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Good morning, welcome to the Sonic Automotive first quarter 2026 earnings conference call. This conference call is being recorded today, Thursday, April 30th, 2026. Presentation materials which accompany management's discussion on the conference call can be accessed at the company's website at ir.sonicautomotive.com. At this time, I would like to refer to the safe harbor statement under the Private Securities Litigation Reform Act of 1995. During this conference call, management may discuss financial projections, information, or expectations about the company's products or market, or market or otherwise make statements about the future. Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from these statements made. These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission.

In addition, management may discuss certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Please refer to the non-GAAP reconciliation tables in the company's current report on Form 8-K filed with the Securities and Exchange Commission earlier today. I would now like to introduce Mr. David Smith, Chairman and Chief Executive Officer of Sonic Automotive. Mr. Smith, you may begin your conference.

Thank you very much, and good morning, everyone. Welcome to the Sonic Automotive first quarter 2026 earnings call. I'm David Smith, the company's Chairman and CEO. Joining me on today's call is our President, Mr. Jeff Dyke, our CFO, Mr. Heath Byrd, our EchoPark Chief Operating Officer, Mr. Tim Keen, and our Vice President of Investor Relations, Mr. Danny Wieland. I would like to open the call by thanking our amazing teammates for continuing to deliver a world-class guest experience for our customers. It's because of our outstanding teammates that Sonic Automotive was just recognized as one of America's most trustworthy companies by Newsweek. We believe our strong relationships with our teammates, guests, and manufacturer lending partners are key to our future success. As always, I would like to thank them all for their continued support and loyalty to the Sonic Automotive team.

Earlier this morning, Sonic Automotive reported first quarter financial results, including record first quarter total revenues of $3.7 billion, up 1% from the previous year, and record first quarter total gross profit of $598.8 million, up 6% year-over-year. First quarter reported GAAP EPS was $1.79 per share. Excluding the effect of certain items, as detailed in our press release this morning, adjusted EPS for the first quarter was $1.62 per share, a 9% increase year-over-year. Moving now to our first quarter franchised dealership segment results. We generated reported revenues of $3.1 billion, flat year-over-year, and same-store revenues of $2.9 billion, down 4% year-over-year.

This same-store decrease was largely driven by a 10% decrease in new vehicle retail volume, offset partially by a 3% increase in used vehicle retail volume year-over-year. It should be noted that first quarter new and used vehicle volume faced tough year-over-year comparisons due to the pull-forward consumer demand for vehicles in the prior year ahead of the U.S. auto import tariffs announced in March 2025. Reported franchised total gross profit for the first quarter was up 5% and was flat year-over-year on a same-store basis. Our fixed operations gross profit and F&I gross profit set quarterly records, up 10% and 7% year-over-year, respectively, on a reported basis.

These two high-margin business lines continue to increase their share of our total gross profit pool, once again contributing over 75% of total gross profit for the first quarter, mitigating the potential headwinds to new vehicle volume and margin to our overall profitability, while also leveraging our SG&A expenses more efficiently than incremental vehicle-related gross profit. Same-store new vehicle GPU was $3,002 per unit, down 4% year-over-year. On a reported basis, new vehicle GPU was $3,144 per unit, up 2% year-over-year. On the used vehicle side of the franchise business, same-store used GPU decreased 4% year-over-year to $1,533 per unit, but increased 11% sequentially due to typical seasonality in the used car business.

Our F&I performance continues to be a strength with first quarter record reported franchised F&I GPU of $2,670 per unit, up 9% year-over-year and up 2% sequentially. Turning now to EchoPark. Adjusted segment income was an all-time record $12.6 million, up 25% year-over-year, and adjusted EBITDA was an all-time record $18.6 million, up 18% year-over-year.

For the first quarter, we reported EchoPark revenues of $581 million, up 4% year-over-year and all-time record gross profit of $68 million, up 6% year-over-year. EchoPark segment retail unit sales volume for the quarter increased 3% year-over-year, and EchoPark segment total GPU was a first quarter record $3,502 per unit, up 3% per unit year-over-year and up 2% sequentially from the fourth quarter. With momentum on our side, we believe we are well positioned to resume a disciplined cadence of EchoPark store openings beginning in late 2026, while also initiating targeted investment in brand marketing as a key component of our long-term growth strategy.

