Q2 2025 Sonic Automotive Inc Earnings Call
Operator: 2nd Quarter 2025 Earnings Conference This conference call is being recorded today, Thursday, July 24, 2025.
Good morning and welcome to the Sonic Automotive, second quarter 2025 earnings conference call.
Operator: Presentation materials which accompany management's discussion on the conference call can be accessed at the company's website at ir.sonicautomotive.com.
This conference call is being recorded today Thursday, July 24th 2025.
Operator: At this time, I would like to refer to the Safe Harbor Statement under the Private Securities and Litigation Reform Act of 1995. During this conference call, management may discuss financial projects. information or expectations about the company's products or market, or otherwise make statements about the company. Such statements are forward-looking and subject to a number of risks and uncertainties.
Presentation materials which a company Management's discussion on the conference call can be accessed at the company's website at IR sonicautomotive.com.
at this time, I would like to refer to the safe harbor statement under the private and securities and 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.
Operator: that could cause actual results to differ materially from These risks and uncertainties are detailed in the company's filings with the Securities and Exchange In addition, management may discuss certain non-GAAP financial measures as defined by the Securities and Exchanges Act.
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.
Operator: 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.
In addition management, 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.
Operator: I would now like to introduce Mr. David Smith, Chairman and Chief Executive Officer of Sonic Automotive.
John Smith: I'm John Smith, you may begin your call.
David Smith: Thank you very much and good morning everyone. Welcome to the Sonic Automotive second quarter 2025 earnings call. I'm David Smith, the company's chairman and CEO.
Speaker Change: I would now like to introduce Mr. David Smith, chairman and chief executive officer of Sonic Automotive, Mr. Smith. You may begin your conference
Speaker Change: Thank you very much. And good morning everyone. Welcome to the Sonic Automotive, second quarter, 2025 earnings call.
David Smith: Joining me on today's call is our president, Jeff Dyke, our CFO, Heath Byrd, our Echo Park chief operating officer, Mr. Tim Keen, and our VP of investor relations, Danny Wieland. I would like to open the call by sincerely thanking our amazing teammates for continuing to deliver a world-class guest experience for our customers. We believe our strong relationships with our teammates, our guests, and manufacturer and lending partners are key to our future success, and as always, I would like to thank them all for their continued support and loyalty to the Sonic Automotive team.
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.
Speaker Change: Our Echo Park Chief Operating Officer, Mr. Tim Keane and our VP of investor relations. Danny wland.
Speaker Change: Experience for our customers.
David Smith: Turning now to our second quarter results.
Speaker Change: We believe our strong relationships with our teammates, our guests and manufacturer, and lending, partners are key to our future success. And as always, I would like to thank them all for their continued, support and loyalty to the Sonic Automotive team.
David Smith: primarily as a result of a non cash charge, a non cash charge relating to our annual franchise asset impairment test.
Speaker Change: turning now, to our second quarter results,
David Smith: reported GAAP EPS was a loss of $1.34 per share. Excluding these non-cash impairment charges and the effect of certain other items as detailed in our press release this morning, adjusted EPS for the second quarter was $2.19 per share, which was a 49% increase year over year. Consolidated total revenues were a second quarter record, up 6% year over year, while consolidated gross profit grew 12% and consolidated adjusted EBITDA increased 22%. Moving now to our franchise dealership segment results, we generated second quarter record franchise revenues of $3.1 billion, up 6% year-over-year on a same-store basis. This revenue growth was driven by a 5% increase in same store new retail volume and a 10% increase in same store fixed operations revenue.
Speaker Change: Primarily as a result of a non-cash charge, a non-cash charge relating to our annual. Franchise asset impairment testing reported gaap EPS was a loss of a134 per share.
Speaker Change: Excluding these non-cash impairment charges and the effect of certain other items as detailed in our press release this morning. Adjusted EPS for the second quarter was $2.19 per share which was a 49% increase year-over-year.
Speaker Change: We're a second quarter record.
Speaker Change: up 6% year-over-year while Consolidated gross profit, grew 12% and Consolidated adjusted evida increased 22%
Speaker Change: Moving now to our franchise dealership segment results we generated second quarter record franchise revenues of 3.1 billion.
Up 6% year-over-year on the same store basis.
David Smith: Second quarter results benefited from an increase in consumer demand and new vehicle sales in April and early May, which we expect was the result of customers buying in advance of anticipated tariff-driven price increases. Our fixed operations gross profit and F&I gross profit also set all-time quarterly records up 12% and 15% year-over-year, respectively, on a same-store basis. These two high-margin business lines continue to increase their share of our total gross profit pool, approaching 75% of total gross profit for the second quarter, mitigating the potential tariff impact on vehicle pricing and margin to our overall profitability, while also leveraging our SG&A expenses more efficiently than vehicle-related gross profit.
Speaker Change: This Revenue growth was driven by a 5% increase in same store. New retail volume in a 10% increase in same store. Fixed operations revenues.
Speaker Change: Second quarter results benefited from an increase in consumer demand and new vehicles sales in April and early May, which we expect was the result of customers buying in advance of anticipated. Tariff, driven price increases
Speaker Change: Our fixed operations growth profit and fni growth profit also, set all-time quarterly records up, 12% and 15% year-over-year respectively on the same store basis.
Speaker Change: These 2 high margin businesses business lines continue to increase their share of our total gross profit. Pool approaching 75% of total gross profit for the second quarter, mitigating the potential tariff impact on vehicle, pricing and margin to our overall profitability.
Speaker Change: While also leveraging our sgna expenses, more efficiently than vehicle related, gross profit.
