Q1 2022 Sonic Automotive Inc Earnings Call
Yes.
Thank you.
Thank you.
Sure.
Yes.
You may begin.
Okay.
Okay.
Thomas.
Okay.
Okay.
Yes.
Yes.
[music].
Yeah.
Good morning, and welcome to the Sonic automotive first quarter 2022 earnings conference call.
This conference call is being recorded today Thursday April 28 2020.
Patient materials, which accompany management's decisions on the conference call can be assessed at the Companys website at <unk> Dot Sonic automotive Dot com.
At this time I would like to refer to the Safe Harbor statement under the private Securities Litigation Reform Act of 1095.
During this conference call management may discuss financial projections information or expectations about the company's products or market otherwise make statements about the future.
Such statements are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made.
These risks and uncertainties are detailed in the Companys filings with the Securities and Exchange Commission.
In addition management may discuss certain non-GAAP's financial measures.
As defined by the Securities Exchange and Commission.
Please refer to the non GE AAP.
Constellation tables in the company's current report on form 8-K filed with the Securities and Exchange Commission earlier today.
I would now like to introduce Mr. David Smith, Chief Executive Officer of Sonic Automotive Mr. Smith, you may begin your conference.
Thank you and good morning, everyone and welcome to Sonic Automotive's first quarter 2022 earnings call.
I'm, David <unk>, the company's CEO .
Can you me on the call today is our president Mr. Jeff Dyke.
LIFO Mr Heath Byrd.
Chief operating officer of that report.
Jean.
<unk> retail officer, Mr. Steve Whitman.
Our vice President of Investor Relations, Mr. Danny Wang.
Building on our record breaking results in 2021 today, we reported record first quarter 2022 revenues and earnings per share driven.
Driven by strong customer demand.
Execution of our operating Playbooks.
Keen focus on accomplishing our strategic growth plans.
We also continued to expand our nationwide footprint and digital network.
Also strategically growing our franchise dealership network with our acquisition of Southern Chevrolet and Upstate New York.
This performance without a impossible without the amazing effort and execution by our Sonic <unk> minutes.
Congratulations and thank you all.
We would also like to thank our customers manufacturer and vendor partners, who are helping us achieve another record quarter.
Now, let's briefly review our financial highlights.
During the first quarter of 2022, sorry delivered all time record quarterly revenues and the 13th consecutive quarter of year over year EPS growth.
On a consolidated basis, we posted first quarter revenues of $3 6 billion.
Up 29% from the previous year.
And record first quarter EPS of $2 33.
89% year over year.
These exceptional results were driven by strong performance across our business.
A challenging operational environment.
We also continued to see further benefits from our initiatives to enhance operating efficiencies.
Permanently reduce expenses throughout our entire organization.
As a result of these efforts we reported record low first quarter SG&A expenses as a percentage of gross profit of 67, 7%.
And on a franchise dealership segment basis. This figure was 59, 8%.
A 1060 basis point improvement year over year.
Our team remains committed to optimizing our expense structure to drive long term profitability improvements.
Taking a look at the larger industry picture, we've continued to generate record results in spite of the lingering effects of the pandemic.
With ongoing new vehicle inventory constraints inflation and supply chain issues.
Despite these headwinds we achieved record revenues and profitability for the first quarter as a result of persistent consumer demands are.
Our targeted sales and marketing initiatives as well as our improved digital channels.
Additionally, as an organization, we continue to realize the enhanced operating efficiency and cost management measures that we implemented during the height of the pandemic with.
Which demonstrates the inherent strength and flexibility flexibility of our business model.
Based on our positive operating outlook and continued execution of our long term strategic growth plan for Sonic in Echo Park.
We remain confident in our ability to reach our stated goal of $28 billion in total revenues by 2025.
Looking at our franchise dealership business first quarter 2022 revenues were a record $3 billion.
Up 30% from $2 3 billion in the prior year.
On a same store basis franchise dealerships first quarter revenues were up 5% year over year.
While gross profit improved by 27%.
Parts and service gross profit continues to improve up 10% on a same store basis with a 21% increase in customer pay gross profit.
Same store F&I gross profit was up 7%. Despite a 15% decrease in retail unit volume driven by all time record F&I per unit.
$2400 40, $22448 and our franchise dealership segment.
We continue to see supply chain disruptions during the first quarter that limited new vehicle production and inventory levels.
This contributed to a 15% decrease in same store retail new vehicle unit sales volume.
Slightly better than the industry retail Saar decline of 11%.
Offsetting the lower sales volume same store retail new vehicle gross profit per unit.
<unk> $6799.
