Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q3 2017 Earnings Presentation
53 slides from Sonic Automotive's earnings presentation, Oct 24, 2017
Slide 1: Q3 2017 Investor Presentation
Q3 2017 Investor Presentation 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
CONTENT COMPANY OVERVIEW STRATEGIC FOCUS FINANCIAL REVIEW OPERATIONS REVIEW SUMMARY & OUTLOOK
Slide 4: Company Overview
COMPANY OVERVIEW Sanic) EchoPark
Slide 5: Overview – Franchised Geographic Platforms
OVERVIEW – FRANCHISED GEOGRAPHIC Headquartered in Charlotte, NC 104 Stores, 25 Brands, 18 Collision Repair Centers Platforms in Major Metro Markets
Slide 6: Overview – EchoPark Geographic
OVERVIEW – ECHOPARK GEOGRAPHIC Colorado Springs - Opened Q2 2017 Have purchased property in the following markets (some are under construction): Dallas/Ft. Worth San Antonio Houston Austin Carolinas In Process of Converting Jacksonville AutoMatch Store Also have property in Savannah, GA that is bein
Slide 7: Concentration in Major Metro Markets
Note: Percentages are percent of total revenue for FY 2016. Concentration in Major Metro Markets
Slide 8: Revenue streams and brand mix diversification
Revenue streams and brand mix offer attractive diversification across the automotive retail space. Note: Percentages are for FY 2016.
Slide 9: Strategic Focus
STRATEGIC FOCUS Sanic) EchoPark
Slide 10: Strategic Focus
STRATEGIC FOCUS Growth EchoPark One Sonic-One Experience Acquisitions & Open Points Own Our Properties Return Capital to Stockholders Share Repurchases Dividends
Slide 11: Strategic Focus: EchoPark
STRATEGIC FOCUS EchoPark Six Locations Open In Colorado Thornton Hub Centennial Highlands Ranch Littleton Stapleton Colorado Springs Texas Expansion Expect openings in 2017/2018 Florida AutoMatch Transition Acquiring Property in the Carolinas Expect openings in 2018 EP Revenue FY 2016 revenue of $12
Slide 12: 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 13: Acquisitions & Open Points
STRATEGIC FOCUS Acquisitions & Open Points Open Points Mercedes-Benz in Dallas Market Estimated Annual Revenues >$100M Operational in Q3 2016 Nissan in TN Market Estimated Annual Revenues >$30M Operational in Q4 2016 Audi in Pensacola Market Estimated Annual Revenues >$50M Operational in Q2 2017 Exp
Slide 14: Own Our Properties
STRATEGIC FOCUS Own Our Properties % of Properties Owned Increased Equity in Properties to $281M in 2016
Slide 15: Share Repurchases
SHARE REPURCHASES Quarterly Dividend at $0.05/Share in Q1, Q2 & Q3 of 2017 Acquired 11.2% of OS in 2016, 4.5% of OS in 2017 YTD New Share Count = 43.2M Down from High of 53.2M (Dec 2012) Dividends Declared of $9.1M in 2016 (000's) (000's) (000's) Shares $/Share $ Availability EOY - 2016 45,033 $ Q1
Slide 16: 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 Stockholders
Slide 17: Q3 2017 Financial Review: Franchised Dealerships
Q3 2017 Financial Review FRANCHISED DEALERSHIPS
Slide 18: Q3 2017 Results: Franchised Dealerships
