SAH - Earnings call transcript Q1 2024

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Operator

Good morning, and welcome to the Sonic Automotive First Quarter 2024 Earnings Conference Call. This conference call is being recorded today, Thursday, April 25, 2024. The presentation materials, which accompany management's discussion on the conference call can be accessed at the company's website at ir.sonicautomotive.com.

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

During this conference call, management may discuss financial projections, information or expectations about the company's products or markets or otherwise make statements about the future. and that to to could from statements forward-looking risks number differ are the uncertainties and cause made. statements are a subject of materially Such actual results with detailed the are Commission. uncertainties and and Exchange risks company's These filings the Securities in

today. discuss Please filed Exchange In Commission. current measures as and to report the with company's the and non-GAAP on non-GAAP defined addition, certain earlier financial X-K the the by Securities Commission management Securities in Form may refer Exchange reconciliation tables

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

David Smith

Heath Thank joining Sonic our EchoPark everyone. And from Automotive me is $X.X morning, our financial on you company's and Dyke; revenues quarter Officer, VP I'm Weiland. Earlier previous as Tim the Automotive total XXXX good of results, reported Quarter Byrd, the Keen; to Call. this Chief down X% today's Danny quarter CFO, which was first Earnings call welcome very first much, Jeff First Sonic David Relations, President, and our year. CEO, you Operating our including and billion, morning, Investor Smith, said, of Chairman

EPS as morning. the which per $X.XX of certain release effect charges First share, GAAP detailed quarter press was our in includes this

our diversified per Excluding share value of via repurchases due $X.XX items, segment, commitment these demonstrating franchise business the adjusted increase offset capital EPS operating model. dealership which in to stockholders our along at share, year-over-year to improvement X% a EchoPark was our lower primarily segment, significant returning to profit our with

them our strong strategic thank relationships teammates, and would for manufacturer believe to goals. our their and are like market support. in positioning and we team's performance to the our near keys our achieve the remain the long-term lending to I Sonic very all our continued to quarter, adapting while proud first partners with are of We term guests focused success. on our dynamics We changing in our

Turning now to franchise dealership trends. first quarter

to with see end of fourth vehicle expansion days which inventory the our of new XX-day quarter levels of a XX continue inventory, across ending the quarter. up We supply at the brand portfolio, was

result, in [indiscernible] quarter. gross vehicle first unit decline unit new per a profit continued its the to sequential As same-store per

expect it new continue quarter new the level the range. in vehicle in new this remain that We XXXX, believe was But of decline exiting to low continue throughout will pre-pandemic. GPUs higher vehicle the than to fourth structurally GPU we $X,XXX normal

In options to vehicles as turning team partners a evolving gross profit hybrid we consumer our electric electric are alternative levels work and electric our convenient more vehicles. demand. we've Additionally, seen increasing and and demand align at consumer with with more our vehicles faster fully fully recent manufacturer inventory traditional to than and to levels closely hybrid months, powertrain continues inventory for cost-effective

In the to fully $XXX. of headwind reported approximately sales Consistent quarter, our day the discounts sales with supply. supply. manage electric XX by price vehicle first days, averaged just by averaged increasing overall due supply day supply fourth reduced primarily days, the quarter day inventory EV XX to vehicles of first X vehicle our hybrid GPU and At reported while end the volume quarter push EV days new

to dealerships historical X% affordability vehicles prices fourth pricing sequentially vehicle consistent amid used seasonal market, average consumers quarter. wholesale first contributing the interest X-year-old environment. the current used quarter, retail during remain from In a with while declined challenge auction retail trends, concerns for the used is increased X% rate Elevated which for franchise prices the our

and positive and XXXX. lease our and remainder at for used sales However, selling lower our limit should year-over-year to turn-ins and of supply prices unit. a restrict decline per in first wholesale the drove to GPU used return quarter continued Fewer used in used affordability outlook $X,XXX same-store volume to retail retail benefit the volume trends vehicle the dealerships franchise seasonal vehicle our are vehicle used normal in X% business in pricing

remains and the of business XXXX, over and this driving sales time. in acquisition used retail Our expected pricing team upside of in on inventory opportunities incremental volumes alongside focused normalization car driving line the used

