Q4 2020 AutoNation Inc Earnings Call
Good morning, My name is Jacqueline and I will be your conference operator today at this time of and thanks, and welcome everyone and Autonation and fourth quarter, 'twenty and 'twenty earnings Conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question press the pound key.
Thank you I would now like to turn the call over to you Rob Portera Vice President of Investor Relations you May begin your conference.
Thank you.
Good morning, and welcome to Autonation and fourth quarter and full year 2020 conference call and webcast.
Leading our call today will be Mike Jackson, our Chief Executive Officer, and Joe Lower our Chief Financial Officer.
Following their remarks, we will open up the call for question and that'll be available by phone and following the call to address any additional questions that you may have.
Before we begin let me read our brief statement regarding forward looking comments.
Certain statements and information on this call, including any statements regarding our anticipated financial results and objectives.
Institute forward looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995.
Such forward looking statements involve known and unknown risks that may cause our actual results or performance to differ materially from such forward looking statements.
Additional discussions of factors that could cause our actual results to differ materially from a container of press release issued earlier today and in our SEC filings, including our most recent annual report on form 10-K, and subsequent quarterly reports on form 10-Q, and current reports on form 8-K, and now I'll turn the call over to Autonation as Chief Executive Officer, Mike <unk>.
Jackson.
Good morning, and.
Thank you for joining us today.
And we reported all time record quarterly results with adjusted EPS from continuing operations of $2.43.
And an increase of 94% compared to last year.
During the fourth quarter same store revenue increased $265 million or 5% compared to the prior year of solid growth and new used and customer financial services revenue was partially offset by a decline in customer care, which has experienced a slower recovery correlated with lower miles.
Britain.
New vehicle inventory levels remained constrained and we expect demand to exceed supply for an extended period.
Given these dynamics, we remain focused on optimizing our business and at current operating environment.
We expect industry sales to approach $16 million in 2000, 2021 with strong retail sales growth compared to last year.
We've seen of solid growth and 21 with January trends in line with our annual forecast.
For the quarter.
Same store total variable gross profit per vehicle retailed increased $765 or 21% compared to the prior year.
Same store of new vehicle gross profit per vehicle retailed increased $919 or 50% and same store used vehicle gross profit per vehicle retail increased $127 or 9% compared to the prior year.
We drove significant SG&A leverage and the quarter adjusted SG&A as a percentage of gross profit was 63, 8% for the quarter, representing an 820 basis points of improvement compared to the fourth quarter of 2020.
We remain committed to operating below 68% SG&A as a percentage of gross profit on a long term basis.
We continue our continuing our opportunistic capital allocation strategy that balances of investing in our business and returning capital to shareholders, we expect to allocate capital towards the Autonation USA expansion share repurchase.
And franchise Act.
Acquisitions.
Today, we announced our board authorized an additional $1 billion of share repurchase from October 22nd through February 12, we bought back 6 million shares or 7% of our outstanding shares.
We remain on track to open five new Autonation USA stores by the end of this year the stores will be located in Austin, Phoenix, and San Antonio and two stores in Denver.
We're also entered the planning phase to open an additional 10, autonation USA stores and 2022.
These stores will benefit from the Autonation brand and its proven customer friendly processes.
We have set the long term goal of selling over 1 million combined new and used retail units per year.
We recently announced that we've enhanced the Autonation express our integrated retailing solution that provides customers with a seamless and in tune of intuitive omnichannel shopping and purchase experience.
Autonation Express is powered by real time customer insights that provide a highly personalized mobile optimized step by step digital experience.
I'll now turn the call over to Joe.
Thank you, Mike and good morning to everyone.
As Mike highlighted today, we reported adjusted net income from continuing operations of $213 million or $2 43 per share.
As of 113 million or of $1 25 per share during the fourth quarter of 2019.
This represents an all time high quarterly EPS and of 94% increase year over year.
Results were driven by solid growth of new and used customer financial services profitability, partially offset by a decline and customer care.
During the quarter, new vehicle demand continues to exceed supply.
While our while our and we'll buy your car program supported our used vehicle inventory.
Fourth quarter 2020, adjusted results exclude a non cash accounting loss of $62 million after tax.
Or <unk> 70 per share of associated with our equity investment and room.
Moving to the balance sheet and liquidity, our cash balance at quarter end was $570 million, which combined with our additional borrowing capacity resulted in total liquidity of approximately $2 $3 billion at the end of December.
