SAH - Earnings call transcript Q3 2021

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Operator

Good morning, and welcome to the Sonic Automotive Third Quarter 2021 Earnings Conference Call. This conference call is being recorded today, Thursday, October 28, 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'd 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

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

David Smith

morning, Thank Sonic Welcome to Quarter you good Automotive's very much, everyone. XXXX and Third Earnings Call.

Smith, David CEO. she said, the I'm company's As

record-breaking the quarter. Officer, President, Keen; Joining and Steve Mr. of call our CFO, Executive our excited very Retail Byrd; Tim our This Operations, effort quarter. Danny President Mr. We Investor been today to achieve Digital amazing also all. the Dyke; our thank thank another execution to record Mr. customers, manufacturer and partners is not our Heath vendor by Chief would like Relations, helping Jeff our Mr. VP of Wieland. by Wittman; Congratulations, without We're Vice our me and and and possible Sonic would have you and another EchoPark performance teammates. announce us on

$XXX across $X.X strong XX%, a board quarter basis, billion, Sonic of up record another year-over-year XXXX, quarter by of operations revenue used third On in the During the quarter fixed driven performance profit quarter of gross and record XX% quarter F&I. and we XXth consolidated delivered of new of third and record third million, EPS up growth. posted revenues an consecutive

record profit line percentage growth, just results XX.X%. expense XX.X% as quarter SG&A XXXX. profit expense our validate permanent basis, top continue reductions, a of Going a quarter segment decrease of quarter just third gross Dealerships XX.X%, to third our point Franchised a the achieving though, XXX-basis SG&A was our beyond from gross of percentage a On in down third of and year-over-year as

deeper pandemic. were Turning year-over-year million, gross operations into from and our Dealerships $X.X third same-store of Dealerships since to $X.XX a record new earnings while quarter driven quarter unit, $X,XXX, prior by income continuing of XX%, XX% retail $XX reported record profit $X.X Diving billion used fixed year, up quarter XX% we've the earnings, compared a up Franchised increase On since third quarter and basis, core which demand in third the third year-over-year, a F&I Franchised profit per revenues per from gross from continuing ongoing vehicle XX% the revenues high and improved unit, pay the $XXX XXXX million up segment, profit gross reflects segment operations per in operations share. to in gross XXXX. Franchised billion of record XX% by all-time customer up we consumer seen diluted or pre-tax recovery were

ongoing consumer that supply low of by chain we new production inventories, new limited and inventory third of disruptions new supply believe vehicle impacted the sales result a unit that despite As negatively was vehicle continued volume quarter vehicle demand.

X,XXX new Our used year. supply vehicles XX-day approximately level our inventory Dealerships last was XX of from or line with Comparatively, this just was down Franchised supplying units. vehicle a time new target or days units vehicles same X,XXX inventory in at XX,XXX nearly

record fifth achieved volume We business. prior up consecutive record XX% XX,XXX EchoPark our revenues. of sales quarterly million, $XXX revenues to quarter We EchoPark third year-over-year. units, representing reported retail now all-time EchoPark of quarter and year up the XX% record of our Turning from

X% approximately market vehicle inventory EchoPark XXXX, points used units of in to to four EchoPark the supply. our quarter, of current a was of quarter third X,XXX end At vehicle the the markets. increased basis the one approximately During segment year-old share for XXX XX-day

the million adjusted market-related $XX.X includes and wholesale of The near have loss losses loss $XX.X and we of used in $XX and For drive an million. which negatively effects new term. This reported vehicle of EBITDA million, EchoPark the higher, third margins to pre-tax EchoPark million continued of pricing inventory $XX.X profitability shortages respectively. new quarter, vehicle impacted

disruption market we continue that in EchoPark environment, we nationwide our occur anticipate population volume in distribution believe pricing end committed Despite we remain our pricing in of these our confident potential today, progress the brand growing and population EchoPark in to While to market the very temporary network. coverage used XX% we coverage of attaining conditions margins profitability to goals long-term these the remain remain and and of continue our XX% XXXX. very amid we strategically by XXXX which confident normalize, rebound With will mid-XXXX. once manage this the challenges, will short-term and by

