On August 5, 2024, Sonic Automotive Inc (SAH, Financial) released its 8-K filing for the second quarter ended June 30, 2024. Sonic Automotive is one of the largest auto dealership groups in the United States, operating 108 franchised stores in 18 states, 25 EchoPark used-vehicle stores, 16 collision centers, and 13 powersports locations. The company derives revenue from new and used vehicles, parts and collision repair, finance, insurance, and wholesale auctions.
Financial Performance Overview
Sonic Automotive Inc (SAH, Financial) reported total revenues of $3.5 billion for Q2 2024, a 5% decline year-over-year, missing the analyst estimate of $3.58 billion. The company reported a net income of $41.2 million, up 76% year-over-year, translating to $1.18 earnings per diluted share, which missed the analyst estimate of $1.35.
Operational Challenges
The company faced significant operational disruptions due to a CDK Global software outage, which negatively impacted GAAP income before taxes by approximately $30 million, or $0.64 in diluted earnings per share. Despite these challenges, Sonic Automotive managed to report adjusted net income of $51.3 million, down 22% year-over-year, and adjusted earnings per diluted share of $1.47, down 20% year-over-year.
Segment Performance
Franchised Dealerships Segment:
- Same store revenues down 3%; same store gross profit down 9%
- Same store retail new vehicle unit sales volume down 2%; same store retail new vehicle gross profit per unit down 29%, to $3,590
- Same store retail used vehicle unit sales volume up 3%; same store retail used vehicle gross profit per unit down 14%, to $1,524
- Same store parts, service, and collision repair gross profit up 2%
EchoPark Segment:
- Revenues of $517.3 million, down 14%; gross profit of $51.1 million, up 91%
- Retail used vehicle unit sales volume of 16,641, down 3%
- Adjusted EBITDA of $7.2 million, up 123% year-over-year
Powersports Segment:
- Revenues of $39.6 million, down 12%; gross profit of $10.7 million, down 16%
- Segment income of $0.5 million and adjusted EBITDA of $2.3 million
Financial Metrics and Achievements
Sonic Automotive's total gross profit for Q2 2024 was $539.1 million, down 5% year-over-year. The company's selling, general, and administrative (SG&A) expenses as a percentage of gross profit stood at 72.9%. Adjusted SG&A expenses as a percentage of gross profit were 70.7%.
Despite the challenges, Sonic Automotive maintained a strong financial position with $467 million in cash and floor plan deposits on hand and approximately $885 million of total liquidity as of June 30, 2024.
Commentary from Management
"I'm pleased to report that we continued to make great progress in our EchoPark Segment performance in the second quarter, with record second quarter Adjusted EBITDA that outpaced our previous projections and sets the stage for continued growth in the second half of 2024 and beyond," said David Smith, Chairman and Chief Executive Officer of Sonic Automotive.
"Despite the short-term operational challenges associated with the CDK outage, our team remains dedicated to delivering an outstanding guest experience and executing our long-term strategic vision," commented Jeff Dyke, President of Sonic Automotive.
"Our diversified cash flow streams continued to benefit our overall financial position in the second quarter, despite operational disruption from the CDK outage," added Heath Byrd, Chief Financial Officer of Sonic Automotive.
Conclusion
Sonic Automotive Inc (SAH, Financial) demonstrated resilience in Q2 2024 despite facing significant operational challenges. The company's ability to maintain profitability and liquidity highlights its robust business model and strategic execution. Investors will be keen to see how Sonic Automotive navigates the remainder of the year, especially with the anticipated improvements in the EchoPark Segment.
Explore the complete 8-K earnings release (here) from Sonic Automotive Inc for further details.
