Sonic Automotive(SAH) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for the first quarter of 2024 were reported at $3.4 billion, a decrease of 3% year-over-year [13] - GAAP EPS for the first quarter was$ 1.20 per share, while adjusted EPS was $1.36 per share, reflecting a 2% increase year-over-year [13][14] - Same-store new vehicle gross profit per unit declined to$ 3,716, with expectations of continuing decline throughout 2024 [15][71] Business Line Data and Key Metrics Changes - The EchoPark segment achieved a record quarterly adjusted EBITDA of $7.3 million, returning to positive EBITDA for the first time [19] - EchoPark revenues were$ 559 million, down 14% from the prior year, but gross profit increased by 34% [21] - Franchise dealerships reported a same-store used retail gross profit per unit of $1,585, down 3% year-over-year [8] Market Data and Key Metrics Changes - In the used vehicle market, wholesale auction prices for three-year-old vehicles increased by 2%, while retail used pricing at franchise dealerships declined by 5% sequentially [7] - The average day supply for fully electric vehicles was 70 days, while hybrid vehicles averaged 26 days [4] Company Strategy and Development Direction - The company is focused on adapting to changing market dynamics while positioning for long-term strategic goals [2] - Management emphasized the importance of strong relationships with partners and customers as keys to success [2] - The company plans to add 300 technicians in 2024 to enhance Fixed Operations, expecting an additional$ 100 million in annualized gross profit [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the EchoPark segment's future potential, citing strategic adjustments made over the past few quarters [27] - The company anticipates a gradual improvement in used vehicle market conditions, with expectations for a strong performance in 2024 [51] - Management noted that the demand for hybrid vehicles is increasing, indicating a shift in consumer preferences [53] Other Important Information - The company ended the first quarter with $847 million in available liquidity, including$ 335 million in cash and floor plan deposits [29] - A quarterly cash dividend of $0.30 per share was approved, payable on July 15, 2024 [36] Q&A Session Summary Question: What is the cadence for hiring the 300 technicians and other opportunities to optimize Fixed Ops? - Management reported hiring 35 to 40 technicians so far and emphasized the potential for growth in Fixed Operations with the addition of these technicians [41][44] Question: How is the company managing the inventory constraints in the used vehicle market? - Management indicated that there is sufficient inventory available from various sources, including rental car companies, to support EchoPark's operations [46][48] Question: What is the expected EBITDA cadence for EchoPark throughout the year? - Management expects Q1 to be the strongest quarter, with Q2 seeing a slight decline, followed by a strong Q3 and a return to Q2 levels in Q4 [60][61] Question: What is driving the divergence in used car market performance compared to peers? - Management highlighted their strong inventory management skills and the availability of vehicles, expecting to grow their used car business throughout the year [79][83]