Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q2 2016 Earnings Presentation
52 slides from Sonic Automotive's earnings presentation, Jul 26, 2016
Slide 1: Q2 2016 Investor Presentation
Q2 2016 Investor Presentation July 26, 2016 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: Overview – Franchised Geographic
OVERVIEW – FRANCHISED GEOGRAPHIC Based in Charlotte, NC 102 Stores, 25 Brands, 18 Collision Repair Centers Platforms in Major Metro Markets
Slide 5: Overview – EchoPark Geographic
OVERVIEW – ECHOPARK® GEOGRAPHIC Dakota Ridge - Opened June 2016 Stapleton - Opened June 2016 Colorado Springs - Opens Q4 2016
Slide 6: Revenue concentration in major metro markets
Note: Percentages are percent of total revenue for FY 2015. Concentration in Major Metro Markets
Slide 7: Revenue streams and brand mix diversification
Revenue streams and brand mix offer attractive diversification across the automotive retail space.
Slide 8: Strategic Focus
STRATEGIC FOCUS Growth EchoPark® One Sonic-One Experience Acquisitions & Open Points Own Our Properties Return Capital to Shareholders Share Repurchases Dividends
Slide 9: Strategic Focus: One Sonic-One Experience (OSOE)
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 10: Strategic Focus: EchoPark
STRATEGIC FOCUS EchoPark® Five Locations Open In Denver Thornton Hub Centennial Highlands Ranch Dakota Ridge Stapleton One Additional Denver Market Location by End of 2016 Acquiring Property in the Texas and Carolinas Markets Expect openings in 2017
Slide 11: Strategic Focus: Acquisitions & Open Points
STRATEGIC FOCUS ACQUISITIONS & OPEN POINTS Open Points Mercedes Benz in Dallas Market Operational in 2016 Audi in Pensacola Market Operational in 2016 Nissan in TN Market Operational in late 2016 / early 2017 Exploring Acquisition and Open Point Opportunities in Other Markets
Slide 12: Strategic Focus: Own Our Properties
STRATEGIC FOCUS OWN OUR PROPERTIES % of Properties Owned
Slide 13: Share Repurchases
SHARE REPURCHASES Acquired 9.7% of OS in YTD Q2 New Share Count = 45.4M Down from High of 53.2M (Dec 2012) (amounts in thousands, except per share data) Shares $/Share $ Availability Q1 Activity 4,102 18.14 $ 74,414 $ 70,589 $ Q2 Activity 759 17.24 $ 13,090 $ 57,499 $ YTD 4,861 18.00 $ 87,504 $
Slide 14: 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 15: Q2 2016 Financial Review
Q2 2016 FINANCIAL REVIEW
Slide 16: Franchised Segment
Q2 2016 FINANCIAL REVIEW FRANCHISED SEGMENT
Slide 17: Franchised Segment Q2 2016 Results
FRANCHISED SEGMENT Q2 2016 RESULTS – Q2 2015 results are adjusted – See appendix for reconciliation to GAAP amounts Note – Continuing operations includes results of sold stores after March 31, 2014. B/(W) than Q2 2015 (1) (amounts in millions, except per share data) Q2 2016 $ % Revenue $2,353 ($50)
Slide 18: EchoPark Segment
Q2 2016 FINANCIAL REVIEW ECHOPARK® SEGMENT
Slide 19: EchoPark Segment Q2 2016 Results
ECHOPARK® SEGMENT Q2 2016 RESULTS – Q2 2015 is adjusted – See appendix for reconciliation to GAAP amounts B/(W) than Q2 2015 (1) (amounts in millions, except per share, unit and per unit data) Q2 2016 $ % Revenue $29 $8 40.5% Gross Profit $3 $1 30.2% Operating Profit ($3) $1 21.7% Interest & Other (
Slide 20: Total Enterprise
Q2 2016 FINANCIAL REVIEW TOTAL ENTERPRISE
