Exhibit 99.1 Sonic Automotive Reports First Quarter Financial Results EchoPark Segment Achieved All-Time Record Quarterly Adjusted EBITDA* in the First Quarter of 2024, Exceeding Previously Stated Target of Breakeven Adjusted EBITDA* in the First Quarter CHARLOTTE, N.C. – April 25, 2024 – 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 first quarter ended March 31, ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________________________ FORM 10-K ___________________________________________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-13395 ___ ...

Financial Data and Key Metrics Changes - Fourth quarter total revenues reached $3.6 billion, with all-time record annual revenues of $14.4 billion, up 3% from the previous year [1] - Fourth quarter GAAP EPS was $1.11 per share, while adjusted EPS was $1.63 per share, a decrease from $2.61 in the prior year due to normalization of new vehicle GPU and higher interest rates [1][23] Business Line Data and Key Metrics Changes - The EchoPark segment reported revenues of $557 million, down 6% year-over-year, but gross profit increased by 5% to $43 million [26] - Fixed operations gross profit at franchise dealerships increased by 7% year-over-year, driven by a 9% growth in customer pay business [7] - Used retail GPU declined to $1,443 per unit on a same-store basis due to seasonality [6] Market Data and Key Metrics Changes - Wholesale auction prices for three-year-old vehicles decreased nearly 9% in the fourth quarter, while average retail used pricing declined by 2% [24] - New vehicle gross profit per unit declined to $4,289 per unit, with expectations for continued decline throughout 2024 [23] Company Strategy and Development Direction - The company aims to achieve breakeven EchoPark segment adjusted EBITDA in the first quarter of 2024 and positive adjusted EBITDA for the full year [132] - Management is focused on leveraging a diversified business model to adapt to changing market dynamics while positioning for long-term strategic goals [22] - The company plans to optimize its Fixed Ops business and expects to see continued stability in F&I GPU in 2024 [7][25] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the used vehicle market improving over the next 16 to 18 months, despite current challenges [62] - The company anticipates that the normalization of used car pricing and volumes will drive growth in the EchoPark segment [141] - Management noted that the current interest rate environment poses challenges but remains optimistic about future performance [141] Other Important Information - The company ended the third quarter with $846 million in available liquidity and repurchased 3.3 million shares in 2023 [10] - A quarterly cash dividend of $0.30 per share was approved, payable on April 15, 2024 [29] Q&A Session Questions and Answers Question: What gives confidence in the long-term operating model of EchoPark? - Management believes that the used vehicle market will strengthen, providing a significant opportunity for EchoPark in the future [84] Question: Can you elaborate on the SG&A costs and their drivers? - The increase in SG&A costs is primarily driven by a decrease in gross profit, with fixed expenses rising due to higher insurance and loan expenses [55] Question: What are the expectations for used car volumes in 2024? - Management projects low single-digit growth for used car volume increases from a franchise perspective, with EchoPark expected to maintain similar volume levels as last year [43]

Updated October 26, 2023 You are cautioned that these forward-looking statements are not guarantees of future performance, involve risks and uncertainties and actual results may differ materially from those projected in the forward-looking statements as a result of various factors. These risks and uncertainties include, 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 inte ...

Financial Data and Key Metrics Changes - Sonic Automotive reported record total revenues of $3.6 billion for the third quarter of 2023, representing a 6% increase from the previous year [3] - Third quarter EPS was $1.92 per share, which reflects certain charges related to previously announced store closures [3][32] - Adjusted EPS was $2.02 per share, a decrease from $2.23 in the prior year, primarily due to normalizing new vehicle margins and higher floor plan interest rates [32] Business Line Data and Key Metrics Changes - The new vehicle gross profit per unit (GPU) declined sequentially to $4,678 on a same-store basis, with expectations to exit 2023 in the low to mid $4,000 range [11] - In the used vehicle segment, the wholesale auction prices for three-year-old vehicles decreased by 5% in Q3, following a 6% decline in Q2 [5] - The parts and service business saw record fixed operations gross profit, up 8% year-over-year on a same-store basis, driven by a 10% growth in customer pay business [6] - EchoPark segment revenues reached $627 million, up 6% from the prior year, with retail unit sales volume of 19,050 units, up 25% year-over-year [34] Market Data and Key Metrics Changes - The luxury weighted portfolio generally runs a lower inventory day supply, which may minimize new GPU compression relative to industry trends [12] - The used vehicle market is expected to normalize, with anticipated improvements in pricing and volumes over time [13][41] Company Strategy and Development Direction - The company is focused on driving incremental inventory acquisition and retail sales opportunities while adapting to changing market dynamics [13][19] - Management believes that the diversified business model provides earnings growth opportunities in EchoPark and powersports segments, which may offset industry-driven margin headwinds [19] - The decision to suspend operations at 50% of EchoPark locations is expected to improve near-term financial performance without sacrificing long-term strategic plans [7][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving breakeven adjusted EBITDA for EchoPark in Q1 2024, with a disciplined approach to long-term growth plans as market conditions improve [16] - The company anticipates that the used vehicle market will recover over the next 18 to 24 months, allowing for a return to pre-COVID sales levels [24][41] - Management highlighted the importance of maintaining strong relationships with teammates, manufacturer partners, and customers for future success [32] Other Important Information - The Board of Directors approved a 3.4% increase in the quarterly cash dividend to $0.30 per share, payable on January 12, 2024 [18] - The company ended Q3 with $797 million in available liquidity, including $335 million in cash and floor plan deposits [36] Q&A Session Summary Question: What is the outlook for EchoPark's EBITDA profitability? - Management confirmed that EchoPark is expected to achieve positive EBITDA in Q1 2024 and continue improving thereafter [20] Question: Will the changes in EchoPark's footprint affect long-term growth plans? - Management indicated that larger selling hubs may be considered in the future, but any expansion will be disciplined and based on market conditions [42][43] Question: How does the company plan to navigate shortages in later model used vehicles? - Management stated that they have already started moving to higher mileage and older vehicles to address shortages and have been successful in growing volume [67] Question: What is the impact of electric vehicle servicing on the business? - Management noted that servicing electric vehicles has been more profitable, with higher gross margins compared to internal combustion engine vehicles [70] Question: How is the company managing inventory levels? - Management emphasized a disciplined approach to inventory management, maintaining a 20-day supply on the lot and 10 days in the pipeline [108]

[FORM 10-Q](index=1&type=section&id=FORM%2010-Q) [Registrant Information](index=1&type=section&id=Registrant%20Information) This section details Sonic Automotive, Inc.'s corporate information, including its Delaware incorporation, filer status, and outstanding common stock - Sonic Automotive, Inc. filed a Quarterly Report on Form 10-Q for the period ended September 30, 2023[2](index=2&type=chunk) - The registrant is a Delaware corporation with Commission File Number: **1-13395**[2](index=2&type=chunk) Filer Status and Common Stock Outstanding | Category | Status | | :--- | :--- | | Filer Status | Large accelerated filer | | Class A Common Stock Outstanding (Oct 24, 2023) | 21,857,279 shares | | Class B Common Stock Outstanding (Oct 24, 2023) | 12,029,375 shares | [Uncertainty of Forward-Looking Statements and Information](index=2&type=section&id=UNCERTAINTY%20OF%20FORWARD-LOOKING%20STATEMENTS%20AND%20INFORMATION) This section cautions that forward-looking statements involve risks and uncertainties, with actual results potentially differing materially from projections - The report includes forward-looking statements, which are not guarantees of future performance and actual results may differ materially[5](index=5&type=chunk)[6](index=6&type=chunk) - Key risk factors include new and used vehicle sales volume, ability to fund expansion and operations, EchoPark store operations, vehicle manufacturer reputation and financial condition, relationships with manufacturers, legal proceedings, changes in laws/regulations, supply chain disruptions, general economic conditions (interest rates, inflation, consumer spending), high competition, and control by principal stockholders[6](index=6&type=chunk)[8](index=8&type=chunk) [Table of Contents](index=3&type=section&id=TABLE%20OF%20CONTENTS) This section outlines the Form 10-Q's structure, detailing financial and other information items with their corresponding page numbers - The report is structured into two main parts: Part I – Financial Information and Part II – Other Information[10](index=10&type=chunk) - Part I includes Financial Statements, Management's Discussion and Analysis, Market Risk Disclosures, and Controls and Procedures[10](index=10&type=chunk) - Part II covers Legal Proceedings, Risk Factors, Equity Sales/Purchases, Other Information, and Exhibits[10](index=10&type=chunk) [PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited condensed consolidated financial statements, including operations, balance sheets, cash flows, and detailed accounting notes [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Three Months Ended September 30 (in millions) | Metric | 2023 | 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total Revenues | $3,643.5 | $3,448.1 | +5.7% | | Gross Profit | $582.2 | $580.7 | +0.3% | | Operating Income | $137.4 | $148.9 | -7.7% | | Net Income | $68.4 | $87.3 | -21.7% | | Basic EPS | $1.96 | $2.28 | -14.0% | | Diluted EPS | $1.92 | $2.23 | -13.9% | Nine Months Ended September 30 (in millions) | Metric | 2023 | 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total Revenues | $10,787.6 | $10,410.5 | +3.6% | | Gross Profit | $1,704.6 | $1,740.9 | -2.1% | | Operating Income | $322.1 | $458.1 | -29.7% | | Net Income | $139.5 | $279.4 | -50.1% | | Basic EPS | $3.94 | $7.09 | -44.5% | | Diluted EPS | $3.85 | $6.90 | -44.2% | [Condensed Consolidated Statements of Comprehensive Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Operations) Three Months Ended September 30 (in millions) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Income | $68.4 | $87.3 | | Other Comprehensive Income (Loss) | $0.2 | $— | | Comprehensive Income | $68.6 | $87.3 | Nine Months Ended September 30 (in millions) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Income | $139.5 | $279.4 | | Other Comprehensive Income (Loss) | $1.1 | $0.5 | | Comprehensive Income | $140.6 | $279.9 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2023 vs. December 31, 2022 (in millions) | Metric | Sep 30, 2023 | Dec 31, 2022 | Change | | :--- | :--- | :--- | :--- | | **Assets:** | | | | | Total Current Assets | $2,241.5 | $2,206.3 | +$35.2 | | Total Assets | $5,050.3 | $4,978.3 | +$72.0 | | **Liabilities & Equity:** | | | | | Total Current Liabilities | $2,009.2 | $1,845.4 | +$163.8 | | Long-Term Debt | $1,623.1 | $1,672.2 | -$49.1 | | Total Stockholders' Equity | $857.5 | $895.2 | -$37.7 | | Total Liabilities and Stockholders' Equity | $5,050.3 | $4,978.3 | +$72.0 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Changes in Stockholders' Equity (Nine Months Ended Sep 30, 2023 vs. Dec 31, 2022, in millions) | Metric | Dec 31, 2022 | Sep 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $895.2 | $857.5 | -$37.7 | | Net Income | - | $139.5 | +$139.5 | | Purchases of Treasury Stock | - | $(177.5) | -$177.5 | | Dividends Paid (Class A & B) | - | $(29.7) | -$29.7 | | Stock Compensation Expense | - | $17.3 | +$17.3 | | Effect of cash flow hedge instruments, net of tax | - | $1.1 | +$1.1 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Nine Months Ended September 30 (in millions) | Cash Flow Activity | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $104.2 | $645.4 | -$541.2 | | Net Cash Used in Investing Activities | $(171.4) | $(276.1) | +$104.7 | | Net Cash Used in Financing Activities | $(127.4) | $(529.7) | +$402.3 | | Net Decrease in Cash and Cash Equivalents | $(194.6) | $(160.4) | -$34.2 | | Cash and Cash Equivalents, End of Period | $34.6 | $139.0 | -$104.4 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) This note details the basis of financial statement presentation, GAAP adherence, key revenue recognition policies, and a goodwill impairment test date change - The financial statements are unaudited and prepared in accordance with GAAP for interim financial information[27](index=27&type=chunk) - The company voluntarily changed its annual goodwill and other intangible assets impairment test date from October 1 to April 30, effective Q1 2023, for better alignment with financial information availability[29](index=29&type=chunk) - Revenue is recognized when a customer obtains control of promised goods or services, with material streams identified as new/used vehicle sales, wholesale vehicle sales, F&I product arrangements, and vehicle maintenance/repair services[31](index=31&type=chunk)[32](index=32&type=chunk) [Note 2. Business Acquisitions and Dispositions](index=11&type=section&id=Note%202.%20Business%20Acquisitions%20and%20Dispositions) This note details Q3 2023 acquisitions and dispositions, including a Powersports business purchase and charges from EchoPark store suspensions and closures - Acquired one Powersports business (five locations) for approximately **$75.1 million** during the nine months ended September 30, 2023[38](index=38&type=chunk) - Disposed of three franchised dealerships (one luxury, one domestic, one mid-line import) for approximately **$52.2 million** in net cash during the nine months ended September 30, 2023[40](index=40&type=chunk) - Recorded a total charge of approximately **$75.2 million** in Q2 2023 and an additional **$4.8 million** in Q3 2023 related to indefinitely suspending operations at eight EchoPark locations and closing three Northwest Motorsport stores[40](index=40&type=chunk) [Note 3. Inventories](index=12&type=section&id=Note%203.%20Inventories) This note details the increase in inventories, primarily new vehicle stock, as of September 30, 2023, compared to year-end 2022 Inventories (in millions) | Category | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | New vehicles | $637.7 | $449.3 | | Used vehicles | $523.4 | $534.0 | | Service loaners | $173.9 | $143.8 | | Parts, accessories and other | $98.9 | $89.7 | | **Total Inventories** | **$1,433.9** | **$1,216.8** | [Note 4. Property and Equipment](index=12&type=section&id=Note%204.%20Property%20and%20Equipment) This note details the increase in net property and equipment, capital expenditures, and impairment charges from EchoPark store closures Property and Equipment, Net (in millions) | Category | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Land | $487.8 | $478.2 | | Buildings and improvements | $1,404.0 | $1,365.3 | | Furniture, fixtures and equipment | $557.3 | $504.1 | | Construction in progress | $69.7 | $57.0 | | Total, at cost | $2,518.8 | $2,404.6 | | Less accumulated depreciation | $(907.7) | $(842.9) | | Subtotal | $1,611.1 | $1,561.7 | | Less assets held for sale | $(11.9) | $— | | **Property and equipment, net** | **$1,599.2** | **$1,561.7** | - Capital expenditures were approximately **$153.6 million** for the nine months ended September 30, 2023, primarily for real estate, new store construction, and building improvements[43](index=43&type=chunk) - Fixed asset impairment charges of approximately **$32.5 million** were recorded for the nine months ended September 30, 2023, mainly due to EchoPark store closures[44](index=44&type=chunk) [Note 5. Goodwill and Intangible Assets](index=12&type=section&id=Note%205.%20Goodwill%20and%20Intangible%20Assets) This note details the increase in goodwill from Powersports acquisitions and confirms no impairment was found in the annual test as of April 30, 2023 - Goodwill is tested for impairment at least annually (as of April 30) or more frequently if indications exist[45](index=45&type=chunk) - The annual impairment testing as of April 30, 2023, determined no impairment for goodwill or indefinite-lived franchise assets[47](index=47&type=chunk)[48](index=48&type=chunk) Changes in Goodwill (in millions) | Segment | Dec 31, 2022 | Additions (2023) | Reductions (2023) | Prior Year Allocations (2023) | Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | | Franchised Dealerships | $221.8 | $— | $(1.8) | $(0.4) | $219.6 | | EchoPark | $— | $— | $— | $— | $— | | Powersports | $9.2 | $11.9 | $— | $2.9 | $24.0 | | **Total** | **$231.0** | **$11.9** | **$(1.8)** | **$2.5** | **$243.6** | [Note 6. Long-Term Debt](index=13&type=section&id=Note%206.%20Long-Term%20Debt) This note details the decrease in long-term debt, various credit facilities, and compliance with financial covenants as of September 30, 2023 Long-Term Debt (in millions) | Debt Type | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | 4.625% Senior Notes due 2029 | $650.0 | $650.0 | | 4.875% Senior Notes due 2031 | $500.0 | $500.0 | | 2019 Mortgage Facility | $315.0 | $327.0 | | Mortgage notes to finance companies (fixed rate) | $166.3 | $186.6 | | Mortgage notes to finance companies (variable rate) | $76.8 | $116.0 | | **Total Debt (net of issuance costs)** | **$1,683.5** | **$1,751.7** | | Less current maturities | $(60.4) | $(79.5) | | **Long-term debt** | **$1,623.1** | **$1,672.2** | - The 2021 Revolving Credit Facility has **$288.9 million** remaining borrowing availability as of September 30, 2023[55](index=55&type=chunk) - The company was in compliance with all financial covenants under the 2021 Credit Facilities and the 2019 Mortgage Facility as of September 30, 2023[70](index=70&type=chunk) [Note 7. Commitments and Contingencies](index=16&type=section&id=Note%207.%20Commitments%20and%20Contingencies) This note outlines legal proceedings, guarantees, and indemnification obligations, with management not expecting a material adverse financial effect - Management believes current and threatened legal proceedings will not have a material adverse effect on Sonic's business or financial results[78](index=78&type=chunk) - The company retains responsibility for certain obligations under assigned/sublet real property leases post-dealership dispositions[74](index=74&type=chunk)[75](index=75&type=chunk) - Maximum exposure for general indemnifications related to dealership sales was approximately **$8.0 million** as of September 30, 2023[76](index=76&type=chunk) - Guarantees floor plan commitments of a **50%**-owned joint venture, amounting to approximately **$4.3 million** as of September 30, 2023[77](index=77&type=chunk) [Note 8. Fair Value Measurements](index=17&type=section&id=Note%208.%20Fair%20Value%20Measurements) This note compares fair values to carrying values for financial instruments, noting fixed-rate long-term debt's fair value is generally lower - Fair values of most financial instruments (receivables, floor plan notes, revolving credit borrowings) approximated their carrying values[82](index=82&type=chunk) Fair Value vs. Carrying Value of Fixed Rate Long-Term Debt (in millions) | Debt Type | Sep 30, 2023 Fair Value | Sep 30, 2023 Carrying Value | Dec 31, 2022 Fair Value | Dec 31, 2022 Carrying Value | | :--- | :--- | :--- | :--- | :--- | | 4.875% Notes | $397.5 | $500.0 | $390.3 | $500.0 | | 4.625% Notes | $536.3 | $650.0 | $519.5 | $650.0 | | Mortgage Notes | $159.0 | $166.3 | $174.0 | $186.6 | [Note 9. Segment Information](index=18&type=section&id=Note%209.