Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Q1 2019 Earnings Presentation
42 slides from Sonic Automotive's earnings presentation, Apr 25, 2019
Slide 1: Q1 2019 Investor Presentation
Exhibit 99.2 Q1 2019 Investor Presentation
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 • FINANCIAL & OPERATIONS REVIEW • APPENDIX 3
Slide 4: Company Overview
~ COMPANY OVERVIEW Pn ww, ~arCash
Slide 5: Overview – Franchised Geographic
OVERVIEW – FRANCHISED GEOGRAPHIC Headquartered in Charlotte, NC 92 Stores, 23 Brands, 15 Collision Repair Centers Platforms in Major Metro Markets 5
Slide 6: Overview – EchoPark Geographic
OVERVIEW – ECHOPARK GEOGRAPHIC • Thornton & • Charlotte Location Opened in Centennial Opened October 2018 in 2015 • Velocity of Sales Increasing • CO Springs Opened Faster Compared to Other Q2 2017 New Openings Texas – 4 Locations Denver – 3 Locations NC – 1 Location Dallas/Grand Prairie Location –
Slide 7: Overview - Geographic
OVERVIEW - GEOGRAPHIC NV MD 2% 3% SC 2% OH VA 3% 3% NC CA 3% GA 3% 28% CO Concentration 8% in Major Metro Markets AL 5% FL 6% TN TX 7% 27% 7 Note: Percentages are percent of total revenue for FY 2018.
Slide 8: Overview – Brand & Revenue Composition
OVERVIEW – BRAND & REVENUE COMPOSITION Other Lux 7% Revenue streams VW Land Rover and brand mix offer 2% 4% BMW attractive diversification across Other Non-Lux 20% 3% the automotive retail space. Cadillac 2% GM 5% F&I Fixed 4% Audi Ops 7% Honda 14% 17% New 50% Ford Pre- 6% Owned 32% Lexus 6% Toyota
Slide 9: Q1 2019 Financial Review: Franchised Segment
Q1 2019 FINANCIAL REVIEW FRANCHISED SEGMENT 9
Slide 10: Franchised Segment Q1 2019 Results
FRANCHISED SEGMENT Q1 2019 RESULTS B/(W) than Q1 2018 (In millions) Q1 2019 $ % Revenue $2,140 ($130) (5.7%) Gross Profit $333 ($7) (2.1%) SG&A $227 $54 19.1% SG&A as % of Gross Profit 68.1% 1,440 bps Depreciation $20 $2 8.4% Impairment $0 $4 99.3% Operating Profit $86 $52 152.6% Interest & Other $2
Slide 11: New Vehicle SAAR - Retail
NEW VEHICLE SAAR - RETAIL 15.0 14.5 YTD 2019 – 12.7M 14.3 YTD 2018 – 13.3M 14.2 14.0 13.8 13.5 13.4 13.0 13.0 12.5 12.0 11.5 11.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019 11
Slide 12: New Vehicle Same Store - Franchised
NEW VEHICLE SAME STORE - FRANCHISED Q1 2019 Q1 2018 B/(W) New Unit Volume 24,695 26,910 (8.2%) Selling Price$ 42,425 $ 40,792 4.0% Gross Margin % 5.1% 5.0% 10 bps GPU$ 2,145 $ 2,021 $ 124 Gross Profit (millions)$ 53.0 $ 54.4 (2.6%) Retail SAAR (millions) 12.7 13.3 (4.5%) New Unit Volume Jan Feb Mar
Slide 13: New Vehicle – Unit, Gross Profit & GPU Trend
NEW VEHICLE – UNIT, GROSS PROFIT & GPU TREND Continuing Operations - Franchised Units (In millions) Gross Profit $ 35,000 $59 $58 $58 30,605 30,495 29,500 30,000 $58 25,197 $57 25,000 $57 $56 20,000 $55 15,000 $54 $54 10,000 $53 5,000 $52 - $51 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2016 Q1 2017 Q1 2018
Slide 14: Days' Supply
DAYS’ SUPPLY 80 75 70 71 66 62 60 59 50 47 40 37 35 36 35 35 33 32 30 34 26 30 30 29 28 27 20 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 New Used - Fran Used - EP Parts 14
Slide 15: Used Vehicle Retail
USED VEHICLE RETAIL Franchised – Same Store Q1 2019 Q1 2018 B/(W) Used Retail Unit Volume 26,987 26,397 2.2% GPU$ 1,254 $ 1,216 $ 37 Used to New Ratio 109% 98% 1,100 bps Units/Store/Month (91 stores) 99 97 2 Total Front-End and F&I Gross Profit (In millions) Jan Feb Mar Total 2019$ 23.3 $ 22.2 $ 28.