Note in January of this year, we paid the maturity of our $300 million, 335% senior notes from available cash on our balance sheet.
Our covenant leverage of.
Of debt to EBITDA declined to one eight times at the end of the fourth quarter down from 2.0 times at the end of the third quarter includes.
Including cash and used for and availability our net leverage ratio was one three times at year end.
During the fourth quarter, we sold three 1 million shares of our equity investing and room for proceeds of $105 million.
Early in 2021, we sold the remaining shares of room for proceeds of $109 million. So in total we realized a cash gain of $165 million on our investment.
Autonation remains committing committed to delivering shareholder value through capital allocation, which includes attractive organic growth opportunities.
A disciplined acquisition strategy and opportunistic share repurchase.
Our Autonation USA expansion provides an attractive growth opportunity and we remain on track to open five new Autonation USA stores, and 2021, and additional 10 and 2022 as Mike addressed earlier.
During the fourth quarter, we repurchase of $4 7 million shares of common stock for an aggregate price of $302 million year to date and 2021 through February 12, we repurchased an additional one 3 million shares for an aggregate purchase price of $95 million.
Today, as Mike mentioned, and we also announced at our board has increased our share repurchase authorization by an additional $1 billion.
With the increased authorization. The company has approximately $1 1 billion available for additional share repurchase and at.
And as of February 12, there were approximately 82 million shares outstanding excluding the dilutive impact of certain stock awards.
Looking ahead, we will continue to balance of investing our business and our business with opportunistic share repurchase and acquisitions.
With that I will turn the call back over to Mike.
Thank you, Joe 'twenty, and 'twenty was unimaginable year, but our associates came together and delivered record results we sold our 13th.
And vehicle and December the only automotive retail and history to do so.
We have raised over $25 million and the fight against cancer.
Create at the largest and most recognized automotive retail brand and we did at one sale one service one vehicle at a time.
The acknowledgement and brand awareness continued one autonation was recognized for the third year in a row. According to reputation dot com is having the number one reputation score from public auto retailers and disconnected.
And 'twenty one we are celebrating.
Leadership and add at 86.
Excellent and recognition as the most of it is one of the most admired companies and the world by Fortune magazine.
Autonation was the highest ranked automotive retailer on the list.
Congratulations to all of 'twenty 1000, Autonation associates for achieving such tremendous success will now take your questions.
Operator.
I would now.
And like to remind you that if you'd like to ask a question. Please press star one on your telephone keypad.
Okay and then at Star one on your telephone Keypad. Your first question from comes from John Murphy from Bank of America. Your line is open.
Hi, good morning, guys and congrats on that.
Great quarter and execution here.
Yep.
Michael.
At the first question on the cap allocation because it seems like you turned on to speak at again on share buybacks, which at.
It seems like it makes sense, so yeah, and you guys would be good.
Stewards of capital over time, but when you juxtapose that versus the opportunity on Autonation Express.
Express and and what you can do it as Omnichannel approach and I'm just curious if you think that at.
Rhapsody is where it needs to be worth a lot more capital needs to be put there to really ramp at often and advertise at to get some of the.
And then some of the hotspots are seen at some other names to put it put it and put it politely.
And I'm just curious.
And what you think you need to do there if it's a question of capital of advertising emphasis and how do you juxtapose that versus buybacks and acquisitions and excellent excellent question.
John and I'll go first and then I'll turn it over to Joe.
So.
Look at.
And the first priority on investment as a company and we're making a significant and have made a significant investment in digital.
<unk> is remarkable of the capabilities, we built a platform that.
Has the capability to perform for the entire enterprise day and day out.
And that surge investment period is thankfully behind us and we have the performance that we need and we want we of course will on a sustainable sustainability basis continue to invest and digital but the surge of investment period is behind us.
We're continuing to invest and our USA stores, we're very confident and optimistic about it and here you're absolutely right, John we intend and 'twenty two at.
Some of our 10 new stores.
And to move into new markets, where we're not today and we have budgeted additional communication that as we don't rely on markets, where the Autonation brand is strong and established that we will need incremental marketing dollars for that but.
And investment and USA, we will also do I expect some acquisitions and new vehicle of franchises that fit our strategy and our footprint and we expect that to happen.
And now I'll turn it over to Joe because we are in the position that we can do at all.
With very low leverage on the company and Joe why don't you take it from there.
Thanks, Mike.
