Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to the Sonic Automotive Second Quarter 2023 Earnings Conference Call. This conference call is being recorded today, Thursday, July 27, 2023. Presentation materials, which accompany management's discussion on the conference call can be accessed at company's website at ir.sonicautomotive.com.

At this time, I would like to refer to the safe harbor statement under the Private Securities and Litigation Reform Act of 1995.

During this conference call, management may discuss financial projections, information or expectations about the company's products or market or otherwise make statements about the future.

and could a 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

discuss In Commission. measures as and non-GAAP defined addition, certain financial the by management Securities may Exchange

X-K today. non-GAAP Securities and the the to the refer with tables in company's Commission filed earlier current Please reconciliation report on Form Exchange

Automotive. Chief would Smith, now introduce to begin Officer conference. you Mr. I Sonic your Mr. David may Executive of Smith, like

David Smith

Thank she you Again, Chairman very XXXX Automotive welcome, much, company's and good call. morning, said, second everyone. And I'm earnings Sonic the CEO. as David Smith, to the and quarter

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

record this morning, revenues Automotive quarter billion, reported of second Earlier results, Sonic X% from last quarterly $X.X year. total a increase including financial

gain Second was million $X.XX in EchoPark EchoPark dealerships. the the stores disposal segment. million three hubs eight $XX our operations by delivery EPS related XX the buy centers $XX suspend a as which on and well three share, and Northwest to indefinitely franchise of announced charges effect previously retail includes at as in plan per to quarter Motorsport Offset of partially

per EPS rates. margins share, interest year, $X.XX $X.XX and decrease vehicle adjusted primarily the items, new due was these normalizing Excluding prior a in to from higher

of on amazing goal. quarter, our our maximizing customers Sonic their second support. We in term to strategic and like focused our achieve for course, lending teammates, of profitability remain to would while We our near are and partners proud performance we positioning the continued manufacturer team's in long-term thank the and

decline sales continued which The continue second volume than second pre-pandemic. in incremental to now results. we in progress inventory vehicle levels to in higher new new unit XXXX quarter level remain new profit sequentially vehicle resulted GPUs will production gross the vehicle structurally was improvement expected. and we to XXXX, per industry and This see lower GPU but Turning new the believe and normal that vehicle new it should of through continue vehicle new of as half into as

consumer X% used In second are wholesale quarter, and continued auction month-to-date, prices the in we nearly trend vehicle the this quarters, direction. July price X%, important. which wholesale in fourth for for follows pricing in third And surprise will used same unwinding the the normalization once decreased ultimately demand prices consistent the our first vehicles three-year-old three-year-old for business, saw quarter. increase wholesale with in the expectations is vehicles benefit down the affordability retail and

volume continue dealerships the used to but franchise our the at second used our turn-ins somewhat lease maintain vehicle higher were we quarter, Lower lower in GPUs limit to volume. able offset to

We expect to year. in remainder vehicle the the used further decline of prices

Now our dealerships. franchise to

unit, from $XXX $X,XXX gross and franchise year to record for unit. full we unit first quarter all-time F&I franchise per Our per per our above dealerships an or guidance improved $X,XXX per sequentially profit issued at reiterate previously unit F&I the XXXX

of growth up X% and remains in dealerships driven strong franchise operations profit or very with fixed XX% business. quarter service Our pay fixed our parts gross our customer business another record at year-over-year, all-time by

business had XXXX. our progress believe as success fixed proud has are of opportunities ops through we remaining team area, We in to our we and are the there this optimize

XX EchoPark eight previously Turning delivery locations operations locations. Motorsport Northwest segment. related as details of to at Motorsport hubs suspended and In morning's at release, closure additional press this we the the Northwest we of three total, and announced certain stores. well buy operations the as and In three EchoPark mentioned, as EchoPark provided I suspension centers EchoPark around retail

suspended revenues of $XX.X sorry, In segment operations I'm -- incurred represented operations loss $XX suspended XX% in and million we our million. the a sales EchoPark quarter, of second the volume, segment approximately unit

$X expect we non-operating with in ongoing forward, these $X.X million Going million quarterly associated to expenses locations.

