August 6, 2024 at 12:55PM
Sonic Automotive reported a $30 million loss due to CDK Global’s ransomware attack, with $11.6 million attributed to staff compensation. Despite shareholder confidence, there was a $0.64 drop in diluted EPS, affecting Q2 earnings. Competitors like AutoNation also experienced substantial EPS decreases. Economic consultants estimated CDK customers’ total losses to exceed hundreds of millions per week.
From the meeting notes, it is clear that Sonic Automotive and other car dealerships were significantly impacted by the IT outage caused by CDK Global’s June ransomware attack. Sonic Automotive revealed in its Form 8-K filing with the SEC that the incident led to a $30 million drop in pre-tax GAAP income, with $11.6 million attributed to additional compensation paid to staff and contractors involved in handling the outage.
The outage also diluted per-share earnings by $0.64, and it was indicated that Q3 earnings might also be impacted. Despite this, the market showed confidence in Sonic Automotive, leading to a more than 12 percent rise in shares. Notably, the company’s EchoPark subsidiary reported strong YoY gross profit and adjusted EBITDA increases without the incident.
Sonic’s chairman and CEO acknowledged the operational challenges and disruptions caused by the CDK Global software outage, and the impact was not limited to Sonic alone. Competitors like Ashbury Automotive Group, AutoNation, and Group 1 Automotive also reported notable impacts on their bottom lines due to the incident.
The economic consultants at Anderson Economic Group estimated that franchised dealerships collectively lost out on 56,200 vehicle sales and over $1 billion in revenue by mid-July.
It is clear that the ransomware attack had a widespread and significant financial impact across the automotive industry, with potential ongoing effects into future quarters.