Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q1 2017 Earnings Presentation
52 slides from Sonic Automotive's earnings presentation, Apr 26, 2017
Slide 1: Q1 2017 Investor Presentation
Q1 2017 Investor Presentation April 26, 2017 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
Slide 5: Overview – Franchised Geographic
OVERVIEW – FRANCHISED GEOGRAPHIC Based in Charlotte, NC 104 Stores, 25 Brands, 18 Collision Repair Centers Platforms in Major Metro Markets
Slide 6: Overview – EchoPark Denver Geographic
OVERVIEW – ECHOPARK® DENVER GEOGRAPHIC Colorado Springs - Opens First Half of 2017
Slide 7: Overview – EchoPark Florida Geographic
OVERVIEW – ECHOPARK® FLORIDA GEOGRAPHIC In Process of Converting AutoMatch Stores to EchoPark® Stores: Jacksonville Ocala Ft. Myers Also have property in Savannah, GA that is being developed.
Slide 8: Concentration in Major Metro Markets
Note: Percentages are percent of total revenue for FY 2016. Concentration in Major Metro Markets
Slide 9: 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 10: Strategic Focus
STRATEGIC FOCUS
Slide 11: Strategic Focus
STRATEGIC FOCUS Growth EchoPark® One Sonic-One Experience Acquisitions & Open Points Own Our Properties Return Capital to Shareholders Share Repurchases Dividends
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 Florida AutoMatch Transition Occurring Acquiring Property in the Texas and Carolinas Markets Expect openings in 2017 EP Revenue FY 2
Slide 13: Strategic Focus – 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: Strategic Focus – 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 1H of 2017
Slide 15: Strategic Focus – Own Our Properties
STRATEGIC FOCUS OWN OUR PROPERTIES % of Properties Owned Increased Equity in Properties to $281M in 2016
Slide 16: Strategic Focus – Return Capital to Shareholders
Quarterly Dividend at $0.05/Share in Q1 & Q2 of 2017 Acquired 11.2% of OS in 2016 New Share Count = 44.7M Down from High of 53.2M (Dec 2012) Dividends Declared of $9.1M in 2016 STRATEGIC FOCUS RETURN CAPITAL TO SHAREHOLDERS (000's) (000's) (000's) Shares $/Share $ Availability EOY - 2016 $45,032.523
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: Q1 2017 Financial Review
Q1 2017 FINANCIAL REVIEW
Slide 19: Q1 2017 Financial Review – Franchised Segment
Q1 2017 FINANCIAL REVIEW FRANCHISED SEGMENT
Slide 20: Franchised Segment Q1 2017 Results
FRANCHISED SEGMENT Q1 2017 RESULTS – Q1 2017 and Q1 2016 results are adjusted – See appendix for reconciliation to GAAP amounts. B/(W) than Q1 2016 (1) (amounts in millions, except per share data) Q1 2017 (1) $ % Revenue $2,246.251349599998 $35.439564619999842 1.603175425349% Gross Profit $345.68172
Slide 21: Q1 2017 Financial Review – EchoPark Segment
Q1 2017 FINANCIAL REVIEW ECHOPARK® SEGMENT
Slide 22: EchoPark Segment Q1 2017 Results
ECHOPARK® SEGMENT Q1 2017 RESULTS 22 (1) – Excludes the effect of AutoMatch Stores – see appendix for reconciliation. (1) Total EchoPark EchoPark Only B/(W) than Q1 2016 (amounts in millions, except unit and per unit data) Q1 2017 Q1 2017 $ % Revenue $41.797235549999996 $33.665376829999992 $9.624577
Slide 23: Q1 2017 Financial Review – Total Enterprise
Q1 2017 FINANCIAL REVIEW TOTAL ENTERPRISE
Slide 24: Consolidated Q1 2017 Results