%20Segment%20Information) This note details the performance of Franchised Dealerships, EchoPark, and Powersports segments, highlighting revenue and income trends - Sonic Automotive has three operating segments: Franchised Dealerships, EchoPark, and Powersports[85](index=85&type=chunk) Segment Revenues (Three Months Ended Sep 30, in millions) | Segment | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Franchised Dealerships | $2,959.8 | $2,840.3 | $119.5 | 4% | | EchoPark | $626.7 | $590.8 | $35.9 | 6% | | Powersports | $57.0 | $17.0 | $40.0 | 235% | | **Total Consolidated** | **$3,643.5** | **$3,448.1** | **$195.4** | **6%** | Segment Income (Loss) (Three Months Ended Sep 30, in millions) | Segment | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Franchised Dealerships | $101.5 | $146.3 | $(44.8) | (31)% | | EchoPark | $(16.9) | $(31.1) | $14.2 | 46% | | Powersports | $6.6 | $1.2 | $5.4 | 450% | | **Income before taxes** | **$91.2** | **$116.4** | **$(25.2)** | **(22)%** | Segment Revenues (Nine Months Ended Sep 30, in millions) | Segment | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Franchised Dealerships | $8,773.8 | $8,511.9 | $261.9 | 3% | | EchoPark | $1,877.8 | $1,873.7 | $4.1 | 0% | | Powersports | $136.0 | $24.9 | $111.1 | 446% | | **Total Consolidated** | **$10,787.6** | **$10,410.5** | **$377.1** | **4%** | Segment Income (Loss) (Nine Months Ended Sep 30, in millions) | Segment | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Franchised Dealerships | $357.2 | $472.2 | $(115.0) | (24)% | | EchoPark | $(116.5) | $(100.6) | $(15.9) | (16)% | | Powersports | $9.2 | $0.9 | $8.3 | 922% | | **Income before taxes** | **$187.3** | **$372.5** | **$(185.2)** | **(50)%** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Sonic Automotive's financial condition, operations, and cash flows for Q3 and YTD 2023, covering industry and segment results [Overview](index=21&type=section&id=Overview) This section provides an overview of Sonic Automotive's business, including its operating segments and store count as of September 30, 2023 - Sonic Automotive is one of the largest automotive retailers in the U.S., operating three reportable segments: Franchised Dealerships, EchoPark, and Powersports[94](index=94&type=chunk) - As of September 30, 2023, the company operated **108** Franchised Dealerships (**134** new vehicle franchises), **25** EchoPark stores (including **7** Northwest Motorsport locations), and **13** Powersports stores[94](index=94&type=chunk) - Each segment offers distinct services: Franchised Dealerships (new/used cars, Fixed Operations, F&I), EchoPark (used cars, F&I, no customer-facing Fixed Operations), and Powersports (new/used powersports vehicles, Fixed Operations, F&I)[95](index=95&type=chunk) [Executive Summary](index=22&type=section&id=Executive%20Summary) [Retail Automotive Industry Performance](index=22&type=section&id=Retail%20Automotive%20Industry%20Performance) This section details the U.S. retail automotive industry's new vehicle sales growth and provides full-year 2023 volume estimates U.S. New Vehicle SAAR (in millions of vehicles) | Metric | Q3 2023 | Q3 2022 | Q3 % Change | YTD 2023 | YTD 2022 | YTD % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Retail new vehicle SAAR | 12.6 | 11.2 | 13% | 12.7 | 11.8 | 8% | | Fleet new vehicle SAAR | 2.9 | 2.2 | 32% | 2.8 | 1.9 | 47% | | Total new vehicle SAAR | 15.5 | 13.4 | 16% | 15.5 | 13.7 | 13% | - Full year 2023 new vehicle industry volume is estimated to be between **15.5 million** and **16.0 million** vehicles, representing a **13%** to **17%** increase compared to 2022[96](index=96&type=chunk) [Impact of COVID-19 and Supply Chain Disruptions](index=22&type=section&id=Impact%20of%20COVID-19%20and%20Supply%20Chain%20Disruptions) This section discusses supply chain disruptions, their impact on production and pricing, and risks from the ongoing UAW strike - Global automotive supply chain disruptions, especially in semiconductors, have resulted in lower production and volatile new/used vehicle pricing[97](index=97&type=chunk) - New vehicle and parts production levels improved in the first nine months of 2023, but higher production may not translate to incremental retail sales[97](index=97&type=chunk) - The UAW strike against certain manufacturers could decrease vehicle and parts inventory, leading to higher prices, though Sonic's diversified brand portfolio may mitigate some risk[98](index=98&type=chunk) [Franchised Dealerships Segment (Executive Summary)](index=22&type=section&id=Franchised%20Dealerships%20Segment%20(Executive%20Summary)) This section summarizes the Franchised Dealerships Segment's performance, noting revenue growth but declining gross profit in new vehicles - Retail new vehicle revenue increased **15%** (Q3) and **12%** (YTD) due to higher unit sales volume and average selling prices[101](index=101&type=chunk) - Retail new vehicle gross profit decreased **21%** (Q3) and **20%** (YTD) due to higher inventory invoice costs and increased price competition, leading to a **30%** (Q3) and **26%** (YTD) decrease in gross profit per unit[101](index=101&type=chunk) - Fixed Operations revenue and gross profit increased **8%** (Q3) and **9%** (YTD), driven by higher repair order volume and increased parts/labor costs passed to consumers[104](index=104&type=chunk) - F&I revenue increased **3%** (Q3) and remained flat (YTD), primarily due to decreases in F&I gross profit per retail unit[105](index=105&type=chunk) [EchoPark Segment (Executive Summary)](index=24&type=section&id=EchoPark%20Segment%20(Executive%20Summary)) This section summarizes the EchoPark Segment's performance, noting revenue growth in Q3 but flat YTD, and significant charges from store closures - Reported EchoPark Segment revenues increased **6%** (Q3) and remained flat (YTD), driven by increased retail used vehicle unit sales volume, partially offset by decreased average unit selling prices[108](index=108&type=chunk) - Reported total gross profit increased **22%** (Q3) but decreased **11%** (YTD), influenced by retail used vehicle gross profit per unit and inventory valuation adjustments[108](index=108&type=chunk) - Combined retail used vehicle and F&I gross profit per unit decreased **$101** (Q3) and **$680** (YTD), primarily due to higher inventory acquisition costs[110](index=110&type=chunk) - Same market total revenues increased **73%** (Q3) and **50%** (YTD), with total gross profit up **126%** (Q3) and **92%** (YTD), driven by higher retail used vehicle unit sales[112](index=112&type=chunk) [Powersports Segment (Executive Summary)](index=25&type=section&id=Powersports%20Segment%20(Executive%20Summary)) This section summarizes the Powersports Segment's substantial revenue and gross profit growth, primarily driven by recent acquisitions - Powersports Segment reported total revenue of **$57.0 million** (Q3) and **$136.0 million** (YTD), with total gross profit of **$20.8 million** (Q3) and **$43.4 million** (YTD)[114](index=114&type=chunk) - Retail new vehicle gross profit per unit was **$4,213** (Q3) and **$3,680** (YTD), while retail used vehicle gross profit per unit was **$2,833** (Q3) and **$2,407** (YTD)[115](index=115&type=chunk)[116](index=116&type=chunk) - Fixed Operations revenue was **$21.6 million** (Q3) and **$38.6 million** (YTD), with F&I revenue at **$2.4 million** (Q3) and **$5.9 million** (YTD)[117](index=117&type=chunk)[118](index=118&type=chunk) [Results of Operations – Consolidated](index=26&type=section&id=Results%20of%20Operations%20%E2%80%93%20Consolidated) [New Vehicles – Consolidated](index=26&type=section&id=New%20Vehicles%20%E2%80%93%20Consolidated) Consolidated new vehicle revenue increased, but gross profit decreased significantly due to higher inventory costs and increased price competition Consolidated New Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total New Vehicle Revenue | $1,596.7 | $1,403.8 | $192.9 | 14% | | Total New Vehicle Gross Profit | $132.3 | $163.5 | $(31.2) | (19)% | | Total New Vehicle Unit Sales | 28,729 | 25,448 | 3,281 | 13% | | Total Gross Profit per New Unit | $4,607 | $6,426 | $(1,819) | (28)% | Consolidated New Vehicle Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total New Vehicle Revenue | $4,694.8 | $4,137.4 | $557.4 | 13% | | Total New Vehicle Gross Profit | $414.0 | $501.3 | $(87.3) | (17)% | | Total New Vehicle Unit Sales | 84,171 | 75,344 | 8,827 | 12% | | Total Gross Profit per New Unit | $4,918 | $6,653 | $(1,735) | (26)% | - Retail new vehicle gross profit as a percentage of revenue decreased by **340 basis points** (Q3) and **330 basis points** (YTD)[126](index=126&type=chunk)[127](index=127&type=chunk) [Used Vehicles – Consolidated](index=29&type=section&id=Used%20Vehicles%20%E2%80%93%20Consolidated) Consolidated retail used vehicle revenue decreased despite higher unit sales, with gross profit per unit also declining due to market challenges Consolidated Retail Used Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,340.4 | $1,355.8 | $(15.4) | (1)% | | Gross Profit | $52.3 | $50.9 | $1.4 | 3% | | Unit Sales | 45,428 | 42,069 | 3,359 | 8% | | Gross Profit per Unit | $1,150 | $1,211 | $(61) | (5)% | Consolidated Retail Used Vehicle Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $3,991.2 | $4,174.4 | $(183.2) | (4)% | | Gross Profit | $113.8 | $145.3 | $(31.5) | (22)% | | Unit Sales | 133,931 | 128,906 | 5,025 | 4% | | Gross Profit per Unit | $849 | $1,127 | $(278) | (25)% | - Used vehicle prices reached an all-time high in 2022 and remain elevated, but the current wholesale vehicle price environment is not sustainable long-term and is expected to return to normalized levels[129](index=129&type=chunk)[131](index=131&type=chunk) [Wholesale Vehicles – Consolidated](index=30&type=section&id=Wholesale%20Vehicles%20%E2%80%93%20Consolidated) Consolidated wholesale vehicle revenue decreased significantly due to lower revenue per unit, though gross profit (loss) showed some improvement Consolidated Wholesale Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $79.3 | $114.7 | $(35.4) | (31)% | | Gross Profit (Loss) | $(1.4) | $(2.1) | $0.7 | 33% | | Unit Sales | 7,996 | 8,263 | (267) | (3)% | | Gross Profit (Loss) per Unit | $(180) | $(264) | $84 | 32% | | Gross Profit (Loss) as % of Revenue | (1.8)% | (1.9)% | 10 bps | | Consolidated Wholesale Vehicle Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $256.3 | $404.8 | $(148.5) | (37)% | | Gross Profit (Loss) | $0.5 | $0.6 | $(0.1) | (17)% | | Unit Sales | 25,203 | 27,229 | (2,026) | (7)% | | Gross Profit (Loss) per Unit | $24 | $17 | $7 | 41% | | Gross Profit (Loss) as % of Revenue | 0.2% | 0.1% | 10 bps | | - Wholesale vehicle prices and supply have experienced volatility since March 2020, and average wholesale pricing is expected to return toward normalized levels in Q4 2023 and potentially beyond[131](index=131&type=chunk) [Fixed Operations – Consolidated](index=31&type=section&id=Fixed%20Operations%20%E2%80%93%20Consolidated) Consolidated Fixed Operations