Sonic Automotive Inc: Form 10-Q for the period ended Apr 30, 2026

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, 2025.

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 months ended March 31, 2026 compared to the three months ended March 31, 2025. 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 same market basis, except where otherwise noted. All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition. The following discussion of Powersports Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store 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 March 31, 2026: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and (3) the Powersports Segment. For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As of March 31, 2026, we operated 107 stores in the Franchised Dealerships Segment, 18 stores in the EchoPark Segment and 14 stores in the Powersports Segment. The Franchised Dealerships Segment consists of 127 new vehicle franchises (representing 24 different brands of cars and light trucks) and 16 collision repair centers in 17 states. The EchoPark Segment consists of 18 stores in 10 states. The Powersports Segment consists of 41 franchises at 14 locations (11 full-service dealerships and three authorized retail outlets) in three 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.

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”) decreased 7% for the three months ended March 31, 2026, to approximately 15.5 million vehicles, compared to approximately 16.6 million vehicles for the three months ended March 31, 2025, according to the Power Information Network (“PIN”) from J.D. Power. We currently estimate the 2026 new vehicle industry volume will be between 15.5 million vehicles (a decrease of 5% compared to 2025) and 16.0 million vehicles (a decrease of 2% compared to 2025). The effects of tariffs and trade policies, 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, geopolitical disruptions, energy prices, natural disasters or other unforeseen circumstances could cause the actual 2026 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 decreased 9% to approximately 12.8 million vehicles for the three months ended March 31, 2026, from approximately 14.0 million vehicles for the three months ended March 31, 2025.

Franchised Dealerships Segment

As a result of the acquisition, disposition, termination or closure of certain franchised dealership stores in 2025 and 2026, 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.

Same store retail new vehicle revenue decreased 8% during the three months ended March 31, 2026, driven primarily by a 10% decrease in retail new vehicle unit sales volume, partially offset by a 3% increase in average selling price per new retail unit for the three months ended March 31, 2026. Retail new vehicle gross profit decreased 14% during the three months ended March 31, 2026, due primarily to the effects of tariffs on inventory invoice cost and lower consumer demand as a result of pre-tariff demand in the first quarter of 2025, which combined to drive lower retail new vehicle gross profit per unit for the three months ended March 31, 2026. Retail new vehicle gross profit per unit decreased $133 per unit, or 4%, to $3,002 per unit during the three months ended March 31, 2026. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 58 days as of March 31, 2026, compared to 51 days as of March 31, 2025.

Same store retail used vehicle revenue increased 2% during the three months ended March 31, 2026, driven primarily by a 3% increase in retail used vehicle unit sales volume. Retail used vehicle gross profit decreased 1% during the three months ended March 31, 2026, primarily due to lower retail used vehicle gross profit per unit. Retail used vehicle gross profit per unit decreased $59 per unit, or 4%, to $1,533 per unit during the three months ended March 31, 2026. Same store wholesale vehicle gross loss worsened by approximately $1.0 million, to a gross loss of approximately $1.7 million during the three months ended March 31, 2026, due primarily to a $239 per unit, or 168%, worsening of wholesale vehicle gross loss per unit as a result of changes in pricing and demand for vehicles at wholesale auction. 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 32 days as of March 31, 2026, compared to 31 days as of March 31, 2025.

Same store Fixed Operations revenue increased 5% during the three months ended March 31, 2026, driven primarily by increased service capacity as a result of additional technician headcount, and higher parts and labor costs that were passed along to consumers. Same store Fixed Operations gross profit increased 5% during the three months ended March 31, 2026, driven primarily by higher customer pay revenue contribution and higher internal, sublet and other gross margin contribution. Same store Fixed Operations gross margin increased 40 basis points, to 51.1%, during the three months ended March 31, 2026.

Same store F&I revenue increased 2% during the three months ended March 31, 2026, driven by a 6% increase in F&I gross profit per retail unit, partially offset by a 4% decrease in retail new and used vehicle unit sales volume, respectively. Same store F&I gross profit per retail unit increased $146 per unit, or 6%, to $2,594 per unit during the three months ended March 31, 2026.

