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Record first quarter revenues were driven by high-margin business lines, with Fixed Operations and F&I contributing over 75% of total gross profit, effectively mitigating headwinds in new vehicle volume.

Management attributed the 10% decrease in same-store new vehicle retail volume to tough year-over-year comparisons following a pull-forward of demand in early 2025 ahead of announced auto import tariffs.

EchoPark's record profitability was fueled by a strategic shift toward non-auction sourcing, which now accounts for 40% of inventory and generates approximately $1,200 more gross profit per unit than auction-sourced vehicles.

The company is successfully utilizing its franchise dealerships as a strategic sourcing asset for EchoPark, particularly for nearly new Toyota and Honda models, which has bolstered margins and sales volume.

Powersports growth is being driven by the application of automotive retail playbooks to a fragmented market, specifically focusing on used inventory management and modernizing the guest experience.

Management noted that record-high new vehicle prices, averaging over $60,000, are creating affordability challenges that act as a tailwind for the pre-owned business segments.

Sonic plans to resume a disciplined cadence of EchoPark store openings starting in late 2026, focusing initially on expansion within Florida and Texas.

The company expects to invest $10 million to $20 million in brand marketing during 2026, with the majority of spending occurring in the second half to drive EchoPark awareness.

Management anticipates that upcoming tariff-related price increases in the third quarter will be passed on to consumers, potentially further benefiting used car demand while testing new car price elasticity.

The company is targeting a monthly fixed operations gross profit milestone of $100 million, supported by continued technician hiring and the integration of AI into service processes.

Guidance for 2026 assumes a normalization of year-over-year comparisons starting in May as the company laps the prior year's tariff-driven demand spikes.

The acquisition of five Harley-Davidson dealerships in key riding states diversifies the Powersports segment's geographic footprint and helps offset seasonal volatility.

Management identified potential margin compression risks if new vehicle days' supply grows significantly and volume slows due to affordability issues.

The company flagged a $1 million gross profit headwind in the Honda brand's warranty business, which they intend to offset through increased customer-pay service volume.

A new $500 million share repurchase authorization and an 8% dividend increase reflect management's confidence in the balance sheet and long-term cash flow trajectory.

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Non-auction sourcing has reached 40% of the mix, providing a $1,200 GPU advantage over auction vehicles and insulating the business from wholesale price volatility.

Strategic inventory management allowed EchoPark to expand GPU by $200 sequentially despite a 7% increase in wholesale auction pricing during the quarter.

Brand awareness in Atlanta more than doubled following the naming rights acquisition for EchoPark Speedway, leading to a 25% year-over-year unit volume increase.

Management views Atlanta as a successful proof-of-concept for how targeted marketing and high-efficiency sales processes (30+ units per associate) drive profitability.

Used powersports units are generating higher gross profit per unit ($1,938) than franchise used vehicles ($1,539) despite significantly lower average selling prices.

The segment is benefiting from a 56% increase in used volume as Sonic introduces disciplined inventory management to an industry that historically lacked a pre-owned focus.

Luxury OEMs, particularly BMW and Mercedes, are actively pulling forward lease maturities to manage BEV inventory, which is currently benefiting franchise sales volume.

Management expects a significant increase in BEV lease returns through the end of the year, which will provide a steady supply of late-model used inventory.

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