Sonic Automotive(SAH)2024-02-14 22:57Financial 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]