live out our In the of network early XXXX. in track to end EchoPark entire remain to addition, progress, proprietary our to retail platform the on of digital by go we year this at and continues launch and roll

billion a expertise our Auto we acquisitions business. to to announced U.S. we franchise are strategic acquire signed recently EchoPark's focus Thien future. As as to plans Officer. top a several The revenues. and at world portfolio, by Dodge now Jeep a additional in is plans our continued team highest In to accelerate transaction incremental our brands by revenues these we coverage total which close XXXX. stated agreement the excited of previous XX the long-term EchoPark billion to geographic on $XX XX key to announced expected Sonic's portfolio and to to earlier and in states is add which pleased in team Sonic's acquisition, the in With December add annual further our Officer; year, This We seven to company, see XX brands, incremental this dealer executing September, Returning growth to states this the Motors. definitive welcome to to Chief locations Dino Chief growth are month, in automotive and RFJ addition Smith of dealer revenues Bernacchi, promising Dave of Truong total volume, of group our including our six will RAM EchoPark, and contribute $X.X Marketing reflects five target is an Partners, their the projected roles Revenue Chrysler to

Subaru with Dealerships acquisition the the and we expansion of Colorado, More we to continued Dodge addition Ford, Chrysler Houston automotive franchises RFJ of recently, service the Auto that the in announced Bobby quarter, In Audi RAM further in Volkswagen state. Ford, enhancing during sales of the Bobby our in acquisition and network Jeep market. network our Greater Franchised third

our to business facilities, in principal our Turning upside and with capitalizing our pending capacity we acquisition available to significant note market third $X.XX including an a on balance with Auto, completed $X.XX announced the an million ended in upgraded credit with cash amount total favorable billion, aggregate $XXX liquidity, billion quarter the and now was senior of conditions increasing credit RFJ corporate to million approximately an in offering XXX of oversubscribed on costs. is hand. reach positioned our sheet and balance and our $XXX sheet. refinance pursue More opportunities growth Dealerships connection our keep maturities We recently additional With and the resources, with well as liquidity for continue executing These believe operations. well our we our to operating across business, growth further as Franchised on our improved as EchoPark to Sonic in plans. debt and future we our at rating maximize efficiencies positive strength borrowing of nationwide existing transactions lower outlook terms to demonstrate the to attractive expand

I'm our pandemic. consumer to demonstrate improvements challenges Sonic's stemming pleased and as performance, summary, sheet, quarterly for demand, improvements of payable of of XX, our efficiencies report our December guests. Directors XXXX. delivering Lastly, of to quarterly our to January dedication our the all XXXX, maximizing our in Board per share, results strong XX, Dealerships operating balance from unwavering record given cash approved continued operating dividend in strong tremendous industrywide results a our operations success These stockholders reflect In our despite teammates throughout Franchised that $X.XX on ongoing

EchoPark build Going believe platform beginning by on that look will We our strategic new in of continue forward we Franchised growth continue revenue rollout strong our our forward, increased achieve to segments, much. this will the Dealerships and our may plans quarter. growth, questions answering this digital business we for and value shareholders. to remarks, following and any we execute long-term profitability both to you course, our including you opening concludes very Thank This have.

Operator

comes Instructions] [Operator open. is question America. Our of of Please Bank you. go today from John ahead. John, first line your Thank Murphy

John Murphy

new vehicle a a of I first on cap RFJ side morning to into you of while. that the allocation. the realm off Good the acquisition Obviously, for is just steered around guys. a acquisition clear of ask major reentry question sort kind franchise wanted

of now? It's transition actions. and curious, a you is Just about redeployment kind a of obviously, the we cascade the you it, EchoPark one, signal and it's here. think and one, as that and might think all shareholder it like and very how it's Because strategy about of generates that then previously, but now? Because this do should how our deal, think priorities reinvestment internal But right? been big other capital good a big about business

David Smith

This is David Smith.

fantastic to that. I'll we ask But – acquisition. emphasize on need to think, And the great a unique it's of our of and value a use cash. think that nature we I the Dyke RFJ Jeff expand

Jeff Dyke

Yes, John.

