SAH - Earnings call transcript Q4 2021

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Operator

Good morning, and welcome to the Sonic Automotive Fourth Quarter 2021 Earnings Conference Call. The conference is being recorded today, Wednesday, February 16, 2022. The presentation materials accompanying the Management's discussion on the conference call can be accessed at the company's website, ir.sonicautomotive.com. At this time, I would like to refer to the Safe Harbor statement under 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 by 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

good Great. call. XXXX welcome everyone, earnings and Automotive's full Thank and to year you very morning, fourth much, Sonic quarter and

this company's As is the David Smith, CEO. he said,

on is who us both the Officer, the EchoPark all-time Digital full all-time Chief Dyke; of for revenues Investor Keen, Sonic Wieland. are Automotive record Byrd; record quarter Sonic Relations, results Tim and reported Today, our President today Retail Officer. recently year Heath fourth CFO, call the Vice Automotive is Mr. President, Danny our Operating delivering Chief to XXXX. promoted joining Joining Jeff our Steve and Wittman; me Also

We capped are the company. our of of performance significant for quarter, team's off for very proud our which growth year a

revenues full for XX%, record growth billion for XXXX delivered and $XX.X in In XX% addition a year, quarter $X.X to that basis, of our up and record the financial fourth Sonic performance, continued and milestones position beyond. we achieved billion the several respectively. Sonic XXXX important consolidated for On of

the with improved and same XXXX took At persisted continue sales consumer chain XXXX conditions traffic industry, reduce our expense during which steps drove at in time, strong digital to and from quarter. operating sales the we constraints achieved demand, increased marketing see which, efficiency the the stores including and our benefits have issues. to despite and was organization. customer and This both continue the our structure, throughout enhancing challenging growth see channels, activities we inventory robust our combined supply permanently to throughout We

adjusted contributed improvement SG&A quarter gross a a fourth This compared of percentage of adjusted XX.X%, This share per point year-over-year. XXXX XXX $X.XX XXth quarter per consecutive year-over-year EPS quarter, expenses share, fourth as fourth increase. to diluted basis profit to EPS EPS diluted adjusted the For a growth. quarter represents our XX% of of was $X.XX

in of we full to per per expansion diluted of footprint. quarter, EPS. significant delivered share XXX% the of For fourth of increase the continue and third record-setting share our $X.XX EPS the XXXX, $X.XX In adjusted adjusted measures nationwide our we diluted took to adjusted year a EPS year, strategic compared consecutive

Sonic's volume our geographic upside this Through Smith considerable retail additional our the transaction, add to of Jeep presence in including of previously coverage portfolio, target of Our to Chrysler strategic have single incremental brands states automotive landmark one has acquisition transactions brands, $X.X trajectory. substantially largest are XX we highest Dave added footprint, RFJ Motors. of acquisition XXXX is our in in and the and in XX states billion projected to dealer added in X X With and revenues to locations by revenues, Sonic's world stated RAM total automotive increased XXXX. $XX which and brand X a the billion Dodge portfolio to geographic this Auto, growth history, incremental

Dodge during Audi, Subaru the in New previous These acquisitions teammates at several the in Colorado York. Momentum to completed our Upstate strategic other RFJ and RAM follow Auto, acquisitions or franchise welcome rather. like further in of in to Volkswagen in Fallston we our also and earlier growth Jeep -- drive segment. Greater Maryland We to our Volkswagen year Chrysler Chevrolet dealership addition previous four In quarter would market, franchises Houston Sun newest and

significantly take this of to amazing to these partners want to all at our disciplined industry right dedication opportunity have which our sincerely the additions, couldn't With investing strategic portfolio our right while geographic that in We ensuring the enhanced we in return. manufacturer in XXXX. and have achieved support our coverage businesses brand we thank their for without growth remain and we record

EchoPark. our are With stated the target In concept, date in to and previously states, distribution bringing well population progress end In U.S. positioned of the five our we coverage digital continued XXXX. growing to the our the locations human reach we network, fourth adding nationwide our achieve in to goal EchoPark unique ahead success now EchoPark have by expansion long-term is which our XX% business. of our XX% in population, brand over XXXX. continued vehicle support of of XX% necessary EchoPark U.S. we invest the our of the of of Turning to the quarter, to four preowned interim, to capital by

be Officer the Chief the of Steve Wittman, Chief shortly. Officer; a the Dino Retail Chief Keen Marketing Technology With Tim addition of Revenue of Officer; Bernacchi, and promotion and Officer; Thien EchoPark; Officer, which Operating appointed to Truong, Chief Chief will Digital

out-of-market were F&I XX minutes. conversion positive new better-than-expected To-date, sales end-to-end the from website our the increase feedback and are cars with and in in select which XX% traffic gone percentage e-commerce in overwhelmingly rate, an XXXX, guests over and launch a as transaction echopark.com, Early As XX% completed positive little development a in late of very live proprietary web platform, sold of our update platform. with now sales as we the by markets. is have on starting online of results were

expect EchoPark our us rollout continues network our to and to roll platform allowing progress, we our later new to nationwide. Our to market EchoPark entire out inventory this year, digital entire

our Turning balance now to sheet.

