Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q1 2020 Earnings Presentation
60 slides from Sonic Automotive's earnings presentation, Apr 29, 2020
Slide 1: Sonic Automotive – A Holistic Approach to Creating Shareholder Value
Exhibit 99.2 Sonic Automotive – A Holistic Approach to Creating Shareholder Value Earnings & Investor Presentation Updated April 29, 2020
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: Company Overview
COMPANY OVERVIEW 3
Slide 4: Sonic Automotive: Who We Are
Sonic Automotive: Who We Are QUICK FACTS Our Core Franchised 95 15 Dealerships Segment is a Dealerships Collision Centers Full-Service Automotive Retailer, Selling New and Used Vehicles, Arranging (NYSE: SAH) F&I Product Sales, and a Fortune 500 Providing Parts, Service 20+ 12 and Collision Repair A
Slide 5: Investment Highlights
Investment Highlights Multiple Growth And Profit Drivers For Franchised Segment Broad Geographic, Unique, High Return Revenue Stream And EchoPark Brand Mix Diversification Business Model Complementary Focused On Expense Relationship – Sonic Control And Strengthening Franchised And EchoPark The Balan
Slide 6: Revenue Composition by Geography
Revenue Composition BY GEOGRAPHY Geographic Footprint, Revenue Streams and Brand Mix Offer Attractive Diversification Across the Automotive Retail Space SC 2% NV 2% Other * 3% MD 2% VA 2% GA 3% NC 4% CA 28% AL 5% Concentration in Major Metro FL 6% Markets TN 7% CO 9% TX 27% Note: Percentages are Per
Slide 7: Revenue Composition: Brand Distribution and Business Line Mix
Revenue Composition Brand Distribution Business Line Mix % of % of New Vehicle Brand Revenue Franchise Brand Revenue Used Vehicle (Including Wholesale) BMW 23% Mercedes 11% Parts, Service & Collision Repair ("Fixed Operations") Audi 6% Finance & Insurance ("F&I") Lexus 4% Luxury 57% Land Rover 3% 16
Slide 8: Franchised Dealerships
Franchised Dealerships Franchised Brands, Luxury 86 Dealerships 20+ Weighted New & Used Vehicle Sales Parts & Service (P&S) Finance & Insurance (F&I) Major Collision Metropolitan Repair Centers 15 20 Markets Focused On Inventory Mix and Attractive Pricing to Drive Growth and Profitability 8
Slide 9: Franchised Dealerships – Geographic Footprint
Franchised Dealerships – Geographic Footprint Headquartered in 86 Stores, 20+ Brands, Platforms in Major Charlotte, NC 15 Collision Repair Centers Metro Markets 9
Slide 10: Franchised Dealerships – Strategic Levers
Franchised Dealerships – Strategic Levers Grow Parts and Service Acquire Potential High Maximize Return Stores F&I Penetration Divest Multiple Growth Underperforming Used Vehicle or Cap Ex Volume Intensive Stores Drivers Throughput SG&A Expense Inventory Discipline Sourcing Omni-Channel Selling Echo
Slide 11: EchoPark Automotive: The New Car Alternative
EchoPark Automotive The New Car Alternative™ Get the New Car Feel Without the New Car Price Focus On Pre-Owned Below Market Market – More Stable Pricing With Simplified, Easy Than New Vehicle Purchase Experience Market Unique, High Return Business Model 1 to 4-Year-Old 30% of Guests Vehicles - Nearl
Slide 12: EchoPark – Geographic Footprint
EchoPark – Geographic Footprint Texas Colorado • Grand Prairie (Dallas) – • Thornton and Centennial Pre-Owned Business (Denver) – Opened Q4 2014 Acquired Q3 2017 • Colorado Springs – Opened • San Antonio – Opened Q4 Q2 2017 2017 • New Braunfels – Opened Q1 2018 • Houston – Opened December 2018 North
Slide 13: EchoPark – Growth Path
EchoPark – Growth Path $350 16,000 13,986 14,000 $300 13,206 12,587 12,676 12,000 $250 11,051 10,000 $200 8,762 7,698 7,459 8,000 (In Millions) (In $150 5,518 6,000 4,496 $100 4,000 2,400 2,049 $50 1,585 1,685 1,673 2,000 920 941 1,136 660 881 764 212 $- - Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun
Slide 14: EchoPark – Modeled 4-Wall Economics At Maturity
EchoPark – Modeled 4-Wall Economics At Maturity Medium Store Large Store Existing Medium Stores: • Centennial, CO* Average Monthly Retail Unit Volume (100% Mature) 750 1,500 • Colorado Springs, CO* Average Vehicle Selling Price $ 20,500 $ 20,500 • New Braunfels, TX* Total Annual Revenues $ 210,000,0
Slide 15: EchoPark – Market Maturity Comparison
EchoPark – Market Maturity Comparison Average Monthly Retail Unit Volume - 150 300 450 600 750 900 1,050 1,200 1,350 1,500 1,650 1,800 Denver/Colorado Springs Opened Q4 2014 * Dallas Acquired Q3 2017 Houston Opened Q4 2018 Charlotte Despite Challenging Conditions, Opened Q4 2018 All Markets Grew Vol
Slide 16: EchoPark – Adjusted EBITDA Trend
EchoPark – Adjusted EBITDA Trend $6,352 $6,000 $5,299 $5,169 $4,957 $4,792 $4,000 FY 2019 Adjusted EBITDA of $21.4 $2,000 Million, Up 302% From FY 2018 (In Thousands) $- Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 ($1,115) Q4 Seasonally Lighter Than Q3 $(2
Slide 17: EchoPark – High Volume Drives Superior Returns
EchoPark – High Volume Drives Superior Returns Ultra-Low Pricing Attractive F&I High Volume Throughput May Yield Slightly Negative Higher Penetration Rates 5X Volume Per Store Per Month Front-End Gross Profit Per Unit On F&I Products vs. Sonic Franchised Stores vs. Sonic Franchised Stores Gross Prof
Slide 18: Industry-Leading Used Vehicle Volume Throughput
Industry-Leading Used Vehicle Volume Throughput Retail Used Vehicle Unit Sales Per Store Per Month 518 469 319 105 101 79 Peer Average* Sonic Franchised Sonic Franchised CarMax** EchoPark EchoPark (Q4 2019) (Q1 2020) (Q4 2019) (Q1 2020) Utilize Highly Efficient Inventory Sourcing, Pricing And Sellin
Slide 19: Used Vehicle Volume Throughput Trend
Used Vehicle Volume Throughput Trend Franchised Dealerships Retail Used Vehicle Unit Sales Volume Per Store Per Month 115 109 105 96 95 95 91 88 89 90 85 85 81 75 70 65 55 53 44 45 45 40 41 35 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2005-2019 – 7.4% CAGR 19
Slide 20: Inventory Management Expertise
Inventory Management Expertise 58 Used Vehicle Inventory Days’ Supply 44 34 33 29 28 Peer Average* Sonic Franchised Sonic Franchised CarMax** EchoPark EchoPark (December 31, 2019) (March 31, 2020) (December 31, 2019) (March 31, 2020) Low Inventory Days’ Supply Reduces Exposure to Fluctuations in Use
Slide 21: Inventory Management Expertise
Inventory Management Expertise COVID-19-Related Sales Decline In Second Half Of March 2020 Magnified Seasonal Increase In New Vehicle Days’ Supply 86 75 64 63 59 53 32 33 34 34 29 31 30 29 27 27 28 25 Excellent Used Vehicle Days’ Supply – Manage This To Lower Sales Volume Using Data-Driven Purchasin
Slide 22: Data and Analytics-Based Inventory Management
Data and Analytics-Based Inventory Management POWERFUL EFFICIENT INSTANT SIMPLE Analytics Delivered To Only the Information Needed Insights in Less Than a Click Implementation in Existing Buyer’s Fingertips in the Moment Webpage with No Training HyperIntelligence Embeds The Analytics Into the Tools
Slide 23: Consolidated F&I Per Unit Trend
Consolidated F&I Per Unit Trend Annual F&I Gross Profit Per Unit $1,800 $1,743 $1,700 $1,600 $1,557 $1,500 $1,411 $1,400 $1,354 $1,300 $1,280 $1,219 $1,200 $1,138 $1,100 $1,071 $992 $1,002 $1,006 $1,000 $954 $900 $906 $918 $900 $800 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20
Slide 24: Complementary Relationship Between Segments
Complementary Relationship Between Segments Franchised Dealerships • Thrives When New Vehicle Industry Is • Strong Secular Growth Phase Due To: Healthy, Particularly Where Luxury Focus On Recession-Resistant Brands Are Strong Pre-Owned Vehicle Market • Diverse Revenue Streams - Some Below-Market