Slide 21: Consolidated Q2 2016 Results
CONSOLIDATED Q2 2016 RESULTS Gained SG&A Leverage – Q2 2015 is adjusted – See appendix for reconciliation to GAAP amounts Note – Continuing operations includes results of sold stores after March 31, 2014. B/(W) than Q2 2015 (1) (amounts in millions, except per share data) Q2 2016 $ % Revenue $2,382
Slide 22: Q2 2016 Revenue & Gross Profit
Q2 2016 REVENUE & GROSS PROFIT Increase in New GPU Offset Unit Decline Used Unit and GPU Declined Strong Comp for Fixed Ops F&I Penetration Continues Improvement B/(W) than Q2 2015 (amounts in millions, except per share data) Q2 2016 $ % New Retail Revenue $1,270 ($16) (1.2%) Used Retail Revenue $62
Slide 23: Q2 2016 SG&A to Gross
Q2 2016 SG&A TO GROSS 78.5% 79.2% (1) (1) – Q2 2015 is adjusted – See appendix for reconciliation to GAAP amounts
Slide 24: Q2 2016 SG&A to Gross
Q2 2016 SG&A TO GROSS (1) (1) – Q2 2015 is adjusted – See appendix for reconciliation to GAAP amounts
Slide 25: Interest Expense Q2 2016
INTEREST EXPENSE Q2 2016 Floor Plan Increase Primarily Due to Higher Inventory Balances B/(W) than Q2 2015 (amounts in millions) Q2 2016 $ % Floor Plan Interest Expense $7 ($1) (25.2%) Interest Expense, Other $12 $1 6.5% Total Interest Expense $19 ($0) (2.7%)
Slide 26: 2016 Capex
2016 CAPEX (amounts in millions) YTD Q2 2016 Estimated 2016 Real Estate & Facility Related 94.6 $ 263.1 $ All Other Cap Ex 14.3 29.8 Subtotal 108.9 $ 292.9 $ Less: Mortgage Funding (1) (76.3) (176.3) Total Cash Used – Cap Ex 32.6 $ 116.6 $
Slide 27: Debt Covenants
DEBT COVENANTS Compliant with all Covenants Covenant Actual Q2 2016 Liquidity Ratio >= 1.05 1.17 Fixed Charge Coverage Ratio >= 1.20 1.77 Total Lease Adjusted Leverage Ratio <= 5.50 4.24
Slide 28: Operations Review
OPERATIONS REVIEW
Slide 29: New Vehicle Retail Same Store
NEW VEHICLE RETAIL SAME STORE PUR Gains Offset Lower Retail Volume (BMW drove total company new PUR up) Q2 2016 Q2 2015 B/(W) Retail Volume 33,229 34,352 (3.3%) Selling Price 38,215 $ 37,062 $ 3.1% Gross Margin % 5.2% 5.1% 10 bps GPU 1,977 $ 1,888 $ 89 $ Gross Profit 65.7 $ 64.9 $ 1.3% SAAR (in mill
Slide 30: New Vehicle SAAR
NEW VEHICLE SAAR SAAR is flat Q2 to Q2 but slowing vs growing prior yr YTD Q2 2016 – 17.1M Full Year 2015 – 17.4M Full Year 2014 – 16.4M
Slide 31: New Vehicle SAAR - Retail
NEW VEHICLE SAAR - RETAIL 16.0 ‘Retail SAAR" 15.5 erratic driven by 15.0 manufacturer . incentives 14.5 14.0 39 rn 6 13.5 ‘6 [ 13.3 18.0 C) 13.1 12.5 12.6 12.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 2015 —=2014
Slide 32: Retail New Vehicle – Gross & Unit Trend
RETAIL NEW VEHICLE – GROSS & UNIT TREND Continuing Operations
Slide 33: New Vehicle – Gross Per Unit
NEW VEHICLE – GROSS PER UNIT Continuing Operations BMW Influencing New Car PUR with Month-End Programs – Market is Still Very Competitive
Slide 34: Vehicle Days Supply
VEHICLE DAYS SUPPLY 506 Stop-Sale New Units at 6/30 4,175 Stop-Sale Used Units at 6/30 – 35 Days Supply Without Stop-Sale
Slide 35: Used Vehicle Retail Same Store
USED VEHICLE RETAIL SAME STORE Stop Sale Vehicles are Affecting Volume and Gross Q2 2016 Q2 2015 B/(W) Retail Volume 29,267 29,809 -1.8182428126% GPU $1,288.437369733727 $1,352.9112875305914 $-64.867550557218692 Gross Profit $37.697176049999698 $40.328932569999395 $-2.6317565199996968 Used to New 0.
