SONIC AUTOMOTIVE INC

Previous wording

Unless otherwise noted, all discussion of increases or decreases are for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted. All currently operating franchised dealership stores are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition. The following discussion of EchoPark Segment used vehicles, wholesale vehicles, and finance, insurance and other, net is on a reported basis, except where otherwise noted. All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition. The following discussion of Powersports Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a reported basis, except where otherwise noted. All currently operating stores in the Powersports Segment are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition.

Current wording

Unless otherwise noted, all discussion of increases or decreases are for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023. The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted. All currently operating franchised dealership stores are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition. The following discussion of EchoPark Segment used vehicles, wholesale vehicles, and finance, insurance and other, net is on a reported basis, except where otherwise noted. All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition. The following discussion of Powersports Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a reported basis, except where otherwise noted. All currently operating stores in the Powersports Segment are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition.

Previous wording

We are one of the largest automotive retailers in the U.S. (as measured by reported total revenue). As a result of the way we manage our business, we had three reportable segments as of March 31, 2024: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment. For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of March 31, 2024, we operated 108 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment and 13 stores in the Powersports Segment. The Franchised Dealerships Segment consists of 132 new vehicle franchises (representing 26 different brands of cars and light trucks) and 16 collision repair centers in 18 states. The EchoPark Segment consists of 18 stores in 10 states. The Powersports Segment consists of nine franchises in two states.

Current wording

We are one of the largest automotive retailers in the U.S. (as measured by reported total revenue). As a result of the way we manage our business, we had three reportable segments as of June 30, 2024: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment. For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of June 30, 2024, we operated 107 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment and 13 stores in the Powersports Segment. The Franchised Dealerships Segment consists of 131 new vehicle franchises (representing 25 different brands of cars and light trucks) and 16 collision repair centers in 18 states. The EchoPark Segment consists of 18 stores in 10 states. The Powersports Segment consists of nine franchises and four retail outlets in two states.

Previous wording

The U.S. retail automotive industry’s total new vehicle (retail and fleet combined) seasonally adjusted annual rate of unit sales volume (the “total new vehicle SAAR”) increased 1% for the three months ended March 31, 2024 to approximately 15.4 million vehicles, compared to approximately 15.3 million vehicles for the three months ended March 31, 2023, according to the Power Information Network (“PIN”) from J.D. Power. We currently estimate the 2024 new vehicle industry volume will be between 15.5 million vehicles (flat compared to 2023) and 16.0 million vehicles (an increase of 3% compared to 2023). The effects of interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2024 new vehicle industry volume to vary from expectations. Many factors, including brand and geographic concentrations as well as the industry sales mix between retail and fleet new vehicle unit sales volume, have caused our past results to differ from the industry’s overall trend. Our new vehicle sales strategy focuses on our retail new vehicle sales (as opposed to fleet new vehicle sales) and, as a result, we believe it is appropriate to compare our retail new vehicle unit sales volume to the industry retail new vehicle seasonally adjusted annual rate of unit sales volume (the “retail new vehicle SAAR”) (which excludes fleet new vehicle sales). According to PIN from J.D. Power, the retail new vehicle SAAR remained flat at approximately 12.6 million vehicles for both the three months ended March 31, 2024 and 2023.

Current wording

The U.S. retail automotive industry’s total new vehicle (retail and fleet combined) seasonally adjusted annual rate of unit sales volume (the “total new vehicle SAAR”) increased 1% for both the three and six months ended June 30, 2024, to approximately 15.7 million and 15.6 million vehicles, respectively, compared to approximately 15.6 million and 15.4 million vehicles for the three and six months ended June 30, 2023, respectively, according to the Power Information Network (“PIN”) from J.D. Power. We currently estimate the 2024 new vehicle industry volume will be between 15.5 million vehicles (flat compared to 2023) and 16.0 million vehicles (an increase of 3% compared to 2023). The effects of interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, incentive levels from automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual 2024 new vehicle industry volume to vary from expectations. Many factors, including brand and geographic concentrations as well as the industry sales mix between retail and fleet new vehicle unit sales volume, have caused our past results to differ from the industry’s overall trend. Our new vehicle sales strategy focuses on our retail new vehicle sales (as opposed to fleet new vehicle sales) and, as a result, we believe it is appropriate to compare our retail new vehicle unit sales volume to the industry retail new vehicle seasonally adjusted annual rate of unit sales volume (the “retail new vehicle SAAR”) (which excludes fleet new vehicle sales). According to PIN from J.D. Power, the retail new vehicle SAAR remained flat at approximately 12.7 million vehicles for both the three and six months ended June 30, 2024 from approximately 12.8 million and 12.7 million vehicles for the three and six months ended June 30, 2023, respectively.