And to reinforce.
It takes the extremely strong cash flow and and under leveraged balance sheet. We really do have the wherewithal and frankly, there are very attractive opportunities in front of us as Mike said, the first priority is always going to be to reinvest and the business.
Which we have been doing and will continue to do as Mike said, the significant investment and digital is behind us.
And in front of US is the opportunity on Autonation, USA, which we see very attractive returns.
Beyond that as Mike said, we are going to continue to be opportunistic and M&A, we do of our pipeline, but we will maintain discipline.
And then continue to believe there is tremendous value and our stock we have obviously been active at that historically.
Including recently and will continue to do that going forward.
And just a follow up to that it seems like the attitude of the automakers towards.
Yourselves and the larger groups at as far as approvals on.
Franchise.
And the acquisitions seems to be loosening up or moving more towards collaboration.
Will.
Are you seeing that and could we see you know automation and as you said utilize your under Levered balance sheet debt to make.
Bigger and maybe more robust as opposed to Onesies and Twosies acquisitions.
Yeah.
Joe could you take that please.
Sure So I think.
Hard to say across the entire spectrum.
And the Oems are feeling I can tell you is we've looked at opportunities we're very mindful of.
Location.
The relationship and we do believe there are very viable opportunities for us to acquire within the constraints that are offered and imposed.
So we don't see that as an inhibitor to our strategy, albeit one that is very focused and disciplined.
Okay. That's helpful. And then just lastly, Mike I think some of us.
Maybe a lot of us would love.
Stick around forever.
But the search going on and I'm. Just curious if you can give us and update on and how.
And Thats progressing timing, how we should think about that stuff.
Yes.
And it just took around as chairman.
Would you are you going at.
Remain on the board so.
So we actually are taking a step today.
And because two things and I look at sort of succession as we previously announced in 2019.
We will split the role of chairman and CEO.
With my departure.
And.
We've taken the step of.
Going ahead and doing that because of.
We have a long serving director of Rick Burdick, who has 30 years plus with the company two years as lead director of very successful. So the board met yesterday and selected and elected Rick Burdick as the chairman of the company. So this gives a lot of should give everyone a lot of confidence and trust that.
We have the right way forward, we have some of them from and then the company assuming this responsibility Rick will also lead the search for the new CEO, which will kick off and the spring.
And but half day half day equation is already answered.
And with Rick becoming chairman.
Okay.
Got it okay. Thank you very much guys.
Right.
Yes.
Your next question comes from Bret Jordan from Jefferies. Your line is open.
Hey, good morning, guys.
Morning, when you're at.
Sourcing used inventory of and obviously you are talking about we'll buy your car are you seeing any recent changes and the competitive landscape. Obviously other is trying to execute that strategy or possibly some of the competitors being more aggressive with maybe negative equity financing to attract trades.
Away from you.
Sort of landscape on used inventory.
Yes, we've been very successful and our pre owned business as you see we've outperformed the marketplace.
And the fourth quarter with an increase in revenue and the fourth quarter of 12%, which is quite impressive and of those vehicles, we retailed fully.
85% came from internal efforts of Autonation, we either took them S and trade or we'll buy your car or we took them and from off lease.
So it's at the machine that we've created is quite impressive.
And.
And I view, it as an arbitrage business that our ability to acquire inventory at the right price and pay a fair price of ours.
And customers and then recondition it at speed and get it on the frontline and presented and at one price environments of our customer is obviously, a winning formula of this combination of brand customer experience and digital capability.
Think of sustainable it's one of the reasons were investing and USA.
So five more stores this year 10 more stores next year.
Okay, Great and then a follow up on customer care.
You sort of called out debt and obviously vehicle miles traveled being down is impacting service demand and but have you seen any cadence of improvement as BMT has come back and I guess and that theory, we should be lapping the last of the negative comps should be right about now and we start going against the real declines and BMP and March and April of last year is that a fair.
Way to think about it.
It is.
And we.
And obviously from the dramatic lows, we are past that.
We estimate at the moment that miles driven at.
Are down about 10%.
Our actual customer care business and the fourth quarter is down from four of 5% and something like that at.
And.
So.
We view it as a gradual recovery and obviously, we have opportunity against the extreme situation that exists at when the first pandemic broke out and shut down.
And shelter and place Joe why don't you talk about how you think.
Customer care will unfold this year.
Thanks, Mike, Yeah, and I'll just reiterate.
