Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q2 2020 Earnings Presentation
56 slides from Sonic Automotive's earnings presentation, Jul 31, 2020
Slide 1: Sonic Automotive – Investor Presentation July 2020
Sonic Automotive – Investor Presentation July 2020 Updated July 30, 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 Our Core Franchised Dealerships Segment is a 95 15 Full-Service Automotive Dealerships Collision Centers Retailer, Selling New and Used Vehicles, Arranging F&I Product Sales, and (NYSE: SAH) a Fortune 500 Providing Parts, Service and Collision Repair 20+ 12 A
Slide 5: Investment Highlights
Investment Highlights Multiple Growth And Profit Drivers For Franchised Segment Broad Revenue Unique, High Stream Return EchoPark Diversification Business Model Plan To Grow Total Revenue To Over $20 Billion By 2025 Complementary Focused On Expense Relationship – Sonic Control And Franchised And Str
Slide 6: Revenue Composition
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 – Diversified Revenue Streams
Revenue Composition – Diversified Revenue Streams 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 Repair ("Fixed Operations") Audi 6% Finance & Insurance ("F&I") Lexus
Slide 8: EchoPark Automotive – A Unique Growth Story
EchoPark Automotive – A Unique Growth Story The New Car Alternative™ Price. Quality. Convenience. Focus On 10% Below Pre-Owned Market – More Stable Market Than New Vehicle Pricing With Simplified, Easy Market Purchase Experience Unique, High Return Business Model 1 to 4-Year-Old 30% of Guests Vehicl
Slide 9: EchoPark – High Volume Model Drives Superior Returns
EchoPark – High Volume Model Drives Superior Returns Ultra-Low Pricing Attractive F&I High Volume Throughput May Yield Slightly Negative Higher Penetration Rates 5X Volume Per Store Per Front-End Gross Profit Per On F&I Products Month vs. Sonic Franchised Unit vs. Sonic Franchised Stores Stores Gros
Slide 10: Complementary Relationship Between Segments
Complementary Relationship Between Segments Franchised Dealerships • Thrives When New Vehicle Industry Is • Strong Secular Growth Phase Due To: Healthy, Particularly Where Luxury Focus On Recession-Resistant Brands Are Strong Pre-Owned Vehicle Market • Diverse Revenue Streams - Some Below-Market
Slide 11: Industry-Leading Used Vehicle Volume Throughput
Industry-Leading Used Vehicle Volume Throughput Retail Used Vehicle Unit Sales Per Store Per Month 518 440 Sold 561 Units Per Store In June 2020 205 101 94 77 Sold 110 Units Per Store In June 2020 Peer Average* Sonic Franchised Sonic Franchised CarMax** EchoPark EchoPark (Q1 2020) (Q2 2020) (Q1 2020
Slide 12: Inventory Management Expertise
Inventory Management Expertise Used Vehicle Inventory Days’ Supply 59 52 Days Supply = 31 Days As Of June 30, 2020 On Trailing One-Month Cost of Sales Basis Days Supply = 22 Days As Of June 30, 38 2020 On Trailing 34 One-Month Cost of Sales Basis 29 25 Peer Average* Sonic Franchised Sonic Franchised
Slide 13: Strategic Direction
Strategic Direction Franchised Dealerships EchoPark Capital Allocation Drive New And Used Vehicle Early Stage Strong Secular Opportunistic Divestitures Of Profit Growth Through Growth Phase Underperforming Or Capital- Multiple Channels Intensive Franchised (Traditional Sale Or Lease, Profitability I
Slide 14: EchoPark Accelerated Expansion Plan
EchoPark Accelerated Expansion Plan 14
Slide 15: EchoPark – Developing Nationwide Distribution Network
