Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q3 2019 Earnings Presentation
42 slides from Sonic Automotive's earnings presentation, Oct 24, 2019
Slide 1: Q3 2019 Investor Presentation
Exhibit 99.2 Q3 2019 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 • APPENDIX 3
Slide 4: Company Overview
7” COMPANY OVERVIEW
Slide 5: Overview – Franchised Geographic
OVERVIEW – FRANCHISED GEOGRAPHIC Headquartered in Charlotte, NC 91 Stores, 23 Brands, 15 Collision Repair Centers Platforms in Major Metro Markets 5
Slide 6: Overview – EchoPark Geographic
OVERVIEW – ECHOPARK GEOGRAPHIC Texas – 4 Locations Colorado – 3 Locations North Carolina – 1 Location • Charlotte Location Opened in • Thornton and October 2018 Centennial Opened • Velocity of Sales Increasing in 2015 Faster Compared to Other • Colorado Springs New Openings Opened in Q2 2017 • Dalla
Slide 7: Overview - Geographic
OVERVIEW - GEOGRAPHIC NV MD 2% 3% SC 2% OH VA 3% 3% NC CA 3% GA 3% 28% CO Concentration 8% in Major Metro Markets AL 5% FL 6% TN TX 7% 27% 7 Note: Percentages are percent of total revenue for FY 2018.
Slide 8: Overview – Brand & Revenue Composition
OVERVIEW – BRAND & REVENUE COMPOSITION Other Lux Revenue Streams 7% and Brand Mix Offer VW Land Rover Attractive 4% 2% BMW Diversification Other Non-Lux 20% Across the 3% Automotive Retail Cadillac Space 2% GM 5% F&I Fixed 4% Ops Audi 14% 7% Honda New 17% 50% Ford Pre- 6% Owned 32% Lexus 6% Toyota M
Slide 9: Q3 2019 Financial Review Franchised Segment
Q3 2019 FINANCIAL REVIEW FRANCHISED SEGMENT 9
Slide 10: Franchised Segment Q3 2019 Results
FRANCHISED SEGMENT Q3 2019 RESULTS Continuing Ops Same Store B/(W) than B/(W) than Q3 2018 Q3 2018 (In millions) Q3 2019 $ % Q3 2019 $ % Revenue $2,391 $106 4.6% $2,376 $196 9.0% Gross Profit $357 $11 3.2% $350 $25 7.8% SG&A $275 ($2) (0.8%) $266 ($16) (6.2%) SG&A as % of Gross Profit 76.9% 170 bps
Slide 11: New Vehicle SAAR - Retail
NEW VEHICLE SAAR - RETAIL 15.0 14.5 YTD 2019 – 13.4M 14.3 14.3 YTD 2018 – 13.5M 14.2 14.0 13.8 13.5 13.4 13.0 13.6 13.0 12.5 12.0 11.5 11.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019 11
Slide 12: New Vehicle Same Store - Franchised
NEW VEHICLE SAME STORE - FRANCHISED Q3 2019 Q3 2018 B/(W) New Volume 30,046 29,139 3.1% Selling Price$ 41,710 $ 40,314 3.5% Gross Margin % 4.4% 5.0% (60) bps GPU$ 1,825 $ 2,005 $ (180) Gross Profit (millions)$ 54.8 $ 58.4 (6.2%) Retail SAAR (millions) 14.0 13.7 2.2% New Units Jul Aug Sep Total 2019
Slide 13: Days' Supply
DAYS’ SUPPLY 80 New Days’ Supply 75 Improvement 70 64 63 60 59 62 50 Excellent Used Vehicle Days’ 40 36 Supply 33 32 35 33 30 33 30 34 30 29 31 32 27 27 25 20 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 New Used - Fran Used - EP Parts 13
Slide 14: Used Vehicle Retail
USED VEHICLE RETAIL Franchised – Same Store Q3 2019 Q3 2018 B/(W) Retail Volume 29,050 26,067 11.4% GPU$ 1,235 $ 1,330 $ (95) Used to New Ratio 97% 89% 800 bps Vehicles/Store/Month (90 stores) 108 97 11 Front End Gross and F&I (in millions) Jul Aug Sep Total 2019$ 26.9 $ 28.0 $ 27.1 $ 82.0 2018 24.3
Slide 15: F&I – Gross Profit & GPU Trend
F&I – GROSS PROFIT & GPU TREND Franchised – Same Store GPU (In millions) Gross $ $1,600 $1,587 $95 $92 $1,575 $1,550 $90 $1,525 $1,500 $85 $1,475 $1,450 $1,416 $80 $1,425 $77 $1,400 $1,375 $75 $1,350 $1,325 $70 Q3 2019 Q3 2018 Q3 2019 Q3 2018 15
Slide 16: Fixed Operations
FIXED OPERATIONS Franchised – Same Store (In thousands) Q3 2019 Q3 2018 $ B/(W) % B/(W) Customer Pay$ 76,435 $ 70,218 $ 6,217 8.9% Warranty 37,982 35,569 2,413 6.8% Wholesale Parts 6,594 6,468 126 1.9% Sublet 4,876 4,591 286 6.2% Internal 27,988 25,819 2,169 8.4% Other 14,402 13,479 923 6.8% Total G