Previous wording

Retail new vehicle revenue increased 3% during the three months ended March 31, 2024, driven primarily by a 5% increase in retail new vehicle unit sales volume, partially offset by a 2% decrease in retail new vehicle average selling prices. Retail new vehicle gross profit decreased 29% during the three months ended March 31, 2024, due primarily to increased price competition as a result of higher levels of available inventory and higher inventory invoice cost, which combined to drive lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $1,783 per unit, or 32%, to $3,716 per unit during the three months ended March 31, 2024. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 50 and 31 days as of March 31, 2024 and 2023, respectively, as a result of increased manufacturer production levels.

Current wording

Same store retail new vehicle revenue decreased 2% and remained flat during the three and six months ended June 30, 2024, respectively, driven primarily by a 2% decrease and 1% increase in retail new vehicle unit sales volume, respectively. The CDK outage also had a significant adverse impact on new vehicle unit sales volume during the three and six months ended June 30, 2024. Retail new vehicle gross profit decreased 30% and 29% during the three and six months ended June 30, 2024, respectively, due primarily to increased price competition as a result of higher levels of available inventory and higher inventory invoice cost, which combined to drive lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $1,443 per unit, or 29%, to $3,590 per unit during the three months ended June 30, 2024, and decreased $1,601 per unit, or 30%, to $3,653 per unit during the six months ended June 30, 2024. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 59 and 31 days as of June 30, 2024 and 2023, respectively, as a result of increased manufacturer production levels and a slower rate of sales in the period ended June 30, 2024 due to the CDK outage.

Previous wording

Retail used vehicle revenue decreased 4% during the three months ended March 31, 2024, driven primarily by a 7% decrease in retail used vehicle average selling prices, partially offset by a 4% increase in retail used vehicle unit sales volume. Retail used vehicle gross profit increased 1% during the three months ended March 31, 2024, primarily due to the 4% increase in retail used vehicle unit sales volume, partially offset by lower retail used vehicle gross profit per unit. Retail used vehicle gross profit per unit decreased $46 per unit, or 3%, to $1,585 per unit during the three months ended March 31, 2024 due primarily to higher inventory acquisition costs and lower selling prices due to increased price competition as a result of ongoing consumer affordability challenges, including the effect of higher interest rates. Wholesale vehicle gross profit (loss) worsened approximately $2.0 million during the three months ended March 31, 2024 due primarily to a $382 per unit, or 110%, worsening of in wholesale vehicle gross profit (loss) per unit during the three months ended March 31, 2024. We generally focus on maintaining Franchised Dealerships Segment used vehicle inventory days’ supply in the 25- to 35-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 28 and 29 days as of March 31, 2024 and 2023, respectively.

Current wording

Same store retail used vehicle revenue decreased 5% and 4% during the three and six months ended June 30, 2024, respectively, driven primarily by a 7% decrease in retail used vehicle average selling prices for both the three and six months ended June 30, 2024, partially offset by a 3% increase and 4% increase in retail used vehicle unit sales volume, respectively. Retailed used vehicle unit sales volume during the three and six months ended June 30, 2024 were also significantly adversely affected by the CDK outage. Retail used vehicle gross profit decreased 12% and 6% during the three and six months ended June 30, 2024, respectively, primarily due to lower retail used vehicle gross profit per unit. Retail used vehicle gross profit per unit decreased $255 per unit, or 14%, to $1,524 per unit during the three months ended June 30, 2024 and decreased $150 per unit, or 9%, to $1,555 per unit during the six months ended June 30, 2024 due primarily to higher inventory acquisition costs and lower selling prices due to increased price competition as a result of ongoing consumer affordability challenges, including the effect of higher interest rates. Same store wholesale vehicle gross profit (loss) remained flat and worsened $2.0 million during the three and six months ended June 30, 2024, respectively, on flat wholesale vehicle gross profit (loss) per unit during the three months ended June 30, 2024 and a $191 per unit, or 146%, worsening of wholesale vehicle gross profit (loss) per unit during the six months ended June 30, 2024. We generally focus on maintaining Franchised Dealerships Segment used vehicle inventory days’ supply in the 25- to 35-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 30 and 31 days as of June 30, 2024 and 2023, respectively.

Previous wording

Fixed Operations revenue increased 5% during the three months ended March 31, 2024, and Fixed Operations gross profit increased 6% during the three months ended March 31, 2024, driven primarily by higher repair order volume and higher parts and labor costs that were passed along to consumers. Fixed Operations gross margin increased 70 basis points, to 50.1%, during the three months ended March 31, 2024, primarily driven by an increase in warranty revenue contribution and higher customer pay and warranty gross margin.

Current wording

Same store Fixed Operations revenue increased 1% and 3% during the three and six months ended June 30, 2024, respectively, driven primarily by higher parts and labor costs that were passed along to consumers, despite being negatively affected by the CDK outage. Fixed Operations gross profit increased 2% and 4% during the three and six months ended June 30, 2024, respectively, driven primarily by higher warranty gross margin. Fixed Operations gross margin increased 80 basis points, to 50.4%, during the three months ended June 30, 2024, and increased 70 basis points, to 50.2%, during the six months ended June 30, 2024, primarily driven by an increase in warranty revenue contribution and higher warranty gross margin.