134% year over year and in line with the fourth quarter of 2021, which typically represents our highest GP a quarter.
Due to our luxury brand mix.
On a trailing quarter cost of sales basis.
Franchise dealership segment, new vehicle inventory had approximately 15 days supply.
400 3500 units.
Down from 13200 units a year ago.
Our franchise dealership segment used vehicle inventory of approximately 33 days or.
10600 units up from 9400 units a year ago.
Turning now to Echo Park, we posted record first quarter revenues of $625 million up 23% year over year.
In addition to solid revenue growth. We also continue the nationwide expansion of the Echo Park automotive brand opening airport locations and three new markets since the end of 2021.
Beyond expanding our physical footprint in recent months, we have also grown <unk> digital network.
As previously announced during the first quarter, we launched our proprietary e-commerce platform.
<unk> dot com and.
In select geographic markets.
Since our last earnings call. We have continued to make substantial progress with the national rollout of this digital platform.
As of today. The platform has now been rolled out to 80% of our nationwide traffic at <unk> Dot com.
We continue to see positive early results in customer feedback from the new platform with a 30% increase.
Our website conversion rate and out of market buyers representing over 70% of our online sales.
Given our success today with our expansion of Echo parks nationwide geographic and digital network, we remain on target to achieve 90% population coverage by 2025.
Upon reaching this coverage level, we continue to anticipate delivering 575000 vehicles in generating $14 billion.
And annual Echo Park revenues by the same here.
We remain dedicated to the growth and expansion of our unique pre owned vehicle concept.
Reflecting this commitment to Echo park, we continue to invest the necessary human capital to support <unk> future growth.
This includes the first quarter promotion, Mr. Tim keen as Echo park's first chief operating officer, and more and more recently the appointment of Steven currently as Chief Technology Officer of both Sonic automotive and Echo Park.
These and other recent C suite hires that Echo park represent our commitment to <unk> long term success is a key part of our strategic growth plan for Sonic automotive.
Turning now to our balance sheet, we ended the first quarter with $785 million in available liquidity, including $486 million in cash and $4 deposits on hand.
Our consistently strong sales performance cash flow generation and balanced capital allocation strategy has all contributed to our solid financial position, allowing sonic to return capital to stockholders by increasing our quarterly dividend by 108% and repurchasing approximately one 7 million <unk>.
Shares of stock since the end of 2021.
To that end I'm pleased to report that our board of directors approved a quarterly cash dividend of 25 per share.
Payable on July 15, 2022 to all stockholders of record.
On June 15th 2022.
In summary, our record first quarter results reflect strong consumer demand the success of our targeted sales and marketing initiatives, our enhanced E Commerce network or.
Our continued success in maximizing operating efficiencies throughout our operations and of course, the waiver and dedication of our talented teammates.
And we look forward, we remain committed to implementing our long term strategic growth plans for Sonic automotive.
And for Echo Park automotive.
By continuing to execute on this vision, we expect to realize further revenue growth and increased profitability.
While continuing to enhance our best in class guest experience.
<unk> long term value for our guests our teammates and our stockholders.
This concludes our opening remarks, and we look forward to answering any questions. You may have thank you.
Thank you.
Thank you.
I would like to ask a question.
Please press star one on your telephone keypad.
If you think you can speak to find please pick up your handset before pressing the keys.
If any time.
Your question has been on trucks and you would like to draw. Your question. Please press Star then Keene.
We have the first question on the phone lines from.
John Murphy with Bank of America. Please go ahead, when you're ready John .
Good morning, everyone. This is aileen Smith on for John .
First question I wanted to ask is around Echo Park.
Because as you continue to rollout the Sarbanes bar at the same store sales performance in recent quarters has been.
Pretty disappointing can you give a little bit more color on what is going on in there is it your franchise stores trying to ground our used vehicle to retail rather than letting them flow through to Echo park or is it more of a focus on getting the new Echo park stores up and running rather than running the old ones.
Aggressively.
Yes. Thanks for the question this is Jeff Dyke.
Echo Park, and our franchise stores <unk> never taken inventory from our franchise stores. So when we first started Echo park that was a lesson that <unk> learned from a different light.
We built these two businesses to not really sure inventory overall.
So that absolutely has nothing to do with it.
To educate anticipation of this question is to educate everybody on the call.
I would refer everyone to.
The slide that we developed to help everybody look at this and look at the some of the industry headwinds that we're facing and so as our competition I would refer you to slide 20 of our investor deck I'll give everybody a second to get there.
And so with that being said I sort of broke this slide down into three buckets. The first is just overall, let's take a look at the industry together in some of the headwinds that we have there are three main drivers.
