SAH - Earnings call transcript Q1 2021

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Operator

Good morning and welcome to Sonic Automotive's First Quarter 2021 Earnings Conference Call. This conference call is being recorded today, Thursday, April 29, 2021and presentation materials which management will be reviewing 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. Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. are Exchange the Commission. uncertainties the filings and and Securities risks detailed Company's in with These

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

David Smith

our Automotive. I the This was must is Sonic That hear. can to very a that choppy sure from connection. perspective. be bad That want listeners

Operator

Yes. Everyone hear. can

David Smith

call. everyone CEO. Good very Thank I'm welcome you Smith, earnings morning, and the Company's Sonic Automotive's to much. David first XXXX quarter

on Digital Vice and our President Executive our is Mr. our Joining call Wieland. Danny Tim Officer, Vice Chief Wittman; Investor Retail today Mr. Byrd; President, our Keen; CFO, Heath me President Jeff the of our Relations, Mr. Mr. Mr. of Operations, Dyke; Steve

would partners First, vendor team customers, our mates, thank record of all and to achieve helping manufacturers quarter. us for like another I

to execution XXXX. receiving positive quarter into consumer on coming up XXXX, These team. of our all-time vaccinations year. the our of targets the our of increasing generated in quarter trends $X.XX EPS momentum by continue quarter, outlook During our see to all earnings and a report continued last another adjusted facets pleased year-over-year are long-term off in return were per a strong EPS tripling the toward record Americans record quarter for share, on increasing We XX% and total I'm quarter strength and first the in number We in our in results first per EchoPark reflecting dealerships, based first our second we remain build record have quarter $X.XX business. demand of driven near-term first franchise confident current that share and performance of results in to continue the and record business, by normalcy. revenues strong of adjusted billion, our growth extremely on first we our quarter of beginning $X.X and continued and basis

a compared the XXX% is of taken a increase trends last these date, Given first franchise billion result we confident total revenues of increased increase, revenues more was progress of $XX quarter which doubling two-year the increased million, year. our in year. pre-tax year. XXXX, Total can On by XX% XX% goal In $X.X comparison was lower are our a dealership income by actions structure impact quarter increasing attain $XX.X a strategic significantly to XXXX, our from last $XX.X segment, million billion, than million, same-store income we or our of revenues increase franchise to franchise last going pre-tax to dealership core that an and forward. to compared profitability and of reflecting were expense $XX.X first XXX% as

EchoPark. to now Turning

of We rapid last which experience quarterly continue record all-time up is the achieving during compared period year. the revenues $XXX to growth same to quarter, first XX% million,

XX% quarterly year-over-year is to XX,XXX sales which of record on units XX,XXX units, retail guided to achieved volume our we also We ahead nearly up XX,XXX and call. of February

target we model of total that of our the have use above growth, - $X,XXX. our $X,XXX unit per line pricing gross vehicle EchoPark top to environment of to and currently addition In during build profit

store unit. total for $XXX,XXX gross South profit Generally center to delivery EchoPark $X,XXX and first level selling model our in Carolina March outperform at nearly Our continues XXX the in per profit Greenville, vehicles month. in

full our for scalability learnings flexibility, showcase month consumer Phoenix to stores acquisition momentum in and each EchoPark hub believe are store opened the of December's new XXX demand or continue in proposition King acquired. Used results month EchoPark aggressively. these driving And our EchoPark and up is total results to nicely the to proving in We we the the and model. value choose units of March, the selling for pricing unit continue a And experience visit profit. EchoPark's we store The per in that With selection centers as Car apply more unbeatable over shop or ramping concept and its March level also gross outlook pre-owned ramp $XX.XX we of $XXX,XXX vehicle to stores profit vehicles and unique of incredible delivery and guests the already selling Our unit. unique ratio XXX guest shopping [ph] our in inventory offer. echopark.com

committed EchoPark's distribution and and locations in XXXX. plus and annually nationwide in pre-owned we're retail X.X new omnichannel to opened first retailing As opened our confident of XXX point network platform, development Charleston, time. the We that XXXX in an Alabama XXXX, vehicles new the reach locations our distribution continuing and With retail in we for by can which EchoPark track remain that expansion, South third are over center to EchoPark April, nationwide on on our And by revenue XX five million expect our platform, $XX we by progress omnichannel we billion we we to-date latest quarter. hub Birmingham, Carolina. opening retailing network our update in delivery our in

of that In [Technical quarter, XXXX of structure, compared the in the improved the SG&A remainder due and quarter basis year is were year terms addition first compared total comparisons expenses in to the first in same [ph] last SG&A the our reflected XXX February XXXX margins and pandemic of expense franchise previously press EPS this million XX.X for basis and to was had March than quarter a the XXXX. better the XXXX reductions as initial XXX and expense morning's current expectations of substantially permanent operating quarter's points demonstrating Difficulty] profitability quarter impact release the January for which results despite increased first our strength profit In last communicated. grew beyond. dollar the have to percentage of decreased improvement of representing gross comparisons year-over-year includes store first and our of XXXX, Since a time, XX.X% point expenses earnings to which we of the the we in