Suspending operations stores decision these necessary a used very current difficult at but and outlook. vehicle our given market conditions was the near-term

has faced model, continued the we've adapt EchoPark over we years. have unique the develop the business to As past to challenges team our learned the to three how

for EchoPark center centers delivery sales organic buy returns. brand opportunity meet the growth drive success While we to volume dependent e-commerce road, echopark.com upon our a model to remain traffic believe to generate and awareness broader the down EchoPark the required delivery of and key center the delivery is sufficient

are light of time. not invest the marketing we the it to is in level constraints of facing this feel we do brand this in environment, inventory current In at prudent

center XX% reaching our growth goal to However, our invest to out facilitate us and conditions which roll as enable of market national U.S. of population we'll maturity. EchoPark to selectively improve, begin branding delivery will in the strategy,

for We decision operations near-term EBITDA viability normalize. to these to our adjusted by first quarter maintaining the performance allow improve once goal will conditions XXXX, substantially and EchoPark market financial believe of reach our while at of segment that us strategic our EchoPark the the suspend long-term stores of used plan breakeven

gross quarter we million due EchoPark earlier. XX% wholesale in in volume to and retail segment sales down record back the for X% profit I quarter $XX approximately the EchoPark units, XX,XXX revenues second million, results, mentioned financial to reported unit of of auction part was year-over-year. our volatility up pricing $XXX Turning

loss an and $XX.X the year the million first million in segment quarter quarter to adjusted loss ago in EchoPark period. Second adjusted $XX.X a EBITDA million was EBITDA of $XX.X of compared

half store in improved resources across of continued platform. inventory operating EBITDA losses through remaining allocate due the improvement XXXX, through second our we We the to adjusted better at expect profitability entire stores able and see are and reduced as both to to the footprint management

the third highlighted in the by powersports off quarter Rally the Motorcycle As Sturgis selling kicked season, next peak profitability expect second we summer for quarter, our the month. and Powersports seasonal segment,

growth are continuing in opportunities growing to operational powersports sector. with adjacent the We retail we about this our identify and future remain network, synergies optimistic

Finally, turning now the cash hand. liquidity, combined million ended floor in in with deposits $XXX sheet. We and million our to on including fourth $XXX plan available balance quarter

our record Directors on today pleased Additionally, quarterly $X.XX XXXX, approved report I'm XX, to payable September Board cash XX, a that share, of October of to dividend XXXX. all of stockholders per on

the on retail strategic near-term maximize and team and long-term any automotive to downside In Sonic to changes be the returns. the revenue making time. results closing, profitability, earnings our headwinds should in execution decisions and our in minimizing remains we margin we EchoPark backdrop, environment over macroeconomic a while believe Furthermore, segment consolidated face may franchise business industry-driven tailwind focused growth adapting to to

we and answering have. you. to you This look concludes forward Thank any our may remarks, questions opening

Operator

Instructions] we'll take first [Operator question And Daniel our Stephens. from from Imbro

Daniel Imbro

side. commentary then markets million could million the or that Heath, eight I EchoPark the maybe annual Jeff tier kind of is $XX-ish close? tougher a your and challenging stayed $XX of at restructuring market we implication want numbers for a of savings towards maybe locations? of did it's cost more like I that or guess, just If in Are how on the of accretion the look at if EBITDA? on today, clarifier arrive there those second portfolio start the to you longer,

Jeff Dyke

across took might the that down support stores we the that -- And the in are board, areas we did. inventory is have million XX looked market can more $XX level we And we stores to of enough and correct. We and the buying doing. Jeff, buy the looked to took We conditions difficulty stores down feel, volume that is -- inventory sure, the the the it market getting the at the across way. capable we those around these XX given at inventory Yes, this really by today board. to that pared the from the we stores stores

enough the that you to stores in month. And X we to this support units we buy to stores, as inventory of have. as to rooftop or XXX just per basically, not we're XX pre-COVID, group about XX it averaging was all need to stores able XXX X And I these think pre-COVID, was per go many segment today, remember

inventory knew it's the ability stores buy the market down to back certainly the and adjust that pared we've market we of we the have could conditions got store So hibernated, pull change, number to we comes because to stores leverage the think If for. direction we counts we the than going either in faster to.