David Smith: Our same store new vehicle GPU was $3,391, down 6% year over year, but up 10% sequentially from the first quarter due to a surge in pre-tariff consumer demand. On the use side of the franchise business, same-store use volume decreased 4% year-over-year, driven by lower supply of late-model use vehicles and ongoing consumer affordability challenges. Same store, used GPU increased 2% sequentially to $1,590 per unit. Our F&I performance continues to be a strength with all-time record quarterly franchised F&I GPU of $2,721 per unit in the second quarter, up 12% sequentially and 14% year-over-year. The continued growth in our F&I per unit supports our view that F&I per unit will remain structurally higher than pre-pandemic levels, even in a challenging consumer affordability environment, as we continue to fine-tune our F&I product offerings and cost structure.
Speaker Change: Our same store, new vehicle GPU was 3,391.
Speaker Change: Down 6% year-over-year but up. 10% sequentially from the first quarter, due to a surge in Pre tariff consumer demand.
Speaker Change: On the use side of the franchise business, same store used volume, volume decreased 4% year-over-year driven by lower supply of late model, used vehicles and ongoing consumer affordability challenges.
Speaker Change: Same store used GPU increased 2% sequentially.
Speaker Change: To 1590 per unit.
Speaker Change: Our fni performance continues to be a strength with all-time record quarterly franchised fni, GPU of 2,721 per unit in the second quarter up, 12% sequentially and 14% year-over-year.
David Smith: Our parts and service, or fixed operations business, remains strong, with a 12% increase in same-store fixed operations gross profit in the second quarter. Same Store Warranty Gross Profit continued to be a tailwind in the second quarter, up 34% year-over-year, and Same Store Customer Paid Gross Profit grew 9% year-over-year and 7% sequentially.
Speaker Change: Growth in our fni per unit supports our view. That fni per unit will remain structurally higher than pre-pandemic levels even in a challenging consumer, affordability, environment, as we continue to finetune, our F&I product offerings and cost structure.
Speaker Change: Our parts and service or fixed operations business remain strong with a 12% increase in same store. Fixed operations. Gross profit in the second quarter.
David Smith: We believe this continued strength in customer pay revenues is attributable to the increase in technician headcount we achieved in 2024 and our efforts to not only retain these technicians, but to continue to grow our technician capacity in 2025.
Speaker Change: Same store warranty grows Prophet continued to be a Tailwind in the second quarter up 34% year-over-year and same store, customer pay gross, profit grew 9% year-over-year and 7% sequentially.
David Smith: Turning now to our Echo Park segment, second quarter segment income was an all-time quarterly record $11.7 million and adjusted EBITDA was an all-time quarterly record of $16.4 million, up 128% year over year. For the second quarter, we reported Echo Park revenues of $509 million, down 2% year-over-year, and second quarter record Echo Park gross profit of $62 million, which was up 22% year-over-year. Echo Park Segment retail unit sales volume for the quarter increased 1% year-over-year, and Echo Park Segment total GPU was an all-time quarterly record of $3,747 per unit, up $669 per unit year-over-year, and $336 sequentially from the first quarter.
Speaker Change: We believe this continued strength and customer. Pay revenues is attributable to the increase in technician headcount, we achieved in 2024 and our efforts to not only retain these technicians, but to continue to grow. Our technician capacity in 2025
Speaker Change: Turning now, to our Echo Park segment.
Speaker Change: Second quarter, segment income was an all-time quarterly record 11.7 million and adjusted. Evida was an all-time quarterly record.
Speaker Change: Of 16.4 million up 128% year-over-year.
Speaker Change: 9 million down 2% year-over-year and second quarter record, Echo Park, gross profit of 62 million, which was up 22% year-over-year.
Sales volume for the quarter increased 1% year-over-year in Echo Park segment. Total GPU was an all-time quarterly record of 3,747 per unit.
David Smith: We continue to believe that our data-driven, centralized inventory management strategy is a key differentiator for Echo Park. which should help to minimize disruptions from market volatility in the short term while maximizing Ecoparts long-term growth potential.
Speaker Change: Up 669 per unit year-over-year and 336 sequentially from the first quarter.
Speaker Change: We continued to believe that our data-driven centralized Inventory management strategy is a key differentiator for Echo Park.
David Smith: When combined with the strategic adjustments we made to our Echo Park business model, we believe we are well positioned to resume disciplined, long term growth for Echo Park in 2026, assuming used vehicle market conditions sufficiently improved. Turning now to our Powersports segment, we generated record second quarter revenues of $48.1 million, up 21% year over year, and second quarter gross profit of $12.5 million, up 17% year over year. Our sports segment adjusted EBITDA was $2 million, down 13% year-over-year, but beginning to ramp up ahead of what is typically a seasonally strong third quarter. We are beginning to see the benefits of our investment in modernizing the power sports business, and we remain focused on identifying operational synergies within our current network before deploying capital to expand our power sports footprint.
Speaker Change: Which should help to minimize disruptions from Market volatility. In the short term, while maximizing Echo Parts, long-term growth potential.
Speaker Change: When combined with the Strategic adjustments, we made to our Echo Park business model. We believe we are well, positioned to resume disciplined long-term growth, Reco Park in 2026 assuming used vehicle market conditions, sufficiently improved.
Speaker Change: Turning now to our power sports segment.
Speaker Change: We generated uh record second quarter, revenues of 48.1 million up 21% year-over-year and second quarter, gross profit of 12.5 million up 17% year-over-year.
Speaker Change: In 13% year-over-year, but beginning to ramp up ahead of what is typically a seasonally strong third quarter.
David Smith: Finally, turning to our balance sheet, we ended the quarter with $775 million in available liquidity, including $210 million in combined cash and floor plan deposits on hand. Our focus on maintaining a strong balance sheet and liquidity position allowed us to complete the acquisition of four Jaguar Land Rover dealerships in California using cash and floor plan deposits on hand.