EchoPark Segment

Same market total revenues increased 4% during the three months ended March 31, 2026, attributable to a 2% increase in total vehicle unit sales volume (retail used vehicles plus wholesale used vehicles) in the three months ended March 31, 2026, and a 1% increase in average selling price per used retail unit in the three months ended March 31, 2026. Same market total gross profit increased 6% during the three months ended March 31, 2026, primarily driven by a 2% increase in total vehicle unit sales volume (retail used vehicles plus wholesale used vehicles), and a 3% increase in combined retail used vehicle and F&I gross profit per unit.

Same market retail used vehicle revenue increased 4% during the three months ended March 31, 2026, driven primarily by a 3% increase in retail used vehicle unit sales volume, coupled with a 1% increase in average selling price per used retail unit in the three months ended March 31, 2026. F&I revenue increased 4% during the three months ended March 31, 2026, driven primarily by a 3% increase in retail used vehicle unit sales and a 1% increase in F&I gross profit per unit in the three months ended March 31, 2026. Same market combined retail used vehicle and F&I gross profit per unit increased $86 per unit, or 2.5%, to $3,518 for the three months ended March 31, 2026 due primarily to increases in retail used vehicle unit sales volume during the three months ended March 31, 2026.

Same market wholesale vehicle gross profit improved by approximately $0.4 million during the three months ended March 31, 2026, primarily due to a 227% increase in wholesale vehicle gross profit per unit during the three months ended March 31, 2026. 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 40 and 35 days as of March 31, 2026 and 2025, respectively.

Powersports Segment

Same store retail new vehicle revenue increased 19% during the three months ended March 31, 2026, driven by a 16% increase in retail new vehicle unit sales volume, coupled with a 2% increase in retail new vehicle average selling price during the three months ended March 31, 2026. Retail new vehicle gross profit increased 23% during the three months ended March 31, 2026, as a result of the increase in retail new vehicle unit sales volume and a 7% increase in same store retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit increased $182 per unit, or 7%, to $2,891 per unit for the three months ended March 31, 2026. On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days’ supply was approximately 162 and 166 days as of March 31, 2026 and 2025, respectively, varying based on manufacturer production levels and consumer demand.

Same store used vehicle revenue increased 77% during the three months ended March 31, 2026, primarily driven by a 56% increase in retail used vehicle unit sales volume and a 14% increase in average used vehicle selling price during the three months ended March 31, 2026. Retail used vehicle gross profit increased 60% during the three months ended March 31, 2026, driven by the increase in used vehicle unit sales volume and an 8% increase in retail used vehicle gross profit per unit. Retail used vehicle gross profit per unit increased $141 per unit, or 8%, to $1,938 per unit for the three months ended March 31, 2026. On a trailing quarter cost of sales basis, our reported Powersports Segment used vehicle inventory days’ supply was approximately 96 and 83 days as of March 31, 2026 and 2025, respectively.

Same store Fixed Operations revenue increased 12% and Fixed Operations gross profit increased 9% during the three months ended March 31, 2026, driven by higher repair order volume for the three months ended March 31, 2026. Fixed Operations gross margin decreased 100 basis points to 48% during the three months ended March 31, 2026, respectively, driven primarily by a decrease in warranty revenue contribution and warranty, internal, sublet and other gross margin contribution.

Same store F&I revenue increased 29% during the three months ended March 31, 2026, driven primarily by a 30% increase in combined retail new and used vehicle unit sales volume for the three months ended March 31, 2026. F&I gross profit per retail unit and decreased $45 per unit, or 5%, to $907 per unit for the three months ended March 31, 2026.

Results of Operations – Consolidated

As a result of the acquisition, disposition, termination or closure of certain franchised dealership stores, EchoPark stores, and powersports stores in 2025 and 2026, 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 automobiles to luxury automobiles and powersports vehicles.

The following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues by brand for the three months ended March 31, 2026 and 2025:

(1) Includes Jaguar, MINI, Polestar and Volvo.

(2) Includes Hyundai, 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:

(In millions of vehicles)

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

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

(In millions, except unit and per unit data)

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

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. 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 used vehicle environment.

