Sonic Automotive (SAH) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $3.45 billion, down 5% year-over-year, with net income up 76% to $41.2 million, despite a $30 million negative impact from the CDK software outage, which included $11.6 million in excess compensation costs.

• Adjusted diluted EPS for Q2 2024 was $1.47, down 20% year-over-year, reflecting margin normalization and higher interest expense.

• EchoPark segment delivered record Q2 Adjusted EBITDA of $7.2 million, up 123% year-over-year, and achieved positive segment Adjusted EBITDA for a second consecutive quarter.

• Powersports segment generated $39.6 million in revenue and $2.3 million in Adjusted EBITDA, rebounding from a Q1 loss.

• Board approved a $0.30 per share quarterly dividend, payable October 15, 2024.

Financial highlights

• Q2 2024 gross profit was $539.1 million, down 5% year-over-year; operating income rose to $107.7 million from $78.3 million in Q2 2023.

• Diluted EPS for Q2 2024 was $1.18, up from $0.65 in Q2 2023; adjusted net income was $51.3 million, down 22% year-over-year.

• EchoPark revenues were $517 million (down 14% YoY), but gross profit rose 91% YoY to $51 million, and gross profit per unit increased 96% to $3,078.

• SG&A expenses as a percentage of gross profit were 72.9% reported, 70.7% adjusted.

• Available liquidity at quarter-end was $885 million, including $467 million in cash and floor plan deposits.

Outlook and guidance

• Guidance maintained for positive quarterly EchoPark adjusted EBITDA for the remainder of 2024, with margin normalization in Franchised Dealerships expected to be offset by EchoPark performance.

• New vehicle GPU expected to decline through 2024, exiting Q4 in the low $3,000 range, and normalize at $2,500–$3,000 per unit in 2025.

• EchoPark volumes in 2025 are expected to improve, with sufficient pre-owned inventory anticipated.

• Powersports FY 2024 adjusted EBITDA expected between $10–$13 million, with Q3 as the strongest quarter.

• No material impact from the CDK outage is expected beyond Q2 2024.