Speaker Change: We are beginning to see the benefits of our investment. In modernizing, the power sports business and we remain focused on identifying operational synergies within our current Network before deploying Capital to expand our Powersports footprint.
Speaker Change: Finally turning to our balance sheet, we entered the quarter with 775 million and available liquidity.
Including 210 million in Combined cache and floor plan deposits on hand.
David Smith: And I'd like to take this opportunity to welcome these teammates to the Sonic Automotive family. This acquisition closed on June 30th, so there was no impact to our second-quarter results, but we do anticipate these stores will contribute approximately $500 million in annualized revenues to our franchise dealership segment and make Sonic Automotive the largest Jaguar-Land Rover retailer in the U.S., further enhancing our luxury brand portfolio. Going forward, we remain focused on deploying capital via a diversified growth strategy across our franchise dealerships, Echo Park and PowerSports segments to grow our revenue base and enhance shareholder shareholder returns.
Speaker Change: Our focus on maintaining a strong balance sheet in liquidity position. Allowed us to complete the acquisition of 4 Jaguar. Land Rover, dealerships in California using, cash and floor plan, deposits on hand.
Speaker Change: And I'd like to take this opportunity to welcome these teammates to the Sonic Automotive family.
Speaker Change: This acquisition closed on June 30th so there was no impact to our second quarter results, but we do anticipate. These stores will contribute approximately 500 million in annualized revenues to our franchise dealership segment and make Sonic Automotive, the largest Jaguar Land Rover. Retail retailer in the US. Further enhancing our luxury brand portfolio.
David Smith: In addition, I'm very pleased to report today that our Board of Directors approved a 9% increase to our quarterly cash dividend to $0.38 per share. Payable on October 15, 2025 to all stockholders of record on September 15, 2025. As we told you back in April, we continue to work closely with our manufacturer partners to understand the impact of tariffs on manufacturer production and pricing decisions and the resulting impact tariffs may have on vehicle affordability and consumer demand later this year. To date, we have not seen a material impact on vehicle pricing as a result of tariffs, but that could change as the model year 2026 vehicles begin to arrive at our dealerships late in the third quarter.
Speaker Change: Going forward. We remain focused on deploying Capital via Diversified growth strategy. Across our franchise dealerships, Echo, Park and Powersport segments to grow our Revenue base and enhance shareholder shareholder returns.
Speaker Change: In addition, I'm very pleased to report today that our board of directors approved a 9%, increase to our quarterly cash dividend to 38 cents per share.
Speaker Change: Payable on October 15th, 2025 to all stockholders of record on September 15th, 2025.
Speaker Change: As we told you back in April, we continue to work closely with our manufacturer Partners to understand.
The impact of tariffs on manufactured production and pricing decisions, and the resulting impact tariffs may have on vehicle affordability and consumer demand later this year.
David Smith: Despite this uncertainty, 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 results. Furthermore, we remain confident that we have the right strategy and the right people and the right culture to continue to grow our business and create long-term value for our stakeholders.
Speaker Change: Today, we have not seen a material impact on vehicle pricing as a result of tariffs, but that could change as the model year, 2026 Vehicles. Begin to arrive at our dealerships late in the third quarter.
Speaker Change: Despite this uncertainty, our team remains focused on near-term execution and adapting to ongoing changes in the automotive retail environment and macroeconomic back backdrop.
Speaker Change: While making strategic decisions to maximize long-term results.
David Smith: This concludes our opening remarks, and we look forward to answering any questions you may have. Thank you.
Speaker Change: For the more, we remain confident, that we have the right strategy and the right people and the right culture to continue to grow our business and create long-term value for our stakeholders.
Speaker Change: This concludes our opening remarks and we look forward to answering any questions. You may have. Thank you.
Operator: We will now be conducting a question and answer. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the You may press star 2 if you would like to remove your question.
Speaker Change: Thank you. We will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad,
Speaker Change: A confirmation tone. Will indicate your line is in the question queue?
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before.
You may press star 2 if you would like to remove your question from the queue.
Jeff Lick: Our first question today comes from Jeff Lick of Stevens. Please proceed with your question. Good morning, gentlemen. Congrats on a great quarter again. Thank you. Good morning.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Please proceed with your question.
Jeff Dyke: I was wondering, you know, look, there's a lot of cross currents and noise in 2Q. Obviously, the beginning of the quarter maybe looks a little different than the exit. You know, you have some tariff deals, you know, I'm just curious. of the things, you know, what surprised you the most? What are you pleased with the most? And as we kind of head into the back half, you know, what are the things you think?
Speaker Change: Uh, good morning gentlemen, uh, congrats on a great quarter again. Thank you. Thank you morning.
Speaker Change: I was wondering, you look, there's a lot of cross-currents and noise in 2q, uh, obviously the beginning of the quarter. Maybe looks a little different than the exit. Uh, you know, I have some tariff deals. Uh, you know, I'm just curious.
Jeff Dyke: are kind of indicative of how the back half will go versus, you might say to the analyst community, hey, those particular metrics, I'd be cautious with those and don't read.
Speaker Change: Uh of the things, you know, what surprised you the most, what are you pleased with the most? And as we kind of head into the back half, you know, what are the things you think?
Jeff Dyke: Hey, Jeff. It's Jeff Dyke. Yeah, I mean, obviously, the first part of the quarter took off due to the tariff noise. It did slow down at the end of June and was slow a little bit the first week or two of July. But what is surprising a little bit is the business, the back half of July is picking up nicely. We're going to have a great July, and that's not something that we really anticipated. We thought it would be more average, given all the noise with the tariffs. Obviously, the Japan deal is going to help.