F&I F&I The the increased to be quarter, Our the year-over-year, will $X,XXX from higher franchise our down challenging high despite even F&I F&I supports the sequentially the sequentially fourth with from affordability GPU up pre-pandemic consumer franchise a F&I rates performance F&I continues strength X% unit fourth than our elevated environment. Furthermore, to interest consumer our of in performance but view interest strength with X% demonstrating ability that same-store penetration structurally quarter, dealerships levels market rates in quarter. in continued processes. navigate teammate's per best-in-class playbook a rate our remain first

basis, customer operations fixed Our quarterly gross franchise on same-store record parts or and remained in warranty operations service driven dealerships, our growth our X% fixed year-over-year and XX% pay by business. at with growth all-time in a business strong X% up profit business our

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

profit. incremental on As a we expect an with technicians contribute additional in in annualized of the fourth we earnings million goal we XXX gross adding ops mentioned our launched quarter to XXXX, fixed net call, initiative $XXX XXX which

Turning EchoPark segment. now to the

excited returned We million quarterly quarter. adjusted $X.X of report stated segment previously are EBITDA breakeven adjusted EchoPark positive target EchoPark first to the segment adjusted EBITDA all-time our exceeding reported of that EBITDA. to record very We in

quarter, a a on significantly Excluding closed year $XX.X of the EBITDA stores, last million basis. was segment from same-market EchoPark adjusted in loss $X.X million improved first

XX% prior down units, year-over-year. XX% significant unit revenues down segment $XX.X store reduction first EchoPark of $XXX year first nearly year the and gross we EchoPark up count despite quarter our prior of profit million, sales EchoPark quarter XX% volume reported year-over-year. was a in which the retail the from million, was For quarter, for the from XX,XXX

up by volume a XX% However, XX%. up EchoPark total market which vehicle sales the unit, was market profit F&I and unit up in marginal up gross closed gross was was per gross velocity same inventory driven used XX% increase excludes profit Revenue stores, year-over-year is XX% first per quarter. which basis, unit. on a and unit same improving market pricing, XX% in retail EchoPark's in profit was $X,XXX sales improvements per

the volume As to our variable store XXXX unit discussed platform, of earnings on allocate GPU to the better inventory across our previous and rooftop footprint reductions a calls, the higher better EBITDA. positive to quarter sales per driving adjusted first return allowed since us

a vehicle future as brand. us potential long-term Our positioned unwavering remaining retailers, the for of this tremendous opportunity EchoPark's creating one has few confidence nationwide in used

long-term EBITDA A adjustments for adjusted used past and return positive the the EchoPark to conditions segment strategic few forward quarters, to market vehicle validates continue as resuming years. over improve disciplined for we look in to coming EchoPark growth we the made

Power Turning segment. Sports our now to

generated profit and the of quarter, gross For $X.X revenues $XX.X segment million, we a loss adjusted of of first million about $XXX,XXX.

Black line Powersports geographic results Dakota Sturgis, our the with industry in variability with the our and platform Hills seasonal South the our were Given the quarter presence in projections. in area, first

about our is sector on we selling season network power identifying remain the opportunities begin time retail optimistic powersports future synergies when adjacent continue focus to April, this current the growth in we the sports right. operational and within in As

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

of of first a pleased per the $XX our record XXXX, we stockholders share million $X.XX quarterly on Directors quarter, I'm our X.X dividend all During repurchased for of XX, common report today cash million. shares approved that approximately stock June on And XX, XXXX. of payable July to Board to

you first are our see quarter released results. XXXX investor As morning, limited this the the reaffirming guidance presentation financial for following can in we we

