Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q3 2016 Earnings Presentation
54 slides from Sonic Automotive's earnings presentation, Nov 1, 2016
Slide 1: Q3 2016 Investor Presentation
Q3 2016 Investor Presentation November 1, 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: Company Overview
COMPANY OVERVIEW
Slide 5: Overview – Franchised Geographic Platforms
OVERVIEW – FRANCHISED GEOGRAPHIC Based in Charlotte, NC 106 Stores, 25 Brands, 18 Collision Repair Centers Platforms in Major Metro Markets
Slide 6: Overview – EchoPark Geographic
OVERVIEW – ECHOPARK® GEOGRAPHIC Colorado Springs - Opens First Half of 2017
Slide 7: Concentration in Major Metro Markets
Note: Percentages are percent of total revenue for FY 2015. 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 percent of total revenue for FY 2015.
Slide 9: Strategic Focus
STRATEGIC FOCUS
Slide 10: Strategic Focus
STRATEGIC FOCUS Growth EchoPark® One Sonic-One Experience Acquisitions & Open Points Own Our Properties Return Capital to Shareholders Share Repurchases Dividends
Slide 11: Strategic Focus: Q3 2016 Highlights
STRATEGIC FOCUS Q3 2016 Repurchased 5.4M shares for $97.5M YTD 2016 Dividends Declared of $6.8M YTD Sept 2016 - $9.0M for Year Increased to $0.0375 in Oct 2015 Increased to $0.05 in Feb 2016 Open Point Revenue McKinney MB – estimate annual revenues >$100M Pensacola Audi – estimate annual revenues >$
Slide 12: Strategic Focus: EchoPark
STRATEGIC FOCUS EchoPark® Five Locations Open In Denver Thornton Hub Centennial Highlands Ranch Littleton Stapleton One Additional Denver Market Location by 1H of 2017 Acquiring Property in the Texas and Carolinas Markets Expect openings in 2017
Slide 13: 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 14: Acquisitions & Open Points
STRATEGIC FOCUS ACQUISITIONS & OPEN POINTS Open Points Mercedes-Benz in Dallas Market Operational in Q3 2016 Audi in Pensacola Market Operational in 1H of 2017 Nissan in TN Market Operational in Q4 2016 Exploring Acquisition and Open Point Opportunities in Other Markets
Slide 15: Own Our Properties
STRATEGIC FOCUS OWN OUR PROPERTIES % of Properties Owned
Slide 16: Return Capital to Shareholders
Acquired 10.2% of OS YTD Q3 New Share Count = 44.9M Down from High of 53.2M (Dec 2012) STRATEGIC FOCUS RETURN CAPITAL TO SHAREHOLDERS (amounts in thousands, except per share data) Shares $/Share $ Availability Q1 Activity 4,103 $18.14 $74,415 Q2 Activity 759 $17.239999999999998 $13,090 Q3 Activity 5
Slide 17: 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 18: Q3 2016 Financial Review
Q3 2016 FINANCIAL REVIEW
Slide 19: Franchised Segment
Q3 2016 FINANCIAL REVIEW FRANCHISED SEGMENT
Slide 20: Franchised Segment Q3 2016 Results
FRANCHISED SEGMENT Q3 2016 RESULTS – Q3 2016 results are adjusted – See appendix for reconciliation to GAAP amounts. Note – Continuing operations only, which includes results of sold stores after March 31, 2014. B/(W) than Q3 2015 (1) (amounts in millions, except per share data) Q3 2016 (1) $ % Reve
Slide 21: EchoPark Segment
Q3 2016 FINANCIAL REVIEW ECHOPARK® SEGMENT
Slide 22: EchoPark Segment Q3 2016 Results
ECHOPARK® SEGMENT Q3 2016 RESULTS B/(W) than Q3 2015 (amounts in millions, except per share, unit and per unit data) Q3 2016 $ % Revenue $40.401229439999994 $18.350878429999995 0.83222613652171484 Gross Profit $4.1799412599999997 $1.2924492399999994 0.4476027054093813 Operating Profit $-3.2729912000
Slide 23: Total Enterprise
Q3 2016 FINANCIAL REVIEW TOTAL ENTERPRISE
Slide 24: Consolidated Q3 2016 Results