capacity quarter, liquidity facilities of to total billion. amendment continued the During to an we credit fourth our sheet increase Sonic's and $X.XX strengthen including the balance resources, to

upgrade unsecured and issuance the rating existing of credit maturities capital We borrowing favorable our debt also costs $X.XX to our Auto long-term acquisition the billion markets in approximately growth corporate other ended purposes, to including year million senior general corporate supporting lowering a cash of complete terms, and $XXX of RFJ available notes and at the repayment liquidity, in with We with on refinance plan million our $XXX conditions took and debt. of advantage over including attractive the hand. deposits for

of capital common $XX.X purchased price allocation million. since of Class end we of stock of third aggregate XXXX, As X strategy, the million purchase over quarter shares part A of our an balanced for the

March approved commitment share, to which is pleased This dividend performance dividend XXX% cash of on per XX, report a to the level on In our XX, addition, increase that $X.XX cash to per flow to of returns I'm quarterly its XXXX, all $X.XX the stockholders and increase previous future generation a payable of from April delivering our and share Board Directors of for strong outlook XXXX. reflects our positive our business, record our stockholders. of

dealerships valued EchoPark constant quarter XXXX continued demand commitment maximizing franchise of results headwinds, of and fourth full our our team to in brand efficiencies consumer strong experience demonstrate year we've the operating and Our expansion at and pandemic-related the the our continued diligence members. despite success

commitment Sonic continued teammates dedication We EchoPark our their and which are and grateful especially for to to makes success ultimately our possible.

operating of post the with our results at culture of Our has distinctive do, in year everything another model combined heart we enhanced us guest-centric is enabled to XXXX. record that

ahead, we to our further throughout dealerships remain as on EchoPark. fuel our focused plans as Looking implementing expansion strategic well franchise

long-term future questions answering drive with to guests, you. to have. We XXXX our may deliver and to you are stockholders increase This any executing profitability teammates effectively concludes map to foundation look our opening very strong remarks, we our excited growth. our for value a to look our forward and and enter We forward alike. road Thank

Operator

[Operator question today Our line please Instructions] is ahead, Rick Stephens. now comes from Nelson go your first at Rick, open.

Rick Nelson

start big quarter. great inventory Honda, And you asking any yours, an is normalize? into When like about from morning. new I'd of will the you're could inventory hearing by to challenges guess, speak might two Good there the lot. visibility And Maybe a them. you BMW, brands side. to to, on car think what start supplies abate? I Thanks

Jeff Dyke

some question. be to are supply. our it's days about Look, where the at cutting back quarter news Dick. new perspective they're right included XX yesterday for We That's car shortages. allocation some to ended some unfortunate from we going Thanks Rick, got are of Lexus, We February the Jeff of that continue BMW now. tight. and the for to the Toyota, inventories microchip manufacturers, due from March

surprise, kind ebb expecting brands, to quite that including year, of move going to towards we first That's not flow things and of and with We we to was Yesterday all expect start Honda. a better. get indications a we are But with including were quarter. honest the as bit end BMW, of of the our all to move be this that. second through as are So the you.

stay to to is move December. look We a in it as for pandemic said without margins as goes, record at think see inventory hopefully, move we going day goes to was dealt be for then and that in now new is in get to We so And We us, the to don't can a to And car shape. still supply had a are as XX-day to long had quarter the or new year for couple I we last persist the announcements we of as ever the going that The the into going summer, B&W quarter, to supply of great And is back 'XX. And the progress going supply we we've as our for prior XX- up. we've high. better for before, a margins SG&A yesterday. moved starting. on continuing. to fourth copy happened a come think XX-day I bit this adjustments. what better to as But any front-end supply you a great see quarters. the get Obviously, that I it $X,XXX car made We've that's new where with January. towards on is they're about going our tight. margins, the it's had tight. more over

Rick Nelson

those do inventories you think pre-pandemic Thanks manage until tighter up? do GPUs of GPU go to levels? some -- can think you once carry Jeff. Where Or GPUs back do we settle and elevated things recover

Jeff Dyke

as pre-pandemic can. them sitting I for meetings levels. bring cheerleader inventory we're biggest levels as back on the not I'm And hard to many pressing Yes. very brand to

pandemic less a brings And stay complex, the all be industry away much to right selling the should get prior I MSRP. the are from doing The low. We margins a hell negotiating at value this it to vehicle. lot for high. and mean it’s needs margins so to going easier, are cars the

to don't And we that's RFJ 'XX. back us we're to puts pre-pandemic back models. $X,XXX in of the I great. to So It's I prior as continue it bank, going what it $X,XXX, work in saw number the to make That north ever. going us levels we Sonic the coming move cash industry, margin. like healthy, or the Automotive, in range is into EchoPark that certainly I forward, in keeps stay all see margins and higher, in you the investments doing. to and $X,XXX I coming see lots terms think back that don't investments and did not for in just pandemic, somewhere 'XX of lets them of would make if funding great

it of all years David with supply, SG&A, can manufacturer partners in with permanent run if reduction for working our So a these we up with as we're really next day which in -- makes few his said it great keep on. line just opening, here in the

can used XX-, screw up think that happening. this that bring the that the to to XX-, I see, just they levels don't supply if only we that's I is back the thing see XX-day