And again as you've looked at kind of the business recovering if you think about the brackets of customer pay warranty of all.
Recover.
And total obviously with the volume of business. We are doing is actually recovered quite nicely and collision that has a lag.
And as Mike indicated really driven by the miles as you look out through the year and you're correct, it's really going to be starting in April that we saw the significant decline associated with Covid April may and particular being two months that were dramatically impacted as you recall us talking about last year, but really I think youre going to see throughout.
Q2, Q3, and even into Q4 favorable comps year over year.
And the customer care business, and particular as collision and I think will recover as mild as miles driven recover through the course of the year with.
And with the benefit of the vaccine and if you will the continued reopening of the country.
Okay, great. Thank you.
Sure.
Your next question comes from Rajat Gupta from Jpmorgan. Your line is open.
Oh, Hi, good morning, Thanks for taking my question.
Providing some color on the new vehicle business and generally you know I was tracking in line with the forecast.
Any color one of how like the used Waco business is performing and you talked about the inventory levels and the sourcing but.
And any color on how the units columns have been tracking so far.
David You know January early part of February here.
And you talked about of the parts and services business also more on the miles driven side.
And the customer pay and warranty work started to come.
Come back pretty quickly and I'm assuming there.
Some pent up demand there that should that should continue to flow through so just curious kind of thoughts there and I have a follow up thanks.
So.
Who is at the new vehicle business will improve by about 7% of this year approaching 16 million units. There is demand for higher volume than that but I don't see a path on the production side.
Two of them, but it's a very opaque uncertain disrupted situation on the production side, where you now have this combination impact of <unk>.
And then make with the shortages of the chips to produce vehicles.
One of the things we went through.
When production was resumed after the shutdowns.
Was manufacturers made vehicles without even having all of the parts and then park them to.
For completion and that turned out to be of fiasco, and we literally had vehicles that we were told where ours and we're on the way that didn't show up for 678 months and some of the manufacturers have stopped that practice and really don't produce at a lesser of a sight line to all of the parts.
And when this combination of the pandemic and chip shortage is going to clear I don't think anyone really knows so.
I think the demand is there clearly I think if you look at the extremes of last year and you sort of have smoothed that out I think it's a fairly safe.
But to say that.
New volume will be up 7% this year the demand is there.
And and January tracked along that line.
I think at pre owned business for the industry is probably relatively stable.
But I think we will outperform.
As we did and the fourth quarter and Thats our goal.
Availability as I said, we look to generate as much on our own means in terms as we can we've been very successful at that we'll continue working at that and customer care. You know again, it's a situation of miles driven and when do people fully.
Resume the behavior that existed pre pandemic and that could take a while I don't know exactly Joe what would you like to add to debt.
Let me touch of couple of things.
One you know go into the used as Mike indicated I think one of the benefits. We really do have as of sourcing. So used is a lot about having the inventory.
With 85% of our inventory of being sourced directly from customers versus many of the peers are 50% of what I think that clearly does sort of us well and positions us well for 'twenty and 'twenty one and.
And on the on the let me dissect a little bit customer care I think you asked specifically about customer pay and warranty. So if you look at the fourth quarter of the entire customer care business was down about 3% of <unk>.
Customer pay and that same general directions down a little bit more but not much warranty similar kind of at the same ZIP code if you will.
Internal again being the area that actually saw a positive growth again associated with the volumes of units.
And as I indicated collision and really is the area that has.
Drag if you will the slowest to recover with miles down, 10% and down a little bit greater than that.
And I think as the miles recover we will see that portion of the business and particular improve and are very optimistic about customer care as we go through 2021.
Got it that's helpful and the customer pay and warranty.
It's down slightly and the fourth quarter.
Did it sort of exit at positive rates in December and into January here or is that still are still comping down.
From a year over year perspective at least.
Simply it's at.
And it's still slightly comping down, but the trend continues to be at positive one.
Got it.
Hello, and thanks for the color and then just and Autonation USA any metrics you can share so far.
What are the price stores, you know what the profitability was at the quarter.
Like what the units units are looking like there today and.
Just the economics of those.
And as you know they continue to mature over the last a little of last couple of years.
Joe you take that please sure.
The five existing stores continue to operate successfully and as.
You know those were kind of a five samples.
<unk> stores, if you will we indicated.
Pre tax slightly below 2 million kind of run rate.
Again continues to be very positive, what we're seeing and as we rollout the five new locations set to open this year.
