Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EchoPark segment achieved record second-quarter adjusted EBITDA of $7.2 million, demonstrating strong performance.
- Sonic Automotive Inc (SAH, Financial) reported a 2% increase in same-store fixed-ops gross profit despite operational disruptions.
- The company increased its technician headcount by a net 131 techs, positioning well to achieve its goal of 300 new technicians in 2024.
- EchoPark segment retail unit sales volume was up 23% on a same-store basis in the second quarter.
- Sonic Automotive Inc (SAH) maintained a conservative balance sheet with $885 million in available liquidity, including $467 million in cash and floor plan deposits.
Negative Points
- The CDK software outage negatively impacted second-quarter GAAP income before taxes by approximately $30 million.
- Second-quarter EPS was $1.18 per share on a reported basis, a 20% decrease year over year due to the CDK outage.
- Elevated used retail prices remain a challenge for consumers, contributing to affordability concerns amid the current interest rate environment.
- New vehicle gross profit per unit is expected to decline throughout 2024, exiting the fourth quarter in the low $3,000 range.
- EchoPark segment revenues were down 14% from the prior year, despite improvements in gross profit.
Q & A Highlights
Highlights from Sonic Automotive Inc (SAH) Q2 2024 Earnings Call
Q: Did you see any notable changes in consumer behavior regarding service deferrals or retail traffic in Powersports?
A: Jeff Dyke, President, Director: Not at all. Powersports continued to get stronger as the quarter progressed, and this trend has continued into July and August.
Q: What is driving the recent stability in new unit gross profit per unit (GPU)?
A: Jeff Dyke, President, Director: The stability is partly mix-driven, with brands like Toyota maintaining good margins due to low inventory. However, other brands with higher inventory levels are facing challenges. We expect to exit the year with a GPU around $3,000, driven by increased incentives and better inventory management.
Q: How should we think about EchoPark volumes in 2025 given the supply challenges?
A: Jeff Dyke, President, Director: Despite supply challenges, we expect better volumes due to the increasing new car inventory, which will eventually benefit pre-owned inventory. We are confident in achieving higher unit sales per store and will consider opening new stores as conditions improve.
Q: Can you quantify the impact of the CDK outage on EchoPark volumes?
A: David Smith, Director: The CDK outage impacted EchoPark by approximately 500 units and about 3,000 units for new and used vehicles combined on the franchise side.
Q: What is driving the continued pick-up in F&I (Finance and Insurance) performance?
A: Jeff Dyke, President, Director: The improvement is driven by higher product penetration, with more warranties and products being sold per car. Our team’s high execution level is significantly contributing to this performance.
Q: What are you seeing in terms of the overall health of the consumer and new vehicle demand?
A: Jeff Dyke, President, Director: With increasing day supply, prices are expected to come down, benefiting consumers. Import brands are managing their inventory well, while some other brands are facing high inventory levels. Overall, we expect front-end margin pressure but a bright picture for consumers due to better incentives and pricing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
