SAH - Earnings call transcript Q4 2020

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Operator

Good morning, and welcome to the Sonic Automotive Fourth Quarter 2020 Earnings Conference Call. This conference call is being recorded today, Wednesday, February 17, 2021. Presentation materials, which accompany management's discussion on the conference call, can be accessed at the company's website at ir.sonicautomotive.com. 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 to cause from statements forward-looking and of differ are the that uncertainties the made. statements subject number to risks materially Such actual results with detailed the are Commission. uncertainties and and Exchange risks company's Those filings the Securities in

today. discuss Please filed Exchange In Commission. current measures Jeff as and to report would the with company's the and non-GAAP I on non-GAAP defined addition, you certain earlier Sonic to financial X-K the may the like by Securities introduce Commission conference. President management your Dyke, Securities in Automotive. Form may refer Dyke, Exchange now Mr. reconciliation begin tables Mr. of

Jeff Dyke

We're special And in snow storm you. low this Thank unprecedented storm. ice on everybody, in electricity. I was caught and Texas temperature note, and

will Full reason to cut Call. XXXX my morning, for over Heath that, and Byrd welcome I'm everyone, Dyke, notes. company's and So Quarter Year out, speaking Fourth take President. With good the Earnings Jeff Automotive's I Sonic some

of quarter our fourth the up revenues revenues reported XX.X% the of and XXXX. the our platform. billion drive highest President Executive Vice Vice Digital Mr. who Joining me $X.XX, of Operations, our our omnichannel Heath record quarter Earlier of Mr. Wieland; our $X.X of expansion Keen; an joined and Steve call Mr. quarterly CFO, on history, from company's earnings Officer, Danny Tim retail recently digital Chief Mr. Investor today, President team EPS Byrd; Relations, of to Retail adjusted our with is we Wittman, the in today fourth and our

all-time as support from strength was of EPS challenges with the partners face year. the XXXX. in and model, the business of XXXX our record of the $X.XX of results dedication unprecedented face our we the of together and teammates manufacture of vendor this our $X.XX, full In our earnings, second XX.X% year adjusted consecutive These reflect in up adjusted addition, record year diversified

structure. we improve our operating efficiencies manage and XXXX, expense organization, targeted During took measures cost to entire throughout our improving fundamentally

all-time a Full adjusted the we SG&A quarter expenses XXXX. profit XXX were gross points quarter a fourth XX.X%, as than of XXXX adjusted XX.X% as the better for a down of profit basis XXXX, in record year XXXX. As from expenses fourth percentage of result, XX.X% of SG&A basis achieved percentage XXX of points gross

expect continue of to we our see XXXX, benefit reductions. For permanent a to SG&A

increase line profit, being the of However, rate EchoPark in of percentage still rapid may an overall. as while expansion bottom the to gross a at drive SG&A accretive

segment. XXXX. gross XXXX. $XX.X and adjusted was a SG&A strong profit XX.X% or quarter from new fourth income sequentially $X.X Turning third dealership quarter our year compared fourth core the quarter of and points the to down year, unit reduction of were last the Franchise down dealership Fourth Franchise billion, XXX adjusted SG&A revenues quarter X.X% increased expenses. $XX.X and million segment XX.X% F&I as XX.X%, franchise to the of vehicle prior basis from up million percentage gross from a driven by in per profit dealership segment of

Looking at EchoPark.

units. XX.X% For used in all-time XX.X% revenues unit year of from growth quarter, volume million, vehicle This the sales $XXX.X prior a increase driven fourth up to quarter. by record was were an XX,XXX the

up For the sales retail full year XXXX, of $X.X compared volume XXXX, XXXX. XX.X% with XX.X% EchoPark to from revenues billion, units, a were increase XX,XXX

of the full expect we way units year quarter of XX,XXX XXXX, to our XXX,XXX between and XXX,XXX EchoPark, and units first XX,XXX retail for on delivering the XXXX. between For to at

and these in We're acquisitions car expect guests. them their into of the exceptional buy include footprint revenues experience Baltimore process XXX York, our the the businesses market to model full buyers the value King, that and an total in expanding Metro transitioning team of delivery and our of into Washington Car Syracuse-based businesses As Carolina, we months $XXX centers its and at buy of Carbiz Mid-Atlantic EchoPark our operation. These these Northeast. units area support. same in Used our By strategy, greater update, providing and expansion of part recently and define maturity South completed in and in concept, first on that Each our EchoPark, Maryland of the to pre-owned was revenues culture these future annual retailed incredible EchoPark from Greenville, way acquisition X before group million serving qualified a any geographic New markets of and already will in with delivery focused profitable excess center a New highly January generate embraces X state. pre-owned and throughout values York serving

