Sonic Automotive : Annual Report for Fiscal Year Ending 12/31, 2025 (Form 10-K)

About this update from Sonic Automotive, Inc.

Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and "Item 1A. Risk Factors" included in this Annual Report on Form 10-K. For comparison and discussion of our results of operations for the year ended December 31, 2024 ("2024") to our results of operations for the year ended December 31, 2023 ("2023"), please refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for 2024. Unless otherwise noted, we present the discussion in this Management's Discussion and Analysis of Financial Condition and Results of Operations on a consolidated basis. To the extent that we believe a discussion of the differences among reportable segments will enhance a reader's understanding of our financial condition, cash flows and other changes in financial condition and results of operations, the differences are discussed separately. Unless otherwise noted, all discussion of increases or decreases are for the year ended December 31, 2025 ("2025") compared to 2024. The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted. All currently operating franchised dealership stores are included within the same store group as of the first full month following the first anniversary of the store's opening or acquisition. The following discussion of EchoPark Segment used vehicles, wholesale vehicles, and finance, insurance and other, net is on a reported basis, except where otherwise noted. All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market's opening or acquisition. The following discussion of Powersports Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted. All currently operating stores in the Powersports Segment are included within the same store group as of the first full month following the first anniversary of the store's opening or acquisition. Overview We are one of the largest automotive retailers in the U.S. (as measured by reported total revenue). As a result of the way we manage our business, we had three reportable segments as of December 31, 2025: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment. For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into "stores." As of December 31, 2025, we operated 111 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment, and 14 stores in the Powersports Segment. The Franchised Dealerships Segment consists of 134 new vehicle franchises (representing 24 different brands of cars and light trucks) and 16 collision repair centers in 18 states. The EchoPark Segment consists of 18 stores operating in 10 states. The Powersports Segment consists of 41 franchises at 14 locations (11 full-service dealerships and three authorized retail outlets) in three states. The Franchised Dealerships Segment provides comprehensive sales and services, including: (1) sales of both new and used cars and light trucks; (2) sales of replacement parts and performance of vehicle maintenance, manufacturer warranty repairs, and paint and collision repair services (collectively, "Fixed Operations"); and (3) arrangement of third-party financing, extended warranties, service contracts, insurance and other aftermarket products (collectively, "F&I") for our guests. The EchoPark Segment sells used cars and light trucks and arranges third-party F&I product sales for our guests in pre-owned vehicle specialty retail locations and does not offer customer-facing Fixed Operations services. The Powersports Segment offers guests: (1) sales of both new and used powersports vehicles (such as motorcycles, personal watercraft and all-terrain vehicles); (2) Fixed Operations activities; and (3) F&I services. All three segments generally operate independently of one another with the exception of certain shared back-office functions and corporate overhead costs. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary Retail Automotive Industry Performance The U.S. retail automotive industry's total new vehicle (retail and fleet combined) unit sales volume was approximately 16.3 million vehicles in 2025, an increase of 1%, compared to approximately 16.1 million vehicles in 2024, according to the Power Information Network ("PIN") from J.D. Power. We currently estimate the 2026 new vehicle industry volume will be between 15.8 million vehicles (a decrease of 3% compared to 2025) and 16.5 million vehicles (an increase of 1% compared to 2025). The effects of interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2026 new vehicle industry volume to vary from expectations. Many factors, including brand and geographic concentrations as well as the industry sales mix between retail and fleet new vehicle unit sales volume, have caused our past results to differ from the industry's overall trend. Our new vehicle sales strategy focuses on our retail new vehicle sales (as opposed to fleet new vehicle sales) and, as a result, we believe it is appropriate to compare our retail new vehicle unit sales volume to the industry retail new vehicle seasonally adjusted annual rate of unit sales volume (the "retail new vehicle SAAR") (which excludes fleet new vehicle sales). According to PIN from J.D. Power, the retail new vehicle SAAR increased 4%, to approximately 13.6 million vehicles, in 2025, from approximately 13.1 million vehicles in 2024. CDK Outage On June 19, 2024, CDK Global ("CDK"), a third-party provider of certain information systems, notified us that CDK had suspended certain systems used by us in response to a cybersecurity incident impacting CDK (the "CDK outage"). This outage adversely affected our business and results of operations during the second and third quarters of 2024. We estimate the disruption from the CDK outage negatively impacted reported income before taxes by approximately $47.2 million during 2024 which includes approximately $13.4 million in additional compensation expenses incurred as a result of the incident. In connection with the CDK outage, we recognized $10.0 million in pre-tax income from cyber insurance proceeds during the three months ended December 31, 2024 and $40.0 million in pre-tax income from cyber insurance proceeds during 2025, which were recorded as a reduction to selling, general and administrative expenses. Impairment Charges Impairment charges were approximately $173.8 million and $3.9 million in 2025 and 2024, respectively. Impairment charges for 2025 included approximately $165.9 million in the Franchised Dealerships Segment related to indefinite lived franchise assets, approximately $0.2 million in the EchoPark Segment related to property held for sale, and approximately $7.6 million in the Powersports Segment related to indefinite lived franchise assets. Impairment charges for 2024 included approximately $2.7 million in the EchoPark Segment related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decisions to indefinitely suspend operations at certain EchoPark locations, and approximately $1.2 million of property and equipment impairment charges related to the Franchised Dealerships Segment. Franchised Dealerships Segment As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2024 and 2025, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. Unless otherwise noted, all discussion of increases or decreases are for 2025 compared to 2024. The following discussion is on a same store basis (which excludes results from disposed stores), except where otherwise noted. All currently operating franchised dealership stores are included within the same store group as of the first full month following the first anniversary of the store's opening or acquisition. Same store retail new vehicle revenue increased 5% in 2025, primarily driven by a 2% increase in retail new vehicle unit sales volume, driven in part by an increase in consumer demand for electric vehicles ahead of expiration of the federal tax credit in the third quarter of 2025, combined with a 2% increase in retail new vehicle average selling price. Retail new vehicle gross profit decreased 7% in 2025, due primarily to increased price competition resulting from increasing levels of available inventory and higher inventory invoice cost, which combined to drive lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $310 per unit, or 9%, to $3,094 per unit. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days' supply was approximately 48 days as of December 31, 2025, compared to 46 days as of December 31, 2024. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Same store retail used vehicle revenue increased 3% in 2025, driven by a 3% increase in retail used vehicle average selling price. Retail used vehicle gross profit increased 2% in 2025, primarily due to higher retail used vehicle gross profit per unit. Retail used vehicle gross profit per unit increased $25 per unit, or 2%, to $1,516 per unit in 2025, due primarily to higher retail used vehicle average selling price. Same store wholesale vehicle gross loss worsened by approximately $4.5 million, to a gross loss of $8.8 million during 2025, due primarily to a $188 per unit, or 91%, worsening of wholesale vehicle gross loss per unit as a result of changes in pricing and demand for vehicles at wholesale auction. We generally focus on maintaining used vehicle inventory days' supply in the 25- to 35-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days' supply was approximately 31 days as of both December 31, 2025 and 2024. Same store Fixed Operations revenue increased 6%, driven primarily by increased service capacity as a result of additional technician headcount and higher parts and labor costs that were passed along to consumers. Fixed Operations gross profit increased 8% in 2025, driven primarily by higher warranty revenue contribution and higher warranty gross margin. Fixed Operations gross margin increased 60 basis points, to 51.0%, in 2025, driven primarily by an increase in warranty revenue contribution and higher warranty gross margin. Same store F&I revenue increased 9% in 2025, driven by a 7% increase in F&I gross profit per retail unit and a 1% increase in retail new and used vehicle unit sales volume. F&I gross profit per retail unit increased $174 per unit, or 7%, to $2,551 per unit in 2025, driven by changes in the mix of F&I products sold. EchoPark Segment Unless otherwise noted, all discussion of increases or decreases are for 2025 compared to 2024. The following discussion is on a reported basis, except where otherwise noted as being on a same market basis. All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market's opening or acquisition. Reported total revenues decreased 3% in 2025, driven primarily by a 3% decrease in average retail used vehicle selling price and a 1% decrease in total vehicle unit sales volume (retail used vehicles and wholesale vehicles combined). Reported total gross profit increased 13% in 2025, primarily due to a 15% increase in combined retail used vehicle and F&I gross profit per unit. Same market total revenues decreased 2% in 2025, attributable to a 2% decrease in retail used vehicle unit sales volume, coupled with a 3% decrease in average selling price per used retail unit. Same market total gross profit increased 12% in 2025, driven primarily by a 14% increase in combined retail used vehicle and F&I gross profit per unit. Reported retail used vehicle revenue decreased 5%, due to a 3% decrease in average retail used vehicle unit selling prices and a 2% decrease in retail used vehicle unit sales volume. F&I revenue increased 13% in 2025, driven primarily by a 15% increase in F&I gross profit per retail unit, partially offset by a 2% decrease in total retail units in 2025. Reported combined retail used vehicle and F&I gross profit per unit increased $455 per unit, or 15%, to $3,484 per unit in 2025, primarily due to the increase in F&I revenue. Reported wholesale vehicle gross loss worsened by approximately $0.5 million, to a gross loss of approximately $1.8 million in 2025, primarily due to a worsening in wholesale vehicle gross loss of $30 per unit, or 27%, during 2025. We generally focus on maintaining EchoPark Segment used vehicle inventory days' supply in the 30- to 40-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported used vehicle inventory days' supply in our EchoPark Segment was approximately 40 days as of December 31, 2025, as compared to 38 days as of December 31, 2024 Powersports Segment Unless otherwise noted, all discussion of increases or decreases are for 2025 compared to 2024. The following discussion is on a reported basis, except where otherwise noted as being on a same store basis. All currently operating stores in the Powersports Segment are included within the same store group as of the first full month following the first anniversary of the store's opening or acquisition. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Reported retail new vehicle revenue increased 29% in 2025, primarily driven by a 21% increase in retail new vehicle unit sales volume, coupled with a 6% increase in retail new vehicle average selling price. Reported retail new vehicle gross profit increased 37% in 2025, as a result of higher retail new vehicle unit sales volume and higher retail new vehicle gross profit per unit. Reported retail new vehicle gross profit per unit increased $337 per unit, or 12%, to $3,050 per unit, due primarily to higher retail new vehicle average selling price. Same store retail new vehicle revenue increased 19% in 2025, primarily driven by a 11% increase in retail new vehicle unit sales volume, coupled with a 7% increase in retail new vehicle average selling price. Retail new vehicle gross profit increased 24% in 2025, as a result of the increase in retail new vehicle unit sales volume and increase in retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit increased $319 per unit, or 12%, to $3,032 per unit, due primarily to the increase in retail new vehicle unit sales volume. On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days' supply was approximately 140 days as of December 31, 2025, compared to 178 days as of December 31, 2024, varying based on manufacturer production levels and consumer demand. Reported retail used vehicle revenue increased 70% in 2025, primarily driven by a 54% increase in retail used vehicle unit sales volume, coupled with a 10% increase in retail used vehicle average selling price. Reported retail used vehicle gross profit increased 28% in 2025, as a result of higher retail used vehicle unit sales volume. Reported retail used vehicle gross profit per unit decreased $417 per unit, or 17%, to $1,980 per unit, primarily due to higher inventory costs. Same store used vehicle revenue increased 61% in 2025, primarily driven by a 49% increase in retail used vehicle unit sales volume, coupled with a 9% increase in retail used vehicle average selling price. Retail used vehicle gross profit increased 22% in 2025, as a result of higher retail used vehicle unit sales volume. Retail used vehicle gross profit per unit decreased $437 per unit, or 18%, to $1,982 per unit, primarily due to higher inventory costs. On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days' supply was approximately 121 days as of December 31, 2025, compared to 139 days as of December 31, 2024. Going forward, we generally expect to maintain a used vehicle inventory days' supply in our Powersports Segment in the 75- to 100-day range, depending on seasonality (typically the second and third quarter has more demand and lower days' supply compared to the first and fourth quarters). Reported Fixed Operations revenue increased 12% and Fixed Operations gross profit increased 15% in 2025, driven primarily by higher repair order volume as a result of acquisitions. Fixed Operations gross margin increased 150 basis points to 47.5% in 2025, driven primarily by an increase in warranty revenue contribution and customer pay gross margin. Same store Fixed Operations revenue increased 7% and Fixed Operations gross profit increased 13% in 2025, driven primarily by higher repair order volume. Fixed Operations gross margin increased 240 basis points to 48.0% in 2025, driven primarily by an increase in customer pay gross margin. Reported F&I revenue increased 15% in 2025, driven primarily by a 33% increase in combined retail new and used vehicle unit sales volume, slightly offset by a 12% decrease in F&I gross profit per retail unit. F&I gross profit per retail unit decreased $133 per unit, or 12%, to $959 per unit in 2025. Same store F&I revenue increased 16% in 2025 , driven primarily by a 24% increase in combined retail new and used vehicle unit sales volume, offset partially by a 5% decrease in F&I gross profit per retail unit. F&I gross profit per retail unit decreased $54 per unit, or 5% , to $1,019 per unit in 2025 . SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table summarizes the percentages of total revenues represented by certain items reflected in our consolidated statements of operations: Percentage of Total Revenues Year Ended December 31, 2025 2024 2023 Revenues: New vehicles 47.2 % 46.4 % 44.5 % Used vehicles 32.2 % 33.6 % 36.3 % Wholesale vehicles 2.1 % 2.0 % 2.2 % Parts, service and collision repair 13.3 % 13.0 % 12.2 % Finance, insurance and other, net 5.2 % 5.0 % 4.8 % Total revenues 100.0 % 100.0 % 100.0 % Cost of sales 84.3 % 84.6 % 84.4 % Gross profit 15.7 % 15.4 % 15.6 % Selling, general and administrative expenses 11.1 % 11.1 % 11.1 % Impairment charges 1.1 % - % 0.6 % Depreciation and amortization 1.1 % 1.1 % 1.0 % Operating income 2.4 % 3.2 % 2.9 % Interest expense, floor plan 0.6 % 0.6 % 0.5 % Interest expense, other, net 0.7 % 0.8 % 0.8 % Income (loss) before taxes 1.1 % 1.8 % 1.7 % Provision for income taxes - benefit (expense) 0.4 % 0.3 % 0.4 % Net income (loss) 0.8 % 1.5 % 1.2 % Note: Rounding may cause the sum of percentages to differ from the totals shown. Results of Operations - Consolidated As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2024 and 2025, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. New Vehicles - Consolidated New vehicle revenues include the sale of new vehicles, including new powersports vehicles, to retail customers, as well as the sale of fleet vehicles to businesses for use in their operations. New vehicle revenues and gross profit can be influenced by vehicle manufacturer incentives to consumers (which vary from cash-back incentives to low interest rate financing, among other things), the availability of consumer credit and the level and type of manufacturer-to-dealer incentives, as well as manufacturers providing adequate inventory allocations to our dealerships to meet consumer demand. The automobile manufacturing industry is cyclical and historically has experienced periodic downturns characterized by oversupply and weak demand, both within specific brands and in the industry as a whole. As an automotive retailer, we seek to mitigate the effects of this sales cycle by maintaining a diverse brand mix of dealerships. Our brand diversity allows us to offer a broad range of products at a wide range of prices from lower-priced economy automobiles to luxury automobiles and powersports vehicles. The U.S. retail automotive industry's new vehicle unit sales volume below reflects all brands marketed or sold in the U.S. This industry sales volume includes brands we do not sell and markets in which we do not operate, therefore changes in our new vehicle unit sales volume may not trend directly in line with changes in the industry new vehicle unit sales volume. We believe that the retail new vehicle industry sales volume is a more meaningful metric for comparing our new vehicle unit sales volume to the industry due to our minimal fleet vehicle business. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS U.S. retail new vehicle industry volume, fleet new vehicle industry volume, and total new vehicle industry volume were as follows: Year Ended December 31, Better / (Worse) 2025 2024 % Change (In millions of vehicles) U.S. industry volume - Retail new vehicle (1) 13.6 13.1 4 % U.S. industry volume - Fleet new vehicle 2.7 3.0 (10) % U.S. industry volume - Total new vehicle (1) 16.3 16.1 1 % (1) Source: PIN from J.D. Power We currently estimate the 2026 new vehicle industry volume will be between 15.8 million vehicles (a decrease of 3% compared to 2025) and 16.5 million vehicles (an increase of 1% compared to 2025). The effects of availability of new and used vehicle inventory, interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2026 new vehicle industry volume to vary from expectations. Our consolidated reported new vehicle results (combined retail and fleet data) were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported new vehicle: Retail new vehicle revenue $ 7,047.4 $ 6,507.5 $ 539.9 8 % Fleet new vehicle revenue 101.5 95.3 6.2 7 % Total new vehicle revenue $ 7,148.9 $ 6,602.8 $ 546.1 8 % Retail new vehicle gross profit $ 383.3 $ 388.4 $ (5.1) (1) % Fleet new vehicle gross profit 1.7 3.0 (1.3) (43) % Total new vehicle gross profit $ 385.0 $ 391.4 $ (6.4) (2) % Retail new vehicle unit sales 121,124 115,694 5,430 5 % Fleet new vehicle unit sales 1,991 1,805 186 10 % Total new vehicle unit sales 123,115 117,499 5,616 5 % Revenue per new retail unit $ 58,184 $ 56,247 $ 1,937 3 % Revenue per new fleet unit $ 50,971 $ 52,786 $ (1,815) (3) % Total revenue per new unit $ 58,067 $ 56,194 $ 1,873 3 % Gross profit per new retail unit $ 3,165 $ 3,358 $ (193) (6) % Gross profit per new fleet unit $ 869 $ 1,636 $ (767) (47) % Total gross profit per new unit $ 3,127 $ 3,331 $ (204) (6) % Retail gross profit as a % of revenue 5.4 % 6.0 % (60) bps Fleet gross profit as a % of revenue 1.7 % 3.1 % (140) bps Total new vehicle gross profit as a % of revenue 5.4 % 5.9 % (50) bps SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For further analysis of new vehicle results on a segment basis, see the tables and discussion under the headings "New Vehicles - Franchised Dealerships Segment" and "New Vehicles - Powersports Segment" in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below. Used Vehicles - Consolidated Used vehicle revenues include the sale of used vehicles, including used powersports vehicles, to retail customers and at wholesale. Used vehicle revenues are directly affected by a number of factors, including consumer demand for used vehicles, the pricing and level of