Our consolidated reported retail used vehicle results were as follows:

(In millions, except unit and per unit data)

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

Wholesale Vehicles – Consolidated

Wholesale vehicle revenues are influenced by several factors, including retail new and used vehicle unit sales volume, associated trade-in volume, and short-term, temporary, and seasonal fluctuations in wholesale auction pricing. In recent years, wholesale vehicle prices and supply at auction have experienced periods of volatility, impacting our wholesale vehicle revenues and related gross profit (loss), as well as our retail used vehicle revenues and related gross profit. We believe that the current wholesale vehicle price environment is not sustainable in the long term and expect that average wholesale vehicle pricing and related gross profit (loss) will continue to return toward long-term normalized levels in the long run, but may continue to experience volatility during 2026 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.

Our consolidated reported wholesale vehicle results were as follows:

(In millions, except unit and per unit data)

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.

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 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) 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.

Our consolidated reported Fixed Operations results were as follows:

(In millions)

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

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. We do not have direct credit risk for the vehicle financing, extended warranties and service contracts that we sell. 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:

(In millions, except unit and per unit data)

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

Results of Operations – Franchised Dealerships Segment

As a result of the acquisition, disposition, termination or closure of certain franchised dealership stores in 2025 and 2026, 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.

New Vehicles – Franchised Dealerships Segment

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

(In millions, except unit data)

29

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

(In millions, except unit and per unit data)

30

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

(In millions, except unit and per unit data)

Same Store Franchised Dealerships Segment Retail New Vehicles – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Retail new vehicle revenue decreased approximately $131.5 million, or 8%, due to a 10% decrease in retail new vehicle unit sales volume, driven in part by the pull-forward consumer demand for vehicles in the prior year period ahead of auto tariffs enacted in April 2025, partially offset by a 3% increase in retail new vehicle average selling prices. Retail new vehicle gross profit decreased $12.3 million, or 14%, due to the 10% decrease in retail new vehicle sales volume and the 4% decrease in retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $133 per unit to $3,002 per unit, due primarily to the effects of tariffs on inventory invoice cost and lower consumer demand as a result of pre-tariff demand in the first quarter of 2025, which combined to drive lower retail new vehicle gross profit per unit for the three months ended March 31, 2026.

Used Vehicles – Franchised Dealerships Segment

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

(In millions, except unit data)

NM = Not Meaningful

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

(In millions, except unit and per unit data)

32

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

(In millions, except unit and per unit data)

Same Store Franchised Dealerships Segment Retail Used Vehicles – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Retail used vehicle revenue increased approximately $13.7 million, or 2%, driven primarily by a 3% increase in retail used vehicle unit sales volume. Retail used vehicle gross profit decreased approximately $0.2 million, or 1%, driven primarily by a 4% decrease in retail used vehicle gross profit per unit, offset by a 3% increase in retail used vehicle unit sales volume.

Wholesale Vehicles – Franchised Dealerships Segment

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

(In millions, except unit data)

33

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

(In millions, except unit and per unit data)

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

(In millions, except unit and per unit data)

Same Store Franchised Dealerships Segment Wholesale Vehicles – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Wholesale vehicle revenue decreased approximately $12.2 million, or 23%, driven primarily by a 24% decrease in wholesale vehicle unit sales volume. Wholesale vehicle gross loss worsened by approximately $1.0 million, driven primarily by a $239 per unit worsening in wholesale vehicle gross loss per unit.

Fixed Operations – Franchised Dealerships Segment

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

(In millions)

NM = Not Meaningful

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

(In millions)

35

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

(In millions)

Same Store Franchised Dealerships Segment Fixed Operations – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Fixed Operations revenue increased approximately $21.3 million, or 5%, and Fixed Operations gross profit increased approximately $12.6 million, or 5%. Customer pay revenue increased approximately $12.3 million, or 6%, and customer pay gross profit increased approximately $6.0 million, or 5%. Warranty revenue increased approximately $4.9 million, or 6%, and warranty gross profit increased approximately $3.6 million, or 7%. Wholesale parts revenue increased approximately $1.7 million, or 4%, and wholesale parts gross profit remained flat. Internal, sublet and other revenue increased approximately $2.4 million, or 2.0%, and internal, sublet and other gross profit increased approximately $3.0 million, or 5%. Our Fixed Operations business has benefited from a higher level of vehicle recalls and warranty repairs, as well as additional technician headcount that has driven an increase in customer pay service capacity.

