UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2023~~March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-13395

SONIC AUTOMOTIVE, INC.

(Exact name of registrant as specified in its charter)

______________________________________


Delaware						56-2010790
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


4401 Colwick Road		28211
Charlotte,	North Carolina
(Address of principal executive offices)		(Zip Code)

(704) 566-2400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

SAH

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 24, 2023,~~April 23, 2024, there were ~~21,857,279~~21,861,771 shares of the registrant’s Class A Common Stock, par value $0.01 per share, and 12,029,375 shares of the registrant’s Class B Common Stock, par value $0.01 per share, outstanding.

UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION

This report contains, and written or oral statements made from time to time by us or by our authorized officers may contain, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address our future objectives, plans and goals, as well as our intent, beliefs and current expectations regarding future operating performance, results and events, and can generally be identified by words such as “may,” “will,” “should,” “could,” “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “foresee” and other similar words or phrases.

These forward-looking statements are based on our current estimates and assumptions and involve various risks and uncertainties. As a result, you are cautioned that these forward-looking statements are not guarantees of future performance, and that actual results could differ materially from those projected in these forward-looking statements. Factors which may cause actual results to differ materially from our projections include those risks described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 and elsewhere in this report, as well as:

•the number of new and used vehicles sold in the United States as compared to our expectations and the expectations of the market;

•our ability to generate sufficient cash flows or to obtain additional financing to fund our ~~EchoPark~~business expansion, capital expenditures, our share repurchase program, dividends on our common stock, acquisitions and general operating activities;

•our business and growth strategies, including, but not limited to, our EchoPark store operations;

•the reputation and financial condition of vehicle manufacturers whose brands we represent, the financial incentives vehicle manufacturers offer and their ability to design, manufacture, deliver and market their vehicles successfully;

•our relationships with vehicle manufacturers, which may affect our ability to obtain desirable new vehicle models in inventory or to complete additional acquisitions or dispositions;

•the adverse resolution of one or more significant legal proceedings against us or our subsidiaries;

•changes in laws and regulations governing the operation of automobile franchises, accounting standards, taxation requirements and environmental laws;

•changes in vehicle and parts import quotas, duties, tariffs or other restrictions, including supply shortages that could be caused by global political and economic factors or other supply chain disruptions;

•the inability of vehicle manufacturers and their suppliers to obtain, produce and deliver vehicles or parts and accessories to meet demand at our franchised dealerships for sale and use in our parts, service and collision repair operations;

•general economic conditions in the markets in which we operate, including fluctuations in interest rates, inflation, vehicle valuations, employment levels, the level of consumer spending and consumer credit availability;

•high levels of competition in the retail automotive industry, which not only create pricing pressures on the products and services we offer, but also on businesses we may seek to acquire;

•our ability to successfully integrate recent or future acquisitions;

•the significant control that our principal stockholders exercise over us and our business matters; and

•the rate and timing of overall economic expansion or contraction.

These forward-looking statements speak only as of the date of this report or when made, and we undertake no obligation to revise or update these statements to reflect subsequent events or circumstances, except as required under the federal securities laws and the rules and regulations of the U.S. Securities and Exchange Commission.

SONIC AUTOMOTIVE, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2023~~MARCH 31, 2024

TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Statements of Operations	1
	Condensed Consolidated Statements of Comprehensive Operations	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	65
	Notes to Unaudited Condensed Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6757
Item 4.	Controls and Procedures	6858
PART II – OTHER INFORMATION		6959
Item 1.	Legal Proceedings	6959
Item 1A.	Risk Factors	7060
Item 2.	U ~~nregistered~~Unregistered Sales of Equity Securities and Use of Proceeds ~~and Issuer Purchases of Equity Securities~~	7161
Item 5.	O ~~ther~~Other Information	7262
Item 6.	Exhibits	7363
SIGNATURES		7464

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
		(Dollars and shares in millions, except per share amounts)
		(Dollars and shares in millions, except per share amounts)
		(Dollars and shares in millions, except per share amounts)
Revenues:
Retail new vehicles
Retail new vehicles
Retail new vehicles
Fleet new vehicles
Fleet new vehicles
Fleet new vehicles
Total new vehicles
Total new vehicles
Total new vehicles
Used vehicles
Used vehicles
Used vehicles
Wholesale vehicles
Wholesale vehicles
Wholesale vehicles
Total vehicles
Total vehicles
Total vehicles
Parts, service and collision repair
Parts, service and collision repair
Parts, service and collision repair
Finance, insurance and other, net
Finance, insurance and other, net
Finance, insurance and other, net
Total revenues
Total revenues
Total revenues
Cost of sales:
Cost of sales:
Cost of sales:
Retail new vehicles
Retail new vehicles
Retail new vehicles
Fleet new vehicles
Fleet new vehicles
Fleet new vehicles
Total new vehicles
Total new vehicles
Total new vehicles
Used vehicles
Used vehicles
Used vehicles
Wholesale vehicles
Wholesale vehicles
Wholesale vehicles
Total vehicles
Total vehicles
Total vehicles
Parts, service and collision repair
Parts, service and collision repair
Parts, service and collision repair
Total cost of sales
Total cost of sales
Total cost of sales
Gross profit
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses
Impairment charges
Impairment charges
Impairment charges
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization
Operating income
Operating income
Operating income
Other income (expense):
Other income (expense):
Other income (expense):
Interest expense, floor plan
Interest expense, floor plan
Interest expense, floor plan
Interest expense, other, net
Interest expense, other, net
Interest expense, other, net
Other income (expense), net
Other income (expense), net
Other income (expense), net
Total other income (expense)
Total other income (expense)
Total other income (expense)
Income before taxes
Income before taxes
Income before taxes
Provision for income taxes - benefit (expense)
Provision for income taxes - benefit (expense)
Provision for income taxes - benefit (expense)

		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		(Dollars and shares in millions, except per share amounts)
Revenues:
Retail new vehicles		$	1,573.5	$	1,371.8	$	4,624.4	$	4,067.4
Fleet new vehicles		23.2		32.0		70.4		70.0
Total new vehicles		1,596.7		1,403.8		4,694.8		4,137.4
Used vehicles		1,340.4		1,355.8		3,991.2		4,174.4
Wholesale vehicles		79.3		114.7		256.3		404.8
Total vehicles		3,016.4		2,874.3		8,942.3		8,716.6
Parts, service and collision repair		453.4		408.2		1,327.6		1,188.6
Finance, insurance and other, net		173.7		165.6		517.7		505.3
Total revenues		3,643.5		3,448.1		10,787.6		10,410.5
Cost of sales:
Retail new vehicles		(1,442.1)		(1,209.6)		(4,213.5)		(3,569.2)
Fleet new vehicles		(22.3)		(30.7)		(67.3)		(66.9)
Total new vehicles		(1,464.4)		(1,240.3)		(4,280.8)		(3,636.1)
Used vehicles		(1,288.1)		(1,304.9)		(3,877.4)		(4,029.1)
Wholesale vehicles		(80.7)		(116.8)		(255.8)		(404.2)
Total vehicles		(2,833.2)		(2,662.0)		(8,414.0)		(8,069.4)
Parts, service and collision repair		(228.1)		(205.4)		(669.0)		(600.2)
Total cost of sales		(3,061.3)		(2,867.4)		(9,083.0)		(8,669.6)
Gross profit		582.2		580.7		1,704.6		1,740.9
Selling, general and administrative expenses		(409.6)		(399.0)		(1,214.2)		(1,188.8)
Impairment charges		—		—		(62.6)		—
Depreciation and amortization		(35.2)		(32.8)		(105.7)		(94.0)
Operating income		137.4		148.9		322.1		458.1
Other income (expense):
Interest expense, floor plan		(17.4)		(9.6)		(48.9)		(20.6)
Interest expense, other, net		(29.0)		(22.9)		(86.2)		(65.1)
Other income (expense), net		0.2		—		0.3		0.1
Total other income (expense)		(46.2)		(32.5)		(134.8)		(85.6)
Income before taxes		91.2		116.4		187.3		372.5
Provision for income taxes - benefit (expense)		(22.8)		(29.1)		(47.8)		(93.1)

Net income

Net income

Net income	Net income	$	68.4	$	87.3	$	139.5	$	279.4

Basic earnings per common share:	Basic earnings per common share:

Basic earnings per common share:

Basic earnings per common share:

Earnings per common share

Earnings per common share

Earnings per common share	Earnings per common share	$	1.96	$	2.28	$	3.94	$	7.09
Weighted-average common shares outstanding	Weighted-average common shares outstanding	34.9		38.3		35.4		39.4
Weighted-average common shares outstanding
Weighted-average common shares outstanding
Diluted earnings per common share:
Diluted earnings per common share:
Diluted earnings per common share:	Diluted earnings per common share:

Earnings per common share	Earnings per common share	$	1.92	$	2.23	$	3.85	$	6.90

Earnings per common share

Earnings per common share
Weighted-average common shares outstanding	Weighted-average common shares outstanding	35.6		39.2		36.2		40.5
Weighted-average common shares outstanding
Weighted-average common shares outstanding

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		(Dollars in millions)
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
		(Dollars in millions)
		(Dollars in millions)
		(Dollars in millions)
Net income	Net income	$	68.4	$	87.3	$	139.5	$	279.4
Other comprehensive income (loss) before taxes:	Other comprehensive income (loss) before taxes:
Other comprehensive income (loss) before taxes:
Other comprehensive income (loss) before taxes:
Change in fair value and amortization of interest rate cap agreements
Change in fair value and amortization of interest rate cap agreements
Change in fair value and amortization of interest rate cap agreements	Change in fair value and amortization of interest rate cap agreements	0.3		—		1.5		0.7

Total other comprehensive income (loss) before taxes	Total other comprehensive income (loss) before taxes	0.3		—		1.5		0.7

Total other comprehensive income (loss) before taxes

Total other comprehensive income (loss) before taxes
Provision for income tax benefit (expense) related to components of other comprehensive income (loss)
Provision for income tax benefit (expense) related to components of other comprehensive income (loss)
Provision for income tax benefit (expense) related to components of other comprehensive income (loss)	Provision for income tax benefit (expense) related to components of other comprehensive income (loss)	(0.1)		—		(0.4)		(0.2)
Other comprehensive income (loss)	Other comprehensive income (loss)	0.2		—		1.1		0.5
Other comprehensive income (loss)
Other comprehensive income (loss)
Comprehensive income	Comprehensive income	$	68.6	$	87.3	$	140.6	$	279.9
Comprehensive income
Comprehensive income

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


		September 30, 2023		December 31, 2022
		(Dollars in millions, except per share amounts)
	March 31, 2024						March 31, 2024		December 31, 2023
	(Dollars in millions, except per share amounts)							(Dollars in millions, except per share amounts)
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	34.6	$	229.2
Receivables, net	Receivables, net	431.5		462.4
Inventories	Inventories	1,433.9		1,216.8
Other current assets	Other current assets	341.5		297.9
Total current assets	Total current assets	2,241.5		2,206.3
Property and Equipment, net	Property and Equipment, net	1,599.2		1,561.7
Goodwill	Goodwill	243.6		231.0
Other Intangible Assets, net	Other Intangible Assets, net	417.4		396.7
Operating Right-of-Use Lease Assets	Operating Right-of-Use Lease Assets	189.2		260.7
Finance Right-of-Use Lease Assets	Finance Right-of-Use Lease Assets	258.4		224.1
Other Assets	Other Assets	101.0		97.8
Total Assets	Total Assets	$	5,050.3	$	4,978.3
						LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:	Current Liabilities:
Notes payable - floor plan - trade
Notes payable - floor plan - trade
Notes payable - floor plan - trade	Notes payable - floor plan - trade	$	121.2	$	114.9
Notes payable - floor plan - non-trade	Notes payable - floor plan - non-trade	1,266.2		1,112.7
Trade accounts payable	Trade accounts payable	143.0		138.4
Operating short-term lease liabilities	Operating short-term lease liabilities	31.7		36.4
Finance short-term lease liabilities	Finance short-term lease liabilities	10.4		11.1

Other accrued liabilities
Other accrued liabilities
Other accrued liabilities	Other accrued liabilities	376.3		352.4
Current maturities of long-term debt	Current maturities of long-term debt	60.4		79.5
Total current liabilities	Total current liabilities	2,009.2		1,845.4
Long-Term Debt	Long-Term Debt	1,623.1		1,672.2
Other Long-Term Liabilities	Other Long-Term Liabilities	108.2		105.5
Operating Long-Term Lease Liabilities	Operating Long-Term Lease Liabilities	176.1		231.4
Finance Long-Term Lease Liabilities	Finance Long-Term Lease Liabilities	276.2		228.6

Commitments and Contingencies	Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Stockholders’ Equity:	Stockholders’ Equity:
Class A Convertible Preferred Stock, none issued	Class A Convertible Preferred Stock, none issued	—		—
Class A Common Stock, $0.01 par value; 100,000,000 shares authorized; 68,541,841 shares issued and 21,857,279 shares outstanding at September 30, 2023; 67,574,922 shares issued and 24,204,324 shares outstanding at December 31, 2022		0.7		0.7
Class B Common Stock, $0.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at September 30, 2023 and December 31, 2022		0.1		0.1
Class A Convertible Preferred Stock, none issued
Class A Convertible Preferred Stock, none issued
Class A Common Stock, $0.01 par value; 100,000,000 shares authorized; 69,047,806 shares issued and 21,861,407 shares outstanding at March 31, 2024; 68,618,393 shares issued and 21,931,785 shares outstanding at December 31, 2023
Class B Common Stock, $0.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at March 31, 2024 and December 31, 2023
Paid-in capital	Paid-in capital	848.3		819.4
Retained earnings	Retained earnings	1,210.1		1,100.3
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	2.7		1.6
Treasury stock, at cost; 46,684,562 Class A Common Stock shares held at September 30, 2023 and 43,370,598 Class A Common Stock shares held at December 31, 2022		(1,204.4)		(1,026.9)
Treasury stock, at cost; 47,186,399 Class A Common Stock shares held at March 31, 2024 and 46,686,608 Class A Common Stock shares held at December 31, 2023
Total Stockholders’ Equity	Total Stockholders’ Equity	857.5		895.2
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	5,050.3	$	4,978.3

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


		Class A Common Stock			Class A Treasury Stock			Class B Common Stock			Paid-In Capital				Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
		Shares	Amount		Shares	Amount		Shares	Amount
		(Dollars and shares in millions, except per share amounts)
Balance at June 30, 2022		67.1	$	0.7	(39.9)	$	(858.1)	12.0	$	0.1			$	804.6			$	1,223.5	$	(0.8)	$	1,170.0
	Class A Common Stock																						Class A Common Stock	Class A Treasury Stock	Class B Common Stock	Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total Stockholders’ Equity
	Shares
		(Dollars and shares in millions, except per share amounts)
		(Dollars and shares in millions, except per share amounts)
		(Dollars and shares in millions, except per share amounts)
Balance at December 31, 2022
Shares awarded under stock compensation plans	Shares awarded under stock compensation plans	0.5	—		—	—		—	—		7.2				—		—		7.2
Purchases of treasury stock	Purchases of treasury stock	—	—		(3.1)	(152.1)		—	—		—				—		—		(152.1)

Effect of cash flow hedge instruments, net of tax benefit
Stock compensation expense	Stock compensation expense	—	—		—	—		—	—		3.8				—		—		3.8
Net income	Net income	—	—		—	—		—	—		—				87.3		—		87.3

Class A dividends declared ($0.25 per share)		—	—		—	—		—	—		—				(6.3)		—		(6.3)
Class B dividends declared ($0.25 per share)		—	—		—	—		—	—		—				(3.0)		—		(3.0)
Balance at September 30, 2022		67.6	$	0.7	(43.0)	$	(1,010.2)	12.0	$	0.1	$	815.6			$	1,301.5	$	(0.8)	$	1,106.9
Class A dividends declared ($0.28 per share)
Class A dividends declared ($0.28 per share)
Class A dividends declared ($0.28 per share)
Class B dividends declared ($0.28 per share)
Balance at March 31, 2023

Class A
Common Stock Class A
Treasury Stock Class B
Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity
Shares Amount Shares Amount Shares Amount
(Dollars and shares in millions, except per share amounts)
Balance at June 30, 2023 68.4 $ 0.7 (45.0) $ (1,117.6) 12.0 $ 0.1 $ 839.8 $ 1,151.2 $ 2.5 $ 876.7
Shares awarded under stock compensation plans 0.1 — — — — — 1.8 — — 1.8
Purchases of treasury stock — — (1.7) (86.8) — — — — — (86.8)
Effect of cash flow hedge instruments, net of tax expense of $0.1 — — — — — — — — 0.2 0.2
Stock compensation expense — — — — — — 6.7 — — 6.7
Net income — — — — — — — 68.4 — 68.4
Class A dividends declared ($0.29 per share) — — — — — — — (6.0) — (6.0)
Class B dividends declared ($0.29 per share) — — — — — — — (3.5) — (3.5)
Balance at September 30, 2023 68.5 $ 0.7 (46.7) $ (1,204.4) 12.0 $ 0.1 $ 848.3 $ 1,210.1 $ 2.7 $ 857.5


	Class A Common Stock			Class A Treasury Stock			Class B Common Stock			Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
	(Dollars and shares in millions, except per share amounts)
Balance at December 31, 2023	68.6	$	0.7	(46.7)	$	(1,204.5)	12.0	$	0.1	$	855.4	$	1,238.6	$	1.6	$	891.9
Shares awarded under stock compensation plans	0.4	—		—	—		—	—		0.6		—		—		0.6
Purchases of treasury stock	—	—		(0.5)	(27.0)		—	—		—		—		—		(27.0)
Effect of cash flow hedge instruments, net of tax expense of $0.2	—	—		—	—		—	—		—		—		0.5		0.5
Stock compensation expense	—	—		—	—		—	—		6.6		—		—		6.6
Net income	—	—		—	—		—	—		—		42.0		—		42.0

Class A dividends declared ($0.30 per share)	—	—		—	—		—	—		—		(6.6)		—		(6.6)
Class B dividends declared ($0.30 per share)	—	—		—	—		—	—		—		(3.6)		—		(3.6)
Balance at March 31, 2024	69.0	$	0.7	(47.2)	$	(1,231.5)	12.0	$	0.1	$	862.6	$	1,270.4	$	2.1	$	904.4

See notes to unaudited condensed consolidated financial statements.

Class A
Common Stock Class A
Treasury Stock Class B
Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity
Shares Amount Shares Amount Shares Amount
(Dollars and shares in millions, except per share amounts)
Balance at December 31, 2021 66.5 $ 0.7 (37.8) $ (765.0) 12.0 $ 0.1 $ 790.2 $ 1,051.7 $ (1.3) $ 1,076.4
Shares awarded under stock compensation plans 1.1 — — — — — 8.5 — — 8.5
Purchases of treasury stock — — (5.2) (245.2) — — — — — (245.2)
Effect of cash flow hedge instruments, net of tax expense of $0.2 — — — — — — — — 0.5 0.5
Stock compensation expense — — — — — — 16.9 — — 16.9
Net income — — — — — — — 279.4 — 279.4
Class A dividends declared ($0.62 per share) — — — — — — — (22.1) — (22.1)
Class B dividends declared ($0.62 per share) — — — — — — — (7.5) — (7.5)
Balance at September 30, 2022 67.6 $ 0.7 (43.0) $ (1,010.2) 12.0 $ 0.1 $ 815.6 $ 1,301.5 $ (0.8) $ 1,106.9

Class A
Common Stock Class A
Treasury Stock Class B
Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity
Shares Amount Shares Amount Shares Amount
(Dollars and shares in millions, except per share amounts)
Balance at December 31, 2022 67.6 $ 0.7 (43.4) $ (1,026.9) 12.0 $ 0.1 $ 819.4 $ 1,100.3 $ 1.6 $ 895.2
Shares awarded under stock compensation plans 0.9 — — — — — 11.6 — — 11.6
Purchases of treasury stock — — (3.3) (177.5) — — — — — (177.5)
Effect of cash flow hedge instruments, net of tax expense of $0.4 — — — — — — — — 1.1 1.1
Stock compensation expense — — — — — — 17.3 — — 17.3
Net income — — — — — — — 139.5 — 139.5
Class A dividends declared ($0.86 per share) — — — — — — — (19.4) — (19.4)
Class B dividends declared ($0.86 per share) — — — — — — — (10.3) — (10.3)
Balance at September 30, 2023 68.5 $ 0.7 (46.7) $ (1,204.4) 12.0 $ 0.1 $ 848.3 $ 1,210.1 $ 2.7 $ 857.5

~~See notes to unaudited condensed consolidated financial statements.~~

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Nine Months Ended September 30,
		2023		2022
		(Dollars in millions)
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
	(Dollars in millions)						(Dollars in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	139.5	$	279.4
Adjustments to reconcile net income to net cash provided by operating activities:
Net income
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment
Depreciation and amortization of property and equipment
Depreciation and amortization of property and equipment	Depreciation and amortization of property and equipment	92.0		84.2

Debt issuance cost amortization	Debt issuance cost amortization	4.9		3.8

Debt issuance cost amortization

Debt issuance cost amortization

Stock-based compensation expense
Stock-based compensation expense
Stock-based compensation expense	Stock-based compensation expense	17.3		16.9
Deferred income taxes	Deferred income taxes	(10.5)		(10.4)

Asset impairment charges
Asset impairment charges
Asset impairment charges	Asset impairment charges	62.6		—
Gain on disposal of dealerships and property and equipment	Gain on disposal of dealerships and property and equipment	(18.1)		(0.5)

Other	Other	0.3		1.5

Other

Other
Changes in assets and liabilities that relate to operations:	Changes in assets and liabilities that relate to operations:
Receivables
Receivables
Receivables	Receivables	49.2		43.5
Inventories	Inventories	(230.7)		101.1
Other assets	Other assets	(7.2)		107.5
Notes payable - floor plan – trade	Notes payable - floor plan – trade	6.3		5.3
Trade accounts payable and other liabilities	Trade accounts payable and other liabilities	(1.4)		13.1
Total adjustments	Total adjustments	(35.3)		366.0
Net cash provided by operating activities		104.2		645.4
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses, net of cash acquired
Purchases of businesses, net of cash acquired
Purchases of businesses, net of cash acquired	Purchases of businesses, net of cash acquired	(75.1)		(94.2)
Purchases of land, property and equipment	Purchases of land, property and equipment	(153.6)		(197.6)
Proceeds from sales of property and equipment	Proceeds from sales of property and equipment	5.1		15.7
Proceeds from sales of dealerships		52.2		—

Net cash used in investing activities
Net cash used in investing activities
Net cash used in investing activities	Net cash used in investing activities	(171.4)		(276.1)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on notes payable - floor plan - non-trade		153.5		(218.8)
Net borrowings on notes payable - floor plan - non-trade
Net borrowings on notes payable - floor plan - non-trade
Net borrowings on notes payable - floor plan - non-trade
Borrowings on revolving credit facilities
Repayments on revolving credit facilities

Debt issuance costs
Debt issuance costs
Debt issuance costs	Debt issuance costs	(1.6)		(0.5)
Principal payments of long-term debt	Principal payments of long-term debt	(71.5)		(42.1)
Principal payments of long-term lease liabilities	Principal payments of long-term lease liabilities	(11.7)		(6.4)
Purchases of treasury stock	Purchases of treasury stock	(177.5)		(245.2)

Issuance of shares under stock compensation plans	Issuance of shares under stock compensation plans	11.6		8.5
Issuance of shares under stock compensation plans
Issuance of shares under stock compensation plans
Dividends paid	Dividends paid	(30.2)		(25.2)
Net cash used in financing activities		(127.4)		(529.7)
Net cash (used in) provided by financing activities
NET DECREASE IN CASH AND CASH EQUIVALENTS	NET DECREASE IN CASH AND CASH EQUIVALENTS	(194.6)		(160.4)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	229.2		299.4
CASH AND CASH EQUIVALENTS, END OF PERIOD	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	34.6	$	139.0

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Cash paid (received) during the period for:
Cash paid (received) during the period for:
Interest, including amounts capitalized
Interest, including amounts capitalized
Interest, including amounts capitalized	Interest, including amounts capitalized	$	115.0	$	68.7
Income taxes	Income taxes	$	73.4	$	95.2

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation – The accompanying unaudited condensed consolidated financial statements of Sonic Automotive, Inc. and its wholly owned subsidiaries ~~(“Sonic,~~(collectively referred to herein as “Sonic,” the “Company,” “we,” “us” or “our”) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (the “U.S.”) (“GAAP”) for interim financial information and applicable rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all material normal, recurring adjustments necessary to fairly state the financial position, results of operations and cash flows for the periods presented. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Recent Accounting Pronouncements – Please refer to Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 for further discussion of recent accounting pronouncements.

~~Change in~~In November 2023, the Financial Accounting ~~Principle~~ ~~– During~~Standards Board issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Accounting Standards Codification Topic 820): Improvements to Reportable Segment Disclosures.” The amendments require the ~~first quarter~~disclosure of significant segment expenses as well as expanded interim disclosures, along with other changes to segment disclosure requirements. The standard will be effective for fiscal years beginning after December 15, 2023, ~~Sonic voluntarily changed~~and interim periods beginning after December 15, 2024. We are currently evaluating the ~~date of its annual goodwill impairment test and other intangible assets impairment test from October 1 to April 30. This change is preferable under~~impact that the ~~circumstances as it provides Sonic with better alignment~~adoption of the ~~annual impairment test with~~provisions of the ~~availability of final approved prospective~~ASU will have on our consolidated financial information for use in projecting future cash flows in our impairment models. We intend to utilize the same valuation approach and do not expect the change in valuation date to produce different impairment results. This change is not applied retrospectively as it is impracticable to do so because retrospective application would require the application of significant estimates and assumptions with the use of hindsight. Accordingly, the change was applied prospectively, beginning with the April 30, 2023 impairment test date.statements.

Principles of Consolidation – All of our dealership and non-dealership subsidiaries are wholly owned and consolidated in the accompanying unaudited condensed consolidated financial statements, except for one 50%-owned dealership that is accounted for under the equity method. All material intercompany balances and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements. Certain amounts and percentages may not compute due to rounding.

Revenue Recognition – Revenue is recognized when a customer obtains control of promised goods or services and in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. We do not include the cost of obtaining contracts within the related revenue streams since we elected the practical expedient to expense the costs to obtain a contract when incurred.

Management has evaluated our established business processes, revenue transaction streams and accounting policies, and identified our material revenue streams to be: (1) the sale of new vehicles; (2) the sale of used vehicles to retail customers; (3) the sale of wholesale used vehicles at third-party auctions; (4) the arrangement of third-party vehicle financing and the sale of third-party service, warranty and other insurance contracts; and (5) the performance of vehicle maintenance and repair services and the sale of related parts and accessories. The transaction price for a retail vehicle sale is specified in the contract with the customer and encompasses both cash and non-cash considerations. In the context of a retail vehicle sale, customers frequently trade in their existing vehicles. The value of this trade-in is determined based on its stand-alone selling price as specified in the contract, utilizing various third-party pricing sources. There are no other non-cash forms of consideration associated with retail vehicle sales, and sales are reported net of sales tax and other similar assets. Generally, performance obligations are satisfied when the associated vehicle is delivered to a customer and customer acceptance has occurred, over time as the maintenance and repair services are performed, or at the time of wholesale and retail parts sales. We do not have any revenue streams with significant financing components, as payments are typically received within a short period of time following completion of the performance obligation(s).

Retrospective finance and insurance revenues (“F&I retro revenues”) are recognized when the product contract has been executed with the end customer and the transaction price is estimated each reporting period based on the expected value method using historical and projected data. F&I retro revenues can vary based on a variety of factors, including number of contracts and history of cancellations and claims. Accordingly, we utilize this historical and projected data to constrain the consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We record revenue when vehicles are delivered to customers, as vehicle service work is performed and when parts are delivered. Conditions for completing a sale include having an agreement with the customer, including pricing, and it being probable that the proceeds from the sale will be collected.

The accompanying unaudited condensed consolidated balance sheets as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 include approximately ~~$27.9~~$3.7 million and ~~$38.7~~$31.8 million, respectively, related to contract assets from F&I retro revenues

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

recognition, which are recorded in receivables, net. In addition, we recorded approximately $19.8 million related to contract assets from F&I retro revenues recognition in other assets as of March 31, 2024. Changes in contract assets from December 31, ~~2022~~2023 to ~~September 30, 2023~~March 31, 2024 were primarily due to ordinary business activity, including the receipt of cash for amounts earned and recognized in prior periods. Please refer to Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 for further discussion of our revenue recognition policies and processes.

Earnings Per Share – The calculation of diluted earnings per share considers the potential dilutive effect of outstanding restricted stock units, restricted stock and stock options granted under Sonic’s stock compensation plans (and any non-forfeitable dividends paid on such awards)~~, in addition to Class A Common Stock purchase warrants.~~.

2. Business Acquisitions and Dispositions

We did not acquire any businesses during the three months ended March 31, 2024. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023, we acquired one business (consisting of five locations) in our Powersports Segment (as defined below) for an aggregate gross purchase price (including inventory acquired and subsequently funded by floor plan notes payable) of approximately $75.1 million. The ~~preliminary~~ allocation of the approximately $75.1 million aggregate gross purchase price included inventory of approximately $11.1 million, property and equipment of approximately $0.7 million, franchise assets of approximately $22.6 million, goodwill of approximately $11.9 million, real estate of approximately $29.0 million, other assets of approximately $0.1 million, and other liabilities of approximately $0.3 million.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2024, we ~~acquired~~terminated two ~~business~~luxury franchises, in ~~our Franchised Dealerships~~addition to closing the remaining seven Northwest Motorsport stores within the EchoPark Segment (as defined below) and two business included in our Powersports Segment (as defined below) for an aggregate gross purchase price (including inventory acquired and subsequently funded by floor plan notes payable) of approximately $79.5 million. During that period, we also recorded the impact of a $14.7 million post-close adjustment related to the acquisition of RFJ Auto Partners, Inc. and its subsidiaries completed in December 2021 (the “RFJ Acquisition”). The allocation of the approximately $79.5 million aggregate gross purchase price included inventory of approximately $31.0 million, property and equipment of approximately $0.5 million, franchise assets of approximately $33.2 million, goodwill of approximately $14.1 million, other assets of approximately $1.1 million, and liabilities of approximately $0.4 million. During the nine months ended September 30, 2023, we booked a post-close goodwill adjustment related to one businesses acquired in our Franchised Dealership Segment and one business in our Powersports Segment for a decrease of $0.4 million and an increase of $2.9 million, respectively.

~~During the nine months ended September 30, 2023, we disposed of one luxury franchised dealership, one domestic franchised dealership, and onemid-line import franchised dealership that generated net cash of approximately $52.2 million.~~ We did not dispose of any ~~stores~~businesses during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

Revenues and other activities associated with disposed ~~franchised dealerships~~stores, terminated franchises or closed stores that remain in continuing operations were as follows:


		Three Months Ended September 30,					Nine Months Ended September 30,
		2023		2022			2023		2022
				Three Months Ended March 31,
				Three Months Ended March 31,
				Three Months Ended March 31,
						2024					2024	2023
Income (loss) from operations	Income (loss) from operations	$	(0.3)	$	1.9		$	0.2	$	5.7
Gain (loss) on disposal		(0.3)		—			20.4		(0.1)
Gain (loss) on disposal, termination and closure charges
Lease exit accrual adjustments and charges
Pre-tax income (loss)	Pre-tax income (loss)	(0.6)		1.9			20.6		5.6
Total Revenues	Total Revenues	$	—	$	38.6		$	70.1	$	119.0

~~On June 22,~~

3. Inventories

Inventories consist of the following:


	March 31, 2024		December 31, 2023
	(In millions)
New vehicles	$	938.5	$	799.6
Used vehicles	481.5		505.7
Service loaners (1)	177.8		172.7
Parts, accessories and other	102.7		100.3
Inventories	$	1,700.5	$	1,578.3

(1)Service loaner inventory includes approximately $31.6 million and $22.7 million as of March 31, 2024 and December 31, 2023, we announced a plan to indefinitely suspend operations at eight EchoPark locations and 14 related delivery/buy centers. In addition, during the three months ended September 30, 2023, we closed three Northwest Motorsport pre-owned locations within the EchoPark Segment (as defined below). In connection with these decisions, Sonic recorded a charge totaling approximately $75.2 million during the second quarter of 2023. This charge included impairments of $32.5 millionrespectively, related to fixed assets, $16.0 million related to right-of-use assets and $14.1 million related to cease-use accruals; $0.4 million related to lease exit charges; $10.0 million of inventory valuation adjustments (of which $5.8 million relates to stores with ongoing operations at EchoPark locations and $1.9 million relates to ongoing operations of Northwest Motorsport locations); and $2.2 million related to severance. Duringvehicles that are leased directly from the ~~third quarter of 2023, we recorded approximately $4.8 million in additional charges related to~~manufacturer on a short-term basis. A corresponding liability is included within notes payable - floor plan - trade on the EchoPark store closures, which included $3.9 million of lease exit charges and $0.9 million related to severance. The locations within our EchoPark Segment with indefinitely suspended operations or that were closed are not considered disposed and therefore are not included in the above table disclosing the effect of disposed franchised dealerships on continued operations.accompanying unaudited condensed consolidated balance sheets.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~3. Inventories~~

~~Inventories consist of the following:~~
September 30, 2023 December 31, 2022
(In millions)
New vehicles $ 637.7 $ 449.3
Used vehicles 523.4 534.0
Service loaners 173.9 143.8
Parts, accessories and other 98.9 89.7
Inventories $ 1,433.9 $ 1,216.8

4. Property and Equipment

Property and equipment, net consists of the following:


		September 30, 2023		December 31, 2022
		(In millions)
	March 31, 2024					March 31, 2024		December 31, 2023
	(In millions)						(In millions)
Land	Land	$	487.8	$	478.2
Buildings and improvements	Buildings and improvements	1,404.0		1,365.3
Furniture, fixtures and equipment	Furniture, fixtures and equipment	557.3		504.1
Construction in progress	Construction in progress	69.7		57.0
Total, at cost	Total, at cost	2,518.8		2,404.6
Less accumulated depreciation	Less accumulated depreciation	(907.7)		(842.9)
Subtotal	Subtotal	1,611.1		1,561.7
Less assets held for sale (1)	Less assets held for sale (1)	(11.9)		—
Property and equipment, net	Property and equipment, net	$	1,599.2	$	1,561.7

(1)Classified in other current assets in the accompanying unaudited condensed consolidated balance sheets.