The headwinds that we're all faced with.
In the industry today, one is supply chain disruption, we all know that low new vehicle inventory is coming from the manufacturers or slowing down the ability to acquire one to four year old vehicles. So that's what that's a major issue.
The second bullet point would be rental car companies typically what we see at this point in time as rental car companies in the auctions weighing selling cars and we're all buying cars. If they hit purchase new railcar companies are now in the auction lanes buying cars and because of their depreciation model, they're able to pay more for that one to four year old cars.
Then the traditional retailers and that's causing a lot more competitive issues and pushing the prices up.
And then finally.
We use the 1000 inmates.
31 buying that car.
And the auction lane and overall, we are now approaching a price point on used cars in the auction lanes of 70% that of a new vehicle, which is pushing the average payment that a customer would make on a pre owned car upward.
Some major headwinds customers even exciting.
We're going to wait to see what happens with prices.
It's come back down or they are moving because its so close to new car payment they are moving.
To our new car. So if we understand the industry headwinds and I'll walk you through very quickly.
John about this on the last call.
So from a one to four year old model to a 1% to eight year old model and maybe go to non and 10 year old depending on the inventory.
Inventories that we can acquire that is something that we said on the last call is going to take US four five months to be we've got to retool, we've got to hire some different technicians, but in a few different parts processes in order to handle that.
All in play and are part of our game plan.
We're also launching as David Smith mentioned in his opening notes, we're launching our new Echo Park Dot com to modernize our ecommerce offering this this offering.
Steve Whitman could talk about it in a minute. There has just been fantastic. The results are fantastic and we will get into some of those details here in just a minute.
Are also brand at launching our <unk> brand.
Dino Bernacki and our new CMO of Echo Park is driving that process and we will launched from a marketing perspective remember we've rallied we've really never marketed Echo Park. It's just the SCM SCO play from a low price perspective, and so our entire brand launch will start this summer and we're also very excited about that so with some of the action plans in.
Things that we're doing initiatives that we've taken whatsapp and what are some of the results as you can see on the slide we've improved non auction sourcing from the first quarter of last year at 7% to now over 20%. This year and we expect that number to continue to grow just Tim This G&P rolling above 30% is it.
Percentage of our total mix, which really brings our margins often changes the overall.
Especially in terms of profitability for Echo Park.
Our Denver hub locations, where it leads the way.
They returned to profitability in March to make $458000 or having another good April so we do see some signs of the initiatives that were taken beginning to take hold from a profit perspective.
There is also a slide and we gave you sort of are by month profitability for the first quarter on slide 22 of the Investor deck, you can see that in our mature stores, how thats how thats working.
And then.
Finally, we've achieved the highest.
By building all these stores and doing all the training and everything that we've done we've achieved the highest guest satisfaction scores in the pre owned competitive segment.
We know our customers love our process, we understand the headwinds that are not just facing us we are facing the industry and you've seen that in all of the announcements so far and we believe that the action plans that we're taking are dealing with those headwinds and it's going to take a few months to sort those things out for us, but we're very very confident in where we are with echo.
We're investing in our teammates structure as David talked about Metro Park, and believe that we've got the right solution for that here in the short term to deal with the terminal that we have today, but again. This is a snapshot in time used car prices are not going to continue to appreciate inventory levels.
<unk> come back to a certain extent.
And that will play right into Echo Park, and so we're very confident where we are and feel like we have things had certainly in the right direction.
Yes. This is Steve refining just to build on what what Jeff said on the New Echo Park Dot Com, we're very very pleased with the progress. So far we've actually launched a new website to 80% of national traffic now going to a 100% by the end of Q2 and early results are showing us that the new website is driving an incremental 30% and conversion rate.
So it is going to drive incremental volume for us as we continue to roll that out.
F&I is at $23 25 per unit exceeding our expectations. Our F&I penetration online is about in line with what we're seeing in store and in our mature stores. The stores that started first with this new echo Dot com, we're actually seeing F&I penetration higher on those stores and we are seeing <unk> talked about the new Echo dot.
Com versus in store so.
Very very good results there.
And then lastly, just from a nationwide inventory standpoint, our new web site enables the consumer to access any co or anywhere and have it shipped to them and interestingly over 70% of the cars that we sold online. So far has been shipped from another market. So we're really relief.
Extending our inventory extending our appeal to consumers, which is in turn driving incremental volume so more to come on the new Echo Park Dot com.
Very strong early results.
Okay Fantastic, that's really really helpful color.
I wanted to make a bet on one of the industry headwinds.