Speaker Change: Are kind of indicative of how the back half will go over versus, you might say to the analyst Community. Hey, those particular metrics. I'd be cautious with those and don't read too much into them.
Jeff Dyke: We need to secure something with the EU. But that's a surprise.
Jeff Dyke: I'm very proud of our F&I performance. We've worked very hard to increase our product penetration above the 2.0 mark, and we've worked very hard on reducing cost with our partners that provide the products. And the combination of those things has really driven, as you can see in the quarter, a nice, nice increase. And we expect that increase to continue. The 2,700 number is a number that feels good for us moving forward from a franchise perspective for the rest of the year.
Hey Jeff, it's Jeff Dyke. Yeah, the I mean obviously, the first part of the quarter took off um, due to the Tariff uh noise. It did slow down uh, at the end of June and was slowed a little bit the first week or 2 of July, but what is surprising a little bit, um, is the business, the back half of July is picking up. Um, um nicely. We're going to have a, a great July and, and that's, um, not something that we really anticipated. We thought it would be more average. Um, given all the noise with the tariffs, uh, obviously the Japan deal is going to help. We need, uh, to secure something with the EU, um, but that's a surprise. Um, very proud of our fni performance. We've worked very hard, uh, to increase our product penetration above the 2, uh, 0.0 Mark. And
David Smith: And then, obviously, we're very, very proud of the work that we've done at Echo Park. Echo Park is just on fire, selling a lot of cars. A little more margin pressure, I think, in the third quarter than we might anticipate, and maybe the back half of the year. But we're hitting all of our expectations. Obviously, the profit's great. And that's putting us in a position to really begin to expand Echo Park as we move into 2022.
David Smith: And this is David. I think that it's important to emphasize that our Echo Park stores still have a lot of runway left, a lot of performance increases to go yet in our current store base. I think that's exciting, and our team did obviously an outstanding job.
And we've worked very hard on reducing cost, uh, with our partners, uh, that provide the products and the combination of those. Those things has really driven. As you can see in the quarter, uh, a nice nice increase and we expect that increase to continue the 2700 numbers, a number that feels good for us, uh, moving forward, um, from a franchise perspective for the rest of the year. And then obviously, we're very, very proud of the work that we've done at Echo Park. Echo Park is just on fire, uh, selling a lot of cars, a little more margin pressure, I think in the in the third quarter um than than we might anticipate and maybe the back half of the year. Um, um, but we're hitting all of our expectations. Obviously the the profits great, um, and that's putting us in a position to, uh, really be begin to expand Echo Park as we move into 2026. And, uh, this is David.
David Smith: Another point to note is that our power sports business, again, is a seasonal business, and we're very excited that coming up next month is our 85th annual Sturgis Motorcycle Rally, the 85th anniversary. We're expecting as many as 800,000 people will come out there for that, and we're expecting some huge numbers to report on that in the next quarter.
Speaker Change: I think that it's important to emphasize that our Echo Park Source, still have a lot of Runway left, a lot of performance, um, increases to go yet and in our current, uh, store base. I think that's, that's exciting. And and, you know, our team did obviously an outstanding job. Another, uh, point to to note is that our our Powersports business again is is a seasonal business that we have our, we're very excited that, uh, coming up next month is our 85th annual Sturgis, Motorcycle Rally, um, the 85th Anniversary. It's, uh, you know, we're expecting as as many as 800,000 people will come out there for that and um, you know, we're we're
Jeff Dyke: And then just a quick follow-up, I'm curious your thoughts on the, you know, the lease return kind of trough this year versus next year. I don't want to say it's going to be a boom, but it should be hard for it not to be considerably better than this year. You know, curious how that ripples through both in your franchise business and Echo Park.
Speaker Change: You know, expecting a huge. Uh, some huge numbers to report on that in the, in the next quarter.
Jeff Dyke: Yeah, that's huge. I mean, we are at the bottom, you know, at the bottom of this now. And obviously, as lease returns pick up, that makes a huge difference in our used vehicle inventory and our ability to grow our volume. Makes it a lot easier to access inventory, so it's going to make a difference in 26. There's no question it'll help Echo Park as well.
Speaker Change: And then just a quick follow-up. I'm curious your thoughts on the, you know, the lease return kind of trough this year versus next year, I don't want to say, it's going to be a boom, but it should be hard for it. Not to be considerably better than this year, you know, curious how that ripples through both in your franchise business and Echo Park.
Jeff Dyke: And then as we get into 27 and 28, it really gets back to the pre-pandemic levels, and that is a game changer from an Echo Park perspective. It does help our franchise business, there's no question, but it allows Echo Park to have access to inventory that's just really not as accessible right now. We're doing a great job buying more cars off the street. We're hitting, you know, at times above 40% of our total mix off the street in trades, which is huge. That's double what we were doing last year.
Jeff Dyke: But the lease returns are going to make a big, big difference, and it's just a honey hole that's coming for us. Awesome.
Jeff Dyke: Well, thanks very much and look forward to chatting with you later. Thanks, Jeff. Thanks.
Speaker Change: Yeah, that's huge. I mean, we are at the bottom, you know, at the bottom of this now, um, and obviously, as lease returns pick up, um, that makes a huge difference in our, uh, in our used vehicle inventory, uh, and our ability to, to, to grow our volume. Um, makes it a lot easier to access inventory. Uh, so it's going to make a difference in 26. There's no question. It'll help Echo Park, uh, as well. Uh, and then as we get into 27 and 28, it really gets back to the pre-pandemic levels, um, and that is a game-changer, uh, from an Echo Park perspective. Um, um, it does help our franchise business, there's no question, um, but it allows Echo Park to have access to inventory. That's just really not as accessible right now. Um, we're doing a great job, buying more cars off the street and we're we're we're hitting, you know at times above 40% of our total mix, um, off the street and trades, which is huge. That's double, uh, what we were doing last year, um, but the lease returns are going to make a big, big difference and that's just a, a honey hole that's coming for us.