Our retailed and Knoxville, units month, in second what buy Tennessee delivery opened in we December XX late center first in in mirroring its saw in nearly and X. month full Greenville

at XX center to nearest For XX per markets. in next opening of opening model, per we sold adjacent fourth and to plus store the truly average demonstrating comparison, in before X additional to Phoenix, openings of our locations buy place completed the of in XXXX. in entering X and these by an acquisitions in that XXXX for XX from points give incremental the The week the our Greenville X of are the date, Arizona and end Knoxville to year the the into hubs, XXXX X XX. with us of and markets month new units these over EchoPark units brings the delivery total month sales X will full year-end quarter our These

omnichannel in-store we are we're experience and opportunity to inventory delivery EchoPark EchoPark's you and EchoPark shoppers annual vehicles buyers focused in center $XX buying offers in expected X.X nationwide In that purchase over sales see, full annually a to exceptional growth options model and The drive EchoPark discover annual is - our continue unique the meet their XXXX. selection, revenues guest-centric pre-owned untapped the As value the billion retail which point vehicle with EchoPark range of network, Car million on combined meantime, well concept. nationwide XXX-plus distribution pre-owned needs. our tremendous revenue by establishing underway addressing tools offers. in can to pricing, experience

provide we the of including approach Our new sets an Harris consumer new our belief the guests year, Insights in that buyers. in ideal excellence purchase of September matches we When an omnichannel retail launch reaffirm XXXX commissioned for Poll standard vast in experience to expect this of this our in platform quarter a car digital our fourth online with a of continue studies, industry. majority experience the to

talk and in industry the December trends margins we're elevated fourth market I'd and months X.X date. had from November the and carried Before conditions used we and into seeing in XXXX, about steadily the demand vehicle quarter has to turn the throughout improved of in call vehicle XXXX. questions, to the and new slowdown over February for momentum your sales like first The January

While unit used EchoPark our expectations fourth back and the the persisted was gross in for quarter, expected total at line pressure vehicle on with we per margins January longer than in model XXXX. our

to year rollout was we was service to of a is January we'd continue momentum feel time parts continues progresses, fourth parts will differences be more for and our XXXX of believe but as calendar Our the as slowly service the X% nearly than like, quarter and for as our franchise in in Americans continues to continues area many activities operations to and compared XXXX. our daily resuming Adjusted year-over-year, down We improvement. and closing, year more for first bounce the gain $X,XXX per business a fourth gross this signs fixed to business showing in expect comfortable the recover ways. in unit F&I In X% in highlight vaccine back. quarter. roughly challenging business reached the dealerships, growth

However, franchise the year our quarter fourth our of models. resiliency results and and full EchoPark and strength show

- locations we're our near-term The leaner, the XXXX retail were and than both each more omnichannel and Automotive, for the long-term efficient XX set and for and and exciting of success. EchoPark rollout is an of segments to platform We stage new open year. business new the of Sonic company prior are roll is we for we're to well-positioned believe end out with stronger by a digital we XXXX, our much

look to Heath over my progress throughout And you the keeping concludes a remarks. forward the to for our turn year. opening And we opening this call updated Thank to Byrd always, remarks you. on now his. As few I'm going of

Heath Byrd

Jeff. you, Thank

open our XXXX up provide we're bit questions, we a outlook. to wanted more in Before on for color little seeing I what just

our Texas, in Birmingham, numbers storm, January numbers, impacts February. our going which and Jeff keep franchise what mentioned, some seeing one guys and in to largest as Jeff It's the of largest outlook these this some have in the we're It with going line first these middle mentioned, markets. Nashville. in mind, also is the Also quarter, from the of EchoPark he's know affect impact to This storms. is market. is of you we're As

believe but it to real quickly, going Those And are of outlook go so majority will dramatically half the back peaks quickly, hopefully, Obviously, the normal. we right It's and also obviously, pick that note important second there'll as to impact. closed. stores are be the up up growth now the of I'm some that vaccines get over things out is the to rolling year. weighted we to

we you and single $X,XXX Jeff be we second full for to we high first normalize approximately shortage the start think some as This to as is a we be the GPUs, half up and side. will single it continue year. used, know, have, are - California, the growth The the On are digits. to half elevated. we franchise also to through to see We the large still the the there. to on volume. at is definitely GPU, double and in half to forecasting growth digits weighted We're all looking the normalizing, of in in So up that the Franchise year. aware double-digit expect expect related volume. normalize still inventory Fixed, new, and are of low closing second the mentioned, year. of be expecting of on rate portfolio year we

that ramp think growth, more we of in the So half growth. F&I year. up second will double-digit the low

