Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q3 2018 Earnings Presentation
47 slides from Sonic Automotive's earnings presentation, Oct 25, 2018
Slide 1: Q3 2018 Investor Presentation
Exhibit 99.2 Q3 2018 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 • OUTLOOK 3
Slide 4: Company Overview
COMPANY OVERVIEW 4
Slide 5: Overview – Franchised Geographic
OVERVIEW – FRANCHISED GEOGRAPHIC Headquartered in Charlotte, NC 96 Stores, 23 Brands, 15 Collision Repair Centers 5 Platforms in Major Metro Markets
Slide 6: Overview – EchoPark Geographic - CO
OVERVIEW – ECHOPARK GEOGRAPHIC - CO • Have purchased property in the following markets (some are under construction): o Dallas/Ft. Worth o San Antonio o Houston o Austin o Carolinas Colorado Springs 6
Slide 7: Overview – EchoPark Geographic - TX
OVERVIEW – ECHOPARK GEOGRAPHIC - TX Houston Location Expected to Open • Grand Prairie Location – Relocated driversselect Operation (purchased in Q3 2017) December 2018 • West San Antonio Location Opened in Q4 2017 7 • New Braunfels Location Opened in Q1 2018
Slide 8: Overview – EchoPark Geographic - NC
OVERVIEW – ECHOPARK GEOGRAPHIC - NC • Opened October 8 • Velocity of Sales Increasing Compared to Other New Openings 8
Slide 9: Overview - Geographic
OVERVIEW - GEOGRAPHIC NV MD 2% 3% SC 2% OH VA 3% 3% NC 4% CA GA 3% 30% CO Concentration 7% in Major Metro AL Markets 5% FL 6% TN TX 7% 26% 9 Note: Percentages are percent of total revenue for FY 2017.
Slide 10: Overview – Brand Composition
OVERVIEW – BRAND COMPOSITION New Retail Revenue & Other Lux Revenue streams Overall Revenue Mix 7% VW Land Rover and brand mix offer 2% 3% BMW attractive Other Non-Lux diversification across 3% 20% the automotive retail space. Cadillac 3% F&I GM Fixed 4% 4% Ops 14% Audi 6% New Pre- 54% Owned Honda 2
Slide 11: Q3 2018 Financial Review: Franchised Segment
Q3 2018 FINANCIAL REVIEW FRANCHISED SEGMENT 11
Slide 12: Franchised Segment Q3 2018 Results
FRANCHISED SEGMENT Q3 2018 RESULTS B/(W) than Q3 2017 (1) (amounts in millions, except per share data) Q3 2018 (1) $% Revenue $2,285 ($164) (6.7%) Gross Profit $346 ($10) (2.8%) SG&A ($269) $10 3.7% SG&A as % of Gross 77.7% 70 bps Depreciation ($21) ($0) (0.3%) Operating Profit $56 $0 0.1% Interest
Slide 13: New Vehicle SAAR
NEW VEHICLE SAAR 19.0 Hurricane Harvey Q3 2018 16.9M vs 17.1M Q3 2017 18.5 18.5 YTD 2018 – 17.1M Full Year 2017 – 17.2M 18.0 17.8 17.5 17.5 17.4 17.4 17.0 17.0 17.0 17.0 17.0 16.5 16.5 16.4 16.0 15.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2018 2018 Forecast 13
Slide 14: New Vehicle SAAR - Retail
NEW VEHICLE SAAR - RETAIL 16.0 Hurricane Harvey 15.5 YTD 2018 – 13.5M 15.5 Full Year 2017 – 13.9M 15.0 14.9 14.5 14.2 14.0 13.8 13.4 13.5 13.2 13.3 13.0 12.5 12.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2018 14
Slide 15: New Vehicle Same Store - Franchised
NEW VEHICLE SAME STORE - FRANCHISED Q3 2018 Q3 2017 B/(W) New Volume 31,010 33,162 (6.5%) Selling Price$ 39,829 $ 38,868 2.5% Gross Margin % 4.9% 4.9% 0 bps GPU$ 1,971 $ 1,918 $ 53 Gross Profit (millions)$ 61.1 $ 63.6 (3.9%) Retail SAAR (millions) 13.7 14.1 (2.8%) New Units Jul Aug Sep Total 2018 10
Slide 16: New Vehicle – Gross, Unit & GPU Trend
