Sonic Automotive(US:SAH)2025-07-24 20:03PART I – FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's analysis for the reporting period Financial Statements (Unaudited) Q2 2025 saw a net loss of $45.6 million due to a $172.4 million impairment, despite 5.9% revenue growth Condensed Consolidated Statements of Operations Q2 2025 net loss of $45.6 million was primarily driven by a $172.4 million impairment charge Q2 and H1 2025 vs 2024 Statement of Operations Highlights | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $3,657.2 M | $3,453.0 M | $7,308.5 M | $6,837.0 M | | Gross Profit | $602.2 M | $539.1 M | $1,168.7 M | $1,075.3 M | | Impairment Charges | ($172.4 M) | ($1.4 M) | ($173.8 M) | ($2.4 M) | | Operating Income (Loss) | ($23.3 M) | $107.7 M | $121.6 M | $214.4 M | | Net Income (Loss) | ($45.6 M) | $41.2 M | $25.0 M | $83.2 M | | Diluted EPS | ($1.34) | $1.18 | $0.72 | $2.39 | - A significant impairment charge of $172.4 million in Q2 2025 was the primary driver for the net loss, compared to a minimal charge of $1.4 million in Q2 202412 Condensed Consolidated Balance Sheets Total assets reached $5.93 billion as of June 30, 2025, with goodwill increasing due to acquisitions Balance Sheet Summary | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $2,777.4 M | $2,885.5 M | | Total Assets | $5,930.4 M | $5,895.7 M | | Total Current Liabilities | $2,706.8 M | $2,637.7 M | | Long-Term Debt | $1,474.0 M | $1,511.9 M | | Total Liabilities | $4,890.2 M | $4,833.4 M | | Total Stockholders' Equity | $1,029.6 M | $1,062.3 M | - Goodwill increased significantly to $573.7 million from $358.5 million at year-end 2024, primarily due to acquisitions. Other Intangible Assets, net, decreased to $255.6 million from $430.3 million, reflecting the impairment charge18 Condensed Consolidated Statements of Cash Flows H1 2025 operating cash flow significantly improved to $332.6 million, with substantial investment in acquisitions Six Months Ended June 30, Cash Flow Summary | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $332.6 M | ($66.3 M) | | Net Cash used in Investing Activities | ($421.9 M) | ($61.8 M) | | Net Cash from Financing Activities | $155.7 M | $166.4 M | | Net Increase (Decrease) in Cash | $66.4 M | $38.3 M | | Cash at End of Period | $110.4 M | $67.2 M | - Cash from operations improved significantly in H1 2025, driven by adjustments for non-cash charges like the $173.8 million asset impairment and favorable changes in receivables24 - Investing activities saw a large cash outflow of $359.9 million for business acquisitions in H1 2025, compared to none in the prior-year period24 Notes to Unaudited Condensed Consolidated Financial Statements Key notes detail $359.9 million in acquisitions, a $172.4 million impairment, and credit facility amendments - During the first six months of 2025, the company acquired four Jaguar Land Rover businesses for an aggregate gross purchase price of approximately $359.9 million, adding $215.5 million in goodwill39 - Annual impairment testing as of April 30, 2025, resulted in a non-cash pre-tax franchise asset impairment charge of $172.4 million, reducing the carrying value of these assets to $255.6 million50 - The company amended its Credit Agreement on March 13, 2024, extending the maturity to March 2029 and setting aggregate commitments at $2.4 billion56 Segment Income (Loss) Summary (Six Months Ended June 30) | Segment | 2025 Income (Loss) | 2024 Income (Loss) | | :--- | :--- | :--- | | Franchised Dealerships | $183.6 M | $116.4 M | | EchoPark | $22.0 M | $0.9 M | | Powersports | ($3.5 M) | ($1.7 M) | | Total Segment Income | $202.1 M | $115.6 M | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 revenue growth, segment performance, and the impact of a $172.4 million impairment Executive Summary Q2 2025 saw increased new vehicle SAAR, improved EchoPark profitability, and $10.0 million cyber insurance proceeds - The company recognized $10.0 million in pre-tax income from cyber insurance proceeds during Q2 2025 related to the June 2024 CDK Global outage, which was recorded as a reduction to SG&A expenses98 - Franchised Dealerships Segment: Same-store retail new vehicle revenue increased 6% in Q2 2025, but gross profit per unit decreased by $212 due to increased price competition100 - EchoPark Segment: Reported total gross profit increased 22% in Q2 2025, driven by a 47% increase in used vehicle gross profit104 Results of Operations – Consolidated Q2 2025 consolidated results show revenue growth in new vehicles, Fixed Operations, and F&I, with margin shifts Consolidated Performance by Revenue Stream (Q2 2025 vs Q2 2024) | Category | Revenue Change | Gross Profit Change | Gross Profit Per Unit Change | | :--- | :--- | :--- | :--- | | Retail New Vehicles | +7% | +1% | -5% | | Retail Used Vehicles | 0% | +8% | +8% | | Fixed Operations | +12% | +14% | N/A | | F&I | +17% | +17% | +15% | Results of Operations – Segment Analysis Franchised Dealerships, EchoPark, and Powersports segments all demonstrated revenue growth and improved profitability - Franchised Dealerships: Same-store Fixed Operations revenue grew 10% in Q2 2025, with gross profit up 12%, benefiting from higher vehicle recalls, warranty repairs, and increased technician headcount159 - EchoPark: Same-market combined retail used vehicle and F&I gross profit per unit increased by $590 (19%) to $3,717 in Q2 2025, driven by higher F&I penetration and improved inventory sourcing174 - Powersports: Reported retail new vehicle revenue increased 24% in Q2 2025, with gross profit per unit rising 15% to $2,828183 SG&A, Other Expenses, and Income Taxes SG&A as a percentage of gross profit improved, but a $172.4 million impairment significantly impacted income - Total SG&A expenses as a percentage of gross profit decreased to 68.5% in Q2 2025 from 72.9% in Q2 2024, partly due to a $10.0 million benefit from cyber insurance proceeds216219 - Impairment charges for Q2 2025 were $172.4 million, primarily from the annual franchise asset impairment test, compared to $1.4 million in Q2 2024224 - Floor plan interest expense for new vehicles decreased by $3.7 million in Q2 2025, driven by a lower average interest rate227 Liquidity and Capital Resources The company maintains strong liquidity with $775.1 million available, repurchased shares, and declared dividends Available Liquidity Resources | Resource | June 30, 2025 | | :--- | :--- | | Cash and cash equivalents | $110.4 M | | Floor plan deposit balance | $100.0 M | | Availability under Revolving Credit Facility | $320.6 M | | Availability under Mortgage and Sidecar Facilities | $244.1 M | | Total Available Liquidity | $775.1 M | - In the first six months of 2025, the company repurchased approximately 0.7 million shares of Class A Common Stock for $44.1 million. The remaining share repurchase authorization is approximately $208.2 million242 - The Board of Directors approved a cash dividend of $0.35 per share during Q2 2025 and subsequently approved a dividend of $0.38 per share for Q3 2025244 Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on $2.2 billion in variable rate debt, impacting interest expense - The company's variable rate debt stood at $2.2 billion at the end of Q2 2025, with a 1.0% interest rate change impacting interest expense by $11.3 million over six months266 Controls and Procedures Management confirmed effective disclosure controls and procedures with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025269 - No material changes to internal control over financial reporting occurred during Q2 2025270 PART II – OTHER INFORMATION This section covers legal proceedings, updated risk factors, equity sales, and other relevant disclosures Legal Proceedings The company is involved in various legal matters but has recorded no significant related liabilities as of June 30, 2025 - The company is involved in various legal proceedings but recorded no significant liabilities for these matters as of June 30, 20257677274 Risk Factors An updated risk factor highlights potential negative impacts from new tariffs on imported automobiles and parts - The risk factor for tariffs and foreign trade was updated to reflect potential negative impacts from new U.S. government tariffs on imported automobiles and parts276 Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 0.1 million shares for $8.8 million, with $208.2 million remaining Share Repurchases (Q2 2025) | Month | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | — | — | | May 2025 | 0.1 M | $62.82 | | June 2025 | — | — | | Total | 0.1 M | N/A | - As of June 30, 2025, the remaining availability under the company's share repurchase program was $208.2 million279 Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements in Q2 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during Q2 2025282 Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL data files