manufacturer incentives on new vehicles, the number and quality of trade-ins and lease turn-ins available to our dealerships, the availability and pricing of used vehicles acquired at wholesale auction, and the availability of consumer credit. Depending on the mix of inventory sourcing (trade-ins or purchases from customers versus wholesale auction), the days' supply of used vehicle inventory, and the pricing strategy employed by the dealership, retail used vehicle gross profit per unit and retail used vehicle gross profit as a percentage of revenue may vary significantly from historical levels given recent trends in the used vehicle environment. Our consolidated reported retail used vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported retail used vehicle: Revenue $ 4,872.6 $ 4,780.1 $ 92.5 2 % Gross profit $ 181.1 $ 170.7 $ 10.4 6 % Unit sales 175,280 173,257 2,023 1 % Revenue per unit $ 27,799 $ 27,590 $ 209 1 % Gross profit per unit $ 1,033 $ 985 $ 48 5 % Gross profit as a % of revenue 3.7 % 3.6 % 10 bps For further analysis of used vehicle results on a segment basis, see the tables and discussion under the headings "Used Vehicles - Franchised Dealerships Segment," "Used Vehicles and F&I - EchoPark Segment" and "Used Vehicles - Powersports Segment" in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below. Wholesale Vehicles - Consolidated Wholesale vehicle revenues are influenced by several factors, including retail new and used vehicle unit sales volume, associated trade-in volume, and short-term, temporary, and seasonal fluctuations in wholesale auction pricing. In recent years, wholesale vehicle prices and supply at auction have experienced periods of volatility, impacting our wholesale vehicle revenues and related gross profit (loss), as well as our retail used vehicle revenues and related gross profit. We believe that the current wholesale vehicle price environment is not sustainable in the long term and expect that average wholesale vehicle pricing and related gross profit (loss) will continue to return toward long-term normalized levels in the long run, but may continue to experience volatility into 2026 or beyond. Wholesale vehicle revenues are also significantly affected by our corporate inventory management strategy and policies, which are designed to optimize our total used vehicle inventory and expected gross profit levels and minimize inventory carrying risks. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our consolidated reported wholesale vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported wholesale vehicle: Revenue $ 314.1 $ 287.1 $ 27.0 9 % Gross profit (loss) $ (11.2) $ (6.0) $ (5.2) (87) % Unit sales 34,982 32,223 2,759 9 % Revenue per unit $ 8,978 $ 8,910 $ 68 1 % Gross profit (loss) per unit $ (321) $ (186) $ (135) (73) % Gross profit (loss) as a % of revenue (3.6) % (2.1) % (150) bps For further analysis of wholesale vehicle results on a segment basis, see the tables and discussion under the headings "Wholesale Vehicles - Franchised Dealerships Segment," "Wholesale Vehicles - EchoPark Segment" and "Wholesale Vehicles - Powersports Segment" in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below. Fixed Operations - Consolidated Parts, service and collision repair revenues consist of repairs and maintenance requested and paid by customers ("customer pay"), warranty repairs (manufacturer-paid), wholesale parts (sales of parts and accessories to third-party automotive repair businesses) and internal, sublet and other. Parts and service revenue is driven by the volume and mix of warranty repairs versus customer pay repairs, available service capacity (a combination of service bay count and technician availability), vehicle quality, manufacturer recalls, customer loyalty, and prepaid or manufacturer-paid maintenance programs. Internal, sublet and other primarily relates to preparation and reconditioning work performed on vehicles in inventory that are later sold to a third party and may vary based on used vehicle inventory and sales volume from period to period. When that work is performed by one of our dealerships or stores, the work is classified as internal. In the event the work is performed by a third party on our behalf, it is classified as sublet. We believe that, over time, vehicle quality will continue to improve, but vehicle complexity and the associated demand for repairs by qualified technicians at manufacturer-affiliated dealerships may result in market share gains that could offset any revenue lost from improvement in vehicle quality. We also believe that, over the long term, we have the ability to continue to optimize service capacity and customer retention at our dealerships and stores to further increase Fixed Operations revenues. Manufacturers continue to extend new vehicle warranty periods (in particular for battery electric vehicles) and have also begun to include regular maintenance items in the warranty or complimentary maintenance program coverage. These factors, over the long term, combined with the extended manufacturer warranties on certified pre-owned vehicles, should facilitate growth in our parts and service business. Barriers to long-term growth may include reductions in the rate paid by manufacturers to dealers for warranty repair work performed, as well as the improved quality and design of vehicles that may affect the level and frequency of future customer pay or warranty-related repair revenues. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our consolidated reported Fixed Operations results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) Reported Fixed Operations: Revenue Customer pay $ 921.5 $ 846.8 $ 74.7 9 % Warranty 356.4 290.1 66.3 23 % Wholesale parts 193.0 194.0 (1.0) (1) % Internal, sublet and other 548.2 515.6 32.6 6 % Total revenue $ 2,019.1 $ 1,846.5 $ 172.6 9 % Gross profit Customer pay $ 514.3 $ 472.8 $ 41.5 9 % Warranty 223.1 178.0 45.1 25 % Wholesale parts 33.1 34.5 (1.4) (4) % Internal, sublet and other 258.6 243.6 15.0 6 % Total gross profit $ 1,029.1 $ 928.9 $ 100.2 11 % Gross profit as a % of revenue Customer pay 55.8 % 55.8 % - bps Warranty 62.6 % 61.4 % 120 bps Wholesale parts 17.2 % 17.8 % (60) bps Internal, sublet and other 47.2 % 47.2 % (3) bps Total gross profit as a % of revenue 51.0 % 50.3 % 70 bps For further analysis of Fixed Operations results on a segment basis, see the tables and discussion under the headings "Fixed Operations - Franchised Dealerships Segment" and "Fixed Operations - Powersports Segment" in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below. F&I - Consolidated Finance, insurance and other, net revenues include commissions for arranging third-party vehicle financing and insurance, sales of third-party extended warranties and service contracts for vehicles, and sales of other aftermarket products. In connection with vehicle financing, extended warranties and service contracts, other aftermarket products and insurance contracts, we receive commissions from the third-party providers for originating these contracts. We do not have direct credit risk for the vehicle financing, extended warranties and service contracts that we sell. F&I revenues are recognized net of actual and estimated future chargebacks and other costs associated with originating contracts (as a result, reported F&I revenues and F&I gross profit are the same amount, resulting in a 100% gross margin for F&I). F&I revenues are affected by the level of new and retail used vehicle unit sales volume, the age and average selling price of vehicles sold, the level of manufacturer financing specials or leasing incentives, and our F&I penetration rates for each type of F&I product. The F&I penetration rate represents the number of finance contracts, extended warranties and service contracts, other aftermarket products or insurance contracts that we are able to originate per vehicle sold, expressed as a percentage. Yield spread premium is another term for the commission earned by our dealerships for arranging vehicle financing for consumers. The amount of the commission could be zero, a flat fee or an actual spread between the interest rate charged to the consumer and the interest rate provided by the third-party direct financing source (e.g., a commercial bank, credit union or manufacturer captive finance company). We have established caps on the potential yield spread premium our dealerships can earn with all finance sources. We believe the yield spread premium we earn for arranging vehicle financing represents value to the consumer in numerous ways, including the following: • lower cost, below-market financing is often available only from the manufacturers' captives and franchised dealers; • ease of access to multiple high-quality lending sources; • lease-financing alternatives are largely available only from manufacturers' captives or other indirect lenders; SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • guests with substandard credit frequently do not have direct access to potential sources of sub-prime financing; and • guests with significant "negative equity" in their current vehicle (i.e., the guest's current vehicle is worth less than the balance of their vehicle loan or lease obligation) frequently are unable to pay off the loan on their current vehicle and finance the purchase or lease of a replacement new or used vehicle without the assistance of a franchised dealership's network of lending sources. Our consolidated reported F&I results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported F&I: Revenue $ 798.9 $ 707.8 $ 91.1 13 % Total combined retail new and used vehicle unit sales 296,404 288,951 7,453 3 % Gross profit per retail unit (excludes fleet) $ 2,695 $ 2,450 $ 245 10 % For further analysis of F&I results on a segment basis, see the tables and discussion under the headings "F&I - Franchised Dealerships Segment," "Used Vehicles and F&I - EchoPark Segment" and "F&I - Powersports Segment" in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below. Results of Operations - Franchised Dealerships Segment As a result of the acquisition, disposition, termination or closure of several franchised dealership stores in 2024 and 2025, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. Please refer to the tables and discussion on the following pages for a comparison and discussion of financial results on a comparable store basis. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS New Vehicles - Franchised Dealerships Segment The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for new vehicles: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit data) Retail new vehicle revenue: Same store $ 6,696.7 $ 6,397.8 $ 298.9 5 % Acquisitions, open points, dispositions and holding company 245.2 27.7 217.5 NM Total as reported $ 6,941.9 $ 6,425.5 $ 516.4 8 % Fleet new vehicle revenue: Same store $ 99.5 $ 94.9 $ 4.6 5 % Acquisitions, open points, dispositions and holding company 2.0 0.4 1.6 NM Total as reported $ 101.5 $ 95.3 $ 6.2 7 % Total new vehicle revenue: Same store $ 6,796.2 $ 6,492.7 $ 303.5 5 % Acquisitions, open points, dispositions and holding company 247.2 28.1 219.1 NM Total as reported $ 7,043.4 $ 6,520.8 $ 522.6 8 % Retail new vehicle gross profit: Same store $ 350.2 $ 377.0 $ (26.8) (7) % Acquisitions, open points, dispositions and holding company 17.4 (0.1) 17.5 NM Total as reported $ 367.6 $ 376.9 $ (9.3) (2) % Fleet new vehicle gross profit: Same store $ 1.8 $ 3.0 $ (1.2) (40) % Acquisitions, open points, dispositions and holding company (0.1) - (0.1) NM Total as reported $ 1.7 $ 3.0 $ (1.3) (43) % Total new vehicle gross profit: Same store $ 352.0 $ 380.0 $ (28.0) (7) % Acquisitions, open points, dispositions and holding company 17.3 (0.1) 17.4 NM Total as reported $ 369.3 $ 379.9 $ (10.6) (3) % Retail new vehicle unit sales: Same store 113,181 110,770 2,411 2 % Acquisitions, open points, dispositions and holding company 2,800 680 2,120 NM Total as reported 115,981 111,450 4,531 4 % Fleet new vehicle unit sales: Same store 1,972 1,797 175 10 % Acquisitions, open points, dispositions and holding company 19 8 11 NM Total as reported 1,991 1,805 186 10 % Total new vehicle unit sales: Same store 115,153 112,567 2,586 2 % Acquisitions, open points, dispositions and holding company 2,819 688 2,131 NM Total as reported 117,972 113,255 4,717 4 % NM = Not Meaningful SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Franchised Dealerships Segment reported new vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported new vehicle: Retail new vehicle revenue $ 6,941.9 $ 6,425.5 $ 516.4 8 % Fleet new vehicle revenue 101.5 95.3 6.2 7 % Total new vehicle revenue $ 7,043.4 $ 6,520.8 $ 522.6 8 % Retail new vehicle gross profit $ 367.6 $ 376.9 $ (9.3) (2) % Fleet new vehicle gross profit 1.7 3.0 (1.3) (43) % Total new vehicle gross profit $ 369.3 $ 379.9 $ (10.6) (3) % Retail new vehicle unit sales 115,981 111,450 4,531 4 % Fleet new vehicle unit sales 1,991 1,805 186 10 % Total new vehicle unit sales 117,972 113,255 4,717 4 % Revenue per new retail unit $ 59,854 $ 57,654 $ 2,200 4 % Revenue per new fleet unit $ 50,971 $ 52,786 $ (1,815) (3) % Total revenue per new unit $ 59,704 $ 57,576 $ 2,128 4 % Gross profit per new retail unit $ 3,170 $ 3,382 $ (212) (6) % Gross profit per new fleet unit $ 869 $ 1,636 $ (767) (47) % Total gross profit per new unit $ 3,131 $ 3,354 $ (223) (7) % Retail gross profit as a % of revenue 5.3 % 5.9 % (60) bps Fleet gross profit as a % of revenue 1.7 % 3.1 % (140) bps Total new vehicle gross profit as a % of revenue 5.2 % 5.8 % (60) bps SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Franchised Dealerships Segment same store new vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Same store new vehicle: Retail new vehicle revenue $ 6,696.7 $ 6,397.8 $ 298.9 5 % Fleet new vehicle revenue 99.5 94.9 4.6 5 % Total new vehicle revenue $ 6,796.2 $ 6,492.7 $ 303.5 5 % Retail new vehicle gross profit $ 350.2 $ 377.0 $ (26.8) (7) % Fleet new vehicle gross profit 1.8 3.0 (1.2) (40) % Total new vehicle gross profit $ 352.0 $ 380.0 $ (28.0) (7) % Retail new vehicle unit sales 113,181 110,770 2,411 2 % Fleet new vehicle unit sales 1,972 1,797 175 10 % Total new vehicle unit sales 115,153 112,567 2,586 2 % Revenue per new retail unit $ 59,168 $ 57,758 $ 1,410 2 % Revenue per new fleet unit $ 50,476 $ 52,798 $ (2,322) (4) % Total revenue per new unit $ 59,019 $ 57,678 $ 1,341 2 % Gross profit per new retail unit $ 3,094 $ 3,404 $ (310) (9) % Gross profit per new fleet unit $ 909 $ 1,646 $ (737) (45) % Total gross profit per new unit $ 3,057 $ 3,376 $ (319) (9) % Retail gross profit as a % of revenue 5.2 % 5.9 % (70) bps Fleet gross profit as a % of revenue 1.8 % 3.1 % (130) bps Total new vehicle gross profit as a % of revenue 5.2 % 5.9 % (70) bps Same store retail new vehicle revenue increased 5%, primarily due to a 2% increase in retail new vehicle unit sales volume and a 2% increase in retail new vehicle average selling price. Retail new vehicle gross profit decreased approximately $26.8 million, or 7%, as a result of lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $310 per unit, or 9%, to $3,094 per unit, primarily due to increased price competition as a result of higher levels of available inventory, particularly electric vehicles, than in the prior year and higher inventory invoice costs. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days' supply was approximately 48 and 46 days as of December 31, 2025 and 2024, respectively. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Used Vehicles - Franchised Dealerships Segment The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for retail used vehicles: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit data) Retail used vehicle revenue: Same store $ 2,995.0 $ 2,902.3 $ 92.7 3 % Acquisitions, open points, dispositions and holding company 92.0 17.5 74.5 NM Total as reported $ 3,087.0 $ 2,919.8 $ 167.2 6 % Retail used vehicle gross profit: Same store $ 154.0 $ 150.9 $ 3.1 2 % Acquisitions, open points, dispositions and holding company 3.8 (0.7) 4.5 NM Total as reported $ 157.8 $ 150.2 $ 7.6 5 % Retail used vehicle unit sales: Same store 101,587 101,220 367 - % Acquisitions, open points, dispositions and holding company 2,615 756 1,859 NM Total as reported 104,202 101,976 2,226 2 % NM = Not Meaningful Our Franchised Dealerships Segment reported retail used vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported retail used vehicle: Revenue $ 3,087.0 $ 2,919.8 $ 167.2 6 % Gross profit $ 157.8 $ 150.2 $ 7.6 5 % Unit sales 104,202 101,976 2,226 2 % Revenue per unit $ 29,625 $ 28,632 $ 993 3 % Gross profit per unit $ 1,514 $ 1,473 $ 41 3 % Gross profit as a % of revenue 5.1 % 5.1 % - bps SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Franchised Dealerships Segment same store retail used vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Same store retail used vehicle: Revenue $ 2,995.0 $ 2,902.3 $ 92.7 3 % Gross profit $ 154.0 $ 150.9 $ 3.1 2 % Unit sales 101,587 101,220 367 - % Revenue per unit $ 29,482 $ 28,674 $ 808 3 % Gross profit per unit $ 1,516 $ 1,491 $ 25 2 % Gross profit as a % of revenue 5.1 % 5.2 % (10) bps Same Store Retail used vehicle revenue increased approximately $92.7 million, or 3%, driven primarily by a 3% increase in retail used vehicle average selling price. Retail used vehicle gross profit increased approximately $3.1 million, or 2%, primarily driven by a $25 per unit, or 2% increase in retail used vehicle gross profit per unit. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days' supply was approximately 31 days as of both December 31, 2025 and 2024. Wholesale Vehicles - Franchised Dealerships Segment The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for wholesale vehicles: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit data) Total wholesale vehicle revenue: Same store $ 197.8 $ 187.7 $ 10.1 5 % Acquisitions, open points, dispositions, and holding company 9.2 1.2 8.0 NM Total as reported $ 207.0 $ 188.9 $ 18.1 10 % Total wholesale vehicle gross profit (loss): Same store $ (8.8) $ (4.3) $ (4.5) (105) % Acquisitions, open points, dispositions, and holding company (0.5) (0.3) (0.2) NM Total as reported $ (9.3) $ (4.6) $ (4.7) (102) % Total wholesale vehicle unit sales: Same store 22,233 20,809 1,424 7 % Acquisitions, open points, dispositions, and holding company 635 209 426 NM Total as reported 22,868 21,018 1,850 9 % NM = Not Meaningful SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Franchised Dealerships Segment reported wholesale vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported wholesale vehicle: Revenue $ 207.0 $ 188.9 $ 18.1 10 % Gross profit (loss) $ (9.3) $ (4.6) $ (4.7) (102) % Unit sales 22,868 21,018 1,850 9 % Revenue per unit $ 9,051 $ 8,987 $ 64 1 % Gross profit (loss) per unit $ (409) $ (214) $ (195) (91) % Gross profit (loss) as a % of revenue (4.5) % (2.4) % (210) bps Our Franchised Dealerships Segment same store wholesale vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Same store wholesale vehicle: Revenue $ 197.8 $ 187.7 $ 10.1 5 % Gross profit (loss) $ (8.8) $ (4.3) $ (4.5) (105) % Unit sales 22,233 20,809 1,424 7 % Revenue per unit $ 8,899 $ 9,018 $ (119) (1) % Gross profit (loss) per unit $ (395) $ (207) $ (188) (91) % Gross profit (loss) as a % of revenue (4.4) % (2.3) % (210) bps Same store wholesale vehicle revenue increased $10.1 million, or 5%, driven primarily by a 7% increase in wholesale vehicle unit sales volume, offset slightly by a 1% decrease in wholesale vehicle revenue per unit in 2025. Wholesale vehicle gross loss worsened by approximately $4.5 million, driven primarily by a $188 per unit worsening in wholesale vehicle gross loss per unit during 2025. Fixed Operations - Franchised Dealerships Segment The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for Fixed Operations: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) Total Fixed Operations revenue: Same store $ 1,903.9 $ 1,794.8 $ 109.1 6 % Acquisitions, open points, dispositions and holding company 66.3 8.1 58.2 NM Total as reported $ 1,970.2 $ 1,802.9 $ 167.3 9 % Total Fixed Operations gross profit: Same store $ 971.4 $ 903.9 $ 67.5 7 % Acquisitions, open points, dispositions and holding company 34.5 5.0 29.5 NM Total as reported $ 1,005.9 $ 908.9 $ 97.0 11 % NM = Not Meaningful SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Franchised Dealerships Segment reported Fixed Operations results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) Reported Fixed Operations: Revenue Customer pay $ 912.8 $ 839.0 $ 73.8 9 % Warranty 351.1 286.3 64.8 23 % Wholesale parts 192.4 193.2 (0.8) - % Internal, sublet and other 513.9 484.4 29.5 6 % Total revenue $ 1,970.2 $ 1,802.9 $ 167.3 9 % Gross profit Customer pay $ 510.7 $ 470.0 $ 40.7 9 % Warranty 219.6 175.1 44.5 25 % Wholesale parts 33.0 34.2 (1.2) (4) % Internal, sublet and other 242.6 229.6 13.0 6 % Total gross profit $ 1,005.9 $ 908.9 $ 97.0 11 % Gross profit as a % of revenue Customer pay 55.9 % 56.0 % (10) bps Warranty 62.5 % 61.2 % 130 bps Wholesale parts 17.1 % 17.7 % (60) bps Internal, sublet and other 47.2 % 47.4 % (19) bps Total gross profit as a % of revenue 51.1 % 50.4 % 70 bps SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Franchised Dealerships Segment same store Fixed Operations results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) Same store Fixed Operations: Revenue Customer pay $ 886.0 $ 835.9 $ 50.1 6 % Warranty 333.8 284.5 49.3 17 % Wholesale parts 184.7 192.7 (8.0) (4) % Internal, sublet and other 499.4 481.7 17.7 4 % Total revenue $ 1,903.9 $ 1,794.8 $ 109.1 6 % Gross profit Customer pay $ 494.5 $ 468.4 $ 26.1 6 % Warranty 208.8 174.3 34.5 20 % Wholesale parts 31.4 34.1 (2.7) (8) % Internal, sublet and other 236.7 227.1 9.6 4 % Total gross profit $ 971.4 $ 903.9 $ 67.5 8 % Gross profit as a % of revenue Customer pay 55.8 % 56.0 % (20) bps Warranty 62.6 % 61.3 % 130 bps Wholesale parts 17.0 % 17.7 % (70) bps Internal, sublet and other 47.4 % 47.1 % 25 bps Total gross profit as a % of revenue 51.0 % 50.4 % 60 bps Fixed Operations revenue increased approximately $109.1 million, or 6%, and Fixed Operations gross profit increased approximately $67.5 million, or 8%. Customer pay gross profit increased approximately $26.1 million, or 6%, warranty gross profit increased approximately $34.5 million, or 20%, wholesale parts gross profit decreased approximately $2.7 million, or 8%, and internal, sublet and other gross profit increased approximately $9.6 million, or 4%. Results have been positively impacted by increased capacity realized through our efforts to hire and retain additional service technicians. As a result, we expect to continue to see growth in Fixed Operations revenues and gross profit in 2026. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS F&I - Franchised Dealerships Segment The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for F&I: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Total F&I revenue: Same store $ 547.8 $ 503.8 $ 44.0 9 % Acquisitions, open points, dispositions and holding company 23.7 3.0 20.7 NM Total as reported $ 571.5 $ 506.8 $ 64.7 13 % Total F&I gross profit per retail unit (excludes fleet): Same store $ 2,551 $ 2,377 $ 174 7 % Reported $ 2,596 $ 2,374 $ 222 9 % Total combined retail new and used vehicle unit sales: Same store 214,768 211,990 2,778 1 % Acquisitions, open points, dispositions and holding company 5,415 1,436 3,979 NM Total as reported 220,183 213,426 6,757 3 % NM = Not Meaningful Our Franchised Dealerships Segment reported F&I results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported F&I: Revenue $ 571.5 $ 506.8 $ 64.7 13 % Total combined retail new and used vehicle unit sales 220,183 213,426 6,757 3 % Gross profit per retail unit (excludes fleet) $ 2,596 $ 2,374 $ 222 9 % SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Franchised Dealerships Segment same store F&I results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Same store F&I: Revenue $ 547.8 $ 503.8 $ 44.0 9 % Total combined retail new and used vehicle unit sales 214,768 211,990 2,778 1 % Gross profit per retail unit (excludes fleet) $ 2,551 $ 2,377 $ 174 7 % Same store F&I revenue increased $44.0 million, or 9%, primarily due to a 7% increase in F&I gross profit per retail unit and a 1% increase in combined retail new and used vehicle unit sales volume. F&I gross profit per retail unit increased $174 per unit, or 7%, to $2,551 per unit, primarily due to higher gross profit per finance contract and per service contract and increased penetration rates for finance, service and other aftermarket contracts. Same store finance contract revenue increased 8%, primarily due to a 6% increase in gross profit per finance contract and a 2% increase in finance contract volume. The increase in finance contract volume is due to a 1% increase in total retail unit sales and a 30 basis point increase in the finance contract penetration rate. Service contract revenue increased 7%, primarily due to a 3% increase in gross profit per service contract and a 4% increase in service contract volume. The increase in service contract volume is due to a 1% increase in total retail unit sales and a 100 basis point increase in the service contract penetration rate. Other aftermarket contract revenue increased 2%, driven primarily by a 2% increase in other aftermarket contract volume. The increase in other aftermarket contract volume is due to a 1% increase in total retail unit sales and a 70 basis point increase in the other aftermarket contract penetration rate. Results of Operations - EchoPark Segment All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market's opening or acquisition. Same market results may vary significantly from reported results due to the closure of stores that are no longer included in same market results. In January 2024, we closed the remaining seven Northwest Motorsport stores within the EchoPark Segment. In light of these closures, we believe the following discussion of EchoPark Segment results on a same market basis provides a meaningful year-over-year comparison. Used Vehicles and F&I - EchoPark Segment Our EchoPark operating strategy focuses on maximizing total used vehicle-related gross profit (based on a combination of retail used vehicle unit sales volume, front-end retail used vehicle gross profit (loss) per unit and F&I gross profit per retail unit sold) rather than realizing traditional levels of front-end retail used vehicle gross profit per unit. As such, we believe the best per unit measure of gross profit performance at our EchoPark stores is a combined total gross profit (loss) per retail unit, which includes both front-end retail used vehicle gross profit (loss) and F&I gross profit per retail unit sold. See the discussion under the heading "Results of Operations - Consolidated" for additional discussion of the macro drivers of used vehicle revenues and F&I revenues. All Fixed Operations activity at our EchoPark stores supports our used vehicle inventory reconditioning operations and EchoPark stores do not currently perform customer pay repairs or maintenance work and are not permitted to perform manufacturer-paid warranty repairs. As such, reconditioning amounts that are classified as Fixed Operations revenues and cost of sales in our Franchised Dealerships Segment are presented as used vehicle cost of sales for the EchoPark Segment. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/closed market basis for retail used vehicles: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit data) Total retail used vehicle revenue: Same market $ 1,747.8 $ 1,828.3 $ (80.5) (4) % New markets/closed markets - 9.7 (9.7) NM Total as reported $ 1,747.8 $ 1,838.0 $ (90.2) (5) % Total retail used vehicle gross profit (loss): Same market $ 16.5 $ 15.8 $ 0.7 4 % New markets/closed markets - (0.6) 0.6 NM Total as reported $ 16.5 $ 15.2 $ 1.3 9 % Total retail used vehicle unit sales: Same market 67,636 68,690 (1,054) (2) % New markets/closed markets - 363 (363) NM Total as reported 67,636 69,053 (1,417) (2) % NM = Not Meaningful The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/ closed market basis for F&I: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) Total F&I revenue: Same market $ 220.3 $ 195.5 $ 24.8 13 % New markets/closed markets (1.1) (1.5) 0.4 27 % Total as reported $ 219.2 $ 194.0 $ 25.2 13 % Our EchoPark Segment reported retail used vehicle and F&I results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported retail used vehicle and F&I: Retail used vehicle revenue $ 1,747.8 $ 1,838.0 $ (90.2) (5) % Retail used vehicle gross profit (loss) $ 16.5 $ 15.2 $ 1.3 9 % Retail used vehicle unit sales 67,636 69,053 (1,417) (2) % Retail used vehicle revenue per unit $ 25,841 $ 26,617 $ (776) (3) % F&I revenue $ 219.2 $ 194.0 $ 25.2 13 % Combined retail used vehicle gross profit and F&I revenue $ 235.7 $ 209.2 $ 26.5 13 % Total retail used vehicle and F&I gross profit per unit $ 3,484 $ 3,029 $ 455 15 % SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our EchoPark Segment same market retail used vehicle and F&I results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Same market retail used vehicle and F&I: Retail used vehicle revenue $ 1,747.8 $ 1,828.3 $ (80.5) (4) % Retail used vehicle gross profit (loss) $ 16.5 $ 15.8 $ 0.7 4 % Retail used vehicle unit sales 67,636 68,690 (1,054) (2) % Retail used vehicle revenue per unit $ 25,842 $ 26,617 $ (775) (3) % F&I revenue $ 220.3 $ 195.5 $ 24.8 13 % Combined retail used vehicle gross profit and F&I revenue $ 236.8 $ 211.3 $ 25.5 12 % Total retail used vehicle and F&I gross profit per unit $ 3,501 $ 3,077 $ 424 14 % Same market retail used vehicle revenue decreased approximately $80.5 million, or 4%, due to a 2% decrease in retail used vehicle unit sales volume, and a 3% decrease in used vehicle revenue per unit. Same market combined used vehicle gross profit and F&I revenue increased approximately $25.5 million, or 12%, due to a $424, or 14%, increase in total used vehicle and F&I gross profit per unit. The increase in combined retail used vehicle and F&I gross profit per unit was due primarily to higher F&I penetration rates, an improvement in inventory acquisition costs as a result of sourcing a higher percentage of inventory from non-auction sources. Within same market F&I revenue, finance contract gross profit increased approximately $1.5 million, or 3%, due to a 3% increase in gross profit per finance contract. Service contract gross profit increased approximately $6.7 million, or 9%, due to a 10% increase in gross profit per service contract, partially offset by a 1% decrease in total service contracts. Other aftermarket product contract gross profit increased approximately $9.0 million, or 13%, due to an 11% increase in total aftermarket contracts, a 1% increase in gross profit per aftermarket contract, and a 2,390 basis point increase in other aftermarket product contract penetration rate as a result of our efforts to offer a wider range of F&I products to our guests. On a trailing quarter cost of sales basis, our reported used vehicle inventory days' supply in our EchoPark Segment was approximately 40 and 38 days as of December 31, 2025 and 2024, respectively. We generally focus on maintaining EchoPark Segment used vehicle inventory days' supply in the 30- to 40-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. Wholesale Vehicles - EchoPark Segment See the discussion under the heading "Results of Operations - Consolidated" for additional discussion of the macro drivers of wholesale vehicle revenues. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and new market/closed market basis for wholesale vehicles: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit data) Total wholesale vehicle revenue: Same market $ 104.6 $ 92.7 $ 11.9 13 % New markets/closed markets - 3.1 (3.1) NM Total as reported $ 104.6 $ 95.8 $ 8.8 9 % Total wholesale vehicle gross profit (loss): Same market $ (1.7) $ (0.6) $ (1.1) (183) % New markets/closed markets (0.1) (0.7) 0.6 NM Total as reported $ (1.8) $ (1.3) $ (0.5) (38) % Total wholesale vehicle unit sales: Same market 11,836 10,850 986 9 % New markets/closed markets - 209 (209) NM Total as reported 11,836 11,059 777 7 % NM = Not Meaningful Our EchoPark Segment reported wholesale vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported wholesale vehicle: Revenue $ 104.6 $ 95.8 $ 8.8 9 % Gross profit (loss) $ (1.8) $ (1.3) $ (0.5) (38) % Unit sales 11,836 11,059 777 7 % Revenue per unit $ 8,842 $ 8,663 $ 179 2 % Gross profit (loss) per unit $ (143) $ (113) $ (30) (27) % Gross profit (loss) as a % of revenue (1.6) % (1.3) % (30) bps Our EchoPark Segment same market wholesale vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Same market wholesale vehicle: Revenue $ 104.6 $ 92.7 $ 11.9 13 % Gross profit (loss) $ (1.7) $ (0.6) $ (1.1) (183) % Unit sales 11,836 10,850 986 9 % Revenue per unit $ 8,842 $ 8,537 $ 305 4 % Gross profit (loss) per unit $ (143) $ (61) $ (82) (134) % Gross profit (loss) as a % of revenue (1.6) % (0.7) % (90) bps Same market wholesale vehicle revenue increased 13%, driven primarily by a 9% increase in same market wholesale vehicle unit sales volume, and a $305, or 4%, increase in same market wholesale vehicle revenue per unit. Same market wholesale vehicle gross profit decreased approximately $1.1 million, due primarily to a decrease in same market wholesale vehicle gross profit per unit of $82 per unit. As we adjust the inventory mix of nearly-new versus older model year vehicles sold at retail going forward, the levels of wholesale vehicle revenue and gross profit may vary. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Powersports Segment As a result of the acquisition and termination of certain powersports stores in 2024 and 2025, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. The following discussion of new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a reported basis, except where otherwise noted. Our Powersports Segment results are subject to seasonal variations, such that the second and third quarters are generally expected to contribute higher revenues and segment income than the first and fourth quarters. New Vehicles - Powersports Segment The following table provides a reconciliation of Powersports Segment reported basis and same store basis for retail new vehicles: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit data) Total retail new vehicle revenue: Same store $ 93.8 $ 79.0 $ 14.8 19 % Acquisitions, open points, and terminations 11.7 3.0 8.7 NM Total as reported $ 105.5 $ 82.0 $ 23.5 29 % Total retail new vehicle gross profit: Same store $ 13.9 $ 11.2 $ 2.7 24 % Acquisitions, open points, and terminations 1.8 0.3 1.5 NM Total as reported $ 15.7 $ 11.5 $ 4.2 37 % Total retail new vehicle unit sales: Same store 4,583 4,115 468 11 % Acquisitions, open points, and terminations 560 129 431 NM Total as reported 5,143 4,244 899 21 % NM = Not Meaningful Our Powersports Segment reported retail new vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported retail new vehicle: Revenue $ 105.5 $ 82.0 $ 23.5 29 % Gross profit $ 15.7 $ 11.5 $ 4.2 37 % Unit sales 5,143 4,244 899 21 % Revenue per unit $ 20,517 $ 19,313 $ 1,204 6 % Gross profit per unit $ 3,050 $ 2,713 $ 337 12 % Gross profit as a % of revenue 14.9 % 14.0 % 90 bps SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Powersports Segment same store new vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Same store new vehicle: Revenue $ 93.8 $ 79.0 $ 14.8 19 % Gross profit $ 13.9 $ 11.2 $ 2.7 24 % Unit sales 4,583 4,115 468 11 % Revenue per unit $ 20,473 $ 19,202 $ 1,271 7 % Gross profit per unit $ 3,032 $ 2,713 $ 319 12 % Gross profit as a % of revenue 14.8 % 14.1 % 70 bps Same store retail new vehicle revenue increased 19%, due to a 11% increase in retail new vehicle unit sales volume and a 7% increase in retail new vehicle average selling price. Same store retail new vehicle gross profit increased approximately $2.7 million, or 24%, as a result of higher retail new vehicle unit sales volume and higher retail new vehicle gross profit per unit. Same store retail new vehicle gross profit per unit increased $319 per unit, or 12%, to $3,032 per unit. On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days' supply was approximately 140 and 178 days as of December 31, 2025 and 2024 respectively. We believe that in a normal production environment, the level of new vehicle inventory days' supply in our Powersports Segment should be in the 90 to 120-day range, depending on seasonality (typically the second and third quarters have more demand and lower days' supply compared to the first and fourth quarters). Used Vehicles - Powersports Segment The following table provides a reconciliation of Powersports Segment reported basis and same store basis for retail used vehicles: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit data) Retail used vehicle revenue: Same store $ 33.7 $ 20.9 $ 12.8 61 % Acquisitions, open points, and terminations 4.2 1.4 2.8 NM Total as reported $ 37.9 $ 22.3 $ 15.6 70 % Retail used vehicle gross profit: Same store $ 6.1 $ 5.0 $ 1.1 22 % Acquisitions, open points, and terminations 0.7 0.3 0.4 NM Total as reported $ 6.8 $ 5.3 $ 1.5 28 % Retail used vehicle unit sales: Same store 3,101 2,087 1,014 49 % Acquisitions, open points, and terminations 341 141 200 NM Total as reported 3,442 2,228 1,214 54 % NM = Not Meaningful SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Powersports Segment reported retail used vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported retail used vehicle: Revenue $ 37.9 $ 22.3 $ 15.6 70 % Gross profit $ 6.8 $ 5.3 $ 1.5 28 % Unit sales 3,442 2,228 1,214 54 % Revenue per unit $ 10,997 $ 10,011 $ 986 10 % Gross profit per unit $ 1,980 $ 2,397 $ (417) (17) % Gross profit as a % of revenue 18.0 % 23.9 % (590) bps Our Powersports Segment same store retail used vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Same store retail used vehicle: Revenue $ 33.7 $ 20.9 $ 12.8 61 % Gross profit $ 6.1 $ 5.0 $ 1.1 22 % Unit sales 3,101 2,087 1,014 49 % Revenue per unit $ 10,877 $ 9,996 $ 881 9 % Gross profit per unit $ 1,982 $ 2,419 $ (437) (18) % Gross profit as a % of revenue 18.2 % 24.2 % (600) bps Same store retail used vehicle revenue increased 61%, due primarily to a 49% increase in retail used vehicle unit sales volume and a 9% increase in retail used vehicle average selling price. Same store retail used vehicle gross profit increased approximately $1.1 million, or 22%, due primarily to higher retail used vehicle unit sales volume, offset partially by lower retail used vehicle gross profit per unit. Same store retail used vehicle gross profit per unit decreased $437 per unit, or 18%, to $1,982 per unit, due primarily to changes in inventory mix and variations between wholesale and retail market pricing. On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days' supply was approximately 121 days as of December 31, 2025. Going forward, we generally expect to maintain a used vehicle inventory days' supply in our Powersports Segment in the 75 to 100-day range, depending on seasonality (typically the second and third quarters have more demand and lower days' supply compared to the first and fourth quarters). SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Wholesale Vehicles - Powersports Segment The following table provides a reconciliation of Powersports Segment reported basis and same store basis for wholesale vehicles: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit data) Total wholesale vehicle revenue: Same store $ 2.5 $ 2.1 $ 0.4 19 % Acquisitions, open points, and terminations (0.1) 0.2 (0.3) NM Total as reported $ 2.4 $ 2.3 $ 0.1 4 % Total wholesale vehicle gross profit (loss): Same store $ (0.1) $ (0.3) $ 0.2 66.7 % Acquisitions, open points, and terminations - - - NM Total as reported $ (0.1) $ (0.3) $ 0.2 67 % Total wholesale vehicle unit sales: Same store 275 146 129 88 % Acquisitions, open points, and terminations 3 - 3 NM Total as reported 278 146 132 90 % NM = Not Meaningful Our Powersports Segment reported wholesale vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported wholesale vehicle: Revenue $ 2.4 $ 2.3 $ 0.1 4 % Gross profit (loss) $ (0.1) $ (0.3) $ 0.2 67 % Unit sales 278 146 132 90 % Revenue per unit $ 8,728 $ 16,430 $ (7,702) (47) % Gross profit (loss) per unit $ (597) $ (1,647) $ 1,050 64 % Gross profit (loss) as a % of revenue (6.8) % (10.0) % 320 bps SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Powersports Segment same store wholesale vehicle results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except per unit data) Same store wholesale vehicle: Revenue $ 2.5 $ 2.1 $ 0.4 19 % Gross profit (loss) $ (0.1) $ (0.3) $ 0.2 67 % Unit sales 275 146 129 88 % Revenue per unit $ 8,799 $ 14,750 $ (5,951) (40) % Gross profit (loss) per unit $ (541) $ (1670) $ 1,129 68 % Gross profit (loss) as a % of revenue (6.2) % (11.3) % 510 bps Same store wholesale vehicle revenue increased approximately $0.4 million, and same store wholesale vehicle gross profit (loss) improved approximately $0.2 million, driven by changes in wholesale unit sales volume and wholesale gross profit per unit. Fixed Operations - Powersports Segment The following table provides a reconciliation of Powersports Segment reported basis and same store basis for Fixed Operations: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) Total Fixed Operations revenue: Same store $ 44.7 $ 41.6 $ 3.1 7 % Acquisitions, open points, and terminations 4.2 2.0 2.2 NM Total as reported $ 48.9 $ 43.6 $ 5.3 12 % Total Fixed Operations gross profit: Same store $ 21.5 $ 19.0 $ 2.5 13 % Acquisitions, open points, and terminations 1.7 1.1 0.6 NM Total as reported $ 23.2 $ 20.1 $ 3.1 15 % NM = Not Meaningful SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Powersports Segment reported Fixed Operations results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) Reported Fixed Operations: Revenue Customer pay $ 8.8 $ 7.8 $ 1.0 13 % Warranty 5.3 3.8 1.5 39 % Wholesale parts 0.6 0.8 (0.2) (25) % Internal, sublet and other 34.2 31.2 3.0 10 % Total revenue $ 48.9 $ 43.6 $ 5.3 12 % Gross profit Customer pay $ 3.6 $ 2.8 $ 0.8 29 % Warranty 3.5 2.9 0.6 21 % Wholesale parts 0.1 0.2 (0.1) (50) % Internal, sublet and other 16.0 14.2 1.8 13 % Total gross profit $ 23.2 $ 20.1 $ 3.1 15 % Gross profit as a % of revenue Customer pay 41.6 % 35.4 % 620 bps Warranty 66.7 % 75.9 % (920) bps Wholesale parts 22.8 % 26.5 % (370) bps Internal, sublet and other 46.8 % 45.5 % 127 bps Total gross profit as a % of revenue 47.5 % 46.0 % 150 bps SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our Powersports Segment same store Fixed Operations results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) Same store Fixed Operations: Revenue Customer pay $ 7.4 $ 7.1 $ 0.3 4 % Warranty 4.4 3.7 0.7 19 % Wholesale parts 0.5 0.7 (0.2) (29) % Internal, sublet and other 32.4 30.1 2.3 8 % Total revenue $ 44.7 $ 41.6 $ 3.1 7 % Gross profit Customer pay $ 3.2 $ 2.5 $ 0.7 28 % Warranty 3.1 2.8 0.3 11 % Wholesale parts 0.1 0.2 (0.1) (50) % Internal, sublet and other 15.1 13.5 1.6 12 % Total gross profit $ 21.5 $ 19.0 $ 2.5 13 % Gross profit as a % of revenue Customer pay 42.6 % 35.0 % 760 bps Warranty 69.2 % 76.2 % (700) bps Wholesale parts 23.0 % 28.9 % (590) bps Internal, sublet and other 46.6 % 44.9 % 175 bps Total gross profit as a % of revenue 48.0 % 45.6 % 240 bps Same store Fixed Operations revenue increased approximately $3.1 million and same store Fixed Operations gross profit increased approximately $2.5 million. Same store customer pay revenue increased approximately $0.3 million and same store customer pay gross profit increased approximately $0.7 million. Same store warranty revenue increased approximately $0.7 million and same store warranty gross profit increased approximately $0.3 million. Same store wholesale parts revenue decreased approximately $0.2 million and same store wholesale parts gross profit decreased approximately $0.1 million. Same store internal, sublet and other revenue increased approximately $2.3 million and same store internal, sublet and other gross profit increased approximately $1.6 million. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS F&I - Powersports Segment The following table provides a reconciliation of Powersports Segment reported basis and same store basis for F&I: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Total F&I revenue: Same store $ 7.8 $ 6.7 $ 1.1 16 % Acquisitions, open points, and terminations 0.4 0.4 - NM Total as reported $ 8.2 $ 7.1 $ 1.1 15 % Total F&I gross profit per retail unit (excludes fleet): Same store $ 1,019 $ 1,073 $ (54) (5) % Reported $ 959 $ 1,092 $ (133) (12) % Total combined retail new and used vehicle unit sales: Same store 7,684 6,202 1,482 24 % Acquisitions, open points, and terminations 901 270 631 NM Total as reported 8,585 6,472 2,113 33 % NM = Not Meaningful Our Powersports Segment reported F&I results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Reported F&I: Revenue $ 8.2 $ 7.1 $ 1.1 15 % Total combined retail new and used vehicle unit sales 8,585 6,472 2,113 33 % Gross profit per retail unit (excludes fleet) $ 959 $ 1,092 $ (133) (12) % Our Powersports Segment same store F&I results were as follows: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions, except unit and per unit data) Same Store F&I: Revenue $ 7.8 $ 6.7 $ 1.1 16 % Total combined retail new and used vehicle unit sales 7,684 6,202 1,482 24 % Gross profit per retail unit (excludes fleet) $ 1,019 $ 1,073 $ (54) (5) % SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Same store F&I revenue increased approximately $1.1 million, or 16%, primarily due to a 24% increase in total combined retail new and used vehicle unit sales volume, offset partially by a 5% decrease in F&I gross profit per retail unit. F&I gross profit per retail unit decreased $54 per unit, or 5%, to $1,019 per unit, primarily due to lower gross profits per finance and service contracts and decreased penetration rates for service and aftermarket contracts, offset partially by higher gross profit per aftermarket contract and an increase in finance contract penetration rate. Same store finance contract revenue increased 20%, primarily due to a 28% increase in finance contract volume, offset partially by a 6% decrease in gross profit per finance contract. The increase in finance contract volume is driven by a 24% increase in total retail unit sales volume and a 140 basis point increase in the finance contract penetration rate. Service contract revenue increased 5%, primarily due to a 21% increase in service contract volume, offset partially by a 13% decrease in gross profit per service contract. The increase in service contract unit sales volume is driven by a 24% increase in total retail unit sales volume, offset partially by a 60 basis point decrease in the service contract penetration rate. Other aftermarket contract revenue increased 45%, primarily due to a 20% increase in aftermarket contract volume and a 21% increase in gross profit per other aftermarket contract. The increase in aftermarket contract volume is driven by a 24% increase in total retail unit sales volume, offset partially by a 110 basis point decrease in aftermarket contract penetration rate. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Segment Results Summary In the following table of financial data, total segment income (loss) of the reportable segments is reconciled to consolidated income (loss) before taxes and impairment charges. See above for tables and discussion of results by reportable segment. Year Ended December 31, Better / (Worse) 2025 2024 Change % Change Segment Revenues: (In millions, except unit data) Franchised Dealerships Segment Revenues: Retail new vehicles $ 6,941.9 $ 6,425.5 $ 516.4 8 % Fleet new vehicles 101.5 95.3 6.2 7 % Total new vehicles $ 7,043.4 $ 6,520.8 $ 522.6 8 % Used vehicles 3,087.0 2,919.8 167.2 6 % Wholesale vehicles 207.0 188.9 18.1 10 % Parts, service and collision repair 1,970.2 1,802.9 167.3 9 % Finance, insurance and other, net 571.5 506.8 64.7 13 % Franchised Dealerships Segment revenues $ 12,879.1 $ 11,939.2 $ 939.9 8 % EchoPark Segment Revenues: Used vehicles $ 1,747.8 $ 1,838.0 $ (90.2) (5) % Wholesale vehicles 104.6 95.8 8.8 9 % Finance, insurance and other, net 219.2 194.0 25.2 13 % EchoPark Segment revenues $ 2,071.6 $ 2,127.8 $ (56.2) (3) % Powersports Segment Revenues: Retail new vehicles $ 105.5 $ 82.0 $ 23.5 29 % Used vehicles 37.9 22.3 15.6 70 % Wholesale vehicles 2.4 2.3 0.1 4 % Parts, service and collision repair 48.9 43.6 5.3 12 % Finance, insurance and other, net 8.2 7.1 1.1 15 % Powersports Segment revenues $ 202.9 $ 157.3 $ 45.6 29 % Total consolidated revenues $ 15,153.6 $ 14,224.3 $ 929.3 7 % Segment Income (Loss) (1): Franchised Dealerships Segment (2) $ 316.1 $ 257.6 $ 58.5 23 % EchoPark Segment (3) 28.1 3.5 24.6 703 % Powersports Segment (4) 2.3 (1.1) 3.4 309 % Total consolidated income (loss) $ 346.5 $ 260.0 $ 86.5 33 % Impairment charges (5) (173.8) (3.9) (169.9) NM Income (loss) before taxes $ 172.8 $ 256.1 $ (83.3) (33) % Segment Retail New and Used Vehicle Unit Sales Volume: Franchised Dealerships Segment 220,183 213,426 6,757 3 % EchoPark Segment 67,636 69,053 (1,417) (2) % Powersports Segment 8,585 6,472 2,113 33 % Total consolidated retail new and used vehicle unit sales volume 296,404 288,951 7,453 3 % (1) Segment income (loss) for each segment is defined as income (loss) before taxes and impairment charges. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (2) For 2025, amount includes approximately $40.0 million of pre-tax benefit from cyber insurance proceeds related to the CDK outage, approximately $5.0 million of pre-tax charges related to storm damage, approximately $5.5 million of pre-tax loss related to dispositions, and approximately $0.7 million of pre-tax legal expenses. For 2024, amount includes approximately $13.0 million of pre-tax charges related to excess compensation as a result of the CDK outage, approximately $8.3 million of pre-tax charges related to storm damage, approximately $3.5 million of pre-tax gain related to the acquisition of the remaining equity interest in a joint venture, $10.0 million of pre-tax gain related to the CDK outage cyber claim payment, and approximately $2.2 million of pre-tax charges related to severance and long-term compensation expense. (3) For 2025, amount includes approximately $0.9 million of pre-tax gain on dispositions. For 2024, amount includes approximately $3.0 million of pre-tax gain on exit of leased properties, approximately $2.9 million of pre-tax charges for severance and long-term compensation expense, approximately $2.1 million of pre-tax charges related to closed store accrued expenses related to the indefinite suspension of operations at certain EchoPark locations, approximately $2.1 million of pre-tax gain on real estate dispositions, and approximately $0.4 million of pre-tax charges related to excess compensation as a result of the CDK outage. (4) For 2025, amount includes approximately $1.1 million of pre-tax charges related to dispositions. For 2024, amount includes approximately $0.5 million of pre-tax charges related to severance and long-term compensation expense. (5) For 2025, amount includes approximately $165.9 million of non-cash pre-tax franchise asset impairment charges for the Franchised Dealerships Segment, approximately $0.2 million of non-cash pre-tax property and equipment impairment charges for real estate held for sale in the EchoPark Segment, approximately $0.4 million of non-cash pre-tax property, equipment and right-of-use asset impairment charges, and approximately $7.2 million of non-cash pre-tax franchise asset impairment charges for the Powersports Segment. For 2024, amount includes approximately $1.2 million of pre-tax franchise asset and property and equipment impairment charges for the Franchised Dealerships Segment and approximately $2.7 million of pre-tax property and equipment charges for real estate held for sale in the EchoPark Segment. Selling, General and Administrative ("SG&A") Expenses SG&A expenses are comprised of four major groups: compensation expense, advertising expense, rent expense and other expense. Compensation expense primarily relates to store personnel who are paid a commission or a salary plus commission and support personnel who are generally paid a fixed salary. Commissions paid to store personnel typically vary depending on gross profits realized and sales volume objectives. Due to the salary component for certain store and corporate personnel, gross profits and compensation expense do not change in direct proportion to one another. Advertising expense and other expense vary based on the level of actual or anticipated business activity and the number of dealerships in operation. Rent expense typically varies with the number of store locations owned, investments made for facility improvements and interest rates. Other expense includes various fixed and variable expenses, including gain on disposal of franchises, certain customer-related costs such as gasoline and service loaners, and insurance, training, legal and information technology expenses, which may not change in proportion to gross profit levels. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth information related to our consolidated reported SG&A expenses: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) SG&A expenses: Compensation $ 1,087.4 $ 1,013.9 $ (73.5) (7) % Advertising 101.2 84.5 (16.7) (20) % Rent 46.4 36.6 (9.8) (27) % Other 443.2 442.0 (1.2) - % Total SG&A expenses $ 1,678.2 $ 1,577.0 $ (101.2) (6) % SG&A expenses as a % of gross profit: Compensation 45.6 % 46.2 % 60 bps Advertising 4.2 % 3.9 % (30) bps Rent 1.9 % 1.7 % (20) bps Other 18.7 % 20.1 % 140 bps Total SG&A expenses as a % of gross profit 70.4 % 71.9 % 150 bps Consolidated total SG&A expenses increased in dollar amount and decreased as a percentage of gross profit, primarily due to a decrease in compensation expense as a percent of gross profit as a result of higher gross profit contribution from Fixed Operations and F&I activities, which generally leverage SG&A expenses more effectively. Compensation expense increased in dollar amount due primarily to acquisitions, an increase in overall retail activity and higher medical expenses, and decreased as a percentage of gross profit as a result of higher overall gross profit and favorable gross profit mix shifts. Advertising expense increased in both dollar amount and as a percentage of gross profit, as a result of adapting our advertising spending to current retail automotive market conditions. Rent expense increased in both dollar amount and as a percentage of gross profit, primarily due to the increase in leased dealerships as a result of acquisitions from the fourth quarter of 2024 as well as newly acquired leased dealerships during 2025. Other SG&A expenses increased in dollar amount primarily due to higher information technology and maintenance expenses. However, other SG&A expenses decreased as a percentage of gross profit as a result of higher overall gross profit levels. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth information related to our Franchised Dealerships Segment reported SG&A expenses: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) SG&A expenses: Compensation $ 956.9 $ 892.4 $ (64.5) (7) % Advertising 69.9 55.1 (14.8) (27) % Rent 44.3 39.2 (5.1) (13) % Other 392.5 388.7 (3.8) (1) % Total SG&A expenses $ 1,463.6 $ 1,375.4 $ (88.2) (6) % SG&A expenses as a % of gross profit: Compensation 45.7 % 46.0 % 30 bps Advertising 3.3 % 2.8 % (50) bps Rent 2.1 % 2.0 % (10) bps Other 18.8 % 20.1 % 130 bps Total SG&A expenses as a % of gross profit 69.9 % 70.9 % 100 bps The Franchised Dealerships Segment's total SG&A expenses increased in dollar amount and decreased as a percentage of gross profit, primarily due to higher levels of gross profit that better leverage fixed expenses. Compensation expense increased in dollar amount due primarily to acquisitions, an increase in overall retail activity and higher medical expenses, and decreased as a percentage of gross profit as a result of higher overall gross profit and favorable gross profit mix shifts in Fixed Operations and F&I. Advertising expense increased in both dollar amount and as a percentage of gross profit, as a result of adapting our advertising spending to current retail automotive market conditions. Rent expense increased in both dollar amount and as a percentage of gross profit, primarily due to the increase in leased properties as a result of acquisitions of franchised dealerships. Other SG&A expenses increased in dollar amount primarily due to higher IT expenses. However, other SG&A expenses decreased as a percentage of gross profit as a result of higher overall gross profit levels. For the Franchised Dealerships Segment, SG&A expenses for 2025 include approximately $40.0 million of pre-tax benefit from cyber insurance proceeds related to the CDK outage, approximately $5.0 million of pre-tax charges related to storm damage, approximately $5.5 million of pre-tax loss related to dispositions, and approximately $0.7 million of pre-tax legal expenses. For the Franchised Dealerships Segment, SG&A expenses for 2024 included approximately $11.0 million of pre-tax charges related to excess compensation as a result of the CDK outage, approximately $8.3 million of pre-tax charges related to storm damage, approximately $3.5 million of pre-tax gain related to the acquisition of the remaining equity interest in a joint venture, $10.0 million of pre-tax gain related to the CDK outage cyber claim payment, and approximately $2.2 million of pre-tax charges related to severance and long-term compensation expense. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth information related to our EchoPark Segment reported SG&A expenses: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) SG&A expenses: Compensation $ 100.6 $ 95.8 $ (4.8) (5) % Advertising 30.2 27.7 (2.5) (9) % Rent 3.0 (1.7) (4.7) (276) % Other 39.0 43.9 4.9 11 % Total SG&A expenses $ 172.8 $ 165.7 $ (7.1) (4) % SG&A expenses as a % of gross profit: Compensation 43.0 % 46.1 % 310 bps Advertising 12.9 % 13.3 % 40 bps Rent 1.3 % (0.8) % (210) bps Other 16.6 % 21.1 % 450 bps Total SG&A expenses as a % of gross profit 73.8 % 79.7 % 590 bps The EchoPark Segment's total SG&A expenses increased in dollar amount and decreased as a percentage of gross profit, primarily due to higher gross profit contribution from F&I activities, which generally leverage SG&A expenses more effectively. Compensation expense increased in dollar amount due primarily to an increase in overall retail activity, and decreased as a percentage of gross profit as a result of higher overall gross profit. Advertising expense increased in dollar amount and decreased and as a percentage of gross profit, as a result of adapting our advertising spending to current retail automotive market conditions and higher overall gross profit. Rent expense increased in both dollar amount and as a percentage of gross profit, primarily due to a decrease in rental income and an increase in overall gross profit. Other SG&A expenses decreased in both dollar amount and as a percentage of gross profit primarily due to a decrease in outside contractor expenses. For the EchoPark Segment, SG&A expenses for 2025 include approximately $0.9 million of pre-tax gain on dispositions. For the EchoPark Segment, SG&A expenses for 2024 included approximately $3.0 million of pre-tax gain on exit of leased properties, approximately $2.9 million of pre-tax charges for severance and long-term compensation expense, approximately $2.1 million of pre-tax charges related to closed store accrued expenses related to the indefinite suspension of operations at certain EchoPark locations, approximately $2.1 million of pre-tax gain on real estate dispositions, and approximately $0.4 million of pre-tax charges related to excess compensation as a result of the CDK outage. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth information related to our Powersports Segment reported SG&A expenses: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) SG&A expenses: Compensation $ 29.9 $ 25.7 $ (4.2) (16) % Advertising 1.1 1.7 0.6 35 % Rent (0.9) (0.9) - - % Other 11.7 9.4 (2.3) (24) % Total SG&A expenses $ 41.8 $ 35.9 $ (5.9) (16) % SG&A expenses as a % of gross profit: Compensation 55.6 % 58.7 % 310 bps Advertising 2.1 % 3.9 % 180 bps Rent (1.6) % (2.1) % (50) bps Other 21.6 % 21.5 % (10) bps Total SG&A expenses as a % of gross profit 77.7 % 82.0 % 430 bps The Powersports Segment's total SG&A expenses increased in dollar amount and decreased as a percentage of gross profit, driven by an increase in other SG&A expenses and compensation expenses, coupled with higher gross profit levels. Compensation expense increased in dollar amount due primarily to acquisitions and an increase in overall retail activity, and decreased as a percentage of gross profit as a result of higher overall gross profit. Advertising expense decreased in both dollar amount and as a percentage of gross profit, as a result of adapting our advertising spending to current retail automotive market conditions. Rent expense remained flat in dollar amount and increased as a percentage of gross profit, primarily due to a decrease in rental income. Other SG&A expenses increased in both dollar amount and as a percentage of gross profit primarily due to expenses related to the termination of Powersports franchises. For the Powersports Segment, SG&A expenses for 2025 include approximately $1.1 million of pre-tax charges related to dispositions. For the Powersports Segment, SG&A expenses for 2024 included approximately $0.5 million of pre-tax charges related to severance and long-term compensation expense. Impairment Charges - Consolidated Impairment charges were approximately $173.8 million and $3.9 million in 2025 and 2024, respectively. Impairment charges for 2025 include approximately $173.1 million of franchise asset impairment charges, of which approximately $165.9 million is related to the Franchised Dealerships Segment and approximately $7.2 million is related to the Powersports Segment. Additional impairment charges of approximately $0.2 million are related to pre-tax property and equipment impairment charges for real estate held for sale in the EchoPark Segment, and approximately $0.4 million related to pre-tax property, equipment and right-of-use asset impairment charges in the Powersports Segment. Impairment charges for 2024 primarily related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decisions to indefinitely suspend operations at certain EchoPark locations and to close certain Northwest Motorsport stores. Depreciation and Amortization - Consolidated Depreciation expense increased approximately $13.0 million, or 8.6%, in 2025, due primarily to acquisitions and completed construction projects and purchases of fixed assets for use in our franchised dealerships and EchoPark stores. Interest Expense, Floor Plan - Consolidated SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We typically maintain a floor plan deposit balance (as shown in the table below under the heading "Liquidity and Capital Resources") that earns interest income based on the used floor plan interest rate, effectively reducing the net used vehicle floor plan interest expense. The floor plan deposit balance was $300.0 million as of December 31, 2025 and $340.0 million as of December 31, 2024. Our interest expense, floor plan fluctuates with changes in our outstanding borrowings and associated interest rates, which are variable based on one-month Term SOFR or the U.S. prime rate, plus credit spreads specified in the applicable agreements. Interest expense, floor plan for new vehicles decreased $6.0 million. The average interest rate applied to the new vehicle floor plan decreased in the 12 months ended December 31, 2025, driving $13.0 million of the overall decrease. The average new vehicle floor plan notes payable balance increased $111.4 million, offsetting $7.0 million of the overall decrease. Interest expense, floor plan for used vehicles increased $3.7 million, including the effect of interest income earned on the floor plan deposit balance, driving $7.8 million of the increase. Excluding the effect of the floor plan deposit balance, interest expense, floor plan for used vehicles decreased $4.1 million. The average interest rate applied to the used vehicle floor plan decreased in the 12 months ended December 31, 2025, driving $3.8 million of that decrease. The average used vehicle floor plan notes payable balance decreased $4.2 million, driving $0.3 million of that decrease. Interest Expense, Other, Net - Consolidated Interest expense, other, net is summarized in the table below: Year Ended December 31, Better / (Worse) 2025 2024 Change % Change (In millions) Stated/coupon interest $ 81.5 $ 91.0 $ 9.5 10 % Deferred loan cost amortization 5.6 5.7 0.1 2 % Interest rate hedge expense (benefit) 0.1 0.6 0.5 83 % Capitalized interest (2.2) (2.6) (0.4) (15) % Interest on finance lease liabilities 24.5 22.4 (2.1) (9) % Other interest 0.6 0.9 0.3 33 % Total interest expense, other, net $ 110.1 $ 118.0 $ 7.9 7 % Interest expense, other, net decreased $7.9 million, or 7%, primarily related to lower outstanding balances on our mortgage notes and a lower interest rate environment throughout 2025 as compared to 2024. Provision for Income Taxes - Consolidated The overall effective tax rate was 31.3% and 15.7% for 2025 and 2024, respectively. Income tax expense for 2025 includes a $7.6 million charge related to nondeductible executive compensation, a $5.3 million charge related to adjustments of deferred tax items and a $0.6 million charge related to changes in uncertain tax positions, partially offset by a $3.5 million benefit related to vested or exercised stock compensation awards. Income tax expense for 2024 includes the effect of an out of period adjustment related to franchise assets of $31.0 million, a $1.6 million charge related to charges in uncertain tax positions, and a $4.7 million charge related to non-deductible executive compensation, partially offset by a $1.4 million benefit related to vested or exercised stock compensation awards. Our effective tax rate varies from year to year based on the level of taxable income, the distribution of taxable income between states in which the Company operates and other tax adjustments. Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires Sonic's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the accompanying consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. SONIC AUTOMOTIVE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Goodwill and Other Intangible Assets In accordance with Accounting Standards Codification ("ASC") Topic 350, "Intangibles - Goodwill and Other...

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