And one of the larger players need vehicle market that reported a couple of weeks ago.
Characterizing some of what they saw in the quarter as being demand weakness, which seems a little odd given what's going on from a pricing perspective, yes that does.
Still clearly there, but yes supply is constrained so as you think.
About kind of the affordability dynamic.
The lack of supply that's available is there I don't think from a cost on that.
A consumer perspective on the demand side of the equation that how you getting concerned that the consumer may be getting exhausted.
So any other pushback other than price, which would be.
Yes. This is Jeff Dyke.
Hi.
Don't disagree with the comment made a few weeks ago I don't think thats accurate.
37 to 40 million cars sold.
In America. This year in terms of pre owned so the demand is there.
Problem is is that we're pushing $500.
$3, a month payment and it's too.
Close to the new car pricing.
Look if you.
<unk> study used cars and you kind of a used car geek like I am or like we are.
You really want your average used vehicle selling price to be one half out of your new vehicle selling price and in my whole career, it's always run 50% to 55% somewhere in there at 70%.
You can't it's too close to the new vehicle pricing prices are too high of 500 to whatever $525 a month payment. That's just not that's out of the norm and that's what's causing.
Someone to maybe think that there is there is not a demand there there is plenty of demand for used vehicle prices fall back below $25000 look out because there's a lot of cars are going to be sold in a lot of those that are that are suffering that acquire a lot of cars from auctions et cetera.
We're going to benefit in a big way and I believe that's coming I, just don't think it's coming this year.
And it's COVID-19 in the Ukraine, and all the things that that could hit the used car environment certainly hit.
But it will recover and we don't we're not going to throw out our whole model something that we've been working on for two decades.
And developing here at Sonic automotive just just because there is a women.
I don't want to change in the way that the wins have been blowing and so that's kind of how we see plenty of demand for both Breo NAND Nucor.
<unk> I just want to add to that you pointed out we're not throwing it all out and we're staying the course.
When you look at Echo Park.
Happy to start over again.
Drag that Youll see go onboard as we.
Yes, the current environment.
Yes.
When he talks about staffing the staffing for us as the majority of the service Department.
We're staff to sell 10000 cars not 5000 a month.
And.
We're just not going I mean technicians are very difficult to come by.
And so there are certainly triggers that we can pull but that's under no circumstances under consideration in terms of <unk>.
Pulling back.
You don't see a need to do that.
We're making investment in Echo Park, and we're going to take continue to make that investment and so there were a couple of couple of bumpy quarters, we'll deal with that.
Okay, Great. That's very helpful color, thanks for taking questions.
You bet.
Thank you, we now have Sasha <unk> of Jpmorgan.
Your line is now open. Please go ahead.
Great. Thanks.
Thanks for thanks for all the clarification on vehicle park, but maybe like just to expand on that.
Is there like a contingency plan in place.
Sure.
Used car prices did not Margaret.
You talked about like five to material you Darryl.
It's going to take time to get to.
Our steady state of mix there.
<unk> transformed the business accordingly.
And we currently continue to enable a lot of ongoing investment.
Like how should we think about.
Your flexibility we've done with the call.
Cost structure or the capital expenditure going in there.
Our nimble we can be on that front and then I have a follow up.
Thanks for the question. This is Jeff with very nimble I mean, we have the ability to stop rollouts of facilities Tomorrow, if we so choose.
We can certainly adjust our head count and remember our model is 1% to four year old we lose about $300 on the front end of a vehicle in normal times and make 2500 on the Bakken net up around 22% or 20%.
The <unk>.
One of the things that we're working on right now because of the guest experience in our rent and our reputation.
<unk> scores are so high on our guest experience scores are so high we believe we can translate.
That that experience for higher front end margins. So we've got a big test coming in our Austin market, where we're going to move pricing up change the mix at more years and see if we can't move the minus three $400 margin into the positive 500 upwards of a $1000 front end margin, which then.
Rules.
Out of volume that we're doing now that would roll millions of dollars to the Bottomline in Echo Park positive EBIT immediately.
So I would tell you that we've got a lot of flexibility, we're just being very cautious and very candid with everybody that at the end of the day, we're very confident in our model.
The model, we don't want to adjusted too fast or make a mistake, but if we were to see that this is going to last and used cars are going to be a problem like this for the next couple of years.
It's easy for us to pull the trigger and affect the bottom line and I think if you look at the slide the slide that I told you to kind of look at on page 22. It will show you that.
Net of the new store impacts you could take those with new stores actually are opening a growing you've got opening costs. There, but you can look at March and we significantly adjusted our profit losses.