NEW VEHICLE – GROSS, UNIT & GPU TREND Continuing Operations - Franchised Gross $ (in millions) Units $2,132 $2,070 $2,078 $1,950 $1,988 $1,911 $1,886 $1,925 $1,909 $1,866 $1,855 $1,745 $78 $74 $1,730 $74 $65 $66 $66 $62 $63 $62 37,493 $58 $58 $57 36,531 $57 35,856 36,054 35,562 35,489 33,782 33,148
Slide 17: Days' Supply
DAYS’ SUPPLY 80 70 71 66 60 62 50 52 52 40 36 38 34 35 35 36 31 35 30 29 31 20 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 New Used Parts 17
Slide 18: Used Vehicle Retail
USED VEHICLE RETAIL Franchised – Same Store Q3 2018 Q3 2017 B/(W) Retail Volume 27,254 26,657 2.2% GPU$ 1,325 $ 1,264 $ 61 Used to New 88% 80% 800 bps Vehicles/Store/Month (96 stores) 95 93 2 Front-End Gross and F&I (in millions) Jul Aug Sep Total 2018$ 25.4 $ 25.5 $ 23.5 $ 74.3 2017 23.3 21.5 26.6
Slide 19: F&I – Gross & GPU
F&I – GROSS & GPU Franchised – Same Store Gross $ (in millions) GPU$ $84 $81 $1,402 $1,415 Q3 2018 Q3 2017 19
Slide 20: Fixed Operations
FIXED OPERATIONS Franchised – Same Store (amounts in millions) Q3 2018 Q3 2017 B/(W) Revenue$ 337 $ 327 2.8% Gross Profit$ 163 $ 158 3.7% 20
Slide 21: Fixed Operations Gross
FIXED OPERATIONS GROSS Franchised – Same Store (amounts in millions) Q3 2018 Q3 2017 $ B/(W) % B/(W) Customer Pay$ 74 $ 71 $ 3 4.7% Warranty 37 37 (0) (0.9%) Wholesale Parts 7 7 0 2.2% Internal, Sublet & Other 46 43 3 6.1% Total Gross Profit$ 163 $ 158 $ 6 3.7% 21
Slide 22: Q3 2018 Financial Review: EchoPark Segment
Q3 2018 FINANCIAL REVIEW ECHOPARK SEGMENT 22
Slide 23: EchoPark Segment Q3 2018 Results
ECHOPARK SEGMENT Q3 2018 RESULTS B/(W) than Q3 2017 (1) (amounts in millions, except per share, unit and per unit data) Q3 2018 (1) $% Revenue $185.9 $128.8 225.5% Gross Profit $14.3 $8.0 129.4% SG&A ($16.7) ($7.6) (83.2%) SG&A as % of Gross 117.2% 2,960 bps Depreciation Expense ($2.0) ($0.6) (46.8%
Slide 24: Q3 2018 Financial Review: Total Enterprise
Q3 2018 FINANCIAL REVIEW TOTAL ENTERPRISE 24
Slide 25: Consolidated Q3 2018 Results
CONSOLIDATED Q3 2018 RESULTS B/(W) than Q3 2017 (1) (amounts in millions, except per share data) Q3 2018 (1) $% Revenue $2,471 ($35) (1.4%) Gross Profit $361 ($2) (0.6%) SG&A ($286) $3 0.9% SG&A as % of Gross 79.3% 30 bps Depreciation ($23) ($1) (3.0%) Operating Profit $51 ($0) (0.3%) Interest & Oth
Slide 26: Consolidated Q3 2018 Revenue & Gross Profit
CONSOLIDATED Q3 2018 REVENUE & GROSS PROFIT B/(W) than Q3 2017 (amounts in millions, except unit and per unit data) Q3 2018 $ % New Revenue $1,235 ($127) (9.3%) Used Retail Revenue $746 $86 13.1% Fixed Operations Revenue $343 ($5) (1.3%) F&I Revenue $98 $5 5.6% Total Revenue $2,471 ($35) (1.4%) New
Slide 27: Consolidated Q3 2018 Revenue & Gross Profit – Same Store
CONSOLIDATED Q3 2018 REVENUE & GROSS PROFIT – SAME STORE B/(W) than Q3 2017 (amounts in millions, except unit and per unit data) Q3 2018 $ % New Revenue $1,235 ($54) (4.2%) Used Retail Revenue $654 $39 6.3% Fixed Operations Revenue $338 $8 2.4% F&I Revenue $88 $2 2.1% Total Revenue $2,361 $1 0.0% Ne
Slide 28: Consolidated Q3 2018 Adjusted SG&A to Gross
CONSOLIDATED Q3 2018 ADJUSTED SG&A TO GROSS 79.3% 79.6% 22.9% 22.8% 4.1% 4.9% 48.2% 47.5% 4.1% 4.4% Q3 2018(1) Q3 2017 (1) Advertising Comp Rent Other 28 (1) – Q3 2018 & Q3 2017 results are adjusted – See appendix for reconciliation to GAAP amounts.
