Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q4 2018 Earnings Presentation
58 slides from Sonic Automotive's earnings presentation, Feb 20, 2019
Slide 1: Q4 2018 Investor Presentation
Exhibit 99.2 Q4 2018 Investor Presentation
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
CONTENT • COMPANY OVERVIEW • FINANCIAL & OPERATIONS REVIEW • OUTLOOK 3
Slide 4: Company Overview
COMPANY OVERVIEW Sonic) EchoPark
Slide 5: Overview – Franchised Geographic
OVERVIEW – FRANCHISED GEOGRAPHIC Headquartered in Charlotte, NC 96 Stores, 23 Brands, 15 Collision Repair Centers 5 Platforms in Major Metro Markets
Slide 6: Overview – EchoPark Geographic - CO
OVERVIEW – ECHOPARK GEOGRAPHIC - CO • Have purchased property in the following markets (some are under construction): ◦ Dallas/Ft. Worth ◦ San Antonio ◦ Houston ◦ Austin ◦ Carolinas Colorado Springs 6
Slide 7: Overview – EchoPark Geographic - TX
OVERVIEW – ECHOPARK GEOGRAPHIC - TX Houston Location Opened in Q4 • Grand Prairie Location - Relocated driversselect 2018 Operation (purchased in Q3 2017) • West San Antonio Location Opened in Q4 2017 • New Braunfels Location Opened in Q1 2018 7
Slide 8: Overview – EchoPark Geographic - NC
OVERVIEW – ECHOPARK GEOGRAPHIC - NC • Opened October 8 • Velocity of Sales Increasing Compared to Other New Openings 8
Slide 9: Overview - Geographic
OVERVIEW - GEOGRAPHIC SC VA 2% 3% NV MD 2% 3% GA OH 3% 3% CA NC 28% 4% AL 5% Concentration in Major Metro FL Markets 6% TN 7% CO TX 8% 27% 9 Note: Percentages are percent of total revenue for FY 2018.
Slide 10: Overview - Brand Composition
OVERVIEW - BRAND COMPOSITION New Retail Revenue & Overall Revenue Mix Other Lux Revenue streams and 7% brand mix offer attractive VW Other Non-Lux BMW 2% diversification across 3% 20% the automotive retail Cadillac space. Land Rover 2% F&I and 4% Fixed Other 4% Operations GM 14% 5% New Vehicles Ford
Slide 11: Q4 2018 Financial Review Franchised Segment
Q4 2018 FINANCIAL REVIEW FRANCHISED SEGMENT 11
Slide 12: Franchised Segment Q4 2018 Results
FRANCHISED SEGMENT Q4 2018 RESULTS B/(W) than Q4 2017 (1) (amounts in millions, except per share data) Q4 2018 (1) $ % Revenue $ 2,372 $ (190) (7.4)% Gross Profit $ 354 $ (19) (5.1)% SG&A $ 256 $ 10 3.9 % SG&A as % of Gross 72.5% (90) bps Depreciation $ 20 $ 1 6.8 % Operating Profit $ 77 $ (7) (8.4)
Slide 13: New Vehicle SAAR
NEW VEHICLE SAAR 19.0 Hurricane Harvey Q4 2018 17.6M vs 17.8M Q4 2017 18.5 18.5 Full Year 2018 – 17.2M Full Year 2017 – 17.2M 18.0 17.8 17.5 17.5 17.4 17.4 17.0 16.5 16.4 16.4 16.4 16.4 16.5 16.4 16.0 15.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2018 2019 Forecast 13
Slide 14: New Vehicle SAAR - Retail
NEW VEHICLE SAAR - RETAIL 16.0 Hurricane Harvey 15.5 15.5 Full Year 2018 – 13.6M Full Year 2017 – 13.9M 14.9 15.0 14.5 14.2 14.3 14.0 13.8 13.4 13.5 13.0 13.2 13.3 13.0 13.0 13.0 13.0 12.5 12.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2018 2019 Forecast 14
Slide 15: New Vehicle Same Store - Franchised
NEW VEHICLE SAME STORE - Franchised Q4 2018 Q4 2017 B/(W) New Volume 31,314 34,402 (9.0)% Selling Price $ 42,114 $ 41,106 2.5% Gross Margin % 4.9% 5.3% (40) bps GPU $ 2,083 $ 2,193 $ (110) Gross Profit (millions) $ 65.2 $ 75.4 (13.5)% Retail SAAR (millions) 13.7 14.2 (3.5)% New Units Oct Nov Dec Tot
Slide 16: New Vehicle – Gross, Unit & GPU Trend