– Q3 2017 & Q3 2016 results are adjusted – See appendix for reconciliation to GAAP amounts. Q3 2017 RESULTS Franchised Dealerships B/(W) than Q3 2016 (1) (amounts in millions, except per share data) Q3 2017 (1) $ % Revenue $2,449 ($66) (2.6%) Gross Profit $356 $2 0.6% SG&A $280 ($2) (0.8%) SG&A as %
Slide 19: Q3 2017 Financial Review: Pre-Owned Stores
Q3 2017 Financial Review PRE-OWNED STORES
Slide 20: Q3 2017 Results: Pre-Owned Stores
– Q3 2017 & Q3 2016 results are adjusted – See appendix for reconciliation to GAAP amounts. Q3 2017 RESULTS Pre-Owned Stores B/(W) than Q3 2016 (1) (amounts in millions, except per share, unit and per unit data) Q3 2017 (1) $ % Revenue $57 $13 30.8% Gross Profit $6 $2 32.5% SG&A $9 ($2) (24.6%) SG&A
Slide 21: EchoPark - Colorado Stores Q3 2017
ECHOPARK - Colorado stores Q3 2017 (amounts in thousands, except unit and per unit data) Colorado Stores Retail Units 2,007 Used GPU 935 $ F&I GPU 1,033 $ Total Gross 5,409 $ Pre-tax (989) $ Cash Flow 354 $
Slide 22: Q3 2017 Financial Review: Total Enterprise
Q3 2017 Financial Review TOTAL ENTERPRISE
Slide 23: Q3 2017 Results: Total Enterprise
– Q3 2017 & Q3 2016 results are adjusted – See appendix for reconciliation to GAAP amounts. Q3 2017 RESULTS Total Enterprise B/(W) than Q3 2016 (1) (amounts in millions, except per share data) Q3 2017 (1) $ % Revenue $2,506 ($52) (2.0%) Gross Profit $363 $4 1.0% SG&A $289 ($4) (1.4%) SG&A as % of Gr
Slide 24: Q3 2017 Revenue & Gross Profit
Q3 2017 REVENUE & GROSS PROFIT B/(W) than Q3 2016 (amounts in millions, except unit and per unit data) Q3 2017 $ % New Retail Revenue $1,345 ($20) (1.5%) Used Retail Revenue $660 ($1) (0.2%) Fixed Operations Revenue $348 ($14) (3.9%) F&I Revenue $93 $3 3.7% Total Revenue $2,506 ($52) (2.0%) New Reta
Slide 25: Q3 2017 Adjusted SG&A to Gross
Q3 2017 ADJUSTED(1) SG&A TO GROSS 79.6% 79.2% – Q3 2017 & Q3 2016 results are adjusted – See appendix for reconciliation to GAAP amounts.
Slide 26: Q3 2017 Interest Expense
Q3 2017 INTEREST EXPENSE Floor Plan Higher Due to Rate Increases B/(W) than Q3 2016 (amounts in millions) Q3 2017 $ % Floor Plan Interest Expense $9 ($2) (33.1%) Interest Expense, Other $13 ($0) (0.1%) Total Interest Expense $22 ($2) (11.3%)
Slide 27: 2017 Cap Ex
2017 CAP EX YTD Estimated Q3 2017 2017 Real Estate & Facility Related 154.0 $ 229.9 $ All Other Cap Ex 27.9 18.3 Subtotal 181.9 $ 248.2 $ Less: Mortgages (38.4) (55.0) Total Cash Used - Cap Ex 143.5 $ 193.2 $ (amounts in millions)
Slide 28: Debt Covenants
DEBT COVENANTS Covenant Q3 2017 Liquidity Ratio >= 1.05 1.1299999999999999 Fixed Charge Coverage Ratio >= 1.20 1.75 Total Lease Adjusted Leverage Ratio <= 5.75 4.84
Slide 29: Operations Review
Q3 2017 Operations Review Sanic) EchoPark
Slide 30: New Vehicle Retail – Same Store Franchised Dealerships
Retail Units NEW VEHICLE RETAIL Same Store – Franchised Dealerships Q3 2017 Q3 2016 B/(W) Retail Volume 34,696 35,306 (1.7%) Selling Price 38,357 $ 38,394 $ (0.1%) Gross Margin % 4.8% 4.6% 20 bps GPU 1,856 $ 1,761 $ 96 $ Gross Profit (in millions) 64.4 $ 62.2 $ 3.6% SAAR (in millions) 17.1 17.5 (2.3