F&I – Franchised Dealerships Segment

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

(In millions, except unit and per unit data)

NM = Not Meaningful

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

(In millions, except unit and per unit data)

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

(In millions, except unit and per unit data)

Same Store Franchised Dealerships Segment F&I – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

F&I revenue increased $2.3 million, or 2%, primarily due to a 6% increase in F&I gross profit per retail unit, partially offset by a 4% decrease in total combined retail new and used vehicle unit sales volume. F&I gross profit per retail unit increased $146 per unit, to $2,594 per unit, primarily due to higher penetration rates for finance and service contracts, higher gross profit per contract for finance, service and aftermarket product contracts, and changes to our F&I product cost structure.

Finance contract revenue for combined retail new and used vehicles increased 1%, due primarily to a 280 basis point increase in penetration rate and a 2% increase in gross profit per finance contract. Service contract revenue for combined retail new and used vehicles increased 2%, due primarily to a 160 basis point increase in penetration rate and a 2% increase in gross profit per service contract, partially offset by a 1% decrease in service contract volume. Other aftermarket contract revenue for combined retail new and used vehicles decreased 6%, primarily to a 7% decrease in aftermarket contract volume and a 540 basis point decrease in penetration rate, partially offset by a 2% increase in gross profit per other aftermarket contract.

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 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.

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 sold) rather than realizing traditional levels of front-end retail used vehicle gross profit 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) 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 table provides a reconciliation of EchoPark Segment reported basis, same market basis, and closed store basis for retail used vehicles:

(In millions, except unit data)

38

The following table provides a reconciliation of EchoPark Segment reported basis, same market basis, and closed store basis for F&I:

(In millions)

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

(In millions, except unit and per unit data)

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

(In millions, except unit and per unit data)

Same Market EchoPark Segment Retail Used Vehicles and F&I – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Retail used vehicle revenue increased approximately $18.1 million, or 4%, due primarily to a 3% increase in retail used vehicle unit sales volume, paired with a 1% increase in retail used vehicle revenue per unit. Combined retail used vehicle gross profit and F&I revenue increased approximately $3.5 million, or 5%, due primarily to a 3% increase in retail used vehicle unit sales volume, along with a 3% increase in combined retail used vehicle and F&I gross profit per unit. The increase in combined retail used vehicle and F&I gross profit per unit was due primarily to higher F&I penetration rates, changes to our F&I product cost structure, an improvement in inventory acquisition costs as a result of sourcing a higher percentage of inventory from non-auction sources, and expanding our inventory to include older vehicles, which typically earn a higher gross profit per unit.

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 table provides a reconciliation of EchoPark Segment reported basis, same market basis, and closed store basis for wholesale vehicles:

(In millions, except unit data)

Our EchoPark Segment reported wholesale vehicle results were as follows:

(In millions, except unit and per unit data)

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

(In millions, except unit and per unit data)

40

Same Market EchoPark Segment Wholesale Vehicles – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Wholesale vehicle revenue increased approximately $0.1 million due primarily to a 1% increase in wholesale vehicle revenue per unit, offset partially by a 1% decrease in wholesale vehicle unit sales volume. As we adjust the inventory mix of nearly new versus older model year vehicles sold at retail going forward, the levels of wholesale vehicle revenue and gross profit may vary.

Results of Operations – Powersports Segment

As a result of the acquisition or termination of certain powersports stores in 2025 and 2026, 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. The following discussion of 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. 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

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

(In millions, except unit data)

NM = Not Meaningful

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

(In millions, except unit and per unit data)

41

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

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

(In millions, except unit and per unit data)

Same Store Powersports Segment Retail New Vehicles – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Retail new vehicle revenue increased 19%, primarily due to a 16% increase in retail new vehicle unit sales volume and a 2% increase in retail new vehicle average selling prices. Retail new vehicle gross profit increased 23% as a result of the 16% increase in retail new vehicle unit sales volume and a 7% increase in retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit increased $182 per unit to $2,891 per unit.

Used Vehicles – Powersports Segment

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

(In millions, except unit data)

NM = Not Meaningful

42

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

(In millions, except unit and per unit data)

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

(In millions, except unit and per unit data)

Same Store Powersports Segment Retail Used Vehicles – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Retail used vehicle revenue increased 77%, due primarily to a 56% increase in retail used vehicle unit sales volume, and a 14% increase in retail used vehicle average selling prices. Retail used vehicle gross profit increased 60% as a result of higher retail used vehicle unit sales volume and higher retail used gross profit per unit. Retail used vehicle gross profit per unit increased $141 per unit, or 8%, to $1,938 per unit.