NEW VEHICLE – GROSS, UNIT & GPU TREND Continuing Operations - Franchised ▪ Gross $ (in millions) ▪Units $2,132 $2,070 $2,078 $2,100 $1,988 $1,950 $1,909 $1,911 $1,925 $1,886 $1,866 $1,855 $78 $74 $1,730 $74 $66 $66 $66 $62 $63 $62 $58 $58 $57 $57 35,856 36,054 35,562 35,489 36,531 33,782 33,148 31,3
Slide 17: Days' Supply
DAYS' SUPPLY 80 71 70 66 62 59 60 52 50 47 40 36 35 37 35 36 33 34 35 30 32 30 30 28 26 20 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 New Used - Fran Used - EP Parts 17
Slide 18: Used Vehicle Retail
USED VEHICLE RETAIL Franchised – Same Store Q4 2018 Q4 2017 B/(W) Retail Volume 26,345 25,819 2.0% GPU $ 1,219 $ 1,201 $ 18 Used to New 84.0% 75.0% 900 bps Vehicles/Store/Month (96 stores) 92 91 1 Front-End Gross and F&I (in millions) Oct Nov Dec Total 2018 $ 23.1 $ 21.8 $ 27.4 $ 72.3 2017 22.0 21.6
Slide 19: F&I – Gross & GPU
F&I – GROSS & GPU Franchised – Same Store Gross $ (in millions) GPU$ $88 ▪ ▪ $85 $1,528 $1,422 Q4 2018 Q4 2017 19
Slide 20: Fixed Operations
FIXED OPERATIONS Franchised – Same Store (amounts in millions) Q4 2018 Q4 2017 B/(W) Revenue $ 336 $ 336 0.0% Gross Profit $ 164 $ 164 (0.3)% 20
Slide 21: Fixed Operations Gross
FIXED OPERATIONS GROSS Franchised – Same Store (amounts in millions) Q4 2018 Q4 2017 $ B/(W) % B/(W) Customer Pay $ 72,952 $ 71,664 $ 1,288 1.8 % Warranty 38,526 36,647 1,879 5.1 % Wholesale Parts 6,797 6,906 (109) (1.6)% Internal, Sublet & Other 45,607 49,081 (3,474) (7.1)% Total Gross Profit $ 163
Slide 22: Q4 2018 Financial Review EchoPark Segment
Q4 2018 FINANCIAL REVIEW ECHOPARK SEGMENT 22
Slide 23: EchoPark Segment Q4 2018 Results
ECHOPARK SEGMENT Q4 2018 RESULTS B/(W) than Q4 2017 (1) (amounts in millions, except per share, unit and per unit data) Q4 2018 (1) $ % Revenue $ 202.6 $ 96.3 90.5 % Gross Profit $ 17.2 $ 5.7 49.4 % SG&A $ 18.5 $ (6.2) (49.9)% SG&A as % of Gross 108.0% (40) bps Depreciation Expense $ 2.2 $ (0.9) (63
Slide 24: Q4 2018 Financial Review Total Enterprise
Q4 2018 FINANCIAL REVIEW TOTAL ENTERPRISE 24
Slide 25: Consolidated Q4 2018 Results
CONSOLIDATED Q4 2018 RESULTS B/(W) than Q4 2017 (1) (amounts in millions, except per share data) Q4 2018 (1) $ % Revenue $ 2,574 $ (94) (3.5)% Gross Profit $ 371 $ (13) (3.5)% SG&A $ 275 $ 4 1.5 % SG&A as % of Gross 74.1% (150) bps Depreciation $ 23 $ 1 2.7 % Operating Profit $ 73 $ (8) (10.3)% Inte
Slide 26: Consolidated Q4 2018 Revenue & Gross Profit
CONSOLIDATED Q4 2018 REVENUE & GROSS PROFIT B/(W) than Q4 2017 (amounts in millions, except unit and per unit data) Q4 2018 $ % New Revenue $ 1,320 $ (166) (11.2)% Used Retail Revenue $ 756 $ 70 10.2 % Fixed Operations Revenue $ 339 $ (16) (4.5)% F&I Revenue $ 110 $ 9 9.4 % Total Revenue $ 2,574 $ (
Slide 27: Consolidated Q4 2018 Revenue & Gross Profit - Same Store
CONSOLIDATED Q4 2018 REVENUE & GROSS PROFIT - SAME STORE B/(W) than Q4 2017 (amounts in millions, except unit and per unit data) Q4 2018 $ % New Revenue $ 1,319 $ (95) (6.7)% Used Retail Revenue $ 712 $ 64 9.9 % Fixed Operations Revenue $ 338 $ (1) (0.4)% F&I Revenue $ 102 $ 10 10.9 % Total Revenue
Slide 28: Q4 2018 Adjusted SG&A to Gross
Q4 2018 ADJUSTED SG&A TO GROSS 74.1% 72.6% 20.8% 19.5% 3.9% 4.6% 45.0% 44.6% 4.4% 3.9% Q4 2018 (1) Q4 2017 (1) Advertising Comp Rent Other (1) – Q4 2018 & Q4 2017 results are adjusted - See appendix for reconciliation to GAAP amounts. 28
Slide 29: Q4 2018 Interest Expense
