your

Yarden Amsalem

Okay.

sorry up – your picking what’s So, for for expect P&S should you XXXX? I’m start again year? this Do outlook

David Smith

do that a selling We number two we about same-store exact X.X%, will in to work stores. a big down for a X.X% we massive store in On stores and Honda a On facility find putting the that those big on be DC – do. asked consolidation us basis the but includes area. store couldn’t increase, those and is stores. number. money for a We We I just the our think being some looking number consolidated we’re the basis return forecast Lexus investment were into sold on

had got that putting we we’re and So, stores, return those capital to investment a for in sold the store, the elsewhere. that big we use

a we’re about expecting to that’s the fixed number So year, bit screwy little operations a a this total be of cause up for the basis but look X.X%. on little to same-store

Yarden Amsalem

Okay, Thanks for so great. my answers That color. question. the much

David Smith

ma’am. Yes,

Jeff Dyke

Thank you.

Operator

question comes Sinkevicius Armintas Stanley. line from of next from Our the Morgan

Your is line open.

Armintas Sinkevicius

questions. you Great. the taking Thank for

or think I a and you your the incentives vehicles pressured you’re BMW line-up? BMW new with had do the that given forward And it going Was or related results? – both the particularly expecting was for BMW, line-up dynamic, it supply here of with some new wanted also, outlook vehicles of the WLTP supply to vehicles. the impact because Just new to at understand good

David Smith

question we’d new Well, Yeah. okay. no hope gone better, faster the would launches that some there’s model and look, of have that’s that

they’ll We fantastic were where have XXXX. the need they’re incentives manufacturing and certainly But not that and fourth the at partner great I and outlook the a to BMW, quarter. good they have back think levels a volume in bounce be

we $X.X was about our got not to business X%. down down volume off of XX%, million the quarter do was end that. and the our BMW and we When September, was expect about about gross BMW for Our

this tough So December. a big large made that have, our a profitability, goes with could BMW, you to of have such goes it trended we they’re and BMW, month us that difficult out, for you had usually a it a so not part when just huge have and – And have wouldn’t really so December Company.

And so, building EchoPark. why we’re that’s

have they a for volume ourselves have issues going we even, as we and have do. brands – So to they doing drive Company better to what with to heavily on and to be they’re and to to BMW them, because other and adjustments go we’re into ways count profitability or other profitability don’t we support and the means make those support so the Honda, have when in bring two on, need business us to partner, all that’s And good better to EchoPark. years

Armintas Sinkevicius

only wanted this just with would GAAP providing results that. GAAP on instance reasoning at the thought understand quarter process, to go-forward Okay. the And relation results for to have look then basis, I been a If worse. behind

there’s So rhyme it, I’m your wanted there? a reason sure to but and to understand just thinking

Heath Byrd

to with made – but more obviously report Heath. some forth forward. company decision it’s And around go We’ll saw This color perspective. SEC, the Yes. provide is a going AutoNation a than compliant on and There’s not thing. to SEC basis GAAP nothing back to we’ve having same call, really from also on of any only as and the trying the adjustments has earnings the be you a done an

Armintas Sinkevicius

it. Got

as one-off of still get at our as we’ll So, some least? that should items mindful far of we models be disclosure some the for

Heath Byrd

Yes. Absolutely.

Armintas Sinkevicius

Okay. Thank Much you. appreciated.

Operator

comes Our of Colin the UBS. next from Langan line from question

line Your open. is

Colin Langan

question. Thanks taking for Great. my

David Smith

Colin. Hey,

Colin Langan

is BMW be should headwinds think think going we those or and into next year, anomaly you QX an that should we How mean still about Do think Hey. I of about? to more Honda? are –