We continue surpass unit. to $X,XXX and per GPU to to our opportunity the see continue increase

in year-over-year. the as busy EchoPark end the growth year. footprint, of stores we opened segment, at That current units fourth will quarter. XX so the up grow stores. X.Xx actually had X very the expect On in by of to locations is end the with new That XX% XXXX. mentioned, we XX% our to Units, We XX Jeff of

of XX% of XXXX. a revenue, total in percent the was revenue total As EchoPark about

the includes in XX% approximately million that it XXXX here of XXXX. the percentage higher grow drag a stores. at the $XX $X.X as expect be EBITDA of to We million new to in to to That was business EchoPark XX% continues Sonic. from

opening We the growth a EBITDA CapEx that be of From half stores up XXXX, definitely the CapEx double approximately and they drag $XX million the in in expect XXXX. that related to of million new perspective, that that $XX on that have to new we stores to weighted budgeted maturing. growth. are that in million is about and includes open of to $XX we for year And start EBITDA second as a EchoPark,

growth You can a franchise our flow all us those and strategy. This and is side free allows on generated the those for that such developing see increase increase spend. locations CapEx capital-light our also all cash side. low treating opportunities liquidity to the And franchise take is being that this on at a or

can EchoPark. you very to new low CapEx at XX stores So to that get see

a of to things from keep mind. a couple consolidated So standpoint, in

very XX% luxury XX% has think to the about XX.X%. this we XXXX mix, important cadence talk come The in at that profit in the portfolio fourth in a year. of quarter. first I SG&A because about fourth was such second, that Sonic Again, quarter, brand that's perspective, on our big our XX% a third, will profitability XX% XX% XX% the of to and basis, quarter. consolidated mix each in it's the

will million lever. We've that expect flat at to due We franchise expenses, be will EchoPark. will the The $XX the offset continue lowering SG&A offset side that in but in see mentioned reduced be that of we to opening to up we're on the new continue to SG&A to be slightly XXXX. stores that that franchise -

points in mind, looking you're SG&A seasonality typically at of - percent typically when is of to worse cadence, our it relate Another thing XXX a keep growth basis as XXX from because QX, to maintain if XX% approximately Tax tax to QX. to Share will shares, XX%. are in double-digit approximately we to expect EBITDA, count XX be that low growth modeling rate EBITDA. of and rate an million. we you expected

with to from happen will over share XXXX. investments in call And there's will questions. for turn dilution that We the I ensure will do repurchase that, no the

Operator

[Operator Instructions].

question from Your from comes the of Nelson Rick first Stephens. line

Nels Nelson

bit on standpoint. to from little I like the I'd a in to was side, guess EchoPark. business a dig the a used tough franchise GPU

things If here you December, what think and about weather be of in January seem talk outside track could to in November, back you on the happened issues.

Jeff Dyke

Jeff Rick, Dyke. this is

So than couple in of a we've because lot as our got that margin lease those role. - ago, and unprecedented months so working us of on business, through We're are the held line that's that for the with that margins cars a on big are today all expect back, of stores a of returns lease high the you lot getting a continue. manufacturers. BMW side so less losing the high our a We going happened. COVID. know, a stores BMW in and franchise And of there. And with we've portfolio West Coast, the coming back. while and X got that were other the One, line lot returns the lease of is on amount BMW lot on things we're or a don't those to playing returns returns X those dealers they are

in that and side expect a a our normalizing. but but played role fourth don't it's January, bit on certainly in we franchise to the So throughout little certainly continue, the quarter margin

selling X segment category down side, then and to making side and that into all high break targets really us are X EchoPark years model, years in erosion we because inventories The are margin relative the and X- it at an volumes the only. business segment inventory line, Anything terms thought car good we older. back of is turning created cars news which EchoPark, to the that at is, we to really used in On of our where pre-COVID, X again X-year-old the to and great to so that to year, helps the to XX-day to and fast, our the going and EchoPark we're good we're older, year. a first supply we're down have focus again. we were than and inventory on our that great cars you for need margin margins just is - not have off And to the the and XXX,XXX you on, in with overhang the races couple keep fourth the the - franchise and but X-year-old quarter And the would. XX,XXX on margin X that get smashingly XX,XXX quarter, longer to XXX,XXX on for that exists EchoPark

we're quarter terms It on expect times back no a as to fourth across the unprecedented definitely when issues but affected was these the the So It category forward. move inventory and - margin. swings what have valuations. affected massive country. shrinking you in X And we in volume X-year-old certainly in of track

Nels Nelson

Great. Okay.