Slide 29: Consolidated Q3 2018 Interest Expense
CONSOLIDATED Q3 2018 INTEREST EXPENSE B/(W) than Q3 2017 (amounts in millions) Q3 2018 $ % Floor Plan Interest Expense $12 ($3) (37.3%) Interest Expense, Other $13 ($0) (2.2%) Total Interest Expense $26 ($4) (16.4%) Floor Plan Higher Due to Rate Increases • New Up 76 bps • Used Up 36 bps Fed Funds R
Slide 30: Consolidated Q3 2018 Depreciation Expense
CONSOLIDATED Q3 2018 DEPRECIATION EXPENSE B/(W) than Q3 2017 (amounts in millions) Q3 2018 $ % Depreciation Expense - Franchised $21 ($0) (0.3%) Depreciation Expense - EchoPark $2 ($1) (46.8%) Total $23 ($1) (3.0%) New EchoPark Texas Builds Driving Increase 30
Slide 31: 2018 CAPEX Forecast
2018 CAPEX Forecast Forecast (amounts in millions) FY 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Real Estate & Facility Related $ 199.3 $ 60.4 $ 29.4 $ 32.8 $ 25.6 $ 148.2 All Other Cap Ex 34.9 5.3 4.5 1.5 12.4 23.7 Subtotal$ 234.2 $ 65.7 $ 33.9 $ 34.3 $ 38.1 $ 172.0 Less: Mortgages (52.5) (21.0)
Slide 32: Debt Covenants
DEBT COVENANTS Covenant Q3 2018 Liquidity Ratio >= 1.05 1.14 Fixed Charge Coverage Ratio >= 1.20 1.45 Total Lease Adjusted Leverage Ratio <= 5.75 5.11 Compliant with all Covenants 32
Slide 33: Adjusted EBITDA
ADJUSTED EBITDA LTM Q3 (amounts in thousands) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net Income $ 31,548 $ 89,929 $ 76,254 $ 89,101 $ 81,618 $ 97,217 $ 86,311 $ 93,193 $ 92,983 $ 91,782 Non-Floor Plan Interest 67,735 68,604 63,576 58,453 55,356 52,269 49,524 48,034 50,531 51,483 Depreciat
Slide 34: Share Repurchases
SHARE REPURCHASES (000's) (000's) (000's) Shares $/Share $ Availability EOY - 2017$ 107,686 Q1 Activity 1,153 20.35 $ 23,468 (23,468) Q2 Activity - - - - Q3 Activity 32 19.95 643 (643) Total 2018 Activity 1,186 $ 20.34 $ 24,111 $ 83,575 34
Slide 35: Appendix
APPENDIX 35
Slide 36: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended September 30, 2018 Three Months Ended September 30, 2017 Continuing Operations Continuing Operations Franchised Franchised Dealerships EchoPark Consolidated Dealerships EchoPark Consolidated Reported: Diluted earnings (loss) per share . . . . . . . . . . .
Slide 37: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Nine Months Ended September 30, 2018 Nine Months Ended September 30, 2017 Continuing Operations Continuing Operations Franchised Franchised Dealerships EchoPark Consolidated Dealerships EchoPark Consolidated Reported: Diluted earnings (loss) per share . . . . . . . . . . . .
Slide 38: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark Three Months Ended Three Months Ended Three Months Ended September 30, September 30, September 30, Continuing Operations 2018 2017 2018 2017 2018 2017 (In millions) Reported: SG&A expenses . . . . . . . . . . . . . . . . . . . . .
Slide 39: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark Three Months Ended Three Months Ended Three Months Ended September 30, September 30, September 30, Continuing Operations 2018 2017 2018 2017 2018 2017 (In millions) Reported: Operating income . . . . . . . . . . . . . . . . . . .
Slide 40: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark Nine Months Ended Nine Months Ended Nine Months Ended September 30, September 30, September 30, Continuing Operations 2018 2017 2018 2017 2018 2017 (In millions) Reported: SG&A expenses . . . . . . . . . . . . . . . . . . . . . .
Slide 41: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark Nine Months Ended Nine Months Ended Nine Months Ended September 30, September 30, September 30, Continuing Operations 2018 2017 2018 2017 2018 2017 (In millions) Reported: Operating income . . . . . . . . . . . . . . . . . . . . .
Slide 42: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Consolidated Three Months Ended Nine Months Ended September 30, September 30, Continuing Operations 2018 2017 2018 2017 (In millions) (In millions) Reported: Interest Expense - Other. . . . . . . . . . . . . . . . . . . . . . . . . $ 13.3 $ 13.0 $ 40.1 $ 39.2 Ad
Slide 43: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended September 30, 2018 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
Slide 44: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended September 30, 2017 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
Slide 45: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Nine Months Ended September 30, 2018 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)
Slide 46: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Nine Months Ended September 30, 2017 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)
Slide 47: Sonic Automotive / EchoPark
Sonic) EchoPark