SAH - Earnings call transcript Q2 2024

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Operator

good morning, and welcome to the Sonic Automotive Second Quarter 2024 Earnings Conference Call. This conference call is being recorded today, Monday, August 5, 2024. 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 market or otherwise make statements about the future. Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made.

are Exchange the Commission. uncertainties the filings and and Securities risks detailed company's in with These

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

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

David Smith

good everyone, Smith, Call. and and Chairman the much, Automotive Second Earnings to CEO. very XXXX Sonic Again, you Thank morning, and the welcome Quarter David I'm company's

Investor the on Mr. would . We to Chief me guest our Officer, for Danny CFO, open our Byrd, like by our sincerely world-class a the call teammates Joining experience of President, amazing Operating Jeff for our Dodick, thanking customers. Relations, today is delivering and our Tim Wyle. EchoPark our Keen; call Heath President Vice

automotive and as Our Sonic teammates EchoPark top the preowned have and And scores our in achieved history. satisfaction highest Automotive industry by guest automotive company's our our franchise in among spot Reputation.com. #X the satisfaction ranked customer teammates achieved the dealer

living our are delivers that our to teammates experience purpose for happiness. truly Our dreams, enriches an guests deliver teammates our and and Sonic fulfills lives

thank our positioning team. dynamics achieve key to long-term strong our the like future our ability adapt market to Sonic to believe lending and as in goals. support our all loyalty teammates, while term to the are We I with our strategic remain on relationship Automotive focused would to near changing Sonic guests to We partners success. our our for manufacturer and and always, their And them

make sets half second in we adjusted EchoPark EBITDA beyond. our outpaced I'm continue for XXXX in record the and in that continued the of great to the our pleased previous quarter second second quarter stage with growth that progress report and performance projections segment to

as execute to announced despite software at the the days continued challenges in team XX Automotive Sonic result last outage. operational quarter level previously a the Overall, a high of second the CDK of

information As of today, has Sonic's by CDK to restored. access been systems provided this

However, lead certain management related operational with inventory experience CDK. July applications functionality customer third-party CDK to we related disruptions of applications, applications the and to continued integrations throughout

As to per taxes estimate million had outage. caused a was business second result of disruption or $X.XX to teammates the approximately reduced who by excess or share, EPS potential outage, the to approximately by includes $XX impacted income which GAAP paid $XX.X related diluted income CDK $X.XX compensation million earnings before the negatively in we quarter CDK our in due

XX% basis to Second a our per second share quarter excluding year-over-year was share, reported a EPS as of $X.XX our was the in results. outage Adjusted the $X.XX quarter financial certain and per press effects of release effect on charges morning. this EPS the due CDK detailed decrease on

tracking continue Prior our have and level at moving and to to performance we operating that great execute a of forward. quarter CDK confident I'm outage, the results, team another were financial high will to

trends. dealership franchise quarter second to now Turning

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

quarter to sales was to rate manufacturer. certain as rate last of per part the from that in The sale well the This a new models same-store profit vehicle unit gross driven decline by increase days moderated [indiscernible] the as $X,XXX slower unit. of in subject quarter in XX somewhat order per the were

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

team powertrain interest X-year-old wholesale manage to floor consumer better quarter. the used with during new our auction vehicle inventory vehicle vehicle new demand, work vehicles prices evolving closely market, levels costs align continues the and In and supply, partners inventory decreased second Additionally, options plan day GPU. manufacturer our which with to X% should benefit for

While $X,XXX pricing same-store franchise dealerships our GPU stability first on used used flat average compared a the the retail to basis. was unit providing in at quarter, per

environment. used contributing prices to amid current interest retail consumers, a challenge affordability for remain Elevated concerns the rate

to return volume are used sales vehicle forward. and the pricing benefit going normal in used our wholesale the outlook However, seasonal business vehicle positive for and trends should affordability

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

a will Our unit same-store our consumer despite to that X% from higher with than up elevated F&I $X,XXX be second continues stability levels interest consumer X% pre-pandemic environment. view F&I performance GPU supports the F&I of The in remain quarter. quarter, in F&I but continued per even affordability first franchise sequentially strength year-over-year, rates in structurally challenging the the down

fixed and lost ops at the end productivity with profit in a remained June of gross strong CDK increase operations to service despite parts or Our outage. due X% business fixed the same-store