Speaker Change: Awesome. Well thanks very much and look forward to chatting with you later.
Thanks Jeff. Thank you.
Rajat Gupta: The next question is from Rajat Gupta of J.P. Morgan, please proceed with your question. Great. Thanks for taking the questions. I had one question on Echoport again, just one follow-up on GPU.
Speaker Change: The next question is from Raj, Gupta of JP Morgan please proceed with your question.
Rajat Gupta: On Echo Park, if you look at just the walled-in trajectory... in the second quarter. Obviously, GPUs were very strong. Is there an element of fear over here of, you know, trading off one for the other? Because we would have expected volumes to do better just relative to the industry seasonality. So, we're curious if there is a bit of a change in approach or strategy as to how you want to grow overall Echo Park profits versus just like historically, you know, how you had wanted to grow the business.
Uh great. Uh thanks for taking the question. Um I I had 1 question on Echo Park and just 1 follow up on GPU. Um,
On ankle Park. Um, if you look at just the volume trajectory
Speaker Change: Um, you know, is there an element of here over here of, you know, trading off 1 for the other? Um, because we would have expected volumes to do better.
Jeff Dyke: And have a quick follow-up. We're just being cautious in terms of the inventory management, and Tim can chime in here in a sec, but yeah, we're being cautious in terms of how much inventory we're buying and maximizing our margin, so the total gross dollars is growing the bottom line, and just, you know, I would expect this to kind of continue for the rest of this year, kind of in this range in comparison to last year, somewhere in this ballpark, and then for us, I think we announced $50 to $55 million in terms of EBITDA for the year now, upping our guidance from $30 to $35, I think.
Speaker Change: Just relative to the industry seasonality. Uh so the curious if there is a bit of a change in approach uh or strategy uh as to how you want to grow overall, Echo Park profits versus versus just like historically, you know, uh you know how you had wanted to grow the business and and have a quick follow up. Thanks.
Speaker Change: We're just being cautious in terms of the inventory management and Tim can chime in here in a sec. Um, but yeah. Um,
Jeff Dyke: So yeah, I think that's right, but it doesn't mean there's not more volume there.
Tim Keen: We're just being real cautious and not going out overbuying and making some of the mistakes that we see happening out there today, and so it's not a concern for us. We can turn up the volume when we want, but we're just managing the gross and the profit in the volume, and I think Tim and team are doing a great job.
We're being cautious in in terms of how much inventory we're buying and maximizing our margin. Uh, so the total gross dollars uh, is is growing the bottom line. Um, and just, you know, I would expect this to kind of continue for the rest of this year, kind of in this range, uh, in comparison to to last year. Um, somewhere in this Ballpark. And then for us to, I think we announced 50 to 55 million in terms of ibida for the, for the, for the year. Now, up upping our guidance from 30 to 35, I think. Um, so yeah, I think that's right. But it doesn't mean there's not more volume there. We're just being real cautious, um, and not going out over buying and, and, and making some of the mistakes that we see happening out, uh, uh, out there today. And so, um, it's not a concern for us. Um, we can turn up the volume when when we want, but we're just managing the gross and the profit, uh, and
Tim Keen: Tim, you want to add to that? Yeah, I mean, the second quarter, we saw a fairly unstable MMR market going on the upside, probably caused by the tariff scares as well, and so, you know, we managed through that very strategically, held on to our gross, didn't buy up. kept day supply where we wanted it and I thought we managed to do that well and we'll continue to do that through the rest of the year as we see opportunity.
Danny Wieland: And I think one more point, this is Danny, you know, if you look at the trend in SG&A at Echo Park, despite the fact that we saw that sequential step down in volume, the SG&A actually levered about 110 basis points from 1Q to 2Q. So it just proves we've got some flexibility in the model based on the different contributions up gross via volume, front end gross, or F&I that we can adapt and flex over the next couple of quarters here as the used market becomes more of a tailwind for us. Got it, got it. Yeah, it was nice to see the SG&A step down.
Speaker Change: In the ball game and I think Tim and team are doing a great job. Tim, you want to add to that? Yeah, I mean, the second quarter, we saw a fairly unstable MMR Market, uh, going on the upside, uh, probably caused by the Tariff scares as well. And so, you know, we managed through that uh very strategically held on to our gross. Um didn't buy up, you know, kept a day supply where we wanted it and uh I thought we managed to do that well and we'll continue to do that through the rest of the year as we see opportunities.
Speaker Change: And I think 1 more point, this is Danny, you know, if you look at the trend in sgna at Echo Park, despite the fact that we saw that sequential step down in volume. The sgn ACT sgna actually levered about 110 basis points from 1 Q to 2q. So just proves we've got some flexibility in the model um based on the different contributions of gross via volume front, end growth or fni that we can we can adapt and flex as over. The next couple of quarters here is the the used Market becomes more of a Tailwind for us.
Jeff Dyke: And then, sorry, I have just one more on just F&I before the GPU question. You mentioned some of the changes in your agreements with the partners that drove the F&I increase. I'm curious if you could elaborate a bit more on that. Was it on the warranty side? Was it on the lending side? And was this something that you had in mind? That was left on the table, like, in the past, and this is, like, more entitlement levels. I'm just curious if we could get a little more color on that.