And increasingly optimistic.
Our cash that we provided previously about units.
About the monthly free tax we feel very good about and still continue to believe that the monthly pretax when it gets to a full run rate is and the 200000 dollar of month area.
And very positive at the economics, and very encouraged by from our real estate and build standpoint, the progress we're making.
Got it great.
Great.
That's super helpful. Thanks for all the color I'll get back and Kim.
Thank you.
Your next question comes from Stephanie Benjamin from Choice. Your line is open.
Hi, good morning.
Good morning.
I wanted to touch a little bit on your decision to exit your frame of investment just curious.
And the timing of that or at that played out.
And your expectations and how we should think about what this means for our future investments going forward.
Excellent question glad you asked.
So.
Look we are and we're not and investment enterprise.
When we made.
The partnership with the room it was with the hope that we would find synergy and a common grounds to work together whether that was in our expertise reconditioning digital whatever we just thought there could be some mutual benefit for the two companies and that.
And we could do something together well none of that worked out at.
And.
And then it became purely and investment.
Which is really not what we intended and you know.
And once it was clear and this was.
Just at investment that the companies would not be doing business together.
We decided to.
Declare a victory and move on and I think we originally invested at 15, five zero $50 million and and finished and receiving Joe was at 215 million and we got back something like that day.
Yes.
No.
215, and told them, so and excellent investment.
But you know what the.
The two companies on an operating basis were doing nothing together nothing so.
No.
At the correct decision was to exit the position now of the other investments we have as Wayne Moe and I can tell you want and operating bases, where we are doing things together that is interesting and can lead to something so we stay on that journey and we're optimistic and hopeful that all of that works out but I.
Wanted to be clear.
We only took these two steps because we thought the companies could do business together that was win win from both companies. One of it was clear with room that was not the case, we exited at the position.
Got it and that's very helpful. And then just my second question on your SG&A performance and Jeff.
That level of another record quarter, and certainly well below your target or.
And of that 68% is there any.
No desire to be now low our euro and long term target just given your performance last few quarters or how would you kind of chalk up your outlook going forward just given the performance you've seen in the last few quarters. Thank you.
And at performance is outstanding.
But that.
It doesn't mean today, we're going to lower debt.
At the target from 68.
And we'll be at 68 or below and that's our commitment and so far were doing pretty good on our commitment I can tell you that.
We feel the steps we've taken over the last two years have dramatically improved the cost efficiency and effectiveness of autonation on a sustainable basis and.
And we.
And we'll see how the actual numbers come in but we really like our position, but as far as moving the goalpost today on the 68.
We're not doing that.
What would you like to add.
Yeah, Thanks, Mike So.
Michael is absolutely correct and we have clearly.
And realize the benefits of prior investments and I think a better discipline and running the business. So as you look at SG&A I mean growth was up $88 million and SG&A was down 17, that's remarkable leverage obviously, but it comes across really all three categories of SG&A.
Compensation and made some difficult decisions through the pandemic operating with.
Fewer people are I think learning how to do that very effectively leveraging technology, both in the store and in the back office.
So we had compensation. Despite obviously a significant portion of the compensation being variable down 380 basis points year over year.
And area, we're seeing benefit and digital and advertising.
And I brought that down 80 basis points year over year, and while we still advertise and I think.
And to a greater degree than many of our peers I think the results and and the success and the business is reflective of that so I think we've been very prudent and finding the right level, albeit at a reduced level and leveraging our capabilities.
And then finally overhead.
Again difficult decisions and and.
And people and then of discipline and within the overhead driving that down 350 basis points. So from my perspective, you know driving it down over 800 basis points really across all three categories is a commitment we've made and to a and a change and operating.
And as Mike said, we are committed to continue to operate at or below 68%.
Great. Thank you guys. So much you bet.
Your next question comes from Rick Nelson from Stephens. Your line is open.
Thanks, a lot of parent.
Good morning, guys.
Alright.
But at the acquisition and <unk>.
Environment kind of what you're seeing there.
And just about per ton of at is what kind of breakdown.
Outgrew and produce you're looking at and.
Multiples.
Sure thing.
Yeah.
Yeah.
We definitely have a lot of conversations going on and a lot of negotiations and I fully expect we will have some new vehicle franchise acquisitions. This year.
But I'm not going to put a specific number on it.
We're very happy with.
