Sonic Automotive, Inc. · NYSE:SAH
Sonic Automotive — Shareholder Meeting (April 2020)
64 slides from Sonic Automotive's shareholder meeting presentation, Apr 29, 2020
Slide 1: Sonic Automotive 2020 Annual Meeting of Stockholders
&YIJCJU Sonic Automotive 2020 Annual Meeting Of Stockholders April 29, 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: Agenda
Agenda 1. Welcome and Call to Order 2. Introduction of Meeting Chairperson David Smith - CEO 3. Report of a Quorum Mr. Peter Friz of CT Hagberg LLC - Inspector of Elections 4. Issues Before the Stockholders Stephen K. Coss - Secretary ‡ Election of Directors ‡ Ratification of the Appointment of KPMG
Slide 4: Your Executive Management Team
Your Executive Management Team O. Bruton Smith David Bruton Smith Jeff Dyke Heath R. Byrd Executive Chairman, Chief Executive Officer, President, Director Executive Vice President, Director Director Chief Financial Officer 4
Slide 5: Other Participating Executives
Other Participating Executives Angela Steve Coss Rachel Richards Maren McGrane Broadway Senior VP & General VP – Human Resources Chief Marketing Officer VP – Culture and Counsel Strategic Initiatives C.G. Saffer Karen McKemie Danny Wieland VP & Chief Accounting VP – Guest Experience Director – Finan
Slide 6: Report of A Quorum
Report of A Quorum 6
Slide 7: Issues Before Stockholders
Issues Before Stockholders ‡ Election of Directors ‡ Ratification of the Appointment of KPMG LLP as Sonic’s Independent Public Accounting Firm ‡ Advisory Vote on Executive Compensation ‡ Approval of Amendment and Restatement of Sonic’s 2012 Formula Restricted Stock and Deferral Plan for Non-Employee
Slide 8: Report of Operations and Financial Results for 2019 Fiscal Year
Report of Operations and Financial Results for 2019 Fiscal Year 8
Slide 9: FY 2019 – Consolidated All-Time Records
FY 2019 – Consolidated All-Time Records ™Total Revenue – $10.454 Billion ™Used Retail Volume – 162,149 Units ™F&I Gross – $477.0 Million ™F&I Gross PUR – $1,743 Per Unit ™Total Gross Profit – $1.521 Billion ™Net Income – $144.1 Million ™Adjusted EBITDA(1) – $308.5 Million ™GAAP Continuing Ops EPS –
Slide 10: FY 2019 – Consolidated – GAAP B/(W) than FY 2018
FY 2019 – Consolidated – GAAP B/(W) than FY 2018* (amounts in millions, except per share data) FY 2019* $ % Revenue $10,454 $503 5.1% Gross Profit $1,521 $75 5.2% SG&A $1,099 $46 4.0% SG&A as % of Gross 72.3% 690 bps Depreciation $93 $0 0.5% Operating Profit $308 $130 73.2% Interest & Other ($108) (
Slide 11: FY 2019 – Consolidated – Adjusted B/(W) than FY 2018
FY 2019 – Consolidated – Adjusted B/(W) than FY 2018(1) (amounts in millions, except per share data) FY 2019 (1) $% Revenue $10,454 $503 5.1% Gross Profit $1,521 $75 5.2% SG&A $1,169 ($26) (2.3%) SG&A as % of Gross 76.9% 210 bps Depreciation $93 $0 0.5% Operating Profit $258 $48 22.9% Interest & Oth
Slide 12: FY 2019 – Consolidated Continuing Operations
FY 2019 – Consolidated Continuing Operations Revenue Gross Profit Segment Income (Loss)* $9.1 $1,162 $112 $700 $58 In Millions ($52.6) $211.3 $9,252 $9,292 $1,388 $1,409 $157.4 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 Total Revenue Up 5.1% Total Gross Profit Up 5.2% Adjusted EBITDA(1) Up 19.0
Slide 13: FY 2019 – Consolidated Adjusted SG&A Expenses to Gross Profit