Speaker Change: Got it, got it. Yeah, it would like to see the fgn step down uh, dearly. Um uh and then um, uh. Sorry. I had just 1 more on just fni and, you know, before, before the GPU question, um, the you mentioned, you know, you know some of the changes in your agreements with the partners um that drove the fni increase.
Speaker Change: A curious, if you could elaborate a bit more on that, you know, was it on the warranty side? Was it on like the lending side? Um and uh and was this something um,
Jeff Dyke: Yeah, sure. And mostly, this is Jeff, mostly on the product side. And what we did was put RFQs out, RFPs out, and renegotiated all our positions. And our team did an amazing job. We've been doing that since maybe the end of last year to now. And that's starting to really pay off. We're saving a ton of money. We've been making our partners a lot of money selling their products. And as we studied that and we looked at how much money they were making, we thought there was opportunity there for us to share in some of the dollars.
Jeff Dyke: And that came to fruition. And so we're hitting it. Not only are we performing better at the store level, but we're also going out and reducing our costs. So those things are coming together at the same time. And that's driving much higher penetrations. It's driving better margin. And what's great is if we don't sell one more car, one more product, we're making more money. And that was a big focus for us. Like technicians were the first half of last year, this has been a big focus for us the first half of this year. And it's really beginning to pay off.
Speaker Change: That was left on the table, like, in the past, uh, and this is like more entitlement levels. Uh, just curious if we could get a little more color on that. Yeah, sure. Mostly this is Jeff mostly on the, on the product side. Um, and what we did was put rfqs out rfps out uh, and renegotiated all our positions. Um, in our team did a, an amazing job. We've been doing that, uh, since maybe the end of last year, uh, to now and that's starting to really pay off. We're saving a ton of money. We've been making our partners a lot of money selling their products. Um, and as we studied that and we looked at how much money they were making we, we thought there was opportunity there for us to share in some of the dollars um, in that came to fruition. Um, and so we're hitting it. Not only are we performing better at the store level but we're also going out and reducing our our costs. So those things are coming together at the same time and that's uh that's driving much higher penetrations. It's driving better margin. And what's great is if we don't sell 1 more car, 1 more product, we're making more money um and and that was our, that was a big.
Jeff Dyke: And we expect that to continue as we move forward.
Jeff Dyke: Got it, got it, that's very clear.
Speaker Change: Focus for us, I'd like technicians were the first half of the last year. This has been a big Focus for us. Uh this the first half of this year and it's really beginning to pay off and we expect that to continue as we as we move forward.
Jeff Dyke: And just lastly, just on new GPUs, just more housekeeping question, any color you could give us on how like the different months of the quarter did on the new Waco GPU, you know, April, May, June, how that trended, that would be helpful. Thanks. Yeah, GPUs in the beginning of the quarter were stronger than they were at the end of the quarter. Yeah, as we mentioned, yeah, the demand spike that I talked about in our opening comments with the, you know, anticipation of the tariffs coming in, people did, you know, absolutely rushed out to buy. Yeah, I mean, we're $3,600 in that ballpark in April, maybe $3,250 in May and $3,300, but it's the end of the quarter, so we get some pickups and stuff in June.
Speaker Change: Got it, got it. That's very clear. And this lastly, just a new GPU just more uh, housekeeping question. Um, any any color you could give us on how like the different months of the quarter did uh on the new whoa GPU, uh, you know, April May June, and how that trended um that would be helpful. Thanks.
Speaker Change: Yeah, gpus and and and in the beginning of the quarter, we're stronger than they were at the end of the quarter. Yeah.
Jeff Dyke: But the front end margin for new is materially higher than what we even anticipated to be for this calendar year. And I think it's going to stay in the same ballpark that we've been running. There's not any reason for it to, you know, massively drop off, which is great. That's a great tailwind for us for the remainder of the year. Understood. Thanks for all the color and good luck.
Speaker Change: But it's the end of the quarter so we get some pickups and stuff uh, in June. Um, but the the front end margin for new is materially higher than what we even anticipated it to be for this calendar year. Um, and I think it's going to stay in the same ballpark that we've been running. Um, there's there's not any reason for it to, you know, massively drop off, which is great. That's a great Tailwind for us. Uh, for the remainder of the year,
Jeff Dyke: You bet.
I understood. Thanks for all the color and good luck. You bet. Thank you. Thank you.
Chris Pierce: The next question is from Chris Pierce of Needham & Company, please proceed with your Hey, good morning, everyone. Can you just go in deeper on Rajat's question there? If we look at front-end groups at Echo Park...
Chris Pierce: The next question is from Chris Pierce of needam in Company. Please proceed with your question.
Jeff Dyke: I just want to confirm, is that sort of a change in strategy, or it's due to certain market dynamics in this point in time? Because I notice now you're getting to total vehicle GPU, not F&I GPU, so I just kind of want to get a sense of if it's just a unique moment in time, are you able to take advantage of that, or due to inventory, or if it's sort of business as usual going forward? Look, at the end of the day, we're buying more cars off the street, and as we buy more cars off the street, margin's going to go up.
Chris Pierce: Hey uh, good morning everyone. Can you just go in deeper on Ridge? Out's question there. If we look at front end growth at Echo Park,
It. I just want to think is that sort of a change in strategy, or it's due to certain market dynamics in this point in time, because I noticed. Now, you got into total vehicle GPU, not definite GPU so that I just kind of want to get a sense of, if it's just a unique moment in time, you're able to take advantage of that or do the inventory, or if it's sort of business as usual, going forward, it that look at
Jeff Dyke: So that 40% number I was talking about makes a big difference there. But we do expect margin pressure in the third and fourth quarter. Used car inventory's moving around, Mannheim, as Tim said earlier, the Mannheim indexes are moving around. A lot of that's being played off just because of the tariffs. So it's going to be in and around the same ballpark, but if there's $50 or $100 worth of margin pressure there, it's probably somewhere in that ballpark in total, and should get better as we go towards the end of the year, but there's a little uncertainty out there right now, and we'll see how that plays out.