Slide 31: New Vehicle SAAR
NEW VEHICLE SAAR 3rd QTR Down 2.3% Sept SAAR driven by Houston YTD 2017 – 17.0M Full Year 2016 – 17.4M Full Year 2015 – 17.4M
Slide 32: New Vehicle – Gross & Unit Trend
NEW VEHICLE – GROSS & UNIT TREND Continuing Operations – Franchised Dealerships
Slide 33: New Vehicle – Gross Per Unit
NEW VEHICLE – GROSS PER UNIT Continuing Operations – Franchised Dealerships GPU Lift From Houston Stores Contributed to Q3 Results
Slide 34: Days Supply New and Used
Days 50 40 30 20 38 Q2 Q3 Q4 Qi Q2 Q3 Q4 Qi Q2 Q3 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 —New —Used
Slide 35: Used Vehicle Retail Franchised Dealerships
Continuing: Same Store: USED VEHICLE RETAIL Franchised Dealerships Q3 2017 Q3 2016 B/(W) Retail Volume 27,988 29,054 (3.7%) GPU 1,245 $ 1,243 $ 2 $ Used to New 81% 82% (100) bps Vehicles/Store/Mth (102 stores) 91 95 (3) Q3 2017 Q3 2016 B/(W) Retail Volume 28,441 29,348 (3.1%) GPU 1,306 $ 1,291 $ 15
Slide 36: Used Vehicle – Gross Trend
* - Used Related Gross = (Used Gross + F&I + Reconditioning) ($’s in millions) USED VEHICLE – GROSS TREND Continuing Operations – Franchised Dealerships
Slide 37: Used Vehicle Gross Contribution
Front End Gross and F&I USED VEHICLE GROSS CONTRIBUTION Continuing Operations – Franchised Dealerships (in millions) Jul Aug Sep Total 2017 25.7 $ 23.2 $ 28.6 $ 77.5 $ 2016 26.1 26.2 25.3 77.5 B/(W) (0.4) $ (3.0) $ 3.4 $ (0.0) $
Slide 38: F&I – Gross & PUR Trend
F&I – GROSS & PUR TREND Continuing Operations – Franchised Dealerships $85 $83 $80 $83 $88 $86 $81 $85 $90 $1,279 $1,324 $1,366 $1,349 $1,351 $1,357 $1,385 $1,391 $1,420 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Gross $ (in millions) GPU $
Slide 39: Fixed Operations – Gross Trend
($’s in millions) FIXED OPERATIONS – GROSS TREND Continuing Operations – Franchised Dealerships One Less Fixed Day in Addition to Hurricane Disruption
Slide 40: Fixed Operations Franchised Dealerships
Continuing: Same Store: One Less Selling Day + Hurricane Effects FIXED OPERATIONS Franchised Dealerships Q3 2017 Q3 2016 B/(W) Revenue 344 $ 359 $ (4.0%) Gross Profit 166 $ 169 $ (1.6%) Q3 2017 Q3 2016 B/(W) Revenue 341 $ 356 $ (4.1%) Gross Profit 164 $ 167 $ (1.6%) (amounts in millions)
Slide 41: Summary & Outlook
SUMMARY & OUTLOOK EchoPark Continues Expansion – Ramp up for 2018 – Additional 10 Stores by the End of 2018 San Antonio Dallas / Fort Worth Houston Austin Carolinas Georgia Houston Region Expected to Have Higher Repair and Replace Through Q1 2018 Continuing to Challenge Cost Structure to Gain Effici
Slide 42: Appendix
APPENDIX SOC
Slide 43: GAAP Reconciliations: Adjusted EBITDA
(amounts in thousands) Net Income 'Non-Floorplan Interest Depreciation & Amortization Income Taxes. Stock Comp Lease Exit Impairment Loss (Gain) on Debt Extinguishment Loss (Gain) on Dealership Disposal ‘Adjusted EBITDA GAAP RECONCILIATIONS 57,036 (63,900) 1,931 33,013 30,038 6,745 102 $174,248 7,66