We expect to begin funding these brand marketing efforts this year, potentially increasing advertising expenses by $10 million-$20 million, with the majority of that investment occurring in the second half. Turning now to our Powersports segment. We generated first quarter record revenues of $41 million, up 19% year-over-year. First quarter record gross profit of $10 million, up 19% year-over-year. First quarter combined new and used retail volume was up 25% year-over-year, we are beginning to see the benefits of our investment in modernizing the Powersports business and the future growth opportunities it may provide. We also welcome our new team members from Space Coast Harley-Davidson, Treasure Coast Harley-Davidson, Falcon's Fury Harley-Davidson, Raging Bull Harley-Davidson, and. The acquisition of these five dealerships provides us coverage in key riding states of California, Florida, Georgia, and North Carolina.

This acquisition further reaffirms our commitment to strategic growth within the Powersports segment and diversifies our geographic footprint and seasonality. Finally, turning to our balance sheet, we ended the quarter with $770 million in available liquidity, including $381 million in combined cash and floor plan deposits on hand. Our focus on maintaining a strong balance sheet and liquidity position allows us to strategically deploy capital in a variety of ways to deliver value to our shareholders. During the first quarter, we repurchased approximately 2.1 million shares of our common stock for approximately $136 million, representing a 6% decrease in outstanding share count from December 31, 2025.

In addition, I'm pleased to report today that our Board of Directors approved an additional $500 million share repurchase authorization and an 8% increase to the quarterly cash dividend to $0.41 per share payable on July 15, 2026 to all stockholders of record on June 15, 2026. We continue to work closely with our manufacturer partners to understand the potential impact of tariffs on vehicle production, pricing and volume forecasts, vehicle affordability, and consumer demand going forward. The full year 2026 outlook and guidance on page 13 of our investor presentation considers these uncertainties and represents our current expectations for 2026 financial results. As always, our team remains focused on executing our strategy and adapting to ongoing changes in the automotive retail environment while making strategic decisions to maximize long-term returns.

This concludes our opening remarks, and we look forward to answering any questions you may have. Thank you.

We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Jeff Lick with Stephens Inc.

Good morning. Thanks for taking my questions. I was curious if you could just talk a little bit about EchoPark. You know, appears that you're having some success there. Now you're talking about being optimistic about opening some new stores. I'm curious, is there anything about this particular environment where obviously supply is pretty tight? Seems like used demand might be a little higher than new demand. Anything about this environment that plays into EchoPark's business model? You know, then what is it that gives you confidence to open new stores?

This is Jeff Dyke. On a same-store basis, new car prices were over $60,000 in the first quarter. That's an all-time high for the first quarter. Our total store was over $61,000. With the appreciation or the increase in new car pricing, you know, it's making affordability a big, big issue, and that is gonna put wind in the sail for pre-owned. It gives us a lot of confidence. We also are buying a lot more cars as a percentage of our overall business off the street, both on the franchise side and EchoPark. I believe we approached in the 40% range in the first quarter. That makes a big difference. The margins are better. We're selling more cars. We have access to inventory. We're growing. We're executing at a high level.

It gives us a lot of confidence as we move into Q2 to see the same kinda growth or even better for EchoPark on a year-over-year basis. We're seeing it on the franchise side too. Maybe as a percentage growth, not quite to the extent, but in Q2, but the business is real strong and it's being driven by, you know, just amazingly high new car pricing in the marketplace.

This is Heath. Let me add one point. I think it's really important to understand the value of us getting the non-auction sourcing. The team's done a great job. Keep in mind, when we started, we were 90% auction and 10% other sources. Now, as Jeff mentioned, we're 40%, and those vehicles make $1,200, give or take, more in GPU than the auction vehicles. That's been a big driver. The team has found ways to source vehicles in multiple ways rather than the auction. That's a big part of it.