Slide 36: Used Vehicle – Gross Trend
* - Used Related Gross = (Used Gross + F&I + Reconditioning) ($’s in millions) USED VEHICLE – GROSS TREND Continuing Operations Stop Sale Units are Impacting Results
Slide 37: F&I Same Store
Higher PUR Accounted for All of the Increase in F&I Gross Gross (millions) $ 81.5 $ 84.0 F&I SAME STORE Total Gross Up 3.1%
Slide 38: F&I – Gross & PUR Trend
F&I – GROSS & PUR TREND Continuing Operations
Slide 39: Fixed Ops Same Store
FIXED OPS SAME STORE Strong 2015 Comp in Warranty – High Labor Component in 2015 Q2 2016 Q2 2015 B/(W) Revenue $351.31016336999897 $341.03512471000101 3.1289747463% Gross Profit $168.13163195999999 $167.73099999999999 .2388538553% SAAR - Keyed $0 $0 0.0%
Slide 40: Fixed Ops Same Store – Customer Pay
FIXED OPS SAME STORE – CUSTOMER PAY We Continue to Perform Better in CP
Slide 41: Fixed Operations – Gross Trend
($’s in millions) FIXED OPERATIONS – GROSS TREND Continuing Operations
Slide 42: Summary
EchoPark® Opens 2 Denver market stores - entering 2 new markets – Texas & Carolinas Rolled out the OSOE Technologies to 14 Additional Stores (Chattanooga, Birmingham and Los Angeles Markets) Other Markets Will Follow Upon Completion of Migration Activities and Required Market/Brand Specific Technolo
Slide 43: EchoPark Automotive
EchoPark. AUTOMOTIVE
Slide 44: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Such as, but notlimited to, adjusted | P« 016 June 30, 201: Continuing Operations Continuing Operations Franchised Franchised Dealerships _EchoPark® Consolidated Dealerships _EchoPark® Consolidated Reported: Diluted earnings (loss) per share $ 054 $ (04 $ 050 $ 035 $ (005) $
Slide 45: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Loss) 1 5) rom Continuing inued Operations Operations Net Income (Loss) Weighted Per Per Per Average phere Share Shares jount Amount _Amount tn oman; icant per’ sranire Smouriay Reported: Eamings (loss) and shares 50,784 § 15,092 Gain on disposal $ (1,057) s- $ (1,057) Storm
Slide 46: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS June 30,2016 Tncome (Le Income (Loss) rom Continuing Dis Operatic Operations Net income (Loss) Weighted r Per Average ahr Share Shares jount Amount _Amount Reported: Eamings (loss) and shares 46,340 $ 37,507 $61) $ 37,446 Non-vested restricted stoct = (21) = (21) 46340 $37,4
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Months Ended June 30,2015 je (Loss) Tncome (Loss) rom Continuing Discontinued Operations Operations Net Income (Loss) Weighted Per Per Per Average Share re Shares jount_ _Amount_ Amount Amount. Amount _ Amount (in thousands, except per shire amour Reported: Eamings (loss) an
Slide 48: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® June 30, June 30, Continuing Operations 2015 2016 ‘(nmillions) Reported: ‘SG&Aexpenses S$ 272 $ 247 $ 217 $ 2794 55° $ 56 justments: Gain on disposal - 10 - 10 - - - (42) - (42) - = = 2) = (32) 7 5 Adjusted: ‘SG&Aexpenses Reporte
Slide 49: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark@ June 30, Continuing Operations 2015 2076 Cnmilions) Reported: $s 570 43.1 $ 600 $$ 469 $$ (0) $ (3.8) ‘Adjustments (before income taxes): SG&Aexpenses - 32 - 32 : - 104 104 befor 736 138 - ‘Adjusted: porte, Income ss om laid oper
Slide 50: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Franchised Dealerships EchoPark® June 30, June 30, , Continuing Operations 2016 2015 i i 1016 2015. ‘(millions Reported: SG&Aexpenses S$ 5616 $ 5555 $ 5504 $ 5440 $ 12 $ 115 ‘Adjustments: Gain on disposal 9 09 - - (60) 6.1) (6.0) (4) (60) (42) (60) (42) = 7 Adjusted: SG&Aexp
Slide 51: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® June 30, Continuing Operations 2016 cy aos Reported: $ 994 $ 846 $ 1056 $ 946 $ (62) $ (100) Adjustments (before income taxes): SG&Aexpenses 60 9) 60 (0.9) - - 167 153 14 befor 60 158 60 144 7 14 Adjusted: 7054 7004 TH16 708.0 (a
Slide 52: EchoPark Automotive
EchoPark. AUTOMOTIVE