Q1 2026 Sonic Automotive Inc Earnings Call

April 30, 2026

Operator: Good morning, welcome to the Sonic Automotive Q1 2026 Earnings Conference Call. This conference call is being recorded today, Thursday, 30 April 2026. Presentation materials which accompany 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 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 these statements made. These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission.

Speaker #2: Presentation materials, which accompany 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 Securities Litigation Reform Act of 1995.

Speaker #2: 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.

Speaker #2: Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from these statements made.

Speaker #2: These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission. In addition, management may discuss certain non-GAAP financial measures as defined by the Securities and Exchange Commission.

Operator: 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 8-K filed with the Securities and Exchange Commission earlier today. 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 #2: Please refer to the non-GAAP reconciliation tables in the company's current report on Form 8-K filed with the Securities and Exchange Commission earlier today. I would now like to introduce Mr. David Smith, Chairman and Chief Executive Officer of Sonic Automotive.

Speaker #2: Mr. Smith, you may begin your conference. Thank you very much, and good morning, everyone. Welcome to the Sonic Automotive first quarter 2026 earnings call.

David Bruton Smith: Thank you very much, and good morning, everyone. Welcome to the Sonic Automotive Q1 2026 earnings call. I'm David Smith, the company's Chairman and CEO. Joining me on today's call is our President, Mr. Jeff Dyke, our CFO, Mr. Heath Byrd, our EchoPark Chief Operating Officer, Mr. Tim Keane, and our Vice President of Investor Relations, Mr. Danny Wieland. I would like to open the call by thanking our amazing teammates for continuing to deliver a world-class guest experience for our customers. It's because of our outstanding teammates that Sonic Automotive was just recognized as one of America's Most Trustworthy Companies by Newsweek. We believe our strong relationships with our teammates, guests, and manufacturer lending partners are key to our future success. As always, I would like to thank them all for their continued support and loyalty to the Sonic Automotive team.

David Smith: Thank you very much, and good morning, everyone. Welcome to the Sonic Automotive Q1 2026 earnings call. I'm David Smith, the company's Chairman and CEO. Joining me on today's call is our President, Mr. Jeff Dyke, our CFO, Mr. Heath Byrd, our EchoPark Chief Operating Officer, Mr. Tim Keane, and our Vice President of Investor Relations, Mr. Danny Wieland. I would like to open the call by thanking our amazing teammates for continuing to deliver a world-class guest experience for our customers. It's because of our outstanding teammates that Sonic Automotive was just recognized as one of America's Most Trustworthy Companies by Newsweek.

Speaker #2: I'm David Smith, the company's chairman and CEO. Joining me on today's call is our president, Mr. Jeff Dyke; our CFO, Mr. Heath Bird; our Echo Park, chief operating officer, Mr. Tim Keane; and our vice president of investor relations, Mr. Danny Weiland.

Speaker #2: I would like to open the call by thanking our amazing teammates for continuing to deliver a world-class guest experience for our customers. It's because of our outstanding teammates that SONIC AUTOMOTIVE was just recognized as one of America's most trustworthy companies by Newsweek.

David Smith: We believe our strong relationships with our teammates, guests, and manufacturer lending partners are key to our future success. As always, I would like to thank them all for their continued support and loyalty to the Sonic Automotive team.

Speaker #2: We believe our strong relationships with our teammates, guests, and manufacturer 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.

Speaker #2: Earlier this morning, SONIC AUTOMOTIVE reported first quarter financial results. Including record first quarter total revenues of $3.7 billion, up 1% from the previous year, and record first quarter total gross profit of $598.8 million, up 6% year over year.

David Bruton Smith: Earlier this morning, Sonic Automotive reported Q1 financial results, including record Q1 total revenues of $3.7 billion, up 1% from the previous year, and record Q1 total gross profit of $598.8 million, up 6% year over year. Q1 reported GAAP EPS was $1.79 per share. Excluding the effect of certain items as detailed in our press release this morning, adjusted EPS for Q1 was $1.62 per share, a 9% increase year over year. Moving now to our Q1 franchised dealership segment results. We generated reported revenues of $3.1 billion, flat year over year, and same-store revenues of $2.9 billion, down 4% year over year.

David Smith: Earlier this morning, Sonic Automotive reported Q1 financial results, including record Q1 total revenues of $3.7 billion, up 1% from the previous year, and record Q1 total gross profit of $598.8 million, up 6% year over year. Q1 reported GAAP EPS was $1.79 per share. Excluding the effect of certain items as detailed in our press release this morning, adjusted EPS for Q1 was $1.62 per share, a 9% increase year over year. Moving now to our Q1 franchised dealership segment results. We generated reported revenues of $3.1 billion, flat year over year, and same-store revenues of $2.9 billion, down 4% year over year.

Speaker #2: First quarter reported GAAP EPS was $1.79 per share, excluding the effect of certain items as detailed in our press release this morning, adjusted EPS for the first quarter was $1.62 per share, a 9% increase year over year.

Speaker #2: Moving now to our first quarter franchised dealership segment results. We generated reported revenues of $3.1 billion, flat year over year, and same store revenues of $2.9 billion, down 4% year over year.

Speaker #2: This same store decrease was largely driven by a 10% decrease in new vehicle retail volume, offset partially by a 3% increase in used vehicle retail volume year over year.

David Bruton Smith: This same-store decrease was largely driven by a 10% decrease in new vehicle retail volume, offset partially by a 3% increase in used vehicle retail volume year over year. It should be noted that Q1 new and used vehicle volume faced tough year over year comparisons due to the pull-forward consumer demand for vehicles in the prior year ahead of the US auto import tariffs announced in March 2025. Reported franchised total gross profit for Q1 was up 5% and was flat year over year on a same-store basis. Our fixed operations gross profit and F&I gross profit set quarterly records, up 10% and 7% year over year, respectively, on a reported basis.

David Smith: This same-store decrease was largely driven by a 10% decrease in new vehicle retail volume, offset partially by a 3% increase in used vehicle retail volume year over year. It should be noted that Q1 new and used vehicle volume faced tough year over year comparisons due to the pull-forward consumer demand for vehicles in the prior year ahead of the US auto import tariffs announced in March 2025. Reported franchised total gross profit for Q1 was up 5% and was flat year over year on a same-store basis. Our fixed operations gross profit and F&I gross profit set quarterly records, up 10% and 7% year over year, respectively, on a reported basis.

Speaker #2: It should be noted that first quarter new and used vehicle volume faced tough year over year comparisons due to the pull forward consumer demand for vehicles in the prior year ahead of the US auto import tariffs announced in March 2025.

Speaker #2: Reported franchised total gross profit for the first quarter was up 5% and was flat year over year on a same store basis. Our fixed operations gross profit and F&I gross profit set quarterly records.

Speaker #2: Up 10% and 7% year over year, respectively, on a reported basis. These two high-margin business lines continue to increase their share of our total gross profit pool, once again contributing over $75% of total gross profit for the first quarter mitigating the potential headwinds to new vehicle volume and margin to our overall profitability while also leveraging our SG&A expenses more efficiently than incremental vehicle-related gross profit.

David Bruton Smith: These two high-margin business lines continue to increase their share of our total gross profit pool, once again, contributing over 75% of total gross profit for Q1, mitigating the potential headwinds to new vehicle volume and margin to our overall profitability while also leveraging our SG&A expenses more efficiently than incremental vehicle-related gross profit. Same-store new vehicle GPU was $3,002 per unit, down 4% year over year. On a reported basis, new vehicle GPU was $3,144 per unit, up 2% year over year. On the used vehicle side of the franchise business, same-store used GPU decreased 4% year over year to $1,533 per unit, but increased 11% sequentially due to typical seasonality in the used car business.

David Smith: These two high-margin business lines continue to increase their share of our total gross profit pool, once again, contributing over 75% of total gross profit for Q1, mitigating the potential headwinds to new vehicle volume and margin to our overall profitability while also leveraging our SG&A expenses more efficiently than incremental vehicle-related gross profit. Same-store new vehicle GPU was $3,002 per unit, down 4% year over year. On a reported basis, new vehicle GPU was $3,144 per unit, up 2% year over year. On the used vehicle side of the franchise business, same-store used GPU decreased 4% year over year to $1,533 per unit, but increased 11% sequentially due to typical seasonality in the used car business.

Speaker #2: Same store new vehicle GPU was $3,002 per unit. Down year. On a reported basis, new vehicle GPU was $3,144 per unit. Up 2% year over year.

Speaker #2: On the used vehicle side of the franchise business, same store used GPU decreased 4% year over year to $1,533 per unit, but increased 11% sequentially due to typical seasonality in the used car business.

Speaker #2: Our F&I performance continues to be a strength with first quarter record reported franchised F&I GPU of $2,670 per unit up 9% year over year and up 2% sequentially.

David Bruton Smith: Our F&I performance continues to be a strength with Q1 record reported franchised F&I GPU of $2,670 per unit, up 9% year over year and up 2% sequentially. Turning now to EchoPark. Adjusted segment income was an all-time record $12.6 million, up 25% year over year, and adjusted EBITDA was an all-time record $18.6 million, up 18% year over year. For Q1, we reported EchoPark revenues of $581 million, up 4% year over year, and all-time record gross profit of $68 million, up 6% year over year.

David Smith: Our F&I performance continues to be a strength with Q1 record reported franchised F&I GPU of $2,670 per unit, up 9% year over year and up 2% sequentially. Turning now to EchoPark. Adjusted segment income was an all-time record $12.6 million, up 25% year over year, and adjusted EBITDA was an all-time record $18.6 million, up 18% year over year. For Q1, we reported EchoPark revenues of $581 million, up 4% year over year, and all-time record gross profit of $68 million, up 6% year over year.

Speaker #2: Turning now to EchoPark, adjusted segment income was an all-time record of $12.6 million, up 25% year over year. Adjusted EBITDA was also an all-time record at $18.6 million, up 18% year over year.

Speaker #2: For the first quarter, we reported Echo Park revenues of $581 million up 4% year over year and all-time record gross profit of $68 million up 6% year over year.

Speaker #2: Echo Park segment retail unit sales volume for the quarter increased 3% year over year, and Echo Park segment total GPU was a first quarter record $3,502 per unit, up 3% per unit year over year, and up 2% sequentially from the fourth quarter.