'XX. of and in we at XX,XXX can we If being other stores we prices to up pull up. Certainly, happens inventory XX,XXX. positive in basically in a make We certainly then EBITDA that our saw us valuations quarter other where March, went we can first of the jug what buying back were to again, if target adjustments levers to get that from the see open

Heath Byrd

And Heath. this is

think of just add. things to couple I a

That have. that can savings the Your XX $XX than the because remaining million that Jeff's benefit sell can bigger properly. is fact correct XX from locations annual shelves stock the basis. is units But units is more we you -- of we the point is to out the an the

mix units of at so that a can sense. of we And in now the gross these job XX we if more inventory better because with of XX, do a of at than limitations moves the getting and had those GPUs inventory, resulting makes higher

Jeff Dyke

Yes.

and this breakeven we as second looking we basis, we're quarter. EBITDA, the going remaining go-forward more than a out to in first locations are quarter did of get the on to cars So if out of modeling first locations XX you the XX sell the and guys at

the sell simply is should in July, We're almost what quarter. July. quarter improvement going And cars We're to margin our second -- we that turn enough buy inventory third can our because you in And of Xx the in versus which month and fourth in it's $XXX volume. in around enough the seeing quarter better fantastic. be the in saw happen versus

And getting is pre-COVID these stores and model were level volume big what on built built back that is that about. the what to

So where stores we it's at. as can buy right inventory definitely stays long to market now the remaining support the as enough

get continue to Meaning is more right? of year. drop to market as we move and available going the is continue get -- inventories we the better, the are Now prices to now think end going become to to going from to

Daniel Imbro

your kind helpful understand assumption. That's to of

challenging, further the just would and more front. make that I So store understand, pricing in to the that pricing, necessitate to were get actions would sure potentially side, move on higher wholesale if

Jeff Dyke

are day in supply down. high, and manufacturer in of a Yes. producing perspective. is right auction from though. inventory prices now, is the announcements car correct. a That's the inventory don't We to good going sign from everybody's which north board come sales is the building real cards, new anticipate across that cars, lanes just that, going That's not more No XX% the are up

buy the much and now buying car lanes to cars, volume So for from issue big industry. there's more rental companies that's going of the a the to what be and in are us out pretty caused really for March

in So are indicators right that we're headed certainly the direction. all

Daniel Imbro

Great. That's look we per then last helpful. for stronger. unit, And much it one me. the was F&I franchise Heath, maybe if at

some you unit drivers year, over on I that maybe some changes going and partners. last what take out made were dealer sustainability level the Can F&I think per franchise forward? of financing the you of you the think the on new the side parse I stronger brought sequentially

Jeff Dyke

I peer group. one the the not Yes. we're mean, in look, number

I think And every We're penetration getting month. over is $X,XXX. warranty a just better better $X,XXX. and little AutoNation's out there, our

numbers. we're reiterated had all-time quarter. in those now so David's going $X,XXX And copy, and north to doing and hit an we of a record We're announcement it

Heath Byrd

Heath. this And is

penetration at points look basis XXX was penetration point, XX up finance on Warranty new basis up our new basis to warranty points. was was penetration penetration and Jeff's you points. our used up If XXX

Operator

JPMorgan. And Rajat our Gupta question from we'll take next from

Rajat Gupta

I just clarification wanted a bit on EchoPark. of further

that you're to the better going remaining around -- You you're stores. be get mentioned throughput going to

million little million better. be volumes sequentially if Is second going mentioned that how volume Is reduction. more breakeven? we forward? I'm the profit we trying -- $XX loss granularity, like remaining assumption growth in coming loss $XXX million like the understand Is So of per is from you quarter So the just to it that is gross or do breakeven? from here? the for store from get $XX assumption that would the that a the unit, going to with -- to Or the the up the or loss $XX count that adjusting going adjusted keep