XXXX. at If a growth plan in the XXXX go add from interest XXXX. $XX in $X.XX. got XXXX there. F&I perspective. we takeout, a guess, I'm floor from of lower we've million rates to We've compared pre-COVID XXXX in calculating XXXX, number and lower back should in benefits XXXX, to to compared earnings got I cost So power EchoPark expense higher be in And around different benefits then looking that

would XXXX but free GPU, Anything I comments compared buybacks be bigger not it like XXXX? to there. You guess, or to I'm looks missing? the acquisitions. cash probably should in I'd like get sustainable, had excess flow, that support your

Jeff Dyke

you Jeff. to half to expect carry - lot do $X,XXX expect in continue first well. F&I GPUs XXXX our great, eclipsed over. been. to unravel of We F&I. the there. that I When they a this have I be very like all So to just expect I A is to very, expect mark. I

- model. EBITDA that a statements, EPS There's very complexity going many of create it. going it a in about proved to stores. to create stopped We perspective, is that back an open should there's drag SG&A there that Heath we're And from we're - And from fast, we it's that made drag to his our can going confident mode. lot that complexity now think of growth EchoPark, it We're only and we'll profitable. perspective. bit get stores lot going opening to in We Rick, get. growing growing an is but But a into grew we that going from to the little we stated - is done. need as XX moving thing, really perspective think I you the it the

I I as million sure somewhere because $XX make an you that sort $XX your you're modeling would thoughts those drag perspective. you think is, that of model there opening need say, So to million - those from in include up you make SG&A you 'XX, sure between from and

Heath Byrd

that Rick. I Yes, spot in pick will you almost tailwinds I'll think second on, you're profitability, at in of fixed drive year. I model do that the Heath. if that think look the business metrics just the add, think all total got up category. the every and you half is We This

New, in in and this have going lot We usually of the be on opportunity we mentioned, based are EchoPark opening still as to on franchise Jeff discussed half. comments a both elevated GPUs side. what the

very is drag one of year being and the But to expenses that. have opening segments, a other the EchoPark drag good to every the with expansion, the all EchoPark. the expect expansion we really, of and tailwinds so And in related accelerated have the the segments, those of

Jeff Dyke

for all year and intents record-setting another should It be purposes.

really drive another the to As record-setting Heath tailwind year. us discussed, should

Nels Nelson

the balance on finally, then And sheet.

fund free actually should targeted cash below the I with do franchise side CapEx fully excess leverage cash? Xx, allocation, of house. and with your Xx, what What on the think thoughts, able about be closer to debt-to-EBITDA is your the I to guess, capital you net you ratio

Heath Byrd

Yes, couple a of things.

You're exactly point of - with have business. We free all the grow the cash it don't side We're flow right. utilize that to of fact continuing. we franchise at that the can actually capital-light is now kind strategy. The we EchoPark, a from that without have the

been absolutely which capacity one, have number obviously we start on for a contemplated, additional debt we opportunities we number opportunity, liquidity, but see that one. side, nothing we the from used be a accumulating And can number If believe So has we can good franchise have capacity. two, perspective.

Nels Nelson

would infrastructure And the accelerating it. EchoPark Got or you would contemplate growth support not that?

Heath Byrd

obviously, CapEx a perspective. got cash almost. store to We're every actually every perspective, Well, we've of it. plenty a putting from a It's actually up X weeks, do resource week

And perspective is it so it capital. than more is resource a

Jeff Dyke

is this Rick, Jeff.

so at perspective faster really in So that's the that's one place, - X and another happening you in build. have place, will from personnel a constraints the EchoPark that have other that quarter pre-owned thing do X you it's acquired thing dealer evolution fit saw us capital and facilities our is allow - piece fourth is that in because we model, us of no to the grow you to already groups

And so inventory the is build train, have price, we and and do away go. to all we pipeline

it expand us And quicker. be to so makes able

opportunities $XX those we've billion for advantage towards that us So - of along, as those XXXX. you'll because been as see number allow talking about that take even us it faster move will to that deals come

Danny Wieland

And is Danny. to add to that, this

multiple. side time lower the acquisitions, - on that I franchise as as shorter relative much one days, a XX we much think in little EBIT in to accomplish the those frame can pre-owned thing

slow that manufacturer and drag process. of You things out in approvals don't have that considerations terms can and

capital so us said, as and do effectively more solve allows constraints. So accelerate even resource that it cost much you to, growth,

Heath Byrd

Yes.

good that's is preowned to less in like what think point. acquisition Then than the of an do expense a side. on you into new I very to entry have the dramatically the

Operator

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

Rajat Gupta

the the moving I appreciate on all XXXX parts. color

questions. then of point couple and clarification a Just of one

I that the this you wanted just earnings, that the or quarter, was year. to Sort that or was provided have pretax? around - of like first EPS EBITDA number for an for XX% that XX% clarify to seasonality comment that of was

Heath Byrd

is XX% profit XX% Yes, profit, that in our for to It's a we total realized QX. profit. related the to of year,

Rajat Gupta

income, net or? that This it is the is

Heath Byrd

to or cadence for Yes. From income typically net you the that, that's to back look the [indiscernible] years prior seasonal EPS a our quarterly perspective. if contributions.

