Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q4 2016 Earnings Presentation
52 slides from Sonic Automotive's earnings presentation, Feb 21, 2017
Slide 1: Q4 2016 Investor Presentation
Q4 2016 Investor Presentation February 21, 2017 Exhibit 99.2
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events, are not historical facts and are based on our current expectations and assumptions regarding our bu
Slide 3: Content Overview
CONTENT OVERVIEW STRATEGIC FOCUS FINANCIAL REVIEW OPERATIONS REVIEW SUMMARY & OUTLOOK
Slide 4: Company Overview
COMPANY OVERVIEW
Slide 5: Overview – Franchised Geographic Platforms
OVERVIEW – FRANCHISED GEOGRAPHIC Based in Charlotte, NC 107 Stores, 25 Brands, 18 Collision Repair Centers Platforms in Major Metro Markets
Slide 6: Overview – EchoPark Geographic Platforms
OVERVIEW – ECHOPARK® GEOGRAPHIC Colorado Springs - Opens First Half of 2017
Slide 7: Concentration in Major Metro Markets
Note: Percentages are percent of total revenue for FY 2016. Concentration in Major Metro Markets
Slide 8: Revenue streams and brand mix diversification
Revenue streams and brand mix offer attractive diversification across the automotive retail space. Note: Percentages are for FY 2016.
Slide 9: Strategic Focus
STRATEGIC FOCUS
Slide 10: Strategic Focus
STRATEGIC FOCUS Growth EchoPark® One Sonic-One Experience Acquisitions & Open Points Own Our Properties Return Capital to Shareholders Share Repurchases Dividends
Slide 11: Strategic Focus: FY 2016 Progress
STRATEGIC FOCUS FY 2016 Repurchased 5.6M shares for $100.0M YTD 2016 Dividends Declared of $9.1M YTD 2016 Increased quarterly dividend to $0.05/share in Feb 2016 Open Point Revenue McKinney MB – estimate annual revenues >$100M - OPEN Nissan of Cleveland – estimate annual revenues >$30M - OPEN Pensac
Slide 12: Strategic Focus: EchoPark
STRATEGIC FOCUS EchoPark® Five Locations Open In Denver Thornton Hub Centennial Highlands Ranch Littleton Stapleton One Additional Denver Market Location by 1H of 2017 Acquiring Property in the Texas and Carolinas Markets Expect openings in 2017
Slide 13: Strategic Focus: One Sonic-One Experience
STRATEGIC FOCUS ONE SONIC-ONE EXPERIENCE (OSOE) Goals 1 Associate, 1 Price, 1 Hour Improve Transparency; Increase Trust Operational Efficiencies Grow Market Share Feed Fixed Operations Technology Being Introduced into Additional Markets (Charlotte was Pilot) CRM, Desking & Appraisal
Slide 14: Strategic Focus: Acquisitions & Open Points
STRATEGIC FOCUS ACQUISITIONS & OPEN POINTS Open Points Mercedes-Benz in Dallas Market Operational in Q3 2016 Nissan in TN Market Operational in Q4 2016 Audi in Pensacola Market Operational in 1H of 2017 Exploring Acquisition and Open Point Opportunities in Other Markets
Slide 15: Strategic Focus: Own Our Properties
STRATEGIC FOCUS OWN OUR PROPERTIES % of Properties Owned
Slide 16: Return Capital to Shareholders
Acquired 11.2% of OS in 2016 New Share Count = 44.7M Down from High of 53.2M (Dec 2012) STRATEGIC FOCUS RETURN CAPITAL TO SHAREHOLDERS (amounts in thousands, except per share data) Shares $/Share $ Availability Q1 Activity 4,103 $18.14 $74,415 Q2 Activity 759 $17.239999999999998 $13,090 Q3 Activity
Slide 17: Outstanding Share Count
OUTSTANDING SHARE COUNT (in millions) Note – Balances are amounts outstanding at the end of the applicable period. These amounts exclude the effect of share dilution from convertible notes and equity grants outstanding. STRATEGIC FOCUS RETURN CAPITAL TO SHAREHOLDERS
Slide 18: Q4 2016 Financial Review
Q4 2016 FINANCIAL REVIEW
Slide 19: Franchised Segment
Q4 2016 FINANCIAL REVIEW FRANCHISED SEGMENT
Slide 20: Franchised Segment Q4 2016 Results