both it years, a to our and that to First debt ourselves. expand not of were intend positioning never business. sheet, expand couple of all, our years, Franchised EchoPark go been or in we've there, five position and off paying four and liquidity-wise busy just the last was that in we It out but up shoring our business always didn't we franchise balance was call

the Ford start did as Automotive. can management at in along say, we together and his the that. go back We that I recruited industry, with worked XX – AutoNation. advantage at here, We day that. I done we've take certainly and We Sonic when the And restart, come consolidation years. team. together work Rick did should So of

allocation, want to I people know business. here. as you look ability our have And at grow comment to the end two now the franchise capital to We're we of so to at going the But continue fronts. portend day, battle we

very our other business. we've planning We been about working excited we're have growing EchoPark that on. we're acquisitions And that

the coverage we're this to the notes, opening by his XXXX. of going on track of the in to have said the year, of and have coverage we're by XX% end market of David As market end XX%

EchoPark so for And the growth a very very, of that's investor an about in brand. that excited We're us, exciting SAH the because there. and we you're see in real time particular, if

And for meets we been then, of both business and Heath? franchise our a When fight add to it EchoPark about are to going we're that. we're growth where we'll So geographically, and upfront and then model what in battles. needs us we've going an clear course, there. there's with to do very opportunity our do

Heath Byrd

your is Yes. I'll reiterate exactly that right. just point

the We strong resources bit have have a We fight ability the balance been We've now and more a franchise a do and aggressively. always internal the both growth to just on sheet consolidator a side. to little battles. that

On much capital-light it's capital the growing to It continue side, that a take model. doesn't EchoPark business that.

obviously. of priorities, So our that will be one

We ratio. up soon. will acquisitions, our to We are impact ones and without deal large lever having leverage at do that the accretive be looking to do us intend a also anytime that opportunistic material that another don’t allow to fit, on

a never We X.X. of that. go We’ll ceiling have over

on It’s acquisition. our If actually RFJ you the less most turn restricted than leverage at one ratio. look

to that businesses that That in strong is includes So even facilities. After obviously continue current with maintain both the that, included invested the we’re sheet. on sides. – balance going to

investments significant doing digital in We’re retail our platform.

shareholders, return undervalued. our to the will year program, these we opportunistically actually a process continue technologies We enable course, continue in of is we price gross to like think that the dividend down. will will regular of SG&A then, continue robotic and And greatly that to share that investing things percent SG&A reduce to also will we efficiencies repurchases. look get us at this our capital We’re and automation, as think

share to at return looking And an capital as will to so we continue shareholders. opportunity repurchase always

John Murphy

Or the that’s then Okay. on I mean very as focus this I should here we pickup acquisitions just helpful. acquisition follow-up. separating maybe and for and or reading is – not dealership mean, that’s view leaning sign in you direction process the be that this of review of into with much associated EchoPark? that a this, alternatives EchoPark? And then new pace the in a the too may

David Smith

We David EchoPark, cannot Yes, this you on just is comment it our announcement please. at any previously and further Smith. will, about that, we’ll if leave disclosed

to on allow legally We’re not just it. expand

John Murphy

you. Got

mean it of the your other I little there Okay. the dealers, bit as in vehicle well. your a doing on like core the lastly market force And been but has disruptive used seems highlighting in you franchise just new dealers franchise tightness then for and EchoPark. EchoPark, a new guys vehicle fairly are used business

I’m far side just as delta think have So used of trade-ins, businesses to lasts? And question curious it’s Is you what’s do long you from is? the sourcing how more as two it of the that a and equation? that And not from there? just you in disruptive better the why franchised flow the just think auctions

Jeff Dyke

Yes.

to It That our if But can if that you to things continues – franchise I buying of that’s refer we’re see So margin side, No retailing business XX%, of XX% mean September year-old to street. where could the or some July represents business, of buy Jeff. John, the you look overall at is at we’re trades to XX%, mitigate trying done be Slide loss. we’re XX, I what through this from to XX% one models not to our XX% are. we’re because auctions we’re four EchoPark in the and doesn’t the question. off mean the that, about inventory range. you we’ve

really great prices. that There’s of We coverage we the this at get separation talking three by see little prices for to begin to EchoPark. have earlier, we’re – car bit And And expect like exciting retail things us EchoPark. a of doing. a new inventory got prices back the lot was and quarters a next we’ll I to going said you I comes And raised time we two our this But a it’s we time wholesale bit in between XXXX, the as be expect to bumpy. is XX% the – country.