Turning which with now million to our support More incumbent closed recently, available balance we sheet, million financial over in partners. credit both new the $X.X credit cash $XXX four-year all-time was strong hand. and facility. facility in an Company a new with at billion the substantially $XXX from and in oversubscribed first million April liquidity ended set mark quarter $XXX liquidity included high The on

facilitate XXXX this per are maturities, growth our on Difficulty] XX, and total pleased which costs extended share with fore-playing liquidity transaction We raised and our record has of expansion debt resources, of [Technical on capacity [Technical July borrowing very shareholders payable to very XXXX. improved liquidity Difficulty] pleased to I'm report plans. our available XX, all to our June

in rapidly increased demand, look rapid the the pre-owned share million, and operating our improving remaining well summary, Additionally, as leading forward EchoPark total as million. retail by authorization we our constantly authorization has expansion automotive In steadily success quarter $XXX the bringing $XXX our increasing automotive industry, XXXX. retail to in repurchase become of continuing stories one to performance conditions. its first Board reflects record

last vehicles further see expect strong which new and demand our EchoPark drive term, for the near should in and stronger improvements a the the as we our EchoPark pre-owned for during year much us both much growth manner. franchise brand. same pandemic, all challenges global the faced Despite continued organization. in to have and At time, the We dealerships efficiency Sonic and emerged operate enabled in profitable leaner more this has

This opening answering our and questions very look remarks encouraged to-date successes our our forward any remain We plans. strategic may concludes confident you are much. Thank by to in have. we you and long-term

Operator

Rick first [Operator question from Instructions] comes Your Difficulty] [Technical

Unidentified Analyst

you Can quarter. me, hear Great morning. Good okay? Thanks.

David Smith

Rick, but It's we'll a it. bit ahead, make little go choppy,

Unidentified Analyst

Yeah.

think I Difficulty] [Technical that

Jeff Dyke

Yeah.

Rick, So, We point car is quarter a ended this basis inventory. the new XX with first Jeff.

that. then I toughest going hardest. in What's domestic, the May to certainly in of second - we're should got three are from [Technical And margins those in We the I we inventory world. and - margins. the think so it's continue. break enjoy good it of product buckets. month of them great reinforcing Digitally be to other And Difficulty] domestic course to going quarter terms maybe parts So shape. and

rest help quarter. difficult conditions year. and the continue going of harder domestic with Imports we think through really to I get through going work our from [Technical Difficulty] second the perspective more us as in to are will domestic is to

Unidentified Analyst

Difficulty] [Technical

Jeff Dyke

auctions [Technical Difficulty] the are doing of ever this this seen. good. February, XXX,XXX something there for more really, couple out you a to inventory this continuing January, really obtained because category our And money quarter, what time, first months four-year-old have for in And The Difficulty] [Technical is March cars last year. for right cars particular after know, now yet, pattern long growth in we in to is best over happens, one- there and this as

Unidentified Analyst

Okay. [Technical Difficulty]

Jeff Dyke

Thanks, Rick.

Operator

question Gupta Next JPMorgan. Rajat is from with

Rajat Gupta

give morning. shot. better but from Hey, little it here, a good a Hopefully,

with levels just to million, first to EchoPark the you about match $XX [Technical Jeff, levels million XXXX, had are start quarter in the $X talk On given can the you EBITDA XXXX Difficulty]. million $XX to

Jeff Dyke

a but it. Yeah. I choppy, Rajat, think is got your questions I

there's $XX million be that have less lot for executing $XX that in to quarter what about $XXX,XXX. much XX playing beginning year. Difficulty] a of this a faster. the we've this $XX cars We or couple still Difficulty] sort taking the the a we do switch. [Technical as see Danny, have while, just we're have in the opening were seeing conversions we've lot more more benefits to happening at but or we and less lot opened expect the can the they going in quickly, and it's done. drag straight we right six a that drag. Charleston on $XX those the and opened And some almost Phoenix, We just is to range. there We're moving The [Technical are the that million stores, We good Danny add nearly mature lot. cars we months will get that opened think first the in learned on one up is of - in that it still to And a for but there to acquisitions we'll people light stores to than have York faster We just the one quarter, than done able greenfield ramping would delay year as the turn which go end money, $XX and up XXX our drag out that, went the XXX,XXX thing, remaining like [Technical have newly faster [ph] beginning in can to sell past. we to the hit Phoenix, do of cars we really $XX is of been anticipated. million months in guidance was in Maybe to team we like that A in are We you that million to been are this Usually quarter, it made more we in forward. that's like to Wieland last quicker, you Maryland. Birmingham, more or stores, only to online, to five stores in a I meet like year, gave certainly, the and a second and stores up update $XXX,XXX February, better, of hopefully move had locations million We're opened improving of more now Birmingham, we EchoPark, four news fully thought. our and I month good, New the to million last that I and much Difficulty] just year, we little being come we And acquisitions year. pre-opening, be last also we're XXX did pipeline And And get much is margin. made first that think

the comes where majority benefit that from, that's traditional the it going is greenfield having of of in back So flexibility drag And EchoPark. during that's and do the be weighted. versus we doing the one to acquisitions