Can you talk a little bit about? I know you're, you've somewhat integrated or tried to use your franchise dealerships as a strategic asset for EchoPark. You know, it's notable that you did a positive same store sales and franchise for used as well. Can you maybe just talk about, you know, kind of the symbiotic relationship between those two and how you're using that, you know, the source for the entire enterprise?

Yeah, it's Jeff. We've never done that before. We started here in the first quarter, really the latter end of the first quarter. It's not that many cars yet, a few 100, overall. It's gonna grow. We're buying nearly new cars out of the franchise side of the business, which obviously is helping the franchise. It helps the franchise side of the business, bringing those cars into EchoPark. The margins are decent. Backend margins are great. We're selling the heck out of them, in particular, on the East Coast. They've been really, really strong. The Atlanta market's been really strong in this arena. We'll continue to explore and do that with more brands.

We've been really focused on Toyota and Honda, but we'll do that with more brands as we get better at this. It's very new for us and again, just a few hundred units would be included in those numbers that you're looking at for the quarter.

Well, thanks very much. I'll get back in the queue, and best of luck in the-

Thank you, sir.

Thank you.

Our next question is from John Babcock with Barclays.

All right. Thanks. First question, I was wondering if you're able to quantify the impact of weather. Apologies if I missed, but, you know, whether it's, you know, an impact on overall dollars or if there's some way to estimate the impact on volumes, any color there would be useful?

Yes. Thank you. This is David Smith. You know, honestly, I'm not being a smart ass, but we really do not allow weather reports in our business and in our meetings, and we just push through. We really don't focus on that at all.

Okay. Totally understand. Next question, I was wondering, are you guys seeing OEMs pull forward lease maturities? If so, is that benefiting EchoPark at this point?

100%, they're doing that, in particular around BEV. We're seeing that on the East Coast and or the West Coast, and we're selling those vehicles. It's helping both the franchise side and somewhat at EchoPark. We're keeping most of those on the franchise side of the business. Definitely, the pull-aheads are helping in BMW, Mercedes. BMW's done a particular really good job with it. We expect that to continue as we move forward, in particular around BEV, because there's so many more BEV lease returns coming back here over the next six, between now and the end of the year, as those leases mature.

Is it primarily happening with the luxury brands?

Yes.

Okay. Interesting. Then just last question, I was wondering if you might be able to provide some color on where you plan to open the EchoPark stores, whether it's in the same region as your existing stores or if you're planning to expand into other areas.

Our early expansion is primarily in Florida and Texas.

Okay. Thank you.

Thanks, sir.

Our next question is from Chris Pierce with Needham & Company.

Hey, good morning. Just one on EchoPark. I know you're guiding to high single-digit unit gains. I just was curious, I mean, you guys have performed better on front-end GPU, kind of talked how you performed better last year on vendor leverage, seeing healthy OpEx leverage. I guess I just wanna understand, what would be the real driver of unit growth? Again, I'm not trying to poo-poo, you know, high single-digit unit growth in a flat market. I just wanna. I'm also not trying to compare you to someone putting up 40% unit growth, but I'm just kind of curious what would be a real driver of the double-digit unit gains.

That sounds like what you're doing. Yeah, 40% is, it certainly was an impressive number. Nah, look, at the end of the day, we're executing our playbook and our process. We sold well over 30 units per sales associate in the month of March, for example, and we're executing, we think, at a high level. Those gains will continue through this year. That's what's given us the confidence to open more stores as we move to the end of the year and then on into 2027. We're very comfortable with where we are, proud of our team for the growth that they have, and we look forward to that growth continuing.

This is Heath. I'll add one of the things that would drive the unit growth is awareness. That is precisely why we're investing in the brand starting this year.

Yeah. Jeff noted, before you mentioned Atlanta, we've had all-time record sales in Atlanta, and we think that a big part of that is because the market is much more aware of the EchoPark brand.

One final point on that, this is Danny. Is on the earlier point on non-auction sourcing improvements, we were up about 15% in terms of our sales in the first quarter year-over-year that were non-auction source. You know, as Heath added, it's about a $1,200 better GPU on those vehicles, but it also gives us upside.