Slide 44: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Franchised Pre-Owned Franchised Pre-Owned Dealerships __Stores___Consolidated Dealerships __Stores_—_ Consolidated Reporter Siaeal canis esr, S$ 052 $ 007) $ 045 $ 048 $ (008) $ 042 jets (et income ane: peeranet : - 0.08 Storm damage 004 : 0.04 (0.03) . (0.03) Legal and oer
Slide 45: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Continuing Operations Re} ported: SGBAexpenses eee S$ 2640 $ 2621 $ 2750 $ 2749 § 90 72 just ments: ents. (SBA adjustments justed: ‘SG8A expenses Reported: ScsAewpenses as % ofg8s pot. Legal and other accruals Lease exit adjustments . ‘SG8A adjustments Adjusted: ‘SGBA expens
Slide 46: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Franchised Dealerships Pre-Owned Stores ber September 30, September 30, Continuing Operations 2017 2017 2016 2017 207 Reported: $ 558 $ 509 $ 600 $ S46 $ (42) $ (7) ‘Adjustments (before income taxes): GBA. Adjusted: Reported: $ 39 $ 313 $ 37 $ 355 $ (48) $ (42) ‘Adjustments
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS ber Continuing Operations. 2017 2016 2017 16 207 {in millions) Reported: ‘SG&A expenses S 8701 S$ 8437 $ 8429 $ 822 $ 272 S$ 185 ‘Adjustments: ‘Storm damage Adjusted: ‘SG&Aexpenses Reported: Adjustments: ‘Storm damage (0.9%) (0.4%) (0.9%) (0.4%) Adjusted: NM= Not meaningful
Slide 48: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Franchised Dealerships. Reported: S$ 1344 $ 1503 $ 1509 $ 1602 $ (165) $ (99) ‘Adjustments (before income taxes): ‘SG&Aexpens: Adjusted: Reported: ‘Adjustments (efor income taxes): SG8Aexpense: Adjusted: Reported: Adjustments (net of income taxes): SGBA 24 23 22 37 93 Total
Slide 49: Non-GAAP Reconciliations
‘Adjustments: Impairment charges s NON-GAAP RECONCILIATIONS ued Operations Operations Net Income (Loss) Weighted Per Per Per ‘Average Share Share Share Shares _ Amour nt_ _Amount_ _Amount_ _ Amount __ Amount (in thousands, except per share amounts) Reported: Earns oss) ates 43496 $ 19,730 $ (290) $
Slide 50: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS ‘Three Months Ended September 30, 2016 (Loss) Tncome (Loss) Income (I Continuing i Operations Operations Net Income (Loss) Weighted Per Per Per ‘Average mere Share Share Shares _ Amount Amount _ Amount 7 xen por share amoumta} Reported: Eamings (loss) and shares 45,118 $ 18,
Slide 51: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Months Ended September 30,2017 Tacome (Loss) Income (Loss) From Continui From Discontinued perations. Net Income (Loss) Pe Shares _ Amount ported: Eamings (oss) and shares . 44281 $ 32,024 $ 31,031 Effect of participating securities: Non-wsted restricied stock (2a) (28) Basi
Slide 52: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Nine Months Ended September 30,2016 Tncome (Loss) Income (Loss) From Continui Operations Net income (Loss) Weighted Per Per Per ‘Average = e re Share Shares Amour Amount _Amount Tntoosana, except per share amounts) Reported: Eamings (loss) and shares 45,930 $ 56,475 $ (918)
Slide 53: Non-GAAP Reconciliation of Guidance
NON-GAAP RECONCILIATION OF GUIDANCE