– Q3 2016 results are adjusted – See Appendix for reconciliation to GAAP amounts. Note – Continuing operations only, which includes results of sold stores after March 31, 2014. CONSOLIDATED Q3 2016 RESULTS B/(W) than Q3 2015 (1) (amounts in millions, except per share data) Q3 2016 (1) $ % Revenue $2
Slide 25: Q3 2016 Revenue & Gross Profit
Q3 2016 REVENUE & GROSS PROFIT New Unit Down 3.2% - GPU Down $31 Used Unit Up 1.5% - GPU Down $89 Fixed Operations Gross Flat on One Less Day - Up 1.7% Adjusted for Days (2.2% same store) F&I Per Unit Up $70 to $1,344 or 5.5% B/(W) than Q3 2015 (amounts in millions, except per unit data) Q3 2016 $ %
Slide 26: Q3 2016 SG&A to Gross
Q3 2016 SG&A TO GROSS 79.2% 77.7% – Q3 2016 is adjusted – See appendix for reconciliation to GAAP amounts. (1) (1)
Slide 27: Q3 2016 SG&A to Gross
Q3 2016 SG&A TO GROSS – Q3 2016 is adjusted – See appendix for reconciliation to GAAP amounts. (1) (1)
Slide 28: Interest Expense
INTEREST EXPENSE Q3 2016 Increase Primarily Due to Higher Inventory Balances and Mortgages B/(W) than Q3 2015 (amounts in millions) Q3 2016 $ % Floor Plan Interest Expense $6.67207357000001 $-1.3079855000000089 -0.24384116795457625 Interest Expense, Other $13.0158422 $-0.65474677999999953 -5.2968346
Slide 29: 2016 Cap Ex
2016 CAP EX (amounts in millions) YTD Q3 2016 Estimated 2016 Real Estate & Facility Related $132.9 $203.25700000000001 All Other Cap Ex 22.2 29.797000000000004 Subtotal $155.1 $233.054 Less: Mortgage Funding -99.5 -,117.33499999999999 Total Cash Used – Cap Ex $55.599999999999994 $115.71900000000001
Slide 30: Debt Covenants
DEBT COVENANTS Compliant with all Covenants Actual Q3 Covenant 2016 2015 Liquidity Ratio >= 1.05 1.1599999999999999 1.2 Fixed Charge Coverage Ratio >= 1.20 1.7 1.78 Total Lease Adjusted Leverage Ratio <= 5.50 4.32 4.13
Slide 31: Operations Review
OPERATIONS REVIEW
Slide 32: New Vehicle Retail Same Store
NEW VEHICLE RETAIL SAME STORE Both Retail Volume and GPU Declines Driven by BMW Brand, Weakness in Texas and Stop-Sale Units Q3 2016 Q3 2015 B/(W) Retail Volume 35,618 36,562 -2.5819156501% Selling Price $38,173.282193553823 $36,621.327003719714 4.2378453126% Gross Margin % 4.5% 4.9% -40 bps GPU $1,
Slide 33: New Vehicle SAAR
NEW VEHICLE SAAR SAAR is down 1.7% Q3 to Q3 YTD Q3 2016 – 17.2M Full Year 2015 – 17.4M Full Year 2014 – 16.4M
Slide 34: New Vehicle SAAR - Retail
NEW VEHICLE SAAR - RETAIL 16.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 ——2015 ——2014 Sonic) EchoPark uTomorive
Slide 35: Retail New Vehicle – Gross & Unit Trend
RETAIL NEW VEHICLE – GROSS & UNIT TREND Continuing Operations
Slide 36: New Vehicle – Gross Per Unit
NEW VEHICLE – GROSS PER UNIT Continuing Operations
Slide 37: Vehicle Days Supply
VEHICLE DAYS SUPPLY New Units Normalizing – 302 Stop-Sale Units at 9/30/16– About 1 day sales 1,811 Stop-Sale Used Units at 9/30 – 37 Days Supply Without Stop-Sale
Slide 38: Used Vehicle Retail Same Store
USED VEHICLE RETAIL SAME STORE Stop-Sale Vehicles Hurting Volume and Gross Q3 2016 Q3 2015 B/(W) Retail Volume 30,433 30,053 1.2644328353% GPU $1,309.8398744784247 $1,388.3972608391375 $-78.557386360712826 Gross Profit $39.862356900001899 $41.725502879998601 $-1.8631459799967052 Used to New 0.85 to
Slide 39: Used Vehicle – Gross Trend
* - Used Related Gross = (Used Gross + F&I + Reconditioning) ($’s in millions) USED VEHICLE – GROSS TREND Continuing Operations Volume and Gross Hurt By Stop-Sale in Largest Brands (BMW & Honda)
Slide 40: F&I Same Store
Higher PUR Accounted All of the Increase in F&I Gross Gross (millions) $ 85.0 $ 88.6 F&I SAME STORE Total Gross Up 4.2%
Slide 41: F&I – Gross & GPU Trend