Heath Byrd

at least to, look going And Rick, the specifically, models in our of to indicate all Sonic stay just is that same over Heath. thing add saying $X,XXX XXXX. is this I'll Jeff if at it's that well you

a that brings be is little to different mix. RFJ's GPU than Their down ours of going bit. the impacted is and bit mix Some it by a

that lower higher the driving maintaining it's reduces combination be So and ours. higher of keep little bit going of mix that it impact a an inventory RFJ's of to a GPU, our

Rick Nelson

hear. to Good

there. kind Speaking early any RFJ, about surprises like to come positive negative hear of about any or of learnings,

David Smith

Yes.

this Fortunately, David. is

team everything have been pleased So place the has are Rick has far, with very team leadership in so and got very and We've Ford unfortunately, smooth. very, been his and going very been smoothly. everything still

Jeff Dyke

in do Yes. a from that mid- thing The would smaller to only They that I learn think is fantastic to we running add small I stores other. job a each can lot markets.

has them offer open acquisitions they've our in to doing a got their radar Ford, platform. on some culture, door those It now. cultures a similar But our Myron really do fantastic, our overall, have I on the that and us of as might been might were Heronema for coming so there. stores. team lot David type that are past so said, already. of the fantastic results into Early tuck-in And whole be to radar also expectations. the running our not been job Rick beat

So we're on an for at acquisition very to of was the excited very, and organization acquisition. absolute addition It fantastic great this Sonic bullish just family this Automotive. our time, a

Rick Nelson

deals? do while for integrate thoughts hear. on our appetite your you in go market more you to Do curious Good to acquisitions. or slower I'm additional RFJ now you the

David Smith

This is David.

focused on and continue there. very We growth also EchoPark integrating focused and our are RFJ on

be disciplined at acquisitions. happened along wouldn't take deal to on further and with we the that over, going only not record RFJ if what we're because that's together about came That's three-month a look in so time very period. something that say that And really to it came

announced. So and our businesses knew you're see I driving team, those we like that, that great but very special it deal to it continuing people, was us existing was a think we've so growth really on I of so a lot but on path something of and and focused it the was -- that barring our growth think going -- already a

Rick Nelson

in profitability I'm if XXXX. curious you Finally, I I has slide if don't your believe targeted in on EchoPark. had it that see expectation deck? late I changed, previously could ask

Jeff Dyke

X to are average about is up that's payment average levels retail difficult. But customer back, $XXX. the market to auctions. get prices This from to mature stores, our which our begin to at prices seen been new margins the from is last really ease. And about used right $XX,XXX, Jeff. selling a ease that inventory the with it and In we've over the what X weeks car as the car true. see X years a call of buy Obviously, to $XX,XXX able challenge. going $XXX that We've profitable. our for a We're The stores moved car to about that's old been to $X,XXX now moving prices the the come bit the begin

EBITDA -- with be the us to towards quarter from certainly year move consumers Our requests getting sort do I to on continue already X-year-old-plus track. we started store that second We're back to little sell There's some the as think are EchoPark. and us the looking model the more end our model. a than to do the of X-year-old quarter of that first and tough. the the X- at X-year-old we've bit for car going

here. of to looking reconditioning stores cars. some handful in we're We've do order that So X- do if the goes. at we're do X- see make like we to how see because one that time X-year-old But taking we got year. of progress at retooling how in that, a We'll adjustments complexities go the through a And that. and now. and that. need We as things do and to we'll quarter it We'll some

branding Bernacchi, to We'll joining the EchoPark year. Dino We're by with will to We of our end and nation the are also expand. campaigns introducing expand marketing summer. reach start going -- of our the continue XX% team. this

watching spend our what at the two need we selling to on you $XX quarter-by-quarter prices in down in at making retail in moves. come from added it's expect a or the to million EchoPark. combine think drop it to stores can price the year those when and we quarter those We our where two another of we you will. year we $XX if below a But yes, going watch add things, plan So for one forward, million wind time the that. here. into before that's drag perspective range of some a really puts average can get year they're to move the marketing sales continue internally a that retail have forecast a And the like markets average just But lot as we pre-owned somewhere to start we and $XX,XXX, we're our least for

David Smith

want on X-year-old the are customers cars Yes. -- And surveys want, in what X- just this customers. they the this. the [indiscernible], is in to position said, David, chime more many us But one telling than number markets. reputation.com Jeff our to And may we achieved as our from they want our and our in from

touch if stores deliver on is able open that to achieve you was incredible. want know as able but our being to incredible still just that guys to to don't and that, as performance customers additional to experience did be I guest many #X and So that spot we absolutely

Jeff Dyke

the what experience just the slow the be stronger cars it's short and are for get it's I EchoPark guess becoming in rest -- the the drag is to think stronger instead this just term. of little to it in typical. it's out perspective EBIT inventory And levels we look half from it's slow The only going again, experience next new that, nation already an all But Used market, how be few next continue a really drove bit And really cars our year the normal not for selling We that's now That's until here in those of going come continue stronger. to to add of lanes things Inventory will and and price. cars margins EchoPark's at if of able by is it's car guest depreciating taking the get end would nothing not or thing we buying be car to traffic. going back lot improve. forward that's be we're you more I just as of of over companies appreciate to just than nation the improve, a a continue here to back When months. we rental move We'll auction year. the levels quarters, a projected. although we couple combine about not getting the the hold. to to of EchoPark.