David Smith

mentioned, store, I'll our and Yes, less on interesting. on touched in this to let that ago, It's is we David. -- second now Jeff the per it. note you per whereas store. XXX it's interesting sitting cars XXX touch volume, capacity we we as is him did a units where past, to our -- than But grow we're

our on our the EchoPark the guest of we the for have sell deliver really easily So and more far experience stores structure -- with world-class to years. been team this XX group cars our and also remaining last in nearly that delivering has capacity

Jeff Dyke

quarter Yes. The was cars. it you all breakeven, was quarter gave I -- before, or last think we around the X,XXX

Given changes now X,XXX that made, And the that we've we're the be and year, between now cars. end happen. the that segment that number feel is breakeven to of in a position for make we going to the

more more means people, Remember, throughput hire a hire more got lot technicians. we've to

XX% over guide Our month this experience XX%. XX.X% sales associate be were the EchoPark Pre-COVID, doing is average to in well to at going range. we

back. So that's coming

continue we have that. can to open. the -- So of we there's we to inventory grow that plenty stores think left And the volume support

the that XXXX. QX fourth quarter third We will to our target continue of and and grow hit for through breakeven

Heath Byrd

to reduction basically it's those plus increase three the the of million volume in in It's a in the the sum And increase GPU. quarter it expenses $XX components. up, Yes. and

Jeff Dyke

occur we are seeing in And Yes. July. that

Rajat Gupta

Got quarter? Would the into that in that just our $XX here in And sequentially has quarter charge increase the second the And fourth GPU the favorable that gross drive well. it. in more base that kind this and does of million. the $XXX profit That's mean third front-end it. just as like EchoPark, Got much inventory confidence a revaluation on helpful. and

thinking about correctly. sure make to wanted Just we're like that

Jeff Dyke

the that. X faster a much our cheaper. old XX-day buying it's it's Yes, of so more But that we're importantly, turning car to part selling, we're inventory certainly cars

a inventory lot probably on before seen that of ever went margin March a $XX So our than bought and better lot that million against faster The we significantly is our history. inventory. fresh depreciated aged in the in really our we've inventory

us normal and above even range now, we've those of normal that's so inventory, to But fresh on actually in took on inventory. $XXX where pre-COVID. for news bigger fantastic. that that's the us, some better making We're is our for to of margin dollars inventory than where well is we're And is which the $XXX care the that fresh back just been which

improving to And July. that's you it turned your our on So inventory. probably is news the inventory, nearly exciting fast, faster margins to ever are Xx be. turning turned margins your because fresh we going we're higher turning we've our really inventory inventory know turn going be our faster We're the in than the

Rajat Gupta

Right, to sense. the right. one That last second on expect GPUs prior makes mid-XXs. One thoughts updated how like like you're if believe, The was, gross. to on used SG&A just car reiterating maybe I the half? new guidance any and you curious I'm and franchise in trend that

Heath Byrd

tune and from We be reiterate a round of a Yes. for believe we the to will to the that year. mid-XXs as franchise that of XX in a percent gross that will SG&A XX equate that

Jeff Dyke

the that perspective from between used from a And ballpark the car new in what margins end year. second and range, vehicle margins, you In of the mid-X,XXX be somewhere consistent quarter. should now saw in

Operator

next, take Instructions] from Bret we'll [Operator Jordan from a question And Jefferies.

Patrick Buckley

Bret. Buckley on This is for Patrick

volatility into about Just couple we a in digging a low think in the should bit is new term moving used forward? of about the or longer How more Given normal think GPUs. more X,XXX past we what the there new there? the rebound as quarters, should the

Jeff Dyke

to like to are I be comfortable the it's the margins moving market that's that X,XXX dropping, a range. going up And lot, think just in the real depreciation. keeps around dropping market if move keeps with then around. keeping If going we're

it's gone car drops, the -- or four are $XX,XXX at five June. markets here out car I another of a maybe part because to flatten the $XX,XXX but going point in first weeks some from don't think we've got to But of a or

buying we're trend is that continue just not steep to Now below level. $XX,XXX. cars going at That

the between entered perspective. end if sustain a begin are now So from itself franchise year, around to and today where things that and flatten should out, margin we of the happens

