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Q4 2024 Sonic Automotive Inc Earnings Call

In This Article:

Participants

David Smith; Chairman of the Board, Chief Executive Officer; Sonic Automotive Inc

Jeff Dyke; President, Director; Sonic Automotive Inc

Danny Wieland; Investor Relations; Sonic Automotive Inc

Thomas Keen; EVP of Operations, EchoPark Automotive; Sonic Automotive Inc

Heath Byrd; Chief Financial Officer, Executive Vice President; Sonic Automotive Inc

John Murphy; Analyst; Bank of America

Rajat Gupta; Analyst; JPMorgan

Bret Jordan; Analyst; Jefferies

Jeff Lick; Analyst; Stephens

Chris Pierce; Analyst; Needham & Company, LLC

Presentation

Operator

Good morning and welcome to the Sonic Automotive, fourth quarter 2024 earnings conference call. This conference call is being recorded today, Wednesday, February 12, 2025. Presentation materials which the company management discussions on the conference call can be accessed at the company's website @ir.sonicautomotive.com.
At this time I'd like to refer to the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. During this conference call, management may discuss financial projections, information, or expectations about the company's products or market or otherwise make statements about the future.
Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission.
In addition management, it may discuss certain non-GAAP financial measures. As defined by the Securities and Exchange Commission, please refer to the non-GAAP reconciliation tables in the company's current report on Form 8K filed with the Securities and Exchange Commission earlier today.
I'd now like to introduce Mr. David Smith, Chairman and Chief Executive Officer of Sonic Automotive.
Mr. Smith, you may begin your conference.