David Bruton Smith: EchoPark segment retail unit sales volume for the quarter increased 3% year over year, and EchoPark segment total GPU was a Q1 record $3,502 per unit, up 3% per unit year over year and up 2% sequentially from the Q4. With momentum on our side, we believe we are well-positioned to resume a disciplined cadence of EchoPark store openings beginning in late 2026, while also initiating targeted investment in brand marketing as a key component of our long-term growth strategy. We expect to begin funding these brand marketing efforts this year, potentially increasing advertising expenses by $10 to $20 million, with the majority of that investment occurring in the H2. Turning now to our Powersports segment. We generated Q1 record revenues of $41 million, up 19% year over year.

David Smith: EchoPark segment retail unit sales volume for the quarter increased 3% year over year, and EchoPark segment total GPU was a Q1 record $3,502 per unit, up 3% per unit year over year and up 2% sequentially from the Q4. With momentum on our side, we believe we are well-positioned to resume a disciplined cadence of EchoPark store openings beginning in late 2026, while also initiating targeted investment in brand marketing as a key component of our long-term growth strategy. We expect to begin funding these brand marketing efforts this year, potentially increasing advertising expenses by $10 to $20 million, with the majority of that investment occurring in the H2. Turning now to our Powersports segment.

Speaker #2: With momentum on our side, we believe we are well positioned to resume a disciplined cadence of EchoPark store openings beginning in late 2026, while also initiating targeted investment in brand marketing as a key component of our long-term growth strategy.

Speaker #2: We expect to begin funding these brand marketing efforts this year, potentially increasing advertising expenses by $10 to $20 million, with the majority of that investment occurring in the second half.

Speaker #2: Turning now to our power sports segment, we generated first quarter record revenues of $41 million, up 19% year over year. First quarter record gross profit of $10 million, up 19% year over year.

David Smith: We generated Q1 record revenues of $41 million, up 19% year over year. Q1 record gross profit of $10 million, up 19% year-over-year. Q1 combined new and used retail volume was up 25% year-over-year. We are beginning to see the benefits of our investment in modernizing the Powersports business and the future growth opportunities it may provide. We also welcome our new team members from Space Coast Harley-Davidson, Treasure Coast Harley-Davidson, Falcon's Fury Harley-Davidson, Raging Bull Harley-Davidson, and San Diego Harley-Davidson.

David Bruton Smith: Q1 record gross profit of $10 million, up 19% year-over-year. Q1 combined new and used retail volume was up 25% year-over-year. We are beginning to see the benefits of our investment in modernizing the Powersports business and the future growth opportunities it may provide. We also welcome our new team members from Space Coast Harley-Davidson, Treasure Coast Harley-Davidson, Falcon's Fury Harley-Davidson, Raging Bull Harley-Davidson, and San Diego Harley-Davidson. The acquisition of these 5 dealerships provides us coverage in key riding states of California, Florida, Georgia, and North Carolina. This acquisition further reaffirms our commitment to strategic growth within the Powersports segment and diversifies our geographic footprint and seasonality.

Speaker #2: First quarter combined new and used retail volume was up 25% year over year, and we are beginning to see the benefits of our investment in modernizing the power sports business and the future growth opportunities it may provide.

Speaker #2: We also welcome our new team members from Space Coast Harley-Davidson Treasure Coast Harley-Davidson, Falcon's Fury Harley-Davidson, Raging Bull Harley-Davidson, and San Diego Harley-Davidson. The acquisition of these five dealerships provides us coverage in key riding states of California, Florida, Georgia, and North Carolina.

David Smith: The acquisition of these 5 dealerships provides us coverage in key riding states of California, Florida, Georgia, and North Carolina. This acquisition further reaffirms our commitment to strategic growth within the Powersports segment and diversifies our geographic footprint and seasonality. Finally, turning to our balance sheet, we ended the quarter with $770 million in available liquidity, including $381 million in combined cash and floor plan deposits on hand.

Speaker #2: This acquisition further reaffirms our commitment to strategic growth within the powersports segment and diversifies our geographic footprint and seasonality. Finally, turning to our balance sheet, we ended the quarter with $770 million in available liquidity, including $381 million in combined cash and floor plan deposits on hand.

David Bruton Smith: Finally, turning to our balance sheet, we ended the quarter with $770 million in available liquidity, including $381 million in combined cash and floor plan deposits on hand.

Speaker #2: Our focus on maintaining a strong balance sheet and liquidity position allows us to strategically deploy capital in a variety of ways to deliver value to our shareholders.

Jeff Dyke: Our focus on maintaining a strong balance sheet and liquidity position allows us to strategically deploy capital in a variety of ways to deliver value to our shareholders. During Q1, we repurchased approximately 2.1 million shares of our common stock for approximately $136 million, representing a 6% decrease in outstanding share count from 31 December 2025. In addition, I'm pleased to report today that our board of directors approved an additional $500 million share repurchase authorization and an 8% increase to the quarterly cash dividend to $0.41 per share, payable on 15 July 2026, to all stockholders of record on 15 June 2026. We continue to work closely with our manufacturer partners to understand the potential impact of tariffs on vehicle production, pricing, and volume forecasts, vehicle affordability, and consumer demand going forward.

David Smith: Our focus on maintaining a strong balance sheet and liquidity position allows us to strategically deploy capital in a variety of ways to deliver value to our shareholders. During Q1, we repurchased approximately 2.1 million shares of our common stock for approximately $136 million, representing a 6% decrease in outstanding share count from 31 December 2025. In addition, I'm pleased to report today that our board of directors approved an additional $500 million share repurchase authorization and an 8% increase to the quarterly cash dividend to $0.41 per share, payable on 15 July 2026, to all stockholders of record on 15 June 2026. We continue to work closely with our manufacturer partners to understand the potential impact of tariffs on vehicle production, pricing, and volume forecasts, vehicle affordability, and consumer demand going forward.

Speaker #2: During the first quarter, we repurchased approximately $2.1 million shares of our common stock for approximately $136 million. Representing a 6% decrease in outstanding share count from December 31st, 2025.

Speaker #2: In addition, I'm pleased to report today that our board of directors approved an additional $500 million share repurchase authorization and an 8% increase to the quarterly cash dividend to $41 per share, payable on July 15, 2026, to all stockholders of record on June 15, 2026.

Speaker #2: We continue to work closely with our manufacturer partners to understand the potential impact of tariffs on vehicle production, pricing, and volume forecasts, vehicle affordability, and consumer demand going forward.

Speaker #2: The full year 2026 outlook and guidance on page 13 of our investor presentation considers these uncertainties and represents our current expectations for 2026 financial results.

Jeff Dyke: The full year 2026 outlook and guidance on page 13 of our investor presentation considers these uncertainties and represents our current expectations for 2026 financial results. As always, our team remains focused on executing our strategy and adapting to ongoing changes in the automotive retail environment while making strategic decisions to maximize long-term returns. This concludes our opening remarks. We look forward to answering any questions you may have. Thank you.

David Smith: The full year 2026 outlook and guidance on page 13 of our investor presentation considers these uncertainties and represents our current expectations for 2026 financial results. As always, our team remains focused on executing our strategy and adapting to ongoing changes in the automotive retail environment while making strategic decisions to maximize long-term returns. This concludes our opening remarks. We look forward to answering any questions you may have. Thank you.

Speaker #2: As always, our team remains focused on executing our strategy and adapting to ongoing changes in the automotive retail environment while making strategic decisions to maximize long-term returns.

Speaker #2: This concludes our opening remarks, and we look forward to answering any questions you may have. Thank you.

Speaker #1: We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Operator: We'll now be conducting a question and answer session. Thank you. Our first question is from Jeff Lick with Stephens Inc.

Speaker #1: You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker #1: One moment, please, while we pull for questions. Thank you. Our first question is from Jeff Lick with Stevens, Inc.

Jeff Lick: Good morning. Thanks for taking my questions.

Speaker #3: Good morning. Thanks for taking my questions. I was curious if you can just talk a little bit about Echo Park. Appears that you're having some success there, and now you're talking about the optimistic about opening some new stores.

Jeff Lick: Good morning. Thanks for taking my questions.

Jeff Dyke: Good morning.

David Smith: Good morning.

Jeff Lick: if you could just talk a little bit about EchoPark. You know, appears that you're having some success there. I know you're talking about being optimistic about opening some new stores. I'm curious, is there anything about this particular environment where obviously supply is pretty tight, seems like used demand might be a little higher than new demand. Anything about this environment that plays into EchoPark's business model? You know, then what is it that gives you confidence to open new stores?

Speaker #3: I'm curious, is there anything about this particular environment where obviously supply is pretty tight, seems like used demand might be a little higher than new demand?

Speaker #3: Anything about this environment that plays into Echo Park's business model and then what is it that gives you confidence to open new stores?

Speaker #4: This is Jeff Dyke on a same-store basis, new car prices were over 60,000 dollars in the first quarter. That's an all-time high for the first quarter.

Jeff Dyke: This is Jeff Dyke. On a same store basis, new car prices were over $60,000 in Q1. That's an all-time high for Q1. Our total store was over $61,000. With the appreciation or the increase in new car pricing, you know, it's making affordability a big, big issue, and that is gonna give, put wind in the sail for pre-owned. It gives us a lot of confidence. We also are buying a lot more cars as a percentage of our overall business off the street, both on the franchise side and EchoPark. I believe we approached in the 40% range in Q1. That makes a big difference. The margins are better. We're selling more cars. We have access to inventory. We're growing.

Speaker #4: Our total store was over 61,000. So with the appreciation or the increase in new car pricing, it's making affordability a big, big issue. And that is going to give put wind in the sail for pre-owned.

Speaker #4: So it gives us a lot of confidence. We also are buying a lot more cars as a percentage of our overall business off the street, both on the franchise side and Echo Park.

Speaker #4: I believe we approached in the 40% range in the first quarter, and so that makes a big difference. The margins are better. We're selling more cars.

Speaker #4: We have access to inventory. We're growing. We're executing at a high level. And so, it gives us a lot of confidence as we move into Q2 to see the same kind of growth or even better for EchoPark.