Rajat Gupta

account benefits Or just you're And Okay. on taking vehicle more is right? the the a grosses of... new well, as is I the strength understand. trajectory normalized seeing into of that that just excluding

Heath Byrd

It throughout we're and it's the of percentage that to a year. into expect we takes but January year. total purely see February, Yes, seeing what account in the definitely

think of So the coming And QX luxury we into even still quarter. in as a at did to grosses the our relative if first get of did we you see [indiscernible] that's rating look it's that XX% QX. industry, see to new percentage, the what XX% to we'll out QX, rest you the QX come and downside where in from of

Rajat Gupta

it. Got

this Okay. That's EchoPark guided for this year. in things, side of away is $XX target the X-year mean $XX just - then here. million still like EBITDA to helpful. I to you you're XX% your from still And roughly million on

see costs But when XXXX XXXX the I coming to quarter EchoPark. ramping period these up the and have the there mean with you're stores you year new So really EBITDA can for added that. the with for earnings levels flat where I is guiding inflecting? mean essentially you or obviously

So you're more continue despite and of twice going to despite several number going stores the lot forward. a units, - add to

inflection? that real us last XXXX? of I if some year plan have trajectory follow-up. just one is the X-year give Or towards XXXX your EBITDA. is you curious And it Just of could on So sense

Jeff Dyke

So Rajat, Dyke. Jeff this is

same opening slowed novel prove profitability of of right, the make One in need about we we a that and is could at the things sell of cars which to bunch right, EchoPark, actually you concept the in a to money, XXXX, think stores, idea really is, time. that

X, to center 'XX have recent stores is move you 'XX, tomorrow, along get having was stores profitable the our We XX across of we going X in on us and opened stop a center And we first you're maturing. that But profitability. continue we've X profitability as improve months return first. ground opening We months. comes drag XX, good to network same XX profitable. We that. so made to sold The that announcement now so of high and see in news our really, the the second really X, opened more that with taking in money that's lot - XXX as for stores about In stores into great where distribution months, 'XX, our today could, grow off another - XX that And stores X, is to we're units news are really the you'll XXX-plus us. stores country. off and way and the another in our this - really 'XX, there's It's in and the way never see X delivery into to so X year. moving taking delivery

would to to be I So profitability I year, continue as expect out we're expect that the what continue calling mature. to stores improve see would this and to

Heath Byrd

maturity start And our when a gone XXXX their based if locations, look - you that XX on have or maturity. through is of at XX got you projections, you portion locations - now seeing their

enough that tipping started that answer hitting you've question when specifically, have we having your So is to that that point more matured that is bottom see line profit. stores XXXX

Danny Wieland

store a loss the drag XX pre-breakeven of of EBITDA open, million from that And to preopening and we for that's just each perspective. to million $XX $XX cohorts add that, to

From And that's XX XXXX stores, mature. XX-plus so base will we got Those XXXX. continue it from the steady to initial be 'XX, through today stores. into going the will

in for the you're to outlook we comparable the forecast XXXX that if to stores, it's that from is million million that really $XX drag helps. $XX we levels, did excluding XXXX to our back new XXXX, if million $XX comparing So XXXX for

Heath Byrd

Correct.

Rajat Gupta

the either That's it it. a contactless a was color. car? just fully if last the the up of sense us one getting Or be also, updates when an through And you that's on on that give to could expect it live customer helpful. cars transaction, Darwin-Cox home you rollout, sold digital all And it of for how how update with could give picking Any delivered going? platform, will many That's those channels or the be us that? me. where were helpful on that the inventory, the rollout Got just you

Steve Wittman

conversely Wittman, here have first at because Retail journey. of And little about Sure. think We Sonic. customer can there, differently. that in on About the a consumers one, the us Harris questions sure execute Two gone model. digitally. process bit XXX% done, to want throughout a Poll is Rajat, like mentioned, want some to so us, their consumers we here, channels, consumer-centric told right? in XX% we've a to on digital centers be of have Jeff Officer from it about their really hybrid in websites, additional that both really our the XXXX, consumer we've done with this call our cars actually and, we through Steve consumer And their Chief journey percentage - we've tried it perspective to So with mix The make want good which of of course, serve think Digital our research physical interactions of only we digital this a and physical so September X% of be locations.

