Sonic Automotive, Inc. (SAH) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reveals strong financial performance with expectations of sustained customer pay revenue growth, strategic capital deployment, and a focus on non-auction sourcing for EchoPark. The Q&A section highlights EchoPark's competitive pricing strategy and growth plans, along with positive updates on parts and services. Despite some uncertainties around tariffs and OEM cost pass-throughs, the company shows confidence in its growth outlook. The market cap indicates moderate sensitivity to these factors, leading to a positive stock price prediction over the next two weeks.
Key Financial Performance
GAAP EPS (Q4 2025) $1.36 per share. Adjusted EPS was $1.52 per share, a 1% increase year-over-year.
Consolidated Total Revenues (Q4 2025) $3.9 billion, down 1% year-over-year.
Consolidated Gross Profit (Q4 2025) 4% growth year-over-year.
Consolidated Adjusted EBITDA (Q4 2025) Flat compared to the prior year fourth quarter.
GAAP EPS (Full Year 2025) $3.42 per share. Adjusted EPS was $6.60 per share, an 18% increase from 2024.
Consolidated Total Revenues (Full Year 2025) $15.2 billion, up 7% year-over-year.
Consolidated Total Gross Profit (Full Year 2025) $2.4 billion, up 9% year-over-year.
Consolidated Adjusted EBITDA (Full Year 2025) $615 million, up 10% year-over-year.
Franchise Dealership Revenues (Q4 2025) $3.4 billion, flat year-over-year and down 5% on a same-store basis.
Same-Store New Vehicle Retail Volume (Q4 2025) Down 11% year-over-year due to pull-forward consumer demand for electric vehicles and strong luxury demand in the prior year.
Same-Store Used Vehicle Retail Volume (Q4 2025) Up 5% year-over-year.
Franchise Total Gross Profit (Q4 2025) Up 4% year-over-year, declined 2% on a same-store basis.
Fixed Operations Gross Profit (Q4 2025) Up 8% year-over-year.
F&I Gross Profit (Q4 2025) Up 6% year-over-year.
Same-Store New Vehicle GPU (Q4 2025) $3,033 per unit, down 7% year-over-year but up 6% sequentially due to a higher luxury mix.
Reported New Vehicle GPU (Q4 2025) $3,209 per unit, down 1% year-over-year and up 7% sequentially.
Same-Store Used GPU (Q4 2025) $1,379 per unit, down 2% year-over-year and down 10% sequentially.
Franchised F&I GPU (Q4 2025) $2,624 per unit, up 8% year-over-year and up 1% sequentially.
EchoPark Adjusted Segment Income (Q4 2025) $3.6 million, up 300% year-over-year.
EchoPark Adjusted EBITDA (Q4 2025) $8.8 million, up 110% year-over-year.
EchoPark Revenues (Q4 2025) $481 million, down 5% year-over-year.
EchoPark Gross Profit (Q4 2025) $54 million, up 9% year-over-year.
EchoPark Retail Unit Sales Volume (Q4 2025) Decreased 6% year-over-year.
EchoPark Total GPU (Q4 2025) $3,420 per unit, up 15% year-over-year and up 2% sequentially.
EchoPark Adjusted EBITDA (Full Year 2025) $49.2 million, up 78% year-over-year.
Powersports Revenues (Q4 2025) $36 million, up 19% year-over-year.
Powersports Gross Profit (Q4 2025) $9 million, up 25% year-over-year.
Powersports Combined New and Used Retail Volume (Q4 2025) Up 18% year-over-year.
Available Liquidity (End of Q4 2025) $702 million, including $306 million in combined cash and floor plan deposits.
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Operating Highlights
EchoPark Business Model Adjustments: Strategic adjustments made to the EchoPark business model to improve consumer affordability and retail sales volume.
Powersports Segment Modernization: Investments in modernizing the Powersports business, leading to record revenues and gross profit in Q4 2025.
EchoPark Expansion: Plans to expand EchoPark platform to reach 90% of U.S. car buyers, selling over 1 million vehicles annually.
Powersports Growth Opportunities: Future growth opportunities identified in the Powersports segment due to modernization efforts.
Record Customer Satisfaction: Achieved all-time record customer satisfaction scores for franchise dealership guests for the third consecutive year.
Revenue and Profit Growth: 2025 consolidated total revenues reached $15.2 billion (up 7% YoY) and gross profit hit $2.4 billion (up 9% YoY).
