Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q4 2019 Earnings Presentation
50 slides from Sonic Automotive's earnings presentation, Feb 19, 2020
Slide 1: A Holistic Approach to Creating Shareholder Value
Exhibit 99.2 Sonic Automotive – A Holistic Approach to Creating Shareholder Value February 19, 2020
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: Company Overview
COMPANY OVERVIEW 3
Slide 4: Sonic Automotive: Who We Are
Sonic Automotive: Who We Are QUICK FACTS Collision Franchised and Repair EchoPark Stores Our Core Franchised 95 15 Centers Dealership Business Focuses on High Levels of New and Used Vehicle (NYSE: SAH) Sales Volume to Drive a Fortune 500 Profit From Parts and Service and Finance and Different Compan
Slide 5: Investment Highlights
Investment Highlights Multiple Growth And Profit Drivers For Franchised Operations Broad Geographic, Unique, High Return Revenue Stream And EchoPark Brand Mix Diversification Business Model Complementary Focused On SG&A Relationship – Sonic Control And Strengthening Franchises And EchoPark The Balan
Slide 6: Revenue Composition by Geography
Revenue Composition BY GEOGRAPHY Geographic Footprint, Revenue Streams and Brand Mix Offer Attractive Diversification Across the Automotive Retail Space SC 2% NV 2% Other * 3% MD 2% VA 2% GA 3% NC 4% CA 28% AL 5% Concentration in Major Metro FL 6% Markets TN 7% CO 9% TX 27% Note: Percentages are Per
Slide 7: Revenue Composition: Brand Distribution and Business Line Mix
Revenue Composition Brand Distribution Business Line Mix % of % of New Vehicle Brand Revenue Franchise Brand Revenue Used Vehicle (Including Wholesale) BMW 23% Mercedes 11% Parts, Service & Collision Audi 6% Finance & Insurance Lexus 4% Luxury 57% Land Rover 3% 16% Porsche 3% Cadillac 3% 9% 47% MINI
Slide 8: Franchised Operations
Franchised Operations Franchised Brands, Luxury 86 Dealerships 20+ Weighted New & Used Vehicle Sales Parts & Service (P&S) Finance & Insurance (F&I) Major Collision Metropolitan 15 Repair Centers 20 Markets Focused On Inventory Mix and Attractive Pricing to Drive Growth and Profitability 8
Slide 9: Franchised Geographic Footprint
Franchised Geographic Footprint Headquartered in 86 Stores, 20+ Brands, Platforms in Major Charlotte, NC 15 Collision Repair Centers Metro Markets 9
Slide 10: Franchised Operations – Levers
Franchised Operations – Levers Parts and Service Acquire Potential High Return Stores F&I Penetration Divest Multiple Growth Underperforming Pre-Owned or Capital-Intensive Volume Stores Drivers Throughput Continued Expense Reductions Car Cash Omni-Channel Approach (Digital EchoPark One-Stop) Learnin
Slide 11: EchoPark Automotive: The New Car Alternative
EchoPark Automotive The New Car Alternative™ Get the New Car Feel Without the New Car Price Focus On Pre-Owned Below Market Market – More Stable Pricing With Simplified, Easy Than New Vehicle Purchase Experience Market Unique, High Return Business Model 1- 4 Year Old 30% of Guests Vehicles - Nearly
Slide 12: EchoPark Geographic Footprint
EchoPark Geographic Footprint Texas Colorado • Grand Prairie (Dallas) – • Thornton and Centennial Pre-Owned Business (Denver) – Opened Q4 2014 Acquired Q3 2017 • Colorado Springs – Opened • San Antonio – Opened Q4 Q2 2017 2017 • New Braunfels – Opened Q1 2018 • Houston – Opened December 2018 North C
Slide 13: EchoPark – Modeled 4-Wall Economics At Maturity
EchoPark – Modeled 4-Wall Economics At Maturity Medium Store Large Store Existing Medium Stores: • Centennial, CO* Average Monthly Retail Unit Volume (100% Mature) 750 1,500 • Colorado Springs, CO* Average Vehicle Selling Price $ 20,500 $ 20,500 • New Braunfels, TX* Total Annual Revenues $ 210,000,0
Slide 14: EchoPark Market Maturity Comparison
EchoPark Market Maturity Comparison Average Monthly Retail Unit Volume (Q4 2019) - 150 300 450 600 750 900 1,050 1,200 1,350 1,500 1,650 1,800 Denver/Colorado Springs Opened Q4 2014 * Dallas Acquired Q3 2017 Houston Opened Q4 2018 Charlotte Opened Q4 2018 Long Beach Opened December 2019 San Antonio
Slide 15: EchoPark Retail Unit Sales Volume Growth
EchoPark Retail Unit Sales Volume Growth Quarterly Quarterly Revenue Retail Units $350,000,000 13,206 14,000 12,587 12,676 $300,000,000 11,051 12,000 Converted All Stores To Current Operating Model $250,000,000 10,000 8,762 7,698 $200,000,000 7,459 8,000 Acquired Pre-Owned Business In Dallas, TX $15
Slide 16: EchoPark Adjusted EBITDA Trend
EchoPark Adjusted EBITDA Trend $6,352 $6,000 $5,299 $4,957 $4,792 $4,000 FY 2019 Adjusted EBITDA of $21.4 $2,000 Million, Up 302% From FY 2018 (In Millions) $- Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 $(1,115) Q4 Seasonally Lighter Than Q3 $(2,000) $(2,059) $0.