Jeff Dyke: We're executing at a high level. It gives us a lot of confidence as we move into Q2 to see the same kind of growth or even better for EchoPark on a year-over-year basis. We're seeing it on the franchise side too, maybe as a percentage growth, not quite to the extent in Q2. The business is real strong. It's being driven by, you know, just amazingly high new car pricing in the marketplace.

Speaker #4: On a year-over-year basis, and we're seeing it on the franchise side too. Maybe as a percentage growth, not quite to the extent, but in Q2.

Speaker #4: But the business is real strong, and it's being driven by just amazingly high new car pricing in the marketplace.

Heath Byrd: This is Heath. Let me add 1 point. I think it's really important to understand the value of us getting the non-auction sourcing, and the team's done a great job. Keep in mind, when we started, we were 90% auction and 10% other sources. Now, as Jeff mentioned, we're 40%, and those vehicles make $1,200, give or take, more in GPU than the auction vehicles. That's been a big driver. The team has found ways to source vehicles in multiple ways rather than the auction. That's a big part of it.

Speaker #3: And this is Steve. Let me add one point. I think it's really important to understand the value of us and the teams done a great job.

Speaker #3: Keep in mind when we started we were 90% auction and 10% other sources, and now as Jeff mentioned, we're 40%. And those vehicles make $1,200 give or take more in GPU than the auction vehicles.

Speaker #3: So that's been a big driver. The team has found ways to source vehicles in multiple ways, rather than the auction. That's a big, big part of it.

Speaker #4: And could you talk a little bit about I know you've somewhat integrated or tried to use your franchise dealerships as a strategic asset for Echo Park.

Jeff Lick: Can you talk a little bit about I know you've somewhat integrated or tried to use your franchise dealerships as a strategic asset for EchoPark? You know, it's notable that you did a positive same store sales and franchise for used as well. Could you maybe just talk about, you know, the kind of the symbiotic relationship between those two and how you're using that, you know, the source for the entire enterprise?

Speaker #4: And it's notable that you did a positive same-store sales and franchise for used as well. Could you maybe just talk about kind of the symbiotic relationship between those two and how you're using that to source for the entire enterprise?

Speaker #3: Yeah, it's Jeff. We've never done that before we started here in the first quarter. Really, the later end of the first quarter. And so it's not that many cars yet.

Jeff Dyke: Yeah, it's Jeff. We've never done that before. We started here in the Q1, really the later end of the Q1. It's not that many cars yet, a few hundred overall. It's gonna grow. We're buying nearly new cars out of the franchise side of the business, which obviously it helps the franchise side of the business, bringing those cars into EchoPark. The margins are decent. Back-end margins are great. We're selling the heck out of them in particular on the East Coast. They've been really, really strong. The Atlanta market's been really strong in this arena. We'll continue to explore and do that with more brands.

Speaker #3: A few hundred overall, but it's going to grow. And we're buying nearly new cars out of the franchise side of the business, which obviously is helping the franchise.

Speaker #3: It helps the franchise side of the business, bringing those cars into Echo Park. The margins are decent. Back-end margins are great. And we're selling the heck out of them in particular on the East Coast.

Speaker #3: They've been really, really strong. The Atlanta market's been really strong in this arena, and we'll continue to explore and do that with more brands.

Speaker #3: We've been really focused on Toyota and Honda. But we'll do that with more brands as we get better at this. It's very new for us.

Jeff Dyke: We've been really focused on Toyota and Honda, we'll do that with more brands as we get better at this. It's very new for us and again, just a few hundred units would be included in those numbers that you're looking at for the quarter.

Speaker #3: And again, just a few hundred units would be included in those numbers that you're looking at for the quarter.

Jeff Lick: Well, thanks very much. I'll get back in the queue and best of luck.

Speaker #4: Thanks very much. I'll get back in the queue, and best of luck in the—thank you.

Jeff Dyke: Thank you, sir.

Heath Byrd: Thank you.

Speaker #1: Our next question is from John Babcock with Barclays.

Operator: Our next question is from John Babcock with Barclays.

Speaker #5: All right. Thanks. First question, I was wondering if you're able to quantify the impact of weather. And apologies if I miss, but whether it's an impact on overall dollars or if there's some way to estimate the impact on volumes, any color there would be useful.

John Babcock: All right. Thanks. First question, I was wondering if you're able to quantify the impact of weather. Apologies if I missed, but, you know, whether it's, you know, an impact on overall dollars or if there's some way to estimate the impact on volumes. Any color there would be useful.

Speaker #3: Yeah. Thank you. This is David Smith. And honestly, I'm not being smart-ass, but we really do not allow weather reports in our business and in our meetings.

David Bruton Smith: Yes, thank you. This is David Smith. You know, honestly, I'm not being a smartass, but we really do not allow weather reports in our business and in our meetings, we just push through. We really don't focus on that at all.

David Smith: Yes, thank you. This is David Smith. You know, honestly, I'm not being a smartass, but we really do not allow weather reports in our business and in our meetings, we just push through. We really don't focus on that at all.

Speaker #3: And we push through, and so we really don't focus on that at all.

Speaker #5: Okay. Totally understand. Next question, I was wondering, are you guys seeing OEMs pull forward at least maturities? And if so, is that benefiting Echo Park at this point?

John Babcock: Okay. Totally understand. Next question, I was wondering, are you guys seeing OEMs pull forward lease maturities? If so, is that benefiting EchoPark at this point?

Speaker #3: 100%. They're doing that in particular around Bev. And we're seeing that on the East Coast or the West Coast. And we're selling those vehicles.

Jeff Dyke: One hundred percent, they're doing that, in particular around BEV. We're seeing that on the East Coast or the West Coast, and we're selling those vehicles. It's helping both the franchise side and somewhat at EchoPark. We're keeping most of those on the franchise side of the business. Definitely, the pull aheads are helping. BMW, Mercedes, BMW has done a particular really good job with it. We expect that to continue as we move forward, in particular around BEV, because there's so many more BEV lease returns coming back here over the next six, between now and the end of the year, as those leases mature.

Speaker #3: It's helping both the franchise side and somewhat at EchoPark. We're keeping most of those on the franchise side of the business. But definitely, the pull-aheads are helping.

Speaker #3: And BMW, Mercedes—BMW has done a particularly good job with it. And we expect that to continue as we move forward, in particular around BEV, because there are so many more BEV lease returns coming back here between now and the end of the year as those leases mature.

Speaker #5: So is it primarily happening with the luxury brands?

John Babcock: Is it primarily happening with the luxury brands?

Speaker #3: Yes.

Jeff Dyke: Yes.

Speaker #5: Okay. Interesting. And then just last question, I was wondering if you might be able to provide some color on where you plan to open the Echo Park stores, whether it's in the same region as your existing stores or if you're planning to expand into other areas.

John Babcock: Okay. Interesting. Just last question, I was wondering if you might be able to provide some color on where you plan to open the EchoPark stores, whether it's in the same region as your existing stores or if you're planning to expand into other areas.

David Bruton Smith: Our early expansion is primarily in Florida and Texas.

Speaker #3: Our early expansion is primarily in Florida and Texas.

David Smith: Our early expansion is primarily in Florida and Texas.

Speaker #5: Okay. Thank you.

John Babcock: Okay. Thank you.

Speaker #4: Thank you, sir.

David Bruton Smith: Thank you, sir.

David Smith: Thank you, sir.

Speaker #1: Our next question is from Chris Pierce with Needham and Company.

Operator: Our next question is from Chris Pierce with Needham & Company.

Speaker #6: Hey, good morning. Just one on EchoPark. I know you're guiding to high single-digit unit gains. I was just curious—I mean, you guys have performed better on front-end GPU and kind of talked that you performed better last year on vendor leverage.

Chris Pierce: Hey, good morning. Just one on EchoPark. I know you're guiding to 7 to high single-digit unit gains. I just was curious, I mean, you guys have performed better on front-end GPU, kind of talked how you performed better last year on vendor leverage. Seeing healthy OpEx leverage. I guess I just wanna understand, what would be the real driver of unit growth? Again, I'm not trying to poo-poo, you know, high single-digit unit growth in a flat market. I'm also not trying to compare you to someone putting up 40% unit growth, but I'm just kinda curious what would be a real driver of the double-digit unit gains.

Speaker #6: Seeing healthy OPEX leverage. But I guess I just want to understand, what would be the real driver of unit growth? And again, I'm not trying to pooh-pooh high single-digit unit growth in a flat market.

Speaker #6: I just want to and I'm also not trying to compare you to someone putting up 40% unit growth, but I'm just kind of curious what would be a real driver of the double-digit unit gains.

Speaker #3: It sounds like what you're doing. Yeah. 40% is certainly was an impressive number. Now, look, at the end of the day, we're executing our playbook and our process.

Jeff Dyke: That sounds like what you're doing. Yeah, 40% is, it certainly was an impressive number. Nah, look, at the end of the day, we're executing our playbook and our process. We sold well over 30 units per sales associate in the month of March, for example, and we're executing, we think, at a high level. Those gains will continue through this year. That's what's given us the confidence to open more stores as we move to the end of the year and then on into 2027. We're very comfortable with where we are, proud of our team for the growth that they have, and we look forward to that growth continuing.

Speaker #3: We sold well over 30 units per sales associate in the month of March, for example. And we're executing, we think, at a high level.

Speaker #3: Those gains will continue through this year. That's what's given us the confidence to open more stores as we move to the end of the year and then on into '27.

Speaker #3: And we're very comfortable with where we are. Proud of our team for the growth that they have. And we look forward to that growth continuing.

Speaker #6: And this is Ethan. I'll add, one of the things that would drive the unit growth is awareness. That is precisely why we're investing in the brand starting this year.

Heath Byrd: This is Heath. I'll add, one of the things that would drive the unit growth is awareness. That is precisely why we're investing in the brand starting this year.

Speaker #3: Yeah. And Jeff noted, before he mentioned Atlanta, we've had all-time record sales in Atlanta. And we think that a big part of that is because the market is much more aware of the Echo Park brand.

David Bruton Smith: Yeah. Jeff noted before he mentioned Atlanta. We've had all-time record sales in Atlanta. We think that a big part of that is because the market is much more aware of the EchoPark brand.

David Smith: Yeah. Jeff noted before he mentioned Atlanta. We've had all-time record sales in Atlanta. We think that a big part of that is because the market is much more aware of the EchoPark brand.

