Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q3 2015 Earnings Presentation
41 slides from Sonic Automotive's earnings presentation, Oct 28, 2015
Slide 1: Q3 2015 Earnings Review
Q3 2015 EARNINGS REVIEW OCTOBER 28, 2015 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 STRATEGIC FOCUS FINANCIAL RESULTS OPERATIONS REVIEW SUMMARY AND OUTLOOK
Slide 4: Strategic Focus
STRATEGIC FOCUS Growth One Sonic-One Experience EchoPark® Acquisitions & Open Points Own Our Properties Return Capital to Shareholders
Slide 5: 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 Multi-Year Implementation Charlotte Market in Optimization Phase Technology Being Introduced into Additional Market
Slide 6: Strategic Focus: EchoPark
STRATEGIC FOCUS EchoPark® Denver Market with three stores open and four additional planned openings in next 12 months Currently acquiring property for expansion into an additional market
Slide 7: Strategic Focus: Acquisitions & Open Points
STRATEGIC FOCUS ACQUISITIONS & OPEN POINTS Open Points Mercedes Benz in Dallas Market Operational in 2016 Audi in Pensacola Market Operational in 2016 Nissan in TN Market Operational in late 2016 / early 2017 Exploring Acquisition and Open Point Opportunities in Other Markets
Slide 8: Strategic Focus: Own Our Properties
STRATEGIC FOCUS OWN OUR PROPERTIES Expect to be Nearly 40% at 12/31/15
Slide 9: Strategic Focus: Return Capital to Shareholders
STRATEGIC FOCUS RETURN CAPITAL TO SHAREHOLDERS YTD Repurchased 2.8% of outstanding shares as of 12/31/2014 Unused Authorization of Approximately $ 47 million Increased Quarterly Dividend 50% to $0.0375 Per Share Shares (in thousands) Average Price / Share $ (in millions) Q3 2015 Activity 802 21.53 $
Slide 10: Q3 2015 Financial Review
Q3 2015 FINANCIAL REVIEW
Slide 11: Franchised Dealerships
Q3 2015 FINANCIAL REVIEW FRANCHISED DEALERSHIPS
Slide 12: Franchised Dealerships
FRANCHISED DEALERSHIPS B/(W) than Q3 2014(1) (amounts in millions, except per share data) Q3 2015 $ % Revenue $ 2,472 $ 116 5.0% Gross Profit $ 357 $ 16 4.6% SG&A as % of Gross 76.8% 150 bps Operating Profit $ 66 $ 7 11.0% Interest & Other $ 17 ($ 0) (0.7%) Pretax $ 49 $ 6 15.3% Diluted EPS $ 0.57 $
Slide 13: EchoPark
Q3 2015 FINANCIAL REVIEW ECHOPARK®
Slide 14: EchoPark
EchoPark® B/(W) than Q3 2014 (amounts in millions, except per share data) Q3 2015 $ Revenue $ 22 n/a Gross Profit $ 3 n/a Operating Profit ($ 4) $ 0 Interest & Other $ 0 ($ 0) Pre-tax Profit (Loss) ($ 4) ($ 0) Diluted EPS Impact ($ 0.04) $ 0.00 Store Level (retail units) 920 n/a GPU $ 1,470 n/a F&I
Slide 15: Total Enterprise
Q3 2015 FINANCIAL REVIEW TOTAL ENTERPRISE
Slide 16: Consolidated Q3 2015 Results
CONSOLIDATED Q3 2015 RESULTS B/(W) than Q3 2014(1) (amounts in millions, except per share data) Q3 2015 $ % Revenue $ 2,494 $ 139 5.9% Gross Profit $ 360 $ 19 5.5% Operating Profit $ 63 $ 7 12.2% Interest & Other $ 18 ($ 0) (2.5%) Continuing Ops: Profit (after tax) $ 27 $ 3 12.7% Diluted EPS $ 0.53
Slide 17: Revenue & Gross Profit
REVENUE & GROSS PROFIT Q3 2015 B/(W) than Q3 2014 (amounts in millions, except per share data) Q3 2015 $ % New Retail Revenue $ 1,352 $ 40 3.0% Used Retail Revenue $ 652 $ 68 11.7% Fixed Operations Revenue $ 350 $ 25 7.6% F&I Revenue $ 86 $ 9 11.4% Total Revenue $ 2,494 $ 139 5.9% New Retail Gross $
Slide 18: SG&A to Gross
SG&A TO GROSS 77.7% 79.4% (1) – Q3 2014 amounts are adjusted. See appendix for reconciliation of adjusted amounts to GAAP amounts 72.5% 74.1%
Slide 19: Q3 2015 SG&A to Gross
Q3 2015 scaa To GR DS Bees Total Sonic A\Y Less: EchoPark Franchised Dealerships
Slide 20: Adjusted and GAAP EPS Summary
(amounts in millions, except per share date) Q3 2015 Q3 2014 Pre-Tax EPS Pre-Tax EPS Franchised $48.9 $ 0.57 $ 42.4 $0.50 EchoPark® ($3.7) ($0.04) ($ 3.6) ($ 0.04) Adjusted Total $ 45.2 $ 0.53 $38.8 $ 0.46 Adjustments: Gain on Disposal ($0.0) ($ 0.00) $ 3.2 $ 0.04 Physical Damage ($0.0) ($0.00) ($ 2
Slide 21: Capital Spend
CAPITAL SPEND (amounts in millions) YTD Q3 2015 Estimated 2015 Real Estate & Facility Related $ 97.1 $ 141.2 All Other Cap Ex 30.1 34.5 Subtotal $127.2 $175.7 Less: Mortgage Funding (65.0) (73.5) Total Cash Used – Cap Ex $ 62.2 $ 102.2 Note – Spending excludes the effect of franchise acquisitions.