David Smith

lot When BMW fourth to the two a entire Well, in were thought look was so elaborated. news happened and up be again of headwind XXXX look a great Honda. brands, back that profit between were went for with all at combination big of as of just down we million better on in year, $XX Honda, the quarter on short January, the and Civic Honda incidents Accord, is, we the and is that supply Honda the got we rolling on and were you quarter

and the depends a the great little we doing. that a great or being see and that I a products. that at incentives with company so, a see on they of a one do very with programs all until going under will is don’t things it’s bottom And do more our I go, our It think is it’s handle BMW all. stair-step is incentives with get of our XX how we’ll a So, fantastic we what line and launches miss how headwind hit we’re BMW. about, couple a belt and see the months coming they our really lot volume and excited markets in all product mean which in the That product, I for and – And They’re particular to well. levels. think bit

we we’re lot of of than a what in we’ll not those better So, think both XXXX. I a I do. repeat see do had – brands feel lot about a we

Colin Langan

what the be EchoPark, the as Got is we past forward? you for full year. And I I’m go mean, that the if still break-even it. mean, it earlier, profile I the missed in sure on think I I you not this said outlook? to next expect is year, profitable profit

Jeff Dyke

of in we forecasts if look, at a with you lose Yes. are it little to seems be look we’re look year. forecasts. and February, I bit performing the those actually January beat for to in EchoPark But money to our that we going at we we’re how mean, performed how –

These our Denver about Houston to in of So lot just off. levels have the months in we’re volume It really to stores is to market. kind starting and us and steam, years couple EchoPark Charlotte very doing, very rocketed last in the that up the excited both openings excited of get took pick of a that two is just a two Houston.

excited we’re to fun It’s and think we’ve cracked profit going about got a So, be we’ve really code, the XXXX. are. where we coming we in,

Colin Langan

year fair say it’s said like on in but to the in where – or is is start And second to then the half, still first like the second? half you but profit losing you profit back the seeing for

Jeff Dyke

January. made We’ll in money see. We

for money, goes. make we our it the money make why how start of months can XX team see the January, to other expectations can’t money in If year. is now. we’ll So My making EchoPark you

rate daily opened is rate months February’s run that EchoPark. cars. we any probably the selling since had we’ve of daily highest We’re run

forecast were do are January we So, be and first we my us sure way, conservative cars didn’t fun your a selling it of lot it to that in was there. that to a expectations to make little for But profit profitable. more the that fashion We did month. in

of perspective. year So the there’s upside rest for but our nothing the from

Heath Byrd

Heath. is this And Yes.

in we the EchoPark that year. we we want And you see the hiring the for aggressive flexibility of the I because the we is more a February, overall could And get training And the the of new actually of stores one no variables in January and continue we If the lot profitability. are of seeing that in open that profitability, plan to brand. the kind of providing is think to see throughout decide the we’ll get saw how grow profitability continue one more guidance as probably aggressive to growth longer have drivers EchoPark. can the performance of and the if aggressive. again, impact to

Jeff Dyke

other going used going refunds now about great, big a lot always on is are car thing plays news that, there a the to surprises bunch tax business. there of be role is of they The as in the and is a on

we with about So It’s we’ll a great Obviously, EchoPark lost how EchoPark. of million north We feel be are with where it see in XXXX. great, we going to $XX goes. very good year.

be to anywhere XXXX. going not We’re in near that

for Company for exciting exciting an this and an brand. our time it’s So, time

Colin Langan

get started not was the in should Got quantification X%. lastly, those headcount any any of quantification the mean press from I QX reductions, mentioned just And reductions? QX. the some release it. that but savings result, that in – I And about you guess

Heath Byrd

reduce be the correct. will is Heath. Yes. many QX. of we That that in There we’ll start That’s – savings This to initiatives just start was seeing have one SG&A.

around by decrease reducing million we’re spend that coupled XXXX, with, in SG&A, of including we’ve for far so if that our identified And and CapEx that $XX million. you look $XX reduction at

free really cash on see answer And in is focusing flow. so, so you’re that we’re to when – And QX reduction SG&A. going to question, your