~~In the three and nine months ended September 30, 2023, capital~~Capital expenditures were approximately ~~$78.1~~$43.8 million and ~~$153.6~~$37.2 million ~~respectively, and~~ in the three ~~and nine~~ months ended ~~September 30, 2022, capital expenditures were approximately $97.3 million~~March 31, 2024 and ~~$197.6 million,~~2023, respectively. Capital expenditures in all periods were primarily related to ~~real estate acquisitions,~~ construction of new franchised dealerships and EchoPark and powersports stores, building improvements and equipment purchased for use in our franchised dealerships and EchoPark and powersports stores. Certain capital expenditures are recognized in the Franchised Dealerships Segment to better monitor project development costs prior to transferring the capitalized asset balance to the appropriate entity or operating segment upon project completion. Assets held for sale as of March 31, 2024 and December 31, 2023 consisted of real property not currently used in operations that we expect to dispose of in the next 12 months.

Fixed asset impairment charges for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 were approximately ~~$32.5~~$1.0 million, ~~the majority of~~ which ~~relate~~related to ~~our decisions to indefinitely suspend operations at certain locations~~capitalized IT project write-off costs associated with our ~~EchoPark Segment and~~decision to close ~~certain~~the remaining Northwest Motorsport ~~stores.~~stores in January 2024. There were no fixed asset impairment charges for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

5. Goodwill and Intangible Assets

In accordance with Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other,” we test goodwill for impairment at least annually (as of April 30 of each year) or more frequently if indications of impairment exist. The ASC also states that if an entity determines, based on an assessment of certain qualitative factors, that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative goodwill impairment test is unnecessary.

In performing a quantitative test for impairment of goodwill, we primarily use the income approach method of valuation that includes the discounted cash flow (“DCF”) method that utilizes inputs, including projected revenues, margin, terminal growth rates, discount rates and a market capitalization reconciliation.

~~We completed our annual impairment testing as of April 30, 2023 and determined there was no impairment.~~

In evaluating the recoverability of our indefinite lived franchise assets, we utilized a multi-period excess earnings method (“MPEEM”) model using unobservable inputs (Level 3) to estimate the fair value of the franchise assets for each of our franchises with recorded franchise assets. The significant assumptions in our MPEEM model include projected revenue,

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

projected operating margins, a discount rate (and estimates in the discount rate inputs) and residual growth rates. We completed our annual impairment testing as of April 30, 2023 and determined there was no impairment.

The changes in the carrying amount of goodwill for ~~September 30,~~the year ended December 31, 2023 and ~~December~~the three months ended March 31, ~~2022~~2024 were as follows:


		Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total
		(In millions)
Balance at December 31, 2021 (1)		$	251.2	$	165.2	$	—	$	416.4
Additions through current year acquisitions		5.1		—		9.2		14.3

Reductions from impairment		—		(202.9)		—		(202.9)
Prior year acquisition allocations		(34.5)		37.7		—		3.2
Balance at December 31, 2022 (2)		$	221.8	$	—	$	9.2	$	231.0
	Franchised Dealerships Segment									Franchised Dealerships Segment	EchoPark Segment	Powersports Segment	Total
	(In millions)											(In millions)
Balance at December 31, 2022 (1)
Additions through current year acquisitions	Additions through current year acquisitions	—		—		11.9		11.9
Reductions from dispositions	Reductions from dispositions	(1.8)		—		—		(1.8)

Prior year acquisition allocations	Prior year acquisition allocations	(0.4)		—		2.9		2.5
Balance at September 30, 2023 (2)		$	219.6	$	—	$	24.0	$	243.6
Prior year acquisition allocations
Prior year acquisition allocations
Balance at December 31, 2023 (1)
Additions through current year acquisitions
Reductions from dispositions
Reductions from impairment
Prior year acquisition allocations
Balance at March 31, 2024 (1)

(1)~~Net of accumulated impairment losses of $1.1 billion related to the Franchised Dealerships Segment.~~

~~(2)~~Net of accumulated impairment losses of $1.1 billion and $202.9 million related to the Franchised Dealerships Segment and the EchoPark Segment, respectively.

The carrying amount of indefinite lived franchise assets was approximately $417.4 million and $396.7 million as of September 30, 2023 and December 31, 2022, respectively. We did not record any impairment charges for the ~~nine months ended September 30, 2023 and 2022.~~

~~6. Long-Term Debt~~

~~Long-term debt consists of the following:~~
September 30, 2023 December 31, 2022
(In millions)
2021 Revolving Credit Facility (1) $ — $ —
4.625% Senior Notes due 2029 (the “4.625% Notes”) 650.0 650.0
4.875% Senior Notes due 2031 (the “4.875% Notes”) 500.0 500.0
2019 Mortgage Facility (2) 315.0 327.0
Mortgage notes to finance companies - fixed rate, bearing interest from 2.05% to 7.03% 166.3 186.6
Mortgage notes to finance companies - variable rate, bearing interest at 1.50 to 2.90 percentage points above one-month or three-month LIBOR or SOFR 76.8 116.0
Subtotal $ 1,708.1 $ 1,779.6
Debt issuance costs (24.6) (27.9)
Total debt 1,683.5 1,751.7
Less current maturities (60.4) (79.5)
Long-term debt $ 1,623.1 $ 1,672.2

~~(1)~~The interest rate on the 2021 Revolving Credit Facility (as defined below) was 135 basis points above one-month Term SOFR (as defined below) at September 30, 2023 and 110 basis points above one-month Term SOFR at December 31, 2022.

~~(2)~~The interest rate on the 2019 Mortgage Facility (as defined below) was 160 basis points above one-month Term SOFR (as defined below) at September 30, 2023 and 135 basis points above one-month Term SOFR at December 31, 2022.

~~2021 Credit Facilities~~

On April 14, 2021, we entered into an amended and restated syndicated revolving credit facility (the “2021 Revolving Credit Facility”) and amended and restated syndicated new and used vehicle floor plan credit facilities (the “2021 Floor Plan

108

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The changes in the carrying amount of franchise assets for the year ended December 31, 2023 and the three months ended March 31, 2024 were as follows:


	Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total
	(In millions)
Balance at December 31, 2022	$	371.7	$	1.9	$	23.1	$	396.7
Additions through current year acquisitions	—		—		22.6		22.6
Reductions from dispositions	—		(1.9)		—		(1.9)


Balance at December 31, 2023	$	371.7	$	—	$	45.7	$	417.4
Additions through current year acquisitions	—		—		—		—
Reductions from dispositions	—		—		—		—


Balance at March 31, 2024	$	371.7	$	—	$	45.7	$	417.4

6. Long-Term Debt

Long-term debt consists of the following:


	March 31, 2024		December 31, 2023
	(In millions)
Revolving Credit Facility (1)	$	—	$	—


4.625% Senior Notes due 2029 (the “4.625% Notes”)	650.0		650.0
4.875% Senior Notes due 2031 (the “4.875% Notes”)	500.0		500.0
Mortgage Facility (2)	307.0		311.0
Mortgage notes to finance companies - fixed rate, bearing interest from 2.05% to 7.03%	152.8		163.0
Mortgage notes to finance companies - variable rate, bearing interest at 1.50% to 2.90% above one-month or three-month SOFR	67.9		75.6


Subtotal	$	1,677.7	$	1,699.6
Debt issuance costs	(26.3)		(23.0)
Total debt	1,651.4		1,676.6
Less current maturities	(68.0)		(60.1)
Long-term debt	$	1,583.4	$	1,616.5

(1)The interest rate on the Revolving Credit Facility (as defined below) was 125 basis points above one-month Adjusted Term SOFR (as defined in the Credit Facilities) at March 31, 2024 and 125 basis points above one-month Term SOFR (as defined in the Credit Facilities) at December 31, 2023.

(2)The interest rate on the Mortgage Facility (as defined below) was 150 basis points above one-month Adjusted Term SOFR at March 31, 2024 and 150 basis points above one-month Term SOFR at December 31, 2023.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Credit Facilities

On April 14, 2021, we amended and restated our syndicated revolving credit facility (the “Revolving Credit Facility”) and our syndicated new and used vehicle floor plan credit facilities (the “Floor Plan Facilities” and, together with the ~~2021~~ Revolving Credit Facility, the ~~“2021 Credit~~“Credit Facilities”). The amendment and restatement of the ~~2021~~ Credit Facilities extended the scheduled maturity dates to April 14, 2025. On October 8, 2021, we ~~entered into an amendment to~~amended the ~~2021~~ Credit Facilities ~~(the “Credit Facility Amendment”)~~ to, among other things: (1) increase the aggregate commitments under the 2021 Revolving Credit Facility to $350.0 million (which may be increased at the Company’s option up to $400.0 million upon satisfaction of certain conditions) and the 2021 Floor Plan Facilities to $2.6 billion (which, under certain conditions, may be increased at the Company’s option up to $2.9 billion that may be allocated between the new vehicle revolving floor plan facility and the used vehicle revolving floor plan facility that comprise the 2021 Floor Plan Facilities as the Company requests, with no more than 40% of the aggregate commitments allocated to the commitments under the used vehicle revolving floor plan facility);commitments; and (2) permit the issuance of the 4.625% Notes and the 4.875% Notes. On October 7, 2022, we ~~entered into an amendment to~~amended the ~~2021~~ Credit Facilities ~~(the “Second Credit Facility Amendment”)~~ to, among other things: (i) replace the ~~2021~~ Credit Facilities’ London InterBank Offered Rate (“LIBOR”)-based Eurodollar reference interest rate option with ~~a reference interest rate option based upon one-month~~ Term SOFR (as defined in the ~~2021~~ Credit ~~Facilities) (the conversion~~Facilities, inclusive of ~~the interest rate benchmark from LIBOR to one-month Term SOFR included~~ a 10-basis point credit spread adjustment); (ii) amend the provisions relating to the basis for inclusion of real property owned by the Company or certain of its subsidiaries in the borrowing base for the ~~2021~~ Revolving Credit Facility; (iii) amend the minimum amount ~~for~~of commitments under the ~~2021~~ Revolving Credit Facility and the proportion that such commitments ~~under the 2021 Revolving Credit Facility~~ may compose of the total Credit Facility commitments made by the lenders; and (iv) adjust aspects of the offset account used for voluntary reductions to interest under the ~~2021~~ Floor Plan Facilities.

On March 13, 2024, we amended the Credit Facilities (the “Sixth Credit Facility Amendment”) to extend the maturity date to March 13, 2029, with a permitted one-year extension option thereafter, and reduce the aggregate commitments to $2.4 billion. The commitment under the new vehicle revolving floor plan facility was increased to $1.35 billion, the commitment under the used vehicle revolving floor plan facility was reduced to $700.0 million and the commitment under the revolving credit facility remained at $350.0 million. The Sixth Credit Facility Amendment also includes an accordion feature in which the aggregate commitments may be increased at the Company’s option up to $450.0 million allocated between the three facilities on a pro rata basis. The Sixth Credit Facility Amendment also contains the provision indicating that the Revolving Credit Facility commitments cannot be reduced below $50.0 million and may not consist of more than 40% of total commitments.

AsIn addition, the Sixth Credit Facility Amendment (i) increased the basket for quarterly dividends from $0.12 to $0.18 per share of qualified capital stock; (ii) provided additional flexibility for the Company to make asset sales and repurchases of its qualified capital stock; (iii) removed the covenant requiring the Company to maintain a specified consolidated liquidity ratio; and (iv) amended ~~availability~~the definition of “Adjusted Term SOFR” to clarify that it is inclusive of a 10-basis point credit spread adjustment. Amounts outstanding under the ~~2021~~Credit Facilities bear interest at rates based upon specified credit spreads above Adjusted Term SOFR.

Availability under the Revolving Credit Facility is calculated as the lesser of the current $350.0 million commitment or a borrowing base ~~calculated based on~~(the “Revolving Borrowing Base”) collateralized by certain eligible assets, less ~~the aggregate amount of~~ any outstanding letters of credit and ~~borrowings under the 2021 Revolving Credit Facility (the “2021 Revolving Borrowing Base”).~~borrowings. As of ~~September 30, 2023,~~March 31, 2024, the ~~2021~~ Revolving Borrowing Base was ~~$301.1~~$350.0 million ~~based on balances as of such date. As of September 30, 2023,~~and we had ~~no outstanding borrowings and $12.2~~$11.5 million in outstanding letters of credit ~~under the 2021 Revolving Credit Facility,~~and no borrowings, resulting in ~~$288.9~~$338.5 million ~~remaining borrowing~~of availability under the ~~2021~~ Revolving Credit Facility.

Our obligations under the ~~2021~~ Credit Facilities are guaranteed by the Company and certain ~~of our~~ subsidiaries and are secured by a pledge of substantially all of ~~our and our subsidiaries’ assets. As~~the assets of the dates presented in the accompanying unaudited condensed consolidated financial statements, the amounts outstanding under the 2021 Credit Facilities bear interest at variable rates based on specified percentages above LIBOR (subsequent to September 30, 2022, the Second Credit Facility Amendment replaced LIBOR with one-month term SOFR).guarantors. We have agreed under the ~~2021~~ Credit Facilities not to pledge any assets to any third parties (other than those explicitly allowed to be pledged by the amended terms of the ~~2021~~ Credit Facilities), including other lenders, subject to certain stated exceptions, including floor plan financing arrangements. In addition, the ~~2021~~ Credit Facilities contain certain negative covenants, including covenants which could restrict or prohibit indebtedness, liens, the payment of dividends and other ~~restricted payments,~~stockholder distributions, capital expenditures and material dispositions and acquisitions of assets, as well as other customary covenants and default provisions. Specifically, the ~~2021~~ Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to ~~$0.12~~$0.18 per share so long as no Event of Default (as defined in the ~~2021~~ Credit Facilities) has occurred and is continuing and provided that we remain in compliance with all financial covenants under the ~~2021~~ Credit Facilities. ~~Additional dividends~~Dividends greater than $0.18 per share are permitted subject to limitations on restricted payments set forth in the ~~2021~~ Credit Facilities.

4.625% Notes

On October 27, 2021, we issued $650.0 million in aggregate principal amount of 4.625% Notes, which will mature on November 15, 2029. Sonic used the net proceeds from the issuance of the 4.625% Notes, along with the net proceeds of the 4.875% Notes, to fund the acquisition of RFJ ~~Acquisition~~Auto Partners, Inc. and its subsidiaries completed in December 2021 (“RFJ Acquisition”) and to repay existing debt.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The 4.625% Notes were issued under an Indenture, dated as of October 27, 2021 (the “2029 Indenture”), by and among the Company, certain subsidiary guarantors named therein (collectively, the “Guarantors”) and U.S. Bank National Association, as trustee (the “trustee”). The 4.625% Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis initially by all of the Company’s domestic operating subsidiaries. The parent company has no independent assets or operations. The non-domestic operating subsidiary that is not a guarantor is considered minor. Under certain circumstances set forth in the 2029 Indenture, the guarantees of the certain subsidiaries of the Company comprising the EchoPark Business (as defined in the 2029 Indenture) may be released. The 2029 Indenture also provides substantial flexibility for the Company to enter into fundamental transactions involving the EchoPark Business. The 2029 Indenture provides that interest on the 4.625% Notes will be payable semi-annually in arrears on May 15 and November 15 of each year beginning May 15, 2022. The 2029 Indenture also contains other restrictive covenants and default provisions common for an issue of senior notes of this nature. The 4.625% Notes are redeemable by the Company under certain circumstances. For further discussion of the 4.625% Notes, see Note 6,

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~“Long-Term~~ “Long-Term Debt,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

4.875% Notes

On October 27, 2021, we issued $500.0 million in aggregate principal amount of 4.875% Notes, which will mature on November 15, 2031. Sonic used the net proceeds from the issuance of the 4.875% Notes, along with the net proceeds of the 4.625% Notes, to fund the RFJ Acquisition and to repay existing debt.

The 4.875% Notes were issued under an Indenture, dated as of October 27, 2021 (the “2031 Indenture”), by and among the Company, the Guarantors and the trustee. The 4.875% Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis initially by all of the Company’s domestic operating subsidiaries. The parent company has no independent assets or operations. The non-domestic operating subsidiary that is not a guarantor is considered minor. Under certain circumstances set forth in the 2031 Indenture, the guarantees of the certain subsidiaries of the Company comprising the EchoPark Business (as defined in the 2031 Indenture) may be released. The 2031 Indenture also provides substantial flexibility for the Company to enter into fundamental transactions involving the Echo-Park Business. The 2031 Indenture provides that interest on the 4.875% Notes will be payable semi-annually in arrears on May 15 and November 15 of each year beginning May 15, 2022. The 2031 Indenture also contains other restrictive covenants and default provisions common for an issue of senior notes of this nature. The 4.875% Notes are redeemable by the Company under certain circumstances. For further discussion of the 4.875% Notes, see Note 6, “Long-Term Debt,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

~~2019~~ Mortgage Facility

On November 22, 2019, we entered into a delayed draw-term loan credit agreement, which was scheduled to mature on November 22, 2024 (the ~~“2019 Mortgage~~“Mortgage Facility”). On October 11, 2021, we entered into an amendment to the ~~2019~~ Mortgage Facility to permit the consummation of the RFJ Acquisition and the issuance of the 4.625% Notes and the 4.875% Notes. On November 17, 2022, we entered into an amendment to the ~~2019~~ Mortgage Facility to, among other things, extend the scheduled maturity date to November 17, 2027.

On November 17, 2022, in connection with the closing of the ~~amendment,~~Fourth Mortgage Facility Amendment, the Company incurred a $320.0 million term loan, ~~under the 2019 Mortgage Facility with a principal amount of $320.0 million,~~ with a portion of the proceeds used to repay the entire $77.6 million principal amount of ~~the~~a prior term loan. The $320.0 million borrowing amortizes on a fixed schedule through the maturity date. In addition, the lenders under the ~~2019~~ Mortgage Facility committed to providing, upon the terms set forth in the ~~amendment~~Fourth Mortgage Facility Amendment and upon the pledging of sufficient collateral by the Company, delayed draw-term loans in an aggregate principal amount up to ~~$78.0~~$85.0 million (the “Delayed Draw Credit Facility”), and revolving loans in an aggregate principal amount not to exceed $95.0 million. Based on this, the aggregate commitments of the lenders under the Mortgage Facility equaled a total of $500.0 million, ~~outstanding. On November 18, 2022,~~after satisfaction of the conditions set forth in the Mortgage Facility, including the appraisal and pledging of collateral of a specified value. The Fourth Mortgage Facility Amendment also (i) replaced the Mortgage Facility’s LIBOR-based Eurodollar reference interest rate option one-month Term SOFR (as defined in the Mortgage Facility); and (ii) made changes to the pricing grid for loans incurred under the Mortgage Facility, specifying credit spreads based on the Company’s Consolidated Total Lease Adjusted Leverage Ratio (as defined in the Mortgage Facility). As permitted by this amendment, the Company incurred a term loan under the Delayed Draw Credit Facility with a principal amount of $7.0 ~~million. The aggregate commitments~~million on November 18, 2022.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On March 22, 2024, we entered into an amendment to the Mortgage Facility (the “Fifth Mortgage Facility Amendment”) to conform to the terms of the ~~lenders under~~Sixth Credit Facility Amendment including (i) adding certain specified share exchange transactions as permitted restricted payments and dispositions; (ii) removing the ~~2019 Mortgage Facility equal a total of $500.0 million, upon satisfaction of~~requirement that the ~~conditions set forth in the 2019 Mortgage Facility, including the appraisal and pledging of collateral of~~Company maintain a specified ~~value. The amendment also amended~~consolidated liquidity ratio; and (iii) increasing the ~~2019 Mortgage Facility~~basket for quarterly dividends from $0.12 to among other things: (1) replace the 2019 Mortgage Facility’s LIBOR-based Eurodollar reference interest rate option with a reference interest rate option based upon one-month Term SOFR (as defined in the 2019 Mortgage Facility); and (2) make changes to the pricing grid for loans incurred under the 2019 Mortgage Facility, which price is based on an incremental interest margin calculated based on the Company’s Consolidated Total Lease Adjusted Leverage Ratio (as defined in the 2019 Mortgage Facility).$0.18 per share of qualified capital stock.

~~Under the 2019 Mortgage Facility, Sonic had an initial maximum borrowing limit~~As of ~~$500.0 million, which varies based on the appraised value of the collateral underlying the 2019 Mortgage Facility. Based on balances as of September 30, 2023,~~March 31, 2024, we had ~~$315.0~~$307.0 million of outstanding borrowings and $173.0 million available under the ~~2019~~ Mortgage Facility.

Amounts outstanding under the 2019 Mortgage Facility bear interest at: (1) a specified rate above one-month Term SOFR, ranging from 1.25% to 2.25% per annum according to a performance-based pricing grid determined by the Company’s Consolidated Total Lease Adjusted Leverage Ratio as of the last day of the immediately preceding fiscal quarter (the “Performance Grid”); or (2) a specified rate above the Base Rate (as defined in the 2019 Mortgage Facility), ranging from 0.25% to 1.25% per annum according to the Performance Grid. Interest on the ~~2019~~ Mortgage Facility is paid monthly in ~~arrears calculated using the Base Rate plus the Applicable Rate (as defined in the 2019 Mortgage Facility) according to the Performance Grid. Amortized~~arrears. Amortizing principal payments are scheduled to be $4.0 million per quarter from the quarter ending March 31, 2023 through the quarter ending December 31, 2024 and $6.0 million per quarter from the quarter ending March 31, 2025 tothrough the quarter ending September 30, 2027 with the remaining balance due on ~~November 17, 2027. Prior to~~ the November 17, 2027

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

maturity ~~date, the~~date. The Company has the right to prepay ~~the~~outstanding principal ~~amount outstanding~~ at any time without premium or penalty provided the prepayment amount exceeds $0.5 million. ~~Additional dividends are permitted subject to limitations on restricted payments set forth in the 2021 Credit Facilities.~~

For further discussion of the ~~2019~~ Mortgage Facility, see Note 6, “Long-Term Debt,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Mortgage Notes to Finance Companies

As of ~~September 30, 2023,~~March 31, 2024, the weighted-average interest rate of our other outstanding mortgage notes (excluding the ~~2019~~ Mortgage Facility) was ~~5.24%~~5.20% and the total outstanding mortgage principal balance of these notes (excluding the ~~2019~~ Mortgage Facility) was approximately ~~$243.1~~$220.8 million. These mortgage notes require monthly payments of principal and interest through their respective maturities, are secured by the underlying properties and contain certain cross-default provisions. Maturity dates for these mortgage notes range from 2024 to 2033.

Covenants

The ~~2021~~ Credit Facilities and the ~~2019~~ Mortgage Facility contain certain negative covenants, including covenants which could restrict or prohibit indebtedness, liens, the payment of dividends and other restricted payments, capital expenditures and material dispositions and acquisitions of assets, as well as other customary covenants and default provisions. The ~~2021~~ Credit Facilities and the ~~2019~~ Mortgage Facility also contain limitations on our ability to pledge assets to third parties, subject to certain stated exceptions.

We were in compliance with the financial covenants under the ~~2021~~ Credit Facilities and the ~~2019~~ Mortgage Facility as of ~~September 30, 2023.~~March 31, 2024. Financial covenants include required specified ratios (as each is defined in the ~~2021~~ Credit Facilities and the ~~2019~~ Mortgage Facility) of:

Covenant

Minimum Consolidated Liquidity Ratio

Minimum Consolidated Fixed Charge Coverage Ratio

Maximum Consolidated Total Lease Adjusted Leverage Ratio

Covenant

Minimum Consolidated Fixed Charge Coverage Ratio

Maximum Consolidated Total Lease Adjusted Leverage Ratio

Required ratio

1.05

1.20

5.75

Required ratio

1.20

5.75

September 30, 2023 actual

1.27

1.60

2.87

March 31, 2024 actual

1.94

3.10

The ~~2021~~ Credit Facilities and the ~~2019~~ Mortgage Facility contain events of default, including cross defaults to other material indebtedness, change of control events and other events of default customary for syndicated commercial credit facilities. Upon the future occurrence of an event of default, we could be required to immediately repay all outstanding amounts under the ~~2021~~ Credit Facilities and the ~~2019~~ Mortgage Facility.

After giving effect to the applicable restrictions on the payment of dividends under our debt agreements, as of ~~September 30, 2023,~~March 31, 2024, we had approximately ~~$245.7~~$264.1 million of net income and retained earnings free of such restrictions. We were in compliance with all restrictive covenants under our debt agreements as of ~~September 30, 2023.~~March 31, 2024.

In addition, many of our facility leases are governed by a guarantee agreement between the landlord and us that contains financial and operating covenants. The financial covenants under the guarantee agreement are identical to those under the ~~2021~~ Credit Facilities and the ~~2019~~ Mortgage Facility with the exception of one additional financial covenant related to the ratio of EBITDAR to Rent (as defined in the guarantee agreement) with a required ratio of no less than 1.50 to 1.00. As of ~~September 30, 2023,~~March 31, 2024, the ratio was ~~12.05~~11.70 to 1.00.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. Commitments and Contingencies

Guarantees and Indemnification Obligations

In accordance with the terms of our operating lease agreements, our dealership subsidiaries, acting as lessees, generally agree to indemnify the lessor from certain exposure arising as a result of the use of the leased premises, including environmental exposure and repairs to leased property upon termination of the lease. In addition, we have generally agreed to indemnify the lessor in the event of a breach of the lease by the lessee.

In connection with dealership dispositions and facility relocations, certain of our subsidiaries have assigned or sublet to the buyer their interests in real property leases associated with such dealerships. In general, the subsidiaries retain responsibility

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

for the performance of certain obligations under such leases, including rent payments and repairs to leased property upon termination of the lease, to the extent that the assignee or the sublessee does not perform. In the event an assignee or a sublessee does not perform its obligations, Sonic remains liable for such obligations.

In accordance with the terms of agreements entered into for the sale of our dealerships, we generally agree to indemnify the buyer from certain liabilities and costs arising subsequent to the date of sale, including environmental exposure and exposure resulting from the breach of representations or warranties made in accordance with the agreements. While our exposure with respect to environmental remediation is difficult to quantify, our maximum exposure associated with these general indemnifications was approximately $8.0 million as of ~~September 30, 2023~~both March 31, 2024 and ~~there was not any material exposure with respect to these indemnifications at~~ December 31, ~~2022.~~2023. These indemnifications typically expire within a period of one to three years following the date of sale. The estimated fair value of these indemnifications was not material and the amount recorded for this contingency was not significant at ~~September 30, 2023.~~March 31, 2024.

Legal Matters

Sonic is involved, and expects to continue to be involved, in various legal and administrative proceedings arising out of the conduct of its business, including regulatory investigations and private civil actions brought by plaintiffs purporting to represent a potential class or for which a class has been certified. Although Sonic is unable to predict with certainty the ~~eventual~~ outcome of any litigation, regulatory investigation or inquiry, in the opinion of management, Sonic does not believe it is reasonably possible that its current and threatened legal proceedings will have a material adverse effect on Sonic’s business, financial position or consolidated results of operations. Given the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material adverse effect on Sonic’s financial results.

There were no significant liabilities recorded related to legal matters as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.

8. Fair Value Measurements

Assets and liabilities recorded at fair value in the accompanying unaudited condensed consolidated balance sheets as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 were as follows:


	Fair Value Based on Significant Other Observable Inputs (Level 2)						Fair Value Based on Significant Other Observable Inputs (Level 2)
	March 31, 2024					March 31, 2024		December 31, 2023
	(In millions)						(In millions)
Assets:
Cash surrender value of life insurance policies (1)
Cash surrender value of life insurance policies (1)
Cash surrender value of life insurance policies (1)
Interest rate caps designated as hedges (2)
Total assets

		Fair Value Based on Significant Other Observable Inputs (Level 2)
		September 30, 2023		December 31, 2022
		(In millions)
Assets:
Cash surrender value of life insurance policies (1)		$	41.3	$	38.2
Interest rate caps designated as hedges (2)		2.9		—
Total assets		$	44.2	$	38.2

Liabilities:

Deferred compensation plan (3)		$	24.5	$	21.1
Total liabilities		$	24.5	$	21.1

(1)Included in other assets in the accompanying unaudited condensed consolidated balance sheets.

(2)As of ~~September 30, 2023,~~March 31, 2024, approximately ~~$2.1~~$1.1 million ~~and $0.8 million were~~was included in other current assets ~~and other assets, respectively,~~ in the accompanying unaudited condensed consolidated balance sheets.

~~(3)Included~~ As of December 31, 2023, approximately $1.0 million was included in other ~~long-term liabilities~~current assets in the accompanying unaudited condensed consolidated balance sheets.

In conjunction with the approximately $75.2 million charge recorded during the second quarter of 2023 and the subsequent $4.8 million charge recorded in the third quarter of 2023 related to our decisions to indefinitely suspend operations at certain EchoPark locations and to close certain Northwest Motorsport stores discussed above, Sonic was required to adjust certain real estate assets to fair value on a non-recurring basis. After $5.7 million of adjustments during the second quarter of 2023, the recorded balances were $55.5 million at June 30, 2023. The book value of such assets may be reevaluated as changes in circumstances require. There were no instances during the three months ended September 30, 2023 that required a fair value measurement of assets ordinarily measured at fair value on a non-recurring basis.

1413

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the fair values of Sonic’s financial instruments, including receivables, notes receivable from finance contracts, notes payable – floor plan, trade accounts payable, borrowings under the revolving credit facilities and certain mortgage notes, approximated their carrying values due either to length of maturity or existence of variable interest rates that approximate prevailing market rates.

As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the fair value and the carrying value of Sonic’s significant fixed rate long-term debt were as follows:


	March 31, 2024										March 31, 2024			December 31, 2023
	Fair Value									Fair Value		Carrying Value	Fair Value		Carrying Value
	(In millions)												(In millions)
		September 30, 2023				December 31, 2022
		Fair Value		Carrying Value		Fair Value		Carrying Value
		(In millions)

4.875% Notes (1)
4.875% Notes (1)
4.875% Notes (1)	4.875% Notes (1)	$	397.5	$	500.0	$	390.3	$	500.0
4.625% Notes (1)	4.625% Notes (1)	$	536.3	$	650.0	$	519.5	$	650.0
Mortgage Notes (2)	Mortgage Notes (2)	$	159.0	$	166.3	$	174.0	$	186.6

(1)As determined by market quotations from similar securities as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively (Level 2).

(2)As determined by the ~~DCF~~discounted cash flow method (Level 2).

For further discussion of Sonic’s fair value measurements, see Note 11, “Fair Value Measurements,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

9. Segment Information

As of ~~September 30, 2023,~~March 31, 2024, Sonic had three operating segments: (1) retail automotive franchises that sell new vehicles and buy and sell used vehicles, sell replacement parts, perform vehicle maintenance, warranty and repair services, and arrange finance and insurance products (the “Franchised Dealerships Segment”); (2) pre-owned vehicle specialty retail locations that provide guests an opportunity to search our nationwide inventory, purchase a pre-owned vehicle, select finance and insurance products and sell their current vehicle to us (the “EchoPark Segment”); and (3) retail locations that sell new and used powersports vehicles, perform vehicle maintenance, warranty and repair services, and arrange finance and insurance products (the “Powersports Segment”). Sonic has determined that its operating segments also represent its reportable segments.

The reportable segments identified above are the business activities of Sonic for which discrete financial information is available and for which operating results are regularly reviewed by Sonic’s chief operating decision maker to assess operating performance and allocate resources. Sonic’s chief operating decision maker is a group of three individuals consisting of: (1) the Company’s Chief Executive Officer; (2) the Company’s President; and (3) the Company’s Chief Financial Officer.