Heath Byrd

really for begun. just has And Dino, branding Greg, the party the this is building out mentioned platform We've And the Heath. getting XXXX being With mentioned, view and Jeff got, make happen. add. digital our David infrastructure coming this I'll is I year. we're that rolled out as to retail we're EchoPark. also

a point so becomes coupled you for ability tipping once combine that and that's the with be buy to online it a household And branding name, going to us.

this year coming for is is my perspective, a this XXXX. -- so from really out And

Jeff Dyke

for And comment are Steve our I here from retailing guys you Wittman, think, needs where on e-commerce in an Rick, we digital perspective. platform, Steve? to

Steve Wittman

Yes, sure.

digital cars site financing Of expanded the Carolina positive. Overall, opening in warranty versus is the recently -- we've old old and XX% driving versus in very David penetration as as South new sold results to So XXX% The online, end-to-end mentioned XX%. the North incremental site. the penetration tool is is website comments, the Carolina. a cars launched well. cars extended are his retailing those sold We've and proprietary

Additionally, nationwide we've our website. shipping on new enabled

that. it really have and Charlotte cars and interesting enable North consumer outside a And a consumer what the online XX% to seen Carolina. shipped sold that's car of So have Beach find that in on shipped we've Long we is been to of from we can go to website, do the the

driving is So ability volume nationwide for to shop inventory that new really us. incremental

faster used have simplicity the And with internal They an down also who online -- the about it, are website. XX%. consumers is XX% very site, to XX% the talk bounce interaction Additionally, technical on strong way and no on end-to-end the They tool. go transparency. automated of than the new love it. old we've to the we're human internals lastly, rate time ability and in talked site seeing It's up

consumer, on transparent the the we're here. we price, getting great to from and sell the feedback the We them early are very about products payments,

enhancement business. it's going our a overall to to So be huge

Rick Nelson

Thanks a good commentary lot it, Much appreciate for there. and the luck.

Operator

line next Murphy John The open. please comes John from go Bank ahead, question from America. is your of

John Murphy

EchoPark to kind the that of pricing would that -- morning I that be I look of or in like say of did less or you basically new wanted mean, sold a Good the vehicles half value right follow on the maybe on as more it now? less market just mean XX% at think guys. used even be is I the of normal. up XX% would Jeff, is Where gap specifically. used that kind here of I your this, sort is newer in gap relative you Is used to pricing? which target

Jeff Dyke

question. That's the car a great to big new No, and the prices. closer are I issue prices up car mean -- That's new closer butting is

XX% just range, now it's So it That's of typically XX% pushing runs kind the I think, automotive range, number. in XX%, XX%. the that's is too up towards high.

that buy what if so really And to good out we we're off switch shape side. the got and have new was where supply, it they're a be have height issues. That's even you really the worry that about of they're XX, if easier on I XX-day in. inventory franchise side We're we've to lot lot like don't a EchoPark sitting customer little a the of they kicks down sitting base particular, the there good the out that, at in bring still a can might in that But to pay at we're for closer inventory. the think shape inventory. of is is that openings. get cars This supply rest monthly in But tougher. and used maybe is with market, happens and the store on to there XX-day XX, something car market would higher wind car really What have the such there, going with a EchoPark supply, EchoPark the a XX% down back and payment range our $XXX. And

sales to to back that needs of That's put bleed to that closer level. at very drive to needs to EchoPark. that volumes preowned, on cost that's big, all through average we're going the accustomed us down to So come going and XX% big inventory that

We've great that's business flexibility. lot So lot of we're this a a patient. got franchise being money. gives of very It printing us

said, looking and real took I being you car to could the don't appreciating with "Hey, we're asked taking guys to off. We X-year-old into in patient up EchoPark. we're put store inventory change by this market, so want start go that to, and going selling David put in But cars, given have some environment. X- customers, that model And Tampa X- our if that used and what's as the and and We being on is off. it. we're at store Birmingham it we

seeing with play drop price XX%, back. retail start the get we XX% a below selling bit. and to XX,XXX that going little needs That really volumes or it when come we're So really will to that's get around average and to

John Murphy

I when about 'XX mean, sales, Jeff, think for the RFJ So is we new 'XX XXXX, vehicle XX.X.

of So I young, to by used than been wouldn't that depressed constrained and mean years years, be next we're folks. vehicles volume have few the just to most we're because there's available But three sold. years, supply in they not say going let's many going made pretty have lower