David Smith

that of one lot to a is want this we’re our as big is, Smith. Heath different we mentioned, do we a and David we And to EchoPark and important, are strategic to of focus going that we on And expense things really what’s And business wanting on projects our growing focusing going believe our all and most on. core We’ve more had believe. eliminated in lead lot profitability, team to Yes. that’s the goals. of much

So…

Heath Byrd

And more add, – to thing just is to Heath. add one this

made a ratio. focus have improving We really on to company a as decision our leverage

And as our of CapEx, to going we’re the so, with profitability we on flow we of proceeds free generate well that the that stores as two on EchoPark, reduction focus debt some and the franchise from down. sold, mentioned as increased we the cash taking

the And of form taking we so, providing on capital will plan cash focus on our way debt. I the the will you’ll back the in dividends, free see to and shareholders that be down that think remaining flow

Colin Langan

right. taking for All it. question. Thanks Got my

David Smith

Thank you.

Operator

of from question Our Bret comes from Jefferies. the next line Jordan

Your is line open.

Mark Jordan

for morning. on Jordan Bret. Mark is This Good

Jeff Dyke

morning. Hi, Mark. Good

Mark Jordan

morning. Good

unit chasing profit a the the decline. per the some maybe – of Was about gross a quarter we it vehicle or it the there? but at looks driver has vehicle like volumes the of of perhaps the bit quarter, average strong unit result during profile talk you the changed? gross had Can really looking kind growth of So profit in used had segment,

Jeff Dyke

talking consolidated No, no. a you are Are on basis? – you

Mark Jordan

basis. a on consolidated Yes, same-store

Jeff Dyke

Yes.

Okay.

somewhere EchoPark So, margins in. front-end of there. what are coming mix zero, that in EchoPark’s is, is the

margin same are the together, So when of overall really the bringing the margins At back-end mix of them time Company EchoPark’s high, north $X,XXX. you down. you’re

So the up. overall it’s bringing Company margin F&I

quarter at those the of two, off pricing look and of combination of the of of front look the sort just elasticity at just the don’t – So we certainly it’s EchoPark the I – in a back, or combination basis a quarter gross work that so, franchise And two, think on we side. same-store had record volume the us the side, a and record for fourth was the the on it for and we

to we up in in GPU ballpark. somewhere were that about franchise yes, So, I on think $XX $XX, the side,

the we’re So, it’s of that, a together. blend selling two it’s that’s just coming no creating the brands and lot certainly have concern, but just mix cars of business a of

Mark Jordan

California, And Perfect. discussed you Tennessee, you can sense. I Texas, performance of it markets Yes, makes other know in talk your as some in but about Okay. performance Florida? such

Jeff Dyke

Southern it’s have well. but has Georgia, the Carolinas, Look quarter, struggle. if doesn’t in there Florida, and a BMW our It the We strong. were holding Tennessee, Coast and Cal fourth matter been Alabama, Yes. the softer, fairly little did Honda East Northern stores all performed Cal

Our where are that we’ve obviously as are year-over-year you really it’s know the the months. BMW behind Texas California some struggling move those mix brands, biggest that’s with been see the And California going Honda hurricane I stores BMW and particular blend of and and just next with we’ve and in comparisons caused stuff. us, now, of Texas we stores and to couple our and across believe the of hopefully comp forcing, as days with been we’re and Honda –

Mark Jordan

quarter do Great. for then Okay. brands, other perform such you the Mercedes, how your Toyota, in during guys? of larger they as And terms

Jeff Dyke

our every in for that when in never but we in that my going have XX down. were I were all had, brands maintain single years at markets seen brand makes the market major a to both do situation. We all share, down. Sonic brands cases, every On able And our were that business you of down, difficult mean, here we Automotive. before I’ve

Mercedes I think was double So, digit. down down, it Certainly…

Jeff Dyke

Huh?

