Sonic Automotive Reports Fourth Quarter and Full Year Financial Results

Full Year 2023 Results Include All-Time Record Annual Revenues of $14.4 Billion

EchoPark Segment Expected to Achieve Breakeven Adjusted EBITDA* in the First Quarter of 2024

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Sonic Automotive, Inc. (“Sonic Automotive,” “Sonic,” the “Company,” "we," "us" or "our") (NYSE:SAH), one of the nation’s largest automotive retailers, today reported financial results for the fourth quarter and fiscal year ended December 31, 2023.

Fourth Quarter 2023 Financial Summary

• Total revenues of $3.6 billion, flat year-over-year; total gross profit of $541.1 million, down 6% year-over-year
• Reported net income of $38.7 million ($1.11 earnings per diluted share)
  • Reported fourth quarter net income includes the effect of a $16.7 million pre-tax charge related to non-cash impairment charges (partially offset by a $4.3 million tax benefit on above charges), and a one-time income tax charge of $5.8 million related to certain non-deductible tax items
  • Excluding these items, adjusted fourth quarter net income* was $56.9 million ($1.63 adjusted earnings per diluted share*)
• Total selling, general and administrative (“SG&A”) expenses as a percentage of gross profit of 71.4% (67.0% on a Franchised Dealerships Segment basis)
• Franchised Dealerships Segment revenues of $3.0 billion, up 1% year-over-year; Franchised Dealerships Segment gross profit of $491.4 million, down 7% year-over-year
• EchoPark Segment revenues of $556.6 million, down 6% year-over-year; EchoPark Segment gross profit of $42.8 million, up 5% year-over-year; EchoPark Segment retail used vehicle unit sales volume of 17,562 units, up 1% year-over-year
• EchoPark Segment loss (defined as loss before taxes and impairment charges) of $15.9 million; EchoPark Segment adjusted EBITDA* loss of $9.1 million, a 64% improvement year-over-year
  • Expect to achieve breakeven EchoPark Segment adjusted EBITDA* in the first quarter of 2024
  • Fourth quarter EchoPark Segment adjusted EBITDA* loss includes: a $0.9 million loss recognized in the fourth quarter related to stores closed prior to the fourth quarter; and a $1.3 million loss related to the Northwest Motorsport stores closed after the end of the fourth quarter in January 2024

Full Year 2023 Financial Summary

• All-time record annual revenues of $14.4 billion, up 3% year-over-year; gross profit of $2.2 billion, down 3% year-over-year
• Reported full year net income of $178.2 million ($4.97 earnings per diluted share)
  • Reported net income includes the effect of a $79.3 million pre-tax charge related to non-cash impairment charges and a $10.0 million pre-tax charge to gross profit related to inventory valuation adjustments, offset partially by a net $9.3 million pre-tax gain in SG&A expenses (collectively, these items are partially offset by a $19.9 million tax benefit on the above net charges), and a one-time income tax charge of $5.8 million related to certain non-deductible tax items
  • Excluding these items, adjusted net income* was $244.1 million ($6.81 adjusted earnings per diluted share*)
• Total SG&A expenses as a percentage of gross profit of 71.3% (64.6% on a Franchised Dealerships Segment basis)
  • Adjusted SG&A expenses as a percentage of gross profit* of 71.4% (65.6% on a Franchised Dealerships Segment basis)
• Franchised Dealerships Segment revenues of $11.8 billion, up 3% year-over-year; Franchised Dealerships Segment gross profit of $2.0 billion, down 4% year-over-year
• EchoPark Segment revenues of $2.4 billion, down 1% year-over-year; EchoPark Segment gross profit of $161.8 million, down 8% year-over-year; EchoPark Segment retail used vehicle unit sales volume of 73,676 units, up 15% year-over-year
• Reported EchoPark Segment loss (defined as loss before taxes and impairment charges) of $132.4 million; adjusted EchoPark Segment loss* of $112.8 million; EchoPark Segment adjusted EBITDA* loss of $83.0 million, a 21% improvement year-over-year
  • Full year EchoPark Segment adjusted EBITDA* loss includes: a $35.3 million loss related to stores closed during 2023; and a $5.1 million loss related to the Northwest Motorsport stores closed after the end of the fiscal year in January 2024
• During 2023, Sonic repurchased approximately 3.3 million shares of its Class A Common Stock, or 9% of shares outstanding at December 31, 2022, for an aggregate purchase price of approximately $177.6 million

* Please refer to the discussion and reconciliation of Non-GAAP Financial Measures below.