Slide 25: Strategic Direction
Strategic Direction Franchised Dealerships EchoPark Capital Allocation Drive New And Used Vehicle Early Stage Strong Secular Opportunistic Divestitures Of Profit Growth Through Growth Phase Underperforming Or Capital- Multiple Channels Intensive Franchised (Traditional Sale Or Lease, Profitability I
Slide 26: Financial Overview
a 4 -_ _ = FINANCIAL OVERVIEW AUTOMOTIVE OMOTIVE AUTOMOTIVE
Slide 27: Q1 2020 – Consolidated Continuing Operations – GAAP
Q1 2020 – Consolidated Continuing Operations – GAAP B/(W) than Q1 2019 (In millions, except per share data) Q1 2020 $ % Revenues $2,308.1 ($81.1) (3.4%) Gross profit $350.6 ($8.4) (2.3%) SG&A expenses $282.2 ($35.1) (14.2%) SG&A expenses as % of gross profit 80.5% (1,170) bps Earnings from continuin
Slide 28: Q1 2020 – Consolidated Continuing Operations – Adjusted
Q1 2020 – Consolidated Continuing Operations - Adjusted B/(W) than Q1 2019(1) (1) (In millions, except per share data) Q1 2020 $ % Revenues $2,308.1 ($81.1) (3.4%) Gross profit $350.6 ($8.4) (2.3%) SG&A expenses $282.2 $5.4 1.9% SG&A expenses as % of gross profit 80.5% (40) bps Earnings from continu
Slide 29: Q1 2020 Build – Consolidated Continuing Operations
Q1 2020 Build – Consolidated Continuing Operations FY 2019 Momentum Carried Into The First Two Months Of FY 2020, March Impacted By COVID-19 B/(W) than Comparable Period in 2019 (In millions, except unit and per unit data) January - February 2020 March 2020 Q1 2020 $ % $ % $ % New vehicle revenues $
Slide 30: Q1 2020 Build – Consolidated Same Store
Q1 2020 Build – Consolidated Same Store FY 2019 Momentum Carried Into The First Two Months Of FY 2020, March Impacted By COVID-19 B/(W) than Comparable Period in 2019 (In millions, except unit and per unit data) January - February 2020 March 2020 Q1 2020 $ % $ % $ % New vehicle revenues $ 83 13.5% $
Slide 31: Q1 2020 – Franchised Dealerships Segment – GAAP
Q1 2020 – Franchised Dealerships Segment – GAAP B/(W) than Q1 2019 (In millions, except unit and per unit data) Q1 2020 $ % Revenues $1,976.3 ($163.2) (7.6%) Gross profit $318.8 ($14.5) (4.4%) SG&A expenses $256.4 ($29.4) (13.0%) SG&A expenses as % of gross profit 80.4% (1,230) bps Segment income (l
Slide 32: Q1 2020 – Franchised Dealerships Segment – Adjusted
Q1 2020 – Franchised Dealerships Segment – Adjusted B/(W) than Q1 2019(1) (In millions, except unit and per unit data) Q1 2020 $ % Revenues $1,976.3 ($163.2) (7.6%) Gross profit $318.8 ($14.5) (4.4%) SG&A expenses $256.4 $11.0 4.1% SG&A expenses as % of gross profit 80.4% (20) bps Segment income (lo
Slide 33: Q1 2020 – Franchised Dealerships Segment Same Store
Q1 2020 – Franchised Dealerships Segment Same Store B/(W) than Q1 2019 (In millions, except unit and per unit data) Q1 2020 $ % New vehicle revenues $959 ($47) (4.7%) Retail used vehicle revenues $567 ($10) (1.8%) Wholesale used vehicle revenues $42 ($7) (14.7%) Fixed Operations revenues $327 $5 1.5
Slide 34: Q1 2020 – EchoPark Segment
Q1 2020 – EchoPark Segment B/(W) than Q1 2019 (In millions, except unit and per unit data) Q1 2020 $ % Revenues $331.7 $82.1 32.9% Gross profit $31.8 $6.1 23.7% SG&A expenses $25.7 ($5.6) (28.1%) SG&A expenses as % of gross profit 80.9% (270) bps Segment income (loss) $2.1 ($0.0) (0.5%) Retail used
Slide 35: Q1 2020 – EchoPark Segment Same Store
Q1 2020 – EchoPark Segment Same Store B/(W) than Q1 2019 (In millions, except unit and per unit data) Q1 2020 $ % Retail used vehicle revenues $265 $49 22.6% Wholesale used vehicle revenues $6 $4 162.6% Parts, service and collision repair revenues $10 $4 84.0% F&I revenues $30 $5 17.8% Total revenue