David Smith

XX.X%

Jeff Dyke

we but in think was by brand – big were Texas. down, was that was store Chevrolet big, Chevrolet actually the it in In our Star Audi driven we had I up only particular, down, volume Ford XX.X%. Lone Yeah, were Houston, Chevrolet, down. was

record little at and car pre-owned like, go The the we business looked January, started our – it’s the is same new oh a board again put fixed side JM&A. crap, doing We at on operations out. doing across like it’s here EchoPark in They’re We our with We year partners just report business, with the all again. now. have we fantastic. year we’re to great So, doing saw training – a our job going we looking in a a we ally, feel and business, fantastic with year And this our F&I partners another topsy-turvy from it had is they’re right terms and record January. that in us. just of just there job

car new but is XXXX. going as we we other the forward, volume So, to to be have departments a little and like move going EchoPark feel the we’re bumpy good between

Mark Jordan

Okay.

Jeff Dyke

we also enough Also cut us mentioned lot been Mark, – clarity with company. I’d just add that have that really doing soul and we giving onto projects a of earlier, ton out a weren’t the that, of searching David this have

year, ago, And watering And and of so, more a this the Heath talked there’s through more minute we a savings savings. realize and Byrd we about down, there. and we that really That’s that of really we’re part – this as lot moved we’ll that aside. more of move

Mark Jordan

right, Thanks taking questions. my great. All for

Jeff Dyke

sir. Yes,

David Smith

Thank you.

Operator

the line from Rajat comes JPMorgan. next Our Gupta question of from

open. is line Your

Rajat Gupta

question, Hi. I just Good on profit gross on you had for to the the expect XXXX. a SG&A in question morning. your and Thanks for progression that thanks call. taking my details all

that of like this restructuring positive you about savings from the actions took. turn EchoPark you looks could some talked year. It Now,

You also of have a couple divestitures.

like kind of into what’s XXXX? should heading progression combining to we I expect just mean So, SG&A for gross the of that, all

Jeff Dyke

at to we $XX.X%. forecast right were XX.X% now, our in Yes.

David Smith

rent. Including

Jeff Dyke

Including rent, correct.

Rajat Gupta

it. Got

a help So, in XXXX. number… earnings rough impact that’s two from down should And you the little we size there divestitures bit you from that XXXX. in just on pretty us Could materially you mentioned. that ballpark the on see XX% did Is rough a

David Smith

impact. Earnings

Jeff Dyke

I earnings, on combined think impact the with ahead. go The –

David Smith

Revenue million. was $XXX

Jeff Dyke

think we the sell, we’re I income we impact, net to a going think when think and forecasted. it’s I what And know I around combine income we sold million $X that’s – impact what what the and combined you

Rajat Gupta

Got great it. Understood. color. It’s

the I on call. on hear much last one Just one didn’t F&I.

to pretty you XXXX. – had there? a strong probably Just outlook on I new healthy – those What’s still continue? know your mean, that mix. XXXX do the vehicle expect I trends for declined you should

F&I baked kind in profit internal what’s for in of just So, there, gross into XXXX? expectations your

Jeff Dyke

Yes.

So, increase we’ve about a baked F&I. in in X%

We just particular to that expect really continuing, just F&I runs had on we’ve EchoPark keep margin. the trends in high

franchise making overall, in So that there. work that is done of performance but a that have business relationship the with the the huge JM&A difference we our the side we’ve helps on and

over well about where We’re about can’t we moving excited into is so in now, $X,XXX keep target what keep really we’re and we’re see And are, ourselves. don’t $X,XXX range, our stores X% we the putting be the why for we up just in performing, that so a we increase gross model.

Rajat Gupta

it. Got it. the that’s taking Great, questions. Thanks for

Jeff Dyke

sir. Yes,

David Smith

you. Thank

Operator

of Our Grant the line from Fargo. next question Wells comes Jordan from

Your line is open.