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

QX, of XXXX. per to XX have goal headcount As technician month our new date, and in in contribute launched ] million the an we ops would an additional in To headcount increased expect technicians we achieve gross a which increase net March, techs XXXX, net well in by we initiative annualized remainder fixed mentioned we $XXX by this XXX our XXX previously, to [ positioning profit. in us techs technician a placed nearly

segment. Turning now EchoPark to the

are quarter of EchoPark $X.X We adjusted excited second EBITDA to record segment million. report quarterly

lighter the at for quarter end EBITDA Excluding stores, million with outage previous was second seasonally of and adjusted headwinds our second the in June. a line quarter from closed the in $X the of quarter, segment EchoPark despite first ahead guidance CDK

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

on a same-store in basis, EchoPark However, XX% was which stores, unit sales excludes volume closed second up quarter. retail the

and per and wholesale per and market $XXX and was gross Revenue gross first XX% unit. was per year-on-year pricing, up unit per up improvements by velocity up F&I unit gross profit inventory improving unit total quarter from was EchoPark used per segment XX%. profit up $X,XXX $XXX marginal unit, the profit higher driven sales

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

used in made adjusted to allowed second we strategic confidence disciplined potential second segment performance has tremendous years. to challenges growth few resuming the adjustments unwavering we demonstrates quarter long-term forward opportunity coming in the EchoPark's the we Our in believe for market quarters, in over years, vehicle our us look EBITDA continue past EchoPark positive improve quarter the long-term vehicle consecutive used for this to weather as validates A for and EchoPark a the recent and the conditions in market brand. of

segment. Powersports our to now Turning

gross of $X.X second million EBITDA segment-adjusted $XX.X For million. generated of quarter, the we profit $XX.X and million, revenues of

off Powersports As past rally, this expected, are week. surges up we looking maximizing ramp year's April, the this season the of selling kicked which forward to in and began to really benefits

Powersports We continue to operational current focus fine-tuning synergies our identifying within our on playbooks. while network Powersports

the near look the In sonicpowersports.com. to forward we and sales implementing of marketing management and strategy, our refined term, F&I centralized inventory rollout

we optimistic in approach about this when taking the this in right. retail segment, the are time to remain adjacent opportunities future While expansion we is sector a disciplined growth

position streams our our to disruptions the quarter the cash Finally, operational despite financial outage. flow from diversified CDK second in benefit continued overall

to Turning deposits We available cash floorplan including million balance in quarter $XXX ended our combined in and hand. $XXX on the liquidity, million with second sheet.

the a evolves. capital continue conservative We market sheet ability deploy to to the maintain strategically with approach as balance

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

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

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

current environment retail decisions long-term on growth, focused CDK to the closing, quarter making of year-over-year of the in franchise-only adapting to near-term were our model and while automotive business in a EPS traditional demonstrating environment execution the second consecutive outage, model. compared to remains to ongoing and macroeconomic Prior a In changes strategic our diversified returns. maximize backdrop, projecting team value the we

and This and concludes Furthermore, confident may we continue consolidated right Thank our forward that time. you. may our provides culture continue in any results remarks, segments headwinds we and grow franchise the business, diversified our help Powersports industry-driven our value the that you stakeholders. offset business to may have answering the the Sonic questions business EchoPark minimizing to our right significant downside create earnings any we growth We to face look opportunities the right strategy people believe model margin earnings to and in to long-term we and for have. opening remain over

Operator

first Instructions] Jefferies. question Our comes from Jordan with [Operator Bret

Bret Jordan

relates backdrop sort maybe retail on Just side really I conversion, guess a the the Did question service Powersports. question. as consumer it Powersports, an pay as as anything to deferral notable sort far as or macro progressed of and traffic you or quarter economic see customer of service or

