Sonic Automotive Inc. (NYSE:SAH) Q1 2018 Earnings Conference Call - Preliminary Transcript

Apr 26, 2018 • 11:00 am ET

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Sonic Automotive Inc. (NYSE:SAH) Q1 2018 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

Good morning, and welcome to the Sonic Automotive First Quarter 2018 Earnings Conference Call. This conference call is being recorded today, Thursday, April 26, 2018.

Presentation materials, which management will be reviewing on the conference call can be accessed at the Company's website at www.sonicautomotive.com, by clicking on Our Company, then Investor Relations, then Webcasts & Presentations.At this time, I would like to refer to the safe harbor statement under the Private Securities and Litigation Reform Act of 1995.

During this conference call, management may discuss financial projections, information or expectations about the Company's products or market or otherwise make statements about the future. Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission.

I would now like to introduce Mr. Scott Smith, Co-Founder and CEO of Sonic Automotive. Mr. Smith, you begin your conference.

Executive
Scott Smith

Thank you. Good morning, and welcome to Sonic Automotive's First Quarter 2018 Earnings Call. I'm Scott Smith, the Company's CEO and Co-Founder. Joining me today on the call are David Smith, our Executive Vice Chairman and Chief Strategic Officer; Mr. Heath Byrd, our CFO; and Jeff Dyke, our Executive Vice President of Operations. I'll provide some brief comments, and then turn the call over for questions.

We're pleased with the results of the quarter, which were in line with our internal expectations. Our operations have continued to drive top line growth, with record-breaking results and generating $2.4 billion in revenue and $352.5 million in gross profit. We were able to maintain GPU on the new vehicle side in a very competitive environment. Growth in F&I was outstanding, with an increase of 12.8%. Fixed ops also performed well, generating first quarter record amount of gross of $169.6 million on one less selling day in 2018. We sold 33,739 pre-owned vehicles in the quarter, more than any other quarter, and the pre-owned segment, represented by our EchoPark brand, made up of over 5,500 of those units.

During the quarter, we made the decision to reduce the number of pre-owned vehicles we had on hand and aggressively dispose of inventory to achieve a lower (ph) days of supply. This decision negatively affected pre-owned GPU during the quarter, which we believe is now behind us. We expect the remaining quarters to be more consistent with our historical GPU. Days supply for the pre-owned vehicles dropped nearly four days, and was 31 days at the end of the quarter. Our growth strategy continues to be concentrated on increasing the footprint of our pre-owned business. We'll open at least three additional new EchoPark locations later this year.

At this point, we'd like to open the call up for your questions.