dip needs. adaptable and So have can be their can where so omnichannel about in of the a and a model consumer physical and that X as hybrid digital handoff out we to the between we seamless actually think both

strategy. our that's So

omnichannel have is in an strategy Our infrastructure place. to

also they person a when so is that talk that, make strategy handoff Our versus they to seamless, the interact to is anything online. when sure consumer notice doesn't

go consumers take by that our contract last our they person - consumers at thing, time about take come means of XX% that online consumers And our they consumer Now dealership. specific Darwin out form, the before tool. to our the chat, digital. What come consumers, website year, physical in out and That of that's the is online, and end-to-end see piece action our And of a fill action and fill do financing they that in X our of both talk key data for thing. XX% About kind mean a last some they saves average, Sonic stores. of the dip the I start actually online. XX% on delighting about we into the they hours form, out and in on GEC, with the about saving in

the first first that's the question. answer So for

The path. parallel really, second thinking the about question our And year. strategy this we're how is digital at

optimizing what those the you've paths some we changes online. with relationship, of we're So and are: X already one, have seen Cox happen and Darwin

to dramatically can cars our with website you interaction seeing more options see EchoPark above We've We've given and listing simplified our consumer made You page, more fold. and better. the look photos at go it. and we've that our consumers can vehicle

best So we we right the parallel, consumer thing consumer on improve consumer websites. what with now firm turn seeing We've in we've we're language Sonic here is automotive the Darwin, e-commerce consumers automotive, we're massive In not kicked to but what where looking Same an made is industry. here doing the the experiences process we're process. is that and at a with what is to outside also create project e-commerce in the our really to into language. dealer automotive. in the platform tried at the outside the simplified best off clear, language, And partnering it have

a buying on to really industry the apply leapfrogs those we have really and give consumers don't and to car already of what's be just great Walmart.com, special consumers the on Amazon, out really, to experiences there. We want competition. that copycat something want on Wayfair, learnings So

talent So I'm about industry. outside into excited that. We're the super tapping of

we're today our our thinking that about a a only also to future expertise. tech leveraging creating from we're course, needs. industry modern e-commerce And adaptable we're be not stack will standpoint, Of just

X not X and last it'll X years just XX So year or but years. years,

Operator

comes next from Your John question the of from of Bank Murphy line America.

John Murphy

year trying like of it's we're And question auctions. sourcing coming? and getting vehicles. years, shifting that and shifting what First there's and or next to the more do maybe it a over I'm there online over you lower this of think X returns and more just EchoPark and beyond your lot physical a thinking the this here, where for more, like away just kind lease around your these franchise it or opportunity so be sort from curious, How pricing do next just might bulk sourcing the lot efficient quarter Obviously, seems cost used how think two, just you of envision there's about transaction And seems later make sourcing time be shifting? you of both. and dealers? to with you're

Jeff Dyke

Dyke. Jeff it's John,

different as us on the comments part our now ago, some for second to a look, that applications, of So through buying vehicle the buying street, transition consumer he trade it going street. is and a to more auctions, off we're the we're much easier and to Wittman's more lot of a inventory cars off working a that the to make into Steve made us and

today, And than so while that's inventory a our smaller overall of percentage XX%. less

shift EchoPark trade for of thing off take bulk the companies. buying opportunities there's terms to more inventory. take X that expect that grow is, which of no a the We on synergies on two don't in at is in a franchise for XXX and XX% apply which cars in forward not The big, move to of where you over as trade. hard margins, the to cars - network, sourcing we in us consumers great really a and category, and X we a - stores, they the between forward franchise will to turning But those at inventory move fast stores auction moving our of are that to stores lanes most franchise will support do. XX% sourcing. In street. cars where get have the our the as so time can particular, us But has been higher support the buying to number the your There's all no we of concern Sonic for cars everything at We those enough of are stores more time to street than for our north versus the certainly there's over from you our to concern perspective cars at we take on, the sales. to the closed off

John Murphy

through time the some your you're think repurchases? inventory to a street you your do it's be of at future? this your trades of and envision of vehicle where I new But XX%, said current than sourcing I comments, XX% mean, more vehicles you off period but the XX% could in And majority point

Jeff Dyke

Yes.

car But buy the than are to through think they're the for category, off see X that's less source and continue we'll street to X-year-old volume that to is cars. supply product And I that buy as that franchise the long X, we're it the percentage is the X-year-old you that's companies X cars, EchoPark's happen the as older that's there. in cars, can to our street to that through majority that be What opportunities side, looking through model, low-cost we X-year-old - drives future there a from vehicles as auctions, for so a the the our sure. the perspective, and rental X on in because X, off manufacturers, to the to tends EchoPark EchoPark. opportunities X-year-old that at the X, category the what not X higher there are in X in

John Murphy

it. Got

Okay. helpful. That's

How When work? people getting integration of that to those that these and the it. [indiscernible] the on processes. your sort Carbiz and does of Car Used of standard drive It hyper there's a you're with, running work? acquiring Second you're you're a integration in acquisition. you're and dealing mean I like exactly growth does know legacy But way what model you're you market. how question whole stuff, sounds new it's you have what doing how really given just assets, the stores, lot

