EchoPark Reported Record Second Quarter Adjusted EBITDA*

The CDK Global Software Outage Is Estimated To Have Reduced Second Quarter GAAP Income Before Taxes By Approximately $30.0 Million, Or $0.64 In GAAP Diluted Earnings Per Share

Sonic Automotive, Inc. (“Sonic Automotive,” “Sonic,” the “Company,” “we” “us” or “our”) (NYSE:SAH), one of the nation’s largest automotive retailers, today reported financial results for the second quarter ended June 30, 2024.

Second Quarter 2024 Financial Summary

• Total revenues of $3.5 billion, down 5% year-over-year; total gross profit of $539.1 million, down 5% year-over-year
• Reported net income of $41.2 million, up 76% year-over-year ($1.18 earnings per diluted share, up 82% year-over-year)
  • Reported net income includes the pre-tax effects of $11.6 million in excess compensation expense related to the CDK outage, a $3.6 million charge related to hail and storm damage, a $1.4 million impairment charge related to real estate held for sale at previously closed EchoPark Segment stores, and $0.7 million in severance expense, offset partially by a $3.6 million gain related to exit of leases and sale of real estate at previously closed EchoPark Segment stores, net of a $3.6 million tax benefit on the above net charges
  • Excluding these items, adjusted net income* was $51.3 million, down 22% year-over-year ($1.47 adjusted earnings per diluted share*, down 20% year-over-year)
• Total reported selling, general and administrative (“SG&A”) expenses as a percentage of gross profit of 72.9% (72.9% on a Franchised Dealerships Segment basis, 72.9% on an EchoPark Segment basis, and 73.7% on a Powersports Segment basis)
  • Total adjusted SG&A expenses as a percentage of gross profit* of 70.7% (69.9% on a Franchised Dealerships Segment basis, 77.7% on an EchoPark Segment basis, and 73.7% on a Powersports Segment basis)
• EchoPark Segment revenues of $517.3 million, down 14% year-over-year; record second quarter EchoPark Segment total gross profit of $51.1 million, up 91% year-over-year; EchoPark Segment retail used vehicle unit sales volume of 16,641, down 3% year-over-year
• Reported EchoPark Segment income of $3.9 million and adjusted EchoPark Segment income* of $1.4 million
• EchoPark Segment adjusted EBITDA* of $7.2 million, up 123% year-over-year
  • Excluding closed stores, EchoPark Segment adjusted EBITDA* was $9.0 million, a 149% improvement year-over-year
• The CDK Global software outage is estimated to have reduced second quarter GAAP income before taxes by approximately $30.0 million, and net income by approximately $22.2 million, or $0.64 in diluted earnings per share
  • Approximately $11.6 million ($0.25 in diluted earnings per share) of the pre-tax CDK impact was related to excess compensation paid to our teammates as a result of the CDK outage, which is included as a reconciling item in the non-GAAP reconciliation tables below

Commentary

David Smith, Chairman and Chief Executive Officer of Sonic Automotive, stated, “I'm pleased to report that we continued to make great progress in our EchoPark Segment performance in the second quarter, with record second quarter Adjusted EBITDA* that outpaced our previous projections and sets the stage for continued growth in the second half of 2024 and beyond. Overall, the Sonic Automotive team continued to execute at a high level, despite operational challenges in the last 12 days of the second quarter as a result of the previously announced CDK Global (“CDK”) software outage. As of today, Sonic's access to the information systems provided by CDK has been restored, however we experienced operational disruptions throughout July related to the functionality of certain CDK customer lead applications, inventory management applications and related third-party application integrations with CDK. As a result of the business disruption caused by the CDK outage, we estimate our second quarter GAAP income before taxes was negatively impacted by approximately $30 million, or $0.64 in diluted earnings per share.”

Jeff Dyke, President of Sonic Automotive, commented, “Despite the short-term operational challenges associated with the CDK outage, our team remains dedicated to delivering an outstanding guest experience and executing our long-term strategic vision. Throughout the second quarter, we made great progress on our net 300 technician hiring initiative and continued to see improvement in our used vehicle business in both the Franchised Dealerships and EchoPark Segments. Given the used vehicle market's continued improvement, we maintain our guidance for positive quarterly EchoPark Segment adjusted EBITDA* for the remainder of 2024, which is expected to help mitigate the continuing effects of margin normalization in our Franchised Dealerships Segment on consolidated earnings potential.”

Heath Byrd, Chief Financial Officer of Sonic Automotive, added, “Our diversified cash flow streams continued to benefit our overall financial position in the second quarter, despite operational disruption from the CDK outage. As of June 30, 2024, we had $467 million in cash and floor plan deposits on hand, and approximately $885 million of total liquidity, before considering unencumbered real estate. We continue to maintain a conservative balance sheet approach, with the ability to deploy capital strategically as market conditions evolve.”

Second Quarter 2024 Segment Highlights

The financial measures discussed below are results for the second quarter of 2024 with comparisons made to the second quarter of 2023, unless otherwise noted.