The footprint, we have and new vehicles, and we spent a lot of time, Rick as you know optimizing that and one of the reasons for our success. Today is that we really took the time to go through every store, we had and decided.
And if they fit or not.
And I would say the number one issue when we look at and acquisition is.
Whether it will be of cultural fit with auto and nation or is it a complete reinvention of the dealership.
In order to meet our operating standards.
And how we do business I would say that's the most important.
And then of course, we're very comfortable.
Adding within our existing infrastructure with new vehicle franchises.
Don't expect much outside debt, but not.
And we'd be open to doing it and of course, we're very disciplined on the.
And the cost side.
And you have to be careful around multiples because 2020 at a very odd year debase anything off of you sort of have to go back and look at 18, and 19 and what the world was like.
So that's all of our approach and.
And so I think we can do all of the above build the USA stores and invest in our digital capabilities.
Keep all of our existing stores fresh and do some new vehicle and acquisitions and.
And as our stock, which we take is very attractive.
Thanks for that color somewhat.
Your peers are talking about though.
Potential for public company.
Sure.
And look to debt to review them at.
Whether you think of the Oems.
And would be.
Supportive.
Uh huh.
So I'll give you my view.
And what I've experienced is that.
When you become as large as we arm and you make an acquisition.
Pick say.
Brand Z.
And you already own 25, <unk> stores, and you want to buy a number of 26 and 27 and the negotiation with the manufacturer.
I will ask Okay will improve number 26 and number 27, but let me tell you what you have to do from store one through 25 and in order to get approval for the next increments.
And if you're really at that demand onto what you're acquiring and really changes and the return on investment.
And so.
At the higher you climb the mountain.
And the more difficult it becomes to keep climbing and.
And now where do you only one over $20 billion revenue. So I'm talking from a point of view of that no. One else has experienced yet that's our experience. It's one of the reasons for us.
And having it.
Going to the Autonation USA stores is because now we are in charge of our own destiny.
And we're able to build these stores for nine and $10 million. Each we do not need manufacturer of approval. All we need is a brand a great customer experience and additional ability to penetrate the market and the size of the market is much larger.
I'm in charge of my own fate my own destiny.
I don't need manufacturer approval that goes all the way back to the beginning of time.
And all I need is the capability to execute and we've gone through the most difficult period, which is building the brand protecting the customer experience having of digital capability.
So.
And that is on a on a investing capital return return on invested capital is a very winning equation at.
And one of the reasons for it.
And as spot on Rick what you just called out our experience is when you get over 20 billion and the number of stores you have non saying you can't get manufactured at Blue you can but.
And it's it's quite of negotiation.
Okay.
A lot of sense.
Thanks, and good luck thank.
Thank you.
Your next question comes from Adam Jonas from Morgan Stanley. Your line is open.
Hey, Mike first Bethany and good morning.
Hey, good morning, best of luck with the new chapter I'm sure, we're not going to see the last of your so.
Thank you of luck yeah. Thank you Frank and thank you I think that you've got a lot more and more to share.
And I'm curious why are so many startup.
EV Oems going either going direct to consumer we're planning to go direct to consumer and when we put them on the spot at least saying Hey, why don't you use and autonation or at some of the best of breed existing franchises to really get the leverage and time to market and stuff.
And why why why you go and B to C.
By yourself why do you think that is are they are they are they foolish.
Yeah.
So I think they're making a mistake.
And.
And and I think I think the verdict is close to coming in.
And quite frankly, so what's you avoid by going the route of going is the massive cost of investing and a customer care infrastructure for a very sophisticated technically complex product.
And by the way this.
Thought that electric vehicles are.
And will not need care is also a folly as a matter of fact, they are more complex than at any time of combustion vehicle I've seen as far as the expertise and the equipment you need because we're investing.
Heavily with all of the manufacturers to be able to care for electric vehicles. So if you Wanna skipped at whole infrastructure footprint to care for your customers.
You can do that.
By the route that Tesla has gone and some others have gone, but less and we're taking at Tesla and trade all the time and and one of the number one issue we hear when when when they trade at and is there just frustrated at the lack of a enjoyable customer care experience for win.
Something does go wrong.
And so I think that's.
And what they're trying to bypass, but I think it's a mistake and I think it'll be proven wrong.
And I think the strength of the win win win equation of the new vehicle franchise of win for consumers of win for the manufacturers.
And it can be a good investment for.
Dealers and publicly traded investment groups has been proven as far as our sustainability viability and value in the marketplace.