platform, exciting we this a Wittman We’re I’ll just on And going most that. of to few comments thing the the launch website e-commerce quarter, and when get selling we’re our let only new Steve to as XXX,XXX is end cars. and comment

Steve Wittman

options in Yes, sure. the believe the And real online, deal, and We’ll consumer a options. in perfect it retailing this echopark.com able what in a will document online industry with online experience consumer has. end-to-end is experience go what that which which financing best payment Absolutely, nobody into the means new be we signing, we will have industry paying is payments and else our the the launch real to with and quarter in the tool. that is

Lastly, we’ll online to kind consumer let that model, being in able the of finish and go hybrid start where they store. can

about that XX% Our that tells model. want data of consumers hybrid us really

Our digital tool this without is hybrid. both really, involvement. enable any human retailing enabled will and And end-to-end

done So using robotic process well the as automation. as AI sale

to track on we’re net-net, deliver. So

an this be in delivering it business. We’re accelerator to will quarter our and

Jeff Dyke

franchise So EchoPark combined, stores Sonic an in John, an exciting for are you’re the it’s whether or investor just for incredibly time Automotive.

business We’re and of to the side franchise the allocate accordingly. going grow capital

few to look at quarters a things. other EchoPark. next these few to going on an to look at as the We’re for accelerator continue press We opportunity

stores, gap of overall, five XX,XXX come have between retail you When testing and mitigate this to we now to the couple in year-old before practicing we’re EBITDA see where – and expect going help But strategy. our pricing. we the up of to continue all maybe soon a mileage to a quarters. range, change to were we as that expanding model we’re as was just just nicely, next the We’re growing back wholesale couple hit, not of a our

quarter, third to but range, of quarter the quarter quarter. some into days’ retail terms year. days’ be terms get through up new in going tough, the And there gap But and second supply are that as days’ of of we in the next XX, gets done cars back certainly first which in we is XX historically us. hopefully, trickle be for in job low, wholesale of move supply So that fourth the supply to the to would creating

David Smith

is This Yes. Smith. David

You share growing we’re our – as market have as that and we’re footprint. growing to as far EchoPark, remember

is that. this so an And investment in

of to profitable the have remember, market you to the wholesale EchoPark normal And where situation in reverts what this unusual market, stores right our traditional company. stores our in some the market so got of now most our entire when we to back some prior

back see shortly corrects. here pop So the you’ll it market up as

John Murphy

And to on your EchoPark? you’re what inventory mean, MO just why consumer sorry, offer the some drop kind the of not a represent I or pressure Jeff, with vehicle, one of supply to follow-up. vehicle trying alleviate to in six consistent that year-old of five you a be and high-quality to kind can there of that’s well

Jeff Dyke

Yes.

adds reconditioning on in Remember, it’s car, days of of at, time. year-old, buy car, car, the particular, the about moving it looking five getting the John, terms XX EchoPark to complexities, frontline, like is car amount all merchandise and the We’re and recon the in transport gone.

frontline expenses critical is XX-day keeping that supply So pipeline supply where need to and that be. they to XX-day us our

got bit recon technician, a volume one market. a eight hasn’t the adjusted different Antonio we process, and bit margins different San a to of are little have but positive. of really the a there, You to little sell And our in

So new pre-pandemic under the and And event, levels. really entire we’ll if just next that We that going things sort for has swan that to It’s time come years not the just here we’re or prime meant is makes back. it back EchoPark that’s in when model pile XX,XXX not is to at a with going we you happened model no never this of see And this inventory disrupt that over happened. we’re coming will, come to going this, out it miles, our know black we goes. the XX sense might – five to my working are of there so. quarter we’re how year-old be model on around one- some that,

margins I back. all that think stores. But going to the to the ensuring on not to We’ll car back X,XXX stay because know and It’s ground eight- franchise want come XX,XXX, XX-day XX,XXX that we we’re year going coverage it side. the it’s going of at cars number now not have comes on to our of amount the that supply, stores we’re high have gap back, in new next will we to normal. open that EBITDA year. cars given skyrocket And watch happens EchoPark, and of by things have will the the we’ll to and return and that the end that get