To grow that volume without the independent or at risk of pricing on the wholesale auction front. Our wholesale auction volume was actually down year-over-year in the first quarter, and some of that was strategic given the, you know, 7% wholesale auction price increases we saw in Q1. Take advantage of it in the late fourth quarter. When pricing gets too high, we really push on this non-auction sourcing path, and that will only benefit from further investment in brand awareness, and sourcing from customers as we go forward.

Could you please drill down on Atlanta a little bit? Like, how should we think of Atlanta in terms of cohort, age of store versus Denver, marketing spend in Atlanta versus other regions, and sort of just kind of give us some sort of like support beams as to, you know, what you're doing there that's driving the growth you talked about.

Yeah, this is David. One of the things we did, you may have seen, is that we got the naming rights for Atlanta Motor Speedway, which is now EchoPark Speedway. That's had a we've seen in the numbers, that's been a major impact on customer awareness of the brand. We found, you know, since 2014, and when we opened our first stores in Denver, that, you know, people know about the EchoPark brand, and they search for us, and they once they experience it and their friends experience it's why we have the number one guest experience in the industry, as rated by reputation.com. That really pays off. We've been really focused on that.

As we said, we're gonna start growing now, but we wanted to make sure we can maintain that world-class guest experience. The kind of volume that, like Jeff mentioned, in March, our teammates were able to deliver those. We had some teammates that sold 50 or 60 cars in just the month of March and maintain that high-level guest experience. That's something that we're thinking of the future and how that's gonna benefit the brand in the future.

The awareness in the Atlanta market has more than doubled since the sponsorship. That really gave us the leg to say, okay, we need to really make some investments here from a marketing perspective, from a brand awareness. We just weren't ready till this year. We, you know, really spent a lot of time getting our house in order, buying more cars off the street, executing at a high level. You've seen we've put quarters back to back-to-back-to-back together if you're following EchoPark closely in the growth. That growth is gonna accelerate. In particular, as we start opening stores, it'll have the, you know, hockey stick acceleration. We're very excited about that opportunity, but we're gonna be, you know, very prudent and focused.

We've done this before and, this time we're gonna make sure that we get this absolutely right. We're real excited about getting some stores open towards the end of the year.

I just wanted to highlight one more thing on this, is that, both Jeff and David mentioned, the fact that we have sales associates that are selling 30-plus vehicles, when I would say probably the on average.

Yeah, 30+ on the average per month per associate. That efficiency, the process that we have, that's one of the reasons that you see for this quarter, EchoPark's SG&A as a percent of gross was lower than 70%. Our semi-fixed expense structure there, coupled with the processes that allow that kind of efficiency, is just gonna get better. You'll see, as we've said from the beginning, that EchoPark has the ability to delever or to leverage that SG&A because of the way it's set up. It's very unique to have associates averaging that number of vehicles per month.

Chris, one more point on the Atlanta market specifically. You know, I guess as maybe operational points supporting the brand awareness and the gains we've made there, our unit volume in the first quarter in Atlanta was up about 25% year-over-year, and our total GPU was up $225 a car. We're seeing more traffic. We're monetizing those incremental vehicles at a better rate. Some of that non-auction sourcing mix we talked about obviously benefits us there. We really think that's, you know, kind of an incremental proof point in the early stages on brand awareness and reaching consumers and letting them know who EchoPark is, what our guest experience is, will only help continue to benefit those growing markets, also our more mature markets in Houston and Dallas and Denver as we go forward.

Yeah, this is David. One last thing is, you'll see as we move forward and as we open new stores, new EchoPark stores, that our cost basis in those stores is gonna be less than we have spent historically. Which is gonna make it far easier to become profitable a lot faster in those locations.

Great. Thanks for all that detail. Appreciate it, and good luck.

Yes, sir. Thank you.

Our next question is from Rajat Gupta with JPMorgan.

Great. Thanks for taking the question. Pretty good execution. Congrats on that. I had a.

Thanks.