Frank Dyke

Not Jeff, at at all. This not all. is

continued August. the of powersports going packed that jam of to on July now the through continues and in terms means stronger coming Powersports, rally matter in customers and It the with As fact, a on it are and we as rally. went on season quarter get for

Bret Jordan

unit point build? slowing new front-end settling GPU, guess, inventory bit you than then of softening talking point on next some in you're at just the a of X,XXX cadence expecting I of a to on were Is we result better I did quarter. And year. this about X,XXX as slowing think new just a GPUs

the what do to? of stability attribute recent you Sort

Frank Dyke

that But mix the some got is are tale of that and Toyota brand because XX-day a product X driven. a of it's is supply on got Stellantis, on brands, cities ground quite just good. other mean, fire. Nissan. margins honestly, They've of I you've still

managing product brands ridiculous. which Some XXX, of of supply there of XXX just are are we're terms fighting that reduces age, these That days in against out front-end. the

should that X,XXX we in, to X,XXX But in number. settle

the a maybe exit think at X,XXX, little I we'll year better. bit

the balance day third out incentives more that's There's inventory right trying expect of more High And Mercedes-Benz now. this aggressive this as I really in driven. even incentives to couple to see in aggressive fourth reduce quarter, trying mix that there. starting just some last incentives get super supply to manufacturers on. really, just of of some on got out we're Line the the aggressive vehicle electric that days. to especially quarter, they're some And are

So Mercedes it a be ought big quarter. month and to big,

Heath R. Byrd

you sequentially XXXX and the is brand of at degradation was QX, the since if lowest This Heath, look of XXXX. GPU since year-over-year December the in December

we based data. cadence on So see do the slowing . QX's

Operator

comes next with question from JPMorgan. Rajat Our Gupta

Rajat Gupta

feel you've EchoPark. like X-year-old a challenges think you used highlighted chart it ton slide less and mentioned cars, navigating to In had relates In that think makes of or just I ones. it than on sense. as I X past, you these X of supply the the I confident supply the

to curious, you're in just volumes EchoPark you and slide because have should XXXX? Should explicit, And or helpful. of year-over-year would follow-on. chart gains that can offset of I think it the color I a supply the drop we in seeing because share we Any XXXX So supply how the EchoPark challenges us of give there context quick have on expect help about that? mean, pretty pace the that you would be

David Smith

going greatly. you interesting what they Well, to talking we're this benefit actually question supply, this about is that a the because just It's vehicle EchoPark lot. talk asked something new about we it's

Frank Dyke

Jeff. it's

we're you right that And today, I cars defines 'XX, there of the plenty stores at pretty you're If volumes. seeing preowned EchoPark That's can inventory to there's that X,XXX expecting XX month. out for amount be new that's into look We problem. not easily the better think as car inventory now. existing a a X,XXX of we going buy just to move

per of to cars on rooftop continue were basis stores group of where prices the a XX end of As store, were a we which think of that's COVID. that drop, do month, units XXX-or-so kind is low I per prior where can the kind we to

Rajat Gupta

that important actually That's before. we've achieved

Frank Dyke

Yes.

unit I that to and XXX see look like average we as and we'll to again So this And stores day to I'd at were the themselves. have. begin back that, begin we of in approach opportunities get they COVID, We're $X,XXX to stores. We there that's lesson us to control manufacturers because their day per brand. been then help range, got I to supplies, that group to cost wish you'll It'd with to grow out think have waiting the begin [ open the ] with $X,XXX, totally patiently see can't continue drop of we a coming overall, lot just for better manufacturers in the another industry you've but lost would have didn't learn a but the didn't, supply. and the

of of winner And not as for vehicle We're plenty picture better, the in with to over There's to trickle be worse And new going it's that's is a time getting inventories They concerned pre-owned watch able the terms we consumer. side the 'XX. of big lot we pay inventory. The going our car to franchise incentives. less is as into time. down grow EchoPark in to getting into cost stores supply forward The the being move and/or all not going here them business. a marketplace. at