1514

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Reportable segment financial information for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		(In millions)
Revenues:
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
		(In millions)
		(In millions)
		(In millions)
Segment Revenues:
Franchised Dealerships Segment revenues:
Franchised Dealerships Segment revenues:
Franchised Dealerships Segment revenues:	Franchised Dealerships Segment revenues:
Retail new vehicles	Retail new vehicles	$	1,546.7	$	1,359.6	$	4,550.9	$	4,047.1
Retail new vehicles
Retail new vehicles
Fleet new vehicles
Fleet new vehicles
Fleet new vehicles	Fleet new vehicles	23.2		32.0		70.4		70.0
Total new vehicles	Total new vehicles	1,569.9		1,391.6		4,621.3		4,117.1
Total new vehicles
Total new vehicles
Used vehicles
Used vehicles
Used vehicles	Used vehicles	780.7		842.4		2,322.8		2,568.1
Wholesale vehicles	Wholesale vehicles	51.4		75.8		165.3		261.2
Wholesale vehicles
Wholesale vehicles
Parts, service and collision repair
Parts, service and collision repair
Parts, service and collision repair	Parts, service and collision repair	431.8		404.7		1,289.0		1,183.4
Finance, insurance and other, net	Finance, insurance and other, net	126.0		125.8		375.4		382.1
Finance, insurance and other, net
Finance, insurance and other, net
Franchised Dealerships Segment revenues
Franchised Dealerships Segment revenues
Franchised Dealerships Segment revenues	Franchised Dealerships Segment revenues	$	2,959.8	$	2,840.3	$	8,773.8	$	8,511.9

EchoPark Segment revenues:	EchoPark Segment revenues:

EchoPark Segment revenues:

EchoPark Segment revenues:
Retail new vehicles
Retail new vehicles
Retail new vehicles	Retail new vehicles	$	—	$	1.6	$	1.0	$	7.3
Used vehicles	Used vehicles	554.8		511.4		1,651.3		1,601.3
Used vehicles
Used vehicles
Wholesale vehicles
Wholesale vehicles
Wholesale vehicles	Wholesale vehicles	26.6		38.9		89.1		143.3

Finance, insurance and other, net	Finance, insurance and other, net	45.3		38.9		136.4		121.8

Finance, insurance and other, net

Finance, insurance and other, net
EchoPark Segment revenues
EchoPark Segment revenues
EchoPark Segment revenues	EchoPark Segment revenues	$	626.7	$	590.8	$	1,877.8	$	1,873.7

Powersports Segment revenues:	Powersports Segment revenues:

Powersports Segment revenues:

Powersports Segment revenues:
Retail new vehicles
Retail new vehicles
Retail new vehicles	Retail new vehicles	$	26.8	$	10.6	$	72.5	$	13.0

Used vehicles	Used vehicles	4.9		2.0		17.1		5.0

Used vehicles

Used vehicles
Wholesale vehicles
Wholesale vehicles
Wholesale vehicles	Wholesale vehicles	1.3		—		1.9		0.3
Parts, service and collision repair	Parts, service and collision repair	21.6		3.5		38.6		5.2
Parts, service and collision repair
Parts, service and collision repair
Finance, insurance and other, net	Finance, insurance and other, net	2.4		0.9		5.9		1.4
Finance, insurance and other, net
Finance, insurance and other, net
Powersports Segment revenues
Powersports Segment revenues
Powersports Segment revenues	Powersports Segment revenues	$	57.0	$	17.0	$	136.0	$	24.9

Total consolidated revenues	Total consolidated revenues	$	3,643.5	$	3,448.1	$	10,787.6	$	10,410.5

Total consolidated revenues

Total consolidated revenues


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		(In millions)
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
		(In millions)
		(In millions)
		(In millions)
Segment Income (Loss) (1):	Segment Income (Loss) (1):
Franchised Dealerships Segment		$	101.5	$	146.3	$	357.2	$	472.2
EchoPark Segment		(16.9)		(31.1)		(116.5)		(100.6)
Franchised Dealerships Segment (2)
Franchised Dealerships Segment (2)
Franchised Dealerships Segment (2)
EchoPark Segment (3)
EchoPark Segment (3)
EchoPark Segment (3)
Powersports Segment
Powersports Segment
Powersports Segment	Powersports Segment	6.6		1.2		9.2		0.9
Total segment income	Total segment income	$	91.2	$	116.4	$	249.9	$	372.5
Impairment charges		—		—		(62.6)		—
Total segment income
Total segment income
Impairment charges (4)
Impairment charges (4)
Impairment charges (4)
Income before taxes	Income before taxes	$	91.2	$	116.4	$	187.3	$	372.5
Income before taxes
Income before taxes

(1)Segment income (loss) for each segment is defined as income (loss) before taxes and impairment charges.

(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.

(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.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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.


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Impairment Charges:
Franchised Dealerships Segment	$	1.0	$	—
EchoPark Segment	—		—
Powersports Segment	—		—
Total impairment charges	$	1.0	$	—


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Depreciation and Amortization:
Franchised Dealerships Segment	$	29.8	$	26.5
EchoPark Segment	5.5		7.0
Powersports Segment	1.0		0.8
Total depreciation and amortization	$	36.3	$	34.3


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Floor Plan Interest Expense:
Franchised Dealerships Segment	$	16.0	$	9.9
EchoPark Segment	3.8		4.6
Powersports Segment	0.5		0.1
Total floor plan interest expense	$	20.3	$	14.6


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Interest Expense, Other, Net:
Franchised Dealerships Segment	$	27.8	$	26.9
EchoPark Segment	0.7		0.9
Powersports Segment	0.5		0.6
Total interest expense, other, net	$	29.0	$	28.4

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		(In millions)
Depreciation and Amortization:
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
		(In millions)
		(In millions)
		(In millions)
Segment Capital Expenditures:
Franchised Dealerships Segment
Franchised Dealerships Segment
Franchised Dealerships Segment	Franchised Dealerships Segment	$	28.2	$	25.8	$	82.8	$	75.8
EchoPark Segment	EchoPark Segment	6.1		6.8		20.4		17.7
EchoPark Segment
EchoPark Segment
Powersports Segment	Powersports Segment	0.9		0.2		2.5		0.5
Total depreciation and amortization		$	35.2	$	32.8	$	105.7	$	94.0
Powersports Segment
Powersports Segment
Total capital expenditures
Total capital expenditures
Total capital expenditures

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(In millions)
Floor Plan Interest Expense:
Franchised Dealerships Segment (1) $ 12.9 $ 6.6 $ 34.7 $ 13.9
EchoPark Segment 4.3 3.0 13.6 6.7
Powersports Segment 0.2 — 0.6 —
Total floor plan interest expense $ 17.4 $ 9.6 $ 48.9 $ 20.6

~~(1)~~Amount is net of interest earned on the floor plan deposit balance of $5.0 million and $0.9 million in the three months ended September 30, 2023 and 2022, respectively, and $13.8 million and $2.3 million in the nine months ended September 30, 2023 and 2022, respectively.

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(In millions)
Interest Expense, Other, Net:
Franchised Dealerships Segment $ 27.9 $ 21.4 $ 82.2 $ 61.7
EchoPark Segment 0.7 1.1 2.5 3.0
Powersports Segment 0.4 0.4 1.5 0.4
Total interest expense, other, net $ 29.0 $ 22.9 $ 86.2 $ 65.1

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(In millions)
Capital Expenditures:
Franchised Dealerships Segment $ 72.1 $ 43.8 $ 137.3 $ 95.8
EchoPark Segment 5.4 53.5 14.1 101.8
Powersports Segment 0.6 — 2.2 —
Total capital expenditures $ 78.1 $ 97.3 $ 153.6 $ 197.6

September 30, 2023

December 31, 2022

(In millions)

Assets:

March 31, 2024

(In millions)

Segment Assets:

Franchised Dealerships Segment

3,806.0

4,091.7

EchoPark Segment

700.9

267.6

EchoPark Segment

Powersports Segment

208.8

117.8

Corporate and other:

Cash and cash equivalents

34.6

229.2

Cash and cash equivalents

Floor plan deposit balance

300.0

272.0

Total assets

5,050.3

4,978.3

Total assets

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes thereto, as well as the consolidated financial statements and related notes thereto, “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Unless otherwise noted, we present the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations on a consolidated basis. To the extent that we believe a discussion of the differences among reportable segments will enhance a reader’s understanding of our financial condition, cash flows and other changes in financial condition and results of operations, the differences are discussed separately. Certain amounts and percentages may not compute due to rounding.

Unless otherwise noted, all discussion of increases or decreases are for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 compared to the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~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.~~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.

Overview

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 ~~September 30, 2023:~~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 ~~September 30, 2023,~~March 31, 2024, we operated 108 stores in the Franchised Dealerships Segment, 2518 stores in the EchoPark Segment and 13 stores in the Powersports Segment. The Franchised Dealerships Segment consists of ~~134~~132 new vehicle franchises (representing 2826 different brands of cars and light trucks) and 16 collision repair centers in 18 states. AsThe EchoPark Segment consists of ~~September 30, 2023, we operated 25 EchoPark~~18 stores in ~~11 states, including 7 Northwest Motorsport pre-owned vehicle stores acquired~~10 states. The Powersports Segment consists of nine franchises in ~~the RFJ Acquisition in December 2021 that are included in the EchoPark Segment.~~two states.

The Franchised Dealerships Segment provides comprehensive sales and services, including (1) sales of both new and used cars and light trucks; (2) sales of replacement parts and performance of vehicle maintenance, manufacturer warranty repairs, and paint and collision repair services (collectively, “Fixed Operations”); and (3) arrangement of third-party financing, extended warranties, service contracts, insurance and other aftermarket products (collectively, “F&I”) for our guests. The EchoPark Segment sells used cars and light trucks and arranges third-party F&I product sales for our guests in pre-owned vehicle specialty retail locations, and does not offer customer-facing Fixed Operations services. The Powersports Segment offers guests: (1) sales of both new and used powersports vehicles (such as motorcycles, personal watercraft and all-terrain vehicles); (2) Fixed Operations activities; and (3) F&I services. All three segments generally operate independently of one another with the exception of certain shared back-office functions and corporate overhead costs.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

Retail Automotive Industry Performance

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 ~~16% and 13%~~1% for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 to approximately ~~15.5~~15.4 million vehicles, ~~in each period,~~ compared to approximately ~~13.4 million and 13.7~~15.3 million vehicles for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, according to the Power Information Network (“PIN”) from J.D. Power. We currently estimate the ~~full year 2023~~2024 new vehicle industry volume will be between 15.5 million vehicles ~~(an increase of 13%~~(flat compared to ~~2022)~~2023) and 16.0 million vehicles (an increase of ~~17%~~3% compared to ~~2022)~~2023). The ~~ongoing~~ effects of ~~supply chain disruptions as a result of the COVID-19 pandemic, availability of new and used vehicle inventory,~~ 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 ~~2023~~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 ~~increased 13% and 8%, to~~remained flat at approximately 12.6 million ~~and 12.7 million~~ vehicles for both the three ~~and nine~~ months ended ~~September 30, 2023, respectively, from approximately 11.2 million~~March 31, 2024 and ~~11.8 million vehicles for the three and nine months ended September 30, 2022, respectively.~~

~~Impact of COVID-19 and Supply Chain Disruptions~~

The global automotive supply chain has been significantly disrupted since the onset of the COVID-19 pandemic, primarily related to the production of semiconductors and other components that are used in many modern automobiles, in addition to workforce-related production delays and stoppages. As a result, automobile manufacturing has operated for multiple years at lower than usual production levels, reducing the amount of new vehicle inventory and certain parts inventory available to our dealerships. These inventory constraints have led to low new and used vehicle inventory and a volatile new and used vehicle pricing environment. New vehicle and certain parts production levels have improved through the first nine months of 2023; however, there is a risk that higher production levels and new vehicle inventory on hand may not result in incremental retail new vehicle sales volume, which could cause new vehicle industry volume to vary from our expectations.

During the third quarter of 2023, the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the “UAW”) commenced a labor strike against certain automobile manufacturers and automotive parts suppliers in North America. Depending on the length and severity of the UAW strike, certain manufacturers’ vehicle and parts inventory levels may decrease, causing disruption to our business and/or higher vehicle or parts prices for consumers. While we believe our diversified brand portfolio may somewhat mitigate the risk to our business, it is difficult to predict the potential length of the UAW strike and its potential impact on our business and financial results of operations.2023.

Franchised Dealerships Segment

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. Unless otherwise noted, all comparisons are to the prior year period.

Retail new vehicle revenue increased ~~15% and 12%~~3% during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, driven primarily by a ~~12% and 8%~~5% increase in retail new vehicle unit sales volume, ~~respectively, and~~partially offset by a 2% ~~and 4% increase~~decrease in retail new vehicle average selling ~~prices, respectively.~~prices. Retail new vehicle gross profit decreased ~~21% and 20%~~29% during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, due primarily to ~~higher inventory invoice costs and~~ increased price competition as a result of higher levels of available inventory and higher inventory invoice cost, which ~~drove~~combined to drive lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased ~~$1,988~~$1,783 per unit, or ~~30%~~32%, to ~~$4,678~~$3,716 per unit during the three months ended ~~September 30, 2023, and decreased $1,734 per unit, or 26%, to $5,056 per unit during the nine months ended September~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

30, 2023. We generally focus on maintaining Franchised Dealerships Segment new 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.March 31, 2024. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 3350 and 1931 days as of ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively.~~respectively, as a result of increased manufacturer production levels.

Retail used vehicle revenue decreased ~~7% and 9%~~4% during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, driven primarily by a ~~3% and~~ 7% decrease in retail used vehicle ~~unit sales volume, respectively. Retail used vehicle gross profit decreased 5% during both the three and nine months ended September 30, 2023, primarily due to the decrease~~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 ~~$36~~$46 per unit, or 2%3%, to ~~$1,668~~$1,585 per unit during the three months ended ~~September 30, 2023,~~March 31, 2024 due primarily to higher inventory acquisition costs and lower selling prices due to increased ~~$30~~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 2%110%, ~~to $1,694 per unit during the nine months ended September 30, 2023. The primary driver~~worsening of ~~the decrease~~ in ~~retail used~~wholesale vehicle gross profit (loss) per unit during the three months ended September 30, 2023 was the decrease in retail used vehicle unit sales volume. Wholesale vehicle gross profit increased approximately $0.5 million and $2.5 million during the three and nine months ended September 30, 2023, respectively, due primarily to a $59 per unit, or 18%, decrease in wholesale vehicle gross profit per unit during the three months ended September 30, 2023 and a $139 per unit, or 101%, improvement in wholesale vehicle gross profit per unit during the nine months ended September 30, 2023.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 3129 days as of ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively.

Fixed Operations revenue increased ~~8% and 9%~~5% during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, and Fixed Operations gross profit increased ~~8% and 9%~~6% during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~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 1070 basis points, to ~~49.7%~~50.1%, during the three months ended ~~September 30, 2023,~~March 31, 2024, primarily driven by an increase in warranty revenue contribution and ~~increased 10 basis points, to 49.6%, during the nine months ended September 30, 2023.~~higher customer pay and warranty gross margin.

F&I revenue increased ~~3% and remained flat~~4% during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, driven ~~primarily~~ by ~~decreases~~a 4% increase in ~~F&I gross profit per~~total retail ~~unit.~~vehicle unit sales volume. F&I gross profit per retail unit decreased ~~$118~~$20 per unit, or 5%1%, to ~~$2,407 per unit, and increased $8 per unit to $2,437~~$2,350 per unit during the three ~~and nine~~ months ended ~~September 30, 2023, respectively.~~

~~EchoPark Segment~~

~~The following discussion of EchoPark Segment used vehicles, wholesale vehicles,~~March 31, 2024. We believe that our proprietary software applications, playbook processes 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. ~~Unless otherwise noted, all comparisons are~~guest-centric selling approach enable us to ~~the prior year period.~~

On June 22, 2023, Sonic announced a plan to indefinitely suspend operations at eight EchoPark locations and 14 related delivery/buy centers. In addition, during the third quarter of 2023 we closed three Northwest Motorsport pre-owned locations within the EchoPark segment. In connection with these decisions, Sonic recorded a charge totaling approximately $75.2 million during the second quarter of 2023. This charge included impairments of $32.5 million related to fixed assets, $16.0 million related to right-of-use assets and $14.1 million related to cease-use accruals; $0.4 million related to lease exit charges; $10.0 million of inventory valuation adjustments (of which $5.8 million relates to stores with ongoing operations at EchoPark locations and $1.9 million relates to ongoing operations of Northwest Motorsport locations); and $2.2 million related to severance. During the third quarter of 2023, we recorded approximately $4.8 million in additional charges related to the EchoPark store closures, which included $3.9 million of lease exit charges and $0.9 million related to severance. We expect expenses related to the EchoPark store closures of approximately $1.5 million to $2.0 million per quarter (excluding any amounts related to exiting leased or owned properties).

Reported EchoPark Segment revenues increased 6% and remained flat during the three and nine months ended September 30, 2023, respectively, driven primarily by an increase in retail used vehicle unit sales volume, offset partially by a decrease in average unit selling prices. Reported totaloptimize F&I gross profit ~~increased 22% during the three months ended September 30, 2023, primarily due to an increase in retail used vehicle gross profit~~and penetration rates (the number of F&I products sold per unit and higher retail used vehicle unit sales volume. Reported total gross profit decreased 11% during the nine months ended September 30, 2023 primarily due to a decrease in retail used vehicle gross profit (loss) per unit (including the effect of inventory valuation adjustments recorded in the second quarter of 2023), offset partially by higher retail used vehicle unit sales volume.

Reported retail used vehicle revenue increased 9% and 3% during the three and nine months ended September 30, 2023, respectively, driven primarily by an increase in retail used vehicle unit sales volume.vehicle) across our F&I ~~revenue increased 17% and 12%~~product lines.

2019

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EchoPark Segment

In January 2024, we closed the remaining seven Northwest Motorsport stores following the closure of three Northwest Motorsport stores in the third quarter of 2023.

Reported total revenues decreased 14% during the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, driven primarily by ana 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.

Reported retail used vehicle revenue decreased 16% during the three months ended March 31, 2024, driven primarily by the decrease in retail used vehicle unit sales volume. F&I revenue decreased 4% during the three months ended March 31, 2024, driven primarily by the decrease in retail used vehicle unit sales volume, offset partially by a ~~decrease~~6% increase in F&I gross profit per unit. Reported combined retail used vehicle and F&I gross profit per unit ~~decreased $101~~increased $1,049 per unit, or 4%55%, to ~~$2,767~~$2,955 per unit during the three months ended ~~September 30, 2023, and decreased $680 per unit, or 25%, to $2,095 per unit during the nine months ended September 30, 2023,~~March 31, 2024, due primarily to ~~higher inventory acquisition costs as~~ a ~~result of increases~~150% increase in ~~wholesale auction prices during the three~~retail used vehicle gross profit per unit and ~~nine months ended September 30, 2023.~~a 6% increase in F&I gross profit per unit.

Reported wholesale vehicle gross profit ~~increased~~decreased approximately ~~$0.2~~$1.7 million during the three months ended ~~September 30, 2023,~~March 31, 2024, primarily due to ~~an increase in wholesale vehicle gross profit per unit, and decreased approximately $2.3 million during the nine months ended September 30, 2023, 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 3736 and 5748 days as of ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively.

Same market total revenues increased ~~73% and 50%~~12% during the three ~~and nine~~ months ended ~~September 30, 2023, respectively, driven~~March 31, 2024, primarily ~~by an~~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 ~~126% and 92%~~79% during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, driven primarily by ana 150% increase in retail used vehicle ~~unit sales volume.~~gross profit per unit.

Powersports Segment

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. In the third quarter of 2022, we acquired one powersports business with seven locations, and, in the first quarter of 2023, we acquired one powersports business with five locations.

In the three and nine months ended September 30, 2023, reported total revenue was $57.0 million and $136.0 million, respectively, and reported total gross profit was $20.8 million and $43.4 million, respectively.

Reported retail new vehicle revenue ~~for~~decreased 24% during the three ~~and nine~~ months ended ~~September 30, 2023 was $26.8 million and $72.5 million, respectively, and reported~~March 31, 2024, primarily driven by a 24% decrease in retail new vehicle unit sales volume. Retail new vehicle gross profit ~~was $5.9 million and $14.3 million, respectively, based on~~decreased 43% during the three months ended March 31, 2024, as a ~~retail new vehicle average selling price~~result of ~~$19,271 and $18,618, respectively, and~~ a 25% decrease in retail new vehicle gross profit per unit ~~of $4,213~~and lower retail new vehicle unit sales volume. Retail new vehicle gross profit per unit ~~and $3,680~~decreased $897 per unit, ~~respectively.~~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 ~~107~~225 and 140 days as of ~~September 30, 2023. We believe that in a normal~~March 31, 2024 and 2023, respectively, varying based on manufacturer production ~~environment, the level of new vehicle inventory days’ supply in our Powersports Segment should be in the 90- to 120-day range, depending on~~levels, consumer demand and seasonality.

Reported retail used vehicle revenue ~~for~~decreased 30% during the three ~~and nine~~ months ended ~~September 30, 2023 was $4.9 million and $17.1 million, respectively, and reported retail used vehicle gross profit was $2.4 million and $4.7 million, respectively, based on~~March 31, 2024, primarily driven by a 24% decrease in retail used vehicle average selling ~~price~~prices and an 8% decrease in retail used vehicle unit sales volume. Retail used vehicle gross profit decreased 10% during the three months ended March 31, 2024, as a result of ~~$5,807 and $8,683, respectively, and a~~lower retail used vehicle unit sales volume. Retail used vehicle gross profit per unit ~~of $2,833~~decreased $143 per unit, ~~and $2,407~~or 6%, to $2,185 per unit, ~~respectively.~~due primarily to lower retail used vehicle average selling prices. On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days’ supply was approximately 3799 and 133 days as of ~~September 30,~~March 31, 2024 and 2023, due primarily to seasonally elevated sales in the quarter ended September 30, 2023. Going forward, we generally expect to maintain a used vehicle inventory days’ supply in our Powersports Segment in the 75- to 100-day range, depending on seasonality.respectively.

Reported Fixed Operations revenue ~~for~~remained flat during the three ~~and nine~~ months ended ~~September 30, 2023 was $21.6 million~~March 31, 2024, and ~~$38.6 million, respectively, and reported~~ Fixed Operations gross profit was $10.2 million and $18.5 million, respectively. Customer pay revenue for the three and nine months ended September 30, 2023 was $4.5 million and $10.5 million, respectively, and customer pay gross profit was $2.7 million and $6.0 million, respectively. Warranty revenue for the three and nine months ended September 30, 2023 was $0.5 million and $1.3 million, respectively, and warranty gross profit was $0.3 million and $0.7 million, respectively. Wholesale parts revenue for the three and nine months ended September 30, 2023 was $0.2 million and $0.5 million, respectively. There was no wholesale parts gross profit fordecreased 6% during the three months ended ~~September 30, 2023 and wholesale parts~~March 31, 2024, driven primarily by lower repair order volume. Fixed Operations gross ~~profit for~~margin decreased 250 basis points to 46.4% during the ~~nine~~three months ended ~~September 30, 2023 was $0.1 million. Internal, sublet~~March 31, 2024, driven primarily by a decrease in customer pay revenue contribution and ~~other revenue for the three and nine months ended September 30, 2023 was $16.4 million and $26.3 million, respectively, and internal, sublet and other~~lower customer pay gross ~~profit was $7.2 million and $11.7 million, respectively.~~margin.

Reported F&I revenue ~~for~~remained flat during the three ~~and nine~~ months ended ~~September 30, 2023 was $2.4 million~~March 31, 2024, driven primarily by a 19% decrease in combined retail new and ~~$5.9 million, respectively, based on~~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 ~~of $1,075~~increased $217 per unit, ~~and $1,006~~or 22%, to $1,197 per unit ~~respectively.~~during the three months ended March 31, 2024.

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.

2120

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations – Consolidated

As a result of the acquisition, disposition, termination or closure of certain franchised dealership stores and EchoPark stores ~~since the beginning of 2022,~~in 2023 and 2024, the change in consolidated reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores.

New Vehicles – Consolidated

New vehicle revenues include the sale of new vehicles, including new powersports vehicles, to retail customers, as well as the sale of fleet vehicles to businesses for use in their operations. New vehicle revenues and gross profit can be influenced by vehicle manufacturer incentives to consumers (which vary from cash-back incentives to low interest rate financing, among other things), the availability of consumer credit and the level and type of manufacturer-to-dealer incentives, as well as manufacturers providing adequate inventory allocations to our dealerships to meet consumer demand. The automobile manufacturing industry is cyclical and historically has experienced periodic downturns characterized by oversupply and weak demand, both within specific brands and in the industry as a whole. As an automotive retailer, we seek to mitigate the effects of this sales cycle by maintaining a diverse brand mix of dealerships. Our brand diversity allows us to offer a broad range of products at a wide range of prices from lower-priced economy ~~vehicles~~automobiles to luxury ~~vehicles~~automobiles and powersports vehicles.

2221

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues by brand for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022:~~2023:


		Three Months Ended September 30,				Nine Months Ended September 30,
Brand		2023		2022		2023		2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
New Vehicle Brand
New Vehicle Brand
New Vehicle Brand
Luxury:
Luxury:
Luxury:	Luxury:
BMW	BMW	24	%	25	%	25	%	25	%
BMW
BMW
Mercedes	Mercedes	13	%	14	%	14	%	13	%
Mercedes
Mercedes
Lexus
Lexus
Lexus
Audi	Audi	7	%	6	%	6	%	6	%
Lexus		5	%	5	%	5	%	5	%
Audi
Audi
Land Rover
Land Rover
Land Rover
Porsche	Porsche	4	%	4	%	4	%	4	%
Land Rover		4	%	3	%	4	%	3	%
Porsche
Porsche
Cadillac
Cadillac
Cadillac	Cadillac	2	%	2	%	2	%	2	%
Volvo	Volvo	1	%	1	%	1	%	1	%
Volvo
Volvo
MINI
MINI
MINI	MINI	1	%	1	%	1	%	—	%
Other Luxury (1)	Other Luxury (1)	1	%	—	%	—	%	—	%
Other Luxury (1)
Other Luxury (1)
Total Luxury
Total Luxury
Total Luxury	Total Luxury	62	%	61	%	62	%	59	%
Mid-line Import:	Mid-line Import:
Mid-line Import:
Mid-line Import:
Honda
Honda
Honda	Honda	11	%	8	%	11	%	8	%
Toyota	Toyota	10	%	9	%	9	%	9	%
Toyota
Toyota
Volkswagen
Volkswagen
Volkswagen	Volkswagen	2	%	2	%	2	%	2	%
Hyundai	Hyundai	1	%	2	%	1	%	2	%
Hyundai
Hyundai
Other Mid-line Import (2)
Other Mid-line Import (2)
Other Mid-line Import (2)	Other Mid-line Import (2)	—	%	—	%	—	%	1	%
Total Mid-line Import	Total Mid-line Import	24	%	21	%	23	%	22	%
Total Mid-line Import
Total Mid-line Import
Domestic:
Domestic:
Domestic:	Domestic:
General Motors (3)	General Motors (3)	5	%	7	%	6	%	7	%
General Motors (3)
General Motors (3)
Chrysler
Chrysler
Chrysler	Chrysler	5	%	6	%	5	%	6	%
Ford	Ford	4	%	5	%	4	%	6	%
Ford
Ford
Total Domestic
Total Domestic
Total Domestic	Total Domestic	14	%	18	%	15	%	19	%
Total	Total	100	%	100	%	100	%	100	%
Total
Total

(1)Includes Alfa Romeo, Infiniti, Jaguar and Maserati.

(2)Includes Mazda, Nissan and Subaru.

(3)Includes Buick, Chevrolet and GMC.

The U.S. retail automotive industry’s new vehicle unit sales volume below reflects all brands marketed or sold in the U.S. This industry sales volume includes brands we do not sell and markets in which we do not operate, therefore, changes in our new vehicle unit sales volume may not trend directly in line with changes in the industry new vehicle unit sales volume. We believe that the industry retail new vehicle unit sales volume is a more meaningful metric for comparing our new vehicle unit sales volume to the industry due to our minimal fleet vehicle business.

U.S. retail new vehicle SAAR, fleet new vehicle seasonally adjusted annual rate of unit sales volume (the “fleet new vehicle SAAR”) and total new vehicle SAAR were as follows:


		Three Months Ended September 30,		Better / (Worse)		Nine Months Ended September 30,		Better / (Worse)
		2023	2022	% Change		2023	2022	% Change
		(In millions of vehicles)
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
		(In millions of vehicles)
		(In millions of vehicles)
		(In millions of vehicles)
U.S. Retail new vehicle SAAR (1)	U.S. Retail new vehicle SAAR (1)	12.6	11.2	13	%	12.7	11.8	8	%
U.S. Fleet new vehicle SAAR	U.S. Fleet new vehicle SAAR	2.9	2.2	32	%	2.8	1.9	47	%
U.S. Fleet new vehicle SAAR
U.S. Fleet new vehicle SAAR
U.S. Total new vehicle SAAR (1)	U.S. Total new vehicle SAAR (1)	15.5	13.4	16	%	15.5	13.7	13	%
U.S. Total new vehicle SAAR (1)
U.S. Total new vehicle SAAR (1)

(1)Source: PIN from J.D. Power

2322

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our consolidated reported new vehicle results (combined retail and fleet data) were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																						Three Months Ended March 31,												Better / (Worse)
	2024																	2024								2023							Change							% Change
	(In millions, except unit and per unit data)																																(In millions, except unit and per unit data)
Reported new vehicle:	Reported new vehicle:
Retail new vehicle revenue
Retail new vehicle revenue
Retail new vehicle revenue	Retail new vehicle revenue	$	1,573.5		$	1,371.8		$	201.7	15	%	$	1,455.8			$			$	1,442.8			$				$	13.0			1				1		%
Fleet new vehicle revenue	Fleet new vehicle revenue	23.2			32.0			(8.8)		(28)	%	Fleet new vehicle revenue		19.6			18.8					18.8				0.8					0.8			4					4	%
Total new vehicle revenue	Total new vehicle revenue	$	1,596.7		$	1,403.8		$	192.9	14	%	Total new vehicle revenue		$	1,475.4		$				$	1,461.6			$				$	13.8		1					1		%

Retail new vehicle gross profit	Retail new vehicle gross profit	$	131.4		$	162.2		$	(30.8)	(19)	%
Retail new vehicle gross profit
Retail new vehicle gross profit														$	96.4						$	138.1							$	(41.7)						(30)		%
Fleet new vehicle gross profit	Fleet new vehicle gross profit	0.9			1.3			(0.4)		(31)	%	Fleet new vehicle gross profit		0.7			0.9					0.9				(0.2)					(0.2)			(22)					(22)	%
Total new vehicle gross profit	Total new vehicle gross profit	$	132.3		$	163.5		$	(31.2)	(19)	%	Total new vehicle gross profit		$	97.1		$				$	139.0			$				$	(41.9)		(30)					(30)		%

Retail new vehicle unit sales
Retail new vehicle unit sales
Retail new vehicle unit sales	Retail new vehicle unit sales	28,260			24,776			3,484		14	%	26,142				25,657				25,657				485					485			2					2		%
Fleet new vehicle unit sales	Fleet new vehicle unit sales	469			672			(203)		(30)	%	Fleet new vehicle unit sales		379			441					441				(62)					(62)			(14)					(14)	%
Total new vehicle unit sales	Total new vehicle unit sales	28,729			25,448			3,281		13	%	Total new vehicle unit sales		26,521			26,098					26,098				423					423			2					2	%

Revenue per new retail unit	Revenue per new retail unit	$	55,678		$	55,366		$	312	1	%
Revenue per new retail unit
Revenue per new retail unit														$	55,689						$	56,233							$	(544)						(1)		%
Revenue per new fleet unit	Revenue per new fleet unit	$	49,495		$	47,636		$	1,859	4	%	Revenue per new fleet unit		$	51,708		$				$	42,680			$				$	9,028		21					21		%
Total revenue per new unit	Total revenue per new unit	$	55,577		$	55,162		$	415	1	%	Total revenue per new unit		$	55,632		$				$	56,004			$				$	(372)		(1)					(1)		%

Gross profit per new retail unit
Gross profit per new retail unit
Gross profit per new retail unit	Gross profit per new retail unit	$	4,649		$	6,547		$	(1,898)	(29)	%	$	3,688			$			$	5,381			$				$	(1,693)			(31)				(31)		%
Gross profit per new fleet unit	Gross profit per new fleet unit	$	2,046		$	1,955		$	91	5	%	Gross profit per new fleet unit		$	1,706		$				$	2,020			$				$	(314)		(16)					(16)		%
Total gross profit per new unit	Total gross profit per new unit	$	4,607		$	6,426		$	(1,819)	(28)	%	Total gross profit per new unit		$	3,660		$				$	5,325			$				$	(1,665)		(31)					(31)		%

Retail gross profit as a % of revenue	Retail gross profit as a % of revenue	8.4		%	11.8		%	(340)		bps
Retail gross profit as a % of revenue
Retail gross profit as a % of revenue														6.6		%					9.6		%						(300)							bps
Fleet gross profit as a % of revenue	Fleet gross profit as a % of revenue	4.1		%	4.1		%	—		bps		Fleet gross profit as a % of revenue		3.3		%					4.7		%						(140)			bps						bps
Total new vehicle gross profit as a % of revenue	Total new vehicle gross profit as a % of revenue	8.3		%	11.6		%	(330)		bps		Total new vehicle gross profit as a % of revenue		6.6		%					9.5		%						(290)			bps						bps

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported new vehicle:
Retail new vehicle revenue $ 4,624.4 $ 4,067.4 $ 557.0 14 %
Fleet new vehicle revenue 70.4 70.0 0.4 1 %
Total new vehicle revenue $ 4,694.8 $ 4,137.4 $ 557.4 13 %
Retail new vehicle gross profit $ 410.9 $ 498.2 $ (87.3) (18) %
Fleet new vehicle gross profit 3.1 3.1 — — %
Total new vehicle gross profit $ 414.0 $ 501.3 $ (87.3) (17) %
Retail new vehicle unit sales 82,671 73,890 8,781 12 %
Fleet new vehicle unit sales 1,500 1,454 46 3 %
Total new vehicle unit sales 84,171 75,344 8,827 12 %
Revenue per new retail unit $ 55,938 $ 55,046 $ 892 2 %
Revenue per new fleet unit $ 46,918 $ 48,176 $ (1,258) (3) %
Total revenue per new unit $ 55,777 $ 54,913 $ 864 2 %
Gross profit per new retail unit $ 4,970 $ 6,742 $ (1,772) (26) %
Gross profit per new fleet unit $ 2,059 $ 2,133 $ (74) (3) %
Total gross profit per new unit $ 4,918 $ 6,653 $ (1,735) (26) %
Retail gross profit as a % of revenue 8.9 % 12.2 % (330) bps
Fleet gross profit as a % of revenue 4.4 % 4.4 % — bps
Total new vehicle gross profit as a % of revenue 8.8 % 12.1 % (330) bps

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.