Slide 16: F&I – Gross Profit & GPU
F&I – GROSS PROFIT & GPU Franchised – Same Store GPU (In millions) Gross Profit $ $1,525 $78 $77 $1,499 $77 $76 $1,500 $76 $1,475 $75 $74 $1,450 $1,443 $73 $72 $1,425 $71 $1,400 $70 Q1 2019 Q1 2018 Q1 2019 Q1 2018 16
Slide 17: Fixed Operations
FIXED OPERATIONS Franchised – Same Store B/(W) than Q1 2018 (In millions) Q1 2019 $ % Customer Pay$ 73 $ 4 5.3% Warranty 38 2 4.8% Wholesale Parts 7 (0) (2.3%) Internal, Sublet and Other 42 (1) (2.1%) Total Gross Profit$ 160 $ 4 2.8% Total Gross Profit Up 4.4% Adjusted for Selling Days 17
Slide 18: Q1 2019 Financial Review: EchoPark Segment
Q1 2019 FINANCIAL REVIEW ECHOPARK SEGMENT 18
Slide 19: EchoPark Segment Q1 2019 Results
First ECHOPARK SEGMENT Q1 2019 Quarter of RESULTS Profitability B/(W) than Q1 2018 (In millions, except unit and per unit data) Q1 2019 $ % Revenue $249.6 $118.1 89.8% Gross Profit $25.7 $13.6 112.5% SG&A $20.1 $4.1 17.0% SG&A as % of Gross Profit 78.2% 12,210 bps Depreciation Expense $2.4 ($0.8) (4
Slide 20: EchoPark Retail Unit Sales Growth
ECHOPARK RETAIL UNIT SALES GROWTH Revenue Units $300,000,000 12,000 11,051 10,055 $250,000,000 10,000 8,762 $200,000,000 7,459 7,698 8,000 $150,000,000 5,518 6,000 4,496 $100,000,000 4,000 2,400 2,049 $50,000,000 1,585 1,685 1,673 2,000 920 941 1,136 660 881 764 212 $0 ‐ Dec Mar Jun Sep Dec Mar Jun
Slide 21: EchoPark Cash Flow – Corporate & Store Level
ECHOPARK CASH FLOW – CORPORATE & STORE LEVEL EchoPark Corporate Adjusted EBITDA $0 • Corporate Cost Structure ($1,000) is Maturing and ($1,147) ($2,000) Becoming More Efficient • Expect Leveraging of ($3,000) ($2,612) ($2,966) Corporate Investment to ($4,000) ($3,608) ($3,689) ($4,136) Continue Impr
Slide 22: EchoPark Cash Flow - Consolidated
ECHOPARK CASH FLOW - CONSOLIDATED $6,000 $4,957 $4,000 Total EchoPark Adjusted EBITDA $2,000 $0 ($807) ($2,000) ($2,161) ($2,042) ($2,561) ($3,017) ($4,000) ($3,353) ($3,866) ($4,216) (In thousands) ($6,000) Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 • Current Inventory
Slide 23: EchoPark Model Estimates
ECHOPARK MODEL ESTIMATES Medium Large Average Selling Price$ 20,500 $ 20,500 Medium Stores: Annual Revenues$ 184,500,000 $ 369,000,000 Denver - Centennial Average Monthly Unit Volume - 100% Mature 750 1,500 Denver - Colorado Springs Total Front-End and F&I GPU$ 2,150 $ 2,150 San Antonio - New Braunf
Slide 24: Q1 2019 Financial Review: Consolidated
Q1 2019 FINANCIAL REVIEW CONSOLIDATED 24
Slide 25: Consolidated Q1 2019 Results