– Q1 2017 and Q1 2016 results are adjusted – See appendix for reconciliation to GAAP amounts. CONSOLIDATED Q1 2017 RESULTS B/(W) than Q1 2016 (1) (amounts in millions, except per share data) Q1 2017 (1) $ % Revenue $2,288 $53 2.4% Gross Profit $350 $5 1.5% SG&A $291 ($13) (4.6%) SG&A as % of Gross 8
Slide 25: Q1 2017 Revenue & Gross Profit
Q1 2017 REVENUE & GROSS PROFIT B/(W) than Q1 2016 (amounts in millions, except unit and per unit data) Q1 2017 $ % New Retail Revenue $1,147 ($2) (0.2%) Used Retail Revenue $634 $36 6.0% Fixed Operations Revenue $352 $6 1.7% F&I Revenue $83 $2 2.2% Total Revenue $2,288 $53 2.4% New Retail Gross $58
Slide 26: Q1 2017 SG&A to Gross
Q1 2017 SG&A TO GROSS – Q1 2017 & Q1 2016 are adjusted – See appendix for reconciliation to GAAP amounts. (1) 83.1% 80.6%
Slide 27: Q1 2017 SG&A to Gross
Q1 2017 SG&A TO GROSS – Q1 2017 and Q1 2016 are adjusted – See appendix for reconciliation to GAAP amounts. (1)
Slide 28: Q1 2017 Interest Expense
Q1 2017 INTEREST EXPENSE Floor Plan Increase Due to Higher Rates – Q1 2017 is adjusted – See appendix for reconciliation to GAAP amounts. B/(W) than Q1 2016 (amounts in millions) Q1 2017 (1) $ % Floor Plan Interest Expense $8.3863741399999991 $-1.95091313 -0.3031504855624943 Interest Expense, Other
Slide 29: 2017 Cap Ex
2017 CAP EX (amounts in millions) YTD Q1 2017 Estimated FY 2017 Real Estate & Facility Related $63.8 $224.8 All Other Cap Ex 12 19.899999999999999 Subtotal $75.8 $244.70000000000002 Less: Mortgage Funding -19.8 -73.7 Total Cash Used – Cap Ex $56 $171
Slide 30: Debt Covenants
DEBT COVENANTS Compliant with all Covenants Covenant Q1 2017 Liquidity Ratio >= 1.05 1.17 Fixed Charge Coverage Ratio >= 1.20 1.90 Total Lease Adjusted Leverage Ratio <= 5.75 4.25
Slide 31: Operations Review
OPERATIONS REVIEW
Slide 32: New Vehicle Retail Same Store
NEW VEHICLE RETAIL SAME STORE Retail Units Q1 2017 Q1 2016 B/(W) Retail Volume 29,563 30,156 (2.0%) Selling Price 38,344 $ 38,116 $ 0.6% Gross Margin % 5.1% 5.1% 0 bps GPU 1,954 $ 1,935 $ 20 $ Gross Profit (millions) 57.8 $ 58.3 $ (1.0%) SAAR (millions) 17.2 17.1 0.6% Jan Feb Mar Total 2017 9,505 8,
Slide 33: New Vehicle SAAR
NEW VEHICLE SAAR YTD 2017 – 17.2M Full Year 2016 – 17.4M Full Year 2015 – 17.4M
Slide 34: New Vehicle SAAR - Retail
NEW VEHICLE SAAR - RETAIL 16.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 —2016
Slide 35: Vehicle Days Supply
VEHICLE DAYS SUPPLY 20 + — Q2 Q Q4 Qi Q2 Q3 Q4 Qi 2015 2015 2015 2015 2016 2016 2016 2016 2017 —New —wUsed
Slide 36: New Vehicle – Gross & Unit Trend
NEW VEHICLE NEW VEHICLE – GROSS & UNIT TREND Continuing Operations
Slide 37: New Vehicle – Gross Per Unit
NEW VEHICLE NEW VEHICLE – GROSS PER UNIT Continuing Operations
Slide 38: Used Vehicle Retail Same Store
USED VEHICLE RETAIL SAME STORE Q1 Record Used Retail Volume March Month All-Time Record of 10,854 Used Retailed Q1 2017 Q1 2016 B/(W) Retail Volume 29,458 29,333 .4261412062% GPU $1,299.6950353045147 $1,329.2717543381109 $-29.576719033596191 Used to New 1 to 1.00 0.97 to 1.00 0.03 Vehicles/Store/Mth
Slide 39: Used Vehicle – Gross Trend
* - Used Related Gross = (Used Gross + F&I + Reconditioning) ($’s in millions) USED VEHICLE – GROSS TREND Continuing Operations