Previous wording

Reported total revenues decreased 14% during the three months ended March 31, 2024, driven primarily by a 10% decrease in retail used vehicle unit sales volume and a 6% decrease in average retail used vehicle unit selling prices. Reported total gross profit increased 34% during the three months ended March 31, 2024, primarily due to a 150% increase in retail used vehicle gross profit per unit, to $294 per unit, partially offset by a 10% decrease in retail used vehicle unit sales volume.

Current wording

Reported total revenues decreased 14% for both the three and six months ended June 30, 2024, driven primarily by a 3% and 7% decrease in retail used vehicle unit sales volume, respectively, and a 12% and 9% decrease in average retail used vehicle unit selling prices, respectively. Retail used vehicle unit sales volume during the three and six months ended June 30, 2024 were also adversely affected by the CDK outage. Reported total gross profit increased 91% and 57% during the three and six months ended June 30, 2024, respectively, primarily due to a 133% and 138% increase in retail used vehicle gross profit, respectively.

Previous wording

Same market total revenues increased 12% during the three months ended March 31, 2024, primarily attributable to a 13% increase in total retail used vehicle unit sales volume. The change in same market total retail vehicle unit sales volume is driven primarily by the closure of EchoPark and Northwest Motorsport locations in 2023 and the first quarter of 2024. Same market total gross profit increased 79% during the three months ended March 31, 2024, driven primarily by a 150% increase in retail used vehicle gross profit per unit.

Current wording

Same market total revenues increased 11% during both the three and six months ended June 30, 2024, primarily attributable to a 23% and 18% increase in total retail used vehicle unit sales volume, respectively. Same market total gross profit increased 81% and 80% during the three and six months ended June 30, 2024, respectively, driven primarily by a 191% and 163% increase in retail used vehicle gross profit per unit, respectively.

Previous wording

Reported wholesale vehicle gross profit decreased approximately $1.7 million during the three months ended March 31, 2024, primarily due to a 139% decrease in wholesale vehicle gross profit per unit. We generally focus on maintaining EchoPark Segment used vehicle inventory days’ supply in the 30- to 40-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported EchoPark Segment used vehicle inventory days’ supply was approximately 36 and 48 days as of March 31, 2024 and 2023, respectively.

Current wording

Reported wholesale vehicle gross profit decreased approximately $0.1 million and $1.8 million during the three and six months ended June 30, 2024, respectively, primarily due to a 300% and 156% decrease in wholesale vehicle gross profit per unit, respectively. We generally focus on maintaining EchoPark Segment used vehicle inventory days’ supply in the 30- to 40-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported EchoPark Segment used vehicle inventory days’ supply was approximately 38 and 39 days as of June 30, 2024 and 2023, respectively.

Previous wording

Reported retail new vehicle revenue decreased 24% during the three months ended March 31, 2024, primarily driven by a 24% decrease in retail new vehicle unit sales volume. Retail new vehicle gross profit decreased 43% during the three months ended March 31, 2024, as a result of a 25% decrease in retail new vehicle gross profit per unit and lower retail new vehicle unit sales volume. Retail new vehicle gross profit per unit decreased $897 per unit, or 25%, to $2,676 per unit, due primarily to higher inventory invoice cost. On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days’ supply was approximately 225 and 140 days as of March 31, 2024 and 2023, respectively, varying based on manufacturer production levels, consumer demand and seasonality.

Current wording

Reported retail new vehicle revenue decreased 13% and 18% during the three and six months ended June 30, 2024, respectively, primarily driven by a 15% and 19% decrease in retail new vehicle unit sales volume, respectively. Retail new vehicle gross profit decreased 36% and 39% during the three and six months ended June 30, 2024, respectively, as a result of a 24% and 25% decrease in retail new vehicle gross profit per unit, respectively, and lower retail new vehicle unit sales volume. Retail new vehicle gross profit per unit decreased $769 per unit, or 24%, to $2,466 per unit for the three months ended June 30, 2024, and decreased $832 per unit, or 25%, to $2,553 for the six months ended June 30, 2024, primarily due to higher invoice costs. On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days’ supply was approximately 187 and 111 days as of June 30, 2024 and 2023, respectively, varying based on manufacturer production levels and consumer demand.

Previous wording

Reported Fixed Operations revenue remained flat during the three months ended March 31, 2024, and Fixed Operations gross profit decreased 6% during the three months ended March 31, 2024, driven primarily by lower repair order volume. Fixed Operations gross margin decreased 250 basis points to 46.4% during the three months ended March 31, 2024, driven primarily by a decrease in customer pay revenue contribution and lower customer pay gross margin.

Current wording

Reported Fixed Operations revenue decreased 6% and 3% during the three and six months ended June 30, 2024, respectively, and Fixed Operations gross profit decreased 8% and 7% during the three and six months ended June 30, 2024, respectively, driven primarily by lower repair order volume. Fixed Operations gross margin decreased 110 basis points to 47% and decreased 170 basis points to 47% during the three and six months ended June 30, 2024, respectively, driven primarily by a decrease in customer pay revenue contribution and lower customer pay gross margin.