Used Vehicles – Consolidated

Used vehicle revenues include the sale of used vehicles, including used powersports vehicles, to retail customers and at wholesale. Used vehicle revenues are directly affected by a number of factors, including consumer demand for used vehicles, the pricing and level of manufacturer incentives on new vehicles, the number and quality of trade-ins and lease turn-ins available to our dealerships, the availability and pricing of used vehicles acquired at wholesale auction, and the availability of consumer credit.

As a result of low levels of new vehicle inventory and a heightened demand for used vehicles by automobile dealers and rental car companies at wholesale auction, used vehicle prices reached an all-time high in 2022 and remain elevated above historical levels. Depending on the mix of inventory sourcing (trade-ins or purchases from customers versus wholesale auction), the days’ supply of used vehicle inventory, and the pricing strategy employed by the dealership, retail used vehicle gross profit per unit and retail used vehicle gross profit as a percentage of revenue may vary significantly from historical levels given recent trends in the ~~current~~ used vehicle environment.

2523

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our consolidated reported retail used vehicle results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																						Three Months Ended March 31,											Better / (Worse)
	2024																	2024							2023							Change						% Change
	(In millions, except unit and per unit data)																															(In millions, except unit and per unit data)
Reported retail used vehicle:	Reported retail used vehicle:
Revenue
Revenue
Revenue	Revenue	$	1,340.4		$	1,355.8		$	(15.4)	(1)	%	$	1,215.6			$			$	1,344.9			$			$	(129.3)			(10)				(10)	%
Gross profit	Gross profit	$	52.3		$	50.9		$	1.4	3	%	Gross profit		$	47.0		$				$	30.0		$				$	17.0		57				57		%
Unit sales	Unit sales	45,428			42,069			3,359		8	%	Unit sales		44,056			45,531					45,531			(1,475)					(1,475)			(3)				(3)	%
Revenue per unit	Revenue per unit	$	29,506		$	32,230		$	(2,724)	(8)	%	Revenue per unit		$	27,593		$				$	29,538		$				$	(1,945)		(7)				(7)		%
Gross profit per unit	Gross profit per unit	$	1,150		$	1,211		$	(61)	(5)	%	Gross profit per unit		$	1,068		$				$	660		$				$	408		62				62		%
Gross profit as a % of revenue	Gross profit as a % of revenue	3.9		%	3.8		%	10		bps		Gross profit as a % of revenue		3.9		%					2.2		%					170			bps					bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue $ 3,991.2 $ 4,174.4 $ (183.2) (4) %
Gross profit $ 113.8 $ 145.3 $ (31.5) (22) %
Unit sales 133,931 128,906 5,025 4 %
Revenue per unit $ 29,801 $ 32,383 $ (2,582) (8) %
Gross profit per unit $ 849 $ 1,127 $ (278) (25) %
Gross profit as a % of revenue 2.9 % 3.5 % (60) bps

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.

Wholesale Vehicles – Consolidated

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. ~~Since March 2020,~~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 ~~fourth quarter of 2023,~~long run, but may continue to experience volatility ~~into~~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.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Our consolidated reported wholesale vehicle results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																						Three Months Ended March 31,											Better / (Worse)
	2024																	2024							2023							Change						% Change
	(In millions, except unit and per unit data)																															(In millions, except unit and per unit data)
Reported wholesale vehicle:	Reported wholesale vehicle:
Revenue
Revenue
Revenue	Revenue	$	79.3		$	114.7		$	(35.4)	(31)	%	$	77.3			$			$	85.6			$			$	(8.3)			(10)				(10)	%
Gross profit (loss)	Gross profit (loss)	$	(1.4)		$	(2.1)		$	0.7	33	%	Gross profit (loss)		$	(0.8)		$				$	3.0		$				$	(3.8)		(127)				(127)		%
Unit sales	Unit sales	7,996			8,263			(267)		(3)	%	Unit sales		8,112			8,406					8,406			(294)					(294)			(3)				(3)	%
Revenue per unit	Revenue per unit	$	9,922		$	13,874		$	(3,952)	(28)	%	Revenue per unit		$	9,530		$				$	10,169		$				$	(639)		(6)				(6)		%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	(180)		$	(264)		$	84	32	%	Gross profit (loss) per unit		$	(89)		$				$	359		$				$	(448)		(125)				(125)		%
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	(1.8)		%	(1.9)		%	10		bps		Gross profit (loss) as a % of revenue		(0.9)		%					3.5		%					(440)			bps					bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue $ 256.3 $ 404.8 $ (148.5) (37) %
Gross profit (loss) $ 0.5 $ 0.6 $ (0.1) (17) %
Unit sales 25,203 27,229 (2,026) (7) %
Revenue per unit $ 10,166 $ 14,867 $ (4,701) (32) %
Gross profit (loss) per unit $ 24 $ 17 $ 7 41 %
Gross profit (loss) as a % of revenue 0.2 % 0.1 % 10 bps

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

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fixed Operations – Consolidated

Parts, service and collision repair revenues consist of repairs and maintenance requested and paid by customers (“customer pay”), warranty repairs (manufacturer-paid), wholesale parts (sales of parts and accessories to third-party automotive repair businesses) and internal, sublet and other. Parts and service revenue is driven by the volume and mix of warranty repairs versus customer pay repairs, available service capacity (a combination of service bay count and technician availability), vehicle quality, manufacturer recalls, customer loyalty, and prepaid or manufacturer-paid maintenance programs. Internal, sublet and other primarily ~~relate~~relates to preparation and reconditioning work performed on vehicles in inventory that are later sold to a third party and may vary based on used vehicle inventory and sales volume from period to period. When that work is performed by one of our dealerships or stores, the work is classified as internal. In the event the work is performed by a third party on our behalf, it is classified as sublet.

We believe that, over time, vehicle quality will continue to improve, but vehicle complexity and the associated demand for repairs by qualified technicians at manufacturer-affiliated dealerships may result in market share gains that could offset any revenue lost from improvement in vehicle quality. We also believe that, over the long term, we have the ability to continue to optimize service capacity and customer retention at our dealerships and stores to further increase Fixed Operations revenues. Manufacturers continue to extend new vehicle warranty periods (in particular for battery electric ~~vehicles, or “BEVs”)~~vehicles) and have also begun to include regular maintenance items in the warranty or complimentary maintenance program coverage. These factors, over the long term, combined with the extended manufacturer warranties on certified pre-owned vehicles, should facilitate growth in our parts and service business. Barriers to long-term growth may include reductions in the rate paid by manufacturers to dealers for warranty repair work performed, as well as the improved quality and design of vehicles that may affect the level and frequency of future customer pay or warranty-related repair revenues.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Our consolidated reported Fixed Operations results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions)
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,																								Better / (Worse)
	2024																	2024							2023								Change							% Change
	(In millions)																																(In millions)
Reported Fixed Operations:	Reported Fixed Operations:
Revenue	Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Customer pay
Customer pay
Customer pay	Customer pay	$	209.7		$	171.9		$	37.8	22	%	$	210.2			$			$	203.4			$				$	6.8			3				3		%
Warranty	Warranty	62.0			60.4			1.6		3	%	Warranty		64.5			58.9					58.9			5.6						5.6			10					10	%
Wholesale parts	Wholesale parts	51.3			49.9			1.4		3	%	Wholesale parts		50.8			54.4					54.4			(3.6)						(3.6)			(7)					(7)	%
Internal, sublet and other	Internal, sublet and other	130.4			126.0			4.4		3	%	Internal, sublet and other		121.2			113.8					113.8			7.4						7.4			7					7	%
Total revenue	Total revenue	$	453.4		$	408.2		$	45.2	11	%	Total revenue		$	446.7		$				$	430.5		$					$	16.2		4					4		%

Gross profit	Gross profit
Gross profit
Gross profit
Customer pay
Customer pay
Customer pay	Customer pay	$	118.0		$	100.8		$	17.2	17	%	$	118.0			$			$	113.0			$				$	5.0			4				4		%
Warranty	Warranty	36.6			34.2			2.4		7	%	Warranty		38.5			34.6					34.6			3.9						3.9			11					11	%
Wholesale parts	Wholesale parts	9.1			9.1			—		—	%	Wholesale parts		8.9			9.7					9.7			(0.8)						(0.8)			(8)					(8)	%
Internal, sublet and other	Internal, sublet and other	61.6			58.7			2.9		5	%	Internal, sublet and other		58.5			55.6					55.6			2.9						2.9			5					5	%
Total gross profit	Total gross profit	$	225.3		$	202.8		$	22.5	11	%	Total gross profit		$	223.9		$				$	212.9		$					$	11.0		5					5		%

Gross profit as a % of revenue	Gross profit as a % of revenue
Gross profit as a % of revenue
Gross profit as a % of revenue
Customer pay
Customer pay
Customer pay	Customer pay	56.3		%	58.6		%	(230)		bps		56.2		%					55.6		%						60				bps					bps
Warranty	Warranty	58.9		%	56.7		%	220		bps		Warranty		59.7		%					58.7		%						100			bps						bps
Wholesale parts	Wholesale parts	17.8		%	18.2		%	(40)		bps		Wholesale parts		17.6		%					17.8		%						(20)			bps						bps
Internal, sublet and other	Internal, sublet and other	47.2		%	46.6		%	60		bps		Internal, sublet and other		48.2		%					48.9		%						(70)			bps						bps
Total gross profit as a % of revenue	Total gross profit as a % of revenue	49.7		%	49.7		%	—		bps		Total gross profit as a % of revenue		50.1		%					49.5		%						60			bps						bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
Reported Fixed Operations:
Revenue
Customer pay $ 621.1 $ 501.2 $ 119.9 24 %
Warranty 180.1 168.2 11.9 7 %
Wholesale parts 159.3 149.9 9.4 6 %
Internal, sublet and other 367.1 369.3 (2.2) (1) %
Total revenue $ 1,327.6 $ 1,188.6 $ 139.0 12 %
Gross profit
Customer pay $ 348.0 $ 290.2 $ 57.8 20 %
Warranty 105.7 98.3 7.4 8 %
Wholesale parts 28.3 27.0 1.3 5 %
Internal, sublet and other 176.6 172.9 3.7 2 %
Total gross profit $ 658.6 $ 588.4 $ 70.2 12 %
Gross profit as a % of revenue
Customer pay 56.0 % 57.9 % (190) bps
Warranty 58.7 % 58.5 % 20 bps
Wholesale parts 17.8 % 18.0 % (20) bps
Internal, sublet and other 48.1 % 46.8 % 130 bps
Total gross profit as a % of revenue 49.6 % 49.5 % 10 bps

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.

2825

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

F&I – Consolidated

Finance, insurance and other, net revenues include commissions for arranging third-party vehicle financing and insurance, sales of third-party extended warranties and service contracts for vehicles, and sales of other aftermarket products. In connection with vehicle financing, extended warranties and service contracts, other aftermarket products and insurance contracts, we receive commissions from the third-party providers for originating these contracts. F&I revenues are recognized net of actual and estimated future chargebacks and other costs associated with originating contracts (as a result, reported F&I revenues and F&I gross profit are the same amount, resulting in a 100% gross margin for F&I). F&I revenues are affected by the level of new and retail used vehicle unit sales volume, the age and average selling price of vehicles sold, the level of manufacturer financing specials or leasing incentives, and our F&I penetration rate for each type of F&I product. The F&I penetration rate represents the number of finance contracts, extended warranties and service contracts, other aftermarket products or insurance contracts that we are able to originate per vehicle sold, expressed as a percentage.

Yield spread premium is another term for the commission earned by our dealerships for arranging vehicle financing for consumers. The amount of the commission could be zero, a flat fee or an actual spread between the interest rate charged to the consumer and the interest rate provided by the third-party direct financing source (e.g., a commercial bank, credit union or manufacturer captive finance company). We have established caps on the potential yield spread premium our dealerships can earn with all finance sources. We believe the yield spread premium we earn for arranging vehicle financing represents value to the consumer in numerous ways, including the following:

•lower cost, below-market financing is often available only from the manufacturers’ captives and franchised dealers;

•ease of access to multiple high-quality lending sources;

•lease-financing alternatives are largely available only from manufacturers’ captives or other indirect lenders;

•guests with substandard credit frequently do not have direct access to potential sources of sub-prime financing; and

•guests with significant “negative equity” in their current vehicle (i.e., the guest’s current vehicle is worth less than the balance of their vehicle loan or lease obligation) frequently are unable to pay off the loan on their current vehicle and finance the purchase or lease of a replacement new or used vehicle without the assistance of a franchised dealership’s network of lending sources.

Our consolidated reported F&I results were as follows:

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported F&I:
Revenue $ 173.7 $ 165.6 $ 8.1 5 %
Total combined retail new and used vehicle unit sales 73,688 66,845 6,843 10 %
Gross profit per retail unit (excludes fleet) $ 2,357 $ 2,477 $ (120) (5) %


		Nine Months Ended September 30,				Better / (Worse)
		2023		2022		Change		% Change
		(In millions, except unit and per unit data)
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,																						Better / (Worse)
	2024															2024							2023								Change					% Change
	(In millions, except unit and per unit data)																														(In millions, except unit and per unit data)
Reported F&I:	Reported F&I:
Revenue
Revenue
Revenue	Revenue	$	517.7	$	505.3	$	12.4	2	%	$	169.0			$			$	168.6			$				$	0.4			—				—	%
Total combined retail new and used vehicle unit sales	Total combined retail new and used vehicle unit sales	216,602		202,796		13,806		7	%	Total combined retail new and used vehicle unit sales		70,198			71,188					71,188			(990)						(990)			(1)			(1)	%
Gross profit per retail unit (excludes fleet)	Gross profit per retail unit (excludes fleet)	$	2,390	$	2,492	$	(102)	(4)	%	Gross profit per retail unit (excludes fleet)		$	2,407		$				$	2,369		$					$	38		2				2	%

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.

2926

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations – Franchised Dealerships Segment

As a result of the acquisition, disposition, termination or closure of certain franchised dealership stores ~~since the beginning of 2022,~~in 2023 and 2024, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. Please refer to the same store tables and discussion on the following pages for a more meaningful comparison and discussion of financial results on a comparable store basis.

3027

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

New Vehicles – Franchised Dealerships Segment

The following ~~tables provide~~table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for new vehicles:


		Three Months Ended September 30,				Better / (Worse)
		2023		2022		Change		% Change
		(In millions, except unit data)
	Three Months Ended March 31,																				Three Months Ended March 31,												Better / (Worse)
	2024															2024								2023							Change						% Change
	(In millions, except unit data)																														(In millions, except unit data)
Retail new vehicle revenue:	Retail new vehicle revenue:
Same store
Same store
Same store	Same store	$	1,538.1	$	1,341.9	$	196.2	15	%	$	1,435.5			$			$	1,398.8			$				$	36.7			3				3	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	8.6		17.7		(9.1)		NM		Acquisitions, open points, dispositions and holding company		4.4			22.2					22.2				(17.8)					(17.8)			NM				NM
Total as reported	Total as reported	$	1,546.7	$	1,359.6	$	187.1	14	%	Total as reported		$	1,439.9		$				$	1,421.0			$				$	18.9		1				1	%

Fleet new vehicle revenue:	Fleet new vehicle revenue:
Fleet new vehicle revenue:
Fleet new vehicle revenue:
Same store
Same store
Same store	Same store	$	23.2	$	32.0	$	(8.8)	(28)	%	$	19.6			$			$	18.9			$				$	0.7			4				4	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	—		—		—		NM		Acquisitions, open points, dispositions and holding company		—			(0.1)					(0.1)				0.1					0.1			NM				NM
Total as reported	Total as reported	$	23.2	$	32.0	$	(8.8)	(28)	%	Total as reported		$	19.6		$				$	18.8			$				$	0.8		4				4	%

Total new vehicle revenue:	Total new vehicle revenue:
Total new vehicle revenue:
Total new vehicle revenue:
Same store
Same store
Same store	Same store	$	1,561.3	$	1,373.9	$	187.4	14	%	$	1,455.1			$			$	1,417.7			$				$	37.4			3				3	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	8.6		17.7		(9.1)		NM		Acquisitions, open points, dispositions and holding company		4.4			22.1					22.1				(17.7)					(17.7)			NM				NM
Total as reported	Total as reported	$	1,569.9	$	1,391.6	$	178.3	13	%	Total as reported		$	1,459.5		$				$	1,439.8			$				$	19.7		1				1	%

Retail new vehicle gross profit:	Retail new vehicle gross profit:
Retail new vehicle gross profit:
Retail new vehicle gross profit:
Same store
Same store
Same store	Same store	$	125.0	$	158.8	$	(33.8)	(21)	%	$	93.7			$			$	132.3			$				$	(38.6)			(29)				(29)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	0.5		1.9		(1.4)		NM		Acquisitions, open points, dispositions and holding company		0.4			1.7					1.7				(1.3)					(1.3)			NM				NM
Total as reported	Total as reported	$	125.5	$	160.7	$	(35.2)	(22)	%	Total as reported		$	94.1		$				$	134.0			$				$	(39.9)		(30)				(30)	%

Fleet new vehicle gross profit:	Fleet new vehicle gross profit:
Fleet new vehicle gross profit:
Fleet new vehicle gross profit:
Same store
Same store
Same store	Same store	$	1.0	$	1.3	$	(0.3)	(23)	%	$	0.7			$			$	0.9			$				$	(0.2)			(22)				(22)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	(0.1)		—		(0.1)		NM		Acquisitions, open points, dispositions and holding company		—			—					—				—					—			NM				NM
Total as reported	Total as reported	$	0.9	$	1.3	$	(0.4)	(31)	%	Total as reported		$	0.7		$				$	0.9			$				$	(0.2)		(22)				(22)	%

Total new vehicle gross profit:	Total new vehicle gross profit:
Total new vehicle gross profit:
Total new vehicle gross profit:
Same store
Same store
Same store	Same store	$	126.0	$	160.1	$	(34.1)	(21)	%	$	94.4			$			$	133.2			$				$	(38.8)			(29)				(29)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	0.4		1.9		(1.5)		NM		Acquisitions, open points, dispositions and holding company		0.4			1.7					1.7				(1.3)					(1.3)			NM				NM
Total as reported	Total as reported	$	126.4	$	162.0	$	(35.6)	(22)	%	Total as reported		$	94.8		$				$	134.9			$				$	(40.1)		(30)				(30)	%

Retail new vehicle unit sales:	Retail new vehicle unit sales:
Retail new vehicle unit sales:
Retail new vehicle unit sales:
Same store
Same store
Same store	Same store	26,727		23,816		2,911		12	%	25,225				24,053				24,053				1,172					1,172			5				5	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	142		425		(283)		NM		Acquisitions, open points, dispositions and holding company		72			486					486				(414)					(414)			NM				NM
Total as reported	Total as reported	26,869		24,241		2,628		11	%	Total as reported		25,297			24,539					24,539				758					758			3			3		%

Fleet new vehicle unit sales:	Fleet new vehicle unit sales:
Fleet new vehicle unit sales:
Fleet new vehicle unit sales:
Same store
Same store
Same store	Same store	469		672		(203)		(30)	%	379				441				441				(62)					(62)			(14)				(14)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	—		—		—		NM		Acquisitions, open points, dispositions and holding company		—			—					—				—					—			NM				NM
Total as reported	Total as reported	469		672		(203)		(30)	%	Total as reported		379			441					441				(62)					(62)			(14)			(14)		%

Total new vehicle unit sales:	Total new vehicle unit sales:
Total new vehicle unit sales:
Total new vehicle unit sales:
Same store
Same store
Same store	Same store	27,196		24,488		2,708		11	%	25,604				24,494				24,494				1,110					1,110			5				5	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	142		425		(283)		NM		Acquisitions, open points, dispositions and holding company		72			486					486				(414)					(414)			NM				NM
Total as reported	Total as reported	27,338		24,913		2,425		10	%	Total as reported		25,676			24,980					24,980				696					696			3			3		%
NM = Not Meaningful	NM = Not Meaningful

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit data)
Retail new vehicle revenue:
Same store $ 4,491.8 $ 3,995.7 $ 496.1 12 %
Acquisitions, open points, dispositions and holding company 59.1 51.4 7.7 NM
Total as reported $ 4,550.9 $ 4,047.1 $ 503.8 12 %
Fleet new vehicle revenue:
Same store $ 70.4 $ 70.0 $ 0.4 1 %
Acquisitions, open points, dispositions and holding company — — — NM
Total as reported $ 70.4 $ 70.0 $ 0.4 1 %
Total new vehicle revenue:
Same store $ 4,562.2 $ 4,065.7 $ 496.5 12 %
Acquisitions, open points, dispositions and holding company 59.1 51.4 7.7 NM
Total as reported $ 4,621.3 $ 4,117.1 $ 504.2 12 %
Retail new vehicle gross profit:
Same store $ 392.2 $ 488.8 $ (96.6) (20) %
Acquisitions, open points, dispositions and holding company 4.3 5.7 (1.4) NM
Total as reported $ 396.5 $ 494.5 $ (98.0) (20) %
Fleet new vehicle gross profit:
Same store $ 3.1 $ 3.1 $ — — %
Acquisitions, open points, dispositions and holding company — — — NM
Total as reported $ 3.1 $ 3.1 $ — — %
Total new vehicle gross profit:
Same store $ 395.3 $ 491.9 $ (96.6) (20) %
Acquisitions, open points, dispositions and holding company 4.3 5.7 (1.4) NM
Total as reported $ 399.6 $ 497.6 $ (98.0) (20) %
Retail new vehicle unit sales:
Same store 77,567 71,986 5,581 8 %
Acquisitions, open points, dispositions and holding company 1,199 1,199 — NM
Total as reported 78,766 73,185 5,581 8 %
Fleet new vehicle unit sales:
Same store 1,500 1,454 46 3 %
Acquisitions, open points, dispositions and holding company — — — NM
Total as reported 1,500 1,454 46 3 %
Total new vehicle unit sales:
Same store 79,067 73,440 5,627 8 %
Acquisitions, open points, dispositions and holding company 1,199 1,199 — NM
Total as reported 80,266 74,639 5,627 8 %
NM = Not Meaningful

3228

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment reported new vehicle results were as follows:

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported new vehicle:
Retail new vehicle revenue $ 1,546.7 $ 1,359.6 $ 187.1 14 %
Fleet new vehicle revenue 23.2 32.0 (8.8) (28) %
Total new vehicle revenue $ 1,569.9 $ 1,391.6 $ 178.3 13 %
Retail new vehicle gross profit $ 125.5 $ 160.7 $ (35.2) (22) %
Fleet new vehicle gross profit 0.9 1.3 (0.4) (31) %
Total new vehicle gross profit $ 126.4 $ 162.0 $ (35.6) (22) %
Retail new vehicle unit sales 26,869 24,241 2,628 11 %
Fleet new vehicle unit sales 469 672 (203) (30) %
Total new vehicle unit sales 27,338 24,913 2,425 10 %
Revenue per new retail unit $ 57,561 $ 56,087 $ 1,474 3 %
Revenue per new fleet unit $ 49,495 $ 47,636 $ 1,859 4 %
Total revenue per new unit $ 57,422 $ 55,859 $ 1,563 3 %
Gross profit per new retail unit $ 4,672 $ 6,627 $ (1,955) (30) %
Gross profit per new fleet unit $ 2,046 $ 1,955 $ 91 5 %
Total gross profit per new unit $ 4,627 $ 6,501 $ (1,874) (29) %
Retail gross profit as a % of revenue 8.1 % 11.8 % (370) bps
Fleet gross profit as a % of revenue 4.1 % 4.1 % — bps
Total new vehicle gross profit as a % of revenue 8.1 % 11.6 % (350) bps


		Nine Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																						Three Months Ended March 31,												Better / (Worse)
	2024																	2024								2023							Change							% Change
	(In millions, except unit and per unit data)																																(In millions, except unit and per unit data)
Reported new vehicle:	Reported new vehicle:
Retail new vehicle revenue
Retail new vehicle revenue
Retail new vehicle revenue	Retail new vehicle revenue	$	4,550.9		$	4,047.1		$	503.8	12	%	$	1,439.9			$			$	1,421.0			$				$	18.9			1				1		%
Fleet new vehicle revenue	Fleet new vehicle revenue	70.4			70.0			0.4		1	%	Fleet new vehicle revenue		19.6			18.8					18.8				0.8					0.8			4					4	%
Total new vehicle revenue	Total new vehicle revenue	$	4,621.3		$	4,117.1		$	504.2	12	%	Total new vehicle revenue		$	1,459.5		$				$	1,439.8			$				$	19.7		1					1		%

Retail new vehicle gross profit	Retail new vehicle gross profit	$	396.5		$	494.5		$	(98.0)	(20)	%
Retail new vehicle gross profit
Retail new vehicle gross profit														$	94.1						$	134.0							$	(39.9)						(30)		%
Fleet new vehicle gross profit	Fleet new vehicle gross profit	3.1			3.1			—		—	%	Fleet new vehicle gross profit		0.7			0.9					0.9				(0.2)					(0.2)			(22)					(22)	%
Total new vehicle gross profit	Total new vehicle gross profit	$	399.6		$	497.6		$	(98.0)	(20)	%	Total new vehicle gross profit		$	94.8		$				$	134.9			$				$	(40.1)		(30)					(30)		%

Retail new vehicle unit sales
Retail new vehicle unit sales
Retail new vehicle unit sales	Retail new vehicle unit sales	78,766			73,185			5,581		8	%	25,297				24,539				24,539				758					758			3					3		%
Fleet new vehicle unit sales	Fleet new vehicle unit sales	1,500			1,454			46		3	%	Fleet new vehicle unit sales		379			441					441				(62)					(62)			(14)					(14)	%
Total new vehicle unit sales	Total new vehicle unit sales	80,266			74,639			5,627		8	%	Total new vehicle unit sales		25,676			24,980					24,980				696					696			3					3	%

Revenue per new retail unit	Revenue per new retail unit	$	57,778		$	55,299		$	2,479	4	%
Revenue per new retail unit
Revenue per new retail unit														$	56,921						$	57,907							$	(986)						(2)		%
Revenue per new fleet unit	Revenue per new fleet unit	$	46,918		$	48,164		$	(1,246)	(3)	%	Revenue per new fleet unit		$	51,708		$				$	42,680			$				$	9,028		21					21		%
Total revenue per new unit	Total revenue per new unit	$	57,575		$	55,160		$	2,415	4	%	Total revenue per new unit		$	56,844		$				$	57,638			$				$	(794)		(1)					(1)		%

Gross profit per new retail unit
Gross profit per new retail unit
Gross profit per new retail unit	Gross profit per new retail unit	$	5,034		$	6,757		$	(1,723)	(25)	%	$	3,722			$			$	5,463			$				$	(1,741)			(32)				(32)		%
Gross profit per new fleet unit	Gross profit per new fleet unit	$	2,059		$	2,132		$	(73)	(3)	%	Gross profit per new fleet unit		$	1,706		$				$	2,020			$				$	(314)		(16)					(16)		%
Total gross profit per new unit	Total gross profit per new unit	$	4,978		$	6,667		$	(1,689)	(25)	%	Total gross profit per new unit		$	3,692		$				$	5,402			$				$	(1,710)		(32)					(32)		%

Retail gross profit as a % of revenue	Retail gross profit as a % of revenue	8.7		%	12.2		%	(350)		bps
Retail gross profit as a % of revenue
Retail gross profit as a % of revenue														6.5		%					9.4		%						(290)							bps
Fleet gross profit as a % of revenue	Fleet gross profit as a % of revenue	4.4		%	4.4		%	—		bps		Fleet gross profit as a % of revenue		3.3		%					4.7		%						(140)			bps						bps
Total new vehicle gross profit as a % of revenue	Total new vehicle gross profit as a % of revenue	8.6		%	12.1		%	(350)		bps		Total new vehicle gross profit as a % of revenue		6.5		%					9.4		%						(290)			bps						bps

3329

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store new vehicle results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																						Three Months Ended March 31,												Better / (Worse)
	2024																	2024								2023							Change							% Change
	(In millions, except unit and per unit data)																																(In millions, except unit and per unit data)
Same store new vehicle:	Same store new vehicle:
Retail new vehicle revenue
Retail new vehicle revenue
Retail new vehicle revenue	Retail new vehicle revenue	$	1,538.1		$	1,341.9		$	196.2	15	%	$	1,435.5			$			$	1,398.8			$				$	36.7			3				3		%
Fleet new vehicle revenue	Fleet new vehicle revenue	23.2			32.0			(8.8)		(28)	%	Fleet new vehicle revenue		19.6			18.9					18.9				0.7					0.7			4					4	%
Total new vehicle revenue	Total new vehicle revenue	$	1,561.3		$	1,373.9		$	187.4	14	%	Total new vehicle revenue		$	1,455.1		$				$	1,417.7			$				$	37.4		3					3		%

Retail new vehicle gross profit	Retail new vehicle gross profit	$	125.0		$	158.8		$	(33.8)	(21)	%
Retail new vehicle gross profit
Retail new vehicle gross profit														$	93.7						$	132.3							$	(38.6)						(29)		%
Fleet new vehicle gross profit	Fleet new vehicle gross profit	1.0			1.3			(0.3)		(23)	%	Fleet new vehicle gross profit		0.7			0.9					0.9				(0.2)					(0.2)			(22)					(22)	%
Total new vehicle gross profit	Total new vehicle gross profit	$	126.0		$	160.1		$	(34.1)	(21)	%	Total new vehicle gross profit		$	94.4		$				$	133.2			$				$	(38.8)		(29)					(29)		%

Retail new vehicle unit sales
Retail new vehicle unit sales
Retail new vehicle unit sales	Retail new vehicle unit sales	26,727			23,816			2,911		12	%	25,225				24,053				24,053				1,172					1,172			5					5		%
Fleet new vehicle unit sales	Fleet new vehicle unit sales	469			672			(203)		(30)	%	Fleet new vehicle unit sales		379			441					441				(62)					(62)			(14)					(14)	%
Total new vehicle unit sales	Total new vehicle unit sales	27,196			24,488			2,708		11	%	Total new vehicle unit sales		25,604			24,494					24,494				1,110					1,110			5					5	%

Revenue per new retail unit	Revenue per new retail unit	$	57,547		$	56,345		$	1,202	2	%
Revenue per new retail unit
Revenue per new retail unit														$	56,909						$	58,157							$	(1,248)						(2)		%
Revenue per new fleet unit	Revenue per new fleet unit	$	49,495		$	47,636		$	1,859	4	%	Revenue per new fleet unit		$	51,708		$				$	42,680			$				$	9,028		21					21		%
Total revenue per new unit	Total revenue per new unit	$	57,408		$	56,106		$	1,302	2	%	Total revenue per new unit		$	56,832		$				$	57,878			$				$	(1,046)		(2)					(2)		%

Gross profit per new retail unit
Gross profit per new retail unit
Gross profit per new retail unit	Gross profit per new retail unit	$	4,678		$	6,666		$	(1,988)	(30)	%	$	3,716			$			$	5,499			$				$	(1,783)			(32)				(32)		%
Gross profit per new fleet unit	Gross profit per new fleet unit	$	2,046		$	1,955		$	91	5	%	Gross profit per new fleet unit		$	1,706		$				$	2,020			$				$	(314)		(16)					(16)		%
Total gross profit per new unit	Total gross profit per new unit	$	4,633		$	6,537		$	(1,904)	(29)	%	Total gross profit per new unit		$	3,686		$				$	5,437			$				$	(1,751)		(32)					(32)		%

Retail gross profit as a % of revenue	Retail gross profit as a % of revenue	8.1		%	11.8		%	(370)		bps
Retail gross profit as a % of revenue
Retail gross profit as a % of revenue														6.5		%					9.5		%						(300)							bps
Fleet gross profit as a % of revenue	Fleet gross profit as a % of revenue	4.1		%	4.1		%	—		bps		Fleet gross profit as a % of revenue		3.3		%					4.7		%						(140)			bps						bps
Total new vehicle gross profit as a % of revenue	Total new vehicle gross profit as a % of revenue	8.1		%	11.7		%	(360)		bps		Total new vehicle gross profit as a % of revenue		6.5		%					9.4		%						(290)			bps						bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Same store new vehicle:
Retail new vehicle revenue $ 4,491.8 $ 3,995.7 $ 496.1 12 %
Fleet new vehicle revenue 70.4 70.0 0.4 1 %
Total new vehicle revenue $ 4,562.2 $ 4,065.7 $ 496.5 12 %
Retail new vehicle gross profit $ 392.2 $ 488.8 $ (96.6) (20) %
Fleet new vehicle gross profit 3.1 3.1 — — %
Total new vehicle gross profit $ 395.3 $ 491.9 $ (96.6) (20) %
Retail new vehicle unit sales 77,567 71,986 5,581 8 %
Fleet new vehicle unit sales 1,500 1,454 46 3 %
Total new vehicle unit sales 79,067 73,440 5,627 8 %
Revenue per new retail unit $ 57,908 $ 55,507 $ 2,401 4 %
Revenue per new fleet unit $ 46,918 $ 48,164 $ (1,246) (3) %
Total revenue per new unit $ 57,700 $ 55,361 $ 2,339 4 %
Gross profit per new retail unit $ 5,056 $ 6,790 $ (1,734) (26) %
Gross profit per new fleet unit $ 2,059 $ 2,132 $ (73) (3) %
Total gross profit per new unit $ 5,000 $ 6,698 $ (1,698) (25) %
Retail gross profit as a % of revenue 8.7 % 12.2 % (350) bps
Fleet gross profit as a % of revenue 4.4 % 4.4 % — bps
Total new vehicle gross profit as a % of revenue 8.7 % 12.1 % (340) bps

Same Store Franchised Dealerships Segment Retail New Vehicles – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

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.