I the mean, there, of to in kind bucket. won't to push vehicles be you vehicles X- don't just mean, to because, to X-year in have X- X- X-year-old sort of to the X- coming the I into right, years, So

side, just just model? -- getting you two to product I a what or in change at it model? that were how older. I is does age. than mean, you happen deliver in curious, just some what's production sort curious the really difference talking vehicles do I price I'm mean, other in a good just mean, there run about I business the So might need lower that of on the mean can you be be good what that year changes. you to points that, at I'm But your

Jeff Dyke

X- system. there. car retool that's our X-year issue We've reconditioning a a the simple. to to parts X real in to It's are I Yes. X-year-old recondition out availability X-, lot got than cars easier mean and

I'll quickly sell a not X, different to can begin last, about year to X, But do we've think they're tell bought not. off-lease X-year their to we very cars that. us take that that XX a got So of leases. something back retool than that can't their days old coming you that have XX% to XX% And But And stayed we out. It XXX more. to tech. might next there would They you, car. to are level in this year, do. That's there's leases lot customers

logical we sell to retool the number guess, February fourth complex. lanes. cars EchoPark's purchases back car, call pushing the We've less different back We're We the are the swim been able So we've up increase come going the can back off can We from being in traditional think come us just also X, probably customer going they're quarter via from, that a They're going XX%. can the But lease if old come come the around XX%. to not it's and X. back a XX% street X-year is returning that to January, off going street. through yes. XX%, the XX%, to X, right. or range. it, to car answer lot you're get and easier to But in buying a We sell way. lot to John, in that X They're the -- car lanes, you're

something the stores those done our our lines that. it in leverage to feed maybe buy buy utilize to of the see buy and is there of stores. street. a quarter coming do franchise to EchoPark, never And before. to also off cars. talk some about us inventory dollars service at inventory selling we've the more more old for day day to the easier off street. cars We those second for every Customers our that. us and You're can do They're street franchise that little can probably to But more going us every more off a are move X-year to the in buying we X-, We lot do X-,

yes, us probably, some middle and you'll logically, so the see quarter, making into And the the third of as move of into moves. we summer those

Heath Byrd

And John, Heath. this is

compared Just way different. to Basically when you X% you the unit on -- one to model. that economics, make the differences a the money will in at of be to add a look way X% four you couple make the to

X for You X-year old the see seeing and X%, because GPU warranties. you the underwriting -- to front-end higher on would F&I be less to for obviously different this X% a is

John Murphy

it. Got

Okay. there's to side. there. it the I mean And service do of then lot a but just recovery parking left how flipping mean, good, legs is pretty franchise like seems see in knock I on that it the like normalizes? mean just as maybe 'XX opportunity huge even 'XX the you wood, there's and seems a I backlog. hopefully there back into still progressing through world,

Jeff Dyke

XXX%. agree we Yes,

grew warranty. Our in XX% customer the down. control Really quarter, That's fourth pay great. can't which over is

several of left the last and think a there. now, of you, I lot adding In it technicians particular, room our of We're if I'm X,XXX%. this. right Coast, was on of There's lot But West brands hiring XX%, of not capacity they first upside. and in were agree sort we out a into all mistaken. there's with of and

there, grow opportunity there's that way. certainly to So budgeting we're and

Heath Byrd

in As to the supply there. growth we're going improves, our It's in been historically a dealership. process more lot high, chain work see

of the -- an which in parts will it up, those that time parts as will, been really that of that has improve. goes shipping it's So issue, think we the that, not been but really

Jeff Dyke

ton us Yes. -- of quarter. all the bit. a sick we hit fourth And we’re in We had that smacked we got a really around did attacks

the in of there's upside business. So fixed plenty

John Murphy

lastly, of give got a real loans I this just rates. to quick you've mean an on then mean, a And is I Okay. and leases. rising one-for-one issue? duration the

You don't one-for-one Fed with go up rate. funds

there? I'm the and to about like So you moment the strong so at of and rising I both gauged with going how overwhelmed demand. have just curious just largely of is rates. backlog in backlog I used or the you supplied just not this balance how be you is do the think think mean mean subsumed new power is

Heath Byrd

obviously, a more in those we as in don't material from demand the I our think plan, perspective, if is the demand that going are we issue. at and perspective, low we actual an year. And it's expenses it But so to we floor are the issue industry. point, to supply prices point think et those impact a increases impacts so standpoint for to think cetera. our affordability the factored the rate become that financing. rate not from vehicle becoming high than as from going increases four the long it's Actually, of affordability Well, And the moderate, that demand budgeted for is the this hikes

John Murphy

Great. Thank Appreciated. guys. you very much

Operator

Rajat go The question of Morgan. ahead. today Gupta next JP Rajat please from comes

open. line is now Your

Rajat Gupta

Great. Thanks for taking the question.