Previous wording

Reported F&I revenue remained flat during the three months ended March 31, 2024, driven primarily by a 19% decrease in combined retail new and used vehicle unit sales volume, offset by a 22% increase in F&I gross profit per retail unit. F&I gross profit per retail unit increased $217 per unit, or 22%, to $1,197 per unit during the three months ended March 31, 2024.

Current wording

Reported F&I revenue remained flat during both the three and six months ended June 30, 2024, driven primarily by an 18% decrease in combined retail new and used vehicle unit sales volume in both the three and six months ended June 30, 2024, offset by a 22% increase in F&I gross profit per retail unit in both the three and six months ended June 30, 2024. F&I gross profit per retail unit increased $201 per unit, or 21%, to $1,153 per unit and increased $208 per unit, or 22%, to $1,172 per unit during the three and six months ended June 30, 2024, respectively.

Previous wording

Same store total revenues decreased 22% during the three months ended March 31, 2024, driven primarily by a 22% decrease in total vehicle unit sales volume. Same store total gross profit decreased 25% during the three months ended March 31, 2024, driven primarily by a 28% decrease in retail new vehicle gross profit per unit.

Current wording

Same store total revenues decreased 12% and 16% during the three and six months ended June 30, 2024, respectively, driven primarily by a 19% and 20% decrease in total vehicle unit sales volume for the three and six months ended June 30, 2024, respectively. Same store total gross profit decreased 17% and 21% during the three and six months ended June 30, 2024, respectively, driven primarily by a 24% and 26% decrease in retail new vehicle gross profit per unit, respectively.

Previous wording

The following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues by brand for the three months ended March 31, 2024 and 2023:

Current wording

The following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues by brand for the three and six months ended June 30, 2024 and 2023:

Previous wording

For further analysis of new vehicle results, see the tables and discussion under the headings “New Vehicles - Franchised Dealerships Segment” and “New Vehicles - Powersports Segment” in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below.

Current wording

For further analysis of new vehicle results on a segment basis, see the tables and discussion under the headings “New Vehicles - Franchised Dealerships Segment” and “New Vehicles - Powersports Segment” in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below.

Previous wording

For further analysis of used vehicle results, see the tables and discussion under the headings “Used Vehicles - Franchised Dealerships Segment,” “Used Vehicles and F&I - EchoPark Segment” and “Used Vehicles - Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below.

Current wording

For further analysis of used vehicle results on a segment basis, see the tables and discussion under the headings “Used Vehicles - Franchised Dealerships Segment,” “Used Vehicles and F&I - EchoPark Segment” and “Used Vehicles - Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below.

Previous wording

Wholesale vehicle revenues are affected by retail new and used vehicle unit sales volume and the associated trade-in volume, as well as short-term, temporary and seasonal fluctuations in wholesale auction pricing. In recent years, wholesale vehicle prices and supply at auction have experienced periods of volatility, impacting our wholesale vehicle revenues and related gross profit (loss), as well as our retail used vehicle revenues and related gross profit. We believe that the current wholesale vehicle price environment is not sustainable in the long term and expect that average wholesale vehicle pricing and related gross profit (loss) will continue to return toward long-term normalized levels in the long run, but may continue to experience volatility through 2024 or beyond. Wholesale vehicle revenues are also significantly affected by our corporate inventory management strategy and policies, which are designed to optimize our total used vehicle inventory and expected gross profit levels and minimize inventory carrying risks.

Current wording

Wholesale vehicle revenues are affected by retail new and used vehicle unit sales volume and the associated trade-in volume, as well as short-term, temporary and seasonal fluctuations in wholesale auction pricing. In recent years, wholesale vehicle prices and supply at auction have experienced periods of volatility, impacting our wholesale vehicle revenues and related gross profit (loss), as well as our retail used vehicle revenues and related gross profit. We believe that wholesale vehicle pricing and volatility has begun to normalize in the first half of 2024 and expect that this trend will continue through the remainder of 2024. Wholesale vehicle revenues are also significantly affected by our corporate inventory management strategy and policies, which are designed to optimize our total used vehicle inventory and expected gross profit levels and minimize inventory carrying risks.

Previous wording

For further analysis of Fixed Operations results, see the tables and discussion under the headings “Fixed Operations - Franchised Dealerships Segment” and “Fixed Operations - Powersports Segment” in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below.

Current wording

For further analysis of Fixed Operations results on a segment basis, see the tables and discussion under the headings “Fixed Operations - Franchised Dealerships Segment” and “Fixed Operations - Powersports Segment” in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below.

Previous wording

For further analysis of F&I results, see the tables and discussion under the headings “F&I - Franchised Dealerships Segment,” “Used Vehicles and F&I - EchoPark Segment” and “F&I - Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below.

Current wording

For further analysis of F&I results on a segment basis, see the tables and discussion under the headings “F&I - Franchised Dealerships Segment,” “Used Vehicles and F&I - EchoPark Segment” and “F&I - Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below.