EchoPark – Developing Nationwide Distribution Network 140+ Point Distribution Network By 2025 Existing Planned Retail Planned Retail Delivery & Buy Center Retail Hub Hub In 2020 Hub In 2021 Coverage Area 15
Slide 16: EchoPark – Modeled 4-Wall Economics At Maturity
EchoPark – Modeled 4-Wall Economics At Maturity Delivery & Medium Large (Modeled Metrics Assume 100% Maturity) Buy Center Retail Hub Retail Hub Average Monthly Retail Unit Volume 300 750 1,500 Average Vehicle Selling Price $ 20,500 $ 20,500 $ 20,500 Total Annual Revenues $ 82,000,000 $ 210,000,000 $
Slide 17: EchoPark – Delivery & Buy Center Rollout
EchoPark – Delivery & Buy Center Rollout Delivery & Buy Center Model • Tremendous Operating Leverage Utilizing Existing Physical Store For Inventory Reconditioning • Advertise Inventory In Surrounding Markets • Complete E-Commerce Sales Into New Markets • Inspect & Buy Vehicles From Guests After App
Slide 18: EchoPark – Delivery & Buy Center Rollout Greenville
EchoPark – Delivery & Buy Center Rollout Greenville, SC Opened July 24 18
Slide 19: EchoPark – 5-Year Accelerated Growth Forecast
EchoPark – 5-Year Accelerated Growth Forecast Total Revenues (In Billions) $14.0 Pre-Tax Profit (In Millions) EBITDA (In Millions) Retail Unit Sales Volume $261.0 $221.0 575,000 $28.0 65,000 $16.0 55% 2020E 2025E 2020E 2025E 2020E 2025E CAGR Rate Of Expansion Total Addressable Market • Expect to Ope
Slide 20: EchoPark Accelerated Expansion Plan Enablers
EchoPark Accelerated Expansion Plan Enablers 20
Slide 21: EchoPark – Brand Promise
EchoPark – Brand Promise P r i c e . Q u a l i t y. C o n v e n i e n c e . Up To 40% Below 10% Below Used High Quality, Low Transparent New Vehicle Price Vehicle Market Price Mileage Vehicle With Guest-Centric Existing Warranty Experience New Car Feel Zero Reported Buy & Sell Complete Purchase With
Slide 22: EchoPark – Full Omni-Channel Infrastructure
EchoPark – Full Omni-Channel Infrastructure B u y & S e l l Yo u r W a y ON-SITE ONLINE Proprietary EchoPark E-Commerce User Interface Developed By Cox Automotive Customer Appraise/Sell Your Old Car Buy Your Nearly New Car Facing Technology Darwin Automotive – Bridging Online And On-Site Experience
Slide 23: Buy & Sell Your Way
Buy & Sell Your Way Buy & Sell Buy Begin Online, Buy Your Way On-Site Finish On-Site Online • Our Blend Of Brick And • Complete A Traditional • Research Online, • Complete An E- Mortar And E- Vehicle Purchase Utilize Web Chat, Text, Commerce Transaction Commerce Strategies Experience With A Phone, Z
Slide 24: EchoPark Segment Historical Data
EchoPark Segment Historical Data 24
Slide 25: EchoPark – Historical Growth Path
EchoPark – Historical Growth Path $350 16,000 13,986 $300 13,206 13,207 14,000 Q2 2020 Volume % Change 12,587 12,676 By Month Vs. 2019 12,000 $250 11,051 April 2020 (30%) 10,000 May 2020 9% 8,762 (In Millions) $200 June 2020 35% 7,459 7,698 8,000 $150 5,518 6,000 4,496 $100 4,000 2,400 2,049 $50 1,5
Slide 26: EchoPark – Adjusted EBITDA Trend
EchoPark – Adjusted EBITDA Trend $6,352 $6,000 $5,569 $5,299 $5,169 $4,957 $4,792 $4,000 FY 2019 Adjusted EBITDA of $21.4 Million, Up 302% From (In Thousands) FY 2018 $2,000 $- Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 ($1,115) Q1 & Q2 2020 Negat
Slide 27: EchoPark – Market Maturity Comparison
EchoPark – Market Maturity Comparison Average Monthly Retail Unit Volume - 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 Market Particularly Affected By Dallas COVID-19 In Early Q2 Acquired Q3 2017 2020, Rebounded To Sell 1,371 Units In H
Slide 28: Franchised Dealerships Segment
Franchised Dealerships Segment 28