Slide 36: Q1 2020 – Consolidated Adjusted SG&A Expenses As Percentage Of Gross Profit
Q1 2020 – Consolidated Adjusted SG&A Expenses As Percentage Of Gross Profit On A GAAP Basis*, SG&A Expenses As Percentage Of Gross Profit Were 80.5% For Q1 2020 Compared To 68.8% For Q1 2019 40 bps Worse 80.5%(1) 80.1%(1) 22.7% 22.1% 4.0% 4.2% 49.8% 49.6% 4.0% 4.2% Q1 2020 Q1 2019 Advertising Comp R
Slide 37: Gross Profit Per Unit Trend
Gross Profit Per Unit Trend $2,500 $2,351 $2,341 $2,294 $2,264 $2,300 $2,234 $2,209 $2,100 $2,135 $2,100 $2,000 $2,091 $1,997 $1,835 $1,900 $1,710 $1,760 $1,700 $1,645 $1,576 $1,581 $1,539 $1,500 $1,300 $1,342 $1,340 $1,297 $1,286 $1,318 $1,241 $1,100 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020
Slide 38: Strong Balance Sheet And Liquidity
Strong Balance Sheet And Liquidity March 31, 2020 December 31, 2019 (In Millions) Cash and cash equivalents $ 181.8 $ 29.1 Availability under the 2016 Revolving Credit Facility - 230.7 Availability under our used vehicle floor plan facilities 26.6 17.1 Availability under the 2019 Mortgage Facility 3
Slide 39: Capital Expenditure Discipline
Capital Expenditure Discipline Gross Capital Expenditures (In Millions) $234.2 $163.6 $125.6 $110.8 FY 2017 FY 2018 FY 2019 FY 2020E Strict Capital Growth Capital Used To Expand Allocation Strategy EchoPark Locations Nationwide Actual Q1 2020 Capital Expenditures Of $19.8 Million FY 2020E Expected T
Slide 40: COVID-19 Impact, Actions Taken, 2020 Outlook
COVID-19 IMPACT ACTIONS TAKEN 2020 OUTLOOK 40
Slide 41: COVID-19 Impact Since Inception of Stay Home Orders
COVID-19 Impact Since Inception of Stay Home Orders Rolling 7-Day Average New Vehicle Rolling 7-Day Average Fixed Operations Unit Sales Volume Gross Profit (Less Internal) 400 $2,500 350 300 $2,000 250 $1,500 200 150 $1,000 100 50 (In Thousands) $500 - $- 2-Apr 4-Apr 6-Apr 8-Apr 7-Mar 9-Mar 10-Apr 1
Slide 42: COVID-19 Actions Taken
COVID-19 Actions Taken 1. Ensure Guest and Teammate Safety 2. Ensure Sonic’s Status As An Essential Business 3. Strengthen Liquidity • Taking Advantage of All Deferral Opportunities (Tax, Floor Plan Interest, Mortgages and Leases) • Daily Modeling Based on Actual Operations • Optimizing Floor Plan C
Slide 43: Inventory Management Expertise
Inventory Management Expertise Used Vehicle Inventory Days’ Supply 34 33 29 28 Sonic Franchise Sonic Franchise EchoPark EchoPark (December 31, 2019) (March 31, 2020) (December 31, 2019) (March 31, 2020) Strength of Day Supply Management, Pricing Engine and Buying Engine Supports Recovery 43
Slide 44: Outlook – J.D. Power
Outlook – J.D. Power J.D. Power New Vehicle Sales % of Original Forecast 120% 100% 100% 100% 100% 100% 100% 100% 100% 91% 80% 81% Back To Original 60% 65% Forecast in August 59% 40% 46% 20% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec J.D. Power COVID-19 Forecast Source Data: COVID-19: J.D. Po
Slide 45: Outlook – Franchised Dealerships New Vehicle Unit Sales Volume
Outlook – Sonic Automotive Franchised Dealerships New Vehicle Unit Sales Volume 14,000 12,000 Above Forecast 10,000 Jan & Feb 8,000 Back To Original 6,000 Forecast in August 4,000 2,000 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Original Forecast COVID-19 Forecast Due To Uncertainty Related T
Slide 46: Outlook – Franchised Dealerships Retail Used Vehicle Unit Sales Volume
Outlook – Sonic Automotive Franchised Dealerships Retail Used Vehicle Unit Sales Volume 14,000 12,000 Above Forecast Above Forecast July Through Dec Jan & Feb 10,000 8,000 Back To Original Forecast in July 6,000 4,000 2,000 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Original Forecast COVID-19
Slide 47: Outlook – EchoPark Retail Used Vehicle Unit Sales Volume