Previous wording

Retail new vehicle revenue increased 3%, due primarily to a 5% increase in retail new vehicle unit sales volume, partially offset by a 2% decrease in retail new vehicle average selling prices. Retail new vehicle gross profit decreased approximately $38.6 million, or 29%, as a result of lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $1,783 per unit, or 32%, to $3,716 per unit, due primarily to increased price competition as a result of higher levels of available inventory than in the prior year period and higher inventory invoice costs.

Current wording

Retail new vehicle revenue was flat, due primarily to a 1% increase in retail new vehicle unit sales volume, despite being negatively affected by the CDK outage, partially offset by a 1% decrease in retail new vehicle average selling prices. Retail new vehicle gross profit decreased approximately $79.0 million, or 29%, as a result of lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $1,601 per unit, or 30%, to $3,653 per unit, due primarily to increased price competition as a result of higher levels of available inventory than in the prior year period and higher inventory invoice costs.

Previous wording

Retail used vehicle revenue decreased approximately $27.9 million, or 4%, driven primarily by a 7% decrease in retail used vehicle average selling prices, partially offset by a 4% increase in retail used vehicle unit sales volume. Retail used vehicle gross profit increased approximately $0.4 million, or 1%, driven primarily by a 4% increase in retail used vehicle unit sales volume, partially offset by a $46 per unit, or 3%, decrease in retail used vehicle gross profit per unit during the first quarter of 2024 due primarily to higher inventory acquisition costs and increased price competition as a result of ongoing consumer affordability challenges.

Current wording

Retail used vehicle revenue decreased approximately $34.3 million, or 5%, driven primarily by a 7% decrease in retail used vehicle average selling prices, partially offset by a 3% increase in retail used vehicle unit sales volume, despite being negatively affected by the CDK outage. Retail used vehicle gross profit decreased approximately $5.2 million, or 12%, driven primarily by a $255 per unit, or 14%, decrease in retail used vehicle gross profit per unit, partially offset by a 3% increase in retail used vehicle unit sales volume during the second quarter of 2024, due primarily to higher inventory acquisition costs and increased price competition as a result of ongoing consumer affordability challenges.

Previous wording

Wholesale vehicle revenue decreased approximately $9.2 million, or 16%, driven primarily by an 11% decrease in wholesale vehicle revenue per unit and a 5% decrease in wholesale vehicle unit sales volume during the first quarter of 2024. Wholesale vehicle gross profit (loss) worsened approximately $2.0 million, driven primarily by a $382 per unit, or 110%, worsening of wholesale vehicle gross profit (loss) per unit as a result of lower wholesale auction prices.

Current wording

Wholesale vehicle revenue decreased approximately $15.6 million, or 14%, driven primarily by a 10% decrease in wholesale vehicle revenue per unit and a 5% decrease in wholesale vehicle unit sales volume during the first six months of 2024. Wholesale vehicle gross profit (loss) worsened approximately $2.0 million, driven primarily by a $191 per unit, or 146%, worsening of wholesale vehicle gross profit (loss) per unit during the first six months of 2024, due primarily to lower wholesale auction prices.

Previous wording

The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for Fixed Operations:

Current wording

The following tables provide a reconciliation of Franchised Dealerships Segment reported basis and same store basis for Fixed Operations:

Previous wording

Finance contract revenue for combined retail new and used vehicles remained flat year over year, due primarily to a 240-basis point increase in the finance contract penetration rate offset by a 7% decrease in gross profit per finance contract. Service contract revenue for combined retail new and used vehicles increased 18%, due primarily to an 11% increase in gross profit per service contract and a 100-basis point increase in the service contract penetration rate. Other aftermarket contract revenue for combined retail new and used vehicles increased 7%, due primarily to an 8% increase in gross profit per other aftermarket contract, partially offset by a 670-basis point decrease in the other aftermarket contract penetration rate.

Current wording

Finance contract revenue for combined retail new and used vehicles decreased 7%, due primarily to an 8% decrease in gross profit per finance contract, offset slightly by a 40-basis point increase in the finance contract penetration rate. Service contract revenue for combined retail new and used vehicles decreased 9%, due primarily to an 8% decrease in gross profit per service contract and a 90-basis point decrease in the service contract penetration rate. Other aftermarket contract revenue for combined retail new and used vehicles was flat, due primarily to a 5% increase in gross profit per other aftermarket contract that was offset by an 890-basis point decrease in the other aftermarket contract penetration rate.

Previous wording

Retail used vehicle revenue increased approximately $39.5 million, or 9%, due primarily to a 13% increase in retail used vehicle unit sales volume, offset partially by a 4% decrease in retail used vehicle revenue per unit. Combined retail used vehicle gross profit and F&I revenue increased approximately $24.6 million, or 86%, due primarily to a $9.2 million, or 24%, increase in F&I revenue. The increasein combined retail used vehicle and F&I gross profit per unit was due primarily to improvement in inventory acquisition cost as a result of lower wholesale auction prices, sourcing a higher percentage of inventory from non-auction sources, and expanding our inventory to include older vehicles, which typically earn a higher gross profit per unit.