Wholesale Vehicles – Powersports Segment

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

(In millions, except unit data)

NM = Not Meaningful

Our Powersports Segment reported wholesale vehicle results were as follows:

(In millions, except unit and per unit data)

44

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

(In millions, except unit and per unit data)

Same Store Powersports Segment Wholesale Vehicles – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Wholesale vehicle revenue decreased approximately $0.6 million, primarily due to a 54% decrease in wholesale vehicle revenue per unit. Same store wholesale vehicle gross loss remained flat during the three months ended March 31,.

Fixed Operations – Powersports Segment

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

(In millions)

45

Our Powersports Segment reported Fixed Operations results were as follows:

(In millions)

46

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

(In millions)

Same Store Powersports Segment Fixed Operations – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Fixed Operations revenue increased approximately $0.8 million, or 12%, and Fixed Operations gross profit increased approximately $0.3 million, or 9%. Customer pay revenue increased approximately $0.2 million, or 14%, and customer pay gross profit increased approximately $0.2 million, or 40%. Warranty revenue remained flat, and warranty gross profit remained flat. Wholesale parts revenue increased approximately $0.1 million, or 100%, and wholesale parts gross profit remained flat. Internal, sublet and other revenue increased approximately $0.5 million, or 13%, and internal, sublet and other gross profit increased approximately $0.1 million, or 5%.

F&I – Powersports Segment

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

(In millions, except unit and per unit data)

NM = Not Meaningful

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

(In millions, except unit and per unit data)

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

(In millions, except unit and per unit data)

Same Store Powersports Segment F&I – Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

F&I revenue increased $0.4 million, or 29%, due primarily to a 30% increase in retail new and used vehicle unit sales volume, partially offset by a 5% decrease in F&I gross profit per retail unit. F&I gross profit per retail unit decreased $45 per unit to $907 per unit, primarily due to higher unit sales volume for finance contracts, service contracts and aftermarket products, higher penetration rates and gross profit per contract for finance contracts and aftermarket products, and changes to our F&I product cost structure.

Finance contract revenue increased 61%, due primarily to a 55% increase in combined new and used vehicle finance contract volume, a 880 basis point increase in penetration rate and a 3% increase in gross profit per finance contract. Service contract revenue decreased 3%, due primarily to a 23% decrease in gross profit per service contract and a 110 basis point decrease in penetration rate, partially offset by a 25% increase in retail new and used vehicle service contract unit sales volume. Other aftermarket contract revenue increased 51%, due primarily to a 38% increase in other aftermarket contract volume, a 10% increase in gross profit per other aftermarket contract, and a 260 basis point increase in penetration rate.

Segment Results Summary

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

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

(In millions, except unit data)

(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, 2026, amount includes approximately $5.1 million of pre-tax gain related to dispositions. For the three months ended March 31, 2025, amount includes approximately $30.0 million of pre-tax benefit in cyber insurance proceeds related to a cybersecurity incident impacting certain of our information systems provided by CDK Global in the second quarter of 2024, approximately $0.9 million of pre-tax charges related to storm damage, and approximately $0.3 million of pre-tax charges related to disposition losses.

(3) For the three months ended March 31, 2026, amount includes approximately $3.6 million of pre-tax gain related to the termination of leases. For the three months ended March 31, 2025, amount includes approximately $0.2 million of pre-tax gain on sale of EchoPark property.

(4) For the three months ended March 31, 2025, amount includes approximately $0.9 million of pre-tax charges related to disposition losses. Due to rounding, segment level financial data may not sum to consolidated results.

(5) For the three months ended March 31, 2026, amount includes approximately $0.4 million of non-cash pre-tax impairment charges related to construction-in-progress projects for the Franchised Dealerships Segment. For the three months ended March 31, 2025, amount includes approximately $0.2 million of pre-tax property and equipment charges for real estate held for sale in the EchoPark Segment and approximately $1.1 million of pre-tax property, equipment and right-of-use asset charges for the Powersports Segment.