revenue and gross profit increased, driven by customer pay revenue and a recovery in activity Consolidated Fixed Operations Performance (Three Months Ended Sep 30, in millions) | Metric | 2023 Revenue | 2022 Revenue | % Change | 2023 Gross Profit | 2022 Gross Profit | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Customer pay | $209.7 | $171.9 | 22% | $118.0 | $100.8 | 17% | | Warranty | $62.0 | $60.4 | 3% | $36.6 | $34.2 | 7% | | Wholesale parts | $51.3 | $49.9 | 3% | $9.1 | $9.1 | 0% | | Internal, sublet and other | $130.4 | $126.0 | 3% | $61.6 | $58.7 | 5% | | **Total Revenue/Gross Profit** | **$453.4** | **$408.2** | **11%** | **$225.3** | **$202.8** | **11%** | | Total Gross Profit as % of Revenue | 49.7% | 49.7% | 0 bps | | | | Consolidated Fixed Operations Performance (Nine Months Ended Sep 30, in millions) | Metric | 2023 Revenue | 2022 Revenue | % Change | 2023 Gross Profit | 2022 Gross Profit | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Customer pay | $621.1 | $501.2 | 24% | $348.0 | $290.2 | 20% | | Warranty | $180.1 | $168.2 | 7% | $105.7 | $98.3 | 8% | | Wholesale parts | $159.3 | $149.9 | 6% | $28.3 | $27.0 | 5% | | Internal, sublet and other | $367.1 | $369.3 | (1)% | $176.6 | $172.9 | 2% | | **Total Revenue/Gross Profit** | **$1,327.6** | **$1,188.6** | **12%** | **$658.6** | **$588.4** | **12%** | | Total Gross Profit as % of Revenue | 49.6% | 49.5% | 10 bps | | | | - Recovery in Fixed Operations activity, particularly customer pay repairs, is above pre-pandemic levels and expected to continue[135](index=135&type=chunk) [F&I – Consolidated](index=33&type=section&id=F%26I%20%E2%80%93%20Consolidated) Consolidated F&I revenue increased due to higher unit sales, but gross profit per retail unit decreased, indicating lower per-unit profitability Consolidated F&I Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $173.7 | $165.6 | $8.1 | 5% | | Total Combined Retail New and Used Vehicle Unit Sales | 73,688 | 66,845 | 6,843 | 10% | | Gross Profit per Retail Unit | $2,357 | $2,477 | $(120) | (5)% | Consolidated F&I Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $517.7 | $505.3 | $12.4 | 2% | | Total Combined Retail New and Used Vehicle Unit Sales | 216,602 | 202,796 | 13,806 | 7% | | Gross Profit per Retail Unit | $2,390 | $2,492 | $(102) | (4)% | - F&I revenues are recognized net of actual and estimated future chargebacks, resulting in a **100%** gross margin for F&I[137](index=137&type=chunk) [Results of Operations – Franchised Dealerships Segment](index=34&type=section&id=Results%20of%20Operations%20%E2%80%93%20Franchised%20Dealerships%20Segment) [New Vehicles – Franchised Dealerships Segment](index=35&type=section&id=New%20Vehicles%20%E2%80%93%20Franchised%20Dealerships%20Segment) The Franchised Dealerships Segment saw new vehicle revenue increase, but gross profit and gross profit per unit declined significantly Franchised Dealerships Segment Reported New Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total New Vehicle Revenue | $1,569.9 | $1,391.6 | $178.3 | 13% | | Total New Vehicle Gross Profit | $126.4 | $162.0 | $(35.6) | (22)% | | Total New Vehicle Unit Sales | 27,338 | 24,913 | 2,425 | 10% | | Total Gross Profit per New Unit | $4,627 | $6,501 | $(1,874) | (29)% | Franchised Dealerships Segment Same Store New Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Retail New Vehicle Revenue | $1,538.1 | $1,341.9 | $196.2 | 15% | | Retail New Vehicle Gross Profit | $125.0 | $158.8 | $(33.8) | (21)% | | Retail New Vehicle Unit Sales | 26,727 | 23,816 | 2,911 | 12% | | Retail Gross Profit per New Retail Unit | $4,678 | $6,666 | $(1,988) | (30)% | Franchised Dealerships Segment Same Store New Vehicle Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Retail New Vehicle Revenue | $4,491.8 | $3,995.7 | $496.1 | 12% | | Retail New Vehicle Gross Profit | $392.2 | $488.8 | $(96.6) | (20)% | | Retail New Vehicle Unit Sales | 77,567 | 71,986 | 5,581 | 8% | | Retail Gross Profit per New Retail Unit | $5,056 | $6,790 | $(1,734) | (26)% | [Used Vehicles – Franchised Dealerships Segment](index=39&type=section&id=Used%20Vehicles%20%E2%80%93%20Franchised%20Dealerships%20Segment) The Franchised Dealerships Segment reported decreases in retail used vehicle revenue and gross profit due to lower unit sales and prices Franchised Dealerships Segment Reported Retail Used Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $780.7 | $842.4 | $(61.7) | (7)% | | Gross Profit | $42.6 | $45.4 | $(2.8) | (6)% | | Unit Sales | 25,541 | 26,647 | (1,106) | (4)% | | Gross Profit per Unit | $1,666 | $1,704 | $(38) | (2)% | Franchised Dealerships Segment Same Store Retail Used Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $775.4 | $829.2 | $(53.8) | (7)% | | Gross Profit | $42.3 | $44.5 | $(2.2) | (5)% | | Unit Sales | 25,371 | 26,122 | (751) | (3)% | | Gross Profit per Unit | $1,668 | $1,704 | $(36) | (2)% | Franchised Dealerships Segment Same Store Retail Used Vehicle Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $2,288.8 | $2,524.3 | $(235.5) | (9)% | | Gross Profit | $126.4 | $133.5 | $(7.1) | (5)% | | Unit Sales | 74,631 | 80,221 | (5,590) | (7)% | | Gross Profit per Unit | $1,694 | $1,664 | $30 | 2% | [Wholesale Vehicles – Franchised Dealerships Segment](index=43&type=section&id=Wholesale%20Vehicles%20%E2%80%93%20Franchised%20Dealerships%20Segment) The Franchised Dealerships Segment saw wholesale vehicle revenue decrease significantly, though gross profit (loss) showed improvement Franchised Dealerships Segment Reported Wholesale Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $51.4 | $75.8 | $(24.4) | (32)% | | Gross Profit (Loss) | $(1.5) | $(2.1) | $0.6 | 29% | | Unit Sales | 5,163 | 5,813 | (650) | (11)% | | Gross Profit (Loss) per Unit | $(288) | $(356) | $68 | 19% | | Gross Profit (Loss) as % of Revenue | (2.9)% | (2.7)% | (20) bps | | Franchised Dealerships Segment Same Store Wholesale Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $51.3 | $75.1 | $(23.8) | (32)% | | Gross Profit (Loss) | $(1.4) | $(1.9) | $0.5 | 26% | | Unit Sales | 5,131 | 5,738 | (607) | (11)% | | Gross Profit (Loss) per Unit | $(274) | $(333) | $59 | 18% | | Gross Profit (Loss) as % of Revenue | (2.7)% | (2.5)% | (20) bps | | Franchised Dealerships Segment Same Store Wholesale Vehicle Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $163.3 | $258.2 | $(94.9) | (37)% | | Gross Profit (Loss) | $— | $(2.5) | $2.5 | 100% | | Unit Sales | 15,921 | 18,164 | (2,243) | (12)% | | Gross Profit (Loss) per Unit | $1 | $(138) | $139 | 101% | | Gross Profit (Loss) as % of Revenue | 0% | (1.0)% | 100 bps | | [Fixed Operations – Franchised Dealerships Segment](index=45&type=section&id=Fixed%20Operations%20%E2%80%93%20Franchised%20Dealerships%20Segment) The Franchised Dealerships Segment reported increases in Fixed Operations revenue and gross profit, driven by customer pay activity Franchised Dealerships Segment Reported Fixed Operations Performance (Three Months Ended Sep 30, in millions) | Metric | 2023 Revenue | 2022 Revenue | % Change | 2023 Gross Profit | 2022 Gross Profit | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Customer pay | $205.2 | $186.6 | 10% | $115.3 | $105.5 | 9% | | Warranty | $61.5 | $60.0 | 3% | $36.3 | $34.0 | 7% | | Wholesale parts | $51.1 | $49.7 | 3% | $9.1 | $9.0 | 1% | | Internal, sublet and other | $114.0 | $108.4 | 5% | $54.4 | $52.5 | 4% | | **Total Revenue/Gross Profit** | **$431.8** | **$404.7** | **7%** | **$215.1** | **$201.0** | **7%** | | Total Gross Profit as % of Revenue | 49.8% | 49.7% | 10 bps | | | | Franchised Dealerships Segment Same Store Fixed Operations Performance (Three Months Ended Sep 30, in millions) | Metric | 2023 Revenue | 2022 Revenue | % Change | 2023 Gross Profit | 2022 Gross Profit | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Customer pay | $203.9 | $184.2 | 11% | $114.5 | $104.3 | 10% | | Warranty | $61.0 | $59.0 | 3% | $36.0 | $33.4 | 8% | | Wholesale parts | $51.0 | $49.2 | 4% | $9.1 | $8.9 | 2% | | Internal, sublet and other | $113.3 | $106.6 | 6% | $53.8 | $51.4 | 5% | | **Total Revenue/Gross Profit** | **$429.2** | **$399.0** | **8%** | **$213.4** | **$198.0** | **8%** | | Total Gross Profit as % of Revenue | 49.7% | 49.6% | 10 bps | | | | Franchised Dealerships Segment Same Store Fixed Operations Performance (Nine Months Ended Sep 30, in millions) | Metric | 2023 Revenue | 2022 Revenue | % Change | 2023 Gross Profit | 2022 Gross Profit | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Customer pay | $603.2 | $542.4 | 11% | $337.9 | $303.1 | 11% | | Warranty | $175.7 | $164.1 | 7% | $103.4 | $96.2 | 7% | | Wholesale parts | $157.6 | $147.9 | 7% | $28.0 | $26.5 | 6% | | Internal, sublet and other | $336.2 | $312.5 | 8% | $161.6 | $151.3 | 7% | | **Total Revenue/Gross Profit** | **$1,272.7** | **$1,166.9** | **9%** | **$630.9** | **$577.1** | **9%** | | Total Gross Profit as % of Revenue | 49.6% | 49.5% | 10 bps | | | | [F&I – Franchised Dealerships Segment](index=48&type=section&id=F%26I%20%E2%80%93%20Franchised%20Dealerships%20Segment) The Franchised Dealerships Segment reported flat F&I revenue and decreased gross profit per unit, influenced by higher interest rates Franchised Dealerships Segment Reported F&I Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $126.0 | $125.8 | $0.2 | 0% | | Total Combined Retail New and Used Vehicle Unit Sales | 52,410 | 50,888 | 1,522 | 3% | | Gross Profit per Retail Unit | $2,403 | $2,473 | $(70) | (3)% | Franchised Dealerships Segment Same Store F&I Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $125.4 | $122.2 | $3.2 | 3% | | Total Combined Retail New and Used Vehicle Unit Sales | 52,098 | 49,938 | 2,160 | 4% | | Gross Profit per Retail Unit | $2,407 | $2,525 | $(118) | (5)% | Franchised Dealerships Segment Same Store F&I Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $370.9 | $369.7 | $1.2 | 0% | | Total Combined Retail New and Used Vehicle Unit Sales | 152,198 | 152,207 | (9) | 0% | | Gross Profit per Retail Unit | $2,437 | $2,429 | $8 | 0% | - The decrease in finance contract penetration rate is attributed to higher average interest rates, leading some customers to opt for cash purchases or outside financing[169](index=169&type=chunk)[171](index=171&type=chunk) [Results of Operations – EchoPark Segment](index=50&type=section&id=Results%20of%20Operations%20%E2%80%93%20EchoPark%20Segment) [Used Vehicles and F&I – EchoPark Segment](index=51&type=section&id=Used%20Vehicles%20and%20F%26I%20%E2%80%93%20EchoPark%20Segment) The EchoPark Segment saw retail used vehicle revenue