Yep. I had a question on parts and service. You know, acknowledge that, you know, you don't like to talk about weather. So irrespective, you know, the growth was pretty strong, despite, you know, some of tough warranty comps. I'm curious how we should think about growth there. I know you're sticking to, like, your framework, but maybe if you could unpack that for us a little bit. You know, what's really helping that business? Any change in processes? You know, hiring cadence? You know, how should we just think about growth there for the rest of the year?

This is Jeff. I mean, look, we told you this two years ago. We were on a mission to hire technicians. We've plus 400 technicians, I think, since we started that mission. We continue to hire techs. We're executing at a really high level on our playbooks. We have a value service program that we're very focused on to drive more customers into our service drive. Which allows us to upsell off of those value services that we brought into the service drive. The used business is growing, that helps internals. Just overall, we're executing at a very high level. You know, mid-single digits is a good number, maybe up a little bit above that. It's across the board. It's not one market or another. It's not one brand or another.

We've got some warranty challenges in comparison to last year. I think we had with our Honda brand, we're off about $1 million in gross there. We'll drive more CPU. Obviously, we're not in control of warranty, we'll drive more customer gross into those brands, into that brand. It's a bright future for fixed operations at Sonic Automotive. It's gonna get, you know, better as we go on this year. It's gonna get better and stronger into 2027, 2028, and towards the end of the decade. There's a lot of business out there for us to get. Remember, customers buy new cars, but half of them don't go to a dealership. Not just Sonic, anybody. Because we're, you know, the industry's priced high and processes were crazy and, just reputation, I think.

We've cleaned all that up. Our service, CSI scores are fantastic. That's all playing into the results that we're seeing, and they're just going to get stronger as we move forward.

One additional opportunity there is it's very ripe for AI. Our AI team is just going in now and we're starting to look at the processes at fixed. Obviously, a very high margin part of our business, but we think we can be more efficient with the technology. I think there's opportunity in that area as well.

Got it, that's helpful.

Rajat, we just broke $90 million in gross in a single month, in the first quarter. That was an all-time record for us for a single month, and that's gonna continue to get bigger. We've got short-term goals of being over $100 million a month in fixed operations gross. We're hopeful to see a month this year do that, and then ongoing we'll be above that. There's just huge growth there, and great opportunity for us as we started to look at the business differently, more of a high volume, high traffic count business than we have in the past. There's just too much opportunity, and too many guests out there, in our AOIs to take advantage of that.

That's what we're focused on. Danny?

Just a couple other points there. As you might have seen in the release, you know, we grew customer pay at a 5% rate on a same store basis, warranty was at a 7% rate. That was even an uptick in growth rate versus the fourth quarter. Warranty was only 2% up year-over-year in the fourth quarter. Continuing to see benefits there as long as that warranty tailwind persists, really focused on customer pay. We got 40 basis points of margin expansion out of it. On an all-in basis, customer pay has grown at 9%, warranty is up 15%, including the acquisition. We've got some year-over-year upside in terms of the comparisons as we get into the back half and lap those JLR acquisitions from last year.

Right. Right. Well, that's very clear and helpful. I wanted to just ask a broader question around just pricing dynamics. I mean, like, maybe like a two-fold question. One is, you know, you have this one big nationwide competitor of yours that is undergoing a pretty well-telegraphed price cut. I'm curious if you're feeling it. Are you seeing it? You know, have you reacted to it? Any thoughts on that would be helpful. Second question, you know, Carvana yesterday talked about, you know, some risk in the second quarter from just narrowing wholesale retail spreads. I know, like, you have, like, much lower day supply, and you're increasing consumer sourcing too, but I'm curious if that is something to keep in mind, you know, as far as your business goes. Thanks.

As far as the pricing goes, we haven't felt that. It's, you know, isolated to VINs and marketplaces, and that hasn't, you know, tripped any wires over here at all. We're not feeling that. You wanna attack the Carvana?

On the spread?

Yeah.

Yeah. I mean, it's pretty normal seasonality. Obviously, prices went up in the first quarter. We were buying cars early in the first quarter when wholesale prices were down. As we go into the second quarter, we're seeing that shrink, the gap between the two. It's not going as rapid as last year, but it is closing. That is real.