EchoPark Store Openings: Planned disciplined store opening cadence for EchoPark starting in late 2026, contingent on market conditions.
Brand Marketing Investment: Planned investment of $10 million to $20 million in EchoPark brand marketing during 2026 to support long-term growth.
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Risk or Challenges
New Vehicle Volume: Faced headwinds from pull-forward consumer demand for electric vehicles ahead of the expiration of the federal tax credit in the third quarter, combined with strong luxury demand in the prior year fourth quarter.
Same-Store Used Vehicle GPU: Decreased 2% year-over-year and decreased 10% sequentially from the third quarter, indicating challenges in maintaining profitability in the used vehicle segment.
EchoPark Retail Unit Sales Volume: Decreased 6% year-over-year, reflecting challenges in maintaining sales volume in the EchoPark segment.
Tariffs on Vehicle Production: Potential impact on vehicle production, pricing, volume forecast, vehicle affordability, and consumer demand, creating uncertainties for 2026.
Advertising Expense for EchoPark: Expected increase in advertising expense by $10 million to $20 million in 2026, which could pressure margins if not offset by revenue growth.
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Guidance & Outlook
EchoPark Expansion: The company plans to resume a disciplined store opening cadence for EchoPark beginning in late 2026, assuming used vehicle market conditions continue to improve. Long-term plans include expanding the EchoPark platform to reach 90% of U.S. car buyers, selling over 1 million vehicles annually. Investment in brand marketing is expected to increase by $10 million to $20 million in 2026 to support this growth.
Powersports Segment Growth: The company is beginning to see benefits from investments in modernizing the Powersports business and anticipates future growth opportunities in this segment.
2026 Financial Outlook: The full year 2026 outlook considers uncertainties related to tariffs and represents current expectations for financial results. The company remains focused on executing its strategy and adapting to changes in the automotive retail environment.
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Shareholder Return Plan
Quarterly Cash Dividend: The Board of Directors approved a quarterly cash dividend of $0.38 per share payable on April 15, 2026, to all stockholders of record on March 13, 2026.
Share Repurchase Program: During the fourth quarter, the company repurchased approximately 600,000 shares of common stock for approximately $38 million. For the full year, the company repurchased 1.3 million shares for approximately $82 million.
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Key Q&A
Q:Where does EchoPark fit into the used car ecosystem?
A:EchoPark is positioned as the low-cost provider in the pre-owned car market, similar to Costco in the retail world. They aim to sell vehicles at $3,000 to $6,000 cheaper than competitors like Carvana and CarMax. EchoPark plans to methodically grow its business by opening new stores and leveraging its strong guest satisfaction scores.
Q:What is the update on non-auction sourcing for EchoPark?
A:EchoPark is incentivizing its team to buy vehicles nationwide and leveraging its new car franchised dealerships for inventory. They aim to reduce dependence on auction lanes and expect inventory feeding into EchoPark to start in March and April of this year.
Q:When will EchoPark's advertising spend begin, and what will it focus on?
A:EchoPark plans to start its $10 million to $20 million advertising spend in the second quarter, focusing on brand-building. The public will see the results of this spend in the fourth quarter as new stores launch. The advertising will initially target existing markets and later expand to markets where EchoPark does not yet exist.
Q:What is the outlook for gross profit per unit (GPU) in 2026?
A:For new cars, the expected GPU is $2,700 to $3,000 per unit, potentially stronger in the first quarter due to tax return season. However, rising new car prices due to tariffs and other factors may impact affordability later in the year, benefiting EchoPark's used car business.
Q:Are OEMs planning to pass on more costs to consumers?
A:Yes, OEMs are lowering dealer margin rebates and increasing prices by 3% to 5%. They are also cutting unnecessary spending to manage costs but will likely pass on more expenses to consumers due to high tariffs and other financial pressures.
Q:What is the growth outlook for EchoPark in 2027?
A:EchoPark expects growth to accelerate in 2027 due to store openings, increased advertising, and brand investments made in 2026. The company is targeting over 1 million units in sales with 90% market coverage.
Q:What are the updates on parts and services growth?
A:Since March 2024, the company has added 400 technicians, contributing to over $1 billion in gross profit from fixed operations in 2025. They aim to grow this to $1.2 billion in 2026 by attracting more customers to their service centers and improving marketing efforts.