David Smith

David. And this is

inventory it's market pressure disciplined levels that right? was that as it it our been through a very But on has should margin improve. as put our Jeff And saying on in think dropped, team important out, selling margin. I to that little touch as has so

Patrick Buckley

capacity just that more your parts physical it. how compares Could overall to room then over That's bit to labor service continues And a about there at? and left to where you helpful. the there, moving capacity side. Got grow? imagine a curious much hear little are levels be to and talk is your but to constraint I

Jeff Dyke

technicians. of actively today share This across market stall, on every further in our perspective our We're locations a terms been our upside need We've from or many Well, have year-over-year is our OpCo Yes. we'd an stalls of really last building growth. brands. runway. quarter in long more share we growing as our we working in all

We've now. got us rest return. specific and brands great just an And of throughout that But done We've amazing growing question another ops no given Honda by about the techs. got grow. a had opcode. more stalls There's to record-breaking perspective, BMW done performance need now. that's from continue we That the share to We've and we fixed that. and need expect continue we quarter, more will

Operator

And Bank from from of John next Instructions] Murphy we'll take America. [Operator question our

John Murphy

and maybe to follow EchoPark just from standpoint. restructuring from operating up wanted I the an on an standpoint accounting

stuff, kind then in or think if of these pretty really think able So about these on quickly? be back lights conditions XX market turned turn to as we improve lights if being ex-auto might maybe off? we these motorsports And you that about the months XX should the locations XX-plus

Jeff Dyke

Yes, that's the exact idea.

David Smith

that bit open. training our team brag and getting and I'd amazing here of does job on team stores hiring little like an these a to our

market experience improves be again, it's going stores at of an that to as going the EchoPark market our again, existing improves. to of because these get as and think the ramp up actually leaders easier and them I job the

Jeff Dyke

Yes. we the think going happen doesn't this closed, out that but it it's right? right would be do. be calendar The lights like turned just improves stores that the can't the in to they going in we intention market if are It's back not on. year, definitely mean And to

seeing and to long And right this the level lot to month get We've and shelves stores becomes improving available prices price triggers that the them can quickly, to if have rooftop absolutely, already go rapidly the the have. is do, pull way down a fill per to remaining buy we we more prices, more $XX,XXX, we're we more exist. occurring availability stores and in open at improving if because got open back levers and because the but inventory so or then obviously, that right But we certainly cars at rapidly that a $XX,XXX and ability now. those they

David Smith

XX% And stores were the the takeaway of that the represented closed volume. key is only that

John Murphy

resounding, chose yes, right? No, you're Yes. it's or appears that's stores. the right chose that right, of you number going pretty the right stores I to it the stores same at mean, clearly given to open, least keep

be help is the in for at not to and flowing. run. on a the write-down Why talk been put trying other understand side. follow-up then expense vehicles accounting trying you the you would something that they the dispersed charge? this. and I'm wise. side just so about on put sold you the Wouldn't follow-on the a have that are this the locations gross is write-down Just accounting short that's that higher keep inventory out then to on When sort into the all how of for accounting an discounts? And then in to ongoing I'm

Danny Wieland

we security to owned you've The charge, the this and are recognizing Yes, accrue that at Two going pieces got John, that. that ongoing forward. and maintenance, couldn't properties utilities leased expenses ongoing is those onetime pieces Danny.

the Other in million, we saw aged you're rate of inventory is as million stores. the some reassign $X.X things in think the cleaning operating depreciation noted noted, inventory The exactly like then with other release, in to second value depreciation rent quarter. Again, million either to we adjustment, of the and just that the just what or as you to in $XX When aging quarter. that $XX as Jeff the of the wholesale. right, as about up at charges that the we contemplated were the remaining with related retail locations the valuing that's million as second EchoPark $X.X market about well

John Murphy

-- -- going but like run to stores I $X.X margins inventory operating understand will that correct? next I that you're short that make the in the as another that through that stores, quarter. Is given But the million in help want op the Okay. just disc in that. write-down I flatter mean sure will