Jeff Dyke

you have we're inventory because Yes. all up. to buying filling might they're It's both franchise our over, easier a so takes the don't side. into baloney lot we and quickly, car than system we're on already, buying, that you have that very supplying Very, locations new the think with deal

in in Then good market. the playbooks got very and we've X good Maryland, assets and on being very, is the is our great car training just ground. The good we've locations, already really the got processes. our now facilities putting X then which team a all Our great Laurel, people, used in really thing is, is

price the coming in we're that's So - now the move do of but this doing a in some what's go do and trying allowing EchoPark. they already does, just lot what things evolution what EchoPark one us formula. great of they to just were we that the And finishing is have is to really to already hadn't and is sellers were figured formula, which faster. And pieces out

looking real all these instead we're could could is of groups and standards, and have already buy gosh, - go those to organizations. the a go in having And As out at search we're plenty operation and facility in stuff, stores, that a find facility easily convert fairly buy it and there, for some build of both our they we if and and they then share cultures go characteristics. well, estate there's same of meets we in both them and thinking, that of leadership

now And guys - our they in matter we fact, introduced buy purchase real the of the distribution matter centers. our part other snapped a As - delivery of a just in network as that distribution of fact, quickly. each one is running of are to this and

very doing exciting what allow a to more less prior. with time because even effective we more us for capital going were than it's to it's and us be So efficient

John Murphy

then vehicle sense. GPUs lot I you makes the highlighted relatively just that kind inventory little tight, the market half first like Yes. seems of bit strong be a That's It very, year. new for very lastly, might mean interesting. that a the of And of

and weeks coming are that then on kind really up very end the to be Or up yet? schedules hits? just And on in showing how kind curious mix and the if shortage thing? dealing production is months something side, with the being not bad shocks that rich expect you're positive this - vehicles not does a chip Just thing you is any such it's as to seeing and of focus in of automakers transit

Jeff Dyke

learning have and less manufacturers the at all we're the end Look, and margins the and supply then the manufacturers means rate, Shorter to of turn incentives. better spend learning. are date higher on day,

so next We the lesson the rest when to It's again, move the inventory do two. last going think or But change suspect The have for impact. all not piece big an immediate It's inventory margins, They chip permanent right month we'll We're do best our learning short into that. manufacturers. here And pushing as high, is I back including to very and levels supply high nice whole that that has in how the going we've all-time of better all ever easy months to supply created fits the because breadbasket with have and so has built. that, that's an a turn. not get to that the impact the margins, and over XX remember, had we world I to a really slower you're our get see industry. that. think it of run-in - we're forward has everything, industry I management, it tight. makes already over

Operator

[Operator Instructions].

Jefferies. Mark from comes Your next from question of Jordan the line

Mark Jordan

the Mark about service a the recovery Jordan channel provide on you segment, Thinking and able each you to largest the maybe are for there? Bret. see and specifically to headwinds for parts where franchise breakout side,

Jeff Dyke

You mean service body and parts shop? and

Mark Jordan

Yes. Yes.

Jeff Dyke

So a less to accidents. really sure. the of is I shop the the mean, defunct, that after you the At end lot less body call. we can get day, business lot driving,

so ROs as much. a struggle service in in for total. big the are driving because business And business not everybody industry service down that's been follows people are the parts the and the And

fourth a quarter. And so we decline in about January, decline the X% saw X% in a

out, this We and into change on, as was getting the back earlier and are traveling, comfortable we that the people half of are to be expect really that's move the the saying vaccines difference that, back we The half fixed driving - Heath make a expect and expect year. much of first we to to to going better and half. perspective year around. That's the from big going than for a more us,

Danny Wieland

flat, was it This the if down customer store. point you is quarter But Danny. look at from the base on roughly the almost about you from overall think competitors in Mark, XX% repair. in fourth Collision we've for X.X And parts with down if that's at adding repair in is the of segments, look heard same it service, to our down. I part the space. and fourth some quarter. collision what also Wholesale line from that, was

You in independent activity the and shops dealerships, our impact. lines service got the lower certainly same having similar the or are

Jeff Dyke

parts another to Mark, the parts are one And our department. to shops that the that is buying that thing body from add

well. percentage that So is off by parts as certainly

Mark Jordan

recently. we've by maybe Great. then EchoPark, emerge I Great. to what talk providing used how visit? few online-only advantages a to you customers about quite And want guess footprint from those seen - that EchoPark do And have that differentiates just you platforms about platforms? switching Can over vehicle thinking physical the might