Speaker #4: And one final point on that. This is Danny. On the earlier point on non-auction sourcing improvements, we were up about 15% in terms of our sales in the first quarter year over year that were non-auction sourced.

Danny Wieland: One final point on that, this is Danny, is on the earlier point on non-auction sourcing improvements, we were up about 15% in terms of our sales in Q1 year over year that were non-auction source. You know, as Heath added, it's about a $1,200 better GPU on those vehicles, but it also gives us upside to grow that volume without being dependent or at risk of pricing on the wholesale auction front. Our wholesale auction volume was actually down year over year in Q1. Some of that was strategic, given the, you know, 7% wholesale auction price increases we saw in Q1, take advantage of it in the late Q4.

Speaker #4: As Ethan added, it's about a $1,200 better GPU on those vehicles, but it also gives us upside to grow that volume without being dependent or at risk of pricing on the wholesale auction front.

Speaker #4: Our wholesale auction volume was actually down year over year in the first quarter. And some of that was strategic given the 7% wholesale auction price increases we saw in Q1.

Danny Wieland: Our wholesale auction volume was actually down year over year in Q1. Some of that was strategic, given the, you know, 7% wholesale auction price increases we saw in Q1, take advantage of it in the late Q4, but hen pricing gets too high, we really push on this non-auction sourcing path, and that will only benefit from further investment in brand awareness, and sourcing from customers as we go forward.

Speaker #4: Take advantage of it in the late fourth quarter. But when pricing gets too high, we really push on this non-auction sourcing path. And that will only benefit from further investment in brand awareness and sourcing from customers as we go forward.

Danny Wieland: When pricing gets too high, we really push on this non-auction sourcing path, and that will only benefit from further investment in brand awareness, and sourcing from customers as we go forward.

Speaker #6: Can you could you please drill down on Atlanta a little bit? How should we think of Atlanta in terms of cohort, age of store versus Denver, marketing spend in Atlanta versus other regions?

Chris Pierce: Can you, can you please drill down on Atlanta a little bit? How should we think of Atlanta in terms of cohort, age of store versus Denver, marketing spend in Atlanta versus other regions, and sort of just kinda give us some sort of, like, support beams as to, you know, what you're doing there that's driving the growth you talked about?

Speaker #6: And sort of just kind of give us some sort of support beams as to what you're doing there that's driving the growth you talked about.

Speaker #3: Yeah. This is David. One of the things we did, you may have seen, is we got the naming rights for Atlanta Motor Speedway, which is now Echo Park Speedway.

David Bruton Smith: Yeah. This is David. You know, one of the things we did, you may have seen, is that, you know, we got the naming rights for Atlanta Motor Speedway, which is now EchoPark Speedway. We've seen in the numbers, that's been a major impact on customer awareness of the brand. We found, you know, since 2014, and when we opened our first stores in Denver, that, you know, if people know about the EchoPark brand and they search for us and once they experience it and their friends experience it's why we have the number one guest experience in the industry, as rated by Reputation.com. That really pays off. We've been really focused on that.

David Smith: Yeah. This is David. You know, one of the things we did, you may have seen, is that, you know, we got the naming rights for Atlanta Motor Speedway, which is now EchoPark Speedway. We've seen in the numbers, that's been a major impact on customer awareness of the brand. We found, you know, since 2014, and when we opened our first stores in Denver, that, you know, if people know about the EchoPark brand and they search for us and once they experience it and their friends experience it's why we have the number one guest experience in the industry, as rated by Reputation.com. That really pays off. We've been really focused on that.

Speaker #3: That's had a we've seen in the numbers, that's been a major impact on customer awareness of the brand. And we found since 2014, when we opened our first stores in Denver, that if people know about the Echo Park brand and they search for us and once they experience it and their friends experience it, it's why we have the number one guest experience in the industry is rated by reputation.com.

Speaker #3: That really pays off. So we've been really focused on that. And as we've said, we're going to start growing now, but we wanted to make sure we can maintain that world-class guest experience and the kind of volume that, like Jeff mentioned, in March, our teammates were able to deliver those.

David Bruton Smith: As we've said, we're going to start growing now, but we wanted to make sure we can maintain that world-class guest experience. The kind of volume that, like Jeff mentioned, in March, our teammates were able to deliver those. We had some teammates that sold 50 or 60 cars in just the month of March and maintain that high-level guest experience. That's something that we're thinking of the future and how that's going to benefit the brand in the future.

David Smith: As we've said, we're going to start growing now, but we wanted to make sure we can maintain that world-class guest experience. The kind of volume that, like Jeff mentioned, in March, our teammates were able to deliver those. We had some teammates that sold 50 or 60 cars in just the month of March and maintain that high-level guest experience. That's something that we're thinking of the future and how that's going to benefit the brand in the future.

Speaker #3: We had some teammates who sold 50 or 60 cars. And just the month of March, and maintain that high-level guest experience. That's something that we're thinking of the future and how that's going to benefit the brand in the future.

Speaker #4: Yeah. The awareness in the Atlanta market is more than doubled since the sponsorship. And that really gave us the leg to say, "Okay. We need to really make some investments here from a marketing perspective, from a brand awareness." We just weren't ready till this year.

Jeff Dyke: Yeah. The awareness in the Atlanta market has more than doubled since the sponsorship. That really gave us the leg to say, okay, we need to really make some investments here from a marketing perspective, from a brand awareness. We just weren't ready till this year. We, you know, really spent a lot of time getting our house in order, buying more cars off the street, executing at a high level. You've seen, we've put quarters back to back together if you're following EchoPark closely and the growth. That growth is gonna accelerate, and in particular, as we start opening stores, it'll have the, you know, hockey stick acceleration. We're very excited about that opportunity, but we're gonna be, you know, very prudent and focused.

Speaker #4: And we really spent a lot of time getting our house in order, buying more cars off the street, executing at a high level. You've seen we've put quarters back to back to back to back together.

Speaker #4: If you're following Echo Park closely in the growth. And that growth is going to accelerate and, in particular, as we start opening stores, it'll have the hockey stick acceleration.

Jeff Dyke: That growth is gonna accelerate, and in particular, as we start opening stores, it'll have the, you know, hockey stick acceleration. We're very excited about that opportunity, but we're gonna be, you know, very prudent and focused. We've done this before, this time we're gonna make sure that we get this absolutely right. We're real excited about getting some stores open towards the end of the year.

Speaker #4: And we're very excited about that opportunity. But we're going to be very prudent and focused we've done this before. And this time, we're going to make sure that we get this absolutely right.

Jeff Dyke: We've done this before, this time we're gonna make sure that we get this absolutely right. We're real excited about getting some stores open towards the end of the year.

Speaker #4: And so we're real excited about getting some stores open towards the end of the year.

Speaker #6: And I just wanted to highlight one more thing on this, which is that both Jeff and David mentioned the fact that we have sales associates that are selling 30-plus vehicles—when I would say probably the average is 30-plus per month per associate. That efficiency, the process that we had, that's one of the reasons that you see for this quarter EchoPark's SG&A as a percent of gross was lower than 70%.

Heath Byrd: I just wanted to highlight one more thing on this is that both Jeff and David mentioned the fact that we have sales associates that are selling 30-plus vehicles, when I would say probably the average-

Jeff Dyke: On the average, yeah.

Heath Byrd: Yeah, 30-plus on the average per month, per associate, that efficiency, the process that we have, that's one of the reasons that you see for this quarter EchoPark's SG&A as a percent of gross was lower than 70%. Our semi-fixed expense structure there, coupled with the processes that allow that kind of efficiency, is just gonna get better. You'll see, as we've said from the beginning, that EchoPark has the ability to delever or to leverage that SG&A because of the way it's set up. It's very unique to have associates averaging that number of vehicles per month.

Speaker #6: And our semi-fixed expense structure there, coupled with the processes that allow that kind of efficiency, is just going to get better. And you'll see as we've said from the beginning that Echo Park has the ability to deliver or to leverage that SG&A because of the way it's set up.

Speaker #6: It's very unique to have associates averaging that number of vehicles per month.

Speaker #4: And Chris, one more point on the Atlanta market specifically. I guess as maybe operational points supporting the brand awareness and the gains we've made there, our unit volume in the first quarter in Atlanta was up about 25% year over year.

Danny Wieland: Chris, one more point on the Atlanta market specifically. You know, I guess as maybe operational points supporting the brand awareness and the gains we've made there, our unit volume in the first quarter in Atlanta was up about 25% year over year, and our total GPU was up $225 a car. You know, some of that non-auction sourcing mix we talked about obviously benefits us there. We really think that's, you know, kind of an incremental proof point in the early stages on brand awareness and reaching consumers and letting them know who EchoPark is, what our guest experience is, will only help continue to benefit those growing markets, but also our more mature markets in Houston, Dallas, and Denver as we go forward.

Speaker #4: And our total GPU was up 225 dollars a car. So we're seeing more traffic. We're monetizing those incremental vehicles at a better rate some of that non-auction sourcing mix we talked about obviously benefits us there.

Speaker #4: But we really think that's kind of an incremental proof point in the early stages on brand awareness and reaching consumers and letting them know who Echo Park is, what our guest experience is.

Speaker #4: We'll only help continue to benefit those growing markets, but also our more mature markets. In Houston and Dallas and Denver as we go forward.

Speaker #3: Yeah. And this is David. One last thing is you'll see as we move forward and as we open new stores, new Echo Park stores that are cost-based in those stores is going to be less than we have spent historically, which is going to make it far easier to become profitable, a lot faster, in those locations.

David Bruton Smith: Yeah, and this is

David Smith: Yeah, and this is this is David. One last thing is, you'll see as we move forward and as we open new stores, new EchoPark stores, that our cost basis in those stores is gonna be less than we have spent historically, which is gonna make it far easier to become profitable a lot faster in those locations.

Heath Byrd: Okay.

Heath Byrd: This is David. One last thing is, you'll see as we move forward and as we open new stores, new EchoPark stores, that our cost basis in those stores is gonna be less than we have spent historically, which is gonna make it far easier to become profitable a lot faster in those locations.

Chris Pierce: Great. Thanks for all the details. Appreciate it, and good luck.

Speaker #6: Great. Thanks for all that detail. Appreciate it. And good luck.

Chris Pierce: Great. Thanks for all the details. Appreciate it, and good luck.