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 information 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 forth information related to our consolidated reported SG&A expenses:

(In millions)

51

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Overall SG&A expenses increased in both dollar amount and as a percentage of gross profit, primarily due to a $30.0 million pre-tax benefit from cyber insurance proceeds related to the CDK outage recorded in other SG&A expenses during the prior year period. Compensation expense increased in both dollar amount and as a percentage of gross profit, based on the variable nature of our sales associate pay plans. Advertising expense increased 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. Rent expense decreased in both dollar amount and as a percentage of gross profit, primarily due to the termination of leases. Other SG&A expenses increased in both dollar amount and as a percentage of gross profit, primarily due to the benefit of cyber insurance proceeds received in the prior year.

The following tables set forth information related to our Franchised Dealerships Segment reported SG&A expenses:

(In millions)

The Franchised Dealerships Segment’s total SG&A expenses increased in both dollar amount and as a percentage of gross profit, primarily due to a $30.0 million pre-tax benefit from cyber insurance proceeds related to the CDK outage recorded in other SG&A expenses during the prior year. Compensation expense increased in both dollar amount and as a percentage of gross profit due to acquisitions in the Franchised Dealerships Segment, an increase in bonus expenses and absentee wages, and an increase in fixed operations sales compensation related to the increase in fixed operations sales. Advertising expense increased 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. Rent expense increased in dollar amount and as a percentage of gross profit, primarily due to the increase in leased dealerships as a result of acquisitions during 2025. Other SG&A expenses increased in both dollar amount and as a percentage of gross profit primarily due to the benefit of cyber insurance proceeds received in the prior year.

For the Franchised Dealerships Segment, SG&A expenses for 2026 include approximately $5.1 million of pre-tax gain related to dispositions. For the Franchised Dealerships Segment, SG&A expenses for 2025 included approximately $30.0 million of pre-tax benefit from cyber insurance proceeds related to the CDK outage, approximately $0.9 million of pre-tax charges related to storm damage, and approximately $0.3 million of pre-tax charges related to disposition losses.

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

(In millions)

The EchoPark Segment’s total SG&A expenses decreased in both dollar amount and as a percentage of gross profit, primarily due to lower rent expenses. Compensation expense increased in dollar amount due primarily to an increase in bonus expenses, and decreased as a percentage of gross profit as a result of higher overall gross profit and favorable gross profit mix shifts in F&I. Advertising expense increased 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. Rent expense decreased in both dollar amount and as a percentage of gross profit, primarily due to a gain on lease terminations. Other SG&A expenses decreased in both dollar amount and as a percentage of gross profit as a result of higher overall gross profit levels and a decrease in outside contractor expenses.

For the EchoPark Segment, SG&A expenses for 2026 include approximately $3.6 million of pre-tax gain related to lease terminations. For the EchoPark Segment, SG&A expenses for 2025 included approximately $0.2 million of pre-tax gain on sale of property.

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

(In millions)

The Powersports Segment’s total SG&A expenses increased in dollar amount and decreased as a percentage of gross profit, primarily due to higher levels of gross profit that better leverage fixed expenses. Compensation expense increased in dollar amount due primarily an increase in overall retail activity and an increase in bonus expenses, and decreased as a percentage of gross profit as a result of higher overall gross profit and favorable gross profit mix shifts in Fixed Operations and F&I. Advertising expense increased 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. Rent expense increased in both dollar amount and as a percentage of gross profit, primarily due to a decrease in rental income. Other SG&A expenses decreased in both dollar amount and as a percentage of gross profit, primarily due to losses related to dispositions during the first quarter of 2025.

For the Powersports Segment, SG&A expenses for 2025 included approximately $0.9 million of pre-tax loss related to dispositions.

Impairment Charges – Consolidated

Impairment charges were $0.4 million for the three months ended March 31, 2026, primarily related to the write-off of construction-in-progress assets within our Franchised Dealerships Segment. Impairment charges were approximately $1.4 million for the three months ended March 31, 2025, primarily related to franchise assets and lease right-of-use assets as a result of the termination of a franchise in the Powersports Segment and the sale of real estate in the EchoPark Segment.

Depreciation and Amortization – Consolidated

Depreciation and amortization expense decreased approximately $1.0 million, or 3%, during the three months ended March 31, 2026, due primarily to changes in estimates related to the useful lives of certain buildings and improvements, resulting in lower depreciation expense.