We still expect nice growth with EchoPark in the second quarter. I mean, we're gonna continue to expand better growth than we had in the first quarter. You know, maybe the margins are hanging in there better, both on the franchise side and EchoPark side, in April better than, you know, they normally do.

Yeah

from a pre-owned perspective, which is very good, and that's great to see. We'll see how supplies hold up as we move in. They always tighten, and we're always trying to shrink our day supply, so at this time of the year after the big first quarter and tax season. We'll see how things go, but the pre-owned business should be nice and solid as we move throughout the rest of the year.

Again, to that, our actual performance in the first quarter, our average selling price at EchoPark was down about 2% sequentially from the fourth quarter. You know, wholesale pricing was up 7% as we went through the first quarter. Our GPU expanded, our vehicle-related GPU only expanded about $200 sequentially. We were seeing narrowing retail pricing on a mixed basis anyway, increases in wholesale pricing, but still saw an expansion in GPU, again, because of the way we buy, because of that non-auction sourcing mix. That should only give us more insulation against those movements, as well as Tim said, recognizing the normal seasonality of used car pricing movements in January, February, March, and then on the downswing in April, May, June, post-tax refund season.

Got it. That's, that's helpful. Maybe just last one on balance sheet. You know, very surprised by like the big buyback here in the first quarter. Curious like how should we think about leverage here? You obviously increased your authorization. So maybe like another way to ask is like, is the ramp up in buyback just a signal that you're not really worried about like the macro or the cycle here and, you know, you just feel like, you know, with the growth in parts and services, you know, the trend in EchoPark, you know, there's just like more good things to come, you know, from an EBITDA perspective and you feel comfortable, you know, buying back this revenue right now.

I was just a little surprised given some of the choppiness we hear about in the macro. Thanks.

Yeah. This is David. Yes, I mean, we obviously we would not have bought back the shares if we didn't feel confident in our business. You know, as always, we want our investors to know that we're gonna be looking at all our different options of where we place our capital and look for the best return. I think the key to what you were saying there is, and what you're, what you're asking is what are we gonna do going forward? We're gonna look at various opportunities like we, you know, the Powersports acquisition that we just made, that was a great opportunity and offered great ROI opportunity.

We're gonna continue with that, whether it's with, you know, whatever we choose, whether it's share repurchases or debt reduction or, you know, acquisitions. It just depends on what we see in the market. Heath?

Yeah. I'll just say, you know, we feel like we have a very strong balance sheet at, you know, a little over two turns for our leverage ratio, and a lot of liquidity. That gives us the ability to actually invest in multiple areas. As you've just seen, we were able to purchase five JLR stores last year, five Powersports dealerships this year. At the same time, buy back 2 million shares, increase the dividend by 8%, investing in our business as it relates to AI, buying real estate, enhancing the facilities. Finally, we're still in great shape to expand EchoPark. I think the balance sheet is allowing us to do that.

We're completely comfortable, where we are on the leverage ratio, and we've got it all cooked in and understand the impact, and we're very comfortable that we've got a lot of dry powder to invest in all of these areas.

Rajat, I think if you look at the quarters, you know, the last six or seven quarters that we've strung together, we're showing the execution, the discipline, you know, in this company like we've never shown before. That gives us a real high level of confidence. It doesn't matter if there's, you know, COVID or tariffs or weather or whatever else is going to come. Godzilla is going to come out of the, you know, whatever and, you know, blow up all our cars. We are overcoming all of that. I think that is just a big testament to our team. The tenure that we have on this team is amazing. We had our board meeting yesterday, and we were going through our tenure in this company. It is just incredible. Very confident.

We look forward to the great remainder of the year and a very bright future for Sonic.

Awesome. Great. Thanks for all the color and good luck.

You bet. Thank you.

Thank you.

Our next question is from Bret Jordan with Jefferies.

Hey, good morning, guys. This is Patrick Buckley for Bret. Thanks for taking our questions.

Hey, Patrick.