Current wording

Retail used vehicle revenue increased approximately $38.9 million, or 9%, due primarily to a 23% increase in retail used vehicle unit sales volume, offset partially by an 11% decrease in retail used vehicle revenue per unit. Combined retail used vehicle gross profit and F&I revenue increased approximately $23.8 million, or 84%, due primarily to a $14.7 million, or 45%, increase in F&I revenue and a 50%, or $1,036, increase in combined retail used vehicle and F&I gross profit per unit. The increasein combined retail used vehicle and F&I gross profit per unit was due primarily to improvement in inventory acquisition cost as a result of lower wholesale auction prices, sourcing a higher percentage of inventory from non-auction sources, and expanding our inventory to include older vehicles, which typically earn a higher gross profit per unit.

Previous wording

Same market wholesale vehicle revenue increased approximately $7.6 million, or 42%, due primarily to an 8% increase in wholesale vehicle revenue per unit, combined with a 31% increase in wholesale vehicle unit sales volume. As we adjust the inventory mix of nearly new versus older model year vehicles sold at retail going forward, the levels of wholesale vehicle revenue and gross profit may vary.

Current wording

Same market wholesale vehicle revenue decreased approximately $4.4 million, or 17%, due primarily to a 23% decrease in wholesale vehicle revenue per unit, offset partially by an 8% increase in wholesale vehicle unit sales volume. As we adjust the inventory mix of nearly new versus older model year vehicles sold at retail going forward, the levels of wholesale vehicle revenue and gross profit may vary.

Previous wording

Retail new vehicle revenue decreased 26%, due primarily to a 25% decrease in retail new vehicle unit sales volume and a 1% decrease in retail new vehicle average selling prices. Retail new vehicle gross profit decreased approximately $1.8 million, or 46%, as a result of lower retail new vehicle unit sales volume and lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $996 per unit, or 28%, to $2,553 per unit, due primarily to higher inventory invoice cost and changes in brand mix.

Current wording

Retail new vehicle revenue decreased 13%, due primarily to a 15% decrease in retail new vehicle unit sales volume, partially offset by a 2% increase in retail new vehicle average selling prices. Retail new vehicle gross profit decreased approximately $1.6 million, or 36%, as a result of lower retail new vehicle unit sales volume and lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $769 per unit, or 24%, to $2,466 per unit, due primarily to higher inventory invoice cost and changes in brand mix.

Previous wording

Same store wholesale vehicle revenue increased approximately $0.2 million, due to higher wholesale vehicle unit sales volume and higher wholesale vehicle average selling prices. Same store wholesale vehicle gross profit (loss) improved approximately $0.2 million.

Current wording

Same store wholesale vehicle revenue increased approximately $0.5 million, due to higher wholesale vehicle average selling prices. Same store wholesale vehicle gross profit (loss) worsened approximately $0.1 million.

Previous wording

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for Fixed Operations:

Current wording

The following tables provide a reconciliation of Powersports Segment reported basis and same store basis for Fixed Operations:

Previous wording

Same store Fixed Operations revenue decreased approximately $0.3 million, or 5%, and same store Fixed Operations gross profit decreased approximately $0.4 million, or 13%, primarily due to lower parts and accessories volume and higher inventory costs of parts and accessories. Same store customer pay revenue decreased approximately $0.8 million, or 32%, and same store customer pay gross profit decreased approximately $0.7 million, or 50%. Same store warranty revenue increased approximately $0.1 million, or 33%, and same store warranty gross profit increased approximately $0.1 million, or 50%. Same store wholesale parts revenue increased approximately $0.1 million, or 100%, and same store wholesale parts gross profit increased approximately $0.1 million, or 100%. Same store internal, sublet and other revenue increased approximately $0.3 million, or 9%, and same store internal, sublet and other gross profit increased approximately $0.1 million, or 6%.

Current wording

Same store Fixed Operations revenue decreased approximately $0.6 million, or 6%, and same store Fixed Operations gross profit decreased approximately $0.4 million, or 8%, primarily due to lower parts and accessories volume and higher inventory costs of parts and accessories. Customer pay revenue decreased approximately $1.8 million, or 51%, and customer pay gross profit decreased approximately $1.7 million, or 89%. Warranty revenue increased approximately $0.8 million, or 200%, and warranty gross profit increased approximately $0.8 million, or 267%. Wholesale parts revenue remained flat and wholesale parts gross profit increased approximately $0.1 million, or 100%. Internal, sublet and other revenue increased approximately $0.4 million, or 6%, and internal, sublet and other gross profit increased approximately $0.4 million, or 14%.