Just market. the car to used again wanted follow on up

What quarter-to-date? any car looks there And sense up demand view commentary on some that how get in picture data You're mean here into you're a dynamic really another couple But the maybe you to a seeing a hearing what the the head stores earlier on the do your suggest you that you pricing. then quarters. side, expect follow-up. did I'm next views the before leg correct as Industry here just mixed tax see season we relatedly, you and I suggest around maybe particularly franchise the growth. demand And into term? near continues bleak have pretty do it of we see over year-to-date. leg down? tax the you season? start like, used I to of to curious at backdrop Can

Jeff Dyke

is car volume Yes. up any as give. we're seeing what really because price the cars it I does. million going in to that's always price are we're see the six happen. I cars right? for not demand not are car are to was and if we're May depreciation and is continue appreciate. said March going going where give. April mean so weeks of mean XX to cars That's to used XX the XX to that's used pretty for million last got to points going in and high pushing up this and decade. It consistent But the Certainly, it do And the it's country going new cycle to It's point, Used is demand indication -- sell like and starting used believe We start, I there. in February, in from January last million. this pick the that. that's the are earlier, to year, to

so most and EchoPark can used just the on you got our inventory for both get is franchise right consumer right the we've point. are that demand payment providing car to And that the payment buyers side. the matter at the a of price the there. And because consumers very It's hit still price It's side strong. of

to it's payment new from price selling too literally new stores $XX,XXX. just Our $XX,XXX on side butting too on average can car. the a close have get car pricing high, that franchise retail And up the the of to $XX,XXX or gone an it's and you selling

even message -- And -- what better. headwind getting budgeted that for get for. been to we we the progressively slowly next and telling from going what it the is quarters, quarter, sure, and us, that's the quarter couple autonomous but what of second we're That's here into teammates manufacturers. first So that's the to that we've battle maybe message quarter, for we the third our that's going are

David Smith

And Rajat, this David. is

only our or new a naturally, car that's X- days, because get. car a shape they As supply in you XX to can get great just can as a the imagine, pre-owned is are can't who thing car that's going day customers from stores car that's franchise buy the X-year-old XX, new

going a vehicle And so a need to but new it they vehicle. still they're may the closer be of -- price new to

to vehicle. go So X X-old they're for preowned or going

Rajat Gupta

EchoPark follow-up And puts takes. the Got it. just on Great. full a maybe maybe year like into and then

at you to going any -- or like of we you continued continue numbers improvement see kind to put quarters. You metering stay volume and takes you for numbers out if other could Just overall the some kind like could like how unit that into Have in year. terms volume for mentioned EchoPark that a mean EBITDA maybe well. volume level, the for this should that tie expectations play this loss puts reduced the And of the business we maybe loss? are losses? around could Or this of expect couple some next just some and full as for trajectory time? I year here of just on that around EBITDA

Jeff Dyke

Yes.

to as in let's happens progressively year. this ballpark get fourth year This problem, quarter for getting just So somewhere EBITDA bit maybe of cars, what the even on to little EBITDA a depending quarter. through the and the the XXX,XXX guess, goes but EchoPark third call, a each positive better that XXX,XXX to inventory. is we in quarter

levels to of first be and the third tough. to where the coverage the to second inventory little because tough think moving getting the getting in now, be quarter right is is the certainly just the going going of in then fourth some from dragged quarter, better a better in It's EBITDA are I But the XX% quarter. progressively country. in

goes $XX on This this been it out drag $XX We're very then our party that campaigns on coming that kind that is, and annualized how bullish about of summer. he working EchoPark. an is Dino we've million million. of we'll $XX telling launch customers branding our as the what talking very, on opening to see maybe are million to And We'll in earlier, year said for $XX stores marketing the us. that from even basis. range So million $XX million, investment that

scores, group We're dealership reputation.com earlier. nation a stores. said ranked for as David dotcom those in preowned in #X Our reputation the

EchoPark. when improve is to to all going together, as continue to It's going our we 'XX even roll add revenue, just to be is year. to XX- a to increase We're get into as for we year increase roll an a to come volume. And our move you it a this so great through It's the great being better going when back position us year. to level. to Inventory going XX-day supply hopefully in inventories better. EBITDA is going

on gives hopefully, we look move enough So forward. that is to what as insight EchoPark going you like

David Smith

we up the market supply on it's Yes. situation. easier drops was to quickly crank the And as been earlier, about that, rather were real carrying line can crank supply fact that value into of drag going that we this and as kept the day pre-owned the is up David, vehicles lot our sure and large talking a volume day about as Jeff we've whole -- market the a volume it's and a It's performance. versus if that drops, disciplined

Jeff Dyke

Yes.

had the preowned. very, no quarter product. are have had be. in that the supply no but a sitting through that in going we more XX, deal car they're issue the of that, so days inventories So grossing the of we biggest that quarter profit, fourth is water gross about January, December new pre-owned appreciation days it XX-day of inventory market are idea September very the sold Sorry. front we there for had carry and and can from grossing supply year the to market. I ever and XX had to on day cars we've at Is those biggest fourth mean have the what that advantage we could XX, tighter on can ever out with. of tighter? in our we've that nimble. are or to pipeline, and maxed took is out quarter in There's move question competitors in because We XX There's some line, our We do versus quickly lot going the to adjust pre-owned