increase, but combined gross profit per unit decreased due to higher acquisition costs EchoPark Segment Reported Retail Used Vehicle and F&I Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Retail Used Vehicle Revenue | $554.8 | $511.4 | $43.4 | 9% | | Retail Used Vehicle Gross Profit (Loss) | $7.3 | $4.9 | $2.4 | 49% | | Retail Used Vehicle Unit Sales | 19,050 | 15,245 | 3,805 | 25% | | F&I Revenue | $45.3 | $38.9 | $6.4 | 17% | | Combined Retail Used Vehicle and F&I Gross Profit per Unit | $2,767 | $2,868 | $(101) | (4)% | EchoPark Segment Same Market Retail Used Vehicle and F&I Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Retail Used Vehicle Revenue | $469.9 | $268.0 | $201.9 | 75% | | Retail Used Vehicle Gross Profit (Loss) | $5.0 | $(2.0) | $7.0 | 350% | | Retail Used Vehicle Unit Sales | 17,480 | 9,412 | 8,068 | 86% | | F&I Revenue | $41.7 | $22.8 | $18.9 | 83% | | Combined Retail Used Vehicle and F&I Gross Profit per Unit | $2,672 | $2,209 | $463 | 21% | EchoPark Segment Same Market Retail Used Vehicle and F&I Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Retail Used Vehicle Revenue | $1,274.1 | $818.6 | $455.5 | 56% | | Retail Used Vehicle Gross Profit (Loss) | $(4.3) | $(13.7) | $9.4 | 69% | | Retail Used Vehicle Unit Sales | 46,997 | 27,911 | 19,086 | 68% | | F&I Revenue | $114.9 | $70.0 | $44.9 | 64% | | Combined Retail Used Vehicle and F&I Gross Profit per Unit | $2,352 | $2,015 | $337 | 17% | [Wholesale Vehicles – EchoPark Segment](index=55&type=section&id=Wholesale%20Vehicles%20%E2%80%93%20EchoPark%20Segment) The EchoPark Segment's wholesale vehicle revenue decreased significantly, though gross profit (loss) improved in Q3 EchoPark Segment Reported Wholesale Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $26.6 | $38.9 | $(12.3) | (32)% | | Gross Profit (Loss) | $0.2 | $— | $0.2 | 100% | | Unit Sales | 2,740 | 2,449 | 291 | 12% | | Gross Profit (Loss) per Unit | $23 | $(44) | $67 | NM | | Gross Profit (Loss) as % of Revenue | 0.2% | (0.3)% | 50 bps | | EchoPark Segment Same Market Wholesale Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $16.0 | $14.8 | $1.2 | 8% | | Gross Profit (Loss) | $— | $(0.1) | $0.1 | 100% | | Unit Sales | 2,305 | 1,495 | 810 | 54% | | Gross Profit (Loss) per Unit | $15 | $(86) | $101 | 117% | | Gross Profit (Loss) as % of Revenue | 0.2% | (0.9)% | 110 bps | | EchoPark Segment Same Market Wholesale Vehicle Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $56.4 | $73.0 | $(16.6) | (23)% | | Gross Profit (Loss) | $1.1 | $2.0 | $(0.9) | (45)% | | Unit Sales | 7,010 | 5,828 | 1,182 | 20% | | Gross Profit (Loss) per Unit | $170 | $349 | $(179) | (51)% | | Gross Profit (Loss) as % of Revenue | 2.1% | 2.8% | (70) bps | | [Results of Operations – Powersports Segment](index=57&type=section&id=Results%20of%20Operations%20%E2%80%93%20Powersports%20Segment) [New Vehicles – Powersports Segment](index=57&type=section&id=New%20Vehicles%20%E2%80%93%20Powersports%20Segment) The Powersports Segment reported substantial growth in new vehicle revenue and gross profit, driven by recent acquisitions Powersports Segment Reported Retail New Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $26.8 | $10.6 | $16.2 | 153% | | Gross Profit | $5.9 | $2.1 | $3.8 | 181% | | Unit Sales | 1,391 | 490 | 901 | 184% | | Gross Profit per Unit | $4,213 | $4,304 | $(91) | (2)% | | Gross Profit as % of Revenue | 21.9% | 20.0% | 190 bps | | Powersports Segment Reported Retail New Vehicle Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $72.5 | $13.0 | $59.5 | 458% | | Gross Profit | $14.3 | $2.7 | $11.6 | 430% | | Unit Sales | 3,894 | 579 | 3,315 | 573% | | Gross Profit per Unit | $3,680 | $4,742 | $(1,062) | (22)% | | Gross Profit as % of Revenue | 19.8% | 21.0% | (120) bps | | [Used Vehicles – Powersports Segment](index=58&type=section&id=Used%20Vehicles%20%E2%80%93%20Powersports%20Segment) The Powersports Segment's retail used vehicle revenue and gross profit increased significantly due to acquisitions, despite a decline in gross profit per unit Powersports Segment Reported Retail Used Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $4.9 | $2.0 | $2.9 | 145% | | Gross Profit | $2.4 | $0.6 | $1.8 | 300% | | Unit Sales | 837 | 177 | 660 | 373% | | Gross Profit per Unit | $2,833 | $3,328 | $(495) | (15)% | | Gross Profit as % of Revenue | 48.8% | 28.8% | 2,000 bps | | Powersports Segment Reported Retail Used Vehicle Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $17.1 | $5.0 | $12.1 | 242% | | Gross Profit | $4.7 | $1.4 | $3.3 | 236% | | Unit Sales | 1,972 | 353 | 1,619 | 459% | | Gross Profit per Unit | $2,407 | $3,677 | $(1,270) | (35)% | | Gross Profit as % of Revenue | 27.7% | 26.0% | 170 bps | | [Wholesale Vehicles – Powersports Segment](index=59&type=section&id=Wholesale%20Vehicles%20%E2%80%93%20Powersports%20Segment) The Powersports Segment reported a significant increase in wholesale vehicle revenue due to acquisitions, but gross profit saw a decrease in Q3 Powersports Segment Reported Wholesale Vehicle Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1.3 | $— | $1.3 | 100% | | Gross Profit (Loss) | $(0.1) | $— | $(0.1) | (100)% | | Unit Sales | 93 | 9 | 84 | 933% | | Gross Profit (Loss) per Unit | $(188) | $— | $(188) | (100)% | | Gross Profit (Loss) as % of Revenue | (1.3)% | 0% | (130) bps | | Powersports Segment Reported Wholesale Vehicle Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1.9 | $0.3 | $1.6 | 533% | | Gross Profit (Loss) | $— | $— | $— | 0% | | Unit Sales | 150 | 29 | 121 | 417% | | Gross Profit (Loss) per Unit | $(344) | $(2,095) | $1,751 | 84% | | Gross Profit (Loss) as % of Revenue | (2.8)% | (1.0)% | (180) bps | | [Fixed Operations – Powersports Segment](index=60&type=section&id=Fixed%20Operations%20%E2%80%93%20Powersports%20Segment) The Powersports Segment experienced substantial growth in Fixed Operations revenue and gross profit, primarily due to acquisitions Powersports Segment Reported Fixed Operations Performance (Three Months Ended Sep 30, in millions) | Metric | 2023 Revenue | 2022 Revenue | % Change | 2023 Gross Profit | 2022 Gross Profit | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Customer pay | $4.5 | $1.6 | 181% | $2.7 | $0.9 | 200% | | Warranty | $0.5 | $0.2 | 150% | $0.3 | $0.2 | 50% | | Wholesale parts | $0.2 | $0.1 | 100% | $— | $— | 0% | | Internal, sublet and other | $16.4 | $1.6 | 925% | $7.2 | $0.7 | 929% | | **Total Revenue/Gross Profit** | **$21.6** | **$3.5** | **517%** | **$10.2** | **$1.8** | **467%** | | Total Gross Profit as % of Revenue | 47.1% | 51.8% | (470) bps | | | | Powersports Segment Reported Fixed Operations Performance (Nine Months Ended Sep 30, in millions) | Metric | 2023 Revenue | 2022 Revenue | % Change | 2023 Gross Profit | 2022 Gross Profit | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Customer pay | $10.5 | $3.1 | 239% | $6.0 | $1.9 | 216% | | Warranty | $1.3 | $0.4 | 225% | $0.7 | $0.3 | 133% | | Wholesale parts | $0.5 | $0.1 | 400% | $0.1 | $— | 100% | | Internal, sublet and other | $26.3 | $1.6 | NM | $11.7 | $0.5 | NM | | **Total Revenue/Gross Profit** | **$38.6** | **$5.2** | **642%** | **$18.5** | **$2.7** | **585%** | | Total Gross Profit as % of Revenue | 47.8% | 51.1% | (330) bps | | | | [F&I – Powersports Segment](index=62&type=section&id=F%26I%20%E2%80%93%20Powersports%20Segment) The Powersports Segment's F&I revenue increased significantly due to acquisitions, though gross profit per retail unit decreased Powersports Segment Reported F&I Performance (Three Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $2.4 | $0.9 | $1.5 | 167% | | Unit Sales | 2,228 | 667 | 1,561 | 234% | | Gross Profit per Retail Unit | $1,075 | $1,297 | $(222) | (17)% | Powersports Segment Reported F&I Performance (Nine Months Ended Sep 30, in millions, except unit data) | Metric | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $5.9 | $1.4 | $4.5 | 321% | | Unit Sales | 5,866 | 932 | 4,934 | 529% | | Gross Profit per Retail Unit | $1,006 | $1,445 | $(439) | (30)% | [Segment Results Summary](index=63&type=section&id=Segment%20Results%20Summary) This section summarizes the performance of the Franchised Dealerships, EchoPark, and Powersports segments, highlighting revenue and income trends Segment Revenues (Three Months Ended Sep 30, in millions) | Segment | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Franchised Dealerships | $2,959.8 | $2,840.3 | $119.5 | 4% | | EchoPark | $626.7 | $590.8 | $35.9 | 6% | | Powersports | $57.0 | $17.0 | $40.0 | 235% | | **Total Consolidated** | **$3,643.5** | **$3,448.1** | **$195.4** | **6%** | Segment Income (Loss) (Three Months Ended Sep 30, in millions) | Segment | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Franchised Dealerships | $101.5 | $146.3 | $(44.8) | (31)% | | EchoPark | $(16.9) | $(31.1) | $14.2 | 46% | | Powersports | $6.6 | $1.2 | $5.4 | 450% | | **Income before taxes** | **$91.2** | **$116.4** | **$(25.2)** | **(22)%** | Segment Revenues (Nine Months Ended Sep 30, in millions) | Segment | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Franchised Dealerships | $8,773.8 | $8,511.9 | $261.9 | 3% | | EchoPark | $1,877.8 | $1,873.7 | $4.1 | 0% | | Powersports | $136.0 | $24.9 | $111.1 | 446% | | **Total Consolidated** | **$10,787.6** | **$10,410.5** | **$377.1** | **4%** | Segment Income (Loss) (Nine Months Ended Sep 30, in millions) | Segment | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Franchised Dealerships | $357.2 | $472.2 | $(115.0) | (24)% | | EchoPark | $(116.5) | $(100.6) | $(15.9) | (16)% | | Powersports | $9.2 | $0.9 | $8.3 | 922% | | **Income before taxes** | **$187.3** | **$372.5** | **$(185.2)** | **(50)%** | [Selling, General and Administrative ("SG&A") Expenses – Consolidated](index=65&type=section&id=Selling%2C%20General%20and%20Administrative%20(%22SG%26A%22)%20Expenses%20%E2%80%93%20Consolidated) Consolidated SG&A expenses increased in dollar amount and as a percentage of gross profit, driven by IT, salaries, severance, and lease exit charges Consolidated SG&A Expenses (Three Months Ended Sep 30, in millions) | Category | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Compensation | $256.0 | $255.2 | $(0.8) | 0% | | Advertising | $22.5 | $21.1 | $(1.4) | (7)% | | Rent | $11.7 | $11.9 | $0.2 | 2% | | Other | $119.4 | $110.8 | $(8.6) | (8)% | | **Total SG&A Expenses** | **$409.6** | **$399.0** | **$(10.6)** | **(3)%** | | Total SG&A Expenses as % of Gross Profit | 70.4% | 68.7% | (170) bps | | Consolidated SG&A Expenses (Nine Months Ended Sep 30, in millions) | Category | 2023 | 2022 | Change (YoY) | % Change | | :--- | :--- | :--- | :--- | :--- | | Compensation | $775.8 | $774.1 | $(1.7) | 0% | | Advertising | $71.4 | $72.8 | $1.4 | 2% | | Rent | $34.5 | $38.3 | $3.8 | 10% | | Other | $332.5 | $303.6 | $(28.9) | (10)% | | **Total SG&A Expenses** | **$1,214.2** | **$1,188.8** | **$(25.4)** | **(2)%** | | Total SG&A Expenses as % of Gross Profit | 71.2% | 68.3% | (290) bps | | - Increases in SG&A were primarily due to higher IT and salary expenses, severance charges (**$0.9 million** in Q3, **$3.1 million** YTD), and lease exit charges (**$3.9 million** in Q3, **$3.9 million** YTD), partially offset by a **$20.7 million** gain on disposal of franchises (YTD)[205](index=205&type=chunk)[206](index=206&type=chunk) [Impairment Charges – Consolidated](index=66&type=section&id=Impairment%20Charges%20%E2%80%93%20Consolidated) No impairment charges were recorded in Q3 2023, but YTD charges totaled $62.6 million, mainly from EchoPark store suspensions and closures - No impairment charges were recorded for the three months ended September 30, 2023[207](index=207&type=chunk) - Impairment charges of approximately **$62.6 million** were recorded for the nine months ended September 30, 2023[207](index=207&type=chunk) - These charges were related to fixed assets, lease right-of-use assets, and other contractual obligations due to EchoPark location suspensions and Northwest Motorsport store closures[207](index=207&type=chunk) [Depreciation and Amortization – Consolidated](index=66&type=section&id=Depreciation%20and%20Amortization%20%E2%80%93%20Consolidated) Consolidated depreciation and amortization expense increased due to acquisitions, completed construction projects, and fixed asset purchases - Depreciation and amortization expense increased by approximately **$2.4 million** (**7%**) for Q3 2023 and **$11.7 million** (**12%**) for YTD 2023[208](index=208&type=chunk) - The increase was primarily driven by acquisitions and completed construction projects and purchases of fixed assets for franchised dealerships and EchoPark stores[208](index=208&type=chunk) [Interest Expense, Floor Plan – Consolidated](index=66&type=section&id=Interest%20Expense%2C%20Floor%20Plan%20%E2%80%93%20Consolidated) Consolidated floor plan interest expense increased significantly due to rising average interest rates, impacting both new and used vehicle financing - New vehicle floor plan interest expense increased by approximately **$9.0 million** (Q3) and **$26.6 million** (YTD)[210](index=210&type=chunk)[213](index=213&type=chunk) - The increase in new vehicle floor plan interest was mainly due to higher average interest rates (**$6.5 million** in Q3, **$22.3 million** YTD) and increased average new vehicle floor plan notes payable balance (**$2.5 million** in Q3, **$4.3 million** YTD)[210](index=210&type=chunk)[213](index=213&type=chunk) - Used vehicle floor plan interest expense (net of floor plan deposit interest) decreased by approximately **$1.2 million** (Q3) but increased by **$1.6 million** (YTD)[211](index=211&type=chunk)[214](index=214&type=chunk) [Interest Expense, Other, Net – Consolidated](index=67&type=section&id=Interest%20Expense%2C%20Other%2C%20Net%20%E2%80%93%20Consolidated) Consolidated other interest expense, net, increased due to higher interest rates on variable rate mortgage debt and increased borrowings Consolidated Interest Expense, Other, Net (in millions) | Metric | Q3 2023 | Q3 2022 | Q3 % Change | YTD 2023 | YTD 2022 | YTD % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Stated/coupon interest | $22.9 | $18.0 | (27)% | $68.3 | $52.0 | (31)% | | Deferred loan cost amortization | $1.6 | $1.5 | (7)% | $4.9 | $3.8 | (29)% | | Interest on finance lease liabilities | $4.8 | $3.7 | (30)% | $13.7 | $9.3 | (47)% | | **Total Interest Expense, Other, Net** | **$29.0** | **$22.9** | **(27)%** | **$86.2** | **$65.1** | **(32)%** | - The increases were primarily related to higher interest rates on variable rate mortgage debt and finance lease liabilities, and increased borrowings under the 2019 Mortgage Facility[215](index=215&type=chunk) [Income Taxes](index=67&type=section&id=Income%20Taxes) The effective income tax rate for Q3 and YTD 2023 remained consistent with the prior year, varying based on taxable income and state distribution Effective Income Tax Rate | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | 25.0% | 25.0% | | Nine Months Ended Sep 30 | 25.5% | 25.0% | - The effective income tax rate varies annually based on taxable income, distribution of income between states, and other tax adjustments[216](index=216&type=chunk) [Liquidity and Capital Resources](index=68&type=section&id=Liquidity%20and%20Capital%20Resources) [Floor Plan Facilities](index=68&type=section&id=Floor%20Plan%20Facilities) This section details the company's floor plan financing, noting a significant increase in weighted-average interest rates and manufacturer assistance - All new and certain used vehicle inventory are financed through floor plan facilities with manufacturer captive finance companies and a syndicate of banks[220](index=220&type=chunk) Weighted-Average Interest Rate for Floor Plan Facilities (Net of Deposit Interest) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | 4.96% | 3.42% | | Nine Months Ended Sep 30 | 4.87% | 2.40% | Weighted-Average Interest Rate for Floor Plan Facilities (Excluding Deposit Interest) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | 6.39% | 3.73% | | Nine Months Ended Sep 30 | 6.24% | 2.64% | - Manufacturer assistance received for floor plans was approximately **$14.7 million** (Q3) and **$42.9 million** (YTD) in 2023, up from **$12.6 million** and **$38.1 million** in 2022, respectively[221](index=221&type=chunk) [Long-Term Debt and Credit Facilities](index=69&type=section&id=Long-Term%20Debt%20and%20Credit%20Facilities) This section references Note 6 for details on long-term debt and confirms compliance with all restrictive covenants as of September 30, 2023 - The company was in compliance with all restrictive covenants under its debt agreements as of September 30, 2023[223](index=223&type=chunk) [Capital Expenditures](index=69&type=section&id=Capital%20Expenditures) Capital expenditures for YTD 2023 totaled $153.6 million, primarily for Franchised Dealerships, funded by existing cash, with future commitments - Capital expenditures for the nine months ended September 30, 2023, were approximately **$153.6 million**[225](index=225&type=chunk) - Major allocations included **$137.3 million** for Franchised Dealerships, **$14.1 million** for EchoPark, and **$2.2 million** for Powersports[225](index=225&type=chunk) - All capital expenditures were funded through existing cash balances, with **$40.9 million** committed for future facility construction projects[226](index=226&type=chunk) [Share Repurchase Program](index=69&type=section&id=Share%20Repurchase%20Program) During Q3 and YTD 2023, the company repurchased 1.7 million and 3.3 million shares, respectively, with $286.8 million remaining authorization - Repurchased approximately **1.7 million** shares for **$86.7 million** in Q3 2023[227](index=227&type=chunk) - Repurchased approximately **3.3 million** shares for **$177.5 million** in YTD 2023[227](index=227&type=chunk) - Remaining share repurchase authorization was approximately **$286.8 million** as of September 30, 2023[227](index=227&type=chunk) [Dividends](index=69&type=section&id=Dividends) The Board approved Q3 and Q4 2023 cash dividends, with approximately $245.7 million of retained earnings free of restrictions - Approved a cash dividend of **$0.29** per share for Q3 2023, paid on October 13, 2023[229](index=229&type=chunk) - Approved a cash dividend of **$0.30** per share for Q4 2023, to be paid on January 12, 2024[229](index=229&type=chunk) - Approximately **$245.7 million** of net income and retained earnings were free of dividend restrictions as of September 30, 2023[229](index=229&type=chunk) [Cash Flows](index=70&type=section&id=Cash%20Flows) Net cash from operating activities significantly decreased YTD 2023 due to increased inventories, while investing and financing activities saw changes - Net cash provided by operating activities was approximately **$104.2 million** (YTD 2023), a significant decrease from **$645.4 million** (YTD 2022), primarily due to an increase in inventories[231](index=231&type=chunk) - Net cash used in investing activities was approximately **$171.4 million** (YTD 2023), compared to **$276.1 million** (YTD 2022), driven by acquisitions and property purchases offset by dealership sales[232](index=232&type=chunk) - Net cash used in financing activities was approximately **$127.4 million** (YTD 2023), down from **$529.7 million** (YTD 2022), mainly due to net borrowings on non-trade floor plans offsetting treasury stock purchases and debt payments[233](index=233&type=chunk) - If all floor plan changes were classified as operating activities, net cash provided by operating activities would be approximately **$257.7 million** (YTD 2023) and **$426.6 million** (YTD 2022)[234](index=234&type=chunk) [Seasonality](index=72&type=section&id=Seasonality) Operations are subject to seasonal variations, but historical patterns may not apply to 2023 due to ongoing market disruptions - Operations are subject to seasonal variations, with Q1 historically having lower operating profit and Q4 having the highest[238](index=238&type=chunk) - Due to COVID-19, supply chain disruptions, and potential economic recession, historical seasonality may not apply to 2023[238](index=238&type=chunk) [Future Liquidity Outlook](index=72&type=section&id=Future%20Liquidity%20Outlook) The company expects to rely on cash flows, credit facilities, and asset sales for liquidity, anticipating no material negative changes to capital access - Primary liquidity sources include cash flows from operations, floor plan facilities, revolving credit facilities, mortgage financing, asset sales, and debt/equity offerings[239](index=239&type=chunk) - The company does not anticipate any materially negative changes to its cost of, or access to, capital over the next **12** months[240](index=240&type=chunk) - Cash flows and ability to service obligations depend substantially on subsidiary operations and their ability to provide cash[239](index=239&type=chunk) [Off-Balance Sheet Arrangements](index=72&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has off-balance sheet arrangements including guarantees and indemnification obligations, with a maximum exposure of $8.0 million - The company has