Speaker #4: Yes, sir. Thank you.

Jeff Dyke: Yes, sir. Thank you.

Speaker #1: Our next question is from Rajat Gupta with JPMorgan.

Operator: Our next question is from Rajat Gupta with JPMorgan.

Speaker #7: Great. Thanks for taking the question. Pretty good execution. Congrats on that. I have a question on parts and service. I acknowledge that you don't like to talk about weather.

Rajat Gupta: Great. Thanks for taking the question. Pretty good execution. Congrats on that. I had a question on parts and service. You know, acknowledge that, you know, you don't like to talk about weather. Irrespective, you know, the growth was pretty strong, despite, you know, some of tough warranty comps. I'm curious how we should think about growth there. I know you're sticking to, like, your framework, but maybe if you could unpack that for us a little bit. What's really helping that business? Any change in processes? You know, hiring cadence, you know. How should we just think about growth there for the rest of the year?

Speaker #7: So irrespective the growth was pretty strong despite some of the tough warranty comps. I'm curious how we should think about growth there. I know you're sticking to your framework, but maybe if you could unpack that for us a little bit.

Speaker #7: What's really helping that business? Any change in processes? Hiring cadence? How should we just think about growth there for the rest of the year?

Speaker #4: This is Jeff. I mean, look, we told you this two years ago. We were on a mission to hire technicians. We've plus 400 technicians, I think, since we started that mission.

Jeff Dyke: This is Jeff. I mean, look, we told you this two years ago. We were on a mission to hire technicians. We've plus 400 technicians, I think, since we started that mission. We continue to hire techs. We're executing at a really high level on our playbooks. We have a value service program that we're very focused on to drive more customers into our service drive, which allows us to upsell off of those value services that we brought into the service drive. The used business is growing, that helps internals. Just overall, we're executing at a very high level. I'm, you know, mid-single digits is a good number, maybe up a little bit above that. It's across the board. It's not one market or another. It's not one brand or another.

Speaker #4: We continue to hire techs. We're executing at a really high level in our playbooks. We have a value service program that we're very focused on to drive more customers into our service drive, which then allows us to upsell off of those value services that we brought into the service drive.

Speaker #4: The use business is growing, so that helps internals. Just overall, we're executing at a very high level. And mid-single digits is a good number, maybe up a little bit above that.

Speaker #4: And it's across the board. It's not one market or another. It's not one brand or another. We've got some warranty challenges in comparison to last year.

Jeff Dyke: We've got some warranty challenges in comparison to last year. I think we had With our Honda brand, we're off about $1 million in gross there. We'll drive more CP. We're obviously not in control of warranty, we'll drive more customer gross into those brands, into that brand. It's a bright future for fixed operations at Sonic Automotive. It's gonna get, you know, better as we go on this year. It's gonna get better and stronger into 2027, 2028, and towards the end of the decade. There's a lot of business out there for us to get. Remember, customers buy new cars, half of them don't go to a dealership. Not just Sonic, anybody.

Speaker #4: I think we had a— with our Honda brand, we're off about a million dollars in gross there. But we'll drive more CP. We're obviously not in control of warranty, but we'll drive more customer gross into those brands, into that brand, and it's a bright future for fixed operations at Sonic Automotive.

Speaker #4: It's going to get better as we go on this year. It's going to get better and stronger into '27, '28, and towards the end of the decade.

Speaker #4: There's a lot of business out there for us to get. Remember, customers buy new cars, but half of them don't go to a dealership.

Speaker #4: Not just Sonic. Anybody. Because we're the industry's priced high and processes were crazy and its reputation, I think we've cleaned all that up. Our service CSI scores are fantastic.

Jeff Dyke: Because we're, you know, the industry's priced high and processes were crazy and this reputation, I think we've cleaned all that up. Our service, CSI scores are fantastic. That's all playing into the results that we're seeing, and they're just going to get stronger as we move forward.

Speaker #4: And that's all playing into the results that we're seeing. And they're just going to get stronger as we move forward.

Speaker #6: And one additional opportunity there is, it's very ripe for AI. Our AI team is just going in now and starting to look at the processes at fixed—obviously a very high-margin part of our business—but we think we can be more efficient with the technology.

David Bruton Smith: One additional opportunity there is it's very ripe for AI. Our AI team is just going in now and starting to look at the processes at fixed. Obviously, a very high margin part of our business, but we think we can be more efficient with the technology. I think there's opportunity in that area as well.

David Smith: One additional opportunity there is it's very ripe for AI. Our AI team is just going in now and starting to look at the processes at fixed. Obviously, a very high margin part of our business, but we think we can be more efficient with the technology. I think there's opportunity in that area as well.

Speaker #6: So I think there's opportunity in that area as well.

Speaker #7: Got it. That's helpful.

Rajat Gupta: Got it.

Jeff Dyke: We just broke-

Rajat Gupta: That's helpful.

Speaker #4: Rajiv, we just broke 90 million dollars in gross in a single month in the first quarter. That was an all-time record for us for a single month.

Jeff Dyke: Rajiv, we just broke $90 million in gross in a single month in Q1. That was an all-time record for us for a single month, and that's gonna continue to get bigger. We've got short-term goals of being over $100 million a month in fixed operations gross. We're hopeful to see a month this year do that, then ongoing, we'll be above that. There's just huge growth there and great opportunity for us as we started to look at the business differently, more of a high volume, high traffic count business than we have in the past. There's just too much opportunity and too many guests out there in our AOIs to take advantage of that.

Jeff Dyke: Rajat, we just broke $90 million in gross in a single month in Q1. That was an all-time record for us for a single month, and that's gonna continue to get bigger. We've got short-term goals of being over $100 million a month in fixed operations gross. We're hopeful to see a month this year do that, then ongoing, we'll be above that. There's just huge growth there and great opportunity for us as we started to look at the business differently, more of a high volume, high traffic count business than we have in the past. There's just too much opportunity and too many guests out there in our AOIs to take advantage of that.

Speaker #4: And that's going to continue to get bigger. We've got short-term goals of being over 100 million a month in fixed operations gross. And we're hopeful to see a month this year do that.

Speaker #4: And then ongoing, we'll be above that. So there's just huge growth there. And great opportunity for us as we started to look at the business differently.

Speaker #4: More of a high-volume high-traffic count business than we have in the past. And there's just too much opportunity and too many guests out there in our AOIs to take advantage of that.

Speaker #4: So that's what we're focused on. Danny?

Jeff Dyke: That's what we're focused on.

Speaker #8: And just a couple of other points there. As you might have seen in the release, we grew customer pay at a 5% rate on a same-store basis, and warranty was at a 7% rate.

Danny Wieland: Just a couple other points there. As you might have seen in the release, you know, we grew customer pay at a 5% rate on the same store basis, warranty was at a 7% rate. That was even an uptick in growth rate versus the Q4. Warranty was only 2% up year over year in the Q4. Continuing to see benefits there as long as that warranty tailwind persists, but really focused on customer pay. We got 40 basis points of margin expansion out of it. On an all-in basis, customer pay has grown at 9%, warranty is up 15%, including the acquisition.

Speaker #8: So that was even an uptick in growth rate versus the fourth quarter. Warranty was only 2% up year over year in the fourth quarter.

Speaker #8: So continuing to see benefits there. As long as that warranty tailwind persists. But really focused on customer pay. And we got 40 basis points of margin expansion out of it.

Speaker #8: But on an all-in basis, customers pay is growing at 9%. Warranty is up 15%, including the acquisitions. So we've got some year over year upside in terms of the comparisons as we get into the back half and lap those JLR acquisitions from last year.

Danny Wieland: We've got some year-over-year upside in terms of the comparisons as we get into the H2 and lap those JLR acquisitions from last year.

Speaker #3: Right. Right. That's very clear and helpful. I wanted to just ask a broader question around just pricing dynamics. I mean, maybe like a twofold question.

Rajat Gupta: Right. Right. No, that's very clear and helpful. I wanted to just ask a broader question around just pricing dynamics. I mean, like, maybe like a twofold question. One is, you know, you have this one big nationwide competitor of yours that is undergoing a pretty well-telegraphed price cut. I'm curious if you're feeling it, are you seeing it? You know, how have you reacted to it? You know, any thoughts on that would be helpful. Second question, you know, Carvana yesterday talked about, you know, some risk in the Q2 from just narrowing wholesale retail spreads.

Speaker #3: One is you have this one big nationwide competitor of yours that is undergoing a pretty well-calibrated price cut. I'm curious if you're feeling it.

Speaker #3: Are you seeing it? Have you reacted to it? Any thoughts on that would be helpful. And then second question, Carvana, yesterday talked about some risk in the second quarter from just narrowing wholesale retail spreads.

Speaker #3: I know you have much lower day supply. And you're increasing consumer sourcing too. But curious if that is something to keep in mind as far as your business goes.

Rajat Gupta: I know, like, you have, like, much lower day supply, and you're increasing consumer sourcing too, but curious if that is something to keep in mind, you know, as far as your business goes. Thanks.

Speaker #3: Thanks.

Jeff Dyke: As far as the pricing goes, we haven't felt that. It's, you know, isolated to VINs and marketplaces, and that hasn't, you know, tripped any wires over here at all. We're not feeling that. You wanna attack the Carvana.

Speaker #4: As far as the pricing goes, we haven't felt that. And it's isolated to Vins and marketplaces. And that hasn't tripped any wires over here at all.

Speaker #4: So we're not feeling that. You want to attack the Carvana on the spread?

David Bruton Smith: On the spread?

Rajat Gupta: On the spread?

Speaker #8: Yeah. Yeah. I mean, it's pretty normal seasonality. Obviously, prices went up in the first quarter. We were buying cars early in the first quarter when wholesale prices were down.

Jeff Dyke: Yeah.

Tim Keane: I mean, it's pretty normal seasonality. Obviously prices went up in the Q1. We were buying cars early in the Q1 when wholesale prices were down. As we go into the Q2, we're seeing that shrink the gap between the two. It's not going as rapid as last year, but it is closing. That is real.

Speaker #8: As we go into the second quarter, we're seeing that shrink, the gap between the two. It's not going as rapid as last year. But it is closing.

Speaker #8: So that is real.

Speaker #4: But we still expect nice growth with EchoPark in the second quarter. I mean, we're going to continue to expand—better growth than we had in the first quarter.