• Franchised Dealerships Segment operating results include:
  • Same store revenues down 3%; same store gross profit down 9%
  • Same store retail new vehicle unit sales volume down 2%; same store retail new vehicle gross profit per unit down 29%, to $3,590
  • Same store retail used vehicle unit sales volume up 3%; same store retail used vehicle gross profit per unit down 14%, to $1,524
  • Same store parts, service and collision repair (“Fixed Operations”) gross profit up 2%; same store customer pay gross profit up 2%; same store warranty gross profit up 13%; same store Fixed Operations gross profit margin up 80 basis points, to 50.4%
  • Same store finance and insurance ("F&I") gross profit down 5%; same store F&I gross profit per retail unit of $2,380, down 6%
  • On a trailing quarter cost of sales basis, the Franchised Dealerships Segment had 59 days’ supply of new vehicle inventory (including in-transit) and 30 days’ supply of used vehicle inventory
• EchoPark Segment operating results include:
  • Revenues of $517.3 million, down 14%; gross profit of $51.1 million, up 91%
    • On a same market basis (which excludes closed stores), revenues were up 10% and gross profit was up 81%
  • Retail used vehicle unit sales volume of 16,641, down 3%
    • On a same market basis (which excludes closed stores), retail used vehicle unit sales volume was up 23%
  • Reported segment income of $3.9 million, adjusted segment income* of $1.4 million, and adjusted EBITDA* of $7.2 million
    • Reported segment income includes $0.9 million income related to closed stores (closed stores represent a $1.9 million loss on an adjusted segment loss* basis and a $1.8 million loss on an adjusted EBITDA* basis)
    • Excluding closed stores, reported segment income was $3.0 million, adjusted segment income* was $3.3 million, and adjusted EBITDA* was $9.0 million
  • On a trailing quarter cost of sales basis, the EchoPark Segment had 38 days’ supply of used vehicle inventory
• Powersports Segment operating results include:
  • Revenues of $39.6 million, down 12%; gross profit of $10.7 million, down 16%
  • Segment income of $0.5 million and adjusted EBITDA* of $2.3 million

Dividend

Sonic’s Board of Directors approved a quarterly cash dividend of $0.30 per share, payable on October 15, 2024 to all stockholders of record on September 13, 2024.

Second Quarter 2024 Earnings Conference Call

Senior management will hold a conference call today at 10:00 A.M. (Eastern). Investor presentation and earnings press release materials will be accessible beginning prior to the conference call on the Company’s website at ir.sonicautomotive.com.

To access the live webcast of the conference call, please go to ir.sonicautomotive.com and select the webcast link at the top of the page. For telephone access to this conference call, please dial (877) 407-8289 (domestic) or +1 (201) 689-8341 (international) and ask to be connected to the Sonic Automotive Second Quarter 2024 Earnings Conference Call. Dial-in access remains available throughout the live call; however, to ensure you are connected for the full call we suggest dialing in at least 10 minutes before the start of the call. A webcast replay will be available following the call for 14 days at ir.sonicautomotive.com.

About Sonic Automotive

Sonic Automotive, Inc., a Fortune 500 company based in Charlotte, North Carolina, is on a quest to become the most valuable diversified automotive retail and service brand in America. Our Company culture thrives on creating, innovating, and providing industry-leading guest experiences, driven by strategic investments in technology, teammates, and ideas that ultimately fulfill ownership dreams, enrich lives, and deliver happiness to our guests and teammates. As one of the largest automotive and powersports retailers in America, we are committed to delivering on this goal while pursuing expansive growth and taking progressive measures to be the leader in these categories. Our new platforms, programs, and people are set to drive the next generation of automotive and powersports experiences. More information about Sonic Automotive can be found at www.sonicautomotive.com and ir.sonicautomotive.com.

About EchoPark Automotive

EchoPark Automotive is one of the most comprehensive retailers of nearly new pre-owned vehicles in America today. Our unique business model offers a best-in-class shopping and utilizes one of the most innovative technology-enabled sales strategies in our industry. Our approach provides a personalized and proven guest-centric buying process that consistently delivers award-winning guest experiences and superior value to car buyers nationwide, with savings of up to $3,000 versus the competition. Consumers have responded by putting EchoPark among the top national pre-owned vehicle retailers in products, sales, and service, while receiving the 2023 Consumer Satisfaction Award from DealerRater. EchoPark’s mission is in the name: Every Car, Happy Owner. This drives the experience for guests and differentiates EchoPark from the competition. More information about EchoPark Automotive can be found at www.echopark.com.

Forward-Looking Statements

Included herein are forward-looking statements, including statements regarding the CDK outage, anticipated future EchoPark profitability and anticipated future EchoPark adjusted EBITDA. There are many factors that affect management’s views about future events and trends of the Company’s business. These factors involve risks and uncertainties that could cause actual results or trends to differ materially from management’s views, including, without limitation, the ultimate impact of the CDK outage on the Company, economic conditions in the markets in which we operate, supply chain disruptions and manufacturing delays, labor shortages, the impacts of inflation and increases in interest rates, new and used vehicle industry sales volume, future levels of consumer demand for new and used vehicles, anticipated future growth in each of our operating segments, the success of our operational strategies, the rate and timing of overall economic expansion or contraction, the integration of recent or future acquisitions, and the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and other reports and information filed with the United States Securities and Exchange Commission (the “SEC”). The Company does not undertake any obligation to update forward-looking information, except as required under federal securities laws and the rules and regulations of the SEC. Due to rounding, numbers presented throughout this and other documents may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

Non-GAAP Financial Measures

This press release and the attached financial tables contain certain non-GAAP financial measures as defined under SEC rules, such as adjusted net income, adjusted earnings per diluted share, adjusted SG&A expenses as a percentage of gross profit, adjusted segment income, and adjusted EBITDA. As required by SEC rules, the Company has provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the schedules included in this press release. The Company believes that these non-GAAP financial measures improve the transparency of the Company’s disclosures and provide a meaningful presentation of the Company’s results.