CONSOLIDATED Q1 2019 RESULTS B/(W) than Q1 2018 (In millions, except per share data) Q1 2019 $ % Revenue $2,389 ($12) (0.5%) Gross Profit $359 $7 1.8% SG&A $247 $58 19.0% SG&A as % of Gross Profit 68.8% 1,770 bps Depreciation $23 $1 4.6% Impairment $2 $2 46.4% Operating Profit $87 $67 332.5% Interes
Slide 26: Q1 2019 Consolidated Revenue & Gross Profit
Q1 2019 CONSOLIDATED REVENUE & GROSS PROFIT B/(W) than Q1 2018 (In millions, except unit and per unit data) Q1 2019 $ % New Vehicle Revenue $1,066 ($115) (9.7%) Used Retail Vehicle Revenue $820 $111 15.7% Fixed Operations Revenue $341 ($10) (2.9%) F&I Revenue $106 $13 13.4% Total Revenue $2,389 ($12
Slide 27: Q1 2019 Consolidated Revenue & Gross Profit – Same Store
Q1 2019 CONSOLIDATED REVENUE & GROSS PROFIT – SAME STORE B/(W) than Q1 2018 (In millions, except unit and per unit data) Q1 2019 $ % New Vehicle Revenue $1,048 ($50) (4.6%) Used Retail Vehicle Revenue $765 $99 14.8% Fixed Operations Revenue $335 $8 2.3% F&I Revenue $97 $12 14.0% Total Revenue $2,298
Slide 28: Q1 2019 Consolidated SG&A to Gross Profit
Q1 2019 CONSOLIDATED SG&A TO GROSS PROFIT 86.5% 68.8% 23.3% 9.1% 4.2% 6.2% 51.3% 52.5% 4.2% 4.5% Q1 2019 Q1 2018 Advertising Comp Rent Other Note: See previous slides for items of interest affecting comparability. 28
Slide 29: Q1 2019 Consolidated Interest Expense
Q1 2019 CONSOLIDATED INTEREST EXPENSE B/(W) than Q1 2018 (In millions) Q1 2019 $ % Floor Plan Interest Expense $13 ($3) (23.9%) Interest Expense, Other $13 $1 4.5% Total Interest Expense $26 ($2) (8.1%) Floor Plan Higher Due to Rate Increases • New Up 65 bps • Used Up 37 bps Fed Funds Rate Increases
Slide 30: Q1 2019 Consolidated Depreciation Expense
Q1 2019 CONSOLIDATED DEPRECIATION EXPENSE B/(W) than Q1 2018 (In millions) Q1 2019 $ % Depreciation Expense - Franchised $20 $2 8.4% Depreciation Expense - EchoPark $2 ($1) (45.2%) Total $23 $1 4.6% 30
Slide 31: 2019 Cap Ex
2019 CAP EX YTD Estimated (In millions) FY 2018 Q1 2019 2019 Real Estate & Facility Related$ 147.6 $ 25.7 $ 88.4 All Other Cap Ex 16.0 4.9 20.0 Subtotal$ 163.6 $ 30.6 $ 108.4 Less: Mortgages (21.1) - - Net Cash Used - Cap Ex$ 142.5 $ 30.6 $ 108.4 31
Slide 32: Debt Covenants
DEBT COVENANTS Covenant Q4 2018 Q1 2019 Liquidity Ratio >= 1.05 1.10 1.16 Fixed Charge Coverage Ratio >= 1.20 1.43 1.43 Total Lease Adjusted Leverage Ratio <= 5.75 5.25 4.90 Compliant with all Covenants 32
Slide 33: Share Repurchases
SHARE REPURCHASES (In thousands, except per share data) Shares $/Share $ Availability As of December 31, 2018$ 83,575 Q1 2019 Activity 149 $ 15.63 $ 2,333 (2,333) Total 2019 Activity 149 $ 15.63 $ 2,333 $ 81,242 33