David Smith

the for no the a but is SG&A going show transaction. big through of it truly to really paperwork are one of the for EchoPark and retailing completely efficiencies doing it automated. the rollout the And There's humanless done a consumers, is creates is opportunity digital the things because that's that's one not this incremental scenes behind the only positive year platform for

by XX, units to because consumer the the And will sold so done that XX month higher online. us per per get is being work from

Jeff Dyke

that and it, tool. beginning driving we very you for weapon we're where when there did the lot the team no business fantastic the point BottleRock, to great can a call excited of And interaction. that to we'll our got online forward, rolling display really see ready day to someone show car technology with where we look did job and Robots end It in We to out and partner, coming of get you just tool we'll it showing tool where bots the to guest time first put a everybody buy them, a and or human fantastic or a with we'll share really two. the development the look forward to tool, a what is that is as special have we really out everybody. to a experience. get And quarter and be with we

David Smith

that will an walk all setting do be you up to Analyst Yes. well. Day we as of And

Rajat Gupta

to Got think for the the Got advertising number million just that's I a advertising million EchoPark spent clarify in million, $XX you to year-over-year $XX number? full $XX maybe in And 'XX. it. the year in it. like

Jeff Dyke

totally incremental. that's Yes,

Rajat Gupta

That's all incremental.

the Okay. gave Got us EchoPark on And it. EBITDA just you some color trajectory. lastly,

like around for what You mentioned, SG&A mean company do for where the for mentioned, like GPUs to I ballpark new to you might like X,XXX-plus year. range any the XXXX look in Heath just the Services continue recover? think modeling? for gross

Heath Byrd

it you SG&A, increase math, at you couple if do a this, wages but things in incredible if look understanding merit experiencing and everyone's that to look and there's it's from an good standpoint wages, on a of the think of drag at retaining the I increases modeling talent.

corporate a X.X% up so about perspective. from And that's

RFJ lot million in SG&A. synergies to place. We've So was on we've work of million that but a $XX RFJ, EchoPark. call, I $X got with investments there needs the finally, your SG&A. And the we $XX little talking with that to you need drag would million get do in opportunity some what, be got probably Work to that's that bit, about to going then add run about, to be transition. double And of a then through Jeff to a with it's

will So a in return, as you'll that definitely have have drag the well. it but SG&A

the with see RFJ you that expecting that number to to but expenses transition, corporate comp gets investments total wages. for and in the increase for X.X% That's X% team, the XXXX. coupled on that and got we're the not Jeff reports, in that's mentioned, XX% the our you you So that

Rajat Gupta

good luck. and That’s helpful. Thanks it. Got

Heath Byrd

our third I of in just sequencing at SG&A around to that One the that overall been XX% always thing It's We've look everyone than you understands In of be years. sort more, second the quarter. aware of, the XX%. very each Two, for earnings. percentages is and type run runs think is the around then last XX% fourth more the profitability. never it QX, and quarter it's XX important And and total of quarter quarter as of remaining year. cadence

line, that is And so typically our as bottom way model you the it that works.

Jeff Dyke

think you this Yes. And I if Jeff. is -- refer guys

in or been play fourth second in the the Heath's how the It's quarter quarter, to what, it's quarter. we've very quarter, third secret here's 'XX. 'XX. going that and in always guys wrong. years, year, of played tossed sauce. out better get you And first reason, consistent in XX% over comments if profit like last to exactly more clear that that back referred And guess any guidance. always in it and we out third And the whatever for the fourth in think the I and gave XX% same XX% the up. I be XX% They're very, like in quarter our and works kind the can't stated That's

Rajat Gupta

I lot it's lever, cadence, guess, below total? Got And ultimately the but gross And margin a vehicle it. you depend right? new on a big that such

Jeff Dyke

that? repeat you Can sorry. I'm

Rajat Gupta

new influence would it big like, or vehicle saying, just such just like difficult. of it, That or, a gross GPU was say. on the I little big is I unknown cadence a a makes I the the seasonality has which such mean,

Heath Byrd

new is mind as well. volume going decreases mentioned we the of increase to vehicle that that that we're earlier vehicle GPU in also sales is Keeping new

Jeff Dyke

Yes, to be going XX% in and to XX%, it's going it's be ballpark. that right XX%, -- XX%

Rajat Gupta

Okay. Great.

Operator

line from is The Jordan Bret Instructions] comes next your question [Operator go from Jefferies. Bret, ahead. please open,

Bret Jordan

in percentage say the what auction you your Did quarter? EchoPark product of from came

Jeff Dyke

Yes.

cars trade-ins purchases buying with XX%, XX%, first going about street street. We're about pushing pushing That of our of XX% is up or now, in the number about somewhere off XX% cars down off our the there. keeping quarter. into the So and vehicle

We're of it move to continues buy plan up X, launched we as our strength. to old out to about overall big been for time was A to to that. about of and to that we a X, working X- we're site We've harder and marketing off buy off But around went that. on believe BofA. December-ish that's we're number the cars that diligently street vehicles. than our more going frame the buy John -- So Murphy into can gain traffic branding our getting from talking street first focus That a lot little XX% X-year-old inventory, us. is and sort cars X-year to earlier

further and to to can XX% off So expand it you the X cars. X that as EchoPark and the trade X-year street expect to steps for then grow portfolio old will and And even number we purchases grow of the selling range.