EBITDA to well dealership by lower a in moderate for results, in positive be partially EchoPark segment segment to that year-over-year. our continue segment EchoPark believe franchise the year as We income increase can returning significant as Powersports improvement segment earnings offset adjusted

provides ongoing retail continue making our backdrop, to model in the maximize In closing, significant our and time. minimizing the and Sonic may business consolidated to EchoPark the industry-driven franchise in headwinds segments remains in to face offset believe and to long-term may to an focused over returns. diversified our earnings execution environment on our earnings changes downside team Powersports business, automotive help we growth macroeconomic results opportunities Furthermore, adapting margin decisions strategic that while near-term we

right and have confident and our right and right the the that culture long-term create to strategy business we remain the for our We people to grow stockholders. value continue

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

Operator

Instructions] [Operator with Murphy is John from Bank of question America. Our first

John Murphy

cadence that the the fixed give where if what but that year. besides question said other there quick above about, profit on I are hiring us opportunities I these and a ops. the on you wondering do other Just fixed understand any about can optimizing XXX are on you you you to ultimately, idea those, if XXX optimize an [indiscernible] tech you opportunities And incremental of think talked that? there's this beyond drives focus was ops? statement those and

Frank Dyke

incremental Yes. Jeff. we're so I it's XX John, the far year. mean, look, tax XX to for

gross to taxes per day. hit those so stall a We expect per XXX our generating month of XX,XXX or number, in each

that's So for us. opportunity a huge

stores out got that we'll down. the operate deals -- We technicians We're technician really culture rest That's has And industry we're focused And in there X really it's and throughout focus a on have to with. every culture you a this been the the year. something and organization. that are open bays. approximately into base that we've culture to we've them. like that because effect across that down, day breaking And X,XXX run of continue something breaking

to and So the rate is to rest the And are grow growth think of there. customers great the opportunities I the into year. this there, mid- continue business 'XX mid in for to 'XX, upper

advent often we coming opportunities vehicles there, electric of back the we EV With ICE. more we the do that have see and than

and down. more thing think I is XXX even on that. got top techs, that that of within team add next some and break is, The on opportunity. of and adding those leadership culture to stores we've to We've techs plenty then year on got the work focus there's our we'll So

So it's big for a push us.

of I to returns. see some think those you're beginning

operations expect continue. Our business we fixed is strong, that and to

John Murphy

COVID vehicle turned with that, EchoPark curious already from for constrains X to business ability we're to girding X I'm of or year pressed are continued Super EchoPark that I you're X-year-old deal the we vehicles used how you to to much And you What mean to on through sales. that? mean kind X just even general. or of shrinkage how your that of does managing and X X as to even going helpful. grind EchoPark? than more in Then get new sort just how have?

Frank Dyke

returns lease with that Yes. great There's calls a getting out I 'XX car we year. There's rental and vehicles be back look, I'm puts. their from mean, less in that to companies. we're going there sure coming way. and think is cars delinquencies there, are

for plenty buy. for right buying of there remember, And to only there's So we're now. out us XX inventory stores

So about how XX smart we going inventory easily of we very we grow handle the amount stores. to need We're for very those be can EchoPark.

this that We open any look will we 'XX. into not stores year, as to and move we'll more

throughout the about are at the support all kind in X- continue we category, first quarter. that we're stores. returns we'll to this in year EchoPark got not And easily our to concerned the do. be see able inventory something that going to to We of to That's X-year-old

will in think little the quarter, second margins a the terms cadence, be I bit. of down

a gangbuster and little a fourth quarter be should bit look like quarter. the might quarter second Third

like going We is new it's to year, be said take. EchoPark we There's to car that said, a great races. it's off the crazy. So this last 'XX what growing going is look, inventories and to

a day I saw You from supply to grow. supply. to that mid-XXs a went expect we XX-day continue to