Steve Wittman

ultimately more headwind absolute and unappreciated it’s that launch think And thing as normalized I underappreciated franchise new new of volume trajectory, a turns those back the or because incremental toward that one previous its wholesale margins it’s an from on the tailwind to decline. advantage the perceived – the profitability a that’s really that supply, load wherever EchoPark increases and price business perspective a then both to we’ve level revert and gained once moderate a and go-forward normal pricing used tremendous perspective fast

John Murphy

helpful, Very you Thank so guys. much.

Steve Wittman

You bet.

Operator

you. Thank

from Our open. Nelson Rick, Inc. line of your next today comes Stephens Rick question is

Rick Nelson

I’d loss you Good thanks. curious forward? while levels? XX. compares take that narrow do EBITDA I’m you Slide adjusted The the can think overall the the EBITDA and market on shows from carry September narrowed, the up continue to follow that September now Hi, can how Or like loss and have the pricing, morning. to we to your pricing

Jeff Dyke

Jeff. is this So

price – to We We’re were the of market the range. narrow in traditionally, loss. going to XX.X% to EchoPark’s XX% continue

continue brand expand some of will front-end country. that and we always that the And be five the today. off are $XXX And in the across the long not price that team margin model. buying brand year whole generate positive. range other hold also EchoPark or higher will that’s XX.X% to cars That’s that, XX% also margins. here. It across the country believe end to of a just to the – the going expanding Tim to the $XXX. it’s more A Dino course, being we’re as in as the the up narrow the we entire naturally That’s in things not making, run, and probably moves won’t couple street, why negative those But takes of that. we’ll narrow We’re the it’s

elasticity and we can EBITDA revenue doing really volume We’re growth and growth things. growth, looking of at great how to of the some pricing the the great those continue have by

continue quarter, EBITDA the that will a So that continue other with the the changes of narrowing of we’re and fourth some first then combination of making. loss. through probably will – into quarter along the And –

Rick Nelson

the I’m on sure they And for this, can if answer alternatives continue, if of timeline that EchoPark does that? in not you or wholesale and strategic but exploration market the challenges the executing change the

Jeff Dyke

have changed. timelines No

still executing our We’re on plan.

in that, on executing being tell than And changed going thing to market, to comments, our earlier. that you further we said the timelines That’s no year now have We’re of what’s on that a convergence no we’re end the in all. have sort wholesale versus what the strategic alternatives, I David still The of given there’s XXXX. other that year as there said. the just back Smith would is on the EBITDA entire And going at pushes only year. probably

David Smith

is And Rick, David. this

think, then investment of of footprint at we’re look with group other have just just group side this stores and be short in then EchoPark I going a time And are the and to the profitable in that the again, out come Jeff growing in it. of through brand at we’re highly been going plowing you our this unusual market. to and have and again, saying as the future. to this an It’s – period

Rick Nelson

helpful. management the Just for commentary color on the you coming coming the that stores, the or not might also, be along? along acquisition, multiple give there of paid be that’s like you more would Any if quality the RFJ

Jeff Dyke

stores, Myron road, the the work leader we who living course, Ford, all they in team, of is team Their COO, point Heronema, staying. ride. for The weeks our their is coming entire couple the of the who we’ve whole managers, last myself, visited staying. of the David, all who’s at also, along the been And visited general RFJ Tim regional for the Rick management we Keen one stores. So solutions time, their is us in vice also on presidents

with were on general at their out recently management meeting their general controllers. we So annual the Coast West

so playbooks, comes We’re are Sonic a about Automotive. DNA to very because walk their Sonic and of a They fantastic one this. feels similar kind from store, stores, run leadership they us. like it’s excited it team. just And into We and of be their excited. great. their team. we’re more we to just that – for going very want is our that’s And us. important on us perfect talent to this fit We strictly to team adding always talent This is And a