Speaker Change: The day, we're buying more cars off the street, and as we buy more cars off the street, um, margins going to go up and and, uh, that so that 40% number, I was talking about, uh, makes a big difference there. Um, but we do expect margin pressure, um, in the third and fourth quarter, the the use car inventory is moving around. Manheim is Tim said earlier, the Manheim indexes are moving around. Um, a lot of that's being played off just because of the tariffs. Um, so, you know, it's
Jeff Dyke: Not concerned in terms of the overall volume and the profitability, that should continue to stay solid, and that's why we took our forecast up for the year.
Chris Pierce: Okay, perfect.
Speaker Change: It's going to be in and around the same ballpark, but if there's 50 or a hundred dollars worth of margin pressure there, um, is probably, you know, somewhere in that ballpark, um, in total, um, and should get better as we go towards the end of the year. But there's a little uncertainty out there right now and we'll see how that plays out not concerned, in terms of the overall volume and the and the profitability, um, that'll that, that should continue to stay solid as that's why we took our our forecast up for the year.
David Smith: Chris, this is David Smith, and something to note is, you remember our first Echo Park stores we opened in 2014, and if you look at our guest experience and our market penetration, you know, in a lot of markets we're the number one used dealer in the market, and if you look at our, we've got now over 100,000 five-star reviews, a big part of that, you know, is our, you know, GPU, I think, is our guest experience, and our repeat customers who are just choosing to buy from us, again, we've had multiple, you know, sales to, you know, to the same family, and they tell the, it's the entire guest experience, I think, that's paying off for us, so it's the, you know, we have the number one rated guest experience in the industry.
Speaker Change: okay, perfect because this is this is David Smith and something to to note is you remember our our our first Echo Park Stores, we opened in 2014 and if you you know, if you look at our
David Smith: Guest experience and our Market penetration, you know, in a lot of markets. We're The Number 1 Used dealer in, in the market, and if you look at our, we've got now over 100,000 5-star reviews. A big part of that, you know, is that of our, you know, GPU, I think, is our, is our guest experience, in our repeat customers, who are just choosing to buy from us again. We've had multiple, uh, you know, sales to, you know, to the same family. And, and they tell the
Danny Wieland: And Chris, to your point, this is Danny, on the total GPU shift in the guide away from the F&I piece, you know, you've seen now for the last two quarters we've improved our Echo Park F&I per unit by about $200 a unit, quarter over quarter, both in 1Q and in 2Q, and driven by some of the cost structure negotiations that Jeff was talking about, but that gives us more flexibility in terms of the total gross profit equation for Echo Park, and it's something where if we face front-end margin pressure, as Jeff, as Tim has said, in the coming quarters, the F&I gains help us maintain that kind of total 3,400 to 3,800 range, which is, you know, pretty comparable to what we make on our franchise side, despite the pricing differences that Echo Park has.
David Smith: That that's the entire uh guest experience. I think that's paying off for us. So it's it's that we have the number 1 rated guest experience in in the industry.
Jeff Dyke: Okay, perfect. And then just kind of playing off of that, you had talked about the RFQs you put out there with your existing lenders. Are you seeing new lenders come to the auto loan market the way like Carvanha is talking about finding new lenders? And is that causing sort of, I don't want to say a power shift, but a dynamic shift where you're able to have a little more pricing power? Or is this just leverage with existing lenders as you kind of grow the relationships and have these long-standing relationships? Yeah, this is product providers that we're talking about more along the lines of warranty and gap.
Hey, Chris to your point. This is Danny on the, the total GPU shift in the guide away from the F&I piece. You know, you've seen now for the last 2 quarters, we've improved our Echo Park, fni per unit by about $0, a unit quarter over quarter, open in 1, q and in 2 q and driven by some of the cost structure, uh, negotiations that Jeff was talking about but that gives us more flexibility. In terms of the total gross profit equation for Echo Park and it and it's something where if we Face front end margin pressure. Um, as Jeff is, Tim has said in the last, in the, the coming quarters, the F&I? Gains help. Us maintain that kind of total 3,400 to 3,800 range, which is, you know, pretty comparable to what we make on our franchise side, despite the the pricing differences that Echo Park.
Okay, perfect. And then on just kind of playing off of that.
Jeff Dyke: And those products that we sell, that's where we're getting the leverage. We're not seeing a run of new lenders coming into the marketplace. Our margin that we're making from financing is relatively the same. Where we're getting our pickup is through product sales and the cost reductions that we're seeing there. And that's just going back and really working hard. The teams work very hard on restructuring deals, still giving great wins to our partners, there's no question. But sharing in some of the wins that they've had over the years, on the backs of our team working really hard to grow their business.
You had talked about the rfqs you put out there for with your existing lenders. Are you seeing new lenders? Come to the auto loan markets? The way like carbon is talking about finding new lenders. And is that causing sort of, I don't want to say a power shift, but a dynamic shift where you're able to have a little more pricing power. And is that, or is this just leverage with existing lenders, you know, as you kind of grow the relationships and have these long-standing relationships? Yeah. And this is product providers, that we're talking about more along the lines of warranty and GAP, and those, those products that we sell, that's what we're getting the leverage. We're not seeing, you know, a, a run of new lenders coming into the into the marketplace, um, our our margin that we're making from financing is relatively.