Jeff Dyke

did hoping that its same. we're expecting cars topped platform in After just just we over there synergies our profitable platform, XXX so, hold that Yeah. it on, immediately and in and that the Baltimore

Rajat Gupta

Got it. [Technical Difficulty]

Heath Byrd

the Rajat, franchise We because do EchoPark is as is But of the with heard this have of really and interesting, success allocation. to the for on drag. as on EBITDA becoming these quickly again, net even our to active priorities look a acquisition the well acquisitions of flow, little choppy. creating time, it But capital we're and that get see franchise first Byrd. profitable get well It's the for EchoPark, of we cash some on opportunities And opportunity. will And not producing, opportunity capital the Heath of a allocation. more seeing, because lot side. And think We I the main at side. franchise. of be growing on as the what changed, continue area we're EchoPark how we're starting as got the free opportunities

shares believe in raised We undervalued. did think the which capital the were back can course we dividend, Of capital it's million like repurchase shareholders it's the believe I you allocation, and almost authorization, now. we of We $XX. we to QX undervalued returning part see X XX% bought get share

looking well. repurchase And opportunistically we'll so continue as at share

Rajat Gupta

Got Great. it.

Heath Byrd

you. Thank

David Smith

you. Thank

Operator

question next with Jefferies. Jordan Mark is Your from

Mark Jordan

On of Carolina… EchoPark increase to your directly you from as purchases the move side mix South

Jeff Dyke

Hey, Jeff is Mark, this Dyke.

to with Typically problem four-year-old down, off are four-year-old one- model. the is Customers one- cars they're to sell. bringing when Now, upside have you're still street, that to we whatever. buying the cars

street. of can out cars, And is cars those XX-year-old one- going of of majority buying cars. are the there lot four-year-old market. X, to cars a competition see, our they're you to So not wholesale buying the off some But

never range. our customers it is off the to is straight it And selling XX% street. be the is source for us, there's of sales, it nature big us. percentage a as right a to and source for So now going big, growing, that, But the one- the because of not a business is in of overall two-year-old car not

street. sourcing the from car buying So being auctions some we're from the some buying enjoying, we're able our buy And them coming off our of a then vehicles. where we're Obviously, dealership. of to is new lot

we've of So the carry to all levels prepared. inventory combination of the that us allows kind

Heath Byrd

And add this just as this would well. is to Heath. I

buy we As condition when a at very - very buy the have we product, we auctions, from high predictable range.

keep quickly. as And do very it quickly. so you the recon know we've that and vehicle us low, And to returned allows to the

lot go predictable of through out you've time more source depending a line. street, that to And of very more so a you that get the and you - get got the supply take on when lot some return

the component on So of that's focus another why we auction.

David Smith

got. And I'd add one more thing we

ratio trade almost is Our running XX%. EchoPark of

one- run over from trades. And That's so the of being that then four-year-old And trades big out heck getting just our models home of luxury that we moved business. of we're those inventory for the the great are franchise is, to don't selling to the side fit are a cars. our And us.

Mark Jordan

show are between talk great. about the and you differences might F&I the Okay, then side store in EchoPark can on of customer that them buying online? some up And in like

David Smith

and… sorry I'm saying versus I in in-store I performance to Mark, that F&I, online say, saying F&I that you're think think you're choppy,

Mark Jordan

Yeah…

David Smith

thing along products, It's e-commerce to we the [ph] particular about. our it when for to we've that easier That's even - platform up sell an consumer can lot comes iPhone one our use learned platform. make a

we'll to - that? going we're really going between F&I you online there's And can know for big that not selling F&I, be, be to in add a difference Heath, stores. You versus the see

Heath Byrd

about the because them the it the mean, understand short transparency that's same really online, with products the and does over little than F&I bit Just to we I a consumer. that. the exactly product how seen that where in-store penetration add what They better we've to helps and can to even offer long-term.

Mark Jordan

just [Technical then change part Difficulty] And on great. Okay, any the

Heath Byrd

for three in the X% this the first of up running up us against paying. story great year. year, in We're a so months XX been That's customer far Yeah.

