Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q2 2019 Earnings Presentation
41 slides from Sonic Automotive's earnings presentation, Jul 25, 2019
Slide 1: Q2 2019 Investor Presentation
Exhibit 99.2 Q2 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
~ COMPANY OVERVIEW Pn ww, ~arCash
Slide 5: Overview – Franchised Geographic
OVERVIEW – FRANCHISED GEOGRAPHIC Headquartered in Charlotte, NC 92 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: Q2 2019 Financial Review Franchised Segment
Q2 2019 FINANCIAL REVIEW FRANCHISED SEGMENT 9
Slide 10: Franchised Segment Q2 2019 Results
FRANCHISED SEGMENT Q2 2019 RESULTS Continuing Operations Same Store B/(W) than B/(W) than Q2 2018 (1) Q2 2018 (In millions) Q2 2019 $ % Q2 2019 $ % Revenue $2,322 ($3) (0.1%) $2,311 $99 4.5% Gross Profit $353 $6 1.6% $348 $20 6.0% SG&A Expenses $272 $3 1.2% $266 ($14) (5.6%) SG&A as % of Gross Profi
Slide 11: New Vehicle SAAR - Retail
NEW VEHICLE SAAR - RETAIL 15.0 14.5 YTD 2019 – 13.1M 14.3 YTD 2018 – 13.5M 14.2 14.0 13.8 13.5 13.4 13.0 13.6 13.0 12.5 12.0 11.5 11.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019 11
Slide 12: New Vehicle Same Store - Franchised
NEW VEHICLE SAME STORE - FRANCHISED Q2 2019 Q2 2018 B/(W) New Volume 28,134 28,826 (2.4%) Selling Price$ 42,665 $ 40,598 5.1% Gross Margin % 4.6% 4.7% (10) bps Gross Per Unit$ 1,983 $ 1,905 $ 79 Gross Profit (millions)$ 55.8 $ 54.9 1.6% Retail SAAR (millions) 13.5 13.6 (0.7%) New Units Apr May Jun T
Slide 13: Days' Supply
DAYS’ SUPPLY 80 New Days’ Supply Improvement 75 70 62 64 60 66 59 50 Excellent Used Vehicle Days’ 40 37 35 36 Supply 35 30 34 33 30 33 32 31 30 29 26 27 27 20 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 New Used - Fran Used - EP Parts 13
Slide 14: Used Vehicle Retail
USED VEHICLE RETAIL Franchised – Same Store Q2 2019 Q2 2018 B/(W) Retail Volume 28,760 27,102 6.1% Gross Per Unit$ 1,272 $ 1,339 $ (67) Used to New Ratio 102% 94% 800 bps Vehicles/Store/Month (91 stores) 105 99 6 Front-End Gross Profit and F&I Gross Profit (In millions) Apr May Jun Total 2019$ 26.4
Slide 15: F&I – Gross Profit & Gross Per Unit
F&I – GROSS PROFIT & GROSS PER UNIT Franchised – Same Store Gross Per Unit (In millions) Gross Profit $ $1,550 $90 $1,536 $87 $1,525 $85 $82 $1,500 $80 $1,474 $1,475 $75 $1,450 $1,425 $70 Q2 2019 Q2 2018 Q2 2019 Q2 2018 15
Slide 16: Fixed Operations
FIXED OPERATIONS Franchised – Same Store (In thousands) Q2 2019 Q2 2018 $ B/(W) % B/(W) Customer Pay$ 77,078 $ 71,421 $ 5,657 7.9% Warranty 39,247 34,874 4,373 12.5% Wholesale Parts 6,813 6,557 256 3.9% Sublet 4,830 4,716 115 2.4% Internal 27,697 28,043 (346) (1.2%) Other 14,254 13,438 816 6.1% Tota
Slide 17: Q2 2019 Financial Review EchoPark Segment
Q2 2019 FINANCIAL REVIEW ECHOPARK SEGMENT 17
Slide 18: EchoPark Segment Q2 2019 Results
ECHOPARK SEGMENT Q2 2019 Continuing Profitability RESULTS B/(W) than Q2 2018 (1) (In millions, unit and per unit data) Q2 2019 $ % Revenue $291.7 $111.5 61.9% Gross Profit $27.9 $13.4 92.5% SG&A Expenses $22.2 ($6.1) (38.2%) SG&A as % of Gross Profit 79.5% 3,120 bps Depreciation Expense $2.7 ($0.7)
Slide 19: EchoPark Retail Unit Sales Growth
ECHOPARK RETAIL UNIT SALES GROWTH Revenue Units $350,000,000 14,000 12,587 $300,000,000 11,051 11,085 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 $0 ‐ D
Slide 20: EchoPark Cash Flow – Corporate & Store Level
ECHOPARK CASH FLOW – CORPORATE & STORE LEVEL EchoPark Corporate Adjusted EBITDA $0 • Corporate Cost Structure ($1,000) is Maturing and ($1,147) ($1,032) ($2,000) Becoming More Efficient • Expect Leveraging of ($3,000) ($2,612) ($2,966) Corporate Investment to ($4,000) ($3,608) ($3,689) ($4,136) ($4,
Slide 21: EchoPark Cash Flow - Consolidated
ECHOPARK CASH FLOW - CONSOLIDATED $6,000 $5,000 $4,957 $4,793 Total EchoPark Adjusted EBITDA $4,000 $3,000 $2,000 $1,000 $0 ($1,000) (In thousands) ($807) ($2,000) ($2,161) ($2,042) ($3,000) ($2,561) ($3,017) ($4,000) ($3,353) ($3,866) ($5,000) Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Slide 22: EchoPark Model Estimates
ECHOPARK MODEL ESTIMATES Medium Large Existing Medium Stores: Centennial, CO Average Selling Price$ 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 23: Q2 2019 Financial Review Consolidated