vehicle new Manufacturers pressure left to sense. companies. the to it's downward car buy cars allow more It's buy rental put going That's more us going cars right. time used going pressure just from to lanes, to in pricing. are building to It's allow cars -- and and on us

did to to it's what going probably been we've to -- happen talking for first tailor-made go manufacturers new beginning us. 'XX, us. and And it's throughout in next are end to this now advantage bumpy the not for. off that just going lease been we as It's of happen forward for go bad is to so to and we've back, that, to way the used That we sure going about. with year, again is back going waters vehicle we've better was end rest the happen. between inventory It's marginally get of The 'XX we times of the year. in maturities and been the And to This is the come It's cars. as saying behind of able building quarter, those. races be but than waiting what is going 'XX, to were begin as what it's this take not

John Murphy

I more And in. could sneak if one

You in is Or this just hybrids. Is the asking the inventories coming putting mentioned for essentially they're There's [indiscernible] all that for more in -- that more code hybrid that are market. all coming brands? consumers is across hybrids [indiscernible] back back, year.

So is more the you all are Or getting in really, that this specific? actually you Toyota guys brands wrap? this

David Smith

hybrids wide, EVs. see peer demand consumer It's the other saying our groups, the you if than greater the of moment It's same some an industry for they're thing. is at

Frank Dyke

to at got it's step think Yes. right? a you how I stair EV, to it. And And look that's

coming back last absolutely now the just meeting Mercedes And are some are from in vehicles the Germany that just of amazing, hybrid week.

inventory it's all but as get a XXX%. that. David But And consumers as step across hybrid stair it's used amazing XXXX. in said, to coming brands, Some --

Operator

is question JPMorgan. Rajat next Our from Gupta with

Rajat Gupta

And strong congrats on quarter. a

Just a the first. million first in EBITDA EchoPark $X question quarter. The on

in But And have was give just You in should GPUs. there I can year course mentioned the cadence? dollar the granularity through follow-up. some more a you I we the total EBITDA positive the see how about like think commentary of deck. any a EBITDA of outside that -- the slide might XQ reduction curious

Frank Dyke

you go as always front-end just always around. quarter, flatten best get We right? Yes. prices normalized first couple rid and adjusted, in years, little if move last to out. bit it's of a sales. the your the of to mean So back strongest the QX quarter I kind going sinks seasonally It's is of margins margin have QX.

I would QX quarter, fourth so little QX. real like for EBITDA a strong And be to strong, bit I be QX. like maybe expect maybe certainly and not Then QX expect a as look quarter the to again, as -- then positive

marginally year look So up going down that's the to a for think I I'd progressively, go how we better be is we little as 'XX. huge getting then, kind course, through EchoPark. and it, a at of breakout 'XX into And but as go of just year,

lack stores, to And So we're little right because we're our it's out it's work from people the all total back with of comment. a again, with and of that -- through back fun make there -- of of and this. it's XX fun. stores, not more auction put But didn't the fun it inventory didn't to and our issue there. because of inventory It's David's skill lanes, where less problem. are that inventory now. goes be sets bit to bidding happening a that's against XX And along comes an some XX% in unfortunately, that's With maybe

going going ones year We and forward. feel to of and this throughout it's standing the basis, like rest we're make last some a the fun on for us it of national

David Smith

-- -- We've some from additional emphasize because needing open that got hire this is seeing it's where extremely [indiscernible] demand also It's is strong. demand standpoint. to to we're is what we're stores the David. sales This

over that review have And is -- XX if X-star at scores, reputation.com salesperson, is you our fascinating. stores We some look are cars every review. selling we per are virtually a getting which