Slide 17: Q3 2019 Financial Review EchoPark Segment
Q3 2019 FINANCIAL REVIEW ECHOPARK SEGMENT 17
Slide 18: EchoPark Segment Q3 2019 Results
ECHOPARK SEGMENT Q3 2019 RESULTS Revenues Up Gross Profit 67.9% Up Pre-tax 107.2% Up 138.9% 18
Slide 19: EchoPark Segment Q3 2019 Results
ECHOPARK SEGMENT Q3 2019 RESULTS B/(W) than Q3 2018 (In millions, except unit and per unit data) Q3 2019 $ % Revenue $312.2 $126.3 67.9% Gross Profit $29.6 $15.3 107.2% SG&A $22.2 ($5.5) (33.1%) SG&A as % of Gross Profit 75.3% 4,200 bps Depreciation Expense $2.7 ($0.7) (35.3%) Operating Profit $3.5
Slide 20: EchoPark Retail Unit Sales Growth
ECHOPARK RETAIL UNIT SALES GROWTH Revenue Units $350,000,000 13,206 14,000 12,587 11,515 $300,000,000 11,051 12,000 $250,000,000 10,000 8,762 7,698 $200,000,000 7,459 8,000 $150,000,000 5,518 6,000 4,496 $100,000,000 4,000 2,400 2,049 1,585 1,685 1,673 $50,000,000 1,136 2,000 660 881 920 764 941 212
Slide 21: EchoPark Cash Flow – Corporate & Store Level
ECHOPARK CASH FLOW – CORPORATE & STORE LEVEL EchoPark Corporate Adjusted EBITDA $1,000 $0 • Corporate Cost Structure ($269) is Maturing and ($1,000) ($1,147) ($1,032) Becoming More Efficient ($2,000) • Expect Leveraging of ($3,000) ($2,920) ($3,206) Corporate Investment to ($4,000) ($3,608) ($3,699)
Slide 22: EchoPark Cash Flow - Consolidated
ECHOPARK CASH FLOW - CONSOLIDATED $8,000 Total EchoPark Adjusted EBITDA $6,352 $6,000 $4,957 $4,792 $4,000 $2,000 (In thousands) $0 ($1,115) ($2,000) ($2,168) ($2,059) ($2,802) ($3,029) ($4,000) ($3,353) Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 • Current Inventory and
Slide 23: EchoPark Model Estimates
ECHOPARK MODEL ESTIMATES Medium Large Existing Medium Stores: Centennial, CO Average Selling Price$ 20,500 $ 20,500 Colorado Springs, CO Annual Revenues$ 184,500,000 $ 369,000,000 New Braunfels, TX Average Monthly Unit Volume - 100% Mature 750 1,500 San Antonio, TX Total Front-End and F&I GPU$ 2,150
Slide 24: Q3 2019 Financial Review Consolidated
Q3 2019 FINANCIAL REVIEW CONSOLIDATED 24
Slide 25: Consolidated Q3 2019 Results
CONSOLIDATED Q3 2019 RESULTS B/(W) than Q3 2018 (In millions, except per share data) Q3 2019 $ % Revenue $2,703 $232 9.4% Gross Profit $387 $26 7.3% SG&A $297 ($8) (2.7%) SG&A as % of Gross Profit 76.7% 350 bps Depreciation $24 ($0) (1.2%) Operating Profit $65 $17 35.4% Interest & Other ($25) $1 3.3
Slide 26: Q3 2019 Revenue & Gross Profit
Q3 2019 REVENUE & GROSS PROFIT B/(W) than Q3 2018 (In millions, except unit and per unit data) Q3 2019 $ % New Revenue $1,258 $23 1.9% Used Retail Revenue $914 $168 22.6% Fixed Operations Revenue $352 $9 2.6% F&I Revenue $127 $29 29.3% Total Revenue $2,703 $232 9.4% New Gross Profit $55 ($6) (10.3%)
Slide 27: Q3 2019 Revenue & Gross Profit Same Store
Q3 2019 REVENUE & GROSS PROFIT SAME STORE B/(W) than Q3 2018 (In millions, except unit and per unit data) Q3 2019 $ % New Revenue $1,253 $79 6.7% Used Retail Revenue $856 $142 19.9% Fixed Operations Revenue $349 $22 6.9% F&I Revenue $117 $25 26.5% Total Revenue $2,625 $272 11.6% New Gross Profit $55
Slide 28: Q3 2019 SG&A to Gross Profit
Q3 2019 SG&A TO GROSS PROFIT 350 bps Better 76.7% 80.2% 21.7% 23.4% 3.3% 4.1% 47.6% 48.6% 4.1% 4.1% Q3 2019 Q3 2018 Advertising Comp Rent Other Note: Results reported for the third quarter of 2018 include pre-tax SG&A expenses totaling $3.1 million related to storm damage, executive transition costs
Slide 29: Q3 2019 Interest Expense
Q3 2019 INTEREST EXPENSE B/(W) than Q3 2018 (In millions) Q3 2019 $ % Floor Plan Interest Expense $12 $1 4.5% Interest Expense, Other $13 $0 2.3% Total Interest Expense $25 $1 3.3% Floor Plan Lower Due to New Vehicle Rate Decrease, Offset Partially by Used Vehicle Rate Increase • New Down 29 bps • U
