Sonic Automotive (NYSE: SAH) reported Q4 EPS of $1.50, $0.10 better than the analyst estimate of $1.40. Revenue for the quarter came in at $2.8 billion versus the consensus estimate of $2.8 billion.

Fourth Quarter Highlights

• All-time record quarterly revenues of $2.8 billion, up 1.8%, and all-time record quarterly income from continuing operations before taxes of $90.4 million, up 48.3%
• Reported earnings from continuing operations of $57.5 million ($1.31 per diluted share), compared to $46.3 million ($1.04 per diluted share) for the fourth quarter of 2019
• All-time record quarterly adjusted earnings from continuing operations* of $65.8 million ($1.50 per diluted share), an increase of 52.7% compared to $43.1 million ($0.97 per diluted share) for the fourth quarter of 2019
• Reported selling, general and administrative (“SG&A”) expenses as a percentage of gross profit were 66.6%, compared to 66.2% for the fourth quarter of 2019
• All-time record quarterly adjusted SG&A expenses as a percentage of gross profit* of 68.1%, compared to 73.7% for the fourth quarter of 2019, a 560-basis point improvement
• All-time record quarterly total Finance & Insurance (“F&I”) gross profit per retail unit of $2,031, up 12.3%
• Reported EchoPark results include:
  • All-time record quarterly EchoPark revenues of $386.9 million, up 25.4%
  • EchoPark retail sales volume of 14,841, up 17.1%
• Same store Franchised Dealerships Segment operating results include:
  • Revenues up 1.5%, gross profit up 1.7%
  • New vehicle unit sales volume down 6.9%; new vehicle gross profit per unit up 31.4%, to all-time record $2,932
  • Retail used vehicle unit sales volume down 2.9%; retail used vehicle gross profit per unit down 24.2%, to $972
  • Parts, service and collision repair gross profit down 3.2% (customer pay gross profit down 0.5%); gross margin up 180 basis points, to 50.7%
  • F&I gross profit up 7.8%; all-time record quarterly reported Franchised Dealerships Segment F&I gross profit per retail unit of $1,965, up 14.9%

Commentary

Jeff Dyke, Sonic’s and EchoPark’s President, commented, “We are extremely proud of our team for all they have accomplished in 2020, driving the highest adjusted earnings from continuing operations* in our Company’s history in the face of the challenges of a global pandemic. Our fourth quarter and full year 2020 results reflect the continued strength and resilience of both our EchoPark and franchised dealerships segments, a significant rebound in customer activity and increasing demand for both new and used vehicles during the second half of the year, as well as fundamental improvements in our operating cost structure. These trends have continued into early 2021 and we believe we are well on the path to more than double the Company’s total revenues and significantly increase profitability over the next five years.”

Mr. Dyke continued, “Our EchoPark business achieved strong top-line growth during the fourth quarter, with record quarterly revenues of $386.9 million, up 25.4% from the prior year period. EchoPark’s continued growth demonstrates the significant benefits we offer our guests, who continue to see value in the excellent pricing, inventory selection and buying experience that EchoPark offers. This in-store experience, combined with our hybrid approach between online and on-site, offers consumers a full range of buying options in order to provide their ideal pre-owned vehicle purchase experience. With the opening of four new EchoPark points in the fourth quarter and the recent acquisition of two pre-owned businesses in Maryland and New York, we remain committed to developing our nationwide distribution network, which we continue to expect to retail over half a million pre-owned vehicles annually and drive $14.0 billion in annual EchoPark revenues by 2025.”

Heath Byrd, Sonic’s and EchoPark’s Chief Financial Officer, commented, “In 2020, we took significant steps to improve operating efficiencies and manage expenses throughout our entire organization, which drove record adjusted SG&A expenses as a percentage of gross profit* of 68.1% for the fourth quarter of 2020. Our team met the hurdles of the COVID-19 pandemic head on, initiating cost control measures to meet these challenges and remaining disciplined in this focus even as consumer demand rebounded in the second half of the year. Additionally, our balance sheet position is stronger than it has ever been, with the lowest net debt to adjusted EBITDA* ratio in our Company’s history and total available liquidity of $526.4 million as of December 31, 2020, up 88.0% from the beginning of the year.”

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