FY 2019 – Consolidated Adjusted SG&A Expenses to Gross Profit On A GAAP Basis*, SG&A Expenses To Gross Profit Were 72.3% For FY 2019, Compared To 79.2% For FY 2018 210 bps Better 76.9%(1) 79.0%(1) 21.5% 22.5% 3.6% 4.3% 47.8% 47.8% 4.0% 4.4% FY 2019 FY 2018 Advertising Comp Rent Other * Refer To Appe
Slide 14: FY 2019 – Franchised Dealerships Segment
FY 2019 – Franchised Dealerships Segment B/(W) than FY 2018* (In millions, except unit and per unit data) FY 2019* $ % Revenues $9,292.3 $40.9 0.4% Gross profit $1,408.6 $20.5 1.5% SG&A expenses $1,011.8 $34.7 3.3% SG&A expenses as % of gross profit 71.8% 360 bps Segment income (loss) $211.4 $53.9 3
Slide 15: FY 2019 – EchoPark Segment
FY 2019 – EchoPark Segment B/(W) than FY 2018* (In millions, except unit and per unit data) FY 2019* $ % Revenues $1,162.0 $461.8 66.0% Gross profit $112.4 $54.4 93.7% SG&A expenses $87.6 $11.2 11.4% SG&A expenses as % of gross profit 77.9% 9,250 bps Segment income (loss) $9.1 $61.7 117.4% Retail us
Slide 16: EchoPark Retail Unit Sales Volume Growth
EchoPark Retail Unit Sales Volume Growth Quarterly Quarterly Revenue Retail Units $350,000,000 13,206 14,000 12,587 12,676 $300,000,000 11,051 12,000 $250,000,000 10,000 8,762 7,698 $200,000,000 7,459 8,000 $150,000,000 5,518 6,000 4,496 $100,000,000 4,000 2,400 2,049 1,585 1,685 1,673 $50,000,000 1
Slide 17: EchoPark Segment – Adjusted EBITDA Trend
EchoPark Segment – Adjusted EBITDA Trend $6,352 $6,000 $5,299 $4,957 $4,792 $4,000 FY 2019 Adjusted EBITDA(1) of $21.4 $2,000 Million, Up 302% From FY 2018 (In Millions) $- Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 $(1,115) $(2,000) Q4 Seasonally Lighter Than Q3
Slide 18: Industry-Leading Used Vehicle Volume Throughput
Industry-Leading Used Vehicle Volume Throughput 469 Q4 2019 Retail Used Vehicle Unit Sales Per Store Per Month 299 105 85 82 83 76 69 Utilize Highly Efficient Inventory Sourcing, Pricing And Selling Processes To Maximize Throughput * Peer Average Is 79 Units Per Store Per Month Based On Store Counts
Slide 19: Inventory Management Expertise
Inventory Management Expertise Q4 2019 Used Vehicle Inventory Days’ Supply 65 57 52 39 34 33 29 28 Low Inventory Days’ Supply Reduces Exposure to Fluctuations in Used Vehicle Valuations Note: Peer Data Source: Company Filings, Calculated Based on Trailing Quarter Cost of Sales If Not Explicitly Disc
Slide 20: Data and Analytics-Based Inventory Management
Data and Analytics-Based Inventory Management POWERFUL EFFICIENT INSTANT SIMPLE Analytics Delivered To Only the Information Needed Insights in Less Than a Click Implementation in Existing Buyer’s Fingertips in the Moment Webpage with No Training HyperIntelligence Embeds The Analytics Into the Tools
Slide 21: Strong Balance Sheet and Liquidity
Strong Balance Sheet and Liquidity 12/31/2019 12/31/2018 (In Millions) Cash and cash equivalents $ $29.1 $ $5.9 Availability under the 2016 Revolving Credit Facility 230.7 223.9 Availability under our used vehicle floor plan facilities 17.1 2.0 Availability under the 2019 Mortgage Facility 3.1 - Tot
Slide 22: Financial Results for Q1 2020
Financial Results for Q1 2020 22
Slide 23: Consolidated – Q1 2020 Continuing Operations – GAAP
Consolidated – Q1 2020 Continuing Operations – GAAP B/(W) than Q1 2019 (In millions, except per share data) Q1 2020 $ % Revenues $2,308.1 ($81.1) (3.4%) Gross profit $350.6 ($8.4) (2.3%) SG&A expenses $282.2 ($35.1) (14.2%) SG&A expenses as % of gross profit 80.5% (1,170) bps Earnings from continuin
Slide 24: Consolidated – Q1 2020 Continuing Operations – Adjusted