Slide 17: EchoPark Model – High Volume Drives Superior Returns
EchoPark Model – High Volume Drives Superior Returns Ultra-Low Pricing Attractive F&I High Volume Throughput May Yield Slightly Negative Higher Penetration Rates 5X Volume Per Store Per Month Front-End Gross Profit Per Unit On F&I Products vs. Sonic Franchised Stores vs. Sonic Franchised Stores Fran
Slide 18: Industry-Leading Used Vehicle Volume Throughput
Industry-Leading Used Vehicle Volume Throughput Q4 2019 Retail Used Vehicle Unit Sales Per Store Per Month 469 105 299 85 82 83 76 69 Utilize Highly Efficient Inventory Sourcing, Pricing And Selling Processes To Maximize Throughput * Peer Average Is 79 Units Per Store Per Month Based On Store Counts
Slide 19: Used Vehicle Volume Throughput Trend
Used Vehicle Volume Throughput Trend Franchised Dealerships Retail Used Vehicle Unit Sales Volume Per Store Per Month 115 109 105 96 95 95 91 88 89 90 85 85 81 75 70 65 55 53 44 45 45 40 41 35 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2005-2019 – 7.4% CAGR 19
Slide 20: Inventory Management Expertise
Inventory Management Expertise Q4 2019 Used Vehicle Inventory Days’ Supply 65 57 52 39 34 33 29 28 Low Inventory Days’ Supply Reduces Exposure to Fluctuations in Used Vehicle Valuations Note: Peer Data Source: Company Filings, Calculated Based on Trailing Quarter Cost of Sales If Not Explicitly Disc
Slide 21: Vehicle Inventory Days' Supply Improving
Vehicle Inventory Days’ Supply 75 Improving New Vehicle Days’ Supply 64 63 59 55 Excellent Used Vehicle Days’ Supply 34 32 33 29 31 30 28 27 27 25 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 New Used - Franchised Used - EchoPark Data Analytics Tools Enable Accuracy, Consistency And Scalability Of Invent
Slide 22: Consolidated F&I Per Unit Trend
Consolidated F&I Per Unit Trend Annual F&I Gross Profit Per Unit $1,800 $1,743 $1,700 $1,600 $1,557 $1,500 $1,411 $1,400 $1,354 $1,300 $1,280 $1,219 $1,200 $1,138 $1,100 $1,071 $992 $1,002 $1,006 $1,000 $954 $900 $906 $918 $900 $800 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20
Slide 23: Complementary Relationship
Complementary Relationship Franchised Operations • Thrives When New Vehicle Industry Is • Strong Secular Growth Phase Due To: Healthy, Particularly Where Luxury Brands Focus On Recession-Resistant Are Strong Pre-Owned Vehicle Market • Diverse Revenue Streams - Some Below-Market Price Strategy Re
Slide 24: Strategic Direction
Strategic Direction Franchised Capital EchoPark SG&A And Business Allocation Balance Sheet Drive New And Used Vehicle Early Stage Strong Secular Opportunistic Divestitures Of Relatively Low Fixed Cost Profit Growth Through Multiple Growth Phase Underperforming Or Capital- Structure Already In Place
Slide 25: Financial Overview
FINANCIAL OVERVIEW — A : LOY _of —_—\ i De ’ 7 . » AUTOMOTIVE OMOTIVE AUTOMOTIVE
Slide 26: FY 2019 – Consolidated Continuing Operations
FY 2019 – Consolidated Continuing Operations Revenue Gross Profit Segment Income (Loss)* $9.1 $1,162 $112 $700 $58 In Millions ($52.6) $211.3 $9,252 $9,292 $1,388 $1,409 $157.4 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 Total Revenue Up 5.1% Total Gross Profit Up 5.2% Adjusted EBITDA Up 19.0%**
Slide 27: FY 2019 – Consolidated SG&A Expenses to Gross Profit
FY 2019 – Consolidated SG&A Expenses to Gross Profit On A GAAP Basis, SG&A Expenses To Gross Profit Were 72.3% For FY 2019, Compared To 79.2% For FY 2018 210 bps Better 76.9%* 79.0%* 21.5% 22.5% 3.6% 4.3% 47.8% 47.8% 4.0% 4.4% FY 2019 FY 2018 Advertising Comp Rent Other * Refer To Appendix For Calcu