Commentary

David Smith, Chairman and Chief Executive Officer of Sonic Automotive, stated, “We are proud of our team’s performance in the fourth quarter, delivering financial results that reflect our ability to leverage our diversified business model to adapt to rapidly changing market dynamics. During the quarter, we continued to realize the expected benefits of the strategic adjustments to our EchoPark business model, which showed improvement in year-over-year losses to help offset continued margin normalization in the franchised dealership segment. We remain confident that we have the right strategy, the right people, and the right culture to continue to grow our business and create long-term value for our stakeholders.”

Jeff Dyke, President of Sonic Automotive, commented, “While consumer affordability and used vehicle sourcing challenges persist, our EchoPark results in the fourth quarter demonstrate our team's valuable industry experience and the adaptability of our innovative EchoPark model. Based on recent performance and market trends, we remain confident in our path to achieve breakeven EchoPark segment adjusted EBITDA* in the first quarter of 2024, and expect to resume our disciplined long-term growth plans for EchoPark once used vehicle market conditions improve.”

Heath Byrd, Chief Financial Officer of Sonic Automotive, added, “Our diversified cash flow streams continued to benefit our overall financial position in the fourth quarter. As of December 31, 2023, we had $846 million of total liquidity, including $374 million in cash and floor plan deposits on hand. We believe we remain well-positioned to adapt to evolving market conditions and position the Company for success in 2024 and beyond.”

Fourth Quarter 2023 Segment Highlights

The financial measures discussed below are results for the fourth quarter of 2023 with comparisons made to the fourth quarter of 2022, unless otherwise noted.

• Franchised Dealerships Segment operating results include:
  • Same store revenues up 2%; same store gross profit down 6%
  • Same store retail new vehicle unit sales volume up 10%; same store retail new vehicle gross profit per unit down 30%, to $4,279
  • Same store retail used vehicle unit sales volume down 7%; same store retail used vehicle gross profit per unit down 1%, to $1,433
  • Same store parts, service and collision repair (“Fixed Operations”) gross profit up 7%; same store customer pay gross profit up 9%; same store warranty gross profit up 6%; same store Fixed Operations gross margin up 30 basis points, to 49.9%
  • Same store finance and insurance ("F&I") gross profit down 1%; same store F&I gross profit per retail unit of $2,334, down 3%
  • On a trailing quarter cost of sales basis, the Franchised Dealerships Segment had 37 days’ supply of new vehicle inventory (including in-transit) and 29 days’ supply of used vehicle inventory
• EchoPark Segment operating results include:
  • Revenues of $556.6 million, down 6% year-over-year; gross profit of $42.8 million, up 5% year-over-year
  • Retail used vehicle unit sales volume of 17,562, up 1% year-over-year
  • Segment loss of $15.9 million and adjusted EBITDA* loss of $9.1 million
    • EchoPark Segment stores closed prior to the fourth quarter incurred a $1.1 million segment loss and a $0.9 million adjusted EBITDA* loss during the fourth quarter, respectively
    • Northwest Motorsport stores closed after the end of the fourth quarter in January 2024 incurred a $1.8 million segment loss and a $1.3 million adjusted EBITDA* loss, respectively, in the fourth quarter
  • On a trailing quarter cost of sales basis, the EchoPark Segment had 36 days’ supply of used vehicle inventory
• Powersports Segment operating results include:
  • Revenues of $27.2 million, gross profit of $7.0 million, gross margin of 25.6%
  • Segment loss of $3.5 million and adjusted EBITDA* loss of $2.4 million

* Please refer to the discussion and reconciliation of Non-GAAP Financial Measures below.

Full Year 2023 Segment Highlights

The financial measures discussed below are results for the full year 2023 with comparisons made to the full year 2022, unless otherwise noted.

• Franchised Dealerships Segment operating results include:
  • Same store revenues up 3%; same store gross profit down 4%
  • Same store retail new vehicle unit sales volume up 8%; same store retail new vehicle gross profit per unit down 27%, to $4,849
  • Same store retail used vehicle unit sales volume down 7%; same store retail used vehicle gross profit per unit up 1%, to $1,630
  • Same store Fixed Operations gross profit up 9%; same store customer pay gross profit up 11%; same store warranty gross profit up 7%; same store Fixed Operations gross margin up 10 basis points, to 49.6%
  • Same store F&I gross profit flat year-over-year; same store F&I gross profit per retail unit of $2,411, flat year-over-year
• EchoPark Segment operating results include:
  • Revenues of $2.4 billion, down 1% year-over-year; gross profit of $161.8 million, down 8% year-over-year
  • Retail used vehicle unit sales volume of 73,676, up 15% year-over-year
  • Reported segment loss of $132.5 million, adjusted segment loss* of $112.8 million, and adjusted EBITDA* loss of $83.0 million
    • EchoPark Segment stores closed during 2023 incurred a $30.3 million reported segment loss and a $35.3 million adjusted EBITDA* loss during the fiscal year, respectively
    • Northwest Motorsport stores closed after the end of the fiscal year in January 2024 incurred a $6.7 million segment loss and a $5.1 million adjusted EBITDA* loss, respectively, for the full year
• Powersports Segment operating results include:
  • Revenues of $163.2 million, gross profit of $50.3 million, gross margin of 30.9%
  • Segment income of $5.7 million and adjusted EBITDA* of $10.8 million
  • Year-over-year comparative financial results are not meaningful due to the timing of acquisitions (seven stores acquired in August 2022 and five stores acquired in February 2023)