Given in somewhere mid-Xs. multiple the the

we million for good And synergies have in So, a think there range million when together. really day the to synergies and the then that’s $XX million $XX that one put that, companies deal in long-term $XX us. synergies of then you $XX are range the kind to million we

best So one really time. the done, looked for were at a other fit and We it’s just just really, was us. exciting this of deals a that lot big

David Smith

some to their they the our we Smith. huge would that David opportunity is profitability into in This in of very exciting the of uses nationwide, add be stores implement even Yes. figured just already to as which the haven’t some that that the boost synergy. the is, of a our future, processes part could I is what’s team processes we’ve that learned RFJ

Jeff Dyke

allies some to up revenue a markets. it opens the But particularly, fantastic stores, look of stores, we certainly towns our the USA a own And do smaller job for lot. town us those forward smaller expanding just although, in in of type that and they to more add small-town to we

Rick Nelson

big Great. Thanks Also, for side. GPU was the driver on a that. franchise

right, in the that increase the down, fact put that some If and the in of is you XQ came sustainable? do the you the the could speak several exit we rate and inventory that, exit, to GPU does recovery that think as the parts, GPU

Jeff Dyke

and all, huge us. a question, service parts yes, on of First for the tailwind it’s

think, X%, for the quarter. was warranty Our only off I

as open lags, get tailwind pay that, begin customer as up we're was of big they Our California for XX%. to a well. going up California all to

So and the see a and service to for we as next after. don't year tailwind is us great. business us be parts year continues and fantastic we as into to – We that move big the

GPUs, seeing you of they new than getting I car keep In the the better you're in just exceptional, ceiling saw numbers don't are on October's know where terms is. what the – third gotten stronger. going think going to – have for quarter the really of that is one this. I that to happen wise not manufacturers levels to inventory just things bring us. is They're And I back the the future. don't sustainable it's We're – pre-COVID. new to growth into to just were back to they I go going going levels see never before. to I have car don't want to pre-COVID it And the say for our it's going front-end never, car PUR that future. foreseeable great We're to to but to go levels. very back unlikely it's margins new going enjoy what

Heath Byrd

Yes.

amazing. really On side, it's the fixed

up still Even mentioned you XX%. to compare we're the You if ops. XXXX, fixed

and coming strong. pay is really back fixed customer the So ops

Rick Nelson

Thanks color. That's the great. that. for luck. Thanks for Good guys

David Smith

you. Thank bet. You

Operator

from Gupta today Our next question comes Rajat JPMorgan. of

open. Your line Please proceed. is

Rajat Gupta

if XXXX below side. comment vehicle the I XX% for the earlier, on franchise question. had Thanks I follow-up but levels. I'm used sure taking a just XQ missed not your

saw mean you at stronger I a Just peers. – results curious much

specific company curious be driving So to the the that, maybe there? sourcing the as just regional or Anything to that disconnect first might helpful. mix? that would comment be Just on

Jeff Dyke

Yes, mix. I brand think more it's

lot both leased. and high-line some back and bit that you the I is others. if just us brand that of – look of a Steve, in lot not to a a versus year off-lease mix the were real think There's flat prior cars they've got coming of And a of high-line at stores. little us our

trying we saw at growth growth We're in can the margin that that they're and very the difficult. is of and to that that not balance sourcing good used volume we excellent balance sustain And the so can the And we're industry volume. the with the levels, quarter. we're levels inventory in that margin I'm sustain so sure car along that the levels margin at. comfortable a

that big certified As pre-owned make in will back for in in is which difference particular our a stores, us, the high-line off-lease, of and growth. pre-owned source come of from terms big the inventories a inventory

So drove that's that. what

Danny Wieland

to And this that, Danny. is adding

that the mix one based to mix, I margins lot things we where we you of are expect think of based mix. and of brand where look look where at the lease longer things if and the that at sustainability are GPUs, that frame today we rate, lower you be the on are headwinds and a have those, lower lease on returns, earnings term

think is in at earnings expense but normalized not opportunity selling XXXX more put the in that and beyond just sustain in place to with I levels we a so being And as our XXXX environment. looks I reductions to return think, good, specific these that, pretty

