Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q4 2014 Earnings Presentation
46 slides from Sonic Automotive's earnings presentation, Feb 24, 2015
Slide 1: Q4 2014 Earnings Review
Q4 2014 EARNINGS REVIEW February 24, 2015 Exhibit 99.2
Slide 2: Forward-Looking Statements
2 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
Slide 3: Content
3 CONTENT • STRATEGIC FOCUS • FINANCIAL RESULTS • OPERATIONS REVIEW • SUMMARY AND OUTLOOK
Slide 4: Strategic Focus
4 STRATEGIC FOCUS 1. Growth • One Sonic-One Experience • EchoPark ® • Acquisitions & Open Points 2. Own Our Properties 3. Return Capital to Shareholders
Slide 5: Strategic Focus: One Sonic-One Experience
STRATEGIC FOCUS ONE SONIC-ONE EXPERIENCE 5 • Goals – 1 Associate, 1 Price, 1 Hour – Improve Transparency; Increase Trust – Operational Efficiencies • Pilot Stores Underway • 24 Month Implementation Result - Increase Market Share and Customer Retention
Slide 6: One Sonic-One Experience (cont'd)
6 STRATEGIC FOCUS ONE SONIC-ONE EXPERIENCE (cont’d) Speed Up the Transaction No Negotiation Reduce Paperwork Electronic Signature One Associate One Guest Technology Driven Training Supported Reduce Headcount Through Attrition Creates Significant Cost Savings Create Trust & Transparency Increased CSI
Slide 7: Strategic Focus: EchoPark
STRATEGIC FOCUS EchoPark ® • Hub Opened November 3 • 2 Neighborhood Stores Opened in January 2015 • Expect at least 2 more in 2015
Slide 8: Acquisitions & Open Points
STRATEGIC FOCUS ACQUISITIONS & OPEN POINTS • Purchased Four Franchises: Jaguar (Q1), Nissan (Q3), Chevy and Land Rover (Q4) during 2014 – Estimated Annual Revenues of $156 million • Open Points – Mercedes Benz in Dallas Market – Audi in Pensacola Market – Nissan in TN Market – Exploring Opportunitie
Slide 9: Own Our Properties
9 STRATEGIC FOCUS OWN OUR PROPERTIES 2007 2008 2011 2012 2013 2014 Proj. - 2017 0% 12% 18% 23% 31% 36% 49%
Slide 10: Return Capital to Shareholders
10 STRATEGIC FOCUS RETURN CAPITAL TO SHAREHOLDERS • Unused Authorization of Approximately $ 79 million • Quarterly Dividend of $0.025 Per Share Shares (in thousands) Average Price / Share $ (in millions) 2014 Activity 2,256 $ 23.51 $ 53.0
Slide 11: Q4 & FY 2014 Financial Review
Q4 & FY 2014 FINANCIAL REVIEW
Slide 12: Adjusted Q4 & FY 2014 Results
ADJUSTED Q4 & FY 2014 RESULTS B/(W) than Q4 2013 B/(W) than 2013 12 (1) – Amounts are adjusted. See appendix for reconciliation of adjusted amounts to GAAP amounts (amounts in millions, except per share data) Q4 2014 $ % 2014 $ % Revenue $ 2,352 $ 36 1.6% $ 9,197 $ 354 4.0% Gross Profit $ 349 $ 10 2
Slide 13: EPS Walk – Q4
13 (amounts in millions, except per share date) Q4 2014 Q4 2013 EPS WALK– Q4 Pre-Tax EPS Pre-Tax EPS Reported EPS $ 0.52 $ 0.55 Storm Damage $ 1.5 $ 0.03 $ 0.0 $ 0.00 Gain on Disposal ($ 0.2) ($ 0.00) $ 0.0 $ 0.00 Impairment $ 6.4 $ 0.08 $ 9.9 $ 0.12 Adjusted EPS $ 0.63 $ 0.67 EchoPark $ 7.1 $ 0.08
Slide 14: EPS Walk – FY 2014
EPS WALK– FY 2014 14 (amounts in millions, except per share date) 2014 2013 Pre-Tax EPS Pre-Tax EPS Reported EPS $ 1.87 $ 1.59 Storm Damage $ 4.0 $ 0.05 $ 0.0 $ 0.00 Legal $ 1.1 $0.01 $ 0.0 $ 0.00 Gain on Disposal ($ 10.7) ($ 0.11) $ 0.0 $ 0.00 Impairment $ 6.6 $ 0.08 $ 9.9 $ 0.11 Debt Refi $ 0.0 $
Slide 15: EchoPark – Q4 & FY 2014 Results
ECHOPARK – Q4 & FY 2014 RESULTS 15 (amounts in millions, except per share data) Q4 2014 B/(W) than Q4 2013 FY 2014 B/(W) than FY 2013 Revenue $ 5.4 $ 5.4 $ 5.4 $ 5.4 Gross Profit $ 0.5 $ 0.5 $ 0.5 $ 0.5 Operating Profit ($ 7.0) ($ 4.8) ($ 15.6) ($ 10.1) Interest & Other ($0.1 ) ($ 0.1) ($ 0.1) ($ 0.