guarantees and indemnification obligations related to operating leases and dealership dispositions[241](index=241&type=chunk) - Maximum exposure for general indemnifications was approximately **$8.0 million** as of September 30, 2023[242](index=242&type=chunk) - Guarantees floor plan commitments of a **50%**-owned joint venture, amounting to approximately **$4.3 million**[243](index=243&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section discusses market risks, primarily from interest rate fluctuations on variable rate debt and foreign currency exchange rates [Interest Rate Risk](index=73&type=section&id=Interest%20Rate%20Risk) The company is exposed to interest rate risk from variable rate debt, with a 100-basis point change impacting interest expense by millions - The company is exposed to interest rate risk from variable rate floor plan facilities, the 2021 Revolving Credit Facility, the 2019 Mortgage Facility, and other variable rate notes[246](index=246&type=chunk) - Total net outstanding balance of variable rate instruments was approximately **$1.5 billion** at September 30, 2023[246](index=246&type=chunk) - A **100-basis point** decrease in rates would reduce interest expense by approximately **$10.0 million**, while a **100-basis point** rise would increase it by approximately **$7.4 million** for the nine months ended September 30, 2023, with the difference due to interest rate hedges[246](index=246&type=chunk) [Foreign Currency Risk](index=73&type=section&id=Foreign%20Currency%20Risk) The company faces foreign currency risk from purchasing vehicles and parts from foreign manufacturers, potentially affecting pricing and demand - The company purchases new vehicle and parts inventories from foreign manufacturers, exposing it to foreign exchange rate risk[247](index=247&type=chunk) - This risk could influence manufacturers' ability to provide competitive prices and negatively impact consumer demand, potentially affecting future operating results[247](index=247&type=chunk) [Item 4. Controls and Procedures](index=74&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control - Disclosure controls and procedures were evaluated and concluded to be effective as of September 30, 2023[250](index=250&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2023[251](index=251&type=chunk) [PART II – OTHER INFORMATION](index=75&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=75&type=section&id=Item%201.%20Legal%20Proceedings.) Legal proceedings information is referenced to Note 7, 'Commitments and Contingencies,' in the financial statements - Legal proceedings information is detailed in Note 7, 'Commitments and Contingencies,' of the financial statements[255](index=255&type=chunk) [Item 1A. Risk Factors](index=76&ty

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________________ FORM 10-Q ______________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-13395 ______________________________________ SONIC A ...

Financial Data and Key Metrics Changes - Sonic Automotive reported record quarterly total revenues of $3.7 billion, a 4% increase from last year [110] - Second quarter EPS was $0.65 per share, which includes $75 million in charges related to the suspension of operations at certain EchoPark locations [110] - Adjusted EPS was $1.83 per share, a decrease from $2.45 in the prior year, primarily due to normalizing new vehicle margins and higher interest rates [110] - Franchise dealerships F&I gross profit per unit improved to an all-time record of $2,516 per unit, up $156 sequentially from the first quarter [96] Business Line Data and Key Metrics Changes - EchoPark segment retail unit sales volume for the quarter was approximately 17,100 units, up 4% year-over-year [19] - EchoPark segment adjusted EBITDA was a loss of $31.8 million, an improvement from a loss of $36.9 million in the first quarter [114] - The parts and service business saw a 9% year-over-year increase in fixed gross profit, driven by an 11% growth in customer pay business [17] Market Data and Key Metrics Changes - Wholesale auction prices for three-year-old vehicles decreased by 6% in the second quarter, with July month-to-date prices down nearly 4% [111] - The company expects used vehicle prices to decline further in the remainder of the year [5] Company Strategy and Development Direction - The decision to suspend operations at certain EchoPark locations is aimed at improving near-term financial performance and achieving breakeven adjusted EBITDA by Q1 2024 [7][97] - The company plans to roll out its EchoPark national branding strategy as market conditions improve, aiming to reach 90% of the U.S. population [113] - The focus remains on maximizing profitability in the near term while positioning for long-term strategic goals [146] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about improving market conditions, expecting more inventory availability and lower prices as the year progresses [12][66] - The company is focused on maintaining a strong balance sheet and is prepared for future growth opportunities as the market normalizes [82][84] Other Important Information - The company ended the quarter with $864 million in available liquidity, including $407 million in cash and floor plan deposits [8] - A quarterly cash dividend of $0.29 per share was approved, payable on October 13, 2023 [8] Q&A Session Summary Question: What led to the decision to suspend operations at certain EchoPark locations? - Management indicated that the decision was necessary due to current used vehicle market conditions and aimed at improving financial performance [97] Question: How does the company plan to achieve breakeven EBITDA in the EchoPark segment? - Management stated that they expect to sell more cars from the remaining locations than from the closed ones, with a target of 7,200 cars to reach breakeven [121] Question: What is the outlook for used vehicle pricing and inventory? - Management expects continued normalization of used vehicle prices and improved inventory availability, which should benefit consumer affordability and demand [111][66] Question: How is the company managing its capital allocation strategy? - The company is focused on maintaining cash reserves and reducing debt while being prepared for future growth opportunities [82][143]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Sonic Automotive, Inc. reported increased revenues but significantly decreased net income and negative operating cash flow in Q1 2023 [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2023 vs Q1 2022 Statement of Operations Highlights | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | **Total Revenues** | **$3,491.2** | **$3,456.2** | **+1.0%** | | Gross Profit | $553.5 | $571.3 | -3.1% | | Operating Income | $106.4 | $154.4 | -31.1% | | **Net Income** | **$47.7** | **$97.3** | **-51.0%** | | Diluted EPS | $1.29 | $2.33 | -44.6% | - The decline in profitability was driven by a decrease in gross profit from **$571.3 million** to **$553.5 million**, coupled with an increase in SG&A expenses from **$387.0 million** to **$412.8 million** and higher interest expenses[14](index=14&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Highlights (as of March 31, 2023 vs Dec 31, 2022) | Account | March 31, 2023 (in millions) | Dec 31, 2022 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $160.2 | $229.2 | | Inventories | $1,462.6 | $1,216.8 | | **Total Assets** | **$5,148.0** | **$4,978.3** | | Total Current Liabilities | $2,057.0 | $1,845.4 | | Long-Term Debt | $1,650.8 | $1,672.2 | | **Total Liabilities** | **$4,293.2** | **$4,083.1** | | **Total Stockholders' Equity** | **$854.8** | **$895.2** | - Inventories increased significantly by **$245.8 million**, while cash and cash equivalents decreased by **$69.0 million** from the end of 2022[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2023 vs Q1 2022 Cash Flow Summary | Cash Flow Activity | Q1 2023 (in millions) | Q1 2022 (in millions) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(34.0) | $252.5 | | Net cash used in investing activities | $(107.5) | $(80.3) | | Net cash provided by (used in) financing activities | $72.5 | $(111.4) | | **Net (Decrease) Increase in Cash** | **$(69.0)** | **$60.8** | - The significant shift in operating cash flow from positive **$252.5 million** in Q1 2022 to negative **$34.0 million** in Q1 2023 was primarily due to a **$234.6 million** increase in inventories, compared to a **$72.2 million** decrease in the prior-year period[23](index=23&type=chunk) - Financing activities provided cash, mainly from net borrowings on non-trade floor plan notes (**$188.8 million**), which was partially offset by purchases of treasury stock (**$90.7 million**)[23](index=23&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail a goodwill impairment test date change, a powersports acquisition, financial covenant compliance, and segment performance, highlighting EchoPark's loss - The company voluntarily changed the date of its annual goodwill and other intangible assets impairment test from October 1 to April 30 to better align with the availability of prospective financial information[26](index=26&type=chunk) - During Q1 2023, Sonic acquired one powersports business (five locations) for an aggregate gross purchase price of approximately **$75.1 million**[35](index=35&type=chunk) Segment Income (Loss) Before Taxes (Q1 2023 vs Q1 2022) | Segment | Q1 2023 (in millions) | Q1 2022 (in millions) | | :--- | :--- | :--- | | Franchised Dealerships | $109.8 | $163.8 | | EchoPark | $(46.8) | $(35.3) | | Powersports | $0.6 | $0.4 | | **Total Income Before Taxes** | **$63.6** | **$128.9** | - As of March 31, 2023, the company was in compliance with all financial covenants under its 2021 Credit Facilities and 2019 Mortgage Facility, with a Consolidated Total Lease Adjusted Leverage Ratio of **2.58** against a maximum of **5.75**[60](index=60&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2023 performance to a mixed industry, with slight revenue growth but declining profitability from margin pressure in Franchised Dealerships and EchoPark losses [Executive Summary](index=20&type=section&id=Executive%20Summary) - The U.S. retail automotive industry's total new vehicle unit sales volume increased by **7%** in Q1 2023 compared to Q1 2022, reaching approximately **15.3 million** vehicles (SAAR)[88](index=88&type=chunk) - Franchised Dealerships Segment: Same-store retail new vehicle revenue increased **5%**, but gross profit per unit decreased **17%** to **$5,434** due to higher