Rajat Gupta

And just was you years, unpack go-forward JM&A drivers' as how last should after quarter-to-quarter some on just the the the good really about few can helpful. opportunity there? uptake? That's on if improvement F&I to particularly It of F&I, the And here be Understood. over the we partnership. thinking

Jeff Dyke

Yes.

it to go, continues right. So

our think be leaders. just Our of penetration a company Richard job turnover. a Tim the a and And little also is internally stable turnover warranty general credit on management And this big driving year. is is driver And done partner. you improvement. give our focused business three to very, turnover O'Connor, workforce outstanding terms whole fantastic is lot they've right? what job, F&I team of I – credit us. – of X% The the I done done on that that side us. Keen, stated JM&A. will or last they've lot less just give F&I Our They've of exceptional, We a in franchise to a that years, Very four really over I than great team, an for just very as a with

as in we're And continue There's F&I so think, know nothing are from ahead what really, that forward. I an expect and that is. just I October. out to seeing one, from ceiling two down go improve. moving of perspective upside but numbers good in publics But us, And of the F&I our perspective. an or well. will really shape other really see I We're that I the F&I chase we'll don't

Rajat Gupta

their year. next this Thanks. you are Any to platform later obviously your would that coming This like How be features? what preview on out lot lastly helpful. year, key on peers platform? Any of on early preview be with quick come Understood. differentiate plan We've online is to had platforms. up do going that a in the

Steve Wittman

sure. Yes,

the real they online, perfect lenders, the not network we documents he'll out a XX significant versus looked giving payments, versus the the again omnichannel different So at sign advantage that to can whether come believe journey sign there. to the it's our preferred any And consumer were compare in a shopping to the documents components competition the meaningful ability. sign deliver of other real online, when guys, then the contract We we in have that that ourselves consumer best-in-class And we shopping actually consumer the consumer. ability lender really store. also

online to the and So the to ability stop They before finalize drive want test want the we halfway know consumers finish that. store to go deal. most in do they car

that. Our new platform enables

that do really it and up progress, believe in more a then make sales a pick time your process customer in the in had to dealership. customer reduce experience seamless satisfied be seamless efficient. it and It you great contain a will way, will can we more when our store so can a also and customer you the go way you experience, So the

three will deal. in to not executing hours folks or sales four spending the able more Our cars sell they're be because

our We've to best So we learned we've here. from to business. and be we're accelerate others, taken and believe leverage the we that time going our

Jeff Dyke

Yes.

did slowed we we really down his expertise have and remember, because until just Steve not you'll up. showed think I team the

and bought said, we – or could whoever, Everybody don't and back site or care it hours. if or slow going year, works. everybody's went experience, else to AutoNation was from everything consumer the part last we see like of Carbonear go build launched was where our parts down. CarMax So we for And felt I and we've we and done the and process better on everybody to tool we're to a how – that.

have the where investment you And it's it's so we you tool a with looking get day use guys it, I I that getting to we'll simple to work. the forward tool community very self-intuitive, into mean think and And share launch. we're once really just the

February, Charlotte launch and the North platform. to going And we'll then in Carolina January store in the in we're market rest think I our December. launch of the

Steve Wittman

will point entirely be automated. to is Yes. this make The only other

create background consumer the API also deals. have create We're will right the we robotics the the to before, with the documents automation It's journey. people deal. automated process and different on goes using So we're to as to help to the in doing based said calls those I Like artificial that. using intelligence

involvement. no So human

is course, consumer in, lets our let But simple automated consumer them. human involved seamlessly the if three car be and is steps, system the Of we'll steps. really a might an system that buy this three wants

Rajat Gupta

good Got color it. all Great. and Thanks the luck. for

Jeff Dyke

you. Thank

Operator

ahead. Ethan, from [Operator Instructions] comes Huntley question Ethan go Our Jefferies. of please next

Ethan Huntley

was good wondering, for how sort to color questions. you provide Jordan. morning. throughout if trended Ethan Thank quarter? days hi Bret you quarter, the is some But yes, could just new I at for of along just a the This gradual was improved. taking since Hi, bottom, bounce I my know the that maybe back has decreased during it on the it on XX you inventory. sort you of mentioned quarter start, expect and sort end, improvement. of