Jeff Dyke

cards the thousand aged days a It's Jeff. certainly aged days call XX couple it north let's already. to going is ago inventory, you help of of this car a anything and Yes, XX dollars inventory, because they're down bought

what's on it happening July. yes, cars what's margins that the in in margin run that money to to So than were in the dollars important going where pre-COVID the were And our the now more the that But XX there. are margins significantly higher inventory we're is all making making. seeing they stores And shorten had will that the of inventory. thing rates is we aren't those old days course, are X that that

news. great the that's So

is news pre-COVID. fresh inventory The the in the great it margins was on back better is than back

happen see so we're 'XX. we continue first and that's So quarter now in what why positive hope to in the the of confident and the to year of end between EBITDA

John Murphy

markets on that come last really stores say, mean one ops and will until one these and attractive, and back couple we hey, add any you Does just could new this. are on? new stores there. we can just And Or in a sorry. not listen, found you just disc of this market or that stores open stay a I'm here newer these

these store see could for stores now? grow EchoPark disc of in ops count So kind with even we

Jeff Dyke

said. we've bigger, And markets we some forever, a of mean there, inventory got what name combination might you you I Yes. find and will are there end better, be selling stores and right? it. that those resources It new be of discounts up could

Operator

And comes our Whiston from David next Morningstar. question from

David Whiston

I on franchise had a question business. your

the at side, actually on the up but they X%. versus looking a basis, XX%, GPUs same-store on used same-store Just were were down reported your used

And is volume which see, a the seem strong the you looks franchise side outperforming on the newly have pretty used to we're base but cause industry use to stores that great favoring on and not so you maybe over side, here, in but be like it industry acquired also you're the to yet bucking profit headwind do just same-store that some difference?

Jeff Dyke

There is I some typically we're of that can't are street. you the XX trend. coming, We're conservative. going trading on, rooftop, we and for no but and so sold bucking There's off mean the inventory. off-lease XX but buying cars XXX, really cars the per run we to units just being cars buy we very over

have drop buy the did would lower a our question, There's and we conservative with We but margins. our no in can more see EchoPark we cars. approach take at holding that more in we go little sell and margins terms normally And less to auction, more really much if GPU of than we selling cars a had volume. the

strategic. franchise going that auction balance So running the lanes to buy start the get car is the really for XX% yes, our that continue opening live we go off of back used was this any We're we to that stores. of this a buyers And we the off year now. handle we'll high, rest vehicles trade market. in through to and happen of range buy to really in street XX% before live that keep we'll until to cars to our the off on And trade-ins, right what's which our going ratios into

Heath Byrd

what really year just we we've big the differences brand of this and what the last disclosed year. one mix And heard of is

that's those in some new numbers. noise So also

David Smith

this valuations And earlier. in is mentioned historic David. it market. from I was used accounts, of in a the drop We cars all it mean

to more to really can market few that and volume. the that consistently inventory up until So that maybe then out we miss flatten said, Jeff starts think strategically, retail keep smart tight. as we And it's crank deals a

Jeff Dyke

buy. Yes. that. And prices mix wholesale Last $XX,XXX. seeing cars week, market drop we the retail under bought you your Two we to We're to we account ago, for have in the buying were weeks pricing low on $XX,XXX. for over cars adjust your that

careful. being so very And we're just very,

growth. Turning our franchise reconditioning more quicker with And faster our There's no executing that lot the inventory level, a really our given in side. we're playbooks high the it's seeing EchoPark getting a through question. on cars at us

David Whiston

So just to any though, curiosity, like they do a more you you used have get complaining store the to that on GMs volume side? guys,

Jeff Dyke

No, not buy centrally. inventory all. for buy and Yes, inventory our trade our inventory. we at We

we any Our teams are don't executing their playbooks, have and that. of

David Whiston

volume just Tesla And on Okay. your stores. how but curious on aggressive the if brand hurting not badly that discounting, all, is also brands, at Model Y premium your

Jeff Dyke

but is car overall, manufacturers playing having of mean, franchise a But preowned, right, the aggressive that if product that they're their certainly -- stores now I of electric pricing. are quality played It the any new more other the to it's of simply amazing. vehicles because terms get certainly from perspective, in against producing a role you had bunch hurt a a Teslas in role in stock or

don't the just vehicle name sales of come mix it, And it's a I Audi, BMW, you throughout you're Lexus, to electric a better an product up, the inventory producing if pricing going it's Tesla. levels than Toyota, they're higher the see Mercedes, product. care gets And amazing right, as category.