David Smith

Thank you very much and good morning everyone. Welcome to the Sonic Automotive, fourth quarter 2024 earnings call. As you mentioned, I'm David Smith, the company's Chairman and CEO.
Joining me on today's call is our President, Jeff Dyke; our CFO, Heath Bird; our Eco Park Chief Operating Officer, Tim Keen; and our Vice President of Investor Relations, Mr. Danny Wieland. We would like to open the call by sincerely thanking our amazing teammates for continuing to deliver a world-class guest experience for our customers.
Our Echo Park automotive teammates have once again earned the top spot as the number one pre-owned automotive dealer and guest satisfaction ranked by reputation.com. And our Sonic Automotive franchise teammates set a second consecutive annual record in customer satisfaction scores.
Our teammates are truly living our Sonic purpose to deliver an experience for our guests and our teammates that fulfills dreams, enriches lives, and delivers happiness. We believe our strong relationships with our teammates, our manufacturer and lending partners, and our guests are key to our future success and as always, I would like to thank them all for their support and loyalty to the Sonic Automotive team. I'd also like to welcome our newest Sonic teammates from our fourth quarter acquisition of the remaining 50% joint venture of North [Point] Volvo in Greater Atlanta.
In addition to acquiring Audi New Orleans and motorcycles of Charlotte and Greensboro, collectively we expect these acquisitions to add approximately $145 million in annualized revenues to our business. We would also like to announce that we are back in the market and actively pursuing major acquisitions of new vehicle franchises in 2025.
Turning now to our fourth quarter results, our GAAP, EPS was $1.67 per share, and excluding the effect of certain items as detailed in our press release this morning, adjusted EPS was $1.51 per share, a 7% decrease year over year.
Fourth quarter consolidated total revenues were an all-time quarterly record, up 9% year over year, while consolidated gross profit grew 6% and consolidated adjusted EBITDA increased 5%. Moving now to our franchise dealership segment results. In the fourth quarter, we generated all-time record quarterly franchise revenues of $3.4 billion up 12% year over year.
This revenue growth was driven by a 13% increase in new retail volume, a 5% increase in used retail volume, and a 10% increase in fixed operations revenues. Our fixed operations gross profit and F&I grows profit also set all-time quarterly records up 12% and 14% year over year, respectively.
With the acceleration and new vehicle sales volume in the fourth quarter, new vehicle day supply decreased to 46 days, down from 57 days at the end of the of the third quarter. Same stored new vehicle GPU was $3,241 subsequentially from the third quarter due to our luxury brand mix and in line with our previous guidance to exit the year in the low $3000 range.
On the used vehicle side of the franchise business, while we grew volume by 5% year over year, supply constraints and consumer affordability remain a challenge. Our used inventory day supply was in our target range at 31 days, and used GPU was stable sequentially at $1,396 per unit on a same store basis, approaching normalized GPU levels in this supply environment.
Our FNI performance continues to be a strength with same store franchised FNI, GPU of $2,427 in the fourth quarter, up 4% sequentially and year over year. The continued stability and FNI at these levels supports our view that FNI per unit will remain structurally higher than pre-pandemic levels, even in a challenging consumer affordability environment.
Our parts and service or fixed operations business remains very strong, with a 12% increase in same store fixed operations gross profit in the fourth quarter. This strong growth was driven in part by higher levels of warranty repairs combined with the effects of our initiative to increase technician headcount by 300 net technicians during 2024. We are very excited to announce that we exceeded this challenging goal, adding 335 net technicians during 2024. Which we expect to set the stage for strong fixed operations growth in 2025 as we continue to focus on technician hiring and retention.
Turning now to our Echo Park segment, fourth quarter adjusted EBITDA was $4.2 million. Below our previous guidance for $7 million to $8 million in Echo Park adjusted EBITDA. This shortfall was driven primarily by $200 sequential decline in used GPU from the third quarter. As a result of building inventory a little bit too quickly, exiting the third quarter, which led to aging inventory and depreciation risk amidst a seasonal slowdown in used demand.
In response, we have taken steps to right size our inventory at Echo Park, heading into the first quarter and expect for used GPU to improve sequentially. For the fourth quarter, we reported Eco Park revenues of $506 million, down 9% from the prior year. And fourth quarter, record Ecoar gross profit of $49 million up 14% from the prior year.
Echo Park's segment retail unit sales volume for the quarter was approximately 16,700 units, down 5% year over year. On the same store, on the same market basis, which excludes closed doors. Eco Park revenue was flat, gross profit was up 29%, and retail unit sales volume increased 4% year over year.
Eco Park segment total gross profit per unit was $3004 per unit, up $606 per unit year over year, despite lower than expected front-end use GPU. Echo Park used vehicle day supply finished the fourth quarter at 38 days compared to 33 days to the end of the third quarter.
Our unwavering confidence in Echo Park's long-term potential has allowed us to weather the challenges in the used vehicle market in recent years, and we believe our performance in 2024 demonstrates the tremendous opportunity for this brand. Full year 2024, adjusted IBA was $27.6 million up from a loss of $83 million in 2023. And the Echo Park segment achieved profitability on a pre-tax basis in 2024.
We believe these results validate the strategic adjustments we've made over the past several quarters, and we look forward to resuming disciplined long-term growth for Eco Park as used vehicle market conditions continue to improve over the next several quarters.
Turning now to our Power Sports segment, for the fourth quarter, we generate revenues of $30.6 million gross profit of $7.5 million and a segment adjusted even to loss of $1 million which was in line with our expectations for a seasonally lighter fourth quarter.
We continue to focus on identifying operational synergies within our current power sports network while fine-tuning our operating playbooks. While we are taking a disciplined approach to expansion in this segment, we remain optimistic about the future growth opportunities in this adjacent retail sector when the time is right.
Finally, turning to our balance sheet, we ended the year with $862 million in available liquidity, excluding unencumbered real estate. Including $384 million in combined cash and floor plan deposits on hand. We continue to maintain a conservative balance sheet approach with the ability to deploy capital strategically as the market evolves.
Additionally, I'm pleased to report today that our board of directors approved a quarterly cash dividend of $0.35 per share, payable on April 15, 2025 to all stockholders of record on March 14, 2025. As you can see in the investor presentation we released this morning, we have once again provided certain limited financial guidance for 2025.
Note that there are many variables that may affect our business in 2025, including the impact of potential tariffs, shifts in electric vehicle production and demand, and changes in the interest rate environment and consumer affordability, among others.
In closing, our team remains focused on near-term execution and adapting to ongoing changes in the automotive retail environment and macroeconomic backdrop. While making strategic decisions to maximize long term returns.
Furthermore, we continue to believe that our diversified business model provides significant earnings growth opportunities in our Eco Park and power sports segments that may help to offset any industry-driven margin headwinds we may face in the franchise business.
And as I mentioned earlier, we look forward to announcing some major new vehicle franchise acquisitions in 2025. We remain confident that we have the right strategy, the right people, and the right culture to continue to grow our business and create long-term value for our stakeholders.
This concludes our opening remarks, and we look forward to answering any questions you may have.
Thank you.