3430

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Same Store Franchised Dealerships Segment Retail New Vehicles~~ – ~~Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022~~

Retail new vehicle revenue increased 15%, due primarily to a 12% increase in retail new vehicle unit sales volume, as well as a 2% increase in retail new vehicle average selling prices. Retail new vehicle gross profit decreased approximately $33.8 million, or 21%, as a result of lower retail new vehicle gross profit per unit, due primarily to higher inventory invoice costs and increased price competition as a result of higher levels of available inventory. Retail new vehicle gross profit per unit decreased $1,988 per unit, or 30%, to $4,678 per unit, due primarily to higher inventory invoice costs and increased price competition as a result of higher levels of available inventory than in the prior year period.

~~Same Store Franchised Dealerships Segment Retail New Vehicles~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

Retail new vehicle revenue increased 12%, due primarily to an 8% increase in retail new vehicle unit sales volume, as well as a 4% increase in retail new vehicle average selling prices. Retail new vehicle gross profit decreased approximately $96.6 million, or 20%, as a result of lower retail new vehicle gross profit per unit, due primarily to higher inventory invoice costs and increased price competition as a result of higher levels of available inventory. Retail new vehicle gross profit per unit decreased $1,734 per unit, or 26%, to $5,056 per unit, due primarily to higher inventory invoice costs and increased price competition as a result of higher levels of available inventory than in the prior year period.

Used Vehicles – Franchised Dealerships Segment

The following ~~tables provide~~table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for retail used vehicles:


		Three Months Ended September 30,				Better / (Worse)
		2023		2022		Change		% Change
		(In millions, except unit data)
	Three Months Ended March 31,																				Three Months Ended March 31,												Better / (Worse)
	2024															2024								2023							Change						% Change
	(In millions, except unit data)																														(In millions, except unit data)
Retail used vehicle revenue:	Retail used vehicle revenue:
Same store
Same store
Same store	Same store	$	775.4	$	829.2	$	(53.8)	(6)	%	$	726.0			$			$	753.9			$				$	(27.9)			(4)				(4)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	5.3		13.2		(7.9)		NM		Acquisitions, open points, dispositions and holding company		3.3			13.7					13.7				(10.4)					(10.4)			NM				NM
Total as reported	Total as reported	$	780.7	$	842.4	$	(61.7)	(7)	%	Total as reported		$	729.3		$				$	767.6			$				$	(38.3)		(5)				(5)	%

Retail used vehicle gross profit:	Retail used vehicle gross profit:
Retail used vehicle gross profit:
Retail used vehicle gross profit:
Same store
Same store
Same store	Same store	$	42.3	$	44.5	$	(2.2)	(5)	%	$	40.5			$			$	40.1			$				$	0.4			1				1	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	0.3		0.9		(0.6)		NM		Acquisitions, open points, dispositions and holding company		0.3			0.7					0.7				(0.4)					(0.4)			NM				NM
Total as reported	Total as reported	$	42.6	$	45.4	$	(2.8)	(6)	%	Total as reported		$	40.8		$				$	40.8			$				$	—		—				—	%

Retail used vehicle unit sales:	Retail used vehicle unit sales:
Retail used vehicle unit sales:
Retail used vehicle unit sales:
Same store
Same store
Same store	Same store	25,371		26,122		(751)		(3)	%	25,552				24,601				24,601				951					951			4				4	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	170		525		(355)		NM		Acquisitions, open points, dispositions and holding company		114			506					506				(392)					(392)			NM				NM
Total as reported	Total as reported	25,541		26,647		(1,106)		(4)	%	Total as reported		25,666			25,107					25,107				559					559			2			2		%

NM = Not Meaningful

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit data)
Retail used vehicle revenue:
Same store $ 2,288.8 $ 2,524.3 $ (235.5) (9) %
Acquisitions, open points, dispositions and holding company 34.0 43.8 (9.8) NM
Total as reported $ 2,322.8 $ 2,568.1 $ (245.3) (10) %
Retail used vehicle gross profit:
Same store $ 126.4 $ 133.5 $ (7.1) (5) %
Acquisitions, open points, dispositions and holding company 1.5 2.5 (1.0) NM
Total as reported $ 127.9 $ 136.0 $ (8.1) (6) %
Retail used vehicle unit sales:
Same store 74,631 80,221 (5,590) (7) %
Acquisitions, open points, dispositions and holding company 1,214 1,660 (446) NM
Total as reported 75,845 81,881 (6,036) (7) %
NM = Not Meaningful

Our Franchised Dealerships Segment reported retail used vehicle results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																						Three Months Ended March 31,											Better / (Worse)
	2024																	2024							2023							Change						% Change
	(In millions, except unit and per unit data)																															(In millions, except unit and per unit data)
Reported retail used vehicle:	Reported retail used vehicle:
Revenue
Revenue
Revenue	Revenue	$	780.7		$	842.4		$	(61.7)	(7)	%	$	729.3			$			$	767.6			$			$	(38.3)			(5)				(5)	%
Gross profit	Gross profit	$	42.6		$	45.4		$	(2.8)	(6)	%	Gross profit		$	40.8		$				$	40.8		$				$	—		—				—		%
Unit sales	Unit sales	25,541			26,647			(1,106)		(4)	%	Unit sales		25,666			25,107					25,107			559					559			2				2	%
Revenue per unit	Revenue per unit	$	30,567		$	31,615		$	(1,048)	(3)	%	Revenue per unit		$	28,418		$				$	30,573		$				$	(2,155)		(7)				(7)		%
Gross profit per unit	Gross profit per unit	$	1,666		$	1,704		$	(38)	(2)	%	Gross profit per unit		$	1,592		$				$	1,626		$				$	(34)		(2)				(2)		%
Gross profit as a % of revenue	Gross profit as a % of revenue	5.4		%	5.4		%	—		bps		Gross profit as a % of revenue		5.6		%					5.3		%					30			bps					bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue $ 2,322.8 $ 2,568.1 $ (245.3) (10) %
Gross profit $ 127.9 $ 136.0 $ (8.1) (6) %
Unit sales 75,845 81,881 (6,036) (7) %
Revenue per unit $ 30,625 $ 31,364 $ (739) (2) %
Gross profit per unit $ 1,685 $ 1,661 $ 24 1 %
Gross profit as a % of revenue 5.5 % 5.3 % 20 bps

3631

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store retail used vehicle results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,																								Better / (Worse)
	2024																	2024							2023								Change						% Change
	(In millions, except unit and per unit data)																																(In millions, except unit and per unit data)
Same store retail used vehicle:	Same store retail used vehicle:
Revenue
Revenue
Revenue	Revenue	$	775.4		$	829.2		$	(53.8)	(7)	%	$	726.0			$			$	753.9			$				$	(27.9)			(4)				(4)	%
Gross profit	Gross profit	$	42.3		$	44.5		$	(2.2)	(5)	%	Gross profit		$	40.5		$				$	40.1		$					$	0.4		1				1		%
Unit sales	Unit sales	25,371			26,122			(751)		(3)	%	Unit sales		25,552			24,601					24,601			951						951			4				4	%
Revenue per unit	Revenue per unit	$	30,563		$	31,742		$	(1,179)	(4)	%	Revenue per unit		$	28,414		$				$	30,646		$					$	(2,232)		(7)				(7)		%
Gross profit per unit	Gross profit per unit	$	1,668		$	1,704		$	(36)	(2)	%	Gross profit per unit		$	1,585		$				$	1,631		$					$	(46)		(3)				(3)		%
Gross profit as a % of revenue	Gross profit as a % of revenue	5.5		%	5.4		%	10		bps		Gross profit as a % of revenue		5.6		%					5.3		%						30			bps					bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Same store retail used vehicle:
Revenue $ 2,288.8 $ 2,524.3 $ (235.5) (9) %
Gross profit $ 126.4 $ 133.5 $ (7.1) (5) %
Unit sales 74,631 80,221 (5,590) (7) %
Revenue per unit $ 30,669 $ 31,467 $ (798) (3) %
Gross profit per unit $ 1,694 $ 1,664 $ 30 2 %
Gross profit as a % of revenue 5.5 % 5.3 % 20 bps

Same Store Franchised Dealerships Segment Retail Used Vehicles – Three Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2022~~March 31, 2023

Retail used vehicle revenue decreased approximately ~~$53.8~~$27.9 million, or 7%4%, driven primarily by a ~~3% decrease in retail used vehicle unit sales volume, as well as a 4%~~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 ~~decreased~~increased approximately ~~$2.2~~$0.4 million, or 5%1%, driven primarily by ~~the decrease~~a 4% increase in retail used vehicle unit sales volume, ~~and~~partially offset by a ~~$36~~$46 per unit, or 2%3%, decrease in retail used vehicle gross profit per unit during the ~~third~~first quarter of ~~2023.~~

~~Same Store~~ ~~Franchised Dealerships Segment Retail Used Vehicles~~ – ~~Nine Months Ended September 30, 2023 Compared~~2024 due primarily to ~~Nine Months Ended September 30, 2022~~

~~Retail used vehicle revenue decreased approximately $235.5 million, or 9%, driven primarily by a 7% decrease in retail used vehicle unit sales volume, as well~~higher inventory acquisition costs and increased price competition as a ~~3% decrease in retail used vehicle average selling prices.~~ Retail used vehicle gross profit decreased approximately $7.1 million, or 5%, driven primarily by the decrease in retail used vehicle unit sales volume, partially offset by a $30 per unit, or 2%, increase in retail used vehicle gross profit per unit during the nine months ended September 30, 2023.result of ongoing consumer affordability challenges.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Wholesale Vehicles – Franchised Dealerships Segment

The following ~~tables provide~~table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for wholesale vehicles:


		Three Months Ended September 30,				Better / (Worse)
		2023		2022		Change		% Change
		(In millions, except unit data)
	Three Months Ended March 31,																				Three Months Ended March 31,												Better / (Worse)
	2024															2024								2023							Change						% Change
	(In millions, except unit data)																														(In millions, except unit data)
Total wholesale vehicle revenue:	Total wholesale vehicle revenue:
Same store
Same store
Same store	Same store	$	51.3	$	75.1	$	(23.8)	(32)	%	$	48.4			$			$	57.6			$				$	(9.2)			(16)				(16)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	0.1		0.7		(0.6)		NM		Acquisitions, open points, dispositions and holding company		0.2			0.8					0.8				(0.6)					(0.6)			NM				NM
Total as reported	Total as reported	$	51.4	$	75.8	$	(24.4)	(32)	%	Total as reported		$	48.6		$				$	58.4			$				$	(9.8)		(17)				(17)	%

Total wholesale vehicle gross profit (loss):	Total wholesale vehicle gross profit (loss):
Total wholesale vehicle gross profit (loss):
Total wholesale vehicle gross profit (loss):
Same store
Same store
Same store	Same store	$	(1.4)	$	(1.9)	$	0.5	26	%	$	(0.2)			$			$	1.8			$				$	(2.0)			(111)				(111)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	(0.1)		(0.2)		0.1		NM		Acquisitions, open points, dispositions and holding company		—			0.1					0.1				(0.1)					(0.1)			NM				NM
Total as reported	Total as reported	$	(1.5)	$	(2.1)	$	0.6	29	%	Total as reported		$	(0.2)		$				$	1.9			$				$	(2.1)		(111)				(111)	%

Total wholesale vehicle unit sales:	Total wholesale vehicle unit sales:
Total wholesale vehicle unit sales:
Total wholesale vehicle unit sales:
Same store
Same store
Same store	Same store	5,131		5,738		(607)		(11)	%	5,094				5,389				5,389				(295)					(295)			(5)				(5)	%
Acquisitions, open points, dispositions and holding company	Acquisitions, open points, dispositions and holding company	32		75		(43)		NM		Acquisitions, open points, dispositions and holding company		11			94					94				(83)					(83)			NM				NM
Total as reported	Total as reported	5,163		5,813		(650)		(11)	%	Total as reported		5,105			5,483					5,483				(378)					(378)			(7)			(7)		%
NM = Not Meaningful	NM = Not Meaningful

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit data)
Total wholesale vehicle revenue:
Same store $ 163.3 $ 258.2 $ (94.9) (37) %
Acquisitions, open points, dispositions and holding company 2.0 3.0 (1.0) NM
Total as reported $ 165.3 $ 261.2 $ (95.9) (37) %
Total wholesale vehicle gross profit (loss):
Same store $ — $ (2.5) $ 2.5 100 %
Acquisitions, open points, dispositions and holding company (0.8) (0.5) (0.3) NM
Total as reported $ (0.8) $ (3.0) $ 2.2 73 %
Total wholesale vehicle unit sales:
Same store 15,921 18,164 (2,243) (12) %
Acquisitions, open points, dispositions and holding company 241 272 (31) NM
Total as reported 16,162 18,436 (2,274) (12) %
NM = Not Meaningful

3832

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment reported wholesale vehicle results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																						Three Months Ended March 31,											Better / (Worse)
	2024																	2024							2023							Change						% Change
	(In millions, except unit and per unit data)																															(In millions, except unit and per unit data)
Reported wholesale vehicle:	Reported wholesale vehicle:
Revenue
Revenue
Revenue	Revenue	$	51.4		$	75.8		$	(24.4)	(32)	%	$	48.6			$			$	58.4			$			$	(9.8)			(17)				(17)	%
Gross profit (loss)	Gross profit (loss)	$	(1.5)		$	(2.1)		$	0.6	29	%	Gross profit (loss)		$	(0.2)		$				$	1.9		$				$	(2.1)		(111)				(111)		%
Unit sales	Unit sales	5,163			5,813			(650)		(11)	%	Unit sales		5,105			5,483					5,483			(378)					(378)			(7)				(7)	%
Revenue per unit	Revenue per unit	$	9,987		$	13,028		$	(3,041)	(23)	%	Revenue per unit		$	9,482		$				$	10,637		$				$	(1,155)		(11)				(11)		%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	(288)		$	(356)		$	68	19	%	Gross profit (loss) per unit		$	(36)		$				$	324		$				$	(360)		(111)				(111)		%
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	(2.9)		%	(2.7)		%	(20)		bps		Gross profit (loss) as a % of revenue		(0.4)		%					3.0		%					(340)			bps					bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue $ 165.3 $ 261.2 $ (95.9) (37) %
Gross profit (loss) $ (0.8) $ (3.0) $ 2.2 73 %
Unit sales 16,162 18,436 (2,274) (12) %
Revenue per unit $ 10,232 $ 14,170 $ (3,938) (28) %
Gross profit (loss) per unit $ (38) $ (163) $ 125 77 %
Gross profit (loss) as a % of revenue (0.4) % (1.2) % 80 bps

Our Franchised Dealerships Segment same store wholesale vehicle results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																						Three Months Ended March 31,											Better / (Worse)
	2024																	2024							2023							Change						% Change
	(In millions, except unit and per unit data)																															(In millions, except unit and per unit data)
Same store wholesale vehicle:	Same store wholesale vehicle:
Revenue
Revenue
Revenue	Revenue	$	51.3		$	75.1		$	(23.8)	(32)	%	$	48.4			$			$	57.6			$			$	(9.2)			(16)				(16)	%
Gross profit (loss)	Gross profit (loss)	$	(1.4)		$	(1.9)		$	0.5	26	%	Gross profit (loss)		$	(0.2)		$				$	1.8		$				$	(2.0)		(111)				(111)		%
Unit sales	Unit sales	5,131			5,738			(607)		(11)	%	Unit sales		5,094			5,389					5,389			(295)					(295)			(5)				(5)	%
Revenue per unit	Revenue per unit	$	9,994		$	13,086		$	(3,092)	(24)	%	Revenue per unit		$	9,487		$				$	10,679		$				$	(1,192)		(11)				(11)		%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	(274)		$	(333)		$	59	18	%	Gross profit (loss) per unit		$	(36)		$				$	346		$				$	(382)		(110)				(110)		%
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	(2.7)		%	(2.5)		%	(20)		bps		Gross profit (loss) as a % of revenue		(0.4)		%					3.2		%					(360)			bps					bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Same store wholesale vehicle:
Revenue $ 163.3 $ 258.2 $ (94.9) (37) %
Gross profit (loss) $ — $ (2.5) $ 2.5 100 %
Unit sales 15,921 18,164 (2,243) (12) %
Revenue per unit $ 10,255 $ 14,210 $ (3,955) (28) %
Gross profit (loss) per unit $ 1 $ (138) $ 139 101 %
Gross profit (loss) as a % of revenue — % (1.0) % 100 bps

Same Store Franchised Dealerships Segment Wholesale Vehicles – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

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.

Fixed Operations – Franchised Dealerships Segment

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


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions)
Total Fixed Operations revenue:
Same store	$	438.6	$	417.8	$	20.8	5	%
Acquisitions, open points, dispositions and holding company	1.3		6.0		(4.7)		NM
Total as reported	$	439.9	$	423.8	$	16.1	4	%

Total Fixed Operations gross profit:
Same store	$	219.6	$	206.3	$	13.3	6	%
Acquisitions, open points, dispositions and holding company	1.2		3.3		(2.1)		NM
Total as reported	$	220.8	$	209.6	$	11.2	5	%

NM = Not Meaningful

3933

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Same Store~~ ~~Franchised Dealerships Segment Wholesale Vehicles~~ – ~~Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022~~

Wholesale vehicle revenue decreased approximately $23.8 million, or 32%, driven primarily by a 24% decrease in wholesale vehicle revenue per unit and an 11% decrease in wholesale vehicle unit sales volume during the third quarter of 2023. Wholesale vehicle gross loss decreased approximately $0.5 million, driven primarily by a $59 per unit, or 18%, decrease in wholesale vehicle gross loss per unit as a result of higher wholesale auction prices.

~~Same Store~~ ~~Franchised Dealerships Segment Wholesale Vehicles~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

Wholesale vehicle revenue decreased approximately $94.9 million, or 37%, driven primarily by a 28% decrease in wholesale vehicle revenue per unit and a 12% decrease in wholesale vehicle unit sales volume during the first nine months of 2023. Wholesale vehicle gross profit (loss) improved approximately $2.5 million, driven primarily by a $139 per unit, or 101%, improvement in wholesale vehicle gross profit (loss) per unit during the first nine months of 2023.

~~Fixed Operations~~ – ~~Franchised Dealerships Segment~~

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

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
Total Fixed Operations revenue:
Same store $ 429.2 $ 399.0 $ 30.2 8 %
Acquisitions, open points, dispositions and holding company 2.6 5.7 (3.1) NM
Total as reported $ 431.8 $ 404.7 $ 27.1 7 %
Total Fixed Operations gross profit:
Same store $ 213.4 $ 198.0 $ 15.4 8 %
Acquisitions, open points, dispositions and holding company 1.7 3.0 (1.3) NM
Total as reported $ 215.1 $ 201.0 $ 14.1 7 %

~~NM = Not Meaningful~~

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
Total Fixed Operations revenue:
Same store $ 1,272.7 $ 1,166.9 $ 105.8 9 %
Acquisitions, open points, dispositions and holding company 16.3 16.5 (0.2) NM
Total as reported $ 1,289.0 $ 1,183.4 $ 105.6 9 %
Total Fixed Operations gross profit:
Same store $ 630.9 $ 577.1 $ 53.8 9 %
Acquisitions, open points, dispositions and holding company 9.2 8.6 0.6 NM
Total as reported $ 640.1 $ 585.7 $ 54.4 9 %
~~NM = Not Meaningful~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Our Franchised Dealerships Segment reported Fixed Operations results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions)
	Three Months Ended March 31,																						Three Months Ended March 31,											Better / (Worse)
	2024																	2024							2023							Change							% Change
	(In millions)																															(In millions)
Reported Fixed Operations:	Reported Fixed Operations:
Revenue	Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Customer pay
Customer pay
Customer pay	Customer pay	$	205.2		$	186.6		$	18.6	10	%	$	208.3			$			$	200.8			$			$	7.5			4				4		%
Warranty	Warranty	61.5			60.0			1.5		3	%	Warranty		64.1			58.6					58.6			5.5					5.5			9					9	%
Wholesale parts	Wholesale parts	51.1			49.7			1.4		3	%	Wholesale parts		50.6			54.3					54.3			(3.7)					(3.7)			(7)					(7)	%
Internal, sublet and other	Internal, sublet and other	114.0			108.4			5.6		5	%	Internal, sublet and other		116.9			110.1					110.1			6.8					6.8			6					6	%
Total revenue	Total revenue	$	431.8		$	404.7		$	27.1	7	%	Total revenue		$	439.9		$				$	423.8		$				$	16.1		4					4		%

Gross profit	Gross profit
Gross profit
Gross profit
Customer pay
Customer pay
Customer pay	Customer pay	$	115.3		$	105.5		$	9.8	9	%	$	117.2			$			$	111.6			$			$	5.6			5				5		%
Warranty	Warranty	36.3			34.0			2.3		7	%	Warranty		38.2			34.4					34.4			3.8					3.8			11					11	%
Wholesale parts	Wholesale parts	9.1			9.0			0.1		1	%	Wholesale parts		8.8			9.7					9.7			(0.9)					(0.9)			(9)					(9)	%
Internal, sublet and other	Internal, sublet and other	54.4			52.5			1.9		4	%	Internal, sublet and other		56.6			53.9					53.9			2.7					2.7			5					5	%
Total gross profit	Total gross profit	$	215.1		$	201.0		$	14.1	7	%	Total gross profit		$	220.8		$				$	209.6		$				$	11.2		5					5		%

Gross profit as a % of revenue	Gross profit as a % of revenue
Gross profit as a % of revenue
Gross profit as a % of revenue
Customer pay
Customer pay
Customer pay	Customer pay	56.2		%	56.6		%	(40)		bps		56.3		%					55.6		%					70				bps					bps
Warranty	Warranty	59.0		%	56.6		%	240		bps		Warranty		59.6		%					58.7		%					90			bps						bps
Wholesale parts	Wholesale parts	17.8		%	18.2		%	(40)		bps		Wholesale parts		17.6		%					17.8		%					(20)			bps						bps
Internal, sublet and other	Internal, sublet and other	47.7		%	48.4		%	(70)		bps		Internal, sublet and other		48.2		%					49.0		%					(80)			bps						bps
Total gross profit as a % of revenue	Total gross profit as a % of revenue	49.8		%	49.7		%	10		bps		Total gross profit as a % of revenue		50.2		%					49.5		%					70			bps						bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
Reported Fixed Operations:
Revenue
Customer pay $ 610.6 $ 549.2 $ 61.4 11 %
Warranty 178.8 167.1 11.7 7 %
Wholesale parts 158.8 149.3 9.5 6 %
Internal, sublet and other 340.8 317.8 23.0 7 %
Total revenue $ 1,289.0 $ 1,183.4 $ 105.6 9 %
Gross profit
Customer pay $ 342.0 $ 306.5 $ 35.5 12 %
Warranty 105.0 97.7 7.3 7 %
Wholesale parts 28.2 26.8 1.4 5 %
Internal, sublet and other 164.9 154.7 10.2 7 %
Total gross profit $ 640.1 $ 585.7 $ 54.4 9 %
Gross profit as a % of revenue
Customer pay 56.0 % 55.8 % 20 bps
Warranty 58.7 % 58.5 % 20 bps
Wholesale parts 17.8 % 18.0 % (20) bps
Internal, sublet and other 48.4 % 48.7 % (30) bps
Total gross profit as a % of revenue 49.7 % 49.5 % 20 bps

4134

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store Fixed Operations results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions)
	Three Months Ended March 31,																						Three Months Ended March 31,											Better / (Worse)
	2024																	2024							2023							Change							% Change
	(In millions)																															(In millions)
Same store Fixed Operations:	Same store Fixed Operations:
Revenue	Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Customer pay
Customer pay
Customer pay	Customer pay	$	203.9		$	184.2		$	19.7	11	%	$	207.5			$			$	198.3			$			$	9.2			5				5		%
Warranty	Warranty	61.0			59.0			2.0		3	%	Warranty		63.8			57.3					57.3			6.5					6.5			11					11	%
Wholesale parts	Wholesale parts	51.0			49.2			1.8		4	%	Wholesale parts		50.5			53.8					53.8			(3.3)					(3.3)			(6)					(6)	%
Internal, sublet and other	Internal, sublet and other	113.3			106.6			6.7		6	%	Internal, sublet and other		116.8			108.4					108.4			8.4					8.4			8					8	%
Total revenue	Total revenue	$	429.2		$	399.0		$	30.2	8	%	Total revenue		$	438.6		$				$	417.8		$				$	20.8		5					5		%

Gross profit	Gross profit
Gross profit
Gross profit
Customer pay
Customer pay
Customer pay	Customer pay	$	114.5		$	104.3		$	10.2	10	%	$	116.7			$			$	110.4			$			$	6.3			6				6		%
Warranty	Warranty	36.0			33.4			2.6		8	%	Warranty		38.0			33.7					33.7			4.3					4.3			13					13	%
Wholesale parts	Wholesale parts	9.1			8.9			0.2		2	%	Wholesale parts		8.9			9.6					9.6			(0.7)					(0.7)			(7)					(7)	%
Internal, sublet and other	Internal, sublet and other	53.8			51.4			2.4		5	%	Internal, sublet and other		56.0			52.6					52.6			3.4					3.4			6					6	%
Total gross profit	Total gross profit	$	213.4		$	198.0		$	15.4	8	%	Total gross profit		$	219.6		$				$	206.3		$				$	13.3		6					6		%

Gross profit as a % of revenue	Gross profit as a % of revenue
Gross profit as a % of revenue
Gross profit as a % of revenue
Customer pay
Customer pay
Customer pay	Customer pay	56.2		%	56.6		%	(40)		bps		56.3		%					55.6		%					70				bps					bps
Warranty	Warranty	59.1		%	56.7		%	240		bps		Warranty		59.6		%					58.8		%					80			bps						bps
Wholesale parts	Wholesale parts	17.8		%	18.1		%	(30)		bps		Wholesale parts		17.6		%					17.8		%					(20)			bps						bps
Internal, sublet and other	Internal, sublet and other	47.5		%	48.2		%	(70)		bps		Internal, sublet and other		47.9		%					48.5		%					(60)			bps						bps
Total gross profit as a % of revenue	Total gross profit as a % of revenue	49.7		%	49.6		%	10		bps		Total gross profit as a % of revenue		50.1		%					49.4		%					70			bps						bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
Same store Fixed Operations:
Revenue
Customer pay $ 603.2 $ 542.4 $ 60.8 11 %
Warranty 175.7 164.1 11.6 7 %
Wholesale parts 157.6 147.9 9.7 7 %
Internal, sublet and other 336.2 312.5 23.7 8 %
Total revenue $ 1,272.7 $ 1,166.9 $ 105.8 9 %
Gross profit
Customer pay $ 337.9 $ 303.1 $ 34.8 11 %
Warranty 103.4 96.2 7.2 7 %
Wholesale parts 28.0 26.5 1.5 6 %
Internal, sublet and other 161.6 151.3 10.3 7 %
Total gross profit $ 630.9 $ 577.1 $ 53.8 9 %
Gross profit as a % of revenue
Customer pay 56.0 % 55.9 % 10 bps
Warranty 58.8 % 58.6 % 20 bps
Wholesale parts 17.7 % 17.9 % (20) bps
Internal, sublet and other 48.1 % 48.4 % (30) bps
Total gross profit as a % of revenue 49.6 % 49.5 % 10 bps

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Same Store Franchised Dealerships Segment Fixed Operations – Three Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2022~~March 31, 2023

Fixed Operations revenue increased approximately ~~$30.2~~$20.8 million, or 8%5%, and Fixed Operations gross profit increased approximately ~~$15.4~~$13.3 million, or 8%6%. Customer pay gross profit increased approximately ~~$10.2~~$6.3 million, or ~~10%~~6%, warranty gross profit increased approximately ~~$2.6~~$4.3 million, or 8%13%, wholesale parts gross profit ~~increased~~decreased approximately ~~$0.2~~$0.7 million, or 2%7%, and internal, sublet and other gross profit increased approximately ~~$2.4~~$3.4 million, or 5%6%. As consumer activity and vehicle miles driven have continued to improve from pandemic-induced lows in early 2020, we have experienced a recovery in Fixed Operations activity (in particular, related to customer pay repairs), and are currently operating above pre-pandemic levels and expect to continue to see ~~elevated levels in the remainder of 2023, compared to the prior year period.~~

~~Same Store Franchised Dealerships Segment Fixed Operations~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

Fixed Operations revenue increased approximately $105.8 million, or 9%, and Fixed Operations gross profit increased approximately $53.8 million, or 9%. Customer pay gross profit increased approximately $34.8 million, or 11%, warranty gross profit increased approximately $7.2 million, or 7%, wholesale parts gross profit increased approximately $1.5 million, or 6%, and internal, sublet and other gross profit increased approximately $10.3 million, or 7%. As consumer activity and vehicle miles driven have continued to improve from pandemic-induced lows in early 2020, we have experienced a recoverygrowth in Fixed Operations ~~activity (in particular, related to customer pay repairs) above pre-pandemic levels,~~revenues and ~~expect to continue to see elevated levels in the remainder of 2023, compared to the prior year period.~~gross profit throughout 2024.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

F&I – Franchised Dealerships Segment

The following ~~tables provide~~table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for F&I:

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Total F&I revenue:
Same store $ 125.4 $ 122.2 $ 3.2 3 %
Acquisitions, open points, dispositions and holding company 0.6 3.6 (3.0) NM
Total as reported $ 126.0 $ 125.8 $ 0.2 — %
Total F&I gross profit per retail unit (excludes fleet):
Same store $ 2,407 $ 2,525 $ (118) (5) %
Reported $ 2,403 $ 2,473 $ (70) (3) %
Total combined retail new and used vehicle unit sales:
Same store 52,098 49,938 2,160 4 %
Acquisitions, open points, dispositions and holding company 312 950 (638) NM
Total as reported 52,410 50,888 1,522 3 %


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Total F&I revenue:
Same store	$	119.3	$	115.3	$	4.0	3	%
Acquisitions, open points, dispositions and holding company	0.3		1.8		(1.5)		NM
Total as reported	$	119.6	$	117.1	$	2.5	2	%

Total F&I gross profit per retail unit (excludes fleet):
Same store	$	2,350	$	2,370	$	(20)	(1)	%
Reported	$	2,348	$	2,360	$	(12)	(1)	%

Total combined retail new and used vehicle unit sales:
Same store	50,777		48,654		2,123		4	%
Acquisitions, open points, dispositions and holding company	186		992		(806)		NM
Total as reported	50,963		49,646		1,317		3	%

NM = Not Meaningful

Our Franchised Dealerships Segment reported F&I results were as follows:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Reported F&I:
Revenue	$	119.6	$	117.1	$	2.5	2	%
Total combined retail new and used vehicle unit sales	50,963		49,646		1,317		3	%
Gross profit per retail unit (excludes fleet)	$	2,348	$	2,360	$	(12)	(1)	%

Our Franchised Dealerships Segment same store F&I results were as follows:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Same store F&I:
Revenue	$	119.3	$	115.3	$	4.0	4	%
Total combined retail new and used vehicle unit sales	50,777		48,654		2,123		4	%
Gross profit per retail unit (excludes fleet)	$	2,350	$	2,370	$	(20)	(1)	%

Same Store Franchised Dealerships Segment F&I – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

F&I revenue increased approximately $4.0 million, or 4%, due primarily to an increase in total combined retail new and used vehicle unit sales volume, offset partially by a 1% decrease in F&I gross profit per retail unit. F&I gross profit per retail unit decreased $20 per unit to $2,350 per unit, due primarily to a decrease in the other aftermarket contract penetration rate.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Total F&I revenue:
Same store $ 370.9 $ 369.7 $ 1.2 — %
Acquisitions, open points, dispositions and holding company 4.5 12.4 (7.9) NM
Total as reported $ 375.4 $ 382.1 $ (6.7) (2) %
Total F&I gross profit per retail unit (excludes fleet):
Same store $ 2,437 $ 2,429 $ 8 — %
Reported $ 2,428 $ 2,464 $ (36) (1) %
Total combined retail new and used vehicle unit sales:
Same store 152,198 152,207 (9) — %
Acquisitions, open points, dispositions and holding company 2,413 2,859 (446) NM
Total as reported 154,611 155,066 (455) — %

~~NM = Not Meaningful~~

~~Our Franchised Dealerships Segment reported F&I results were as follows:~~

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported F&I:
Revenue $ 126.0 $ 125.8 $ 0.2 — %
Total combined retail new and used vehicle unit sales 52,410 50,888 1,522 3 %
Gross profit per retail unit (excludes fleet) $ 2,403 $ 2,473 $ (70) (3) %

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported F&I:
Revenue $ 375.4 $ 382.1 $ (6.7) (2) %
Total combined retail new and used vehicle unit sales 154,611 155,066 (455) — %
Gross profit per retail unit (excludes fleet) $ 2,428 $ 2,464 $ (36) (1) %

~~Our Franchised Dealerships Segment same store F&I results were as follows:~~
Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Same store F&I:
Revenue $ 125.4 $ 122.2 $ 3.2 3 %
Total combined retail new and used vehicle unit sales 52,098 49,938 2,160 4 %
Gross profit per retail unit (excludes fleet) $ 2,407 $ 2,525 $ (118) (5) %

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Same store F&I:
Revenue $ 370.9 $ 369.7 $ 1.2 — %
Total combined retail new and used vehicle unit sales 152,198 152,207 (9) — %
Gross profit per retail unit (excludes fleet) $ 2,437 $ 2,429 $ 8 — %

~~Same Store Franchised Dealerships Segment F&I~~ – ~~Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022~~

~~F&I~~Finance contract revenue ~~increased approximately $3.2 million, or 3%, due primarily to a decrease in F&I gross profit per retail unit, partially offset by an increase in F&I in~~for combined retail new and used ~~vehicle unit sales volume. F&I gross profit per retail unit decreased $118 per unit, or 5%, to $2,407 per unit,~~vehicles remained flat year over year, due primarily to a ~~decrease in finance and service contract penetration rates, offset partially by a higher other aftermarket contract penetration rate.~~

~~Finance contract revenue for combined new and used vehicles decreased 1%, due primarily due to a 70-basis~~240-basis point ~~decrease~~increase in the finance contract penetration rate ~~and~~offset by a 4%7% decrease in gross profit per finance contract. We believe the decrease in the finance contract penetration rate is a result of higher average interest rates driving some customers to switch to a cash purchase or to obtain their own outside financing, particularly for used vehicles. Service contract revenue for combined retail new and used vehicles increased ~~31%~~18%, due primarily to an ~~65%~~11% increase in gross profit per service contract ~~partially offset by~~and a ~~1,380-basis~~100-basis point ~~decrease~~increase in the service contract penetration rate. Other aftermarket contract revenue for combined retail new and used vehicles ~~was flat, due primarily to a 6% decrease in gross profit per other aftermarket contract that was offset by a 440-basis point increase in the other aftermarket contract penetration rate.~~

~~Same Store Franchised Dealerships Segment F&I~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

~~F&I revenue~~ increased approximately $1.2 million due primarily to a increase in F&I gross profit per retail unit and a decrease in total combined retail new and used vehicle unit sales volume. F&I gross profit per retail unit increased $8 per unit to $2,437 per unit, due primarily to a decrease in the finance, service and other aftermarket contract penetration rates.