Jeff Dyke: We still expect nice growth with EchoPark in Q2. I mean, we're gonna continue to expand better growth than we had in Q1. The margins are hanging in there better, both on the franchise side and EchoPark side, in April, better than, you know, they normally do, from a pre-owned perspective, which is very good, and that's great to see. We'll see how supplies hold up as we move in. They always tighten, and we're always trying to shrink our day supply, so at this time of the year after the big first quarter and tax season. We'll see how things go, but the pre-owned business should be nice and solid as we move throughout the rest of the year.

Speaker #4: So maybe the margins are hanging in there better, both on the franchise side and Echo Park side. In April, better than they normally do from a pre-owned perspective, which is very good.

David Bruton Smith: Yeah

David Bruton Smith: from a pre-owned perspective, which is very good, and that's great to see. We'll see how supplies hold up as we move in. They always tighten, and we're always trying to shrink our day supply, so at this time of the year after the big first quarter and tax season. We'll see how things go, but the pre-owned business should be nice and solid as we move throughout the rest of the year.

Speaker #4: That's great. To see. We'll see how supplies hold up as we move in. They always tighten. And we're always trying to shrink our day supply.

Speaker #4: So at this time of the year, after the big first quarter and tax season, we’ll see how things go. But the pre-owned business should be nice and solid as we move throughout the rest of the year.

Speaker #8: And again, to that, our actual performance in the first quarter—our average selling price at EchoPark was down about 2% sequentially from the fourth quarter.

Danny Wieland: Again, to that, our actual performance in Q1, our average selling price at EchoPark was down about 2% sequentially from Q4. You know, wholesale pricing was up 7% as we went through Q1. Our GPU expanded, our vehicle-related GPU only expanded about $200 sequentially. We were seeing narrowing retail pricing on a mixed basis anyway, increases in wholesale pricing, but still saw an expansion in GPU, again, because of the way we buy, because of that non-auction sourcing mix. That should only give us more insulation against those movements, as well as Tim said, recognizing the normal seasonality of used car pricing movements in January, February, March, and then on the downswing in April, May, June, post-tax refund season.

Speaker #8: But wholesale pricing was up 7% as we went through the first quarter. But our GPU expanded. Our vehicle-related GPU only expanded about $200 sequentially.

Speaker #8: So we were seeing narrowing retail pricing on a mixed basis anyway. Increases in wholesale pricing, but still saw an expansion in GPU, again, because of the way we buy, because of that non-auction sourcing mix.

Speaker #8: And that should only give us more insulation against those movements, as well as, as Tim said, recognizing the normal seasonality of used car pricing movements.

Speaker #8: In January, February, March, and then on the downswing in April, May, June—post-tax refund season.

Speaker #3: Got it. That's helpful. Maybe just last one on balance sheet. Very surprised by the big buyback here. In the first quarter, curious, how should we think about leverage here?

Rajat Gupta: Got it. That's, that's helpful. Maybe just last one on balance sheet. You know, very surprised by, like, the big buyback here in the Q1. Curious, like, how should we think about leverage here? You obviously increased the authorization. But maybe, like, another way to ask is, like, is the ramp-up in buyback just a signal that you're not really worried about, like, the macro or the cycle here? You know, you just feel like, you know, with the growth in parts and services, you know, the trends in EchoPark, you know, there's just, like, more good things to come, you know, from an EBITDA perspective, and you feel comfortable, you know, buying back this heavily right now. I was just really surprised given some of the choppiness we hear about in the macro. Thanks.

Speaker #3: You obviously increased the authorization. So maybe another way to ask is, is the ramp-up and buyback just a signal that you're not really worried about the macro or the cycle here in you just feel like with the growth in parts and services, the trends in Echo Park, there's just more good things to come from an EBITDA perspective.

Speaker #3: And you feel comfortable buying back this heavily right now? I was just a little surprised, given some of the choppiness we hear about in the macro.

Speaker #3: Thanks.

Speaker #4: Yeah, this is David. Yes, I mean, obviously, we would not have bought back the shares if we didn't feel confident in our business. And, as always, we want our investors to know that we're going to be looking at all our different options of where we place our capital.

David Bruton Smith: Yeah. This is David. Yes, I mean, we obviously we would not have bought back the shares if we didn't feel confident in our business. You know, as always, we want our investors to know that we're gonna be looking at all our different options of where we place our capital and look for the best return. I think the key to what you were saying there is, and what you're asking is, what are we gonna do going forward? We're gonna look at various opportunities.

David Smith: Yeah. This is David. Yes, I mean, we obviously we would not have bought back the shares if we didn't feel confident in our business. You know, as always, we want our investors to know that we're gonna be looking at all our different options of where we place our capital and look for the best return. I think the key to what you were saying there is, and what you're asking is, what are we gonna do going forward? We're gonna look at various opportunities.

Speaker #4: And look for the best return. But I think the key to what you were saying there, and what you're asking, is: What are we going to do going forward?

Speaker #4: And we're going to look at various opportunities. The power sports acquisition that we just made, that was a great opportunity that offered great ROI opportunity.

David Bruton Smith: You know, the Powersports acquisition that we just made, that was a great opportunity, offered great ROI opportunity, and we're gonna continue with that, whether it's with, you know, whatever we choose, whether it's share repurchases or debt reduction or, you know, acquisitions. It just depends on what we see in the market. Heath?

David Smith: You know, the Powersports acquisition that we just made, that was a great opportunity, offered great ROI opportunity, and we're gonna continue with that, whether it's with, you know, whatever we choose, whether it's share repurchases or debt reduction or, you know, acquisitions. It just depends on what we see in the market. Heath?

Speaker #4: And we're going to continue with that, whether it's with whatever we choose—whether it's share repurchases, debt reduction, or acquisitions. It just depends on what we see in the market.

Speaker #4: Heath?

Speaker #8: Yeah. Yeah. I'll just say we feel like we have a very strong balance sheet at a little over two turns for our leverage ratio.

Heath Byrd: Yeah. Yeah, I'll just say, you know, we feel like we have a very strong balance sheet at, you know, little over 2 turns for our leverage ratio, and that gives us and a lot of liquidity. That gives us the ability to actually invest in multiple areas. As you've just seen, we were able to purchase 5 JLR stores last year, 5 Powersports dealerships this year, at the same time, buy back 2 million shares, increase the dividend by 8%.

Speaker #8: And that gives us a lot of liquidity. That gives us the ability to actually invest in multiple areas. As you've just seen, we were able to purchase five JLR stores last year, five powersports dealerships this year, and at the same time buy back 2 million shares, increase the dividend by 8%, invest in our business as it relates to AI, buy real estate, and enhance the facilities.

Heath Byrd: Investing in our business as it relates to AI, buying real estate, enhancing the facilities. Finally, we're still in great shape to expand EchoPark. I think the balance sheet is allowing us to do that. We're completely comfortable where we are on the leverage ratio, and we've got it all cooked in and understand the impact. We're very comfortable that we've got a lot of dry powder to invest in all of these areas.

Speaker #8: And finally, we're still in great shape to expand Echo Park. And so I think the balance sheet is allowing us to do that. We're completely comfortable where we are on the leverage ratio.

Speaker #8: And we've got it all cooked in and understand the impact and we're very comfortable that we've got a lot of dry powder to invest in all of these areas.

Speaker #4: And Rajit, I think if you look at the quarters, the last six or seven quarters that we've strung together, we're showing the execution the discipline in this company like we've never shown before.

Jeff Dyke: Rajeev, I think if you look at the quarters, you know, the last six or seven quarters that we've strung together, we're showing the execution, the discipline, you know, in this company like we've never shown before. That gives us a real high level of confidence. It doesn't matter if there's, you know, COVID or tariffs or weather or whatever else is gonna come. Godzilla's gonna come out of the, you know, the whatever and, you know, blow up all our cars. We're overcoming all of that. I think that's just a big testament to our team. The tenure that we have on this team is amazing. We had our board meeting yesterday, and we were going through our tenure in this company. It's just incredible. Yeah, very confident.

Jeff Dyke: Rajat, I think if you look at the quarters, you know, the last six or seven quarters that we've strung together, we're showing the execution, the discipline, you know, in this company like we've never shown before. That gives us a real high level of confidence. It doesn't matter if there's, you know, COVID or tariffs or weather or whatever else is gonna come. Godzilla's gonna come out of the, you know, the whatever and, you know, blow up all our cars. We're overcoming all of that. I think that's just a big testament to our team.

Speaker #4: And so that gives us a real high level of confidence. It doesn't matter if there's COVID or tariffs or weather or whatever else is going to come Godzilla is going to come out of the whatever.

Speaker #4: And blow up all our cars. We're overcoming all of that. And I think that's just a big testament to our team. The tenure that we have on this team is amazing.

Jeff Dyke: The tenure that we have on this team is amazing. We had our board meeting yesterday, and we were going through our tenure in this company. It's just incredible. Yeah, very confident so we look forward to the great remainder of the year and a very bright future for Sonic.

Speaker #4: We had our board meeting yesterday. And we were going through our tenure in this company. It's just incredible. And yeah, very, very confident. So we look forward to the great remainder of the year and a very bright future for Sonic.

Jeff Dyke: We look forward to the great remainder of the year and a very bright future for Sonic.

Speaker #3: Awesome. Great. Thanks for all the color and good luck.

Rajat Gupta: Awesome. Great. Thanks for all the color and good luck.

Speaker #4: You bet. Thank you.

Heath Byrd: You bet. Thank you.

Heath Byrd: Thanks, guys.

Speaker #1: Our next question, Mr. Brett Jordan with.

Operator: Our next question is from Bret Jordan with Jefferies.

Speaker #8: Hey, good morning, guys. This is Patrick Buckley on for Brett. Thanks for taking our questions.

Patrick Buckley: Hey, good morning, guys. This is Patrick Buckley on for Brett. Thanks for taking our questions.

Speaker #4: Hey, Patrick.

Heath Byrd: Hey, Patrick.

Speaker #8: As you think about the longer-term outlook on franchise new GPUs, how are you thinking about the new floor there? Some peers have recently suggested a landing spot towards the upper end of their previous targets.

