Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q2 2017 Earnings Presentation
56 slides from Sonic Automotive's earnings presentation, Jul 28, 2017
Slide 1: Q2 2017 Investor Presentation
Q2 2017 Investor Presentation July 28, 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
OVERVIEW – FRANCHISED GEOGRAPHIC Based in Charlotte, NC 105 Stores, 25 Brands, 18 Collision Repair Centers Platforms in Major Metro Markets
Slide 6: Overview – EchoPark
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 bei
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
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: 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 $1
Slide 12: 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 13: 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 Q2 2017 Exp
Slide 14: Strategic Focus: Own Our Properties
STRATEGIC FOCUS OWN OUR PROPERTIES % of Properties Owned Increased Equity in Properties to $281M in 2016
Slide 15: Strategic Focus: Return Capital to Shareholders
STRATEGIC FOCUS RETURN CAPITAL TO SHAREHOLDERS Quarterly Dividend at $0.05/Share in Q1 & Q2 of 2017 Acquired 11.2% of OS in 2016, 3.0% of OS in 2017 YTD New Share Count = 43.8M Down from High of 53.2M (Dec 2012) Dividends Declared of $9.1M in 2016 (000's) (000's) (000's) Shares $/Share $ Availabilit
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 SHAREHOLDERS
Slide 17: Q2 2017 Financial Review
Q2 2017 FINANCIAL REVIEW
Slide 18: Financial Review: Franchised Segment
Q2 2017 FINANCIAL REVIEW FRANCHISED SEGMENT
Slide 19: Franchised Segment Q2 2017 Results
FRANCHISED SEGMENT Q2 2017 RESULTS – Q2 2017 results are adjusted – See appendix for reconciliation to GAAP amounts. B/(W) than Q2 2016 (1) (amounts in millions, except per share data) Q2 2017 (1) $ % Revenue $2,356.6915907800003 $3.8519750200100242 .163716004874% Gross Profit $355.29032416501303 $5
Slide 20: Financial Review: EchoPark Segment
Q2 2017 FINANCIAL REVIEW ECHOPARK® SEGMENT
Slide 21: EchoPark Segment Q2 2017 Results
ECHOPARK® SEGMENT Q2 2017 RESULTS – Q2 2017 results are adjusted – See appendix for reconciliation to GAAP amounts. B/(W) than Q2 2016 (1) (amounts in millions, except per share, unit and per unit data) Q2 2017 (1) $ % Revenue $49.054388700000004 $19.581686550000004 0.66440078857852558 Gross Profit
Slide 22: EchoPark Colorado Stores Cash Flow
ECHOPARK® - COLORADO STORES CASH FLOW EchoPark Colorado was cash flow positive in Q2 $215,000 Q2 2017 (amounts in thousands, except unit and per unit data) Colorado Stores Retail Units 1,728 Used GPU $888.22682870370318 F&I GPU $1,017.1155671296297 Total Gross $4,576.8231700000006 Cash Flow $215.107
Slide 23: Financial Review: Total Enterprise
Q2 2017 FINANCIAL REVIEW TOTAL ENTERPRISE
Slide 24: Consolidated Q2 2017 Results
CONSOLIDATED Q2 2017 RESULTS – Q2 2017 results are adjusted – See appendix for reconciliation to GAAP amounts. B/(W) than Q2 2016 (1) (amounts in millions, except per share data) Q2 2017 (1) $ % Revenue $2,405.7459794800002 $23.433661570010241 .983651949992% Gross Profit $360.61829559501399 $7.31369
Slide 25: Q2 2017 Revenue & Gross Profit
Q2 2017 REVENUE & GROSS PROFIT B/(W) than Q2 2016 (amounts in millions, except units or per unit data) Q2 2017 $ % New Retail Revenue $1,247.3184919600001 $-22.524264700000174 -1.773783768255% Used Retail Revenue $641.89062597000202 $19.705123120001982 3.167081687011% Fixed Operations Revenue $361.1
Slide 26: Q2 2017 Adjusted SG&A to Gross
Q2 2017 ADJUSTED(1) SG&A TO GROSS 79.7% 78.5% – Q2 2017 is adjusted – See appendix for reconciliation to GAAP amounts.