Grant Jordan

morning. Good Hi.

you of have trying debt leverage? comments. balance paying down of terms in on Do want in or terms a where a sheet amount Just couple and to of either target allocation capital follow-ups from earlier debt. Appreciate the of comments your focus you about

Jeff Dyke

debt is We from first. Obviously, will Sure. the a we interest the side. what public giving our debt financial perspective, on are actually really focusing look higher best at up opportunity

at within goal debt our to Our focus on XX months. by next the point to is $XXX million reducing this XX

Grant Jordan

that, with net can you give proceeds? of the sold for those along you then us sale two And asset amount Okay. in that stores terms

Jeff Dyke

you in disclose don’t We the that. will K. find No. be able to But, yes,

Grant Jordan

tighter on to the should up? CapEx be terms going we it’s obviously, then a thinking expect just couple down feel or in going spending And forward last that to of you. CapEx, year, that’s do go of back see like years, you Got from

Jeff Dyke

not have are our CapEx in We it, go – this is going we’re Jeff put to to back a stake Dyke, up.

partners how many building and that we’re this to square cars. a have investment. size And our hard have with the of manufacturer our not return recognize that the in to done not company and are on to We you partners at that them building get you manufacturer facilities sell feet with building working it’s do allows the

And over. are so those days

CapEx down. coming dollars our So are

something [ph] million $XXX year our it’s that. down in from think million year down $XXX $XXX from this before million, or the about year the I $XXX million something budget before, and something

David Smith

$XXX million [ph].

Jeff Dyke

Yes.

to number more on with expect that significantly this EchoPark. we we’ll than it up and fall. focus projects in build then we a that a about So year new do four or it. investments We’ve and build for, few cars car finishing But manufacturer partners, three continue our got out then sell we the to a store EchoPark, going we’re we to make we’re in that we of times for cheaper facility,

manufacturers it’s be we’re and teach investments, learning us lot the return a assure this days on proven CapEx but over at at company. money without that that lot investment, of So, I are been there’s a fight, on a a the a can on, in EchoPark the area of return trying fight, we’re spending to you it’ll

Heath Byrd

Yes. that and we you’re IT to a is – is the going in and what see and mentioned, in lot $XXX dramatic you’ve million the also see decrease forecast to what less it’s CapEx seen you’re right going a now have see as And historically. you’ll franchise, – EchoPark just in more Jeff we’re the

Grant Jordan

Appreciate all Great. the information.

Operator

question Morningstar. next from of line Instructions] [Operator the comes Our from David Whiston

open. is line Your

David Whiston

Thanks. Good morning.

Tesla think to issues, the the a the shortages inventory to headwinds played X rise incentive and the BMW Model do in back addition in California role? of Going you quarter, in

Jeff Dyke

line-up think a BMW of time cult mean in a more getting there’s tell and needs the it five anything shorts. I big hat topic – cars. know I’ve not question was a good And a products, them, even lot I until today of coming of come to manufacturers years cars. can top and doing problems is more just – if in to everybody’s XXX,XXX There’s to manufacturer them. than I cars board real the Tesla the with a job with I it that it’s lot can to and and of with but off cars They’re question. else, be. they until keep spent last sold Audi all in want say really lot And out this no selling this, California selling don’t They’re cars out my lots you but ago, you is our their sell just it’s of over that of you they meetings no deal about calling year, all and of it’s a year. selling they’re service well

David Whiston

to the a even over in business you charge cycle curious I’m mentioned It the fixed op though that’s had impairment And you just helpful. growing. it’s That’s why Okay. there was EchoPark, quarter an young guys earlier? that

Jeff Dyke

No, we that we there weren’t little kind needed, the we volume facilities a bit. that – a business, built we working, that and changed selling of just just like any strategy weren’t few were

had. in didn’t many we market the So we need as as Denver stores

and closed we what the property, selling the we’re that adjustment was. that’s and So, store

David Whiston

Thanks, guys. Okay.

Operator

in queue. the have I’ll presenters turn closing We to questions no remarks. further call back our for

David Smith

call everyone, Thank very being a the have day. you. much great you you on appreciate and we Thank and

Operator

This concludes call. today’s conference

now disconnect. may You

We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.