Sonic Automotive(US:SAH)2023-04-27 17:22Financial 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]