Patrick Buckley: As you think about the longer-term outlook on franchise new GPUs, you know, how are you thinking about the new floor there? Some peers have recently suggested a landing spot towards the upper end of their previous targets. Have your thoughts changed at all?

Speaker #8: Have your thoughts changed at all?

Jeff Dyke: I mean, we didn't change guidance there. We're seeing a little bit of shrinkage on front-end margin in April for new. It's going the other way for pre-owned. You know, I think we're fine in the range that we gave you guys for the year. You know, mix moves around a little bit if you're selling more domestic than normal or more Honda than normal. We get a little drop in our front-end margin. Our F&I numbers are so good. At our franchise stores, our F&I numbers in Q1 were up $230 a vehicle, which is just fantastic, and we expect that to continue to grow as we move throughout the year. The total all-in margin, I think we're gonna be just fine.

Speaker #4: I mean, we didn't change guidance there. We're seeing a little bit of shrinkage on front-end margin in April for new. It's going the other way for pre-owned.

Speaker #4: I think we're fine in the range that we gave you guys for the year. Mixed moves around a little bit if you're selling more domestic than normal or more Honda than normal.

Speaker #4: We get a little drop in our front-end margin. But our F&I numbers are so good at our franchise stores. Our F&I numbers in the first quarter were up 230 a vehicle.

Speaker #4: Which is just fantastic. And we expect that to continue to grow as we move throughout the year. So the total all-in margin—I think we're going to be just fine.

Jeff Dyke: It may move around a little bit due to mix. You know, Mercedes sells more or less, or BMW more or less, and then Honda comes in or Ford comes in, the margins are a little different. Our F&I numbers are so strong that it balances it all out. I think we'll be fine with our guidance that we gave you for 2026.

Speaker #4: And it may move around a little bit due to mix. Mercedes sells more or less or BMW more or less. And then Honda comes in or Ford comes in.

Speaker #4: The margins are a little different. But our F&I numbers are so strong that it balances it all out. And I think we'll be fine with our guidance that we gave you for 2026.

Speaker #8: Got it. And then on BMW, we've heard some talks of delayed new product timing there. Has there been any notable disruptions or impact due to that delayed product change this year?

Patrick Buckley: Got it. Then on BMW, we've heard some talks of delayed new product timing there. Has there been any notable disruptions or impact due to that delayed product change this year?

Speaker #4: No, no. They've been doing a fantastic job. They communicate well, and they've done an amazing job managing through this, as all of our manufacturer partners have.

Jeff Dyke: No, no. They've been doing a fantastic job. They communicate well, and they've done an amazing job managing through this, as all of our manufacturer partners have. There've been no issues. I mean, we need to watch affordability and entry-level models into some of the luxury brands. That's an important topic to study and watch. You know, you start getting past. It's 2 quarters in a row now, we're past $60,000 mark. We'll see. I don't see that changing in Q2. Q3, they're gonna pass on, you know, the tariff expenses to the consumer. Prices are going up. It helps the used car business. We'll see how much elasticity is in the new car pricing.

Speaker #4: And there have been no issues. I mean, we need to watch affordability and entry-level models into some of the luxury brands. That's an important topic to study and watch.

Speaker #4: But you start getting past it's two quarters in a row now. We're past 60,000 mark. We'll see. I don't see that changing in the second quarter.

Speaker #4: Third quarter, they're going to pass on the tariff expenses to the consumer. Prices are going up. It helps the used car business. We'll see how much elasticity is in the new car pricing.

Speaker #4: I mean, something's going to have to happen if volume really slows off because day supply will start growing. And then you will have a margin compression issue.

Jeff Dyke: I mean, something's gonna have to happen, if volume really slows off 'cause day supply will start growing. You will have a margin compression issue. Just don't see that happening this quarter or next. Maybe a little bit, due to change in mix, for us, but overall, I think it'll be nice and steady as she goes.

Speaker #4: I just don't see that happening this quarter or next. Maybe a little bit. Due to change in mix. For us. But overall, I think it'll be nice and steady as she goes.

Speaker #8: Got it. That's all for us. Thanks, guys.

Patrick Buckley: Got it. That's all for us. Thanks, guys.

Speaker #4: Thanks, sir.

Jeff Dyke: Thanks.

Heath Byrd: Thank you, sir.

Speaker #1: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Alex Perry with Bank of America.

Operator: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Alexander Perry with Bank of America.

Operator: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Alex Perry with Bank of America.

Speaker #8: Hi. Thanks, sir, taking my question too. And congrats on the execution.

Alexander Perry: Hi. Thanks for taking my question too, and congrats on the execution.

Alex Perry: Hi. Thanks for taking my question too, and congrats on the execution.

Speaker #4: Thanks, Alex.

Heath Byrd: Thanks, Alex.

Speaker #8: I just wanted to ask about if you've seen sort of any impact from the war. Any sort of change in new used vehicle sales trends as we moved into April?

Alexander Perry: I just wanted to ask about, if you've seen sort of any impact from the war, any sort of change in new used vehicle sales trends as we moved into April? Could you maybe help us on, like, the cadence of the monthly comps in the quarter on the new side? Thanks.

Alex Perry: I just wanted to ask about, if you've seen sort of any impact from the war, any sort of change in new used vehicle sales trends as we moved into April? Could you maybe help us on, like, the cadence of the monthly comps in the quarter on the new side? Thanks.

Speaker #8: And could you maybe help us on the cadence of the monthly comps in the quarter on the new side? Thanks.

Speaker #4: I would say, Alex, this is David, that it’s been really pleasantly surprising—the resilience of the consumer—and that they’ve just continued to, that our demand, and you’ve seen in our numbers, they’re continuing to do business with us.

David Bruton Smith: I would say, Alex, this is David, that it's been really pleasantly surprising that the resilience of the consumer and that they've just. That our demand, and you've seen in our numbers, they're continuing to do business with us and despite the uncertainty. I think that it's really been fantastic to see. I think that hopefully soon this major conflict will be over and I think we'll go into the summer months with some great results. But.

David Smith: I would say, Alex, this is David, that it's been really pleasantly surprising that the resilience of the consumer and that they've just. That our demand, and you've seen in our numbers, they're continuing to do business with us and despite the uncertainty. I think that it's really been fantastic to see. I think that hopefully soon this major conflict will be over and I think we'll go into the summer months with some great results. But, JD?

Speaker #4: And despite the uncertainty, I think that it's really been fantastic to see. And I think that hopefully, soon, this major conflict will be over.

Speaker #4: And I think we'll go into the summer months with some great results. But JD?

Jeff Dyke: JD?

Speaker #5: Yeah. I mean, if anything, BEV units on a from a pre-owned perspective, we're selling a lot more of those. The pull aheads are helping.

Jeff Dyke: Any, I mean, if anything, BEV units, from a pre-owned perspective, we're selling a lot more of those. The pull-aheads are helping. That's a big win in our sales right now, because otherwise, you know, we'd have some overhang, I think, with BEV. In particular, I think the luxury stores are doing a great job with that, BMW, Mercedes-Benz. They're doing a really good job. Other than that, no, I mean, the business has been good cadence-wise. January was amazing. I mean, it was just an unreal January. If you want to talk about weather, maybe that slowed us down a little bit at the end of January. I mean, it's just a fantastic January and a really good February.

Speaker #5: And we're getting a—that's a big win in our sales right now. Because otherwise, we'd have some overhang, I think, with BEV. And in particular, I think the luxury stores are doing a great job with that.

Speaker #5: BMW, Mercedes, they're doing a really good job. But other than that, no. I mean, the business has been good. Cadence-wise, January was amazing. I mean, it was just an unreal January.

Speaker #5: If you wanted to talk about weather, maybe that slowed us down a little bit at the end of January. But I mean, it's just a fantastic January.

Speaker #5: And a really good February. We started comping against the tariff pull aheads in March. So and you did that all of March, really. In the first two weeks or so of April, 10 days of April.

Jeff Dyke: We started comping against the tariff pull-aheads in March. You did that all of March, really, in the first 2 weeks or so of April, 10 days of April. You know, the comps will get a lot easier as we move into May and June. We'll see some flip around in our year-over-year numbers. We'll start, you know, sort of heading into the positive direction. I've just, you know, just throw out the comparison of March and the first 2 weeks of April. It's not, it's not a fair comparison. Compare it against 2024 and 2023, we look fantastic on a year-over-year basis. That's how that looks, that's kinda behind us now.

Speaker #5: And then the comps will get a lot easier as we move into May and June. So we'll see some flip around in our year-over-year numbers.

Speaker #5: We'll start sort of heading into the positive direction. And I've just just throw out the comparison of March and the first two weeks of April.

Speaker #5: It's not a fair comparison. Compared against '24 and '23. And we look fantastic on a year-over-year basis. And so that's how that looks. And that's kind of behind us now.

Speaker #5: You're going to get a little bump when we get to the September timeframe. And we bounce against the BEV kind of pull ahead from that timeframe.

Jeff Dyke: You're gonna get a little bump when we get to the September timeframe, and we bounce against the BEV kind of pull ahead from that timeframe. It ought to be smooth sailing other than that for the rest of the year.

Speaker #5: But it ought to be smooth sailing other than that for the rest of the year.

Speaker #8: That's really helpful context. And then I guess my next question you mentioned in the deck consolidation opportunity in power sports. Is that a place where you'll continue to add doors there?

Alexander Perry: That's really helpful context. I guess my next question. You mentioned in the deck, you know, consolidation opportunity in powersports. Is that a place where you'll continue to add doors there? What are you seeing there that gets you excited? Do you expect it to be sort of on the, you know, Harley side and the motorcycle space or more sort of traditional powersports? Would love to hear just sort of how you're thinking about that segment. Thanks.

Alex Perry: That's really helpful context. I guess my next question. You mentioned in the deck, you know, consolidation opportunity in powersports. Is that a place where you'll continue to add doors there? What are you seeing there that gets you excited? Do you expect it to be sort of on the, you know, Harley side and the motorcycle space or more sort of traditional powersports? Would love to hear just sort of how you're thinking about that segment. Thanks.

Speaker #8: What are you seeing there that gets you excited? Do you expect it to be sort of on the Harley side and the motorcycle space or more sort of traditional power sports?

Speaker #8: Would love to hear just sort of how you're thinking about that segment. Thanks.