So you can go to our website today Autonation dot com, you'll see a huge flag for electrification all of the vehicles, we offer from all of the various manufacturers and we're in the game and I think this model will.
And.
And is viable will win at.
And others will ultimately have to deal with this issue of.
And how it how are they going to care for their customers.
Got it Mike Thanks, Thanks for the thoughts.
<unk>.
Your next question comes from David Whiston from Morningstar. Your line is open.
Yes.
Thanks, Good morning.
I guess I wanted to go back to.
The earlier comments and consolidation and just and.
The other thing I've been hearing some chatter about.
And would be if there weren't consolidation amongst the public.
And that those larger players could effectively blocking at the digital startups on used vehicle inventory at least on late model used.
And I was just curious do you agree or disagree with that.
So the whole.
Issue of consolidation and whether to smaller public traded at companies could come together.
And.
And I can't say, because I don't have one of the smaller ones.
But I can tell you as far as us acquiring one I don't see that's one of happened because you immediately run into a problem of too much density and a given market debt.
Youre going to have to divest of significant part of what you just bought.
And at least that would be for us so overlap of too much Anthony at any given market is at a real genuine issue for us and so we will not be acquiring and other publicly traded company I don't see a path of the finish line.
And your other point was what.
Question.
And that was basically.
And talking to them.
Basically this morning and Mark.
And on late model used them to ramp lockouts of Carvana and others.
Starts from getting.
Vehicle limit.
Uh huh.
The phone broke up so I didn't really hit the <unk>.
Here the answer but I can tell you, who do I think wins and this huge.
And marketplace.
I I think companies that have of.
Our brand with a great customer experience and digital capability, we'll take share and there's huge pre owned marketplace from everyone else I think that's what's happening.
And then you have to say well. This is my model and make money or not so we've already proven our model makes money and Carmax as model makes money.
So.
But I think.
Brand, great experience and digital capabilities is a winning combination and pre owned marketplace.
Thanks, that's helpful and then and I'll touch.
Vehicles can you just talk a little bit about especially given your and places like Texas and Florida.
And additionally, the friendly, California market outside of the Tesla demand.
And is there for for Evs is at really ramping up you've seen them and half years.
And really trailing test.
Now we were definitely past.
And inflection point on the journey to electrification.
And there's no turning back.
But it is gradual if you won some numbers for me I think if you go to 2030.
20% of all new vehicle sold will be fully electric. However, this is not like going from the flip phone to the smartphone where you flow throw away all of the flip phones.
I think and 6% of the units and operation on the roads of America. Our all electric by 2030 internal combustion engine is going to have a lifespan of 2025 years is not obsolete from one day to the next there is a huge segment of consumers that.
The affordable transportation and that will come.
With the existing and internal combustion engines will go on for years and years and years. So at the transition for units and operations is a is a deck at long process. The other insight I can give you as far as our customers who are buying electric vehicles, what they like about it as long as as well as all of the obvious things and say like not phones at the gas station anymore and as long as.
You have a range of 250 miles plus.
And what they how they used of vehicle.
Is they use it for daily use and when they get home at the end of the day they plug it in.
At there at the end and either in their garage or parking at and the condo and every morning and come out and they got a fully charged vehicle and they never go at a gas station and we're just delighted and all of our customers, who do buy electric and use it that way and have another vehicle.
At suburban or some other vehicle with an internal combustion engine and use that for long trips and going around so I think the.
Germany to electrification is here, we embrace it and we're gonna be part of it where we're at.
Excited or at least what the manufacturers have and the pipeline ever.
Everything from the Hummer.
Mustang Mach and.
Volkswagen and Thaicom and as a sensation list goes on and on and it's very exciting business to be at.
Yes, I agree there's a lot of change coming and I'm hearing great things about some of these loans you just mentioned.
Moving on in visa and your opinions change the demand for leasing and ramps and the negative way because there's more residual value risk for the captive finance arm and maybe you don't want to pull back on leasing.
We haven't seen that yet.
So.
So far of residual values on electric vehicles are fine and I see no yellow flags of Red flags.
Okay, well, thanks for the color I appreciate it.
Absolutely.
There are no further questions at this time of at least to turn the call over to management for closing remarks.
Well, we have no closing remarks other than we're delighted you joined us per day. Thank you very much for your questions all the best.
Thank you.
This concludes today's conference call you May now day.
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