Slide 27: Adjusted SG&A to Gross
Q2 2017 ADJUSTED(1) SG&A TO GROSS – Q2 2017 is adjusted – See appendix for reconciliation to GAAP amounts.
Slide 28: Q2 2017 Interest Expense
Q2 2017 INTEREST EXPENSE Floor Plan Increase Due to Higher Rates and Higher New Balance B/(W) than Q2 2016 (amounts in millions) Q2 2017 $ % Floor Plan Interest Expense $9.1445464099999914 $-2.4546059599999919 -0.36690998647080508 Interest Expense, Other $12.763516619999999 $-0.55823385999999842 -4.
Slide 29: 2017 Cap Ex
2017 CAP EX (amounts in millions) YTD Q2 2017 Estimated FY 2017 Real Estate & Facility Related $99.6 $229.9 All Other Cap Ex 21.6 18.3 Subtotal $121.19999999999999 $248.20000000000002 Less: Mortgage Funding -32.5 -55 Total Cash Used – Cap Ex $88.699999999999989 $193.20000000000002
Slide 30: Debt Covenants
DEBT COVENANTS Compliant with all Covenants Covenant Q2 2017 Liquidity Ratio >= 1.05 1.1399999999999999 Fixed Charge Coverage Ratio >= 1.20 1.95 Total Lease Adjusted Leverage Ratio <= 5.75 4.38
Slide 31: Operations Review
OPERATIONS REVIEW
Slide 32: New Vehicle Retail Same Store - Franchised
NEW VEHICLE RETAIL SAME STORE - Franchised Retail Units Apr May Jun Total 2017 10,103 11,637 10,346 32,086 2016 10,919 11,865 10,445 33,229 B/(W) -,816 -,228 -99 -1,143 Q2 2017 Q2 2016 B/(W) Retail Volume 32,086 33,229 -3.439766469% Selling Price $38,360.457572461513 $38,214.895322158358 .3809044852
Slide 33: New Vehicle SAAR
NEW VEHICLE SAAR 2nd QTR Down 2.9% YTD 2017 – 16.9M 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 80 77 30 | 20 +— 1 a Q2 Q3 Q4 Qi Q2 Q3 Q4 Qi Q2 2015 2015 2015 2016 2016 2016 2016 2017 2017 —New —vUsed
Slide 36: New Vehicle – Gross & Unit Trend
NEW VEHICLE NEW VEHICLE – GROSS & UNIT TREND Continuing Operations - Franchised
Slide 37: New Vehicle – Gross Per Unit
NEW VEHICLE NEW VEHICLE – GROSS PER UNIT Continuing Operations - Franchised
Slide 38: Used Vehicle Retail
USED VEHICLE RETAIL Franchised Continuing: Same Store: Q2 2017 Q2 2016 B/(W) Retail Volume 28,487 28,151 1.1935632837% GPU $1,342.4427094815073 $1,271.184686748833 $71.258022732674362 Used to New 0.88 0.85 3.0000000000000027E-2 Vehicles/Store/Mth (105/102 stores) 90.43492063492063 91.996732026143789
Slide 39: Used Vehicle – Gross Trend
* - Used Related Gross = (Used Gross + F&I + Reconditioning) ($’s in millions) USED VEHICLE – GROSS TREND Continuing Operations - Franchised
Slide 40: Used Vehicle Gross Contribution
USED VEHICLE GROSS CONTRIBUTION Continuing Operations - Franchised Front End Gross and F&I F&I and Higher GPU is Supporting Front End Gross Growth (in millions) Apr May Jun Total 2017 $25.939812007872501 $26.905302557153838 $25.011024994288018 $77.856139559314357 2016 25.350713645404781 25.513975578
Slide 41: F&I – Gross & PUR Trend
F&I F&I – GROSS & PUR TREND Continuing Operations - Franchised All Time Record PUR
Slide 42: Fixed Operations – Gross Trend
FIXED OPERATIONS ($’s in millions) FIXED OPERATIONS – GROSS TREND Continuing Operations – Franchised All-Time Quarterly Record
Slide 43: Fixed Ops Same Store
FIXED OPS Franchised Continuing: Same Store: ($ in millions) Q2 2017 Q2 2016 B/(W) Revenue $358.15790809999902 $349.081373339999 2.6001200445% Gross Profit $171.59596108 $167.32566605 2.5520860791% Q2 2017 Q2 2016 B/(W) Revenue $354.39144368999899 $349.081373339999 1.5211554542% Gross Profit $170.07
Slide 44: Summary & Outlook