inventory costs and price competition[92](index=92&type=chunk)[95](index=95&type=chunk] Fixed Operations revenue grew **11%**[95](index=95&type=chunk) - EchoPark Segment: Reported total revenue increased **5%**, but total gross profit decreased **9%**[98](index=98&type=chunk] Combined retail used vehicle and F&I gross profit per unit fell **28%** to **$1,906** due to higher inventory acquisition costs[99](index=99&type=chunk) - Powersports Segment: In Q1 2023, the newly expanded segment generated **$34.0 million** in total revenue and **$9.8 million** in gross profit, following the acquisition of a business with five locations[102](index=102&type=chunk) [Results of Operations – Consolidated](index=22&type=section&id=Results%20of%20Operations%20%E2%80%93%20Consolidated) Consolidated Reported Results by Category (Q1 2023 vs Q1 2022) | Category | Revenue (in millions) | Gross Profit (in millions) | | :--- | :--- | :--- | | **New Vehicles** | | | | Q1 2023 | $1,461.6 | $139.0 | | Q1 2022 | $1,369.5 | $168.5 | | **Used Vehicles (Retail)** | | | | Q1 2023 | $1,344.9 | $30.0 | | Q1 2022 | $1,370.1 | $47.8 | | **Fixed Operations** | | | | Q1 2023 | $430.5 | $212.9 | | Q1 2022 | $381.2 | $186.9 | | **F&I, net** | | | | Q1 2023 | $168.6 | $168.6 | | Q1 2022 | $166.6 | $166.6 | - Consolidated new vehicle gross profit per unit decreased by **21%** to **$5,325**, while retail used vehicle gross profit per unit fell **42%** to **$660**[114](index=114&type=chunk)[117](index=117&type=chunk) - Fixed Operations showed strong performance with a **13%** revenue increase and a **14%** gross profit increase, driven by a **15%** rise in customer pay revenue[123](index=123&type=chunk) [Results of Operations by Segment](index=27&type=section&id=Results%20of%20Operations%20by%20Segment) Franchised Dealerships saw pre-tax income decline from margin pressure, EchoPark's loss widened, and the new Powersports segment contributed a small profit Segment Performance Summary (Q1 2023) | Segment | Revenues (in millions) | Income (Loss) Before Taxes (in millions) | | :--- | :--- | :--- | | Franchised Dealerships | $2,806.7 | $109.8 | | EchoPark | $650.5 | $(46.8) | | Powersports | $34.0 | $0.6 | - Franchised Dealerships (Same Store): Retail new vehicle gross profit per unit decreased by **$1,104** (**17%**) to **$5,434**[131](index=131&type=chunk)[134](index=134&type=chunk] Retail used vehicle gross profit per unit decreased by **$208** (**12%**) to **$1,560**[134](index=134&type=chunk) - EchoPark (Same Market): Combined retail used vehicle and F&I gross profit per unit decreased by **$862** (**31%**) to **$1,940**, primarily due to higher inventory acquisition costs[155](index=155&type=chunk)[156](index=156&type=chunk) [Selling, General and Administrative (SG&A) Expenses](index=45&type=section&id=Selling%2C%20General%20and%20Administrative%20%28SG%26A%29%20Expenses) - Total SG&A expenses increased by **7%** to **$412.8 million** in Q1 2023 from **$387.0 million** in Q1 2022[179](index=179&type=chunk) - As a percentage of gross profit, SG&A increased significantly from **67.7%** to **74.6%**, indicating pressure on operating leverage[179](index=179&type=chunk) - The increase was primarily driven by higher compensation expense due to wage inflation and a **22%** increase in 'Other' SG&A, which includes higher IT and customer-related costs[179](index=179&type=chunk)[180](index=180&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) Available Liquidity Resources | Resource | March 31, 2023 (in millions) | | :--- | :--- | | Cash and cash equivalents | $160.2 | | Floor plan deposit balance | $272.0 | | Availability under 2021 Revolving Credit Facility | $294.0 | | Availability under 2019 Mortgage Facility | $166.4 | | **Total available liquidity resources** | **$892.6** | - The company repurchased approximately **1.6 million** shares of Class A Common Stock for **$90.7 million** during Q1 2023[198](index=198&type=chunk] As of March 31, 2023, the remaining share repurchase authorization was approximately **$373.6 million**[198](index=198&type=chunk) - A cash dividend of **$0.28** per share was approved for Q1 2023, and a dividend of **$0.29** per share was approved for Q2 2023[200](index=200&type=chunk) - Capital expenditures for Q1 2023 were **$37.2 million**, primarily for facility construction projects and real estate acquisitions[196](index=196&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks, primarily from interest rate fluctuations impacting interest expense and foreign currency exchange rates affecting manufacturer pricing - The company's primary market risk is interest rate risk, stemming from variable rate debt including floor plan facilities, the 2021 Revolving Credit Facility, and the 2019 Mortgage Facility[218](index=218&type=chunk) - A hypothetical **100 basis point** change in the underlying interest rate would have caused a change in interest expense of approximately **$4.7 million** for the three months ended March 31, 2023[218](index=218&type=chunk) - Foreign currency risk could adversely affect operating results if exchange rate volatility impacts manufacturers' ability to provide products at competitive prices in the U.S.[220](index=220&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[223](index=223&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[224](index=224&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management does not expect them to have a material adverse effect on its financial position or results - The company is involved in various legal proceedings but does not expect them to have a material adverse effect on its financial condition or results[67](index=67&type=chunk)[228](index=228&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the previously disclosed risk factors were reported in the Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes in risk factors were reported compared to those in the Annual Report on Form 10-K for the year ended December 31, 2022[231](index=231&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2023, Sonic Automotive repurchased 1.6 million shares for $90.7 million, with $373.6 million remaining under its share repurchase authorization Share Repurchases in Q1 2023 | Month | Total Shares Purchased (in millions) | Average Price Paid per Share | | :--- | :--- | :--- | | January 2023 | 0.2 | $49.15 | | February 2023 | 0.3 | $57.21 | | March 2023 | 1.1 | $55.14 | | **Total** | **1.6** | **N/A** | - As of March 31, 2023, the remaining availability under the share repurchase program was **$373.6 million**[233](index=233&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents and CEO/CFO certifications required by Sarbanes-Oxley Act - The exhibits include the company's articles of incorporation, bylaws, and certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Act Sections 302 and 906[236](index=236&type=chunk)

Financial Data and Key Metrics Changes - The company reported record first-quarter total revenues of $3.5 billion and record first-quarter EchoPark segment revenues of $651 million, with first-quarter GAAP EPS at $1.29 per share and adjusted EPS at $1.33 per share [42][87] - The EchoPark segment adjusted EBITDA loss was $36.9 million, compared to a loss of $25.4 million in the fourth quarter and $29.5 million in the same period last year [46][87] - The company ended the fourth quarter with $893 million in available liquidity, including $432 million in cash and floor plan deposits [5] Business Line Data and Key Metrics Changes - The EchoPark segment retail unit sales volume reached a record of 19,980 units, up 15% from the fourth quarter and up 34% year-over-year [58] - The average used vehicle selling price in the EchoPark segment decreased by 3% from the fourth quarter but remained 10% to 15% above targeted affordability levels at $28,650 per unit [58] - The parts and service business saw a 12% year-over-year increase in gross profit, indicating strong performance in this area [86] Market Data and Key Metrics Changes - Wholesale auction prices for 3-year-old vehicles rose over 6% since the beginning of the year, while used vehicle retail average selling prices declined approximately 1% year-to-date [1] - The company noted that the supply of new vehicles is improving, which is expected to relieve pressure on used vehicle pricing and enhance consumer affordability [44][45] Company Strategy and Development Direction - The company is focused on optimizing inventory sourcing and expanding affordability by including older vehicles in its inventory mix [3] - The company aims to achieve breakeven adjusted EBITDA for the EchoPark segment by the first quarter of 2024, maintaining a long-term view and a disciplined capital allocation strategy [4][61] - The integration of the Powersports segment is seen as a diversification opportunity, with plans to enhance operational synergies [60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in adapting to market changes and highlighted ongoing macroeconomic uncertainties, including rising interest rates affecting consumer demand [55][57] - The company anticipates that used vehicle prices will decline as new vehicle inventory supply grows, benefiting both consumer affordability and inventory costs [44][45] - Management noted that the demand for vehicles remains strong, particularly for trucks, despite supply chain challenges [74] Other Important Information - The Board of Directors approved a 3.6% increase in the quarterly cash dividend to $0.29 per share, payable on July 14, 2023 [48] - The company repurchased approximately 1.6 million shares for $91 million during the first quarter, representing about 5% of shares outstanding at the end of 2022 [5] Q&A Session Summary Question: What drove the increase in SG&A expenses? - Management clarified that the increase was due to investments in IT and facility enhancements, along with the impact of Stellantis on the franchise side [37][26] Question: What is the expectation for used vehicle supply and pricing? - Management expects supply to improve gradually, leading to a decrease in pricing as the year progresses [11][13] Question: How is the company addressing affordability issues for consumers? - Management noted that many consumers are waiting for prices to come down, and the company is focused on providing options that meet affordability targets [18][102] Question: What is the outlook for the Powersports segment? - Management indicated that they are taking a cautious approach to expansion in the Powersports segment, focusing on execution and learning the business [100][116]