F&I – GROSS & GPU TREND Continuing Operations
Slide 42: Fixed Operations Same Store
FIXED OPERATIONS SAME STORE % of 2016 Total FO Gross 47% 19% 4% 30% One Less Day in Q3 2016 1 Less Day Q3 2016 Q3 2015 B/(W) Revenue $360.21129877000203 $346.83091076999801 3.8578995079% Gross Profit $168.99863822999998 $167.8645453 .6756000369% SAAR - Keyed $0 $0 0.0%
Slide 43: Fixed Operations Same Store – Customer Pay
FIXED OPERATIONS SAME STORE – CUSTOMER PAY One Less Day in Q3 2016 – Up 0.5% YOY on Same Day Basis
Slide 44: Fixed Operations – Gross Trend
($’s in millions) FIXED OPERATIONS – GROSS TREND Continuing Operations One Less Day in Q3 2016 – Up 1.7% YOY on Same Day Basis
Slide 45: Summary
Plateauing top-line revenue and gross GPU pressure continues on new and used vehicles Fixed operations and F&I continue to show strength First three EchoPark® locations combined are cash flow positive for the quarter Rolled out the OSOE Technologies to 14 Additional Stores continues (Chattanooga, Bi
Slide 46: Appendix
APPENDIX
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS f “Adjusted uch as, butnotlimited to, adjusted \ \ Por 2016 201: Franchised Franchis Dealerships _EchoPark® Consolidated Dealerships _EchoPark® Consolidated ported: Diluted eamings (loss) per share $ 047 $ (005 $ 042 $ O57 $ (004) $ 053 Adjustments (net of income taxes): Je
Slide 48: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS ‘Three Months Ended September 30, 2016 some (Loss) Income (Loss) Tne inuing From Discontinued Operations Net Income (Loss) Weighted Per Per Per ‘Average Share Share Shares t nt_ _ Amour 45,118 $18,969 S (858) $18,111 Effect of participating securities: Non-vested restricted
Slide 49: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS ine Months Ended September 30,2016 some (Loss) imam eh From Continuing From Dacontnued Operations Operations Net Income (Loss) Weighted er er Per ‘Average sre Share Share Shares _ Amount Amount _Amount_ Amount _Amount (in =e except per rare amounts) Reported: Eamings (loss)
Slide 50: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS ine Months Ended September 30, or (Loss) income (Loss) From Continuing From Decontnued Operations Operations Net Income (Loss) Weighted er er Per ‘Average mre, Share Share Shares _ Amount Amount_ _Amount___Amount__ Amount in seen, except per rane amounts) Reported: Eamings (
Slide 51: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® September 30, September 30, September 30, Continuing Operations 5 zr 2016 2015 ‘(nmillionsy Reported: Sci S 2821 $ 2800 $ 2757 $ 2745 § 64 55 Adjustments: Adjusted: SG Reported: % of fit 78.6% 111% 77% 76.8% NM NM Adjustments: Ad
Slide 52: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® ‘September 30, September 30, September 30, Continuing Operations 15 2016 i 2016 2015 ‘(nmillionsy Reported: Adjustments (before income taxes) ‘SGBAexpenses .. Adjusted: ported: Income (loss) from continuing operations beforetawes
Slide 53: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® ‘September 30, September 30, Sey Continuing Operations 1016 207 2016 2015 ‘(millions Reported: SG S 8437 $ 8356 $ 8261 $ 8186 $ 176 $ 170 Adjustments: Gain on disposal 09 09 - - Adjusted: SGBA\ Reported: % of fit 79.8% 79.5% 78.9
Slide 54: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Franchised Dealerships EchoPark® Continuing Operations Reported: Adjustments (before income taxes): ‘SG&Aexpenses Adjusted: porte Income (loss) from Sees operations before taxes ‘Adjustments (before income taxes): ‘SG8Aexpenses Income (loss) from continuing operations before