FRANCHISED SEGMENT Q4 2016 RESULTS – Q4 2016 and Q4 2015 results are adjusted – See appendix for reconciliation to GAAP amounts. B/(W) than Q4 2015 (1) (amounts in millions, except per share data) Q4 2016 (1) $ % Revenue $2,522 $69 2.8% Gross Profit $367 $5 1.5% SG&A as % of Gross 75.5% (10) bps Ope
Slide 21: EchoPark Segment
Q4 2016 FINANCIAL REVIEW ECHOPARK® SEGMENT
Slide 22: EchoPark Segment Q4 2016 Results
ECHOPARK® SEGMENT Q4 2016 RESULTS B/(W) than Q4 2015 (amounts in millions, except per share, unit and per unit data) Q4 2016 $ % Revenue $35 $17 92.4% Gross Profit $5 $3 103.1% Operating Profit ($2) $2 47.6% Interest & Other ($0) ($0) (3.2%) Pretax ($2) $2 43.0% Diluted EPS ($0.03) $0.01 25.0% Retai
Slide 23: Total Enterprise
Q4 2016 FINANCIAL REVIEW TOTAL ENTERPRISE
Slide 24: Consolidated Q4 2016 Results
– Q4 2016 and Q4 2015 results are adjusted – See Appendix for reconciliation to GAAP amounts. CONSOLIDATED Q4 2016 RESULTS B/(W) than Q4 2015 (1) (amounts in millions, except per share data) Q4 2016 (1) $ % Revenue $2,557 $86 3.5% Gross Profit $372 $8 2.2% SG&A as % of Gross 76.0% 20 bps Operating P
Slide 25: Q4 2016 Revenue & Gross Profit
Q4 2016 REVENUE & GROSS PROFIT Growth in Used Vehicle Gross (EchoPark®) and F&I Drove Overall Increase B/(W) than Q4 2015 (amounts in millions) Q4 2016 $ % New Retail Revenue $1,396 $19 1.4% Used Retail Revenue $652 $44 7.3% Fixed Operations Revenue $351 $6 1.6% F&I Revenue $88 $5 5.4% Total Revenue
Slide 26: Q4 2016 SG&A to Gross
Q4 2016 SG&A TO GROSS 76.0% 76.2% – Q4 2016 & Q4 2015 are adjusted – See appendix for reconciliation to GAAP amounts. (1) (1)
Slide 27: Q4 2016 SG&A to Gross
Q4 2016 SG&A TO GROSS – Q4 2016 and Q4 2015 are adjusted – See appendix for reconciliation to GAAP amounts. (1) (1) (1)
Slide 28: Interest Expense
INTEREST EXPENSE Q4 2016 Floor Plan Increase Due to Higher Balances and Rates B/(W) than Q4 2015 (amounts in millions) Q4 2016 $ % Floor Plan Interest Expense $8 ($2) (35.6%) Interest Expense, Other $13 ($0) (2.2%) Total Interest Expense $20 ($2) (13.0%)
Slide 29: 2016 Cap Ex
2016 CAP EX (amounts in millions) FY 2016 Estimated 2017 Real Estate & Facility Related 174.3 $ 204.6 $ All Other Cap Ex 31.9 36.6 Subtotal 206.2 $ 241.2 $ Less: Mortgage Funding (103.4) (123.1) Total Cash Used – Cap Ex 102.8 $ 118.1 $
Slide 30: Debt Covenants
DEBT COVENANTS Compliant with all Covenants Covenant Q4 2016 Liquidity Ratio >= 1.05 1.17 Fixed Charge Coverage Ratio >= 1.20 1.92 Total Lease Adjusted Leverage Ratio <= 5.75 4.08
Slide 31: Operations Review
OPERATIONS REVIEW
Slide 32: New Vehicle Retail Same Store
NEW VEHICLE RETAIL SAME STORE All-Time Record Sales in December Month – 14,114 Units Q4 2016 Q4 2015 B/(W) Retail Volume 34,887 35,098 (0.6%) Selling Price 39,594 $ 39,100 $ 1.3% Gross Margin % 5.3% 5.4% (11) bps GPU 2,105 $ 2,120 $ (15) $ Gross Profit 73.4 $ 74.4 $ (1.3%) SAAR (millions) 18.0 17.9
Slide 33: New Vehicle SAAR
NEW VEHICLE SAAR 4th QTR Up 0.6% Full Year 2016 – 17.4M Full Year 2015 – 17.4M Full Year 2014 – 16.4M
Slide 34: New Vehicle SAAR - Retail
NEW VEHICLE SAAR - RETAIL 16.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec —2016 —2015
Slide 35: Vehicle Days Supply
VEHICLE DAYS SUPPLY New Units Normalizing – 400 Stop-Sale Units at 12/31/2016– About 1 day sales 600 Stop-Sale Used Units at 12/31/16 – 34 Days Supply Without Stop-Sale
Slide 36: New Vehicle Retail – Gross & Unit Trend
NEW VEHICLE NEW VEHICLE RETAIL – GROSS & UNIT TREND Continuing Operations
Slide 37: New Vehicle Retail – Gross Per Unit
NEW VEHICLE NEW VEHICLE RETAIL – GROSS PER UNIT Continuing Operations
Slide 38: Used Vehicle Retail Same Store