Slide 22: Liquidity
LIQUIDITY (amounts in millions) Q3 2015 Q4 2014 Cash $ 2.5 $ 4.2 Revolver Availability 152.6 165.6 Used floor plan availability 58.1 22.6 Floor plan deposit balance 74.0 57.5 Total $ 287.2 $ 249.9
Slide 23: Debt Covenants
DEBT COVENANTS Covenant Actual Q3 2015 Liquidity Ratio >= 1.05 1.20 Fixed Charge Coverage Ratio >= 1.20 1.78 Total Lease Adjusted Leverage Ratio <= 5.50 4.13 Compliant with all Covenants
Slide 24: Operations Review
= ln pate OPERATIONS — - REVIEW
Slide 25: New Vehicle Retail Same Store
NEW VEHICLE RETAIL SAME STORE Q3 2015 Q3 2014 B/(W) Volume 36,545 35,670 2.5% Selling Price $ 36,706 $ 36,236 1.3% Gross Margin % 4.8% 5.2% (40 bps) GPU $ 1,778 $ 1,899 ($ 120) Gross Profit $ 65 million $ 68 million (4.0%) SAAR (includes fleet) 17.8 million 16.8 million 6.0% All-time volume record f
Slide 26: Used Vehicle Retail Same Store
USED VEHICLE RETAIL SAME STORE Q3 2015 Q3 2014 B/(W) Retail Volume 29,173 26,902 8.4% Used Retail GPU $ 1,381 $ 1,517 ($ 136) Used to New 0.80:1.00 0.75:1.00 0.05 Vehicles / store / month (97 stores) 100 92 2nd consecutive quarter of 100 vehicles per store, per month All-time volume record for ANY s
Slide 27: Fixed Ops Same Store
FIXED OPS SAME STORE Q3 2015 B/(W) than Q3 2014 (amounts in millions) $ % Revenue $ 347 $ 27 8.3% Gross Profit $ 168 $ 15 10.0%
Slide 28: OSOE Technology Rollout
OSOE Technology Rollout Market Share Phase I Start Q1 2016 - CRM - Appraisal - Desking Tool Phase IIStart – 9-12 Months Later F&I Tool Phase IIIStart 18-24 Months Later Pricing Inventory Management Compensation Branding
Slide 29: EchoPark Performance Highlights
EchoPark® Performance Highlights Store volume continues to grow Margins are exceeding expectations Buying & Recon process being supported by Manheim Generation III facility has been developed cutting cost and creating efficiency while brand supportive M&A team busy acquiring properties Financial pro
Slide 30: Summary
Expect sales growth to continue across all revenue categories Opportunities in pre-owned as vehicles begin to come off lease Fixed operations should continue to grow at a steady rate OSOE roll out of technology to additional markets Growth plans in EchoPark® expected to accelerate in the 2016 Tracki
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Slide 32: Appendix
Appendix
Slide 33: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Adjusted The Company has reconciled these measures to the m patios ninth spe cote i es that emma -C rl ‘ompany , such a, bu not fnitd to, adjusted income from continuing et ‘comparable GAAP measures (the "Reported" amounts) in the release. TELM Cerra ROO ay es nbc a Consolid
Slide 34: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Franchised Dealerships EchoPark® Three Months Ended ‘Three Months Ended ptember 30 Sept 2018 2014 2018 2018 a milivons) Operating Profit Revonsiliation: As Reported s a9 Ss 569s 663 S wos Ss G4 s i) Pretax Adjustments: SG&A Impairment charges Total pre-tax adjustments, p Adj
Slide 35: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Franchised Dealerships Sipteraciea| wie eee Sept (a millions) SG&A Reconciliation As Reported Ss as ius 203 0 GE Te SCS Ad S 110 tax Adjustments: in on disposal Storm damage, Severaice and other Toral pre-tax adjustments Adjusted SG&A Pre. « SG&A as % of Gross Reconciliation
Slide 36: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Consolidated Franchised Dealerships EchoPark® in Ended Nine Months Ended Sept Nine Months Ended v be Operating Profit Revonsiliation: As Reported s W715 S m1 s 1609s 199s (34s 88) Pretax Adjustments: SG&A Impairment charges Total pre-tax adjustments, Adjusted Operating Profi
Slide 37: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS nber 30, 2015 (ass) Three Months Ended Sept Tncome (Loss) T Operations Net Income (Loss) Weighted Per Per Average Share hare Shares Amount ar Amount __Amount Reported: Eamings (loss) and shares 50456 S S$ 26.508 fect of participating securities: Nonevested restricted stoc an
Slide 38: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS ‘Three Months Ended Sept 30,2014 S} Tucome (Lass) Tncome (Los From Continuing From Discontinued Operations Operati Net In pes yme (Loss) Per Share Amount Amount ned: ss) sh 52,070 $ S155 S$ 24,712 of participating securities: Nlaagelgeisiaed to Daisies armas Adjustments (net
Slide 39: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Nine Months Ended September 30, Tncome (Loss) income (Loss) From Continuing From Discontinued Operations erations: Weighted er Fr Average are hare Shares Amount (din thousands, Report S331) s sorted Eamings (loss) and sha Efieet of panicipating securities: Non-vested restric
Slide 40: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Nine Months Ended September 30, 2014, rome (Loss) Tncome (Lass) im Continuing From Discontinued Operations Operations Net Income (Loss) pes Per er 7 Share Share Share es Amount _Amount__Amount__Amount___Amount__Amount (in thousands, except per share amounts) S 71091 52,333 $
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