~~Finance contract revenue for combined new and used vehicles decreased~~ 7%, due primarily to a 190-basis point decrease in the finance contract penetration rate and a 4% decrease in gross profit per finance contract. We believe the decrease in the finance contract penetration rate is a result of higher average interest rates driving some customers to switch to a cash purchase or to obtain their own outside financing, particularly for used vehicles. Service contract revenue for combined new and used vehicles increasedan 8%, due primarily to a 15% increase in gross profit per service contract partially offset by a 280-basis point decrease in the service contract penetration rate. Other aftermarket contract revenue for combined new and used vehicles increased 8%, due primarily to a 11% increase in gross profit per other aftermarket contract, partially offset by ~~an 400-basis~~a 670-basis point decrease in the other aftermarket contract penetration rate.

Results of Operations – EchoPark Segment

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.~~opening or acquisition. Same market results may vary significantly from reported results due to the closure of stores that are no longer included in same market results.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

In January 2024, we closed the remaining seven Northwest Motorsport stores. In light of these closures, we believe the following discussion of EchoPark Segment results on a same market basis provides a meaningful year-over-year comparison.

Used Vehicles and F&I – EchoPark Segment

Our EchoPark operating strategy focuses on maximizing total used vehicle-related gross profit (based on a combination of retail used vehicle unit sales volume, front-end retail used vehicle gross profit (loss) per unit and F&I gross profit per retail unit) rather than realizing traditional levels of front-end retail used vehicle gross profit ~~(loss)~~ per unit. As such, we believe the best per unit measure of gross profit performance at our EchoPark stores is a combined total gross profit (loss) per retail unit, which includes both front-end retail used vehicle gross profit (loss) ~~per unit~~ and F&I gross profit per retail unit sold. See the discussion under the heading “Results of Operations - Consolidated” for additional discussion of the macro drivers of used vehicle revenues and F&I revenues.

All Fixed Operations activity at our EchoPark stores supports our used vehicle inventory reconditioning operations and EchoPark stores do not currently perform customer pay repairs or maintenance work and are not permitted to perform manufacturer-paid warranty repairs. As such, reconditioning amounts that are classified as Fixed Operations revenues and cost of sales in our Franchised Dealerships Segment are presented as used vehicle cost of sales for the EchoPark Segment.

The following ~~tables provide~~table provides a reconciliation of EchoPark Segment reported basis, same market basis and ~~new market/~~closed market basis for retail used vehicles:


		Three Months Ended September 30,				Better / (Worse)
		2023		2022		Change		% Change
		(In millions, except unit data)
	Three Months Ended March 31,																Three Months Ended March 31,									Better / (Worse)
	2024													2024					2023					Change							% Change
	(In millions, except unit data)																							(In millions, except unit data)
Total retail used vehicle revenue:	Total retail used vehicle revenue:
Same market	Same market	$	469.9	$	268.0	$	201.9	75	%
New markets/closed markets		84.9		243.4		(158.5)		NM
Same market
Same market											$	473.2			$	433.7				$	39.5						9		%
Closed stores										Closed stores	9.7				138.8					(129.1)							NM
Total as reported	Total as reported	$	554.8	$	511.4	$	43.4	9	%	Total as reported	$	482.9	$		$	572.5		$		$	(89.6)		(16)					(16)		%

Total retail used vehicle gross profit (loss):	Total retail used vehicle gross profit (loss):
Total retail used vehicle gross profit (loss):
Total retail used vehicle gross profit (loss):
Same market	Same market	$	5.0	$	(2.0)	$	7.0	350	%
New markets/closed markets		2.3		6.9		(4.6)		NM
Same market
Same market											$	5.6			$	(9.8)				$	15.4						157		%
Closed stores										Closed stores	(0.3)				(2.0)					1.7							NM
Total as reported	Total as reported	$	7.3	$	4.9	$	2.4	49	%	Total as reported	$	5.3	$		$	(11.8)		$		$	17.1		145					145		%

Total retail used vehicle unit sales:	Total retail used vehicle unit sales:
Total retail used vehicle unit sales:
Total retail used vehicle unit sales:
Same market	Same market	17,480		9,412		8,068		86	%
New markets/closed markets		1,570		5,833		(4,263)		NM
Same market
Same market											17,618				15,551					2,067							13		%
Closed stores										Closed stores	363				4,429					(4,066)							NM
Total as reported	Total as reported	19,050		15,245		3,805		25	%	Total as reported	17,981		19,980			19,980			(1,999)			(1,999)			(10)					(10)	%
NM = Not Meaningful	NM = Not Meaningful

4637

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit data)
Total retail used vehicle revenue:
Same market $ 1,274.1 $ 818.6 $ 455.5 56 %
New markets/closed markets 377.2 782.7 (405.5) NM
Total as reported $ 1,651.3 $ 1,601.3 $ 50.0 3 %
Total retail used vehicle gross profit (loss):
Same market $ (4.3) $ (13.7) $ 9.4 69 %
New markets/closed markets (14.5) 21.6 (36.1) NM
Total as reported $ (18.8) $ 7.9 $ (26.7) (338) %
Total retail used vehicle unit sales:
Same market 46,997 27,911 19,086 68 %
New markets/closed markets 9,117 18,761 (9,644) NM
Total as reported 56,114 46,672 9,442 20 %
NM = Not Meaningful

The following ~~tables provide~~table provides a reconciliation of EchoPark Segment reported basis, same market basis and ~~new market/~~closed market basis for F&I:

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
Total F&I revenue:
Same market $ 41.7 $ 22.8 $ 18.9 83 %
New markets/closed markets 3.6 16.1 (12.5) NM
Total as reported $ 45.3 $ 38.9 $ 6.4 16 %
NM = Not Meaningful
Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
Total F&I revenue:
Same market $ 114.9 $ 70.0 $ 44.9 64 %
New markets/closed markets 21.5 51.8 (30.3) NM
Total as reported $ 136.4 $ 121.8 $ 14.6 12 %
NM = Not Meaningful

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions)
Total F&I revenue:
Same market	$	47.5	$	38.3	$	9.2	24	%
Closed stores	0.4		11.7		(11.3)		NM
Total as reported	$	47.9	$	50.0	$	(2.1)	(4)	%
NM = Not Meaningful

Our EchoPark Segment reported retail used vehicle and F&I results were as follows:


		Three Months Ended September 30,				Better / (Worse)
		2023		2022		Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																				Three Months Ended March 31,											Better / (Worse)
	2024															2024							2023							Change					% Change
	(In millions, except unit and per unit data)																													(In millions, except unit and per unit data)
Reported retail used vehicle and F&I:	Reported retail used vehicle and F&I:
Retail used vehicle revenue
Retail used vehicle revenue
Retail used vehicle revenue	Retail used vehicle revenue	$	554.8	$	511.4	$	43.4	9	%	$	482.9			$			$	572.5			$			$	(89.6)			(16)				(16)	%
Retail used vehicle gross profit (loss)	Retail used vehicle gross profit (loss)	$	7.3	$	4.9	$	2.4	49	%	Retail used vehicle gross profit (loss)		$	5.3		$				$	(11.8)		$				$	17.1		150				150	%
Retail used vehicle unit sales	Retail used vehicle unit sales	19,050		15,245		3,805		25	%	Retail used vehicle unit sales		17,981			19,980					19,980			(1,999)					(1,999)			(10)			(10)	%
Retail used vehicle revenue per unit	Retail used vehicle revenue per unit	$	29,125	$	33,546	$	(4,421)	(13)	%	Retail used vehicle revenue per unit		$	26,854		$				$	28,653		$				$	(1,799)		(6)				(6)	%
F&I revenue	F&I revenue	$	45.3	$	38.9	$	6.4	17	%	F&I revenue		$	47.9		$				$	50.0		$				$	(2.1)		(4)				(4)	%
Combined retail used vehicle gross profit and F&I revenue	Combined retail used vehicle gross profit and F&I revenue	$	52.6	$	43.8	$	8.8	20	%	Combined retail used vehicle gross profit and F&I revenue		$	53.2		$				$	38.2		$				$	15.0		39				39	%
Combined retail used vehicle and F&I gross profit per unit	Combined retail used vehicle and F&I gross profit per unit	$	2,767	$	2,868	$	(101)	(4)	%	Combined retail used vehicle and F&I gross profit per unit		$	2,955		$				$	1,906		$				$	1,049		55				55	%

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported retail used vehicle and F&I:
Retail used vehicle revenue $ 1,651.3 $ 1,601.3 $ 50.0 3 %
Retail used vehicle gross profit (loss) $ (18.8) $ 7.9 $ (26.7) (338) %
Retail used vehicle unit sales 56,114 46,672 9,442 20 %
Retail used vehicle revenue per unit $ 29,428 $ 34,308 $ (4,880) (14) %
F&I revenue $ 136.4 $ 121.8 $ 14.6 12 %
Combined retail used vehicle gross profit and F&I revenue $ 117.6 $ 129.7 $ (12.1) (9) %
Combined retail used vehicle and F&I gross profit per unit $ 2,095 $ 2,775 $ (680) (25) %

Our EchoPark Segment same market retail used vehicle and F&I results were as follows:


		Three Months Ended September 30,				Better / (Worse)
		2023		2022		Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																				Three Months Ended March 31,											Better / (Worse)
	2024															2024							2023							Change					% Change
	(In millions, except unit and per unit data)																													(In millions, except unit and per unit data)
Same market retail used vehicle and F&I:	Same market retail used vehicle and F&I:
Retail used vehicle revenue
Retail used vehicle revenue
Retail used vehicle revenue	Retail used vehicle revenue	$	469.9	$	268.0	$	201.9	75	%	$	473.2			$			$	433.7			$			$	39.5			9				9	%
Retail used vehicle gross profit (loss)	Retail used vehicle gross profit (loss)	$	5.0	$	(2.0)	$	7.0	350	%	Retail used vehicle gross profit (loss)		$	5.6		$				$	(9.8)		$				$	15.4		157				157	%
Retail used vehicle unit sales	Retail used vehicle unit sales	17,480		9,412		8,068		86	%	Retail used vehicle unit sales		17,618			15,551					15,551			2,067					2,067			13			13	%
Retail used vehicle revenue per unit	Retail used vehicle revenue per unit	$	26,884	$	28,479	$	(1,595)	(6)	%	Retail used vehicle revenue per unit		$	26,859		$				$	27,889		$				$	(1,030)		(4)				(4)	%
F&I revenue	F&I revenue	$	41.7	$	22.8	$	18.9	83	%	F&I revenue		$	47.5		$				$	38.3		$				$	9.2		24				24	%
Combined retail used vehicle gross profit and F&I revenue	Combined retail used vehicle gross profit and F&I revenue	$	46.7	$	20.8	$	25.9	125	%	Combined retail used vehicle gross profit and F&I revenue		$	53.1		$				$	28.5		$				$	24.6		86				86	%
Combined retail used vehicle and F&I gross profit per unit	Combined retail used vehicle and F&I gross profit per unit	$	2,672	$	2,209	$	463	21	%	Combined retail used vehicle and F&I gross profit per unit		$	3,018		$				$	1,833		$				$	1,185		65				65	%

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Same market retail used vehicle and F&I:
Retail used vehicle revenue $ 1,274.1 $ 818.6 $ 455.5 56 %
Retail used vehicle gross profit (loss) $ (4.3) $ (13.7) $ 9.4 69 %
Retail used vehicle unit sales 46,997 27,911 19,086 68 %
Retail used vehicle revenue per unit $ 27,110 $ 29,329 $ (2,219) (8) %
F&I revenue $ 114.9 $ 70.0 $ 44.9 64 %
Combined retail used vehicle gross profit and F&I revenue $ 110.6 $ 56.3 $ 54.3 96 %
Combined retail used vehicle and F&I gross profit per unit $ 2,352 $ 2,015 $ 337 17 %

Same Market EchoPark Segment Retail Used Vehicles and F&I – Three Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2022~~March 31, 2023

Retail used vehicle revenue increased approximately ~~$201.9~~$39.5 million, or ~~75%~~9%, due primarily to ~~an 86%~~a 13% increase in retail used vehicle unit sales volume, offset partially by a 6%4% decrease in retail used vehicle revenue per unit. Combined retail used vehicle gross profit and F&I revenue increased approximately ~~$25.9~~$24.6 million, or ~~125%~~86%, due primarily to ~~an $18.9~~a $9.2 million, or ~~83%~~24%, increase in F&I revenue. The increase in combined retail used vehicle and F&I gross profit per unit was due primarily to ~~improvements~~improvement in inventory acquisition ~~costs~~cost as a result of lower wholesale auction prices, sourcing a higher percentage of inventory from non-auction sources, and ~~more efficient allocation of used vehicle~~expanding our inventory ~~across~~to include older vehicles, which typically earn a ~~smaller number of operating locations in the three months ended September 30, 2023.~~

~~Same Market EchoPark~~ ~~Segment Retail Used Vehicles and F&I~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

Retail used vehicle revenue increased approximately $455.5 million, or 56%, due primarily to a 68% increase in retail used vehicle unit sales volume, offset partially by an 8% decrease in retail used vehicle revenue per unit. Combined retail used vehicle gross profit and F&I revenue increased approximately $54.3 million, or 96%, due primarily to a $44.9 million, or 64%, increase in F&I revenue. The increase in combined retail used vehicle and F&Ihigher gross profit per unit was due primarily to improvements in inventory acquisition costs and more efficient allocation of used vehicle inventory across a smaller number of operating locations in the nine months ended September 30, 2023.unit.

4938

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Wholesale Vehicles – EchoPark Segment

See the discussion under the heading “Results of Operations – Consolidated” for additional discussion of the macro drivers of wholesale vehicle revenues.

The following ~~tables provide~~table provides a reconciliation of EchoPark Segment reported basis, same market basis and ~~new market/~~closed market basis for wholesale vehicles:


		Three Months Ended September 30,				Better / (Worse)
		2023		2022		Change		% Change
		(In millions, except unit data)
	Three Months Ended March 31,																Three Months Ended March 31,									Better / (Worse)
	2024													2024					2023					Change							% Change
	(In millions, except unit data)																							(In millions, except unit data)
Total wholesale vehicle revenue:	Total wholesale vehicle revenue:
Same market	Same market	$	16.0	$	14.8	$	1.2	8	%
New markets/closed markets		10.6		24.1		(13.5)		NM
Same market
Same market											$	25.5			$	17.9				$	7.6						42		%
Closed stores										Closed stores	3.1				9.1					(6.0)							NM
Total as reported	Total as reported	$	26.6	$	38.9	$	(12.3)	(32)	%	Total as reported	$	28.6	$		$	27.0		$		$	1.6		6					6		%

Total wholesale vehicle gross profit (loss):	Total wholesale vehicle gross profit (loss):
Total wholesale vehicle gross profit (loss):
Total wholesale vehicle gross profit (loss):
Same market	Same market	$	—	$	(0.1)	$	0.1	100	%
New markets/closed markets		0.2		0.1		0.1		NM
Same market
Same market											$	0.1			$	1.2				$	(1.1)						(92)		%
Closed stores										Closed stores	(0.7)				(0.1)					(0.6)							NM
Total as reported	Total as reported	$	0.2	$	—	$	0.2	100	%	Total as reported	$	(0.6)	$		$	1.1		$		$	(1.7)		(155)					(155)		%

Total wholesale vehicle unit sales:	Total wholesale vehicle unit sales:
Total wholesale vehicle unit sales:
Total wholesale vehicle unit sales:
Same market	Same market	2,305		1,495		810		54	%
New markets/closed markets		435		954		(519)		NM
Same market
Same market											2,785				2,119					666							31		%
Closed stores										Closed stores	209				797					(588)							NM
Total as reported	Total as reported	2,740		2,449		291		12	%	Total as reported	2,994		2,916			2,916			78			78			3					3	%
NM = Not Meaningful	NM = Not Meaningful

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit data)
Total wholesale vehicle revenue:
Same market $ 56.4 $ 73.0 $ (16.6) (23) %
New markets/closed markets 32.7 70.3 (37.6) NM
Total as reported $ 89.1 $ 143.3 $ (54.2) (38) %
Total wholesale vehicle gross profit (loss):
Same market $ 1.1 $ 2.0 $ (0.9) (45) %
New markets/closed markets 0.2 1.6 (1.4) NM
Total as reported $ 1.3 $ 3.6 $ (2.3) (64) %
Total wholesale vehicle unit sales:
Same market 7,010 5,828 1,182 20 %
New markets/closed markets 1,881 2,964 (1,083) NM
Total as reported 8,891 8,792 99 1 %
NM = Not Meaningful

Our EchoPark Segment reported wholesale vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	28.6		$	27.0		$	1.6	6	%
Gross profit (loss)	$	(0.6)		$	1.1		$	(1.7)	(155)	%
Unit sales	2,994			2,916			78		3	%
Revenue per unit	$	9,578		$	9,279		$	299	3	%
Gross profit (loss) per unit	$	(168)		$	427		$	(595)	NM
Gross profit (loss) as a % of revenue	(1.8)		%	4.6		%	(640)		bps
NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our EchoPark Segment ~~reported wholesale vehicle results were as follows:~~
Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue $ 26.6 $ 38.9 $ (12.3) (32) %
Gross profit (loss) $ 0.2 $ — $ 0.2 100 %
Unit sales 2,740 2,449 291 12 %
Revenue per unit $ 9,652 $ 15,873 $ (6,221) (39) %
Gross profit (loss) per unit $ 23 $ (44) $ 67 NM
Gross profit (loss) as a % of revenue 0.2 % (0.3) % 50 bps
NM = Not Meaningful

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue $ 89.1 $ 143.3 $ (54.2) (38) %
Gross profit (loss) $ 1.3 $ 3.6 $ (2.3) (64) %
Unit sales 8,891 8,792 99 1 %
Revenue per unit $ 10,014 $ 16,307 $ (6,293) (39) %
Gross profit (loss) per unit $ 143 $ 394 $ (251) (64) %
Gross profit (loss) as a % of revenue 1.4 % 2.4 % (100) bps

~~Our EchoPark Segment~~ same market wholesale vehicle results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																						Three Months Ended March 31,											Better / (Worse)
	2024																	2024							2023							Change						% Change
	(In millions, except unit and per unit data)																															(In millions, except unit and per unit data)
Same market wholesale vehicle:	Same market wholesale vehicle:
Revenue
Revenue
Revenue	Revenue	$	16.0		$	14.8		$	1.2	8	%	$	25.5			$			$	17.9			$			$	7.6			42				42	%
Gross profit (loss)	Gross profit (loss)	$	—		$	(0.1)		$	0.1	100	%	Gross profit (loss)		$	0.1		$				$	1.2		$				$	(1.1)		(92)				(92)		%
Unit sales	Unit sales	2,305			1,495			810		54	%	Unit sales		2,785			2,119					2,119			666					666			31				31	%
Revenue per unit	Revenue per unit	$	6,910		$	9,871		$	(2,961)	(30)	%	Revenue per unit		$	9,155		$				$	8,475		$				$	680		8				8		%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	15		$	(86)		$	101	117	%	Gross profit (loss) per unit		$	21		$				$	558		$				$	(537)		(96)				(96)		%
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	0.2		%	(0.9)		%	110		bps		Gross profit (loss) as a % of revenue		0.2		%					6.6		%					(640)			bps					bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Same market wholesale vehicle:
Revenue $ 56.4 $ 73.0 $ (16.6) (23) %
Gross profit (loss) $ 1.1 $ 2.0 $ (0.9) (45) %
Unit sales 7,010 5,828 1,182 20 %
Revenue per unit $ 8,049 $ 12,539 $ (4,490) (36) %
Gross profit (loss) per unit $ 170 $ 349 $ (179) (51) %
Gross profit (loss) as a % of revenue 2.1 % 2.8 % (70) bps

Same Market EchoPark Segment Wholesale Vehicles – Three Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2022~~March 31, 2023

Same market wholesale vehicle revenue increased approximately ~~$1.2~~$7.6 million, or 8%42%, due primarily to ~~a 54%~~an 8% increase ~~in wholesale vehicle unit sales volume, offset partially by a 30% decrease in wholesale vehicle revenue per unit. As we adjust the~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~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.~~

~~Same Market EchoPark Segment Wholesale Vehicles~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

~~Same market wholesale vehicle revenue decreased approximately $16.6 million, or 23%, due primarily to a 36% decrease~~ in wholesale vehicle revenue per unit, ~~offset partially by~~combined with a ~~20%~~31% increase in wholesale vehicle unit sales volume. As we adjust the inventory mix of ~~nearly-new~~nearly new versus older model year vehicles sold at retail going forward, the levels of wholesale vehicle revenue and gross profit may vary.

Results of Operations – Powersports Segment

~~Our Powersports Segment consists of eight stores acquired during 2022 and five stores acquired in the first quarter of 2023.~~ As a result of acquisitions since the ~~timing~~beginning of ~~acquisitions~~2023, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our ~~Powersports Segment, we believe presentation and discussion~~current group of ~~same store results is not meaningful.~~operating stores. The following discussion of new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a ~~reported~~same store basis, except where otherwise noted. Our Powersports Segment results are subject to seasonal variations, such that the second and third quarters are generally expected to contribute higher revenues and segment income than the first and fourth quarters.

New Vehicles – Powersports Segment

~~Our~~The following table provides a reconciliation of Powersports Segment reported basis and same store basis for retail new ~~vehicle results were as follows:~~vehicles:

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported retail new vehicle:
Revenue $ 26.8 $ 10.6 $ 16.2 153 %
Gross profit $ 5.9 $ 2.1 $ 3.8 181 %
Unit sales 1,391 490 901 184 %
Revenue per unit $ 19,271 $ 21,537 $ (2,266) (11) %
Gross profit per unit $ 4,213 $ 4,304 $ (91) (2) %
Gross profit as a % of revenue 21.9 % 20.0 % 190 bps


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Total retail new vehicle revenue:
Same store	$	15.3	$	20.6	$	(5.3)	(26)	%
Acquisitions	0.6		0.2		0.4		NM
Total as reported	$	15.9	$	20.8	$	(4.9)	(24)	%

Total retail new vehicle gross profit:
Same store	$	2.1	$	3.9	$	(1.8)	(46)	%
Acquisitions	0.2		0.1		0.1		NM
Total as reported	$	2.3	$	4.0	$	(1.7)	(43)	%

Total retail new vehicle unit sales:
Same store	828		1,100		(272)		(25)	%
Acquisitions	17		7		10		NM
Total as reported	845		1,107		(262)		(24)	%

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported retail new vehicle:
Revenue $ 72.5 $ 13.0 $ 59.5 458 %
Gross profit $ 14.3 $ 2.7 $ 11.6 430 %
Unit sales 3,894 579 3,315 573 %
Revenue per unit $ 18,618 $ 22,553 $ (3,935) (17) %
Gross profit per unit $ 3,680 $ 4,742 $ (1,062) (22) %
Gross profit as a % of revenue 19.8 % 21.0 % (120) bps

NM = Not Meaningful

5240

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Powersports Segment reported retail new vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported retail new vehicle:
Revenue	$	15.9		$	20.8		$	(4.9)	(24)	%
Gross profit	$	2.3		$	4.0		$	(1.7)	(43)	%
Unit sales	845			1,107			(262)		(24)	%
Revenue per unit	$	18,781		$	18,793		$	(12)	—	%
Gross profit per unit	$	2,676		$	3,573		$	(897)	(25)	%
Gross profit as a % of revenue	14.2		%	19.0		%	(480)		bps

~~Reported~~

Our Powersports Segment same store retail new vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Same store retail new vehicle:
Revenue	$	15.3		$	20.6		$	(5.3)	(26)	%
Gross profit	$	2.1		$	3.9		$	(1.8)	(46)	%
Unit sales	828			1,100			(272)		(25)	%
Revenue per unit	$	18,512		$	18,740		$	(228)	(1)	%
Gross profit per unit	$	2,553		$	3,549		$	(996)	(28)	%
Gross profit as a % of revenue	13.8		%	18.9		%	(510)		bps

Same Store Powersports Segment Retail New Vehicles – Three Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2022~~March 31, 2023

~~Reported~~Retail new vehicle revenue decreased 26%, due primarily to a 25% decrease in retail new vehicle ~~revenue increased~~unit sales volume and a 1% decrease in retail new vehicle average selling prices. Retail new vehicle gross profit decreased approximately ~~$16.2~~$1.8 million, or 46%, as a result of lower retail new vehicle unit sales volume and ~~reported~~lower retail new vehicle gross profit ~~increased approximately $3.8 million, due primarily to the timing of acquisitions. Reported retail~~per unit. Retail new vehicle gross profit per unit decreased ~~$91~~$996 per unit, or 2%28%, to ~~$4,213~~$2,553 per unit, due primarily to ~~the timing of acquisitions and changes in brand mix.~~

~~Reported Powersports Segment Retail New Vehicles~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

Reported retail new vehicle revenue increased approximately $59.5 million and reported retail new vehicle gross profit increased approximately $11.6 million, due primarily to the timing of acquisitions. Reported retail new vehicle gross profit per unit decreased $1,062 per unit, or 22%, to $3,680 per unit, due primarily to the timing of acquisitions and changes in brand mix.

~~Used Vehicles – Powersports Segment~~

~~Our Powersports Segment reported retail used vehicle results were as follows:~~

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue $ 4.9 $ 2.0 $ 2.9 145 %
Gross profit $ 2.4 $ 0.6 $ 1.8 300 %
Unit sales 837 177 660 373 %
Revenue per unit $ 5,807 $ 11,562 $ (5,755) (50) %
Gross profit per unit $ 2,833 $ 3,328 $ (495) (15) %
Gross profit as a % of revenue 48.8 % 28.8 % 2,000 bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue $ 17.1 $ 5.0 $ 12.1 242 %
Gross profit $ 4.7 $ 1.4 $ 3.3 236 %
Unit sales 1,972 353 1,619 459 %
Revenue per unit $ 8,683 $ 14,144 $ (5,461) (39) %
Gross profit per unit $ 2,407 $ 3,677 $ (1,270) (35) %
Gross profit as a % of revenue 27.7 % 26.0 % 170 bps

~~Reported Powersports Segment Retail Used Vehicles~~ – ~~Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022~~

Reported retail used vehicle revenue increased approximately $2.9 million and reported retail used vehicle gross profit increased approximately $1.8 million, due primarily to the timing of acquisitions. Reported retail used vehicle gross profit per unit decreased $495 per unit, or 15%, to $2,833 per unit, due primarily to the timing of acquisitions and changes in brand mix.

~~Reported Powersports Segment Retail Used Vehicles~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

Reported retail used vehicle revenue increased approximately $12.1 million and reported retail used vehicle gross profit increased approximately $3.3 million, due primarily to the timing of acquisitions. Reported retail used vehicle gross profit per unit decreased $1,270 per unit, or 35%, to $2,407 per unit, due primarily to the timing of acquisitionshigher inventory invoice cost and changes in brand mix.

5341

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Used Vehicles – Powersports Segment

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for retail used vehicles:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Retail used vehicle revenue:
Same store	$	2.7	$	4.3	$	(1.6)	(37)	%
Acquisitions	0.7		0.5		0.2		NM
Total as reported	$	3.4	$	4.8	$	(1.4)	(29)	%

Retail used vehicle gross profit:
Same store	$	0.7	$	0.9	$	(0.2)	(22)	%
Acquisitions	0.2		0.1		0.1		NM
Total as reported	$	0.9	$	1.0	$	(0.1)	(10)	%

Retail used vehicle unit sales:
Same store	336		401		(65)		(16)	%
Acquisitions	73		43		30		NM
Total as reported	409		444		(35)		(8)	%

NM = Not Meaningful

Our Powersports Segment reported retail used vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue	$	3.4		$	4.8		$	(1.4)	(30)	%
Gross profit	$	0.9		$	1.0		$	(0.1)	(10)	%
Unit sales	409			444			(35)		(8)	%
Revenue per unit	$	8,238		$	10,864		$	(2,626)	(24)	%
Gross profit per unit	$	2,185		$	2,328		$	(143)	(6)	%
Gross profit as a % of revenue	26.5		%	21.4		%	510		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Powersports Segment same store retail used vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Same store retail used vehicle:
Revenue	$	2.7		$	4.3		$	(1.6)	(37)	%
Gross profit	$	0.7		$	0.9		$	(0.2)	(22)	%
Unit sales	336			401			(65)		(16)	%
Revenue per unit	$	8,180		$	10,805		$	(2,625)	(24)	%
Gross profit per unit	$	2,202		$	2,274		$	(72)	(3)	%
Gross profit as a % of revenue	26.9		%	21.0		%	590		bps

Same Store Powersports Segment Retail Used Vehicles – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Retail used vehicle revenue decreased 37%, due primarily to a 24% decrease in retail used vehicle average selling prices and a 16% decrease in retail used vehicle unit sales volume. Retail used vehicle gross profit decreased approximately $0.2 million, or 22%, as a result of lower retail used vehicle unit sales volume and lower retail used vehicle gross profit per unit. Retail used vehicle gross profit per unit decreased $72 per unit, or 3%, to $2,202 per unit, due primarily to lower average retail selling prices.