Q4 2018 INTEREST EXPENSE B/(W) than Q4 2017 (amounts in millions) Q4 2018 $ % Floor Plan Interest Expense $ 14 $ (4) (36.1)% Interest Expense, Other $ 14 $ (1) (4.4)% Total Interest Expense $ 28 $ (5) (18.0)% 29
Slide 30: Q4 2018 Depreciation Expense
Q4 2018 DEPRECIATION EXPENSE B/(W) than Q4 2017 (amounts in millions) Q4 2018 $ % Depreciation Expense - Franchised $ 20 $ 1 6.8 % Depreciation Expense - EchoPark $ 2 $ (1) (63.0)% Total $ 22 $ — 2.7 % New EchoPark Texas Builds Driving Increase in Depreciation Expense 30
Slide 31: FY 2018 Financial Review
FY 2018 FINANCIAL REVIEW 31
Slide 32: FY 2018 Financial Review Franchised Segment
FY 2018 FINANCIAL REVIEW FRANCHISED SEGMENT 32
Slide 33: Franchised Segment FY 2018 Results
FRANCHISED SEGMENT FY 2018 RESULTS B/(W) than FY 2017 (1) (amounts in millions, except per share data) FY 2018 (1) $ % Revenue $ 9,251 $ (361) (3.8)% Gross Profit $ 1,388 $ (42) (2.9)% SG&A $ 1,077 $ 30 2.7 % SG&A as % of Gross 77.6% (20) bps Depreciation $ 86 $ (2) (2.5)% Operating Profit $ 226 $ (
Slide 34: FY 2018 Financial Review EchoPark Segment
FY 2018 FINANCIAL REVIEW ECHOPARK SEGMENT 34
Slide 35: EchoPark Segment FY 2018 Results
ECHOPARK SEGMENT FY 2018 RESULTS B/(W) than FY 2017 (1) (amounts in millions, except per share, unit and per unit data) FY 2018 (1) $ % Revenue $ 700 $ 446 175.3 % Gross Profit $ 58 $ 30 109.5 % SG&A $ 66 $ (27) (70.0)% SG&A as % of Gross 114.3% 2,660 bps Operating Profit $ (16) $ 0 2.7 % Interest &
Slide 36: EchoPark Retail Unit Sales Growth
ECHOPARK RETAIL UNIT SALES GROWTH 36
Slide 37: FY 2018 Financial Review Total Enterprise
FY 2018 FINANCIAL REVIEW TOTAL ENTERPRISE 37
Slide 38: Consolidated FY 2018 Results
CONSOLIDATED FY 2018 RESULTS B/(W) than FY 2017 (1) (amounts in millions, except per share data) FY 2018 (1) $ % Revenue $ 9,952 $ 84 0.9 % Gross Profit $ 1,446 $ (12) (0.8)% SG&A $ 1,143 $ 3 0.3 % SG&A as % of Gross 79.0% (40) bps Depreciation $ 94 $ (5) (5.3)% Operating Profit $ 210 $ (13) (6.0)%
Slide 39: Consolidated FY 2018 Revenue & Gross Profit
CONSOLIDATED FY 2018 REVENUE & GROSS PROFIT B/(W) than FY 2017 (amounts in millions, except unit and per unit data) FY 2018 $ % New Revenue $ 4,906 $ (311) (6.0)% Used Retail Revenue $ 2,973 $ 351 13.4 % Fixed Operations Revenue $ 1,381 $ (35) (2.5)% F&I Revenue $ 406 $ 42 11.7 % Total Revenue $ 9,9
Slide 40: FY 2018 Adjusted SG&A to Gross
FY 2018 ADJUSTED SG&A TO GROSS 79.0% 78.6% 22.5% 22.1% 4.3% 4.9% 47.8% 47.4% 4.4% 4.2% FY 2018 (1) FY 2017 (1) Advertising Comp Rent Other (1) – FY 2018 & FY 2017 results are adjusted - See appendix for reconciliation to GAAP amounts. 40
Slide 41: Consolidated FY 2018 Interest Expense
CONSOLIDATED FY 2018 INTEREST EXPENSE B/(W) than FY 2017 (1) (amounts in millions) FY 2018 $ % Floor Plan Interest Expense $ 48 $ (12) (33.0)% Interest Expense, Other $ 54 $ (2) (4.2)% Total Interest Expense $ 102 $ (14) (16.1)% (1) – FY 2017 results are adjusted - See appendix for reconciliation to
Slide 42: 2018 Capex
2018 CAPEX Estimated (amounts in millions) FY 2015 FY 2016 FY 2017 FY 2018 2019 Real Estate & Facility Related $ 138.1 $ 174.3 $ 199.3 $ 147.6 $ 103.0 All Other Cap Ex 34.3 31.9 35.0 16.0 20.0 Subtotal $ 172.4 $ 206.2 $ 234.3 $ 163.6 $ 123.0 Less: Mortgages (69.0) (103.3) (52.5) (21.1) — Total Cash
Slide 43: Debt Covenants