Unknown Executive

volume, That's associate. in the and per invest of potential as 'XX, on we existing should to affordability the pricing having how David's point through base supporting more flipped ourselves just key is drive we right count even more we the sales remainder part and to we've the for go this right that into as there. productivity improve the for EBITDA store as positive variability the go do that the begin head EBITDA That's further year of in year growth at

positive there And so in us optionality right marketing may ahead let EBITDA and the brand. having invest with or that the investment to and of we'll some the support growth develop Having count the think of may head side about coming EchoPark things. be begin that growth, to on brand

fly, couple As that on we continue time. that and of had build over do had as we make to nation adjustments the intended to to a network obviously but some out back years build

Rajat Gupta

a mean, used franchise I car color. just helpful business. market. comps you That's broader in And had on the the positive question

to traction curious results facing EchoPark look same-store some like Although pressure in like at numbers. there's starting the I'm on be in from volume. like obviously, is it of what see might that you some that diversion. peers, your is me, to they driving like their some When some your view independent seems still

the having stores? of vehicles -- X-year-old having X- because seem to franchise kind seem not complaining to advantage be disconnect? you it you or you that Is Because how explain about Or not not would to of the at -- all. the be

driving So just like curious divergence? that what's

Frank Dyke

it the for At we know sets end see ways used side, I going the -- the there's for We to us. out car I've off coming in think we the opens this just of how returns as for massive read I some are just where car cars I effect of But the inventory. back best new them. other [indiscernible] the to can't inventory rest And there business. cliff. comments to a get a don't drop and we And inventory lot on having the speak are procure that lease of day, year. know just skill the get of cars, some doors don't to the see on with the it industry. the management

fourth quarters to car there. our the business that continue and the low mid-single-digit from to from to range second, grow and year. the expect expect And I for We grow to into third used

with just exact is morning don't preowned there We're expect bad It's can't The or but so I And be on not commentary gangbusters year. I days to going Keen to marginally Tim us. the us. And throughout us commentary. of asking that. the of not get of better, rest question earlier to seeing explain inventory good marginally the throughout They're margin I behind continue year. there's out this some in the this I significantly procure. front grow with was this to are better sitting And inventory. this

Operator

[Operator next Bret with is Instructions] from our Jefferies. Jordan question

Patrick Buckley

on Buckley Patrick Bret. is This for

I throughout On expect with . guys new you expect does exit steady estimated progression the we X,XXX, what a compare of side, And the 'XX that the about to new into pretty GPU to year? normal 'XX, range the should how guess be?

Frank Dyke

Yes.

So it's Jeff.

expect I and them $XXX think going EVs be don't it's a range around to although as 'XX exiting confident hang in going don't and then to they I that we'll back. manufacturers while for there front-end expect in us that and forward, reduction all I new -- into play range there. in that between are for and crazy this in the to But just quarter going exiting and the $XXX we going of they're are to continue I now, move 'XX this. quite on that I'm range. pull little I getting a expect new I well. And There X,XXX year, is right production, to mean, that's X,XXX car to role kind be a just margin. normal go a as think around bit it

Patrick Buckley

were new a within this or any region on brand there from note, And helpful. I mix GPUs That's callouts notable guess that quarter?

Frank Dyke

drag. of continue a to a little bit be EVs No.

opening in brands. driven overall that's about a PUR of David's that's As we drag a on being handful $XXX comments, announced by and the

EV on days Our fine. supply is

overall supply at You really day look can't numbers. the

units, back more EV a we to got the at production ground, supply but they're and on cutting EVs look I on of the it's units. significantly You mean with BMW, actual XXX coming hybrid. and at have XX-day

recognize we I So the doing that And they're I move the that forward. as manufacturers stabilizes think right think things. everything

Operator

are the closing Smith no to at to this further David any hand There over I'd questions for time. back comments. like floor

David Smith

you, you to thank we'll for joining everyone, and a and talk lot. much, very us, next you Thanks quarter. Thank

Operator

conference. today's concludes This

your lines this you participation. disconnect may You your for Thank at time.

Sonic Automotive (SAH) 25 Apr 242024 Q1 Earnings call transcript