Consolidated – Q1 2020 Continuing Operations - Adjusted B/(W) than Q1 2019(1) (1) (In millions, except per share data) Q1 2020 $% Revenues $2,308.1 ($81.1) (3.4%) Gross profit $350.6 ($8.4) (2.3%) SG&A expenses $282.2 $5.4 1.9% SG&A expenses as % of gross profit 80.5% (40) bps Earnings from continui
Slide 25: Consolidated – Q1 2020 Performance Build By Month
Consolidated – Q1 2020 Performance Build By Month – Continuing Operations B/(W) than Comparable Period in 2019 (In millions, except unit and per unit data) January - February 2020 March 2020 Q1 2020 $% $ % $% New vehicle revenues$ 45 6.9%$ (152) (36.8%)$ (107) (10.0%) Retail used vehicle revenues 12
Slide 26: Consolidated – Q1 2020 Performance Build By Month – Same Store
Consolidated – Q1 2020 Performance Build By Month – Same Store B/(W) than Comparable Period in 2019 (In millions, except unit and per unit data) y - February 2020 March 2020 Q1 2020 $% $ % $% New vehicle revenuesJanuar$ 83 13.5%$ (130) (33.2%)$ (47) (4.7%) Retail used vehicle revenues 127 25.8% (88)
Slide 27: COVID-19 Impact, Actions Taken, 2020 Outlook
COVID-19 Impact Actions Taken 2020 Outlook 27
Slide 28: COVID-19 Impact Since Inception of Stay Home Orders
COVID-19 Impact Since Inception of Stay Home Orders Rolling 7-Day Average New Vehicle Rolling 7-Day Average Fixed Operations Unit Sales Volume Gross Profit (Less Internal) 400 $2,500 350 300 $2,000 250 $1,500 200 150 $1,000 100 $500 50 (In Thousands) - $- 2-Apr 4-Apr 6-Apr 8-Apr 7-Mar 9-Mar 10-Apr 1
Slide 29: COVID-19 Actions Taken
COVID-19 Actions Taken 1. Ensure Guest and Teammate Safety 2. Ensure Sonic’s Status As An Essential Business 3. Strengthen Liquidity ‡ Taking Advantage of All Deferral Opportunities (Tax, Floorplan Interest, Mortgages and Leases) ‡ Daily Modeling Based on Actual Operations ‡ Optimizing Floorplan Cap
Slide 30: Inventory Management Expertise
Inventory Management Expertise Used Vehicle Inventory Days’ Supply 34 33 29 28 Sonic Franchise Sonic Franchise EchoPark EchoPark (December 31, 2019) (March 31, 2020) (December 31, 2019) (March 31, 2020) Strength of Day Supply Management, Pricing Engine And Buying Engine Supports Recovery 30
Slide 31: Outlook – J.D. Power
Outlook – J.D. Power J.D. Power New Vehicle Sales % of Original Forecast 120% 100% 100% 100% 100% 100% 100% 100% 100% 91% 80% 81% Back To Original 60% 65% Forecast in August 59% 40% 46% 20% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec J.D. Power COVID-19 Forecast Source Data: COVID-19: J.D. Po
Slide 32: Outlook – Franchised Dealerships New Vehicle Unit Sales Volume
Outlook – Sonic Automotive Franchised Dealerships New Vehicle Unit Sales Volume 14,000 12,000 Above Forecast 10,000 Jan & Feb 8,000 Back To Original 6,000 Forecast in August 4,000 2,000 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Original Forecast COVID-19 Forecast Due To Uncertainty Related T
Slide 33: Outlook – Franchised Dealerships Retail Used Vehicle Unit Sales Volume
Outlook – Sonic Automotive Franchised Dealerships Retail Used Vehicle Unit Sales Volume 14,000 12,000 Above Forecast Above Forecast July Through Dec Jan & Feb 10,000 8,000 Back To Original Forecast in July 6,000 4,000 2,000 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Original Forecast COVID-19
Slide 34: Outlook – EchoPark Retail Used Vehicle Unit Sales Volume