Heath R. Byrd

to I off I done Yes, just better [indiscernible] this think also buying Heath think street. of is job that a the we've add, is

we ] on longer. the railcars So we're wholesaling. not any the in lanes also, have auction dependent [ And so don't

makes a lot to easier EchoPark. it to enough get stack vehicles So it that

Rajat Gupta

clear. judge way that? CDK impact the any it. in like did Got EchoPark And on to way Any it. you That's is Got quantify the volumes quarter? there like --

Frank Dyke

on it's Kind and brand units so overall, pieces or side. X,XXX the used, and about X,XXX about franchise of XXX new for units the EchoPark

Rajat Gupta

it. it. Got Got

their attach this pickup increases if up? price for a quick mean, going like attach it I Is like some could was prices on MaxCare follow-up like Is CarMax products bridge us there is the on And there? rate X little What's driving Just products. help know the it rate? that the like, more? especially I curious, continued EchoPark. I itself? F&I. you on recently that's raised just

Frank Dyke

And it. more product per penetration. selling car. warranties, selling more It's that's just products We're

that end. terms high our a team is Our executing and the in at performance big makes very on a level, of back difference

David Smith

is this again, think, I David.

remarks I to being world-class offering in about think EchoPark the experience. guest experience is I #X #X to noted preowned on -- the going certainly guest opening when and the market that GPU. team And you're contribute of that that's kind

Operator

from [Operator of Instructions] question Our Bank next America. with comes John Murphy

Unknown Analyst

Healy This is for John. on Billy

seeing the what and year? So if expect rest what terms just ask vehicle of vehicle to you for do on to health the wanted been the pricing consumer trends can the guys, the And for levels? and of demand. you What I you you're the have talk mix new like new overall of in trim

Frank Dyke

Dyke. Jeff is This

supply day down are going up, to to [indiscernible] and get the come going going better. with So pricing is

the good. is consumer. mix better for So

inventory. of there's of supply, inventory. job our think, industry. here. tons import very, earlier, controlling supply, are good Chrysler a consumer is absurd north at doing like just wins the said The you XXX of think a I look brand But I very And our the Nissan which for just day XXX-day I brands around brand

and really the days. range. XX in XX-day great around in between XX Subaru supply is days. Toyota the Hond range, shape in XX-day us sitting for XX Hyundai

the higher I in a a there XX So out little mean Mercedes a a really, Audi the that supply great little is doing here, coming days low. the that of good couple BMW sitting with new day are there day upper a supply. keeping towards really running job. at fighting their lines job or they're supply higher doing XX-day quarter. high the are mix end supply range, are in hopefully, The a first bit. are year

new to vehicles on of XX-some-odd a with going That supply day cars better. bit healthy, little inventory we're get very sitting a mix the amount ground. is that at overall, of But obviously, and is

really on XX, to to electric drop We're vehicles across close electric to off board. to at move is are continue goes demand. their on maybe supply XX days supply I which as eliminating towards some sitting starting great. manufacturers of meet XX, And of expect think the really the vehicles, days I and to year of some that sort

electric there. the demand So but higher consumer on I the country. think was the coast, vehicles manufacturers a in when the in a lot the lesson of not middle not Coast, West overproducing learned Obviously, on of the industry the big higher

the to that end those get dollars hopefully, supply. of think which rightsize for now big some some the spend going with again, they're fantastic great. So is have their rightsizes of incentive a to guys manufacturers now and end day job wake-up the of And a of call and the the the manufacturers I that between year inventory, year, to managing between in Honda, Toyota, doing the

a year. it's end So now the and between picture I bright of think the

it's need show, if I think the because last did we the been in say, inventory a control better along quarter COVID. hopefully, what a X pressure [ it pressure there's front-end look going good than just level at been controlling it's our We complete margin many, you to or with learn over shit to reduce they've lesson to and margin -- during many inventory manufacturing levels. will. cases, ] really they be back can And

Operator

Smith turn I floor to of the reached comments. would David closing to end back session. have over question-and-answer our We now the for like

David Smith

next the call. you talk Great. you everyone. you, We you, very much. appreciate Thank on Thank to we'll and

Operator

today's concludes teleconference. This

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

Sonic Automotive (SAH) 5 Aug 242024 Q2 Earnings call transcript