Q2 2019 FINANCIAL REVIEW CONSOLIDATED 23
Slide 24: Consolidated Q2 2019 Results
CONSOLIDATED Q2 2019 RESULTS B/(W) than Q2 2018 (1) (In millions, except per share data) Q2 2019 $ % Revenue $2,614 $108 4.3% Gross Profit $381 $19 5.2% SG&A Expenses $295 ($3) (1.0%) SG&A as % of Gross Profit 77.2% 330 bps Depreciation $24 $0 0.6% Operating Profit $63 $16 34.8% Interest & Other ($2
Slide 25: Consolidated Q2 2019 Revenue & Gross Profit
CONSOLIDATED Q2 2019 REVENUE & GROSS PROFIT B/(W) than Q2 2018 (In millions, except unit and per unit data) Q2 2019 $ % New Revenue $1,205 ($34) (2.7%) Used Retail Revenue $886 $123 16.1% Fixed Operations Revenue $355 $9 2.5% F&I Revenue $118 $14 13.7% Total Revenue $2,614 $108 4.3% New Gross Profit
Slide 26: Consolidated Q2 2019 Revenue & Gross Profit – Same Store
CONSOLIDATED Q2 2019 REVENUE & GROSS PROFIT – SAME STORE B/(W) than Q2 2018 (In millions, except unit and per unit data) Q2 2019 $ % New Revenue $1,200 $30 2.6% Used Retail Revenue $827 $98 13.5% Fixed Operations Revenue $352 $20 6.0% F&I Revenue $109 $13 13.6% Total Revenue $2,536 $162 6.8% New Gro
Slide 27: Consolidated Q2 2019 SG&A as % of Gross Profit
CONSOLIDATED Q2 2019 SG&A AS % OF GROSS PROFIT 330 Bps 77.2% 80.5% 22.2% 23.4% 3.5% 4.5% 47.5% 48.1% 4.0% 4.5% Q2 2019 Q2 2018(1) Advertising Comp Rent Other (1) – Adjusted for Items of Interest. Refer to Slides at End of Presentation for Reconciliation of Non-GAAP Measures. 27
Slide 28: Consolidated Q2 2019 Interest Expense
CONSOLIDATED Q2 2019 INTEREST EXPENSE B/(W) than Q2 2018 (In millions) Q2 2019 $ % Floor Plan Interest Expense $13 ($1) (4.8%) Interest Expense, Other $14 ($0) (1.9%) Total Interest Expense $26 ($1) (3.3%) Floor Plan Higher Due to Rate Increases • New Up 8 bps • Used Up 33 bps Fed Funds Rate Increas
Slide 29: Consolidated Q2 2019 Depreciation Expense
CONSOLIDATED Q2 2019 DEPRECIATION EXPENSE B/(W) than Q2 2018 (In millions) Q2 2019 $ % Depreciation Expense - Franchised $21 $1 4.0% Depreciation Expense - EchoPark $3 ($1) (39.1%) Total $24 $0 0.6% 29
Slide 30: Capital Expenditures
CAPITAL EXPENDITURES Estimated (In millions) FY 2018 Q1 2019 Q2 2019 FY 2019 Real Estate & Facility Related$ 147.6 $ 25.7 $ 16.3 $ 108.0 All Other Cap Ex$ 16.0 $ 4.9 $ 4.3 $ 20.0 Subtotal$ 163.6 $ 30.6 $ 20.6 $ 128.0 Less: Mortgages$ (21.1) $ - $ - $ - Total Cash Used - Cap Ex$ 142.5 $ 30.6 $ 20.6 $
Slide 31: Debt Covenants
DEBT COVENANTS Covenant Q4 2018 Q2 2019 Liquidity Ratio >= 1.05 1.10 1.17 Fixed Charge Coverage Ratio >= 1.20 1.43 1.55 Total Lease Adjusted Leverage Ratio <= 5.75 5.25 4.20 Compliant With All Covenants 31
Slide 32: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES
Slide 33: Adjusted Diluted Earnings Per Share – Three Months
ADJUSTED DILUTED EARNINGS PER SHARE Three Months Ended June 30, 2019 Three Months Ended June 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$ 26,751 $ 0.62 $ 17,122 $ 0.40 Pre-tax Adjus
Slide 34: Adjusted Diluted Earnings Per Share – Six Months
ADJUSTED DILUTED EARNINGS PER SHARE Six Months Ended June 30, 2019 Six Months Ended June 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$ 69,100 $ 1.60 $ 15,108 $ 0.40 Pre-tax Adjustmen
Slide 35: Adjusted EBITDA – Consolidated
ADJUSTED EBITDA – CONSOLIDATED LTM (In thousands) 2011 2012 2013 2014 2015 2016 2017 2018 6/30/2019 Net Income$ 76,254 $ 89,101 $ 81,618 $ 97,217 $ 86,311 $ 93,193 $ 92,983 $ 51,650 $ 105,759 Non-Floor Plan Interest 63,576 58,453 55,356 52,269 49,524 48,034 50,531 52,049 51,505 Depreciation and Amor
Slide 36: 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 37: 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 38: 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 39: 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 40: Adjusted EBITDA by Segment – Q2 2018 vs. Q2 2017
ADJUSTED EBITDA BY SEGMENT – Q2 2018 VS. Q2 2017 Q2 2018 Q2 2017 Continuing Discontinued Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Franchised EchoPark Operations Operations Total Net Income$ 17,122 $ (216) $ 16,905 $ 12,314 $ (183) $ 12,132 Income Taxes 8
Slide 41: Samic) EchoPark
Samic) EchoPark AUTOMOTIVE