Wholesale Vehicles – Powersports Segment

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


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Total wholesale vehicle revenue:
Same store	$	0.3	$	0.1	$	0.2	200	%
Acquisitions	(0.2)		0.1		(0.3)		NM
Total as reported	$	0.1	$	0.2	$	(0.1)	(50)	%

Total wholesale vehicle gross profit (loss):
Same store	$	0.1	$	(0.1)	$	0.2	200	%
Acquisitions	(0.1)		0.1		(0.2)		NM
Total as reported	$	—	$	—	$	—	—	%

Total wholesale vehicle unit sales:
Same store	10		6		4		67	%
Acquisitions	3		1		2		NM
Total as reported	13		7		6		86	%

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Powersports Segment reported wholesale vehicle results were as follows:

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue $ 1.3 $ — $ 1.3 100 %
Gross profit (loss) $ (0.1) $ — $ (0.1) (100) %
Unit sales 93 9 84 933 %
Revenue per unit $ 14,282 $ 4,011 $ 10,271 256 %
Gross profit (loss) per unit $ (188) $ — $ (188) (100) %
Gross profit (loss) as a % of revenue (1.3) % — % (130) bps


		Nine Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions, except unit and per unit data)
	Three Months Ended March 31,																						Three Months Ended March 31,											Better / (Worse)
	2024																	2024							2023							Change						% Change
	(In millions, except unit and per unit data)																															(In millions, except unit and per unit data)
Reported wholesale vehicle:	Reported wholesale vehicle:
Revenue
Revenue
Revenue	Revenue	$	1.9		$	0.3		$	1.6	533	%	$	0.1			$			$	0.2			$			$	(0.1)			(50)				(50)	%
Gross profit (loss)	Gross profit (loss)	$	—		$	—		$	—	—	%	Gross profit (loss)		$	—		$				$	—		$				$	—		—				—		%
Unit sales	Unit sales	150			29			121		417	%	Unit sales		13			7					7			6					6			86				86	%
Revenue per unit	Revenue per unit	$	12,157		$	7,342		$	4,815	66	%	Revenue per unit		$	17,408		$				$	13,993		$				$	3,415		24				24		%
Gross profit (loss) per unit	Gross profit (loss) per unit	$	(344)		$	(2,095)		$	1,751	84	%	Gross profit (loss) per unit		$	(2,798)		$				$	(125)		$				$	(2,673)		NM					NM
Gross profit (loss) as a % of revenue	Gross profit (loss) as a % of revenue	(2.8)		%	(1.0)		%	(180)		bps		Gross profit (loss) as a % of revenue		(16.1)		%					(0.9)		%					(1,520)			bps					bps

~~Reported~~

Our Powersports Segment same store wholesale vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Same store wholesale vehicle:
Revenue	$	0.3		$	0.1		$	0.2	200	%
Gross profit (loss)	$	0.1		$	(0.1)		$	0.2	200	%
Unit sales	10			6			4		67	%
Revenue per unit	$	21,755		$	16,075		$	5,680	35	%
Gross profit (loss) per unit	$	(3,637)		$	(145)		$	(3,492)	NM
Gross profit (loss) as a % of revenue	(16.7)		%	(0.9)		%	(1,580)		bps

Same Store Powersports Segment Wholesale Vehicles – Three Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2022~~March 31, 2023

~~Reported~~Same store wholesale vehicle revenue increased approximately ~~$1.3~~$0.2 million, due to ~~the timing of acquisitions. Reported~~higher wholesale vehicle unit sales volume and higher wholesale vehicle average selling prices. Same store wholesale vehicle gross profit ~~decreased~~(loss) improved approximately ~~$0.1~~$0.2 million.

~~Reported Powersports Segment Wholesale Vehicles~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

~~Reported wholesale vehicle revenue increased approximately $1.6 million, due to the timing of acquisitions. Reported wholesale vehicle gross profit was flat.~~

5444

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fixed Operations – Powersports Segment

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


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions)
Total Fixed Operations revenue:
Same store	$	6.1	$	6.4	$	(0.3)	(5)	%
Acquisitions	0.7		0.3		0.4		NM
Total as reported	$	6.8	$	6.7	$	0.1	1	%

Total Fixed Operations gross profit:
Same store	$	2.8	$	3.2	$	(0.4)	(13)	%
Acquisitions	0.3		0.1		0.2		NM
Total as reported	$	3.1	$	3.3	$	(0.2)	(6)	%

NM = Not Meaningful

Our Powersports Segment reported Fixed Operations results were as follows:


		Three Months Ended September 30,						Better / (Worse)
		2023			2022			Change		% Change
		(In millions)
	Three Months Ended March 31,																						Three Months Ended March 31,											Better / (Worse)
	2024																	2024							2023							Change							% Change
	(In millions)																															(In millions)
Reported Fixed Operations:	Reported Fixed Operations:
Revenue	Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Customer pay
Customer pay
Customer pay	Customer pay	$	4.5		$	1.6		$	2.9	181	%	$	1.9			$			$	2.6			$			$	(0.7)			(27)				(27)		%
Warranty	Warranty	0.5			0.2			0.3		150	%	Warranty		0.4			0.3					0.3			0.1					0.1			33					33	%
Wholesale parts	Wholesale parts	0.2			0.1			0.1		100	%	Wholesale parts		0.2			0.1					0.1			0.1					0.1			100					100	%
Internal, sublet and other	Internal, sublet and other	16.4			1.6			14.8		925	%	Internal, sublet and other		4.3			3.7					3.7			0.6					0.6			16					16	%
Total revenue	Total revenue	$	21.6		$	3.5		$	18.1	517	%	Total revenue		$	6.8		$				$	6.7		$				$	0.1		1					1		%

Gross profit	Gross profit
Gross profit
Gross profit
Customer pay
Customer pay
Customer pay	Customer pay	$	2.7		$	0.9		$	1.8	200	%	$	0.8			$			$	1.4			$			$	(0.6)			(43)				(43)		%
Warranty	Warranty	0.3			0.2			0.1		50	%	Warranty		0.3			0.2					0.2			0.1					0.1			50					50	%
Wholesale parts	Wholesale parts	—			—			—		—	%	Wholesale parts		0.1			—					—			0.1					0.1			100					100	%
Internal, sublet and other	Internal, sublet and other	7.2			0.7			6.5		929	%	Internal, sublet and other		1.9			1.7					1.7			0.2					0.2			12					12	%
Total gross profit	Total gross profit	$	10.2		$	1.8		$	8.4	467	%	Total gross profit		$	3.1		$				$	3.3		$				$	(0.2)		(6)					(6)		%

Gross profit as a % of revenue	Gross profit as a % of revenue
Gross profit as a % of revenue
Gross profit as a % of revenue
Customer pay
Customer pay
Customer pay	Customer pay	59.7		%	57.4		%	230		bps		43.6		%					55.1		%					(1,150)				bps					bps
Warranty	Warranty	56.5		%	65.9		%	(940)		bps		Warranty		70.8		%					56.7		%					1,410			bps						bps
Wholesale parts	Wholesale parts	15.3		%	15.9		%	(60)		bps		Wholesale parts		25.5		%					20.5		%					500			bps						bps
Internal, sublet and other	Internal, sublet and other	43.9		%	43.8		%	10		bps		Internal, sublet and other		46.1		%					45.9		%					20			bps						bps
Total gross profit as a % of revenue	Total gross profit as a % of revenue	47.1		%	51.8		%	(470)		bps		Total gross profit as a % of revenue		46.4		%					48.9		%					(250)			bps						bps

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
Reported Fixed Operations:
Revenue
Customer pay $ 10.5 $ 3.1 $ 7.4 239 %
Warranty 1.3 0.4 0.9 225 %
Wholesale parts 0.5 0.1 0.4 400 %
Internal, sublet and other 26.3 1.6 24.7 NM
Total revenue $ 38.6 $ 5.2 $ 33.4 642 %
Gross profit
Customer pay $ 6.0 $ 1.9 $ 4.1 216 %
Warranty 0.7 0.3 0.4 133 %
Wholesale parts 0.1 — 0.1 100 %
Internal, sublet and other 11.7 0.5 11.2 NM
Total gross profit $ 18.5 $ 2.7 $ 15.8 585 %
Gross profit as a % of revenue
Customer pay 56.6 % 61.6 % (500) bps
Warranty 58.2 % 69.9 % (1,170) bps
Wholesale parts 17.9 % 15.5 % 240 bps
Internal, sublet and other 44.5 % 31.3 % 1,320 bps
Total gross profit as a % of revenue 47.8 % 51.1 % (330) bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Powersports Segment same store Fixed Operations results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions)
Same store Fixed Operations:
Revenue
Customer pay	$	1.7		$	2.5		$	(0.8)	(32)	%
Warranty	0.4			0.3			0.1		33	%
Wholesale parts	0.2			0.1			0.1		100	%
Internal, sublet and other	3.8			3.5			0.3		9	%
Total revenue	$	6.1		$	6.4		$	(0.3)	(5)	%

Gross profit
Customer pay	$	0.7		$	1.4		$	(0.7)	(50)	%
Warranty	0.3			0.2			0.1		50	%
Wholesale parts	0.1			—			0.1		100	%
Internal, sublet and other	1.7			1.6			0.1		6	%
Total gross profit	$	2.8		$	3.2		$	(0.4)	(13)	%

Gross profit as a % of revenue
Customer pay	42.4		%	55.0		%	(1,260)		bps
Warranty	70.5		%	56.5		%	1,400		bps
Wholesale parts	25.5		%	20.5		%	500		bps
Internal, sublet and other	44.7		%	45.7		%	(100)		bps
Total gross profit as a % of revenue	46.6		%	49.1		%	(250)		bps

Same Store Powersports Segment Fixed Operations – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

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%.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

F&I – Powersports Segment

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for F&I:


	Three Months Ended March 31,		Better / (Worse)
	2024	2023	Change		% Change
	(In millions, except unit and per unit data)
Total F&I revenue:
Same store	1.4	1.5	$	(0.1)	(7)	%
Acquisitions	0.1	—	0.1		NM
Total as reported	1.5	1.5	$	—	—	%

Total F&I gross profit per retail unit (excludes fleet):
Same store	1,225	981	$	244	25	%
Reported	1,197	980	$	217	22	%

Total combined retail new and used vehicle unit sales:
Same store	1,164	1,501	(337)		(22)	%
Acquisitions	90	50	40		NM
Total as reported	1,254	1,551	(297)		(19)	%

NM = Not Meaningful

Our Powersports Segment reported F&I results were as follows:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Reported F&I:
Revenue	$	1.5	$	1.5	$	—	—	%
Total combined retail new and used vehicle unit sales	1,254		1,551		(297)		(19)	%
Gross profit per retail unit (excludes fleet)	$	1,197	$	980	$	217	22	%

Our Powersports Segment same store F&I results were as follows:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Same store F&I:
Revenue	$	1.4	$	1.5	$	(0.1)	(7)	%
Total combined retail new and used vehicle unit sales	1,164		1,501		$	(337)	(22)	%
Gross profit per retail unit (excludes fleet)	$	1,225	$	981	$	244	25	%

5547

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Reported Powersports Segment Fixed Operations~~ – ~~Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022~~

Reported Fixed Operations revenue increased approximately $18.1 million and reported Fixed Operations gross profit increased approximately $8.4 million. Customer pay revenue increased approximately $2.9 million and customer pay gross profit increased approximately $1.8 million. Warranty revenue increased approximately $0.3 million and warranty gross profit increased approximately $0.1 million. Wholesale parts revenue increased approximately $0.1 million and wholesale parts gross profit was flat. Internal, sublet and other revenue increased approximately $14.8 million and internal, sublet and other gross profit increased approximately $6.5 million.

~~Reported Powersports Segment Fixed Operations~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

Reported Fixed Operations revenue increased approximately $33.4 million and reported Fixed Operations gross profit increased approximately $15.8 million. Customer pay revenue increased approximately $7.4 million and customer pay gross profit increased approximately $4.1 million. Warranty revenue increased approximately $0.9 million and warranty gross profit increased approximately $0.4 million. Wholesale parts revenue increased approximately $0.4 million and wholesale parts gross profit increased approximately $0.1 million. Internal, sublet and other revenue increased approximately $24.7 million and internal, sublet and other gross profit increased approximately $11.2 million.

~~F&I~~ – ~~Powersports Segment~~

~~Our Powersports Segment reported F&I results were as follows:~~

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported F&I:
Revenue $ 2.4 $ 0.9 $ 1.5 167 %
Unit sales 2,228 667 1,561 234 %
Gross profit per retail unit (excludes fleet) $ 1,075 $ 1,297 $ (222) (17) %

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit and per unit data)
Reported F&I:
Revenue $ 5.9 $ 1.4 $ 4.5 321 %
Unit sales 5,866 — 932 — 4,934 529 %
Gross profit per retail unit (excludes fleet) $ 1,006 $ 1,445 $ (439) (30) %

~~Reported~~Same Store Powersports Segment F&I – Three Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2022~~March 31, 2023

~~Reported~~Same store F&I revenue ~~increased $1.5~~decreased approximately $0.1 million, or 7%, primarily due to a 22% decrease in retail new and ~~reported~~used vehicle unit sales volume. Same store F&I gross profit per retail unit ~~decreased $222~~increased $244 per unit, or ~~17%~~25%, to ~~$1,075~~$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 ~~changes~~lower retail new and used vehicle unit sales volume, offset partially by a 350-basis point increase in ~~brand mix. The~~the combined new and used vehicle finance contract penetration ~~rate was 35%~~rate. Same store service contract revenue decreased 8%, ~~the combined~~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 was 22%~~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 ~~total~~ other aftermarket contract penetration rate, ~~was 29%.~~

~~Reported Powersports Segment F&I~~ – ~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

~~Reported F&I revenue increased $4.5 million and reported F&I gross profit per~~offset partially by a 24% decrease in retail ~~unit decreased $439 per unit, or 30%, to $1,006 per unit, due primarily to changes in brand mix. The combined~~ new and used vehicle ~~finance contract penetration rate was 41%, the combined new and used vehicle service contract penetration rate was 25% and the total other aftermarket contract penetration rate was 39%.~~unit sales volume.

5648

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Segment Results Summary

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.~~taxes and impairment charges. See above for tables and discussion of results by reportable segment.


		Three Months Ended September 30,				Better / (Worse)
		2023		2022		Change		% Change
		(In millions, except unit data)
	Three Months Ended March 31,																				Three Months Ended March 31,												Better / (Worse)
	2024															2024								2023							Change							% Change
	(In millions, except unit data)																														(In millions, except unit data)
Segment Revenues:	Segment Revenues:
Franchised Dealerships Segment revenues:	Franchised Dealerships Segment revenues:
Franchised Dealerships Segment revenues:
Franchised Dealerships Segment revenues:
Retail new vehicles
Retail new vehicles
Retail new vehicles	Retail new vehicles	$	1,546.7	$	1,359.6	$	187.1	14	%	$	1,439.9			$			$	1,421.0			$				$	18.9			1				1		%
Fleet new vehicles	Fleet new vehicles	23.2		32.0		(8.8)		(28)	%	Fleet new vehicles		19.6			18.8					18.8				0.8					0.8			4					4	%
Total new vehicles	Total new vehicles	1,569.9		1,391.6		178.3		13	%	Total new vehicles		$	1,459.5		$				$	1,439.8			$				$	19.7		1					1		%
Used vehicles	Used vehicles	780.7		842.4		(61.7)		(7)	%	Used vehicles		729.3			767.6					767.6				(38.3)					(38.3)			(5)					(5)	%
Wholesale vehicles	Wholesale vehicles	51.4		75.8		(24.4)		(32)	%	Wholesale vehicles		48.6			58.4					58.4				(9.8)					(9.8)			(17)					(17)	%
Parts, service and collision repair	Parts, service and collision repair	431.8		404.7		27.1		7	%	Parts, service and collision repair		439.9			423.8					423.8				16.1					16.1			4					4	%
Finance, insurance and other, net	Finance, insurance and other, net	126.0		125.8		0.2		—	%	Finance, insurance and other, net		119.6			117.1					117.1				2.5					2.5			2					2	%
Franchised Dealerships Segment revenues	Franchised Dealerships Segment revenues	$	2,959.8	$	2,840.3	$	119.5	4	%	Franchised Dealerships Segment revenues		$	2,796.9		$				$	2,806.7			$				$	(9.8)		—					—		%

EchoPark Segment revenues:	EchoPark Segment revenues:
EchoPark Segment revenues:
EchoPark Segment revenues:
Retail new vehicles
Retail new vehicles
Retail new vehicles	Retail new vehicles	$	—	$	1.6	$	(1.6)	(100)	%	$	—			$			$	1.0			$				$	(1.0)			(100)				(100)		%
Used vehicles	Used vehicles	554.8		511.4		43.4		8	%	Used vehicles		482.9			572.5					572.5				(89.6)					(89.6)			(16)					(16)	%
Wholesale vehicles	Wholesale vehicles	26.6		38.9		(12.3)		(32)	%	Wholesale vehicles		28.6			27.0					27.0				1.6					1.6			6					6	%

Finance, insurance and other, net	Finance, insurance and other, net	45.3		38.9		6.4		16	%
Finance, insurance and other, net
Finance, insurance and other, net												47.9							50.0								(2.1)							(4)		%
EchoPark Segment revenues	EchoPark Segment revenues	$	626.7	$	590.8	$	35.9	6	%	EchoPark Segment revenues		$	559.4		$				$	650.5			$				$	(91.1)		(14)					(14)		%

Powersports Segment revenues:	Powersports Segment revenues:
Powersports Segment revenues:
Powersports Segment revenues:
Retail new vehicles
Retail new vehicles
Retail new vehicles	Retail new vehicles	$	26.8	$	10.6	$	16.2	153	%	$	15.9			$			$	20.8			$				$	(4.9)			(24)				(24)		%

Used vehicles

Used vehicles

Used vehicles	Used vehicles	4.9		2.0		2.9		145	%	3.4				4.8				4.8				(1.4)					(1.4)			(29)					(29)		%
Wholesale vehicles	Wholesale vehicles	1.3		—		1.3		100	%	Wholesale vehicles		0.1			0.2					0.2				(0.1)					(0.1)			(50)					(50)	%
Parts, service and collision repair	Parts, service and collision repair	21.6		3.5		18.1		517	%	Parts, service and collision repair		6.8			6.7					6.7				0.1					0.1			1					1	%
Finance, insurance and other, net	Finance, insurance and other, net	2.4		0.9		1.5		167	%	Finance, insurance and other, net		1.5			1.5					1.5				—					—			—					—	%
Powersports Segment revenues	Powersports Segment revenues	$	57.0	$	17.0	$	40.0	235	%	Powersports Segment revenues		$	27.7		$				$	34.0			$				$	(6.3)		(19)					(19)		%

Total consolidated revenues	Total consolidated revenues	$	3,643.5	$	3,448.1	$	195.4	6	%
Total consolidated revenues
Total consolidated revenues												$	3,384.0						$	3,491.2							$	(107.2)						(3)		%

Segment Income (Loss) (1):	Segment Income (Loss) (1):
Franchised Dealerships Segment		$	101.5	$	146.3	$	(44.8)	(31)	%
EchoPark Segment		(16.9)		(31.1)		14.2		46	%
Segment Income (Loss) (1):
Segment Income (Loss) (1):
Franchised Dealerships Segment (2)
Franchised Dealerships Segment (2)
Franchised Dealerships Segment (2)												$	62.7						$	109.8							$	(47.1)						(43)		%
EchoPark Segment (3)										EchoPark Segment (3)		(2.9)							(46.8)								43.9							94		%
Powersports Segment	Powersports Segment	6.6		1.2		5.4		450	%	Powersports Segment		(2.3)			0.6					0.6				(2.9)					(2.9)			(483)					(483)	%

Income before taxes		$	91.2	$	116.4	$	(25.2)	(22)	%
Total segment income (loss)										Total segment income (loss)		$	57.5						$	63.6							$	(6.1)						(10)		%
Impairment charges (4)										Impairment charges (4)		(1.0)							—								(1.0)							(100)		%
Income (loss) before taxes										Income (loss) before taxes		$	56.5						$	63.6							$	(7.1)						(11)		%

Segment Retail New and Used Vehicle Unit Sales Volume:	Segment Retail New and Used Vehicle Unit Sales Volume:
Segment Retail New and Used Vehicle Unit Sales Volume:
Segment Retail New and Used Vehicle Unit Sales Volume:
Franchised Dealerships Segment
Franchised Dealerships Segment
Franchised Dealerships Segment	Franchised Dealerships Segment	52,410		50,888		1,522		3	%	50,963				49,646				49,646				1,317					1,317			3					3		%
EchoPark Segment	EchoPark Segment	19,050		15,290		3,760		25	%	EchoPark Segment		17,981			19,991					19,991				(2,010)					(2,010)			(10)					(10)	%
Powersports Segment	Powersports Segment	2,228		667		1,561		234	%	Powersports Segment		1,254			1,551					1,551				(297)					(297)			(19)					(19)	%
Total retail new and used vehicle unit sales volume	Total retail new and used vehicle unit sales volume	73,688		66,845		6,843		10	%	Total retail new and used vehicle unit sales volume		70,198			71,188					71,188				(990)					(990)			(1)					(1)	%

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(1)Segment income (loss) for each segment is defined as income (loss) before taxes and impairment charges.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions, except unit data)
Segment Revenues:
Franchised Dealerships Segment revenues:
Retail new vehicles $ 4,550.9 $ 4,047.1 $ 503.8 12 %
Fleet new vehicles 70.4 70.0 0.4 1 %
Total new vehicles 4,621.3 4,117.1 504.2 12 %
Used vehicles 2,322.8 2,568.1 (245.3) (10) %
Wholesale vehicles 165.3 261.2 (95.9) (37) %
Parts, service and collision repair 1,289.0 1,183.4 105.6 9 %
Finance, insurance and other, net 375.4 382.1 (6.7) (2) %
Franchised Dealerships Segment revenues $ 8,773.8 $ 8,511.9 $ 261.9 3 %
EchoPark Segment revenues:
Retail new vehicles $ 1.0 $ 7.3 $ (6.3) (86) %
Used vehicles 1,651.3 1,601.3 50.0 3 %
Wholesale vehicles 89.1 143.3 (54.2) (38) %
Finance, insurance and other, net 136.4 121.8 14.6 12 %
EchoPark Segment revenues $ 1,877.8 $ 1,873.7 $ 4.1 — %
Powersports Segment revenues:
Retail new vehicles $ 72.5 $ 13.0 $ 59.5 458 %
Used vehicles 17.1 5.0 12.1 242 %
Wholesale vehicles 1.9 0.3 1.6 533 %
Parts, service and collision repair 38.6 5.2 33.4 642 %
Finance, insurance and other, net 5.9 1.4 4.5 322 %
Powersports Segment revenues $ 136.0 $ 24.9 $ 111.1 446 %
Total consolidated revenues $ 10,787.6 $ 10,410.5 $ 377.1 4 %
Segment Income (Loss) (1):
Franchised Dealerships Segment $ 357.2 $ 472.2 $ (115.0) (24) %
EchoPark Segment (116.5) (100.6) (15.9) (16) %
Powersports Segment 9.2 0.9 8.3 922 %
Total segment income (loss) 249.9 372.5 (122.6) (33) %
Impairment charges (62.6) — (62.6) 100 %
Income before taxes $ 187.3 $ 372.5 $ (185.2) (50) %
Segment Retail New and Used Vehicle Unit Sales Volume:
Franchised Dealerships Segment 154,611 155,066 (455) — %
EchoPark Segment 56,125 46,798 9,327 20 %
Powersports Segment 5,866 932 4,934 529 %
Total retail new and used vehicle unit sales volume 216,602 202,796 13,806 7 %
(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.

~~(1) Segment income (loss)~~(4)For the three months ended March 31, 2024, amount includes approximately $1.0 million of pre-tax property and equipment charges for ~~each segment is defined as income (loss) before taxes and impairment charges.~~the Franchised Dealerships Segment.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Selling, General and Administrative (“SG&A”) Expenses – Consolidated

Consolidated SG&A expenses are comprised of four major groups: compensation expense, advertising expense, rent expense and other expense. Compensation expense primarily relates to store personnel who are paid a commission or a salary plus commission and support personnel who are generally paid a fixed salary. Commissions paid to store personnel typically vary depending on gross profits realized and sales volume objectives. Due to the salary component for certain store and corporate personnel, gross profits and compensation expense do not change in direct proportion to one another. Advertising expense and other expense vary based on the level of actual or anticipated business activity and the number of dealerships in operation. Rent expense typically varies with the number of store locations owned, investments made for facility improvements and interest rates. Other expense includes various fixed and variable expenses, including gain on the disposal of franchises, certain customer-related costs such as gasoline and service loaners, and insurance, training, legal and ITinformation technology expenses, which may not change in proportion to gross profit levels. Typically, SG&A expenses as a percentage of gross profit are highest in the first quarter of the year, due to the seasonal nature of our business and the effects of certain payroll taxes and fringe benefits that occur early in the year.

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

Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
SG&A expenses:
Compensation $ 256.0 $ 255.2 $ (0.8) — %
Advertising 22.5 21.1 (1.4) (7) %
Rent 11.7 11.9 0.2 2 %
Other 119.4 110.8 (8.6) (8) %
Total SG&A expenses $ 409.6 $ 399.0 $ (10.6) (3) %
SG&A expenses as a % of gross profit:
Compensation 44.0 % 43.9 % (10) bps
Advertising 3.9 % 3.6 % (30) bps
Rent 2.0 % 2.1 % 10 bps
Other 20.5 % 19.1 % (140) bps
Total SG&A expenses as a % of gross profit 70.4 % 68.7 % (170) bps
Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
SG&A expenses:
Compensation $ 775.8 $ 774.1 $ (1.7) — %
Advertising 71.4 72.8 1.4 2 %
Rent 34.5 38.3 3.8 10 %
Other 332.5 303.6 (28.9) (10) %
Total SG&A expenses $ 1,214.2 $ 1,188.8 $ (25.4) (2) %
SG&A expenses as a % of gross profit:
Compensation 45.5 % 44.5 % (100) bps
Advertising 4.2 % 4.2 % — bps
Rent 2.0 % 2.2 % 20 bps
Other 19.5 % 17.4 % (210) bps
Total SG&A expenses as a % of gross profit 71.2 % 68.3 % (290) bps

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions)
SG&A expenses:
Compensation	$	247.3		$	258.8		$	11.5	4	%
Advertising	22.3			26.1			3.8		15	%
Rent	9.3			11.3			2.0		18	%
Other	113.3			116.6			3.3		3	%
Total SG&A expenses	$	392.2		$	412.8		$	20.6	5	%

SG&A expenses as a % of gross profit:
Compensation	46.1		%	46.7		%	60		bps
Advertising	4.2		%	4.7		%	50		bps
Rent	1.7		%	2.0		%	30		bps
Other	21.1		%	21.2		%	10		bps
Total SG&A expenses as a % of gross profit	73.1		%	74.6		%	150		bps

Three Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2022~~March 31, 2023

Overall SG&A expenses ~~increased~~decreased in both dollar amount and as a percentage of gross profit, primarily due to ~~higher IT~~the closure of certain EchoPark and ~~salary expenses, $0.9 million in severance charges, and $3.9 million in lease exit charges.~~Northwest Motorsport locations since the first quarter of 2023. Compensation expense ~~was flat~~decreased in both dollar amount and as a percentage of gross profit. Advertising expense ~~increased~~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.~~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 higher IT expenses, $0.9 million in severance charges, and $3.9 million in lease exit charges.~~

~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

Overall SG&A expenses increased in both dollar amount and as a percentage of gross profit, primarily due to higher IT and salary expenses, $3.1 million in severance charges, $3.9 million in lease exit charges and $1.9 million in hail damage, offset partially by a $20.7 million gain on the disposal of franchises. Compensation expense was flat in dollar amount and increased as a percentage of gross profit primarily due to lower new vehicle gross profit and lower new vehicle gross profit per unit. Advertising expense decreased in dollar amount and was flat as a percentage of gross profit as a result of adapting our advertising spending to the current retail automotive environment. Rent expense decreased in both dollar amount and as a percentage of gross profit, primarily due to ~~the purchase~~a decrease of ~~several properties that were previously leased. Other~~ $9.7 million in building maintenance.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SG&A expenses ~~increased~~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 ~~both dollar~~connection with the indefinite suspension of operations at certain EchoPark locations. SG&A expenses for the three months ended March 31, 2023, amount ~~and as a percentage~~includes approximately $2.0 million of ~~gross profit, primarily due to higher IT expenses, $3.1 million in severance~~pre-tax charges ~~$3.9 million in lease exit charges and $1.9 million in hail damage, offset partially by a $20.7 million gain on the disposal of franchises.~~for long-term compensation expense.

Impairment Charges – Consolidated

Impairment charges were approximately $1.0 million for the three months ended March 31, 2024, related to capitalized information technology project costs that were abandoned when we closed the remaining Northwest Motorsport stores in January 2024. There were no impairment charges for the three months ended ~~September 30,~~March 31, 2023. Impairment charges were approximately $62.6 million for the nine months ended September 30, 2023, related to fixed assets, lease right-of-use assets, and other contractual obligations related to abandoned property as a result of our decisions to indefinitely suspend operations at certain EchoPark locations and to close certain Northwest Motorsport stores during the second and third quarters of 2023. There were no impairment charges for the three and nine months ended September 30, 2022.

Depreciation and Amortization – Consolidated

Depreciation and amortization expense increased approximately ~~$2.4~~$2.0 million, or ~~7%, and $11.7 million, or 12%~~6%, during the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~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.

Interest Expense, Floor Plan – Consolidated

We typically maintain a floor plan deposit balance (as shown in the table below under the heading “Liquidity and Capital Resources”) that earns interest income based on the ~~agreed upon~~ floor plan interest rate, effectively reducing the net used vehicle floor plan interest expense. The below discussion of interest expense, floor plan includes the effect of interest income earned on the floor plan deposit balance, unless otherwise noted. Our interest expense, floor plan fluctuates with changes in our outstanding borrowing and associated interest rates, which are variable based on SOFR or the U.S. prime rate, plus a ~~rate~~credit spread.

Three Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2022~~March 31, 2023

Interest expense, floor plan for new vehicles increased approximately ~~$9.0~~$6.8 million. The average interest rate applied to the new vehicle floor plan increased in the three months ended ~~September 30, 2023,~~March 31, 2024, resulting in ~~$6.5~~$5.5 million of the overall increase. The average new vehicle floor plan notes payable balance increased approximately ~~$319.8~~$102.9 million, which resulted in ~~$2.5~~$1.3 million of the overall increase.

Interest expense, floor plan for used vehicles decreased approximately ~~$1.2~~$1.1 million including the effect of interest income earned on the floor plan deposit balance, which ~~caused $4.2~~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 ~~increased~~decreased approximately ~~$3.0~~$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 ~~increased~~decreased in the three months ended ~~September 30, 2023,~~March 31, 2024, driving ~~$3.4~~$0.8 million of the overall ~~increase.~~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.

6051

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~The average used vehicle floor plan notes payable balance decreased approximately $42.4 million, which reduced used vehicle floor plan interest expense by approximately $0.4 million.~~

~~Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022~~

Interest expense, floor plan for new vehicles increased approximately $26.6 million. The average interest rate applied to the new vehicle floor plan increased in the nine months ended September 30, 2023, resulting in $22.3 million of the overall increase. The average new vehicle floor plan notes payable balance increased approximately $271.3 million, which resulted in $4.3 million of the overall increase.

Interest expense, floor plan for used vehicles increased approximately $1.6 million, including the effect of interest income earned on the floor plan deposit balance which reduced the increase by approximately $11.7 million. Excluding the effect of interest income earned on the floor plan deposit balance, interest expense, floor plan for used vehicles increased approximately $13.3 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 nine months ended September 30, 2023, resulting in $15.3 million of the overall increase. The average used vehicle floor plan notes payable balance decreased approximately $79.7 million, which reduced used vehicle floor plan interest expense by approximately $2.0 million.

Interest Expense, Other, Net – Consolidated

Interest expense, other, net is summarized in the ~~tables~~table below:
Three Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
Stated/coupon interest $ 22.9 $ 18.0 $ (4.9) (27) %
Deferred loan cost amortization 1.6 1.5 (0.1) (7) %
Interest rate hedge expense (benefit) 0.2 — (0.2) (100) %
Capitalized interest (0.5) (0.2) 0.3 150 %
Interest on finance lease liabilities 4.8 3.7 (1.1) (30) %
Other interest — (0.1) (0.1) (100) %
Total interest expense, other, net $ 29.0 $ 22.9 $ (6.1) (27) %
Nine Months Ended September 30, Better / (Worse)
2023 2022 Change % Change
(In millions)
Stated/coupon interest $ 68.3 $ 52.0 $ (16.3) (31) %
Deferred loan cost amortization 4.9 3.8 (1.1) (29) %
Interest rate hedge expense (benefit) 0.9 0.7 (0.2) (29) %
Capitalized interest (1.6) (1.0) 0.6 60 %
Interest on finance lease liabilities 13.7 9.3 (4.4) (47) %
Other interest — 0.3 0.3 100 %
Total interest expense, other, net $ 86.2 $ 65.1 $ (21.1) (32) %


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions)
Stated/coupon interest	$	22.5	$	22.7	$	0.2	1	%

Deferred loan cost amortization	1.6		1.6		—		—	%
Interest rate hedge expense (benefit)	0.2		0.4		0.2		50	%
Capitalized interest	(0.6)		(0.6)		—		—	%
Interest on finance lease liabilities	5.3		4.2		(1.1)		(26)	%
Other interest	—		0.1		0.1		100	%
Total interest expense, other, net	$	29.0	$	28.4	$	(0.6)	(2)	%

Interest expense, other, net increased approximately ~~$6.1~~$0.6 million, or ~~27%~~2%, during the three months ended ~~September 30, 2023 and increased approximately $21.1 million, or 32%, during the nine months ended September 30, 2023. These increases were~~March 31, 2024. The increase was primarily related to ~~higher interest rates on variable rate mortgage debt and~~ higher interest on finance lease liabilities as a result of a rising interest rate ~~environment, combined with increased borrowings under the 2019 Mortgage Facility.~~environment.