DEBT COVENANTS Covenant Q4 2018 Liquidity Ratio >= 1.05 1.10 Fixed Charge Coverage Ratio >= 1.20 1.43 Total Lease Adjusted Leverage Ratio <= 5.75 5.25 Compliant with all Covenants 43
Slide 44: Adjusted EBITDA
ADJUSTED EBITDA (amounts in thousands) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net Income $ 31,548 $ 89,929 $ 76,254 $ 89,101 $ 81,618 $ 97,217 $ 86,311 $ 93,193 $ 92,983 $ 51,650 Non-Floor plan Interest 67,735 68,604 63,576 58,453 55,356 52,269 49,524 48,034 50,531 52,049 Depreciation & A
Slide 45: Share Repurchases
SHARE REPURCHASES Shares $/Share $ Availability (amounts in thousands, except share and per share data) EOY - 2017 $ 107,686 Q1 Activity 1,153 $ 20.35 $ 23,468 $ (23,468) Q2 Activity — — — — Q3 Activity 32 $ 19.95 $ 643 $ (643) Q4 Activity — — — — Total 2018 Activity 1,186 $ 20.34 $ 24,111 $ 83,575
Slide 46: Appendix
APPENDIX Sonic) EchoPark
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended December 31, 2018 Three Months Ended December 31, 2017 Continuing Operations Continuing Operations Franchised Franchised Dealerships EchoPark Consolidated Dealerships EchoPark Consolidated Reported: Diluted earnings (loss) per share $ 0.62 $ (0.11) $ 0.51
Slide 48: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Twelve Months Ended December 31, 2018 Twelve Months Ended December 31, 2017 Continuing Operations Continuing Operations Franchised Franchised Dealerships EchoPark Consolidated Dealerships EchoPark Consolidated Reported: Diluted earnings (loss) per share $ 2.14 $ (0.92) $ 1.2
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 2018 2017 2018 2017 2018 2017 (In millions) Reported: SG&A expenses $ 273.9 $ 277.6 $ 255.4 $ 263.8 $ 18.5 $ 13.
Slide 50: 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 2018 2017 2018 2017 2018 2017 (In millions) Reported: Operating income $ 58.7 $ 77.2 $ 63.8 $ 81.1 $ (5.1) $ (3.
Slide 51: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark Twelve Months Ended Twelve Months Ended Twelve Months Ended December 31, December 31, December 31, Continuing Operations 2018 2017 2018 2017 2018 2017 (In millions) Reported: SG&A expenses $ 1,145.3 $ 1,147.8 $ 1,046.4 $ 1,106.6 $
Slide 52: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark Twelve Months Ended Twelve Months Ended Twelve Months Ended December 31, December 31, December 31, Continuing Operations 2018 2017 2018 2017 2018 2017 (In millions) Reported: Operating income $ 177.7 $ 211.6 $ 227.9 $ 232.2 $ (50.
Slide 53: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Consolidated Three Months Ended Twelve Months Ended December 31, December 31, Continuing Operations 2018 2017 2018 2017 (In millions) Reported: Interest Expense - Other $ 13.9 $ 13.3 $ 54.1 $ 52.5 Adjustments: Double-carry interest - 7.0% Notes — — — (0.7) Total
Slide 54: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended December 31, 2018 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 55: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended December 31, 2017 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 56: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Twelve Months Ended December 31, 2018 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 57: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Twelve Months Ended December 31, 2017 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 58: Sonic Automotive EchoPark
Sonic) EchoPark