Bret Jordan

pricing, X-year-old And obviously, mean, or deck I Okay. on comparable cars prices X shows selling that your X-year-old that at X. you're would be to or

sell the trying price to X line competitive X, below you in are As to pricing be still the with significantly? more Or you you market? are

Jeff Dyke

so the just the X the It's vehicles competitive Yes, we'll we'll in still we're to do greater advantage stores in we have stores we our in that much significantly stores now a vehicles. in those on we still then margins be right to sell below X, that selling And is that that those X- are is price from we'll margin to X. the normal a overall have much X advantage, positive because price front-end see the -- the X-year-old better stores, stores that the but times. volume higher perspective, sell the

Bret Jordan

smaller it. front-end end, about smaller F&I back just the on loss, think The how to

Jeff Dyke

it. same range. that That's that's look $X,XXX number a overall, But at how blended about we for

Bret Jordan

Okay. in you stores? EchoPark to larger the And original saw of the market, as more what you EchoPark seeing attachment F&I see are comparable online in-person test the you

David Smith

Yes, absolutely. store. with online. what love penetration We're we're the in And saying seeing they we what line reframing is are which is love over XX%, they at seeing in and them with value extended warranty the consumers do transparency,

have to road. make they warranty repairs extended You talked costs the but the potentially that versus down about would how much

feedback expectations to F&I consumers penetration positive from exceeded date. and very So our our has

Jeff Dyke

And relief mean our best penetration comes our That's -- a the single performance here I that been the is finance news and great. for warranty penetration. roll over at store a Yes. a the out to it's great website fantastic everywhere. us the lot of here seen and model, gives energy ensure side for comes our is improve really what we've we fantastic us just of side perspective, out and may those metric That's that from enrolling level given but

David Smith

right? And That's our we're in Yes. if an success website in that's big really than the that that that work way, a in-person our this Smith. call. David for that's That's not That's key. takeaway to seeing what at that's seeing. more, this best we're is new are And benchmark, we or making least, highlight, And transaction. from

Bret Jordan

EchoPark sort about then craziness you of ago and the might ago I margin, And evaluating there that? and mean, alternatives. that few market I couple guess I or I vehicle any disruption Okay. quarters Is strategy? update is a the this. around a missed on quarters used obviously, and have the delaying sourcing talked of mean, obviously in But

David Smith

refer that have Just don't any we previous comment No, to David. our is This on from please additional our disclosure.

Bret Jordan

of GPUs consistent going far on ends XX, guess, front question, stay XX. is we're I still running that levels, I last a far obviously, outlook prior profit back full And your are the GPUs read breakout feeling, high and in the quarterly year that Okay. high that feeling, Great. as XX be and then to X this as your the will very Is the levels your very through and relatively stable? goes guess, contribution, supply sense relatively the -- as at as the these XX, at on to

Heath Byrd

Yes.

of internal If bit Again, RFJ and you image impacts basically XXXX. be just models, their look mirror of has is our going at little the board. flat an mix the It’s across to impact. sort the a of

a to we're when sort together, to comes gross. -- if put to mirror image new them our going of you end up, going it they're going be to You're

Danny Wieland

this when were Brett, what look I just to point, if last going inventory is down, Heath's saw XX-day we to running I mean to that quarter in looked think GPU, X,XXX close And of Danny. at is the And year supply, or that. XX the like had the shy of new second you it inventory as we support we were an was production increasing. at imply that's least but come million to because GPUs high

next could may just compression So affect it as could from that year, an offset we overall the from volume doesn't the level said believe, perspective, where earnings the cadence the to it our in overall for affect volume David but the view earnings offset the GPU quarter-to-quarter.

David Smith

Yes. if all I care sold Sonic. what vehicles at through substantially the are pipeline And don't you Brett, is is, through. new at that on look branded it, have It we we sold substantially

come demand inventory. level the a the is So but of lot I more A a little volume. believe may bit off there. little margins

to more to great don't 'XX XX-day up XX-day it just So and you inventory. we get got and We and supply margin, XX-day the could great 'XX be the it back demand, fantastic supply really years industry. inventory. sets don't supply want for just need They XX- for

Bret Jordan

Thank great. you. Okay,

Operator

questions. no There further are currently

remarks. pass conference go to for now the Dave closing Smith ahead. David please back will over I So Smith,

David Smith

very you you call. Thank you, appreciate much, of all your you We attending and the thank a great have week. everyone, rest and

Operator

participation. the concludes XXXX your Automotive Conference. Thank Quarter for Earnings This you Sonic Fourth

disconnect. now may You

Sonic Automotive (SAH) 16 Feb 222021 Q4 Earnings call transcript