Just helpful. provide could you sort any would be there of color

Jeff Dyke

wave – to was we kind you if you August really supply and second the July as XX, of depending Yes, executing chips, think on XX. about to now, that to start XX. back March back manufacturer of we've different if you're September out sort in back to you availability of their XX-day XX, Like issue. by plateauing trickling go inventory. COVID year, bottomed parts, they're order I and here how down that's much just to new COVID was really not it's name is a we did and had of chip June, this of a By up, And going of end the it. go be

parts deliveries see across is the I board. it a issue. getting think We labor parts it side and the on

from not as – in north days but lower forward back to going any supply, to we're our going we think we're get I that So move than it's XX be starts the here, moving slow. and X, X,

challenge. and going challenge and are inventory an QX, to from And a QX QX perspective. QX going be QX So a to be are

Ethan Huntley

used Thank GPUs, new talked on basis. up about helpful. the That's could then maybe same-store about XX% a sort those you. you we GPUs, cadence Great. GPUs provide But of of pretty of on color used month-to-month? And to quarter, the moving any strong sort during but sort of

Jeff Dyke

you answer on Dan, Month-to-month anything want to that? do

Danny Wieland

little variability for And quarter. had it's to of in X,XXX north so that we me went a we the Yes, quarter. as just bit the of through

to doing, If a at July, and we you recall, at wholesale up what catch started price environment when the was of expected soften retail looking bit. end we that allowed to it were what the

there little the business as And the exiting so to margin But our bit to of October those used month in see in seen quarter these we've part a we was the third margins. continue pricing a quarter. maybe mix expand dip with there our through of strength continue of in the to middle date,

Ethan Huntley

priced profitability? of being a you mind, front, if you sort a deals pretty frothy, more Okay. of seeing Great. are seeing on here, Thank multiples of getting lastly M&A the sort the don't profitability? sort – normalized record Are on you. of And given then just you

Jeff Dyke

looking think normalized deals, that way I all that been As out earnings have anybody's whack. I've the a I'm it's we're and pretty have of don't at recently at, we're looking at times deals seen that terms what been deals of paying, announced other the the looking of in few

it's think pretty I normalized. So

a from perspective, that long tax to to that looking what and to an want they're be they of are saying, I the out term at looking and there's don't the to or want dealers journey. situation through and we – there is what think vehicle have we investment to exit go going the lot want electric

combination I are way done; think, don't reasonable. at of deals anything felt that those things, look two the see that rest being certainly whack. And with out way the the are we've And the deals of multiples so done. the keeping we I And I just as of

David Smith

think The it's that's Smith. just begun. David got is done in the to so left you to I market consolidation – This market automotive that huge. remember is the just also is be

would of various are there where opportunities many so multiple. opportunities. huge are some that want dealers there we've a had So plenty But

the as but all Jeff at of that very that together. to think and RFJ team on perspective, perspective I emphasize big from team just in to it and and works – many passed from a mentioned, led team an really is most great the also, the ROI different the that it's cultural ROI-focused announcement we work and – RFJ important deal just up we're opportunities our

emphasize the – focus want we've great this a to it's got on discipline So make just that and we to acquisitions. that, team

wouldn't I ridiculous So paying forward, some expect us multiple. moving see to

Jeff Dyke

been This leadership team one difference to and this. we've We're when came we doing Yes. the And XXXX, XXXX, on worked this the deals do different since in just a selective in talking time is the more really have big balance to company. that a hard sheet. because together, we And big, disciplined, have really out is a go on that position very made dealers in because of one. company pipeline, we've there's for our great – lot it's which a that

these battles like Our we earlier, said there are And balance and to to there out deals share. we of sheet our did got made, short get we're going two fair and be up. plenty fight

Ethan Huntley

I the Great, appreciate color.

Jeff Dyke

You bet. Thank you.

Operator

Thank you.

in queue. We have the no questions further

for hand back to remarks. So David Smith I'll closing

David Smith

you week. a Thank very joining call, much, have us for everyone, you Great. and on the you thank and later. to Talk great

Operator

This concludes for joining you Thank us. today’s call.

may now You lines. your disconnect

Sonic Automotive (SAH) 28 Oct 212021 Q3 Earnings call transcript