Previous wording

Same store F&I revenue decreased approximately $0.1 million, or 7%, primarily due to a 22% decrease in retail new and used vehicle unit sales volume. Same store F&I gross profit per retail unit increased $244 per unit, or 25%, to $1,225 per unit, primarily due to an increase in gross profit per other aftermarket contract. Same store finance contract revenue decreased 13%, primarily due to lower retail new and used vehicle unit sales volume, offset partially by a 350-basis point increase in the combined new and used vehicle finance contract penetration rate. Same store service contract revenue decreased 8%, primarily due to a 12% decrease in retail new and used vehicle service contract unit sales volume, offset partially by a 6% increase in gross profit per service contract and a 380-basis point increase in the service contract penetration rate. Same store other aftermarket contract revenue increased 12%, driven primarily by a 48% increase in gross profit per other aftermarket contract and a 110-basis point increase in the other aftermarket contract penetration rate, offset partially by a 24% decrease in retail new and used vehicle unit sales volume.

Current wording

Same store finance contract revenue decreased 19%, primarily due to a 13% decrease in retail new and used vehicle unit sales volume and a 7% decrease in combined new and used vehicle finance contract volume, offset partially by a 370-basis point increase in the combined new and used vehicle finance contract penetration rate. Service contract revenue increased 1%, primarily due to a 12% increase in gross profit per service contract and a 340-basis point increase in the service contract penetration rate, offset partially by a 10% decrease in retail new and used vehicle service contract unit sales volume. Other aftermarket contract revenue increased 9%, driven primarily by a 39% increase in gross profit per other aftermarket contract, offset partially by a 118-basis point decrease in the other aftermarket contract penetration rate and a 22% decrease in retail new and used vehicle unit sales volume.

Previous wording

In the following table of financial data, total segment income (loss) (defined as income (loss) before taxes and impairment charges for each reportable segment) of the reportable segments is reconciled to consolidated income (loss) before taxes and impairment charges. See above for tables and discussion of results by reportable segment.

Current wording

In the following table of financial data, total segment income (loss) (defined as income (loss) before taxes and impairment charges for each reportable segment) of the reportable segments is reconciled to consolidated income (loss) before taxes and impairment charges. See above for tables and discussion of results by reportable segment. Due to rounding, segment level financial data may not sum to consolidated results.

Previous wording

(2)For the three months ended March 31, 2024, amount includes approximately $2.2 million of pre-tax charges for severance and long-term compensation expense and approximately $1.0 million of pre-tax impairment charges related to property and equipment.

Current wording

(2)For the six months ended June 30, 2024, amount includes approximately $11.2 million of pre-tax charges related to excess compensation related to the CDK outage, approximately $3.6 million of pre-tax charges related to hail and storm damage, approximately $2.2 million of pre-tax charges related to severance and long-term compensation expense, and approximately $1.0 million of pretax impairment charges related to property and equipment. For the six months ended June 30, 2023, amount includes approximately $20.9 million of pre-tax gain related to acquisitions and dispositions and approximately $1.9 million of pre-tax charges related to hail and storm damage.

Previous wording

(3)For the three months ended March 31, 2024, amount includes approximately $2.1 million of pre-tax charges for severance and long-term compensation expense and approximately $2.1 million of pre-tax charges related to closed store accrued expenses related to the indefinite suspension of operations at certain EchoPark locations. For the three months ended March 31, 2023, amount includes approximately $2.0 million of pre-tax charges for long-term compensation expense.

Current wording

(3)For the six months ended June 30, 2024, amount includes approximately $3.0 million of pre-tax gain on exit of leased properties, approximately $2.7 million of pre-tax charges for severance and long-term compensation expense, approximately $2.2 million of pre-tax charges related to closed store accrued expenses related to indefinite suspension of operations at certain EchoPark locations, approximately $1.4 million of pre-tax impairment charges related to property and equipment, approximately $0.6 million of pre-tax gain on acquisitions and dispositions, and approximately $0.4 million of pre-tax charges related to excess compensation related to the CDK outage. For the six months ended June 30, 2023, amount includes approximately $62.6 million of pre-tax impairment charges related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property, approximately $10.0 million of pre-tax charges related to used vehicle inventory valuation adjustments, approximately $4.2 million of pre-tax charges for long-term compensation expense, approximately $0.4 million of pre-tax lease exit charges, and approximately $0.2 million of pre-tax loss related to acquisitions and dispositions.

Previous wording

(4)For the three months ended March 31, 2024, amount includes approximately $1.0 million of pre-tax property and equipment charges for the Franchised Dealerships Segment.

Current wording

(4)For the six months ended June 30, 2024, amount includes approximately $1.4 million of pre-tax property and equipment charges for real estate held for sale in the EchoPark Segment and approximately $1.0 million of pre-tax property and equipment charges for the Franchised Dealerships Segment. For the six months ended June 30, 2023, amount includes approximately $62.6 million of pre-tax impairment charges related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property for the EchoPark Segment.

Previous wording

The following table sets forth information related to our consolidated reported SG&A expenses:

Current wording

The following tables set forth information related to our consolidated reported SG&A expenses:

Previous wording

Overall SG&A expenses decreased in both dollar amount and as a percentage of gross profit, primarily due to the closure of certain EchoPark and Northwest Motorsport locations since the first quarter of 2023. Compensation expense decreased in both dollar amount and as a percentage of gross profit. Advertising expense decreased in both dollar amount and as a percentage of gross profit, as a result of adapting our advertising spending to current retail automotive market conditions, including higher inventory availability and lower new vehicle gross profit levels. Rent expense decreased in both dollar amount and as a percentage of gross profit, primarily due to the purchase of several properties that were previously leased and the closure of stores in the EchoPark Segment. Other SG&A expenses decreased in both dollar amount and as a percentage of gross profit, primarily due to a decrease of $9.7 million in building maintenance.