Slide 16: Adjusted SG&A to Gross
ADJUSTED SG&A TO GROSS 16 75.5% 75.2% Note: See Appendix for reconciliation to GAAP amounts 78.6% 77.1% Q4 2014 Q4 2013 FY 2014 FY 2013 4.4% 4.5% 4.2% 4.3% 44.6% 44.7% 46.8% 46.2% 7.6% 7.5% 7.8% 8.1% 18.9% 18.5% 19.8% 18.5% Advertising Comp Rent & Related Other
Slide 17: SG&A to Gross Walk – Q4
SG&A TO GROSS WALK – Q4 17 Note: See Appendix for reconciliation to GAAP amounts Q4 2014 Adjusted Less: EchoPark Less: OSOE Less: Centralization Q4 2014 Adj for Initiatives 75.5% (1.9%) (1.1%) (0.3%) 72.2% 210 bps Better than Q4 2013 of 74.3%
Slide 18: SG&A to Gross Walk – FY 2014
SG&A TO GROSS WALK – FY 2014 18 Note: See Appendix for reconciliation to GAAP amounts FY 2014 Adjusted Less: EchoPark Less: OSOE Less: Centralization FY 2014 Adj for Initiatives 78.6% (1.1%) (0.8%) (0.2%) 76.5%
Slide 19: Strategic Initiative Investments
STRATEGIC INITIATIVE INVESTMENTS 19 (in millions) 2014 Estimated 2015 EchoPark® $ 15.7 $ 13.3 One Sonic-One Experience $ 10.4 $ 10.0 Centralization of Business Office $ 2.1 $ 5.0
Slide 20: Capital Spend
CAPITAL SPEND (amounts in millions) YTD 2014 Estimated 2015 Note – Spending excludes the effect of franchise acquisitions. 20 Real Estate & Facility Related $ 124.3 $159.1 All Other Cap Ex 39.6 42.0 Subtotal $ 163.9 $ 201.1 Less: Mortgage Funding (44.4) (100.6) Total Cash Used – Cap Ex $ 119.5 $ 100
Slide 21: Liquidity
LIQUIDITY (amounts in millions) Q4 2014 Q4 2013 21 Cash $ 4.2 $3.0 Revolver Availability 165.4 126.0 Used floor plan availability 22.6 27.1 Floor plan deposit balance 57.5 65.0 Total $ 249.7 $221.1
Slide 22: Debt Covenants
DEBT COVENANTS Covenant Actual Q4 2014 Compliant with all Covenants 22 Liquidity Ratio >= 1.05 1.20 Fixed Charge Coverage Ratio >= 1.20 1.61 Total Lease Adjusted Leverage Ratio <= 5.50 4.12
Slide 23: Operations Review
OPERATIONS REVIEW
Slide 24: New Vehicle Retail Same Store
NEW VEHICLE RETAIL SAME STORE Q4 2014 Q4 2013 B/(W) 24 Volume 34,371 32,756 4.9% Selling Price $ 38,571 $ 38,287 0.7% Gross Margin % 5.9% 6.4% (50 bps) GPU $ 2,269 $ 2,435 ($ 166) Gross Profit $ 78 million $ 80 million (2.2%) SAAR (includes fleet) 16.8 million 15.6 million 7.2%
Slide 25: Q4 Revenue Mix
25 Q4 REVENUE MIX Industry Growth Ford, 7.1% GM (includes Cadillac), 7.8% Chrysler, 0.0% Honda, 22.3% Toyota, 14.0% Nissan, 0.0% Other Import, 6.1% MB, 8.5% BMW, 19.1% Lexus, 5.0% Audi, 3.6% Other Luxury, 6.5% Ford (0.7%) GM (includes Cadillac) 8.7% Chrysler 21.0% Honda 3.3% Toyota 7.4% Nissan 7.1%
Slide 26: Q4 2014 vs. Q4 2013 New Vehicle - Brand
Q4 2014 vs. Q4 2013 NEW VEHICLE - BRAND 18.7% 8.0% 2.3% 7.0% 5.4% 22.5% 4.8% 13.8% 4.0% % Sonic Unit Sales BMW MB Cadillac Ford GM Honda Lexus Toyota Audi 21% (1%) (12%) (5%) 10% 7% 2% 5% 16% 7% 1% (13%) (1%) 10% 3% 9% 7% 17% Sonic Industry 26
Slide 27: Used Vehicle Retail Same Store
USED VEHICLE RETAIL SAME STORE Q4 2014 Q4 2013 B/(W) 27 Retail Volume 25,784 25,322 1.8% Used Retail GPU $ 1,433 $ 1,353 $ 80 Used to New 0.75 : 1 0.77 : 1 (0.02) Vehicles / store / month (all stores)
Slide 28: Fixed Ops Same Store
FIXED OPS SAME STORE 28 QTD YOY Gross Profit Change Breakdown: Q4 2014 B/(W) than 2013 • Customer Pay Up 0.1% • Whsl. Parts Up 1.6% • Internal & Sublet Up 8.1% • Warranty Up 12.1% (amounts in millions) $ % Revenue $ 318.0 $ 11.9 3.9% Gross Profit $ 153.7 $ 6.5 4.4%
Slide 29: OSOE
OSOE
Slide 30: OSOE Early Observations and Opportunities
30 OSOE • Low turnover as a result of the changes • January is our first full month and share is reacting positively • We are easily doing deals in less than an hour if that is a guest wish • Customer feedback is fantastic • Our training is excellent • We are attracting a new type of employee • New