Income Taxes

The overall effective income tax rate was ~~25.0% and 25.5%~~27.0% for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 and 25.0% for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023. Sonic’s effective income tax rate varies from year to year based on the level of taxable income, the distribution of taxable income between states in which the Company operates and other tax adjustments.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Liquidity and Capital Resources

We require cash to ~~fund~~service debt, ~~service,~~meet lease obligations, manage working capital requirements, make facility ~~improvements~~ and other capital improvements, ~~and~~pay dividends on our common stock, ~~and to~~ finance acquisitions and otherwise invest in our business. We rely on cash flows from operations, borrowings under our revolving credit and floor plan borrowing arrangements, real estate mortgage financing, asset sales and offerings of debt and equity securities to meet these requirements. We were in compliance with all restrictive covenants under our debt agreements as of September 30, 2023 and expect to be in compliance for at least the next 12 months. We closely monitor our available liquidity and projected future operating results in order to remain in compliance with the restrictive covenants under the 2021 Credit Facilities, the 2019 Mortgage Facility, the indentures governing the 4.625% Notes and the 4.875% Notes, and our other debt obligations and lease arrangements. However, our liquidity could be negatively affected ~~if we fail~~by business performance and could result in failure to comply with the financial covenants in our existing debt obligations or lease arrangements. After giving effect to the applicable restrictions on the payment of dividends under our debt agreements, as of ~~September 30, 2023,~~March 31, 2024, we had approximately ~~$245.7~~$264.1 million of net income and retained earnings free of such restrictions. Cash flows provided by our dealerships are derived from various sources. The primary sources include individual consumers, automobile manufacturers, automobile manufacturers’ captive finance subsidiaries and other financial institutions. Disruptions in these cash flows could have a material adverse impact on our operations and overall liquidity.

Because the majority of our consolidated assets are held by our dealership subsidiaries, the majority of our cash flows from operations are generated by these subsidiaries. As a result, our cash flows and our ability to service our obligations depend to a substantial degree on the results of operations of these subsidiaries, their contractual obligations and capital requirements, and their ability to provide us with cash.

We had the following liquidity resources available as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022:~~2023:

September 30, 2023

December 31, 2022

(In millions)

March 31, 2024

December 31, 2023

(In millions)

Cash and cash equivalents

34.6

229.2

Floor plan deposit balance

300.0

272.0

Availability under the 2021 Revolving Credit Facility

288.9

292.9

Availability under the Revolving Credit Facility

Availability under the 2019 Mortgage Facility

173.0

—

Availability under the Mortgage Facility

Total available liquidity resources

796.5

794.1

Total available liquidity resources

We maintain a floor plan deposit balance (as shown in the table above) that offsets interest based on the agreed upon floor plan interest rate, effectively reducing the net used vehicle floor plan interest expense with the lender. This deposit balance is not designated as a prepayment of notes payable - floor plan, nor is it our intent to use this amount to offset principal amounts owed under notes payable - floor plan in the future, although we have the right and ability to do so. The deposit balances of ~~approximately $300.0~~$320.0 million as of ~~September 30, 2023~~March 31, 2024 and ~~$272.0~~$345.0 million as of December 31, ~~2022~~2023 are classified as other current assets in the accompanying unaudited condensed consolidated balance sheets as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Floor Plan Facilities

We finance all of our new and certain of our used vehicle inventory through standardized floor plan facilities ~~with~~with: (1) certain manufacturer captive finance companies (classified as notes payable - floor plan - trade in the accompanying unaudited condensed consolidated balance sheets) and (2) a syndicate of manufacturer-affiliated captive finance companies and commercial banks (classified as notes payable - floor plan - non-trade in the accompanying unaudited condensed consolidated balance sheets). These floor plan facilities are due on demand and currently bear interest at variable rates based on either one-month Term SOFR or prime plus an additional spread, as applicable. The weighted-average interest rate for our combined new and used vehicle floor plan facilities was ~~4.96%~~5.82% and ~~3.42%~~4.53% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and 4.87% and 2.40% for the nine months ended September 30, 2023 and 2022,~~ respectively. Excluding the effect of interest income earned on the floor plan deposit balance, the weighted-average interest rate for our combined new and used vehicle floor plan facilities was ~~6.39%~~7.14% and ~~3.73%~~5.82% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and 6.24% and 2.64% for the nine months ended September 30, 2023 and 2022,~~ respectively.

We receive floor plan assistance in the form of direct payments or credits from certain manufacturers. Floor plan assistance received is capitalized in inventory and recorded as a reduction of cost of sales when the associated inventory is sold. We received approximately ~~$14.7~~$14.4 million and ~~$12.6~~$12.7 million in manufacturer assistance in the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and approximately $42.9 million and $38.1 million in manufacturer assistance in the nine months ended September 30, 2023 and 2022,~~ respectively. We recognized in cost of sales approximately ~~$14.5~~$15.0 million and

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~$13.9~~ $13.1 million in manufacturer assistance in the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and approximately $42.3 million and $39.4 million in manufacturer assistance in the nine months ended September 30, 2023 and 2022,~~ respectively. Interest payments under each of our floor plan facilities are due monthly and we are generally not required to make principal repayments prior to the sale of the associated vehicles.

Long-Term Debt and Credit Facilities

See Note 6, “Long-Term Debt,” to the accompanying unaudited condensed consolidated financial statements for a discussion of our long-term debt, mortgage notes and credit facilities and compliance with debt covenants.

Capital Expenditures

Our capital expenditures include the purchase of land and buildings, the construction of new franchised dealerships, EchoPark and powersports stores and collision repair centers, building improvements and equipment purchased for use in our franchised dealerships and EchoPark and powersports stores. We selectively construct new or improve existing franchised dealership facilities to maintain compliance with manufacturers’ image requirements. We typically finance these projects through cash flows from operations, new mortgages or our credit facilities.

Capital expenditures in the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 were approximately ~~$153.6~~$43.8 million, including approximately ~~$137.3~~$43.0 million related to our Franchised Dealerships Segment, approximately ~~$14.1~~$0.4 million related to our EchoPark Segment and approximately ~~$2.2~~$0.4 million related to our Powersports Segment. Of the total capital expenditures, approximately ~~$71.1~~$32.0 million was related to facility construction projects, approximately ~~$14.0~~$1.4 million was related to acquisitions of real estate (land and buildings) and approximately ~~$68.5~~$10.4 million was for other fixed assets utilized in our operations.

All of the ~~$153.6~~$43.8 million in gross capital expenditures in the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was funded through existing cash balances. As of ~~September 30, 2023,~~March 31, 2024, commitments for facility construction projects totaled approximately ~~$40.9~~$28.3 million, nearly all of which is expected to be completed in the next 12 months.

Share Repurchase Program

Our Board of Directors has authorized us to repurchase shares of our Class A Common Stock. Historically, we have used our share repurchase authorization to offset dilution caused by the exercise of stock options or the vesting of equity compensation awards and to maintain our desired capital structure. During the three months ended ~~September 30, 2023,~~March 31, 2024, we repurchased approximately ~~1.7~~0.5 million shares of our Class A Common Stock for approximately $86.7 million in open-market transactions at prevailing market prices and in connection with tax withholding on the vesting of equity compensation awards. During the nine months ended September 30, 2023, we repurchased approximately 3.3 million shares of our Class A Common Stock for approximately $177.5$27.0 million in open-market transactions at prevailing market prices and in connection with tax withholding on the vesting of equity compensation awards. As of ~~September 30, 2023,~~March 31, 2024, our total remaining share repurchase authorization was approximately ~~$286.8~~$259.7 million. Under the ~~2021~~ Credit Facilities, share repurchases are permitted to the extent that no Event of Default exists and we do not exceed the restrictions set forth in our debt agreements. After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of ~~September 30, 2023,~~March 31, 2024, we had approximately ~~$245.7~~$264.1 million of net income and retained earnings free of such restrictions.

Our share repurchase activity is subject to the business judgment of our Board of Directors and management, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements and covenant compliance, the current economic environment and other factors considered by our Board of Directors and management to be relevant. These factors are considered each quarter and will be scrutinized as our Board of Directors and management determine our share repurchase policy in the future.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Dividends

During the three months ended September 30, 2023, our Board of Directors approved a cash dividend of $0.29 per share on all outstanding shares of Class A and Class B Common Stock as of September 15, 2023, which was paid on October 13, 2023. Subsequent to September 30, 2023,March 31, 2024, our Board of Directors approved a cash dividend of $0.30 per share on all outstanding shares of Class A and Class B Common Stock as of ~~December~~March 15, ~~2023~~2024, which was paid on April 15, 2024. Subsequent to March 31, 2024, our Board of Directors approved a cash dividend of $0.30 per share on all outstanding shares of Class A and Class B Common Stock as of June 14, 2024 to be paid on ~~January 12,~~July 15, 2024. The ~~2021~~ Credit Facilities ~~permit~~permits quarterly cash dividends on our Class A and Class B Common Stock up to ~~$0.12~~$0.18 per share so long as no Event of Default has occurred and is continuing and provided that we remain in compliance with all financial covenants under the ~~2021~~ Credit Facilities. Additional dividends are permitted subject to the limitations on restricted payments set forth in the ~~2021~~ Credit Facilities. The 2029 Indenture and the 2031 Indenture also contain restrictions on our ability to pay dividends. After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of ~~September 30, 2023,~~March 31, 2024, we had approximately ~~$245.7~~$264.1 million of net income and retained earnings free of such restrictions. The

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

declaration and payment of any future dividend is subject to the business judgment of our Board of Directors, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements and covenant compliance, share repurchases, the current economic environment and other factors considered by our Board of Directors to be relevant. These factors are considered each quarter and will be scrutinized as our Board of Directors determines our dividend policy in the future. There is no guarantee that additional dividends will be declared and paid at any time in the future. See Note 6, “Long-Term Debt,” to the accompanying unaudited condensed consolidated financial statements for a description of restrictions on the payment of dividends.

Cash Flows

Cash Flows from Operating Activities – Net cash provided by operating activities in the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was approximately ~~$104.2~~$70.1 million. This provision of cash was comprised primarily of net income less non-cash items, a decrease in receivables, and an increase in trade accounts payable and other liabilities, ~~and~~offset partially by an increase in inventories and a decrease in notes payable – floor plan – ~~trade, offset partially by an increase in inventories.~~trade. Net cash ~~provided by~~used in operating activities in the ~~nine~~three months ended September 30, 2022 was approximately $645.4 million. This provision of cash was comprised primarily of net income less non-cash items, a decrease in inventories, a decrease in receivables, and an increase in notes payable – floor plan – trade, offset partially by a decrease in trade accounts payable and other liabilities.

~~Cash Flows from Investing Activities~~ ~~– Net cash used in investing activities in the nine months ended September 30,~~March 31, 2023 was approximately ~~$171.4~~$34.0 million. This use of cash was comprised primarily of the purchase of a powersports business (including real property), net of cash acquired, and purchases of land, property and equipment, partially offset by the proceeds from the sale of four franchised dealerships. Net cash usedan increase in investing activities in the nine months ended September 30, 2022 was approximately $276.1 million. This use of cash was comprised primarily of purchases of land, property and equipment and purchases of businesses, net of cash acquired.

~~Cash Flows from Financing Activities~~ – Net cash used in financing activities in the nine months ended September 30, 2023 was approximately $127.4 million. This use of cash was comprised primarily of purchases of treasury stock and payments on long-term debt,inventories, offset partially by net ~~borrowings on notes~~income less non-cash items, a decrease in receivables and an increase in trade accounts payable – floor plan – non-trade. Net cash used in financing activities in the nine months ended September 30, 2022 was approximately $529.7 million. This use of cash was comprised primarily of net repayments on notes payable – floor plan – non-trade, purchases of treasury stock and ~~payments on long-term debt.~~other liabilities.

We arrange our inventory floor plan financing through both manufacturer captive finance companies and a syndicate of manufacturer-affiliated finance companies and commercial banks. Our floor plan financed with manufacturer captives is recorded in the accompanying unaudited condensed consolidated balance sheets as notes payable - floor plan - trade (with the change in balance being reflected in operating cash flows). Our dealerships that obtain floor plan financing from a syndicate of manufacturer-affiliated finance companies and commercial banks record their obligation in the accompanying unaudited condensed consolidated balance sheets as notes payable - floor plan - non-trade (with the change in balance being reflected in financing cash flows).

Due to the presentation differences for changes in trade floor plan financing and non-trade floor plan financing in the accompanying unaudited condensed consolidated statements of cash flows, decisions made by us to move dealership floor plan financing arrangements from one finance source to another may cause significant variations in operating and financing cash flows without affecting our overall liquidity, working capital or cash flows. Upon entering into the Floor Plan Facilities in April 2021, the majority of our outstanding floor plan liabilities were reclassified from trade floor plan liabilities to non-trade floor plan liabilities, resulting in a significant reclassification of related floor plan liability cash flows from operating activities to financing activities.

Net cash provided by combined trade and non-trade floor plan financing was approximately ~~$159.8~~$13.4 million in the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024. Net cash ~~used in~~provided by combined trade and non-trade floor plan financing was approximately ~~$213.5~~$193.0 million in the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. Accordingly, if all changes in floor plan notes payable were classified as an operating activity (to align changes in floor plan liability balances with the associated changes in inventory balances for cash flow classification), the result would have been net cash provided by operating activities of approximately ~~$257.7~~$91.2 million and $154.8 million in the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, respectively.

Cash Flows from Investing Activities – Net cash used in investing activities in the three months ended March 31, 2024 was approximately $39.4 million. This use of cash was comprised primarily of the purchase of land, property and equipment, partially offset by the proceeds from the sale of land, property and equipment. Net cash used in investing activities in the three months ended March 31, 2023 was approximately $107.5 million. This use of cash was comprised primarily of the purchase of a powersports business (including real property), net of cash acquired, and the purchase of land, property and equipment.

Cash Flows from Financing Activities – Net cash used in financing activities in the three months ended March 31, 2024 was approximately $44.5 million. This use of cash was comprised primarily of purchases of treasury stock and payments on long-term debt. Net cash provided by ~~operating~~financing activities ~~of approximately $426.6 million~~ in the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023 was approximately $72.5

6454

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

million. This provision of cash was comprised primarily of net borrowings on notes payable – floor plan – non-trade, offset partially by purchases of treasury stock and payments on long-term debt.

One metric that management uses to measure operating performance is Adjusted EBITDA a(a non-GAAP financial ~~measure,~~measure) for each of the Company’s reportable segments and on a consolidated basis. We believe Adjusted EBITDA enables our operating performance to be compared across reporting periods on a consistent basis by excluding non-floor plan financing costs, non-cash items such as depreciation and amortization, stock-based compensation expense, and impairment charges, and other items that may affect the comparability of reporting periods, including, but not limited to, gains or losses from acquisitions or dispositions, facility exit costs, severance and long-term compensation charges, and storm damage charges. This non-GAAP financial measure is reconciled to net income (loss) (the most directly comparable GAAP financial measure) in the table below:


		Three Months Ended September 30, 2023								Three Months Ended September 30, 2022
		Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total		Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total
		(In millions)
	Three Months Ended March 31, 2024																			Three Months Ended March 31, 2024				Three Months Ended March 31, 2023
	Franchised Dealerships Segment																	Franchised Dealerships Segment	EchoPark Segment	Powersports Segment	Total	Franchised Dealerships Segment		EchoPark Segment	Powersports Segment	Total
	(In millions)																						(In millions)
Net income	Net income							$	68.4							$	87.3
Provision for income taxes	Provision for income taxes							22.8								29.1
Income (loss) before taxes	Income (loss) before taxes	$	101.5	$	(16.9)	$	6.6	$	91.2	$	146.3	$	(31.1)	$	1.2	$	116.4
Non-floor plan interest (1)	Non-floor plan interest (1)	26.2		0.7		0.4		27.3		19.9		1.1		0.4		21.4
Depreciation & amortization (2)	Depreciation & amortization (2)	29.9		6.1		0.9		36.9		27.3		6.7		0.3		34.3
Stock-based compensation expense	Stock-based compensation expense	6.7		—		—		6.7		3.8		—		—		3.8
Loss (gain) on exit of leased dealerships		—		3.9		—		3.9		—		—		—		—

Impairment charges
Impairment charges
Impairment charges

Severance and long-term compensation charges	Severance and long-term compensation charges	—		0.9		—		0.9		—		—		—		—
Acquisition and disposition related (gain) loss		0.2		0.1		—		0.3		0.5		—		—		0.5
Severance and long-term compensation charges
Severance and long-term compensation charges
Closed store accrued expenses

Adjusted EBITDA (3)	Adjusted EBITDA (3)	$	164.5	$	(5.2)	$	7.9	$	167.2	$	197.8	$	(23.3)	$	1.9	$	176.4

Adjusted EBITDA (3)

Adjusted EBITDA (3)

(1)Includes the following line items from the accompanying unaudited condensed consolidated statements of operations, net of any amortization of debt issuance costs or net debt discount/premium included in footnote (2) below: interest expense, other, net.

(2)Includes the following line items from the accompanying unaudited condensed consolidated statements of cash flows: depreciation and amortization of property and equipment; debt issuance cost amortization; and debt discount amortization, net of premium and other amortization.

(3)Adjusted EBITDA is a non-GAAP financial measure.

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022
Franchised Dealerships Segment EchoPark Segment Discontinued Operations Total Franchised Dealerships Segment EchoPark Segment Discontinued Operations Total
(In millions)
Net income $ 139.5 $ 279.4
Provision for income taxes 47.8 93.1
Income (loss) before taxes $ 357.2 $ (179.1) $ 9.2 $ 187.3 $ 472.2 $ (100.6) $ 0.9 $ 372.5
Non-floor plan interest (1) 77.4 2.5 1.6 81.5 58.0 3.0 0.2 61.2
Depreciation & amortization (2) 87.6 20.4 2.4 110.4 79.6 17.6 0.5 97.7
Stock-based compensation expense 17.3 — — 17.3 12.4 — — 12.4
Loss (gain) on exit of leased dealerships — 4.3 — 4.3 — — — —
Impairment charges — 62.6 — 62.6 — — — —
Severance and long-term compensation charges — 5.1 — 5.1 4.4 — — 4.4
Acquisition and disposition related (gain) loss (20.7) 0.3 — (20.4) (0.5) — — (0.5)
Hail and storm damage charges 1.9 — — 1.9 — — — —
Used vehicle inventory valuation adjustment — 10.0 — 10.0 — — — —
Adjusted EBITDA (3) $ 520.7 $ (73.9) $ 13.2 $ 460.0 $ 626.1 $ (80.0) $ 1.6 $ 547.7

~~(1)~~Includes the following line items from the accompanying unaudited condensed consolidated statements of operations, net of any amortization of debt issuance costs or net debt discount/premium included in footnote (2) below: interest expense, other, net.

~~(2)~~Includes the following line items from the accompanying unaudited condensed consolidated statements of cash flows: depreciation and amortization of property and equipment; debt issuance cost amortization; and debt discount amortization, net of premium and other amortization.

~~(3)Adjusted EBITDA is a non-GAAP financial measure.~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Seasonality

Our operations are subject to seasonal variations. Due in part to our franchised dealerships brand mix and the seasonal nature of automotive retail, the first quarter historically has contributed less operating profit than the second and third quarters, while the fourth quarter historically has contributed the highest operating profit of any quarter. Due to the abnormal effects of the COVID-19 pandemic on the automotive supply chain and inventory levels, in addition to the effects of a potential economic recession, this historical seasonality did not play out in 2022 and may not hold true for the year ending December 31, 2023. Weather conditions and the timing of manufacturer incentive programs and model changeovers cause seasonality and may adversely affect vehicle demand and, consequently, our profitability. Comparatively, parts and service demand has historically remained stable throughout the year.

Future Liquidity Outlook

We believe our best sources of liquidity for operations and debt service remain cash flows generated from operations combined with the availability of borrowings under our floor plan facilities (or any replacements thereof), the ~~2021~~ Credit Facilities (or any replacements thereof), the ~~2019~~ Mortgage Facility (or any replacements thereof) and real estate mortgage financing, selected dealership and other asset sales and our ability to raise funds in the capital markets through offerings of debt or equity securities. Because the majority of our consolidated assets are held by our dealership subsidiaries, the majority of our cash flows from operations are generated by these subsidiaries. As a result, our cash flows and our ability to service our obligations depend to a substantial degree on the results of operations of these subsidiaries, their contractual obligations and capital requirements, and their ability to provide us with cash.

We do not currently anticipate any materially negative changes to our cost of, or access to, capital over the next 12 months.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Off-Balance Sheet Arrangements

Guarantees and Indemnification Obligations

In connection with the operation and disposition of our dealerships, we have entered into various guarantees and indemnification obligations. When we sell dealerships, we attempt to assign any related lease to the buyer of the dealership to eliminate any future liability. However, if we are unable to assign the related leases to the buyer, we will attempt to sublease the leased properties to the buyer at a rate equal to the terms of the original leases. In the event we are unable to sublease the properties to the buyer with terms at least equal to our leases, we may be required to record lease exit accruals. As of ~~September 30, 2023,~~March 31, 2024, our future gross minimum lease payments related to properties subleased to buyers of sold dealerships totaled approximately ~~$8.0~~$6.4 million. Future sublease payments expected to be received related to these lease payments were approximately ~~$7.9~~$6.2 million at ~~September 30, 2023.~~March 31, 2024.

In accordance with the terms of agreements entered into for the sale of our dealerships, we generally agree to indemnify the buyer from certain liabilities and costs arising subsequent to the date of sale, including environmental exposure and exposure resulting from the breach of representations or warranties made in accordance with the agreements. While our exposure with respect to environmental remediation is difficult to quantify, our maximum exposure associated with these general indemnifications was approximately $8.0 million as of ~~September 30, 2023~~both March 31, 2024 and ~~there was not any material exposure with respect to these indemnifications as of~~ December 31, ~~2022.~~2023. These indemnifications typically expire within a period of one to three years following the date of sale. The estimated fair value of these indemnifications was not material and the amount recorded for this contingency was not significant at ~~September 30, 2023.~~March 31, 2024.

We also guarantee the floor plan commitments of our 50%-owned joint venture, and the amount of such guarantee at both ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 was approximately $4.3 million. We expect the aggregate amount of the obligations we guarantee to fluctuate based on dealership disposition activity. Although we seek to mitigate our exposure in connection with these matters, these guarantees and indemnification obligations, including environmental exposures and the financial performance of lease assignees and sublessees, cannot be predicted with certainty. An unfavorable resolution of one or more of these matters could have a material adverse effect on our liquidity and capital resources.

See Note 7, “Commitments and Contingencies,” to the accompanying unaudited condensed consolidated financial statements and Note 12, “Commitments and Contingencies,” to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 for further discussion regarding these guarantees and indemnification obligations.

6656

SONIC AUTOMOTIVE, INC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Our variable rate floor plan facilities, the ~~2021~~ Revolving Credit Facility, the ~~2019~~ Mortgage Facility and our other variable rate notes expose us to risks caused by fluctuations in the applicable interest rates. The total net outstanding balance of ~~our~~such variable ~~rate~~instruments, after considering the effect of outstanding cash flow hedge instruments, was approximately ~~$1.5~~$1.7 billion at ~~September 30, 2023. A~~March 31, 2024. Based on that amount along with the notional value of interest rate caps in place on that date, a decrease of 100 basis points in the underlying interest rates would have reduced interest expense by approximately ~~$10.0~~$3.8 million while a 100-basis point ~~rise~~increase in rates would have ~~increased~~resulted in approximately $2.8 million of additional interest expense ~~by approximately $7.4 million~~ for the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024. Of those changes, approximately ~~$7.0~~$2.9 million of the decrease and approximately ~~$4.5~~$1.8 million of the increase would have resulted from the floor plan, net of offset. The difference between ~~these amounts~~the increases and decreases results from the mitigating effect of ~~our~~the interest rate ~~hedges.~~caps.

~~Foreign Currency Risk~~

We purchase certain of our new vehicle and parts inventories from foreign manufacturers. Although we purchase our inventories in U.S. Dollars, our business is subject to foreign exchange rate risk that may influence automobile manufacturers’ ability to provide their products at competitive prices in the U.S. To the extent that we cannot recapture this exchange rate volatility in prices charged to customers or if this volatility negatively impacts consumer demand for our products, this volatility could adversely affect our future operating results. To the extent that we cannot recapture this exchange rate volatility in prices charged to customers or if this volatility negatively impacts consumer demand for our products, this volatility could adversely affect our future operating results.

6757

SONIC AUTOMOTIVE, INC.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures – Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), we evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as ~~amended)~~amended (the “Exchange Act”)) as of ~~September 30, 2023.~~March 31, 2024. Based upon that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of ~~September 30, 2023.~~March 31, 2024.

Changes in Internal Control Over Financial Reporting – There were no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2023,~~March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance that the objectives of the control system are met and may not prevent or detect misstatements. In addition, any evaluation of the effectiveness of internal control over financial reporting in future periods is subject to risk that those internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

6858

SONIC AUTOMOTIVE, INC.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

For information regarding legal proceedings, see the discussion under the heading “Legal Matters” in Note 7, “Commitments and Contingencies,” to the accompanying unaudited condensed consolidated financial statements.

6959

SONIC AUTOMOTIVE, INC.

Item 1A. Risk Factors.

There have been no material changes in our risk factors from those included in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

7060

SONIC AUTOMOTIVE, INC.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds, and Issuer Purchases of Equity Securities.~~Proceeds.

The following table sets forth information about the shares of Class A Common Stock we repurchased during the three months ended ~~September 30, 2023;~~March 31, 2024:

Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
(In millions, except per share data)
July 2023 — $ — — $ 373.5
August 2023 1.1 $ 50.87 1.1 $ 314.5
September 2023 0.5 $ 52.51 0.5 $ 286.8
Total 1.7 1.7



	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
	(In millions, except per share data)
January 2024	—	$	—	—	$	285.8
February 2024	0.2	$	54.61	0.2	$	276.2
March 2024	0.3	$	52.68	0.3	$	259.7
Total	0.5			0.5

(1)On July 28, 2022, we announced that our Board of Directors had increased the dollar amount authorized for us to repurchase shares of our Class A Common Stock pursuant to our share repurchase program. Our share repurchase program does not have an expiration date and current remaining availability under the program is as follows:


	(In millions)


July 2022 authorization	$	500.0
Total active program repurchases prior to ~~September 30, 2023~~March 31, 2024	~~(213.2)~~(240.3)
Current remaining availability as of ~~September 30, 2023~~March 31, 2024	$	~~286.8~~259.7

See “Item 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion of restrictions on share repurchases and payment of dividends.

7161

SONIC AUTOMOTIVE, INC.

Item 5. Other Information.

Insider Trading Arrangements

~~During~~On February 26, 2024, Jeff Dyke, Sonic’s President and a director, adopted a trading plan intended to satisfy the ~~quarter ended September 30, 2023, none~~affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. Mr. Dyke’s trading plan, which has a duration of one year commencing upon the expiration of the applicable mandatory cooling-off period under Rule 10b5-1, provides for the sale of up to 31,734 shares of Sonic’s Class A Common Stock, subject to volume and pricing limits.

On February 26, 2024, Heath R. Byrd, Sonic’s Executive Vice President and Chief Financial Officer adopted a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. Mr. Byrd’s trading plan, which will commence on May 28, 2024 and expire on February 28, 2025, provides for the sale of up to 22,307 shares of Sonic’s Class A Common Stock, subject to volume and pricing limits.

None of our other directors or officers (as defined in Rule 16a-1(f) ofunder the ~~Securities~~ Exchange ~~Act of 1934, as amended)~~Act) adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K). during the quarter ended March 31, 2024.

7262

SONIC AUTOMOTIVE, INC.

Item 6. Exhibits.


Exhibit No.						Description


3.1						Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated August 7, 1997 (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 001-13395)).
3.2						Certificate of Designation, Preferences and Rights of Class A Convertible Preferred Stock, dated March 20, 1998 (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 001-13395)).
3.3						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated June 16, 1999 (incorporated by reference to Exhibit 3.3 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 001-13395)).
3.4						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated April 18, 2017 (incorporated by reference to Exhibit 3.4 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 001-13395)).
3.5						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated May 3, 2021 (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-8 filed June 8, 2021 (File No. 333-256891)).
3.6						Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated May 16, 2023 ~~(incorporated~~ (incorporated by reference to Exhibit 3.6 to the Q ~~uarterly Report~~Quarterly Report on Form 10-Q for the quarter en ~~ded~~ended June 30, 2023 (File No. 001-13395))
3.7						Amended and Restated Bylaws of Sonic Automotive, Inc., dated February 10, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed February 12, 2021 (File No. 001-13395)).
10.1						Sixth Amended and Restated Credit Agreement, dated as of March 13, 2024, among Sonic Automotive, Inc.; the subsidiaries of Sonic Automotive, Inc. named therein; each lender a party thereto; and Bank of America, N.A., as administrative agent, revolving swing line lender, new vehicle swing line lender, used vehicle swing line lender, l/c issuer and a lender (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.2						Fifth Amended and Restated Company Guaranty Agreement, dated as of March 13, 2024, by Sonic Automotive, Inc. to Bank of America, N.A., as administrative agent for each of the lenders (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.3						Sixth Amended and Restated Subsidiary Guaranty Agreement, dated as of March 13, 2024, by the subsidiaries of Sonic Automotive, Inc. named therein, as guarantors, to Bank of America, N.A., as administrative agent for each of the lenders (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.4						Sixth Amended and Restated Securities Pledge Agreement, dated as of March 13, 2024, among Sonic Automotive, Inc., the subsidiaries of Sonic Automotive, Inc. named therein and Bank of America, N.A., as administrative agent for each of the lenders (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.5						Sixth Amended and Restated Escrow and Security Agreement, dated as of March 13, 2024, among Sonic Automotive, Inc., the subsidiaries of Sonic Automotive, Inc. named therein and Bank of America, N.A., as administrative agent for each of the lenders (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.6						Sixth Amended and Restated Security Agreement, dated as of March 13, 2024, among Sonic Automotive, Inc., the subsidiaries of Sonic Automotive, Inc. named therein and Bank of America, N.A., as administrative agent for each of the lenders (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.7						Fifth Amendment to Credit Agreement, dated as of March 22, 2024, among Sonic Automotive, Inc.; the subsidiaries of Sonic Automotive, Inc. named therein; each financial institution party thereto; and PNC Bank, National Association, as administrative agent and a lender (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed March 27, 2024 (File No. 001-13395)).
31.1*						Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						Inline XBRL Instance Document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

~~_______________________________~~______________________________

*Filed herewith.

**Furnished ~~herewith.~~

herewith

7363

SONIC AUTOMOTIVE, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SONIC AUTOMOTIVE, INC.

~~October 26, 2023~~April 25, 2024	By:	/s/ DAVID BRUTON SMITH
		David Bruton Smith
		Chairman and Chief Executive Officer

~~October 26, 2023~~April 25, 2024	By:	/s/ HEATH R. BYRD
		Heath R. Byrd
		Executive Vice President and Chief Financial Officer

7464



	Nine Months Ended September 30, 2023								Nine Months Ended September 30, 2022
	Franchised Dealerships Segment		EchoPark Segment		Discontinued Operations		Total		Franchised Dealerships Segment		EchoPark Segment		Discontinued Operations		Total
	(In millions)
Net income							$	139.5							$	279.4
Provision for income taxes							47.8								93.1
Income (loss) before taxes	$	357.2	$	(179.1)	$	9.2	$	187.3	$	472.2	$	(100.6)	$	0.9	$	372.5
Non-floor plan interest (1)	77.4		2.5		1.6		81.5		58.0		3.0		0.2		61.2
Depreciation & amortization (2)	87.6		20.4		2.4		110.4		79.6		17.6		0.5		97.7
Stock-based compensation expense	17.3		—		—		17.3		12.4		—		—		12.4
Loss (gain) on exit of leased dealerships	—		4.3		—		4.3		—		—		—		—
Impairment charges	—		62.6		—		62.6		—		—		—		—
Severance and long-term compensation charges	—		5.1		—		5.1		4.4		—		—		4.4
Acquisition and disposition related (gain) loss	(20.7)		0.3		—		(20.4)		(0.5)		—		—		(0.5)
Hail and storm damage charges	1.9		—		—		1.9		—		—		—		—
Used vehicle inventory valuation adjustment	—		10.0		—		10.0		—		—		—		—
Adjusted EBITDA (3)	$	520.7	$	(73.9)	$	13.2	$	460.0	$	626.1	$	(80.0)	$	1.6	$	547.7