Current wording

Overall SG&A expenses decreased in dollar amount and increased as a percentage of gross profit, primarily due to lower compensation expenses and lower gross profit as a result of decreases in new vehicle gross profit per unit. Compensation expense decreased in dollar amount and remained flat as a percentage of gross profit, primarily due to the closure of stores in the EchoPark Segment. Advertising expense decreased in both dollar amount and as a percentage of gross profit, as a result of adapting our advertising spending to the current retail automotive environment and the closure of stores in the EchoPark Segment. Rent expense decreased in both dollar amount and as a percentage of gross profit, primarily due to the purchase of several properties that were previously leased and the closure of stores in the EchoPark Segment. Other SG&A expenses increased in both dollar amount and as a percentage of gross profit, primarily due to the $20.9 million gain on franchise disposals during the three months ended June 30, 2023.

Previous wording

SG&A expenses for the three months ended March 31, 2024 included approximately $2.2 million of pre-tax charges for severance and long-term compensation expense and approximately $1.0 million of pre-tax impairment charges related to property and equipment for the Franchised Dealerships Segment. For the EchoPark Segment, SG&A expenses for the three months ended March 31, 2024 also included approximately $2.1 million of pre-tax charges for severance and long-term compensation expense and approximately $2.1 million of pre-tax charges related to closed store accrued expenses in connection with the indefinite suspension of operations at certain EchoPark locations. SG&A expenses for the three months ended March 31, 2023, amount includes approximately $2.0 million of pre-tax charges for long-term compensation expense.

Current wording

For the Franchised Dealerships Segment, SG&A expenses for the six months ended June 30, 2024 included approximately $9.2 million of pre-tax charges related to excess compensation as a result of the CDK outage, approximately $3.6 million of pre-tax charges related to hail and storm damage, and approximately $2.2 million of pre-tax charges related to severance and long-term compensation expense. For the six months ended June 30, 2023, SG&A expenses included approximately $20.9 million of pre-tax gain related to acquisitions and dispositions and approximately $1.9 million of pre-tax charges related to hail and storm damage. For the EchoPark Segment, SG&A expenses for the six months ended June 30, 2024 included approximately $3.0 million of pre-tax gain on exit of leased properties, approximately $2.7 million of pre-tax charges for severance and long-term compensation expense, approximately $0.6 million of pre-tax gain on real estate dispositions, approximately $2.2 million of pre-tax charges related to closed store accrued expenses related to indefinite suspension of operations at certain EchoPark locations, and approximately $0.4 million of pre-tax charges related to excess compensation as a result of the CDK outage. For the six months ended June 30, 2023, SG&A expenses included approximately $4.2 million of pre-tax charges for long-term compensation expense, approximately $0.4 million of pre-tax lease exit charges and approximately $0.2 million of pre-tax loss related to acquisitions and dispositions.

Previous wording

Depreciation and amortization expense increased approximately $2.0 million, or 6%, during the three months ended March 31, 2024, due primarily to acquisitions and completed construction projects and purchases of fixed assets for use in our franchised dealerships and EchoPark and powersports stores.

Current wording

Depreciation and amortization expense increased approximately $0.9 million, or 2%, and $2.7 million, or 4%, during the three and six months ended June 30, 2024, respectively, due primarily to acquisitions and completed construction projects and purchases of fixed assets for use in our franchised dealerships and EchoPark and powersports stores.

Previous wording

Interest expense, floor plan for used vehicles decreased approximately $1.1 million including the effect of interest income earned on the floor plan deposit balance, which contributed to $0.5 million of this decrease. Excluding the effect of interest income earned on the floor plan deposit balance, interest expense, floor plan for used vehicles decreased approximately $0.6 million. Excluding the effect of interest income earned on the floor plan deposit balance, the average interest rate applied to the used vehicle floor plan decreased in the three months ended March 31, 2024, driving $0.8 million of the overall decrease. The average used vehicle floor plan notes payable balance increased approximately $10.0 million, which increased used vehicle floor plan interest expense by approximately $0.2 million.

Current wording

Interest expense, floor plan for used vehicles decreased approximately $3.0 million, including the effect of interest income earned on the floor plan deposit balance, which contributed to approximately $1.6 million of this decrease. Excluding the effect of interest income earned on the floor plan deposit balance, interest expense, floor plan for used vehicles decreased approximately $1.4 million. Excluding the effect of interest income earned on the floor plan deposit balance, the average interest rate applied to the used vehicle floor plan increased in the three months ended June 30, 2024, offsetting $0.3 million of the overall decrease. The average used vehicle floor plan notes payable balance decreased approximately $94.7 million, which reduced used vehicle floor plan interest expense by approximately $1.7 million.