Outlook – Sonic Automotive EchoPark Retail Used Vehicle Unit Sales Volume 8,000 Above Forecast in July Through Dec 7,000 Above Forecast 6,000 Jan & Feb 5,000 Back To Original 4,000 Forecast in July 3,000 2,000 1,000 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Original Forecast COVID-19 Forecas
Slide 35: Outlook – Franchised Dealerships Fixed Operations Gross Profit
Outlook – Sonic Automotive Franchised Dealerships Fixed Operations Gross $ $70,000 Above Forecast Above Forecast Aug Through Dec Jan & Feb $60,000 $50,000 Back To Original Forecast in Aug/Sept $40,000 (In Thousands) $30,000 $20,000 $10,000 $- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Original
Slide 36: Report of the Inspector of Elections
Report of the Inspector of Elections 36
Slide 37: Adjournment
Adjournment 37
Slide 38: Q&A
Q&A 38
Slide 39: Appendices
Appendices 39
Slide 40: Appendix – Company Overview
Appendix – Company Overview April 29, 2020
Slide 41: Sonic Automotive: Who We Are
Sonic Automotive: Who We Are QUICK FACTS Our Core Franchised 95 15 Dealerships Segment is a Dealerships Collision Centers Full-Service Automotive Retailer, Selling New and Used Vehicles, Arranging (NYSE: SAH) F&I Product Sales, and a Fortune 500 Providing Parts, Service 20+ 12 and Collision Repair A
Slide 42: Investment Highlights
Investment Highlights Multiple Growth And Profit Drivers For Franchised Segment Broad Geographic, Unique, High Return Revenue Stream And EchoPark Brand Mix Diversification Business Model Complementary Focused On Expense Relationship – Sonic Control And Strengthening Franchised And EchoPark The Balan
Slide 43: Revenue Composition by Geography
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 44: Revenue Composition – Brand Distribution and Business Line Mix
Revenue Composition 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 Audi 6% Finance & Insurance Lexus 4% Luxury 57% Land Rover 3% 16% Porsche 3% Cadillac 3% 9% 47% MINI
Slide 45: Franchised Dealerships
Franchised Dealerships Franchised Brands, Luxury 86 Dealerships 20+ Weighted New & Used Vehicle Sales Parts & Service (P&S) Finance & Insurance (F&I) Major Collision Metropolitan Repair Centers 15 20 Markets Focused On Inventory Mix and Attractive Pricing to Drive Growth and Profitability 45
Slide 46: Franchised Dealerships – Geographic Footprint
Franchised Dealerships – Geographic Footprint Headquartered in 86 Stores, 20+ Brands, Platforms in Major Charlotte, NC 15 Collision Repair Centers Metro Markets 46
Slide 47: 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 Used Vehicle or Cap Ex Drivers Volume Intensive Stores Throughput SG&A Expense Inventory Discipline Sourcing Omni-Channel Selling Echo
Slide 48: EchoPark Automotive
EchoPark Automotive The New Car Alternative™ Get the New Car Feel Without the New Car Price Focus On Pre-Owned Below Market Market – More Stable Pricing With Simplified, Easy Than New Vehicle Purchase Experience Market Unique, High Return Business Model 1 to 4-Year-Old 30% of Guests Vehicles - Nearl
Slide 49: EchoPark – Geographic Footprint
EchoPark – Geographic Footprint Texas Colorado ‡ Grand Prairie (Dallas) – ‡ Thornton and Centennial Pre-Owned Business (Denver) – Opened Q4 2014 Acquired Q3 2017 ‡ Colorado Springs – Opened ‡ San Antonio – Opened Q4 Q2 2017 2017 ‡ New Braunfels – Opened Q1 2018 ‡ Houston – Opened December 2018 North
Slide 50: 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 9 Focus On Recession-Resistant Brands Are Strong Pre-Owned Vehicle Market ‡ Diverse Revenue Streams - Some 9 Below-Market