Slide 34: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES
Slide 35: Adjusted Diluted Earnings Per Share
ADJUSTED DILUTED EARNINGS PER SHARE Q1 2019 Q1 2018 (In thousands, except per share data) Amount Diluted EPS Amount Diluted EPS Reported Net Income and Diluted Earnings Per Share from Continuing Operations$ 42,349 $ 0.99 $ (2,014) $ (0.05) Pre-tax Adjustments: (Gain) Loss on Franchise Disposals (46,
Slide 36: Adjusted EBITDA – Consolidated LTM
ADJUSTED EBITDA – CONSOLIDATED LTM (In thousands) 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 Net Income$ 76,254 $ 89,101 $ 81,618 $ 97,217 $ 86,311 $ 93,193 $ 92,983 $ 51,650 $ 96,066 Non-Floor Plan Interest 63,576 58,453 55,356 52,269 49,524 48,034 50,531 52,049 51,337 Depreciation and Amortiz
Slide 37: Adjusted EBITDA by Segment – Q1 2019 vs. Q1 2018
ADJUSTED EBITDA BY SEGMENT – Q1 2019 VS. Q1 2018 Q1 2019 Q1 2018 Continuing Discontinued Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Franchised EchoPark Operations Operations Total Net Income$ 42,349 $ (128) $ 42,221 $ (2,014) $ (180) $ (2,194) Income Taxes
Slide 38: Adjusted EBITDA by Segment – Q4 2018 vs. Q4 2017
ADJUSTED EBITDA BY SEGMENT – Q4 2018 VS. Q4 2017 Q4 2018 Q4 2017 Continuing Discontinued Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Franchised EchoPark Operations Operations Total Net Income$ 21,981 $ (161) $ 21,820 $ 62,128 $ (176) $ 61,952 Income Taxes 9
Slide 39: Adjusted EBITDA by Segment – Q3 2018 vs. Q3 2017
ADJUSTED EBITDA BY SEGMENT – Q3 2018 VS. Q3 2017 Q3 2018 Q3 2017 Continuing Discontinued Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Franchised EchoPark Operations Operations Total Net Income$ 15,301 $ (183) $ 15,118 $ 19,730 $ (290) $ 19,440 Income Taxes 7
Slide 40: Adjusted EBITDA by Segment – Q2 2018 vs. Q2 2017
ADJUSTED EBITDA BY SEGMENT – Q2 2018 VS. Q2 2017 Q2 2018 Q2 2017 Continuing Discontinued Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Franchised EchoPark Operations Operations Total Net Income$ 17,122 $ (216) $ 16,905 $ 12,314 $ (183) $ 12,132 Income Taxes 8
Slide 41: Adjusted EBITDA by Segment – Q1 2017
ADJUSTED EBITDA BY SEGMENT – Q1 2017 Q1 2017 Continuing Discontinued (In thousands) Franchised EchoPark Operations Operations Total Net Income$ (20) $ (521) $ (541) Income Taxes 173 (347) (174) Income Before Income Taxes$ 5,726 $ (5,573) $ 152 $ (868) $ (715) Non-Floor Plan Interest 12,568 172 12,74
Slide 42: Samic) EchoPark
Samic) EchoPark AUTOMOTIVE