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 used floor plan interest rate, effectively reducing net used vehicle floor plan interest expense. The floor plan deposit balance was $375.0 million and $365.0 million as of March 31, 2026 and March 31, 2025, respectively, and was $300.0 million and $340.0 million as of December 31, 2025 and December 31, 2024, respectively. Our interest expense, floor plan fluctuates with changes in our outstanding borrowings and associated interest rates, which are variable based on one-month Term SOFR or the U.S. prime rate, plus credit spreads specified in the applicable agreements.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Interest expense, floor plan for new vehicles decreased $1.1 million. The average interest rate applied to the new vehicle floor plan decreased in the three months ended March 31, 2026, driving $2.2 million of the overall decrease. The average new vehicle floor plan notes payable balance increased $77.4 million, offsetting $1.0 million of the overall decrease.

Interest expense, floor plan for used vehicles increased $0.5 million, including the effect of interest income earned on the floor plan deposit balance, driving $1.0 million of the increase. Excluding the effect of the floor plan deposit balance, interest expense, floor plan for used vehicles decreased $0.5 million. The average interest rate applied to the used vehicle floor plan decreased in the three months ended March 31, 2026, driving $1.0 million of that decrease. The average used vehicle floor plan notes payable balance increased $28.0 million, offsetting $0.5 million of that decrease.

Interest Expense, Other, Net – Consolidated

Interest expense, other, net is summarized in the tables below:

(In millions)

Interest expense, other, net increased approximately $0.7 million, or 3%, during the three months ended March 31, 2026. This increase primarily due to increased finance lease liabilities and other interest expense, partially offset by a comparatively lower interest rate environment in the current year.

Income Taxes

The overall effective income tax rate was 28.5% and 27.5% for the three months ended March 31, 2026 and 2025, respectively. Sonic’s effective income tax rate generally 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.

Liquidity and Capital Resources

We require cash to service debt, meet lease obligations, manage working capital requirements, make facility and other capital improvements, pay dividends on our common stock, finance acquisitions and otherwise invest in our business. We rely on cash flows from operations, borrowings under our revolving credit and floor plan facilities, real estate mortgage financing, asset sales and offerings of debt and equity securities to meet these requirements. However, our liquidity could be negatively affected by business performance and could result in a 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 March 31, 2026, we had $282.0 million of net income and retained earnings free of such restrictions. Cash flows provided by our dealerships are derived from various sources including, primarily, 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 March 31, 2026 and December 31, 2025:

(In millions)

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. This deposit balance is not designated as a prepayment of notes payable - floor plan, nor is it our intent to use this amount to settle 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 $375.0 million as of March 31, 2026 and $300.0 million as of December 31, 2025 are classified as other current assets in the accompanying unaudited condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025.

Floor Plan Facilities

The weighted-average interest rates for our combined new and used vehicle floor plan facilities were 5.02% and 5.70% for the three months ended March 31, 2026 and 2025, respectively. Excluding the effect of interest income earned on the floor plan deposit balance, the weighted-average interest rates for our combined new and used vehicle floor plan facilities were 5.06% and 5.75% for the three months ended March 31, 2026 and 2025, 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 $14.5 million and $15.9 million in manufacturer assistance in the three months ended March 31, 2026 and 2025, respectively. We recognized in cost of sales approximately $13.9 million and $15.4 million in manufacturer assistance in the three months ended March 31, 2026 and 2025, 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. The total notes payable - floor plan balance of approximately $2.0 billion as of March 31, 2026 is classified as current liabilities in the accompanying unaudited consolidated balance sheet as of such date.

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 senior notes, 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 three months ended March 31, 2026 were approximately $37.0 million, including approximately $35.9 million related to our Franchised Dealerships Segment, approximately $0.7 million related to our EchoPark Segment and approximately $0.4 million related to our Powersports Segment. Of the total capital expenditures, approximately $17.4 million was related to facility construction projects, approximately $2.8 million was related to real estate projects (buildings and improvements) and approximately $16.8 million was for other fixed assets utilized in our operations.