As you think about the longer term outlook on franchise new GPUs, you know, how are you thinking about the new floor there? Some peers have recently suggested a landing spot towards the upper end of their previous targets. Have your thoughts changed at all?

I mean, we didn't change guidance there. We're seeing a little bit of shrinkage on front-end margin in April for new. It's going the other way for pre-owned. You know, I think we're fine in the range that we gave you guys for the year. You know, mix moves around a little bit if you're selling more domestic than normal or more Honda than normal. We get a little drop in our front-end margin. Our F&I numbers are so good at our franchise stores. Our F&I numbers in the first quarter were up $230 a vehicle, which is just fantastic, and we expect that to continue to grow as we move throughout the year. The total all-in margin, I think we're gonna be just fine.

It may move around a little bit due to mix. You know, Mercedes sells more or less, or BMW more or less, Honda comes in or Ford comes in, the margins are a little different. Our F&I numbers are so strong that it balances it all out and I think we'll be fine with our guidance that we gave you for 2026.

Got it. On BMW, we've heard some talks of delayed new product timing there. Has there been any notable disruptions or impact due to that delayed product change this year?

No. They've been doing a fantastic job. They communicate well, and they've done an amazing job managing through this as all of our manufacturer partners have. There've been no issues. I mean, we need to watch affordability and entry-level models into some of the luxury brands. That's an important topic to study and watch. You know. There's two quarters in a row now we're past the $60,000 mark. We'll see. I don't see that changing in the second quarter. Third quarter, they're gonna pass on, you know, the tariff expenses to the consumer. Prices are going up. It helps the used car business.

We'll see how much elasticity is in the new car pricing. I mean, something's gonna have to happen if volume really slows off because day supply will start growing. Then you will have a margin compression issue. Just don't see that happening this quarter or next. Maybe a little bit due to change in mix for us. Overall, I think it'll be nice and steady as she goes.

Got it. That's all for us. Thanks, guys.

Thanks.

Yes, sir.

As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Alex Perry with Bank of America.

Hi, thanks for taking my question too. Congrats on the execution.

Please hold.

I just wanted to ask about, if you've seen sort of any impact from the war, any sort of change in new used vehicle sales trends as we moved into April. Could you maybe help us on, like, the cadence of the monthly comps in the quarter on the new side? Thanks.

I would say, Alex, this is David, that it's been really pleasantly surprising that the resilience of the consumer and that they've just continued our demand, and you've seen in our numbers, they're continuing to do business with us. Despite the uncertainty, I think that it's really been fantastic to see. I think that hopefully soon this major conflict will be over, and I think we'll go into the summer months with some great results. JD?

Yeah. I mean, if anything, BEV units, from a pre-owned perspective, we're selling a lot more of those. The pull-aheads are helping. That's a big win in our sales right now. Otherwise, you know, we'd have some overhang, I think, with BEV. In particular, I think the luxury stores are doing a great job with that BMW, Mercedes-Benz. They're doing a really good job. Other than that, no, I mean, the business has been good. Cadence-wise, January was amazing. I mean, it was just an unreal January. If you want to talk about weather, maybe that slowed us down a little bit at the end of January. I mean, just a fantastic January and a really good February.

We started comping against the tariff pullaheads in March. You did that all of March, really, in the first two weeks or so of April, 10 days of April. You know, the comps will get a lot easier as we move into May and June. We'll see some flip around in our year-over-year numbers. We'll start, you know, sort of heading into the positive direction. I've just, you know, just throw out the comparison of March and the first two weeks of April. It's not, it's not a fair comparison. Compare it against 2024 and 2023, we look fantastic on a year-over-year basis. That's how that looks, that's kind of behind us now.

You're gonna get a little bump when we get to the September timeframe, and we bounce against the BEV kind of pull ahead, from that timeframe. It ought to be smooth sailing other than that for the rest of the year.

That's really helpful context. I guess my next question, you mentioned in the deck, you know, consolidation opportunity in powersports. Is that a place where you'll continue to add doors there? What are you seeing there that gets you excited? Do you expect it to be sort of on the, you know, Harley side and the motorcycle space or more sort of traditional powersports? Would love to hear just sort of how you're thinking about that segment. Thanks.