Slide 29: Franchised Dealerships
Franchised Dealerships 85 Franchised Dealerships 20+ Brands, Weighted Luxury New & Used Vehicle Sales Parts & Service (P&S) Finance & Insurance (F&I) Major 15 Collision Repair Centers 20 Metropolitan Markets Focused On Inventory Mix and Attractive Pricing to Drive Growth and Profitability 29
Slide 30: Franchised Dealerships – Geographic Footprint
Franchised Dealerships – Geographic Footprint Headquartered in 85 Stores, 20+ Brands, Platforms in Major Charlotte, NC 15 Collision Repair Centers Metro Markets 30
Slide 31: Franchised Dealerships – Strategic Levers
Franchised Dealerships – Strategic Levers Grow Parts and Service Acquire Potential High Maximize Return Stores F&I Penetration Divest Multiple Growth Underperforming or Cap Ex Intensive Stores Drivers Used Vehicle Volume Throughput SG&A Expense Inventory Discipline Sourcing Omni-Channel Selling Echo
Slide 32: Updated 2020 Outlook
Updated 2020 Outlook : ik =~ :
Slide 33: YTD 2020 By Month Versus Prior Year
YTD 2020 By Month Versus Prior Year % Change Better (Worse) From Comparable Prior Year Period January February March April May June July(1) Franchised dealerships segment same store: New vehicle unit sales volume 12% 11% (34%) (40%) (20%) (15%) (18%) Used vehicle unit sales volume 18% 24% (30%) (32%
Slide 34: Illustrative Impact Of SG&A Expense Reductions
Illustrative Impact Of SG&A Expense Reductions $4.07 $84 Million Annualized $2.65 Expense Reductions All-Time Record Adjusted Annualized SG&A Pro Forma Illustrative EPS (FY 2019) (1) Expense Reduction Adjusted EPS (FY 2019) 7% Reduction In SG&A Expenses Modeled To Increase EPS By 54% (1) Amounts Are
Slide 35: Outlook – Franchised New Vehicles
Outlook – Franchised New Vehicles Franchised Dealerships New Vehicle Unit Sales Volume 14,000 Production Constraints Driving Inventory Shortages In Certain Makes/Models 12,000 Expected To Impact Sales In Second Half Of 2020 10,000 8,000 Expect Higher New 6,000 June Actuals Vehicle GPU To Continue 3%
Slide 36: Outlook – Franchised Used Vehicles
Outlook – Franchised Used Vehicles Franchised Dealerships Retail Used Vehicle Unit Sales Volume 14,000 12,000 Back To Original Forecast in August 10,000 8,000 June Actuals 4% Better 6,000 Than Previous Forecast 4,000 2,000 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Original Forecast June 16th
Slide 37: Outlook – EchoPark Used Vehicles
Outlook – EchoPark Used Vehicles EchoPark Retail Used Vehicle Unit Sales Volume 8,000 7,000 6,000 5,000 Expect Continued Acceleration In Second Half 4,000 Of 2020 June Actuals 3% Better 3,000 Than Previous Forecast 2,000 1,000 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Original Forecast June
Slide 38: Outlook – Franchised Fixed Operations
Outlook – Franchised Fixed Operations Franchised Dealerships Fixed Operations Gross Profit $ $70,000 $60,000 $50,000 (In Thousands) Uncertainty Related To $40,000 California Reopening June Actuals 9% $30,000 Better Than Previous Forecast $20,000 $10,000 $- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Slide 39: Q2 2020 Financial Snapshot
Q2 2020 Financial Snapshot 39
Slide 40: Q2 2020 – Consolidated Continuing Operations
Q2 2020 – Consolidated Continuing Operations B/(W) than Q2 2019 (In millions, except per share data) Q2 2020 $ % Revenues $2,111.9 ($502.2) (19.2%) Gross profit $307.4 ($73.9) (19.4%) SG&A expenses $230.4 $64.2 21.8% SG&A expenses as % of gross profit 74.9% 230 bps Earnings from continuing operation
Slide 41: Q2 2020 – Consolidated SG&A Expenses As % Of Gross Profit