Speaker #4: Yeah, thanks for the question. This is David. We've been really, really pleased. A big shout-out to our power sports team—they've just done an outstanding job.

David Bruton Smith: Yeah. Thanks for the question. This is David. You know, we've been, you know, really, really pleased. A big shout-out to our powersports team. They've just done an outstanding job and as I mentioned, modernizing the powersports industry, at least the ones that we have. We see some great opportunities and the prices, the acquisition opportunities are coming at us. It's very interesting. You know, we like our diversified portfolio, we're not gonna be concentrated solely on Harley-Davidson. This recent acquisition was just really just outstanding, and it's in fantastic locations. Whereas I mentioned, you have a lot of sunny days in those markets to offset some of our the snowy weather in our big South Dakota and Sturgis stores.

David Smith: Yeah. Thanks for the question. This is David. You know, we've been, you know, really, really pleased. A big shout-out to our powersports team. They've just done an outstanding job and as I mentioned, modernizing the powersports industry, at least the ones that we have. We see some great opportunities and the prices, the acquisition opportunities are coming at us. It's very interesting. You know, we like our diversified portfolio, we're not gonna be concentrated solely on Harley-Davidson. This recent acquisition was just really just outstanding, and it's in fantastic locations. Whereas I mentioned, you have a lot of sunny days in those markets to offset some of our the snowy weather in our big South Dakota and Sturgis stores.

Speaker #4: And as I mentioned, modernizing the power sports industry, at least the ones that we have. We see some great opportunities. And the prices, the acquisition opportunities are coming at us.

Speaker #4: It's very interesting. We like our diversified portfolio. So we're not going to be concentrated solely on Harley-Davidson. But this recent acquisition was just really just outstanding.

Speaker #4: And fantastic locations. Whereas I mentioned you have a lot of sunny days and those markets to offset some of our the snowy weather and our big South Dakota Sturgis stores.

David Bruton Smith: We do see fantastic opportunities. You look at the growth that's generated in motorcycle sales, new and used, is really, it's crazy. It's like we're making the same amount of profit on selling an item that's maybe a third of the price of a vehicle. There's some great opportunities there. JD?

Speaker #4: But we do see fantastic opportunities. You look at the gross that's generated in motorcycle sales, new and used, is really it's crazy. It's like we're it's like we're making the same amount of profit on selling an item that's maybe a third of the price of a vehicle.

David Smith: We do see fantastic opportunities. You look at the growth that's generated in motorcycle sales, new and used, is really, it's crazy. It's like we're making the same amount of profit on selling an item that's maybe a third of the price of a vehicle. There's some great opportunities there. JD?

Speaker #4: And so there's some great opportunities there. JD?

Speaker #5: Yeah. I would tell you just to give you a little more detail on what David was talking about. I mean, our new GPU for the first quarter on franchise was $31.44.

Jeff Dyke: Yeah. I would tell you, I mean, just to give you a little more detail on what David was talking about. I mean, our new GPU for the Q1 on franchise was $3,144, and our GPU for powersports was $2,891, damn near the same number. Our used GPU, which we've really grown the heck out of our used business on powersports, that's something that industry lacks, was $1,938 a copy versus $1,539 a copy. We're making more gross selling used, you know, than we are selling used on the franchise side. Very exciting opportunity for us to grow that part of the business. We're opportunistically buying, just being very careful and cautious.

Speaker #5: And our GPU for power sports was $2,891. Damn, you're the same number. Our used GPU, which we've really grown the heck out of our used business on power sports, that's something that industry lacks.

Speaker #5: Was $1,938 a copy versus $1,539 a copy. We're making more gross selling used than we are selling used on the franchise side. So very exciting opportunity for us to grow that part of the business.

Speaker #5: And we're opportunistically buying, just being very careful and cautious as we told you from day one, growing the business and putting in our playbooks, our technology taking care of our guests, taking care of our teammates.

Jeff Dyke: As we told you from day one, growing the business and putting in our playbooks, our technology, taking care of our guests, taking care of our teammates, and we just get better and stronger. All-time record quarter. We see that backing up to the next all-time record quarter and the next one. It's a fun business with great margin percentage. Our team loves going in and buying them, and who we are acquiring love it. We're all having a great time. As David said, we've got a fantastic leadership team, running that business, totally separate from EchoPark and our franchise business. We'll see what happens in the coming quarters. There's a lot of opportunity in this segment.

Speaker #5: And we just get better and stronger with all-time record quarter. We see that backing up to the next all-time record quarter and the next one.

Speaker #5: It's a fun business with great margin percentage. And our team loves going in and buying them. And who we are acquiring love it. So we're having a great time.

Speaker #5: And as David said, we've got a fantastic leadership team running that business totally separate from Echo Park and our franchise business on we'll see what happens in the coming quarters.

Speaker #5: There's a lot of opportunity in this segment.

Speaker #8: That's really helpful. Can I ask one follow-up on that? The used grosses and the differential versus the vehicle side—it's pretty interesting. Why do you think the grosses are so high?

Alexander Perry: That's really helpful. Could I ask one follow-up on that? The used grosses and the differential versus the vehicle side's pretty interesting. Why do you think the grosses are so high in the powersports side on a relatively lower ASP? Is it just the fragmentation?

Alex Perry: That's really helpful. Could I ask one follow-up on that? The used grosses and the differential versus the vehicle side's pretty interesting. Why do you think the grosses are so high in the powersports side on a relatively lower ASP? Is it just the fragmentation?

Speaker #8: And the power sports side on a relatively lower ASP, is it just the franchise of the market? Yeah.

Jeff Dyke: Think about-

Alexander Perry: of the market? Yeah.

Alex Perry: of the market? Yeah.

Speaker #4: It is. That's part of it. But think about it—customers don't know what to do with that product. When they buy a new powersport, they buy something, a Polaris or whatever.

Jeff Dyke: It is. That's part of it. Think about it, customers don't know what to do with that product. When they buy a new powersport, they buy something, a Polaris or whatever, they've always taken their old one and put a sign on it in the front yard and said for sale. They don't know that we want to buy that from them. We're giving them a great deal buying that. They're expensive. You buy a brand-new four-door Polaris now, it's $55,000. We can trade for them and sell them for, you know, in the upper teens or lower 20s, make great margin like you see, and provide the consumer with something they've never gotten in this industry.

Speaker #4: They've always taken their old one and put a sign on in the front yard and said, "For sale." They don't know that we want to buy that from them.

Speaker #4: And so we're giving them a great deal buying that. And they're expensive if you buy a brand new four-door Polaris now. It's $55,000. We can trade for them and sell them for in the upper teens or lower 20s, make great margin, like you see and provide the consumer with something they've never gotten in this industry.

Speaker #4: So there's a huge I mean, it's just the industry just did not sell pre-owned. And we're growing pre-owned at 40 and 50 percent clips a quarter.

Jeff Dyke: I mean, it's just the industry just did not sell pre-owned. We're growing pre-owned at 40% and 50% clips a quarter. That's gonna continue into the future. They just didn't focus on it. That's something that, you know, is core to our success at Sonic Automotive, and we're bringing that to this industry and it's making a big difference.

Speaker #4: And that's going to continue into the future. They just didn't focus on it. And that's something that is core to our success at Sonic Automotive.

Speaker #4: And we're bringing that to this industry. And it's making a big difference.

Speaker #8: And that's one of the things that's validated our entry into this is over the last three quarters, we've grown 35, 40. And this quarter, 56% used vehicle volume, year over year.

Tim Keane: That's one of the things that validated our entry into this, is over the last 3 quarters, we've grown 35%, 40%, and this quarter, 56% used vehicle volume year over year. You know, even in an off quarter like the Q1 seasonally, new volume was up 16%. Both new and used gross per unit grew 7% or 8%. We're growing not just the base, but the efficiency of those products, just as we get into prime selling season here starting in April, May.

Jeff Dyke: That's one of the things that validated our entry into this, is over the last 3 quarters, we've grown 35%, 40%, and this quarter, 56% used vehicle volume year over year. You know, even in an off quarter like the Q1 seasonally, new volume was up 16%. Both new and used gross per unit grew 7% or 8%. We're growing not just the base, but the efficiency of those products, just as we get into prime selling season here starting in April, May.

Speaker #8: Even in an off quarter like the first quarter, seasonally, new volume was up 16%. Both new and used gross per unit grew 7 or 8%.

Speaker #8: So we're growing not just the base, but the efficiency of those products just as we get into prime selling season here starting in April, May.

Speaker #5: They also had very, very little discipline around inventory management. And as you guys know, that's something that we're known for in our day supply and how we manage inventory.

Jeff Dyke: They also had very, very little discipline around inventory management. As you guys know, that's something that we're known for in our day supply and how we manage inventory. We don't get surprises there. If we do, they're fixed in two weeks. There's just absolutely none of that in the powersports business. We've cleaned all that up from a parts, from a used, from a new perspective, and we're turning inventory like we should. That's gonna expand margin when you do that.

Speaker #5: We don't get surprises there. If we do, they're fixed and then two weeks. And there was none of there's just absolutely none of that in the power sports business.

Speaker #5: So we've cleaned all that up from a parts, from a used, from a new perspective. And we're turning inventory like we should. And that's going to expand margin when you do that.

Speaker #8: That's incredibly helpful. It sounds like an exciting opportunity. Best of luck going forward.

Alexander Perry: That's incredibly helpful. It sounds like an exciting opportunity. Best of luck going forward.

Alex Perry: That's incredibly helpful. It sounds like an exciting opportunity. Best of luck going forward.

Speaker #4: Thank you so much.

David Bruton Smith: Thank you so much.

Jeff Dyke: Thank you so much.

Speaker #5: Thank you very much.

David Bruton Smith: Thank you very much.

David Smith: Thank you very much.

Speaker #4: Thank you. There are no further questions at this time. I would like to hand the floor back over to David Smith for any closing comments.

Operator: Thank you. There are no further questions at this time. I would like to hand the floor back over to David Smith for any closing comments.

Speaker #6: Great. Thank you very much. Thank you, everyone. We'll talk to you next quarter.

David Bruton Smith: Great. Thank you very much. Thank you, everyone. We'll talk to you next quarter.

David Smith: Great. Thank you very much. Thank you, everyone. We'll talk to you next quarter.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.

Q1 2026 Sonic Automotive Inc Earnings Call

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