Sonic Automotive(SAH) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Reported GAAP EPS for Q4 2025 was $1.36 per share, with adjusted EPS at $1.52 per share, reflecting a 1% increase year-over-year [4] - Consolidated total revenues for Q4 were $3.9 billion, down 1% year-over-year, while full-year revenues reached an all-time record of $15.2 billion, up 7% year-over-year [4][5] - Consolidated total gross profit for the full year was $2.4 billion, up 9% year-over-year, with adjusted EBITDA growing 10% to $615 million [5] Business Line Data and Key Metrics Changes - Franchise dealership segment revenues for Q4 were $3.4 billion, flat year-over-year, with a 5% decrease in same-store sales driven by an 11% decrease in new vehicle retail volume [5][6] - EchoPark revenues for Q4 were $481 million, down 5% year-over-year, but adjusted EBITDA reached a record $49.2 million for the full year, up 78% year-over-year [8][9] - Powersports segment revenues for Q4 were $36 million, up 19% year-over-year, with gross profit increasing by 25% [10] Market Data and Key Metrics Changes - Same-store new vehicle gross profit per unit (GPU) was $3,033, down 7% year-over-year, while used vehicle GPU decreased 2% year-over-year to $1,379 [7] - EchoPark's total GPU for Q4 was a record $3,420 per unit, up 15% year-over-year [8] Company Strategy and Development Direction - The company aims to expand EchoPark to cover 90% of U.S. car buyers, targeting over 1 million vehicles sold annually, while focusing on brand marketing to drive growth [9][10] - Strategic adjustments to the EchoPark business model are expected to facilitate disciplined store openings beginning in late 2026 [9] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about potential tariff impacts on vehicle production and pricing, indicating that new car prices are expected to rise, which could affect consumer affordability [12][40] - The company remains optimistic about the growth potential in fixed operations, projecting significant growth opportunities in the service sector [56] Other Important Information - The company ended the quarter with $702 million in available liquidity and repurchased approximately 600,000 shares for about $38 million during Q4 [11] - A quarterly cash dividend of $0.38 per share was approved, payable on April 15, 2026 [11] Q&A Session Summary Question: Can you discuss EchoPark's position in the used car ecosystem? - Management views EchoPark as a low-cost provider in the pre-owned vehicle market, aiming to sell vehicles at prices $3,000-$6,000 lower than competitors like Carvana and CarMax [19][21] Question: What is the plan for advertising spend? - The planned $10 million-$20 million advertising spend will focus on brand building and will begin in the second quarter, with a broader rollout expected in 2027 [32][34] Question: How is the company addressing fixed operations growth? - The company has increased technician numbers significantly and sees potential for $100 million a month in fixed operations growth, aiming to attract more customers back to dealership service [55][92] Question: What are the expectations for GPU in 2026? - Management anticipates new car GPU to be in the range of $2,700-$3,000, with potential increases during tax return season [39] Question: How is the company planning to handle inventory sourcing? - The company is leveraging its new car franchise dealerships for inventory and is incentivizing teams to buy vehicles from various sources, reducing reliance on auctions [25][26] Question: What is the outlook for the luxury vehicle market? - Management noted that while luxury vehicle prices are high, they are monitoring consumer behavior closely, especially as new car prices continue to rise [40][74]