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SONIC AUTOMOTIVE INC (SAH)·Q2 2025 Earnings Summary
Executive Summary
- Q2 2025 delivered record revenue of $3.66B (+6% y/y) and gross profit of $602.2M (+12% y/y). GAAP EPS was a loss of $1.34 due to a $172.4M non‑cash franchise asset impairment; adjusted EPS rose 49% to $2.19, a material beat vs Wall Street consensus, while revenue was slightly below consensus . EPS consensus: $1.63 vs actual $2.19; revenue consensus: $3.68B vs actual $3.66B*.
- EchoPark posted all‑time record quarterly adjusted EBITDA ($16.4M), segment income ($11.7M), and total GPU ($3,747), with disciplined inventory management offsetting industry volatility .
- Management raised FY 2025 guidance: higher new vehicle GPU ($2,800–$3,200), F&I GPU ($2,500–$2,750), EchoPark adjusted EBITDA ($50–$55M), and lowered SG&A intensity vs Q1 outlook; consolidated liquidity of ~$775M supports growth and acquisitions, including four Jaguar Land Rover dealerships expected to add ~$500M annualized revenue .
- Catalysts: EchoPark profitability inflection, dividend hike (+9% to $0.38), and largest U.S. JLR retailer positioning; watch tariff impacts on pricing/margins and BEV inventory normalization into late Q3/Q4 .
What Went Well and What Went Wrong
What Went Well
- EchoPark inflection: record adjusted EBITDA ($16.4M), segment income ($11.7M), and total GPU ($3,747); management highlighted cautious inventory buys and SG&A leverage (+110 bps q/q) amid variable wholesale pricing .
- Franchised strength: record segment revenues ($3.10B), all‑time quarterly fixed operations and F&I gross profit; F&I GPU rose to $2,721 (+12% q/q, +14% y/y). “Our Franchised Dealerships Segment generated second quarter record total revenues, and all‑time record quarterly fixed operations gross profit and F&I gross profit…” — Jeff Dyke .
- Strategic expansion and shareholder returns: JLR acquisition (~$500M added annualized revenue) and a 9% dividend increase to $0.38; liquidity ~$775M and cash + floor plan deposits ~$210M underpin capital deployment .
What Went Wrong
- GAAP loss driven by $172.4M non‑cash impairment and storm damage/disposition charges; adjusted results strong but headline GAAP loss a negative optics factor .
- Powersports margin pressure: segment income fell to $0.0M; adjusted EBITDA decreased to $2.0M (-13% y/y), with higher SG&A intensity; seasonality flagged with stronger Q3 expected .
- New vehicle GPU down y/y (to $3,391, -5% vs Q2’24) despite sequential improvement; BEV excess supply remains a GPU headwind (−~$200 in Q2) .
Financial Results
Consolidated summary vs prior year, prior quarter, and estimates
Values marked with * retrieved from S&P Global.
Segment performance
Operating KPIs
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- “Record second quarter consolidated revenues and another all‑time record quarterly adjusted EBITDA in our EchoPark Segment… largest Jaguar Land Rover volume retailer in the U.S.” — David Smith, CEO .
- “Franchised… all‑time record quarterly fixed operations gross profit and F&I gross profit… nearly 75% of total gross profit mix.” — Jeff Dyke, President .
- “Total liquidity of approximately $775 million… completed the acquisition of four Jaguar Land Rover dealerships using cash on hand.” — Heath Byrd, CFO .
Q&A Highlights
- EchoPark volume vs margin: Team is “being cautious” on inventory purchases to maximize margin; SG&A levered ~110 bps q/q despite volume step‑down .
- F&I uplift driver: Cost renegotiations with product providers (warranty, GAP) via RFQs/RFPs increased penetrations and margins, independent of unit growth .
- New vehicle GPU cadence: Stronger at quarter start (Apr ~$3,600; May ~$3,250; June ~$3,300); expected to hold in similar ballpark for rest of year .
- Lease returns: Trough now; material improvement expected in 2026, accelerating into 2027–2028; street buys now >40% of mix improving access .
- SAAR outlook: 15–16M range, with interest rates as swing factor; variability noted in quarter .
Estimates Context
- Q2 2025 EPS: Beat — $2.19 vs $1.63 consensus*; adjusted EPS +49% y/y .
- Q2 2025 Revenue: Slight miss — $3,657.2M vs $3,677.3M consensus* .
- Prior quarters: Q1 2025 EPS modest beat ($1.48 vs $1.44*), revenue beat ($3,651.3M vs $3,518.3M*); Q4 2024 EPS beat ($1.51 vs $1.46*), revenue beat ($3,895.8M vs $3,611.3M*) .
Values retrieved from S&P Global.
Key Takeaways for Investors
- EchoPark profitability is accelerating with record GPU and EBITDA; disciplined inventory management and F&I optimization provide structural margin tailwinds .
- Franchised mix shifting toward high‑margin fixed operations and F&I (~75% of gross profit), lowering sensitivity to front‑end margin normalization and tariff volatility .
- Raised FY 2025 guidance (new vehicle and F&I GPU; EchoPark EBITDA) and stronger SG&A leverage support earnings resilience; monitor execution against low‑70s SG&A target .
- Dividend increased to $0.38 (+9%) and JLR acquisitions (~$500M run‑rate) enhance luxury brand exposure and California footprint — potential multiple support .
- Watch risks: BEV inventory alignment (current ~$200 GPU drag), tariff‑driven pricing/margin changes into late Q3/Q4, and Powersports SG&A discipline despite expected seasonal Q3 strength .