Slide 51: 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 52: Appendix – Non-GAAP Reconciliations
Appendix – Non-GAAP Reconciliations April 29, 2020
Slide 53: Items of Interest – Full Year Income Statement
Items of Interest – Full Year Income Statement (In millions) FY 2019 FY 2018 Line Item Gain on franchise disposals$ 76.0 $ 38.9 SG&A expenses Executive transition costs (6.3) (1.6) SG&A expenses Legal and storm damage charges - (5.7) SG&A expenses Long-term compensation charges - (32.5) SG&A expense
Slide 54: Items Of Interest – Q1 Income Statement
Items Of Interest – Q1 Income Statement (In millions) Q1 2020 Q1 2019 Line Item Gain on franchise disposals$ - $ 46.7 SG&A expenses Executive transition costs - (6.3) SG&A expenses (1) Impairment charges (268.0) (1.9) Impairment charges (2) Subtotal: Pre-tax items of interest$ (268.0) $ 38.5 Tax eff
Slide 55: Non-GAAP Reconciliation – Segment Income & Adjusted Earnings – Full Year
Non-GAAP Reconciliation – Segment Income & Adjusted Earnings – Full Year Franchised Dealerships EchoPark Segment Segment Consolidated (In millions, except unit data) FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 Revenues$ 9,292.3 $ 9,251.5 $ 1,162.0 $ 700.2 $ 10,454.3 $ 9,951.6 Gross profit$ 1,408
Slide 56: Non-GAAP Reconciliation – Segment Income & Adjusted Earnings – Q1
Non-GAAP Reconciliation – Segment Income & Adjusted Earnings – Q1 Franchised Dealerships EchoPark Segment Segment Consolidated (In millions, except unit data) Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Revenues$ 1,976.3 $ 2,139.6 $ 331.7 $ 249.6 $ 2,308.1 $ 2,389.1 Gross profit$ 318.8 $ 333.3 $
Slide 57: Non-GAAP Reconciliations – SG&A Expenses
Non-GAAP Reconciliations – SG&A Expenses Consolidated (In millions) FY 2019 FY 2018 Gross profit$ 1,521.0 $ 1,446.1 SG&A expenses$ 1,099.4 $ 1,145.3 Items of interest: Gain on franchise disposals$ 76.0 $ 38.9 Executive transition costs (6.3) (1.6) Legal and storm damage charges - (5.7) Long-term com
Slide 58: Non-GAAP Reconciliations – Earnings Per Share
Non-GAAP Reconciliations – Earnings Per Share FY 2019 FY 2018 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 43,710 $ 144,537 $ 3.31 42,950 $ 52,3
Slide 59: Non-GAAP Reconciliation – Adjusted EBITDA
Non-GAAP Reconciliation – Adjusted EBITDA (In thousands) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Net Income (Loss)$ 76,254 $ 89,101 $ 81,618 $ 97,217 $ 86,311 $ 93,193 $ 92,983 $ 51,650 $ 144,137 Provision For Income Taxes 46,907 47,648 43,386 62,346 55,962 59,899 13,
Slide 60: Non-GAAP Reconciliations – Adjusted EBITDA
Non-GAAP Reconciliations – Adjusted EBITDA FY 2019 FY 2018 Franchised Franchised Dealerships EchoPark Discontinued Dealerships EchoPark Discontinued Segment Segment Operations Total Segment Segment Operations Total (In thousands) Net Income (Loss) $ 144,137 $ 51,650 Provision For Income Taxes 54,954
Slide 61: Non-GAAP Reconciliations – Adjusted EBITDA Q3 2019
Non-GAAP Reconciliations – 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
Slide 62: Non-GAAP Reconciliations – Adjusted EBITDA Q1 2019
Non-GAAP Reconciliations – 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 63: Non-GAAP Reconciliations – Adjusted EBITDA Q3 2018
Non-GAAP Reconciliations – 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 1
Slide 64: Investor Relations Contact
Investor Relations Contact: Sonic Automotive Inc. (NYSE: SAH) Danny Wieland, Director of Financial Reporting ir@sonicautomotive.com (704) 927-3462