Jeff Dyke: And so we want to share in some of that and that's what's happening. And you're seeing our cost reduce, thus growing our margin, which is great. Like I said earlier, we're not selling another car, we're not selling another product. We can keep the same numbers and have better results because of the work the team has done.
Chris Pierce: Okay, perfect, and just lastly for me real quick, Echo Park unit guidance is unchanged, which implies maybe a little bit of a modest pickup in the second half, not pickup, but in the sense of pickup in terms of the growth you just printed at Echo Park units. Is that driven by easier comps in the second half of the year, or is that just some end market view? It's a little bit of a combination of the two. If you were to look at the back half of 24, there were some challenges, there were some pockets of consumer weakness on the used car side.
David Smith: Have better and have a better results because of the work, the team has done.
David Smith: Okay, perfect. And just lastly for me real quick Echo Park. Unit guidance is unchanged which implies maybe a little bit of a modest pickup in the second half. We're not pick up but in the sense of pickup, in terms of the growth you just printed at Echo Park units. Is that driven by easier comps in the second half of the year? Or is that just just some End Market View?
Chris Pierce: So it's a combination of those two things, I think, as we look forward. Okay.
Operator: Thanks, everybody. Thank you.
David Smith: It's a little bit of the combination of of the 2. If you were to look at the the back half of 24, um, there was some challenges, there were some pockets of consumer weakness on the used car side. So it's a combination of those 2 things. I think as we look forward.
David Smith: Okay, thanks for everything.
David Smith: Thank you. Thank you.
Operator: As a reminder, if you would like to ask a question, please press star 1 on your telephone.
Patrick Buckley: Our next question is from Bret Jordan of Jeffreys, please proceed with your question. Hey, good morning guys. This is Patrick Buckley on for Bret. Thanks for taking our questions. He's back, Patrick.
as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad,
Our next question is from Brett Jordan of Jeffrey's please proceed with your question.
David Smith: Hey, good morning guys. This is Patrick Buckley on for Brett. Thanks for taking our questions.
Jeff Dyke: On the franchise used GPU side, with the first half settling a bit above the upper end of the 1.5 thousand annual guide, should we expect some moderation into the second half, and what sort of headwinds could you be expecting there? And, you know, I think that we're going to be in and around that that number. It could be just a little bit like at Echo Park, July and August. We're just not quite sure from a tariff perspective what's happening. It's putting day supply pressure and manufacturers are acting a little quirky, you know, trying to get us to take inventory and put inventory in loaner cars and do things that they, you know, had been getting away from.
Speaker Change: Yes, sir. Patrick
David Smith: On the uh, franchise use GPU side. Uh, with the first half settling a bit of the upper end of the, the 1.5 thousand annual guide, should we expect some moderation into the second half. And, and what sort of headwinds could you be expecting their
Jeff Dyke: So it might put a little pressure, but in and around that number, I feel comfortable. Yeah, the volume should be higher. Got it. That's helpful.
And, you know, I I I think that, um, we're going to be in and around that that number um, it it could be just a little bit like it Echo Park, July, and August. We're just not quite sure from a tariff perspective. What's happening is putting day supply, pressure and manufacturers are acting a little quirky um um, you know, trying to get us to take inventory and put inventory, and loaner cars, and do things that they, you know, had been getting away from. Um, so, it might put a little pressure, but in and around that number, I I feel comfortable.
Speaker Change: Yeah, the volume should be higher.
Jeff Dyke: And then I guess, you know, going off that, you know, as you said, a lot of moving pieces with tariffs you have to shake out, but can you talk a bit about your expectations for new vehicle SAR trajectory from here and expectations for second half and maybe the annual year? I mean, your guess is as good as mine. At the end of the day, in the quarter, we went from 17 to 15. So it's all over the board. But 15, 16 million SAR kind of feels right somewhere in that ballpark, you know, unless something else crazy happens and we get another pull ahead or something, something, you know, happens.
Got it, that's helpful. Uh, and then I guess, you know, going off at, you know, as you said, a lot of moving pieces with tariffs, you have to shake out. But but can you talk a bit about your expectations for new vehicle? SAR trajectory from here, and expectations for second half and, and maybe the annual year
Patrick Buckley: But somewhere in that ballpark, it's kind of our guess. Yeah. Interest rates drops, that could change the game as well. And we'll just have to see. But it's somewhere in that ballpark. Got it. That's all from us. Thanks, guys. Thanks, Patrick.
I mean, your guess is as good as mine is, at the end of the day and the quarter we went from 17 to 15. Um, so it's all over the board, but, uh, 1516 million, SAR kind of feels right somewhere in that ballpark, you know, unless something else crazy happens. And, uh, we get another pull ahead or something. Something, you know, happens. Uh, but somewhere in that ballpark interest rate is kind of our, our guess. Yeah, interest rates drops that that could that could change the the game as well. Um, and we'll just have to, we'll just have to see, but it's somewhere in that ballpark.
Patrick Buckley: Got it. That's all from us. Thanks guys. Thanks, Patrick.
Operator: There are no further questions at this time.
David Smith: I'll turn the call back over to David Smith for closing. Well, thank you everyone for joining us for the call. We'll speak with you next quarter.
Speaker Change: There are no further questions at this time, I'll turn the call back over to David Smith for closing comments.
Operator: Have a great day. Ladies and gentlemen, thank you for your participation.
Speaker Change: Well, thank you everyone for joining us for the call. We'll speak with you. Next quarter, have a great day.
Operator: This concludes today's teleconference.
Operator: Connect your lines and have a wonderful day.
Speaker Change: Ladies and gentlemen, thank you for your participation. This concludes today's teleconference, you may disconnect your lines and have a wonderful day.