And down same, about at we're in warranty but big better, Our April, that's even we is it the pay. just run. XX% home looks if a running into get customer

huge we for move really where like be back us reopening it of be And California back So have That in a year half big be the that's addition footprint. huge more a where as last going rest is particular, CPE operations a we feel travelling to obviously, this. of California, we fixed are this from will in the customers will and huge to perspective. through year, just

So growth us. fantastic kind 'XX, April good. far not is so That of 'XX really versus in for

Mark Jordan

you. Great, thank

Heath Byrd

you. Thank

David Smith

Thank you.

Operator

[Operator of from your Murphy Instructions] Bank And America. with is John next question

John Murphy

Good morning, guys.

David Smith

Hi, John

Jeff Dyke

Good morning.

John Murphy

'XX, and event [Technical sounds Difficulty] opened year when been The point on the you 'XX EchoPark? inflection or the more EchoPark inflection like it enough point, right stores almost of cost the Is ramp? like third I'm XX or to - matters have on that immediate quarter on horizon. it's know, sort trying that stores just understand second less a opening a that is

David Smith

'XX, some started profitable great and stores success still then look, stores we I last now, opening right them immediately with. the time with cars, year we so are this selling the the we're that mean, that'll Yeah, right And getting and three-year be more these than year really happens. we're having but opening

we picking of to to have inflection going the we're on impact to we really up. So that up. We profitability. carrying doing there's really produces down lot the seeing fun We've EchoPark watch. drag to that now. and both here, model and big have it's a of speed know It's really compared start volume this - But year, profitability we're the in slowed not 'XX a a and just done the gas the stores and order - pedal, all an bunch to really going you is be be is put us, down having going of as right where point

decade And just learned be a year, put have getting we're comes 'XX. $XX lot $XX and thought million to great into into right. While million we drag, years that a a point for that we all the it's going even inflection the we've this in number big now here, today, this

Heath Byrd

we To emphasize I cars of bring, a scalability made and huge online the down And the growth going of used the EchoPark and in team month and and - brought this the on then training much and know, Jeff you really think, our our those store But way opened the we the acquisitions they're as stores is the so now the story. in the XXX the how to track e-commerce quickly we earlier, stores is speed to both integrated. cars of our market - up. going speed market, progress is mentioned cost we is like addition in of part Phoenix so first

Heath Byrd

was you The only more management didn't I'll why the other that management that's put the third sort about look the and team lot bench that's what going thing if XXX,XXX for of to drag you in we to and happened. the see and want quarter, more add the at it doing we'll and a right you're one up of John, as that Phoenix that We the range to first so That's is building thing of quite we in more why investment still just And first was there's right but be know, you going year. And anything the know, told, when we're our in quarter quarter. now. second under-stated. sort on much be into in day just strengthen exactly

to the to rollout of year. to people we're help And schedule aggressive order with and be this more rest adding more added in so, the

John Murphy

the all What general human capital. on anticipated developing being that for cost next them opened? managers externally my stores are searching of internally You or the either is question,

David Smith

Yeah.

plans few move continue to as openings. open them go to early to six to And months had have We that we times, to in outside we basically have the of bring a stores layers future We've look we management. layer in up at for each the capacity stores. have several

that so about And talking. ahead forget it, of that drag don't we the we're and schedule expect of and was the part Jeff

Jeff Dyke

XX. was that John,

John Murphy

this how the new this last sticky, is Okay, ramping then on seems one. going? like gross do thank I on On mean, size you part is side, think you. margin, the And side, new it just of

David Smith

new John. things great manufacturers question, your understood that's little car I Again, a keep going are made announcements they're think I learning that doing it's the margin, choppy. mean, learned keep of But sorry, one have the That to flat, margins and to is BMW Force and the supply made announcement, they're side. - and stay going supplies are up. has I to going

of pre-pandemic are at good run more they and car think day. right than typically top happening. if up to little don't margins - sort competitors. just you used are good margin that and higher on In car quite margins puts front, gives the total lower two certainly they combine a I We competitors too. be or a you stick per it the of rig on in a growth as are of in now but us going not knows, much many who as basis, the So to with see of back I that the one on us our going our back but package know,

model, you remember think the going the I on have model large strong. margins so stay EchoPark margin. And said no are to that And

drive through market, price of point $X,XXX models retail to retail. traffic $XXXX of price sort Our the in wholesale being

markets XXX bit going that the so going wholesale XXX an see what's a that of certainly from perspective. us may on in big to EchoPark minus to requires our depending model drive volumes move will around sort And on that little range you're minus that

John Murphy

you Thank Great. much. very

David Smith

bet. You

Operator

no questions are there And this at time. further

David Smith

Okay. day. Have great Thank everyone. very you a much,

Operator

This conference Thank you concludes call. today's participating. for

You may now disconnect.

Sonic Automotive (SAH) 2 May 212021 Q1 Earnings call transcript