Q2 2020 – Consolidated SG&A Expenses As % Of Gross Profit Expect To Reduce SG&A Expenses By Approximately $84 Million Annualized On Go- Forward Basis, Compared To Pre-COVID-19 Levels 230 bps Better 74.9% 77.2% 22.2% 22.4% 3.5% 4.3% 47.5% 45.6% 2.6% 4.0% Q2 2020 Q2 2019 Advertising Comp Rent Other 41
Slide 42: Strong Balance Sheet And Liquidity
Strong Balance Sheet And Liquidity June 30, 2020 December 31, 2019 (In Millions) Cash and cash equivalents $ 115.7 $ 29.1 Availability under the 2016 Revolving Credit Facility 183.4 230.7 (1) Availability under our used vehicle floor plan facilities - 17.1 Availability under the 2019 Mortgage Facili
Slide 43: Capital Expenditure Discipline
Capital Expenditure Discipline Gross Capital Expenditures (In Millions) $234.2 $163.6 $125.6 $133.1 $80.0 FY 2017 FY 2018 FY 2019 FY 2020E FY 2020E (Less Mortgage Proceeds) Strict Capital Allocation Strategy Prioritizes Highest Return On Investment Actual YTD Q2 2020 Gross Capital Expenditures Of $6
Slide 44: Appendix
APPENDIX 44
Slide 45: Non-GAAP Reconciliation – Segment Income
Non-GAAP Reconciliation – Segment Income Franchised Dealerships EchoPark Segment Segment Consolidated (In millions, except unit data) Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Revenues $ 1,796.6 $ 2,322.4 $ 315.3 $ 291.7 $ 2,111.9 $ 2,614.1 Gross profit $ 280.3 $ 353.4 $ 27.1 $ 27.9 $ 307.4 $
Slide 46: Non-GAAP Reconciliation – Earnings Per Share
Non-GAAP Reconciliation – Earnings Per Share Q2 2020 Q2 2019 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 43,575 $ 30,996 $ 0.71 43,230 $ 26,751
Slide 47: Non-GAAP Reconciliations – Adjusted Earnings
Non-GAAP Reconciliations – Adjusted Earnings (In millions) FY 2019 Gross profit $ 1,521.0 SG&A expenses $ 1,099.4 Items of interest: Gain on franchise disposals $ 76.0 Executive transition costs (6.3) Legal and storm damage charges - Long-term compensation charges - Lease exit adjustments - Adjusted
Slide 48: Non-GAAP Reconciliations – Adjusted Earnings
Non-GAAP Reconciliations – Adjusted Earnings 2019 (In millions) January February March April May June July Gross profit $ 116.3 $ 108.0 $ 134.7 $ 123.9 $ 129.1 $ 128.3 $ 126.9 SG&A expenses $ 53.6 $ 92.2 $ 101.3 $ 97.7 $ 100.4 $ 96.4 $ 100.0 Items of interest: Gain on franchise disposals $ 45.6 $ -
Slide 49: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – Adjusted EBITDA LTM* (In thousands) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Q2 2020 Net Income (Loss) $ 86,311 $ 93,193 $ 92,983 $ 51,650 $ 144,137 $ (93,226) Provision For Income Taxes 55,962 59,899 13,198 22,645 54,954 (11,836) Income (Loss) Before Taxes $ 142,273 $ 153,0
Slide 50: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – Adjusted EBITDA Q2 2020 Q2 2019 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) (In thousands) Net Income (Loss) $ 30,791 $ 26,599 Provision For Income
Slide 51: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – Adjusted EBITDA Q1 2020 Q1 2019 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) Net Income (Loss) $ (199,333) $ 42,221 Provision For Income Taxes (44,2
Slide 52: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – 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 7
Slide 53: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – 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 54: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – 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 13
Slide 55: Sonic Automotive and EchoPark Automotive
Slide 56: 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