David Whiston

though, EQSs? think is was complaining Do they’ve [Penske] that some catching Tesla on, consumers better a because you in than product are

Jeff Dyke

Yes.

to the to electric what -- comment, some and go to that early driving vehicles we yet a the kind yet of used It's the electric motor little it's early little and filled, we happens let months. begin right? a customers put it's Shelves in think -- get get concerns. issues to consumers' let's range dealing that the with as move vehicle, see next make I six through the with

see let's what so And happens.

that to I I right of year got do the really they vehicle. could their and keep six with in think then manufacturer questions, can they which they sort a are pricing days of new line, some months boundaries think very, two another supply very on, get electric to focus crossing the we've big well. if need the And

when a going $XX,XXX And they're that to vehicle engine they're have launch to problem. if But is $XXX,XXX are combustion they're going and vehicles aware $XX,XXX the that. of well cheaper, counterpart very

electric there, Some product everybody business it, others. now, Tesla. to is that than to learning compete job how includes are doing what the against and to out the put launch right manufacturers a vehicle manufacturer, how But

near limit. we're that nowhere And

I perspective. BMW year versus to U.S. this XX,XXX think the maybe Mercedes, XXX,XXX XX,XXX a vehicles from in Tesla

there's claim So go vehicle an can a perspective. any we electric lot a long to whole to victories learn before way from and

David Smith

Yes. noting, got regional dealership and that And EQS that's Mercedes that the been adopt part the mentioned to like that worth where the that, EQS I think in California has model. country car. it's of faster the it's It the country you in is in out #X we've

buying And country been out and shipping there. that them EQSs from store so has actually parts other of the

Operator

Instructions] another And from we'll [Operator take Gupta Rajat from JPMorgan. question

Rajat Gupta

capital just use and allocation? But more of get focus cash should sight cash get EchoPark EchoPark. comfortable like buyback, to the Just line you excess the with wanted allocation, near in of How lowered big towards your a term. cash reluctant about we capital and at like think M&A. profitability Obviously, on as conserving in

David Smith

possible. where go deliberately think not and decision strategic have we'll quarter. And David. that And is This comment is buy the sheet balance back on the focus sure sheet here. to has see our know we about a we opportunistically there We second in -- strongest But we this. Heath from I balance shares a Yes. our making

see, balance you a of a lot we've got As cash. sheet, fantastic

had operationally, on. and but look at to few important at acquisitions quite share acquisitions powersports we'll business to thought a We've our putting lot just it strategically focus on with going we've that a is the -- opportunities on we got into dealerships and focus we those And that and various EchoPark And playbooks for buybacks. and is our and making properly. RFJ and execute sure

Heath, be capital But you plenty in And anything? the of future so for did there'll allocation. our opportunities have

Heath Byrd

Yes.

cash believe with king we have reiterate, you just I'll Now conditions. economic uncertainty is that when

powder initiative that, Number number our have bring So we to a down. strategic dry we also want to two, have debt for one.

million for $XX about the debt our year. reduced we've so And

important our as infrastructure our We're a facilities. well and innovation that's allocation reinvesting of in IT So our big, part as plan. capital

So that's a priority.

and is do that again near to perspective growing available we market capital primarily in again, We share normalize. we will repurchase. return that to opportunistically always, term. capital and start from anything as M&A seeing the material And shareholders, have as then dividends our don't EchoPark prepared an We want through pressing be have to start the

Operator

[Operator back be turn this the to appear at like to Instructions] questions management remarks. further time. floor closing Okay. for no There over I'd to

David Smith

you the all Thank you. next you for quarter. we'll call, Thank to much talk so and attending

Jeff Dyke

you. Thank

Heath Byrd

Thanks.

Operator

Thank participation. does Ladies teleconference. your gentlemen, you you. this today's thank We conclude and for

may your have at You lines disconnect this great and a time, day.

Sonic Automotive (SAH) 27 Jul 232023 Q2 Earnings call transcript