Jeff Dyke

allow a shows, can start Heath second. car. footprint of and to Yes, very here to data physical And customers there the our have saying Steve plan as we capital-light, grow and sure. Wittman earlier. a that want chime a think out we was will come XX% But I'll the country across feel in efficiently, in touch us

our the cheap used competitor we're that to to really X-year-old going up pricing difficult average and across very to on spending roll happen. inventory platforms we to provide physical it's plant and the than be running. $X,XXX plants, the perspective. end the And their in facilities And getting we those that $X,XXX across up efficient our as very capital in plan, our are have and cheaper plan than and And like X- country online car with many a open feel compete effective a our day, we of then market. make country cases, more at very, from are an so But to out good we the and

Heath Byrd

as there's is price. one, is three really Heath. really competitors. but components mentioned, just - that there's from all said me, this I'll it, And and Jeff number Jeff EchoPark for differentiates And add, the

lowest you that cost thing, vehicles. the very the used a for, a driver. first structure have they're can price provide is And when We number and from one we what the looking the ask high-quality vehicle, price consumer

Number you're you're want me, to to expense percent population. strategy to number pricing says two, used people our the that cars as on going So differentiator. the of one be the out a going differently. data miss to buy structure if in Steve large only, And the is Wittman discussed,

going the on you're on-site to growing a going you're physical out miss of population. If to percent be only, a

third journey You management. the have lead We've years experience consumer to the then demonstrated ability is I Wittman that component expertise. that running years to inventory we wants. have is dealerships. that strategy strategy we industry a the do to years and and address And that the the walked through, that both, operational is in have mean automotive for got of and our

best together, you add those buy to expertise when from perspective. want all price, three of ability you the the what the So our operate, from EchoPark differentiate are and competitors to things the those the that

Steve Wittman

going an the give their to online office, the at Let in they're can We're just shop their as And about on right? consumer consumers those and view going from right? flexible, way that's them in in that. the they to all industry. to to We've let Amazon things shop a separate world. them retailing do want there. the let to they're this think been and ability they at and their physical car designing doesn't we and is digital We're that's beach, physical consumer Wittman, shop car way add [indiscernible] we've the digital X anymore, ecosystem wherever If digital on to out been or our whatever stores, automotive sitting The the on want. of them desktop there Steve we're

online digital with also about consumer keeping our that transparent where And the GE to and chat able lastly, transparency, seamless services then physical, - products out needs in dealership. somebody steps and EchoPark get this without in digital with being call the the That in the equity, our come our consumer And handoff The at and key. to pick center they important. want So do step have feel, all shouldn't want consumer noticing, our or very going X somebody consumer our or line grounded being else that two, talk the is products and looking products it's is goes experience. to in touch, X and and or integration and online, product our out when critical and to We're everything understanding giving right? if consumer between online, with is opportunity they're to or up at in flexibility infrastructure so cars exist, the to services. consumer when to is consumer in of they an seamless our physical. to going in that Number they outstanding they notice smell

that our hallmarks and flexibility, are digital be transparency that and products. seamless going So handoff of to

Heath Byrd

look want. you think we long-term leading that our Heath listening for I reputation is about believe growth. right, We that success for this And from Wittman long-term are can And you if customer talk again. and perspective, talk if consumer satisfaction And industry, at - satisfaction, the Steve consumer, about, EchoPark the satisfaction. what is the customer the really you believe you we we Steve the they that ratings, see heard phenomenal indicator look indicator at that's lead the and leading has to

consumer, needs you're have the long-term you of going success. If meet to the

Jeff Dyke

is Mark, And Jeff. this

got you highest If you scores our look customer Greenville's satisfaction highest NPS, performance, that, at Greenville to our already. add if

centers basically pen down to in that our our an scores office. and highest state-regulated have So we the yes, have car that where about paper satisfaction we're to then doing online one really delivering of other transaction excited that marketplace. entire from you're we because than And Greenville

So formula. right experience. the the We customer big is want. price. listening, yes, us is importantly, we as telling - love difference. what This the the customer the said, that's is is they Heath this love And telling we're the exactly Most

can your price, grow and If to really retail, create structure car ability do efficiently. a and cost $X,XXX the allows the $X,XXX that that to us you then below it to expand to effectively run supports and

buy look good as on forward roll out we us guys centers, of our coming and you out more early for to news So really delivery and we updating more.

Operator

to further There closing remarks. for I time. back turn Jeff at questions this the are no call

Jeff Dyke

joining us everybody on call. the appreciate I

being on we to appreciate but call. We'll everybody. through weather, worked with talk the Texas in here opening the you our that and for all Thank the certainly way you. next Sorry

Operator

That concludes call. everybody, for today's conference Thank you, today. joining

may disconnect. You now

Sonic Automotive (SAH) 17 Feb 212020 Q4 Earnings call transcript