* Please refer to the discussion and reconciliation of Non-GAAP Financial Measures below.

Dividend

Sonic’s Board of Directors approved a quarterly cash dividend of $0.30 per share, payable on April 15, 2024 to all stockholders of record on March 15, 2024.

Fourth Quarter 2023 Earnings Conference Call

Senior management will hold a conference call today at 11:00 A.M. (Eastern). Investor presentation and earnings press release materials will be accessible beginning prior to the conference call on the Company’s website at ir.sonicautomotive.com.

To access the live webcast of the conference call, please go to ir.sonicautomotive.com and select the webcast link at the top of the page. For telephone access to this conference call, please dial (877) 407-8289 (domestic) or +1 (201) 689-8341 (international) and ask to be connected to the Sonic Automotive Fourth Quarter 2023 Earnings Conference Call. Dial-in access remains available throughout the live call; however, to ensure you are connected for the full call we suggest dialing in at least 10 minutes before the start of the call. A webcast replay will be available following the call for 14 days at ir.sonicautomotive.com.

About Sonic Automotive

Sonic Automotive, Inc., a Fortune 500 company based in Charlotte, North Carolina, is on a quest to become the most valuable automotive retailer and service brand in America. Our Company culture thrives on creating, innovating, and providing industry-leading guest experiences, driven by strategic investments in technology, teammates, and ideas that ultimately fulfill ownership dreams, enrich lives, and deliver happiness to our guests and teammates. As one of the largest automotive and powersports retailers in America, we are committed to delivering on this goal while pursuing expansive growth and taking progressive measures to be the leader in these categories. Our new platforms, programs, and people are set to drive the next generation of automotive and powersports experiences. More information about Sonic Automotive can be found at www.sonicautomotive.com and ir.sonicautomotive.com.

About EchoPark Automotive

EchoPark Automotive is one of the most comprehensive retailers of nearly new pre-owned vehicles in America today. Our unique business model offers a best-in-class shopping experience and utilizes one of the most innovative technology-enabled sales strategies in our industry. Our approach provides a personalized and proven guest-centric buying process that consistently delivers award-winning guest experiences and superior value to car buyers nationwide, with savings of up to $3,000 versus the competition. Consumers have responded by putting EchoPark among the top national pre-owned vehicle retailers in products, sales, and service, while receiving the 2023 Consumer Satisfaction Award from DealerRater. EchoPark’s mission is in the name: Every Car, Happy Owner. This drives the experience for guests and differentiates EchoPark from the competition. More information about EchoPark Automotive can be found at www.echopark.com.

Forward-Looking Statements

Included herein are forward-looking statements, including statements regarding anticipated future EchoPark profitability and anticipated future EchoPark adjusted EBITDA. There are many factors that affect management’s views about future events and trends of the Company’s business. These factors involve risks and uncertainties that could cause actual results or trends to differ materially from management’s views, including, without limitation, economic conditions in the markets in which we operate, supply chain disruptions and manufacturing delays, labor shortages, the impacts of inflation and increases in interest rates, new and used vehicle industry sales volume, future levels of consumer demand for new and used vehicles, anticipated future growth in each of our operating segments, the success of our operational strategies, the rate and timing of overall economic expansion or contraction, the integration of recent or future acquisitions, and the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and other reports and information filed with the United States Securities and Exchange Commission (the “SEC”). The Company does not undertake any obligation to update forward-looking information, except as required under federal securities laws and the rules and regulations of the SEC.

Non-GAAP Financial Measures

This press release and the attached financial tables contain certain non-GAAP financial measures as defined under SEC rules, such as adjusted net income, adjusted earnings per diluted share, adjusted SG&A expenses as a percentage of gross profit, adjusted segment loss, and adjusted EBITDA. As required by SEC rules, the Company has provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the schedules included in this press release. The Company believes that these non-GAAP financial measures improve the transparency of the Company’s disclosures and provide a meaningful presentation of the Company’s results.