Slide 40: F&I Same Store
Total Gross Flat Higher PUR increased gross $0.7M, however, offset entirely by effect of lower overall retail units. Gross (millions) $ 80.9 $ 80.9 F&I SAME STORE Record PUR
Slide 41: F&I – Gross & PUR Trend
F&I F&I – GROSS & PUR TREND Continuing Operations Record Q1 Gross
Slide 42: Fixed Operations – Gross Trend
FIXED OPERATIONS ($’s in millions) FIXED OPERATIONS – GROSS TREND Continuing Operations Record Q1 Fixed Ops Gross
Slide 43: Fixed Ops Same Store
FIXED OPS SAME STORE (amounts in millions) Q1 2017 Q1 2016 B/(W) Revenue $349.44485698 $346.05449943000002 .9797178062% Gross Profit $167.47825774 $165.64933493999999 1.1040930534% SAAR - Keyed 17.8M 16.8M 0.06
Slide 44: Summary
SUMMARY Challenging New Vehicles Environment January and February Slower than Normal – Picked Up In March New Vehicle GPU Leveling Off Used Vehicle Valuations Fairly Consistent - Slight Margin Pressure Fixed Operations Stable – Expect Growth Higher in Remaining Quarters Hail Storms Will Affect Q2 –
Slide 45: Appendix
APPENDIX
Slide 46: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS (amounts in thousands) 2009 2010 2011 2012 2013 2014 2015 2016 Net Income 31,548 $ 89,929 $ 76,254 $ 89,101 $ 81,618 $ 97,217 $ 86,311 $ 93,193 $ Non-Floorplan Interest 67,735 68,604 63,576 58,453 55,356 52,269 49,524 48,034 Depreciation & Amortization 57,036 45,827 51,164 5
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Franchised Dealerships EchoPark® Continuing Operations Reported: Scaacrpenses S$ 2922 $ 2844 $ 2836 $ 2787 $ a6 57 Adjustme! Adjusted: SGEAewpenses s 83.4% 82.4% 82.0% 81.5% NM NM Adjusted: NM=Not meaningful rk AuTomoTive
Slide 48: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® March 31, March 31, March 31, Continuing Operations 2017 2016 a7 2016 207 ‘(millions Reported: Adjustments (before income taxes): G&A 12 61 12 641 - - os - 05 - - 7 a 5 rs 5 2 5 Adjusted: ssi S$ #4 $ 2 $ 516 $ 61 S$ G2 Reported:
Slide 49: Non-GAAP Reconciliations
Reported: Earnings (loss) and shares Basic earnings torsand shares ae - -_ Diluted eaminge {oos)and shares NON-GAAP RECONCILIATIONS ‘Three Months Ended March 31,2017 Weighted ‘Average Share: Amour Amount _ Amount Tin owen, except per er share ‘amounts) 44791 $ (20) S$ (621) S (641) FaTOA oy S (21) “
Slide 50: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Reported: Earnings (loss) and shares ‘Stock compensation plans Diluted earnings (loss) and shares Adjustments: Semmicanssserlober ope Babel ta s . adjustments ...... Eattereirieneneretarincome taxes .. Eamings (loss) and diluted earnings (loss) per share (1)... Three Months
Slide 51: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS "Dintede earnings Gas) por share Adjustments fect of adjustments, noterana ie Adjusted: Diluted eamings (loss) per share. . Franchised Dealerships 2017 EchoPark® Consolidated Franchi 2016 ised Dealerships EchoPark® Consolidated
Slide 52: Non-GAAP Reconciliations – EchoPark
5 NON-GAAP RECONCILIATIONS – ECHOPARK® Total EchoPark EchoPark Only AutoMatch Only (amounts in millions, except unit and per unit data) Q1 2017 Q1 2017 Q1 2017 Revenue $41.797235549999996 $33.665376829999992 $8.1318587200000003 Gross Profit $4.6646679900000096 $4.0060857900000091 $0.6585822000000010