Q:What is the company's approach to capital allocation and leverage?
A:The company is comfortable with a net debt to EBITDA ratio of 2.1 but is willing to go up to 3.5 for strategic acquisitions. They plan to balance capital allocation between dividends, share repurchases, and investments in EchoPark's growth.
Q:What is the impact of marketing expenses on EchoPark's financials?
A:Marketing expenses will initially weigh on financials in 2026 but are expected to drive growth and EBITDA leverage in 2027 and beyond as the brand investment pays off.
Q:Are luxury consumers showing any behavioral changes?
A:Despite concerns about high average selling prices, luxury sales performed well in December and January. However, there is caution about the potential impact of rising prices on consumer behavior later in the year.
Q:What is the company's strategy for fixed operations growth?
A:The company is focusing on marketing and competitive pricing to attract more customers to their service centers. They are also leveraging technology and partnerships with OEMs to improve customer retention.
Q:Does EchoPark plan to launch a digital retail solution?
A:Yes, EchoPark plans to launch an app and invest in a digital retail solution to provide an omnichannel experience, allowing customers to buy cars online or in-store.
Q:What is the inventory situation for JLR and BEVs?
A:JLR's inventory is improving, and the acquisition is performing well. BEV sales mix dropped from 12% in Q3 to 4% in Q4, aligning with inventory levels and benefiting gross profit per unit.
Q:What are the factors driving confidence in EchoPark's growth?
A:Confidence is driven by returning inventory, improved EBITDA efficiency, and the success of older locations with strong brand recognition. The company is also leveraging alternative sourcing methods and plans to open cost-efficient new locations.
Q:What is the outlook for floor plan interest expense?
A:Floor plan interest expense is expected to increase by 10% in 2026 due to higher store count, brand mix, and inflationary vehicle costs. However, variable floor plan rates may offset some of this increase if interest rates decline.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the impact of decontenting by OEMs, stating only that it is a topic of discussion. They also did not provide clear guidance on the elasticity of new car pricing or the exact impact of tariffs on consumer behavior.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Wednesday Presentation
harbor statement
irsonicautomotivecom harbor
today Wednesday
SAH Transcript
Sonic Automotive, Inc. (SAH) Q4 2025 Earnings Call Transcript
Positive2-18
The earnings call summary reveals strong financial performance with expectations of sustained customer pay revenue growth, strategic capital deployment, and a focus on non-auction sourcing for EchoPark. The Q&A section highlights EchoPark's competitive pricing strategy and growth plans, along with positive updates on parts and services. Despite some uncertainties around tariffs and OEM cost pass-throughs, the company shows confidence in its growth outlook. The market cap indicates moderate sensitivity to these factors, leading to a positive stock price prediction over the next two weeks.
Sonic Automotive, Inc. (SAH) Q3 2025 Earnings Call Transcript
Positive10-23
The earnings call summary and Q&A indicate positive developments: strategic growth in EchoPark and Powersports, a significant acquisition in the franchise segment, and a dividend increase. Despite some challenges (e.g., medical expenses, luxury sales slowdown), management's optimistic guidance for margin improvements and growth in 2024 and beyond, coupled with operational synergies, support a positive outlook. The market cap suggests a moderate reaction, aligning with a 'Positive' sentiment prediction.
Sonic Automotive, Inc. (SAH) Q2 2025 Earnings Call Transcript
Positive7-24
The earnings call summary presents a mixed but overall positive picture. Strong financial metrics, such as record-high franchised F&I GPU and EchoPark segment income, indicate positive performance. Despite some challenges like the decrease in same-store used volume, the optimistic guidance and strategic focus on improving margins and operational synergies are promising. The Q&A session highlighted management's confidence in future growth, particularly with EchoPark's expansion plans. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction of 2% to 8%.
Sonic Automotive, Inc. (NYSE:SAH) Q1 2025 Earnings Call Transcript
Unknown4-26
The earnings call presents mixed signals. Financial performance shows record revenues and increased EPS, but guidance is cautious due to tariff uncertainties. The share repurchase program is a positive, but competitive pressures and supply chain challenges raise concerns. Q&A reveals management's uncertainty about tariffs and cautious outlook on EchoPark guidance. Given the market cap of $1.8 billion, the stock is likely to experience a neutral price reaction, with potential fluctuations within a small range due to these mixed factors.
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