All of the $37.0 million in gross capital expenditures in the three months ended March 31, 2026 was funded through existing cash balances. As of March 31, 2026, commitments for facility construction projects and aircraft totaled approximately $64.6 million, nearly all of which is expected to be completed or paid 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 March 31, 2026, we repurchased approximately 2.1 million shares of our Class A Common Stock for approximately $135.7 million in open-market transactions at prevailing market prices and in connection with tax withholding on the vesting of equity compensation awards. As of March 31, 2026, our total remaining share repurchase authorization was approximately $34.2 million. Subsequent to March 31, 2026, we repurchased approximately 0.1 million shares of our Class A Common Stock for approximately $6.2 million, and additionally, our Board of Directors approved an additional $500.0 million of share repurchase authorization, resulting in current remaining availability of approximately $528.0 million. Under the 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 March 31, 2026, we had approximately $282.0 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.

Dividends

During the three months ended March 31, 2026, our Board of Directors approved a cash dividend of $0.38 per share on all outstanding shares of Class A and Class B Common Stock as of March 13, 2026, which was paid on April 15, 2026. Subsequent to March 31, 2026, our Board of Directors approved a cash dividend of $0.41 per share on all outstanding shares of Class A and Class B Common Stock as of June 15, 2026 to be paid on July 15, 2026. The Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to $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 Credit Facilities. Additional dividends are permitted subject to the limitations on restricted payments set forth in the 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 March 31, 2026, we had approximately $282.0 million of net income and retained earnings free of such restrictions. The 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 three months ended March 31, 2026 was approximately $35.5 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, partially offset by an increase in inventories. Net cash provided by operating activities in the three months ended March 31, 2025 was approximately $195.8 million. This provision of cash was comprised primarily of net income less non-cash items, a decrease in inventory and an increase in trade accounts payable and other liabilities, offset partially by an increase in receivables.

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).

Net cash used in combined trade and non-trade floor plan financing was approximately $8.1 million in the three months ended March 31, 2026. Net cash used in combined trade and non-trade floor plan financing was approximately $79.9 million in the three months ended March 31, 2025. 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 $18.6 million and $124.9 million in the three months ended March 31, 2026 and 2025, respectively.

Cash Flows from Investing Activities – Net cash provided by investing activities in the three months ended March 31, 2026 was approximately $21.7 million. This provision of cash was comprised primarily of proceeds from sales of dealerships and proceeds from sales of property and equipment, partially offset by purchases of land, property and equipment. Net cash used in investing activities in the three months ended March 31, 2025 was approximately $35.5 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.

Cash Flows from Financing Activities – Net cash used in financing activities in the three months ended March 31, 2026 was approximately $57.8 million. This use of cash was comprised primarily of purchases of treasury stock, principal payments on long-term debt, and net borrowing. Net cash used in financing activities in the three months ended March 31, 2025 was approximately $139.7 million. This use of cash was comprised primarily of net borrowings on notes payable – floor plan – non-trade and purchases of treasury stock.

One metric that management uses to measure operating performance is Adjusted EBITDA (a non-GAAP financial 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 (the most directly comparable GAAP financial measure) in the table below:

(In millions)

Note: Due to rounding, segment level financial data may not sum to consolidated results.

(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.

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. 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 availability under our Credit Facilities (including the Floor Plan Facilities), Mortgage Facility and Sidecar Facility (or any replacements thereof), Bridge Facility, real estate mortgage financing, selected dealership and other asset sales, along with 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.

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 March 31, 2026, our future gross minimum lease payments related to properties subleased to buyers of sold dealerships totaled approximately $2.0 million. Future sublease payments expected to be received related to these lease payments were approximately $2.1 million at March 31, 2026.

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 $13.7 million as of March 31, 2026 and $3.0 million as of December 31, 2025. 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 March 31, 2026.

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, 2025 for further discussion regarding these guarantees and indemnification obligations.

Interest Rate Risk

Our variable rate debt, which includes our Floor Plan Facilities, Revolving Credit Facility, Mortgage Facility, Sidecar Facility and Bridge Facility, exposes us to risks caused by fluctuations in interest rates. The total outstanding balance of our variable rate debt was $2.2 billion at March 31, 2026. Based on that amount, a 1.0% change in the underlying interest rates would affect interest expense by $5.5 million over a three month period. Of that amount, $4.0 million would have resulted from the floor plan, net of offset.

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 (the “Exchange Act”)) as of March 31, 2026. Based upon that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of March 31, 2026.

Changes in Internal Control Over Financial Reporting – There were no changes in our internal control over financial reporting during the quarter ended March 31, 2026, 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.

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, 2025.