Slide 28: Q4 2019 – Consolidated Continuing Operations
Q4 2019 – Consolidated Continuing Operations B/(W) than Q4 2018 (In millions, except per share data) Q4 2019 $ % Revenues $2,748.4 $174.1 6.8% Gross profit $393.9 $23.2 6.2% SG&A expenses $260.9 $13.0 4.7% SG&A expenses as % of gross profit 66.2% 770 bps Earnings from continuing operations before ta
Slide 29: Q4 2019 – Franchised Dealerships Segment
Q4 2019 – Franchised Dealerships Segment B/(W) than Q4 2018 (In millions, except unit and per unit data) Q4 2019 $ % Revenues $2,439.9 $68.2 2.9% Gross profit $364.6 $11.1 3.1% SG&A expenses $237.8 $17.5 6.9% SG&A expenses as % of gross profit 65.2% 700 bps Segment income (loss) $76.6 $25.1 48.8% Ne
Slide 30: Q4 2019 – EchoPark Segment
Q4 2019 – EchoPark Segment B/(W) than Q4 2018 (In millions, except unit and per unit data) Q4 2019 $ % Revenues $308.6 $106.0 52.3% Gross profit $29.2 $12.1 70.4% SG&A expenses $23.1 ($4.5) (24.6%) SG&A expenses as % of gross profit 78.9% 2,900 bps Segment income (loss) $2.1 $6.8 144.7% Retail used
Slide 31: Q4 2019 – Franchised Dealerships Segment Same Store
Q4 2019 – Franchised Dealerships Segment Same Store B/(W) than Q4 2018 (In millions, except unit and per unit data) Q4 2019 $ % New vehicle revenues $1,337 $122 10.0% Retail used vehicle revenues $586 $43 8.0% Wholesale used vehicle revenues $39 ($7) (15.5%) Parts, service and collision repair reven
Slide 32: Q4 2019 – EchoPark Segment Same Store
Q4 2019 – EchoPark Segment Same Store B/(W) than Q4 2018 (In millions, except unit and per unit data) Q4 2019 $ % Retail used vehicle revenues $224 $55 32.8% Wholesale used vehicle revenues $6 $5 719.3% Parts, service and collision repair revenues $6 $3 115.2% F&I revenues $24 $6 32.3% Total revenue
Slide 33: Gross Profit Per Unit Trend
Gross Profit Per Unit Trend $2,500 $2,351 $2,341 $2,264 $2,300 $2,234 $2,209 $2,100 $2,135 New GPU Seasonal $2,100 $2,000 Low In Q3 $1,997 $1,835 $1,900 $1,710 $1,700 $1,645 $1,576 $1,581 $1,539 $1,500 $1,300 $1,342 $1,340 $1,297 $1,286 $1,318 $1,100 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 New GPU F
Slide 34: Strong Balance Sheet and Liquidity
Strong Balance Sheet and Liquidity December 30, 2019 December 31, 2018 (In thousands) Cash and cash equivalents $ $29,103 $ $5,854 Availability under the 2016 Revolving Credit Facility 230,689 223,922 Availability under our used vehicle floor plan facilities 17,090 1,979 Availability under the 2019
Slide 35: Capital Expenditure Discipline
Capital Expenditure Discipline Gross Capital Expenditures (In Millions) $234.2 $163.6 $125.6 FY 2017 FY 2018 FY 2019 Strict Capital Growth Capital Used To Expand Allocation Strategy EchoPark Locations Nationwide Allocate Capital Where It Generates the Highest Returns 35
Slide 36: Appendix
APPENDIX 36
Slide 37: Items of Interest – Fourth Quarter Income Statement
Items of Interest – Fourth Quarter Income Statement (In millions) Q4 2019 Q4 2018 Line Item Gain on franchise disposals $ 29.3 $ - SG&A expenses Lease exit adjustments - 0.8 SG&A expenses Impairment charges (17.7) (15.6) Impairment charges (1) Loss on extinguishment of debt (7.2) - Other expense Sub
Slide 38: Items of Interest – Full Year Income Statement