Yeah. Thanks for the question. This is David. You know, we've been, you know, really, really pleased. A big shout-out to our Powersports team. They've just done an outstanding job in, as I mentioned, modernizing the Powersports industry, at least the ones that we have. We see some great opportunities and the prices, the acquisition opportunities are coming at us. It's very interesting. You know, we like our diversified portfolio, so we're not gonna be concentrated solely on Harley-Davidson. This recent acquisition was just really just outstanding. There's fantastic locations, where, as I mentioned, you have a lot of sunny days in those markets to offset some of our snowy weather in our big South Dakota Sturgis stores.

We do see fantastic opportunities. You look at the gross that's generated in motorcycle sales, new and used, is really. It's crazy. It's like we're making the same amount of profit on selling an item that's maybe a third of the price of a vehicle. So there's some great opportunities there. JD?

Yeah. I would tell you, and just to give you a little more detail on what David Smith was talking about. I mean, our new GPU for the first quarter on franchise was $3,144, and our GPU for Powersports was $2,891, damn near the same number. Our used GPU, which we've really grown the heck out of our used business on Powersports, that's something that industry lacks, was $1,938 a copy versus $1,539 a copy. We're making more gross selling used, you know, than we are selling used on the franchise side. Very exciting opportunity for us to grow that part of the business. We're opportunistically buying, just being very careful and cautious.

As we told you from day one, growing the business and putting in our playbooks, our technology, taking care of our guests, taking care of our teammates. We just get better and stronger. We have all-time record quarter. We see that backing up to the next all-time record quarter and the next one. It's a fun business with great margin percentage. Our team loves going in and buying them, and who we are acquiring love it. We're having a great time. As David Smith said, we've got a fantastic leadership team running that business, totally separate from EchoPark and our franchise business. We'll see what happens in the coming quarters. There's a lot of opportunity in this segment.

That's really helpful. Could I ask one follow-up on that? The used grosses and the differential versus the vehicle side's pretty interesting. Why do you think the grosses are so high in the Powersports side on a relatively lower ASP? Is it just the fragmentation?

Think about-

of the market? Yeah.

It is. That's part of it. Think about it, customers don't know what to do with that product. They've when they buy a new powersport, they buy something, a Polaris or whatever, they've always taken their old one and put a sign on in the front yard and said, "For sale." They don't know that we want to buy that from them. We're giving them a great deal buying that. They're expensive. You buy a brand-new 4-door Polaris now, it's $55,000. We can trade for them and sell them for, you know, in the upper teens or lower twenties, make great margin, like you see, and provide the consumer with something they've never gotten in this industry. There's a huge.

I mean, it's just the industry just did not sell pre-owned, and we're growing pre-owned at 40 and 50% clips a quarter, and that's gonna continue into the future. They just didn't focus on it. That's something that, you know, is core to our success at Sonic Automotive, and we're bringing that to this industry, and it's making a big difference.

That's one of the things that validated our entry into this, is over the last three quarters, we've grown 35, 40, and this quarter, 56% used vehicle volume year-over-year. You know, even in an off quarter like the first quarter seasonally, new volume was up 16%, both new and used gross per unit grew 7% or 8%. We're growing not just the base, but the efficiency of those products, just as we get into prime selling season here starting in April, May.

They also had very, very little discipline around inventory management. As you guys know, that's something that we're known for in our day supply and how we manage inventory. We don't get surprises there. If we do, they're fixed in two weeks. There's just absolutely none of that in the Powersports business. We've cleaned all that up from a parts, from a used, from a new perspective, and we're turning inventory like we should. That, that's gonna expand margin when you do that.

That's incredibly helpful. It sounds like an exciting opportunity. Best of luck going forward.

Thank you so much.

Thank you very much.

Thank you. There are no further questions at this time. I would like to hand the floor back over to David Smith for any closing comments.

Great. Thank you very much. Thank you, everyone. We'll talk to you next quarter.

This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.