Slide 30: Q3 2019 Depreciation Expense
Q3 2019 DEPRECIATION EXPENSE B/(W) than Q3 2018 (In millions) Q3 2019 $ % Depreciation Expense - Franchised $21 $0 1.9% Depreciation Expense - EchoPark $3 ($1) (35.3%) Total $24 ($0) (1.2%) 30
Slide 31: Capital Expenditures
CAPITAL EXPENDITURES YTD Estimated (In millions) FY 2018 Q1 2019 Q2 2019 Q3 2019 2019 FY 2019 Real Estate & Facility Related$ 147.6 $ 25.7 $ 16.3 $ 19.2 $ 61.2 $ 108.0 All Other Cap Ex 16.0 4.9 4.3 4.1 13.3 20.0 Subtotal 163.6 30.6 20.6 23.3 74.5 128.0 Less: Mortgage Proceeds (21.1) - - - - - Total
Slide 32: Debt Covenants
DEBT COVENANTS Covenant Q4 2018 Q3 2019 Liquidity Ratio >= 1.05 1.10 1.19 Fixed Charge Coverage Ratio >= 1.20 1.43 1.63 Total Lease Adjusted Leverage Ratio <= 5.75 5.25 3.91 Compliant with all Covenants 32
Slide 33: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES
Slide 34: Adjusted Diluted Earnings Per Share – Three Months
ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended Three Months Ended September 30, 2019 September 30, 2018 (In thousands, except per share data) Amount Diluted EPS Amount Diluted EPS Reported Net Income and Diluted Earnings Per Share from Continuing Operations$ 29,168 $ 0.66 $ 15,301 $ 0.36 Pre
Slide 35: Adjusted Diluted Earnings Per Share – Nine Months
ADJUSTED DILUTED EARNINGS PER SHARE Nine Months Ended Nine Months Ended September 30, 2019 September 30, 2018 (In thousands, except per share data) Amount Diluted EPS Amount Diluted EPS Reported Net Income and Diluted Earnings Per Share from Continuing Operations$ 98,268 $ 2.26 $ 30,409 $ 0.71 Pre-t
Slide 36: Adjusted EBITDA – Consolidated LTM
ADJUSTED EBITDA – CONSOLIDATED LTM (In thousands) 2011 2012 2013 2014 2015 2016 2017 2018 9/30/2019 Net Income$ 76,254 $ 89,101 $ 81,618 $ 97,217 $ 86,311 $ 93,193 $ 92,983 $ 51,649 $ 119,650 Non-Floor Plan Interest 63,576 58,453 55,356 52,269 49,524 48,034 50,531 52,049 51,119 Depreciation and Amor
Slide 37: Adjusted EBITDA by Segment – Q3 2019 vs. Q3 2018
ADJUSTED EBITDA BY SEGMENT – Q3 2019 VS. Q3 2018 Q3 2019 Q3 2018 Continuing Discontinued Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Franchised EchoPark Operations Operations Total Net Income$ 29,168 $ (158) $ 29,010 $ 15,301 $ (183) $ 15,118 Income Taxes 1
Slide 38: Adjusted EBITDA by Segment – Q2 2019 vs. Q2 2018
ADJUSTED EBITDA BY SEGMENT – Q2 2019 VS. Q2 2018 Q2 2019 Q2 2018 Continuing Discontinued Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Franchised EchoPark Operations Operations Total Net Income$ 26,751 $ (151) $ 26,599 $ 17,122 $ (216) $ 16,905 Income Taxes 1
Slide 39: Adjusted EBITDA by Segment – Q1 2019 vs. Q1 2018
ADJUSTED EBITDA BY SEGMENT – Q1 2019 VS. Q1 2018 Q1 2019 Q1 2018 Continuing Discontinued Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Franchised EchoPark Operations Operations Total Net Income$ 42,349 $ (128) $ 42,221 $ (2,014) $ (180) $ (2,194) Income Taxes
Slide 40: Adjusted EBITDA by Segment – Q4 2018 vs. Q4 2017
ADJUSTED EBITDA BY SEGMENT – Q4 2018 VS. Q4 2017 Q4 2018 Q4 2017 Continuing Discontinued Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Franchised EchoPark Operations Operations Total Net Income$ 21,981 $ (161) $ 21,820 $ 62,128 $ (176) $ 61,952 Income Taxes 9
Slide 41: Adjusted EBITDA by Segment – Q3 2018 vs. Q3 2017
ADJUSTED EBITDA BY SEGMENT – Q3 2018 VS. Q3 2017 Q3 2018 Q3 2017 Continuing Discontinued Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Franchised EchoPark Operations Operations Total Net Income$ 15,301 $ (183) $ 15,118 $ 19,730 $ (290) $ 19,440 Income Taxes 7
Slide 42: Sonic Automotive EchoPark Automotive
Samic) EchoPark AUTOMOTIVE