Items of Interest – Full Year Income Statement (In millions) FY 2019 FY 2018 Line Item Gain on franchise disposals $ 76.0 $ 38.9 SG&A expenses Executive transition costs (6.3) (1.6) SG&A expenses Legal and storm damage charges - (5.7) SG&A expenses Long-term compensation charges - (32.5) SG&A expens
Slide 39: Segment Income Reconciliation – Fourth Quarter
Segment Income Reconciliation – Fourth Quarter Franchised Dealerships EchoPark Segment Segment Consolidated (In millions, except unit data) Q4 2019 Q4 2018 Q4 2019 Q4 2018 Q4 2019 Q4 2018 Revenues $ 2,439.9 $ 2,371.7 $ 308.6 $ 202.6 $ 2,748.4 $ 2,574.3 Gross profit $ 364.6 $ 353.6 $ 29.2 $ 17.2 $ 39
Slide 40: Segment Income Reconciliation – Full Year
Segment Income Reconciliation – Full Year Franchised Dealerships EchoPark Segment Segment Consolidated (In millions, except unit data) FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 Revenues $ 9,292.3 $ 9,251.5 $ 1,162.0 $ 700.2 $ 10,454.3 $ 9,951.6 Gross profit $ 1,408.6 $ 1,388.1 $ 112.4 $ 58.0 $
Slide 41: Non-GAAP Reconciliations – SG&A Expenses
Non-GAAP Reconciliations – SG&A Expenses Consolidated (In millions) Q4 2019 Q4 2018 Gross profit $ 393.9 $ 370.7 SG&A expenses $ 260.9 $ 273.9 Items of interest: Gain on franchise disposals $ 29.3 $ - Lease exit adjustments - 0.8 SG&A expenses (excluding items of interest) $ 290.2 $ 274.7 SG&A expen
Slide 42: Non-GAAP Reconciliations – Earnings Per Share (Q4)
Non-GAAP Reconciliations – Earnings Per Share Q4 2019 Q4 2018 Weighted- Per Weighted- Per Average Share Average Share (In thousands, except per share amounts) Shares Amount Amount Shares Amount Amount Diluted earnings (loss) and shares from continuing operations 44,463 $ 46,272 $ 1.04 42,911 $ 21,98
Slide 43: Non-GAAP Reconciliations – Earnings Per Share (FY)
Non-GAAP Reconciliations – Earnings Per Share FY 2019 FY 2018 Weighted- Per Weighted- Per Average Share Average Share (In thousands, except per share amounts) Shares Amount Amount Shares Amount Amount Diluted earnings (loss) and shares from continuing operations 43,710 $ 144,537 $ 3.31 42,950 $ 52,3
Slide 44: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA (In thousands) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Net Income (Loss) $ 76,254 $ 89,101 $ 81,618 $ 97,217 $ 86,311 $ 93,193 $ 92,983 $ 51,650 $ 144,137 Provision For Income Taxes 46,907 47,648 43,386 62,346 55,962 59,899 1
Slide 45: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA FY 2019 FY 2018 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) Net Income (Loss) $ 144,137 $ 51,650 Provision For Income Taxes 54,954
Slide 46: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA Q3 2019 Q3 2018 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) Net Income (Loss) $ 29,010 $ 15,118 Provision For Income Taxes 11,307
Slide 47: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA Q1 2019 Q1 2018 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) Net Income (Loss) $ 42,221 $ (2,194) Provision For Income Taxes 18,935
Slide 48: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA Q3 2018 Q3 2017 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) Net Income (Loss) $ 15,118 $ 19,440 Provision For Income Taxes 7,262 1
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Slide 50: Investor Relations Contact
Investor Relations Contact: Sonic Automotive Inc. (NYSE: SAH) KCSA Strategic Communications Danny Wieland, Director of Financial Reporting David Hanover / Scott Eckstein ir@sonicautomotive.com sonic@kcsa.com (704) 927-3462 (212) 896-1220