SUMMARY & OUTLOOK EchoPark Continues Expansion – Ramp Up For 2018 – Additional 15 Stores San Antonio Dallas / Fort Worth Houston Austin Carolinas Georgia Houston Still Affecting Overall Performance Continuing to Challenge Cost Structure to Gain Efficiencies Used Vehicle Valuations Fairly Consistent
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 52,616 58
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS June 30, 2017 Franchised Franchised Dealerships _EchoPark® Consolidated Dealerships _EchoPark® Consolidated Reported: Diuted earings Joss er share Adjustments (net of income taxe: Impaiment charges (0.04) $ 050 g et ofa stments, net ofincome taxes Adjuste Died earings (loss)
Slide 48: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® Continuing Operations 2017 2016 2017 2016 2017 2016 ‘(in millions) Reported: ‘SG&Aexpenses $ 2939 $ 272 $ 244 $ WNT $ 95 $ 55 jjustments: ‘Storm damage (46) - (4.9) - 7 Legal r (1.0) - (1.0) - - Sanie) Echo AuTomoTive
Slide 49: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Franchised Dealerships Continuing Operations Reported: Adpustents foto income taxes SG8Aemenses ..... Adjusted: Reported: Income (loss) from continuing operations before taxes ‘Adjustments (before income taxes): nses Adjusted: Income (loss) from continuing operations before
Slide 50: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® June 30, June 30, June 30, Continuing Operations, 2017 2016 2017 2016 2017, EX ‘(in millionsy Reported: GBA S$ 5862 $ 5616 $ 5681 $ 5504 $ 181 $ 112 just ments: Storm damage Adjusted: ‘SG&Aexpenses Reported: Adjustments: Storm da
Slide 51: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Franchised Dealerships EchoPark® June 30, June 30, Continuing Operations, 2017 2016 207 2076 2017 2076 (amitions) Reported: Operati $ 786 $ 94 $ 910 $ 1056 $ (124) $ (62) ‘Adjustments (before income taxe: SGBA Adjusted: Operating income .....-...2.2.sesseeeeeeeeeeeeeeeeeeee
Slide 52: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Three Months Ended June 30, 2017 Net Income (Loss) Weighted Per ‘Average Share Shares Amount _ Amount Reported: Earnings (loss) and shares 44570 § 12,314 $ (182) $ 12,132 Effect of participating securities: Non-vested restricted stock @) Basic earnings (loss) and shares 4510
Slide 53: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Reported: Earnings (loss) and shares Eetof parkeipatng eocuos Non-vested restricted st Basic earnings torsand shares Ena a ui itisieannios Eas a shares 45,731 a5 731 ‘Three Months Ended June 30, 2016 $ 23030 S$ 050 S$ (221) $23,030 Income (Loss) Income (Loss) Continuing Disc
Slide 54: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS ix Months Ended June 30, 2017, Income (Loss) Continuing From Discontinued tions. Operations Net income (Loss) Weighted Per Per ‘Average Share Share Share Shares _ Amount jount_ _Amount_ _Amount_ __Amount__ Amount (in thousands, except per share amounts) Reported: Eamings (lo
Slide 55: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Reported: Earnings (loss) and shares Effect of paricipating secures: Non-vested restricted stock... Basic earnings (loss) and shares fae ie ane nsal ee baud enna asaya shares tment Effect of adjustments, net Siaeane woe: Adjusted: Eamings (loss) and diluted earings (loss) pe
Slide 56: Non-GAAP Reconciliations – EchoPark
NON-GAAP RECONCILIATIONS – ECHOPARK® – Q2 2017 results are adjusted – See appendix for reconciliation to GAAP amounts. Total EchoPark EchoPark Only AutoMatch Only (amounts in millions, except unit and per unit data) Q2 2017 (1) Q2 2017 Q2 2017 Revenue $49.054388700000004 $41.239478210000001 $7.81491