Outlook – Sonic Automotive EchoPark Retail Used Vehicle Unit Sales Volume 8,000 Above Forecast in July Through Dec 7,000 Above Forecast 6,000 Jan & Feb 5,000 Back To Original 4,000 Forecast in July 3,000 2,000 1,000 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Original Forecast COVID-19 Forecas
Slide 48: Outlook – Franchised Dealerships Fixed Operations Gross
Outlook – Sonic Automotive Franchised Dealerships Fixed Operations Gross $ $70,000 Above Forecast Above Forecast Aug Through Dec Jan & Feb $60,000 $50,000 Back To Original Forecast in Aug/Sept $40,000 (In Thousands) $30,000 $20,000 $10,000 $- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Original
Slide 49: Appendix
APPENDIX 49
Slide 50: Items Of Interest – Q1 Income Statement
Items Of Interest – Q1 Income Statement (In millions) Q1 2020 Q1 2019 Line Item Gain on franchise disposals $ - $ 46.7 SG&A expenses Executive transition costs - (6.3) SG&A expenses(1) Impairment charges (268.0) (1.9) Impairment charges(2) Subtotal: Pre-tax items of interest $ (268.0) $ 38.5 Tax eff
Slide 51: Non-GAAP Reconciliation – Segment Income & Adjusted Earnings
Non-GAAP Reconciliation – Segment Income & Adjusted Earnings Franchised Dealerships EchoPark Segment Segment Consolidated (In millions, except unit data) Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Revenues $ 1,976.3 $ 2,139.6 $ 331.7 $ 249.6 $ 2,308.1 $ 2,389.1 Gross profit $ 318.8 $ 333.3 $ 31
Slide 52: Non-GAAP Reconciliation – SG&A Expenses
Non-GAAP Reconciliation – SG&A Expenses Franchised Dealerships EchoPark Segment Segment Consolidated (In millions) Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Gross profit $ 318.8 $ 333.3 $ 31.8 $ 25.7 $ 350.6 $ 359.0 SG&A expenses $ 256.4 $ 227.0 $ 25.7 $ 20.1 $ 282.2 $ 247.1 Items of interest:
Slide 53: Non-GAAP Reconciliation – Earnings Per Share
Non-GAAP Reconciliation – Earnings Per Share Q1 2020 Q1 2019 Weighted- Per Weighted- Per Average Share Average Share (In thousands, except per share amounts) Shares Amount Amount Shares Amount Amount Diluted earnings (loss) and shares from continuing operations(1) 42,615 $ (199,131) $ (4.67) 42,888
Slide 54: Non-GAAP Reconciliation – Adjusted EBITDA LTM
Non-GAAP Reconciliation – Adjusted EBITDA LTM* (In thousands) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Q1 2020 Net Income (Loss) $ 76,254 $ 89,101 $ 81,618 $ 97,217 $ 86,311 $ 93,193 $ 92,983 $ 51,650 $ 144,137 $ (97,419) Provision For Income Taxes 46,907 47,648 43,386
Slide 55: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – Adjusted EBITDA Q1 2020 Q1 2019 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) Net Income (Loss) $ (199,333) $ 42,221 Provision For Income Taxes (44,2
Slide 56: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – Adjusted EBITDA Q3 2019 Q3 2018 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) Net Income (Loss) $ 29,010 $ 15,118 Provision For Income Taxes 11,307 7
Slide 57: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – Adjusted EBITDA Q1 2019 Q1 2018 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) Net Income (Loss) $ 42,221 $ (2,194) Provision For Income Taxes 18,935
Slide 58: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – Adjusted EBITDA Q3 2018 Q3 2017 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) Net Income (Loss) $ 15,118 $ 19,440 Provision For Income Taxes 7,262 13
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Slide 60: Investor Relations Contact
Investor Relations Contact: Sonic Automotive Inc. (NYSE: SAH) KCSA Strategic Communications Danny Wieland, Director of Financial Reporting David Hanover / Scott Eckstein ir@sonicautomotive.com sonic@kcsa.com (704) 927-3462 (212) 896-1220