Slide 31: OSOE – Market Share
31 OSOE – MARKET SHARE Market Share is Stabilizing 17.8% 14.4% 13.2% 12.9% 14.2% 13.1% 14.6% 18.0% 20.8% 15.8% 16.0% 15.1% 15.8% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 22.0% Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Town & Country Toyota • October 2014 -
Slide 32: OSOE – Market Share
32 OSOE – MARKET SHARE 20.6% 17.7% 19.5% 18.3% 17.0% 16.9% 13.9% 18.5% 17.3% 12.3% 16.0% 13.3% 15.9% 10.0% 15.0% 20.0% 25.0% 30.0% Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Town & Country Ford 18.5% 20.1% 15.9% 18.5% 20.1% 16.3% 17.0% 15.4% 16.3% 14.9
Slide 33: OSOE – Market Share
33 OSOE – MARKET SHARE 42.5% 41.1% 40.7% 51.1% 30.0% 44.4% 43.5% 46.6% 40.5% 50.6% 40.5% 31.7% 42.6% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0% Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Infiniti of South Charlotte 35.7% 32.5% 47.5% 41.7% 38.7% 36.7% 40.4% 40
Slide 34: EchoPark
EchoPark ®
Slide 35: EchoPark Early Observations and Opportunities
35 EARLY OBSERVATIONS • Very low to no turnover • Fantastic guest experience – take a look at the testimonials from Yelp, Yahoo, Google – that’s what we are looking for! • Reconditioning levels are very high • F&I performance ahead of projection with no F&I office • EchoPark SIMS - Excellent invento
Slide 36: EchoPark Openings
36 EchoPark® Openings: Hub – 11/3/2014 Centennial – 12/26/2015 Highlands Ranch – 1/26/2015 0 82 126 150 0 0 35 6 0 20 40 60 80 100 120 140 160 Unit Volume HUB Centennial Highlands Ranch
Slide 37: Summary
SUMMARY
Slide 38: Summary
Continued to grow the top-line in each revenue category achieving record results The franchised dealership landscape supported our operating initiatives Significant milestones / achievements in 2014 • Opening of EchoPark ® • Rollout of One Sonic-One Experience • Gained ground on owning properties –
Slide 39: 2015 Plan
2015 PLAN 2015 Plan Expect new car industry volume to be between 16.5M to 17.0M units We will continue to increase pre-owned volume in the mid- single digits Expect fixed operations to grow at mid-single digits Costs related to EchoPark ® , One Sonic-One Experience, and centralization to continue 20
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Slide 41: Appendix
Appendix 41
Slide 42: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 42 Fourth Quarter Ended Year Ended 2014 2013 2014 2013 SG&A Reconciliation: As Reported 264,402 $ 254,647 $ 1,067,433 $ 1,003,125 $ Pre-tax Adjustments: Fire and severe storm damage (961) - (3,965) - Legal and other (575) - (1,105) - Gain on disposal of franchises 254 - 10,7
Slide 43: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Fourth Quarter Ended Year Ended 2014 2013 2014 2013 Operating Profit Reconciliation: As Reported 62,470 $ 59,264 $ 233,613 $ 234,603 $ Pre-tax Adjustments: Fire and severe storm damage 961 - 3,965 - Legal and other 575 - 1,105 - Impairment charges 6,379 9,873 6,586 9,872 Gai
Slide 44: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 44 Fourth Quarter Ended December 31, 2014 Income (Loss) Income (Loss) From Continuing From Discontinued Operations Average Net Income (Loss) Weighted Per Per Per Average Share Share Share Shares Amount Amount Amount Amount Amount Amount (In thousands, except per share amount
Slide 45: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Year Ended December 31, 2014 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) Reporte
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