USED VEHICLE RETAIL SAME STORE Stop-sale units were a headwind on Honda, BMW, MB, Audi and VW in 2016. Q4 2016 Q4 2015 B/(W) Retail Volume 28,781 28,000 2.7892857143% GPU $1,340.8390917619365 $1,381.4536178572143 $-40.614526095277824 Used to New 0.82 to 1.00 0.80 to 1.00 0.02 Vehicles/Store/Mth (105
Slide 39: Used Vehicle – Gross Trend
* - Used Related Gross = (Used Gross + F&I + Reconditioning) ($’s in millions) USED VEHICLE – GROSS TREND Continuing Operations
Slide 40: F&I Same Store
Total Gross Up 2.5% Higher PUR accounted for $1.3M of the overall $2.1M increase in F&I Gross Gross (millions) $ 83 $ 85 F&I SAME STORE Record F&I PUR For the YEAR!
Slide 41: F&I – Gross & PUR Trend
F&I F&I – GROSS & PUR TREND Continuing Operations Q4 F&I PUR record Record F&I Gross YEAR!
Slide 42: Fixed Operations Same Store
FIXED OPERATIONS SAME STORE All-Time QTR Fixed Ops gross record! Record Fixed Gross YEAR! Q4 2016 Q4 2015 B/(W) Revenue 348 $ 343 $ 1.5% Gross Profit 169 $ 168 $ 0.3%
Slide 43: Fixed Operations – Gross Trend
FIXED OPERATIONS ($’s in millions) FIXED OPERATIONS – GROSS TREND Continuing Operations
Slide 44: Summary
SUMMARY New vehicles affected by supply, stop-sale and competitive pricing Used vehicles affected by stop-sale of high demand models with price support through lower supply available for sale Fixed operations continues to grow, however, operational and customer satisfaction challenges due to lack of
Slide 45: 2017 Plan
2017 PLAN 2017 Plan Expect new car industry volume to be between 17.0M to 17.5M units Expect incentives to drive behavior in 2017 We intend to increase pre-owned volume in the mid-single digits Expect fixed operations to grow at mid-single digits Additional opportunity in F&I through increased penet
Slide 46: Appendix
APPENDIX
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS (amounts in thousands) 2009 2010 2011 2012 2013 2014 2015 2016 Net Income 31,548 $ 89,929 $ 76,254 $ 89,101 $ 81,618 $ 97,217 $ 86,311 $ 93,193 $ Non-Floorplan Interest 67,735 68,604 63,576 58,453 55,356 52,269 49,524 48,034 Depreciation & Amort 57,036 45,827 51,164 52,616 5
Slide 48: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® Three Months Ended Three Months Ended Three Months Ended December 31, December 31, December 31, Continuing Operations 2016 2015 2016 2015 2016 2015 (In millions) Reported: SG&A expenses . . . . .. . . . . . . . . . . . . . . . .
Slide 49: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® Three Months Ended Three Months Ended Three Months Ended December 31, December 31, December 31, Continuing Operations 2016 2015 2016 2015 2016 2015 (In millions) Reported: Operating income . . . . . .. . . . . . . . . . . . . . .
Slide 50: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended December 31, 2016 Income (Loss) Income (Loss) From Continuing From Discontinued Operations Operations Net Income (Loss) Weighted Per Per Per Average Share Share Share Shares Amount Amount Amount Amount Amount Amount (In thousands, except per share amounts)
Slide 51: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended December 31, 2015 Income (Loss) Income (Loss) From Continuing From Discontinued Operations Operations Net Income (Loss) Weighted Per Per Per Average Share Share Share Shares Amount Amount Amount Amount Amount Amount (In thousands, except per share amounts)
Slide 52: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended December 31, 2016 Three Months Ended December 31, 2015 Continuing Operations Continuing Operations Franchised Dealerships EchoPark ® Consolidated Franchised Dealerships EchoPark ® Consolidated Reported: Diluted earnings (loss) per share . . . . . . . . . 0