Sonic Automotive Inc (SAH, Financial) released its 8-K filing on October 24, 2024, reporting financial results for the third quarter ended September 30, 2024. The company, one of the largest auto dealership groups in the United States, operates 108 franchised stores across 18 states, along with 25 EchoPark used-vehicle stores, 16 collision centers, and 13 powersports locations.
Performance Overview and Challenges
In the third quarter of 2024, Sonic Automotive Inc (SAH, Financial) reported total revenues of $3.5 billion, a 4% decline year-over-year, missing the analyst estimate of $3,549.59 million. Despite this, the company achieved a net income of $74.2 million, an 8% increase year-over-year, translating to earnings per diluted share of $2.13, surpassing the analyst estimate of $1.49. This performance was impacted by a $31.0 million income tax benefit from correcting a prior period error.
The company faced significant challenges, including operational disruptions due to a CDK Global software outage, which negatively impacted the Franchised Dealerships Segment. This outage is estimated to have reduced third-quarter GAAP income before taxes by approximately $17.2 million.
Financial Achievements and Industry Context
Sonic Automotive's EchoPark Segment reported an all-time record quarterly gross profit of $55.2 million, a 5% increase year-over-year, despite a 13% decline in segment revenues to $544.9 million. The segment's adjusted EBITDA surged by 271% to $8.9 million, highlighting the company's strategic focus on the used vehicle market, which is crucial given the industry's ongoing challenges with new vehicle supply and pricing pressures.
Key Financial Metrics and Analysis
The company's gross profit for the quarter was $543.6 million, down 7% from the previous year. Selling, general, and administrative expenses were $392.1 million, representing 72.1% of gross profit. The Franchised Dealerships Segment saw a 2% increase in same-store retail new vehicle unit sales, although gross profit per unit fell by 35% to $3,049. Meanwhile, the EchoPark Segment's retail used vehicle unit sales volume decreased by 7% year-over-year.
On the balance sheet, Sonic Automotive reported approximately $418 million in cash and floor plan deposits, with total liquidity of $834 million as of September 30, 2024. This financial position allows the company to strategically deploy capital as market conditions evolve.
Commentary and Strategic Outlook
David Smith, Chairman and CEO, stated, "I'm pleased to report that we continued to build momentum in our EchoPark Segment in the third quarter, generating all-time record quarterly gross profit, segment income, and adjusted EBITDA* as a result of the dedicated efforts of our team and the improving conditions in the used vehicle retail environment."
Jeff Dyke, President, commented, "I'm very proud of our team's performance in the third quarter, which not only drove record segment income in our EchoPark Segment, but also showcased our franchised dealership team's resilience in managing through operational disruptions from the CDK outage."
Dividend and Future Prospects
Sonic Automotive's Board of Directors approved a 17% increase in the quarterly cash dividend to $0.35 per share, payable on January 15, 2025. This decision reflects the company's confidence in its financial stability and future growth prospects.
Overall, Sonic Automotive Inc (SAH, Financial) demonstrated resilience in the face of operational challenges, with strong performance in its EchoPark Segment and a strategic focus on maintaining liquidity and capital deployment flexibility. The company's ability to navigate industry headwinds and leverage its diversified business model will be key to sustaining long-term value for stakeholders.
Explore the complete 8-K earnings release (here) from Sonic Automotive Inc for further details.