In the month of March from actions that I talked about earlier that we took sort of late December January February and what we've talked to you guys about on the call and it just takes a little time to retool.
But we do this everyday on the franchise I know how to sell five to eight year old cars. We just are tooled for Echo Park, but I would tell you that we're very nimble.
We can easily make adjustments.
The only thing in mind right now is as positive EBIT, but thats just there is more to it than that for us.
Committed to growing.
Our position in the pre owned business, we're committed to hitting our 90% levels by 2025, and so it really doesn't mix well if you start pulling all of that back.
Then we're going to be telling you well to be 26, or 27, and that's not that's not our intention and so it's a little bit of investment on our behalf at this point in time.
If we see it's going to last for a longer time, yes, we're very nimble and we can make some some very quick changes to adjusted EBIT.
This is David Smith, I would just add that fortunately with our with our.
Model in our company. We have these amazing franchise dealerships that are making more money than ever and because of all of it.
The ability to adjust that Jeff mentioned.
Sure.
We're making this investment is a long term investment.
None of us think that.
And used car prices are permanent.
And the strange.
$30000 averaged 31000, our average price and say we are.
The same goes we are skating to where the puck is going to be not where it is right now and so we're making those investments and are committed to.
Got it great.
Follow up on auto lending.
Maybe more broadly and back to your question.
Are you seeing any thanks Charlie.
Sure.
I'm sorry, we couldn't hear the question.
Yes can you hear me now.
Yes, Sir.
Yes, okay great.
I just had a broader question on the auto lending environment.
More and more of an industry question are you seeing any signs of stress.
They have not being there.
With interest rates rising.
All the lenders are able to pass on all of those rate increases to the consumer or.
Or is there no.
Stress there just because of affordability, where the landlord is able to absorb.
Some of the ratings, we will get to be more competitive.
Just curious as to what Youre seeing.
Albert.
Is there any concern that developing on that front. Thanks.
Yes.
This is heath Byrd.
What we're seeing from a macro perspective, there's not any material impact to the.
Our prime and near Prime consumers are you starting to see a little bit of degradation in credit and affordability in the lower income brackets.
Which is a very small part of our franchise as well as our core.
Consumer.
So that you're starting to see a little bit on the on the lower income, but on the opportunity, but we're not seeing anything material.
Got it great I'll get back in queue. Thanks.
Thank you. Thank you.
Thank you we now have Ethan Huntley of Jefferies. Please go ahead already.
Hi, Good morning. This is Ethan <unk> on for Brett Thanks for taking my questions here.
Sorry, if I missed it but have you guys provided any.
Update on your strategic alternatives for Echo Park recently.
We have not.
Okay, and then how about maybe.
When we go to the parts and service segment can you maybe break out.
What the difference in traffic versus average ticket was just trying to gauge how much inflation had on that segment.
A modest decrease of numbers up for you real quick I mean, if you look just that warranty and customer pay obviously customer pay is really rolling up over 20% for the quarter warranty was at 4%.
<unk>.
So.
The way the service works is we have not seen and or made major door rate increases.
Across the board and the parts tickets haven't changed on inventory in terms of pricing in the last and certainly not in the first quarter and so there would be very little inflationary impact to the overall the overall.
Gross growth, if you will or to the consumer from a from a service perspective.
Got it. Thank you and then just maybe lastly here on on franchise, New Gpus I think it was close to $6 $700 on a same store basis can you just sort of talk about where you might see those shaking out longer term.
Maybe going back to pre COVID-19 levels or do you think will maybe sort of reset a structurally higher levels.
Once things start to normalize.
Yes. This is Jeff.
They're not going back to pre COVID-19 levels, I, just don't see that happening.
I mean for us that was a little over $2000 a car.
We're running almost $6800 Nikola now.
Is there going to be a pull back in some time common sense would tell you as inventory comes back to some level, yes, there'll be a pullback, but I don't know that its going to be this year.
I certainly believe that in all the discussions that I have with manufacturers or on the <unk> that I sit on there.
When.
When you look at the second quarter in the third quarter the flow of inventory. We're in great shape for April pretty darn good shape for May as we get to the end to make things are going to seem to be tightening up June and July were a little bit of a crap shoot right now in terms of the level of inventory that we're going to be able to expect to come in.
And straight answers, we're not getting.
So to speak and then hopefully things kind of get better as we move towards the end of the year in Ukraine, maybe hopefully get settled.
And COVID-19 sort of starts to wane in the rest of the world like it is here. So we'll see how it goes but I would tell you is steady as she goes in the mid 6000 range somewhere in that ballpark is where we're going to be for the next couple of quarters for sure as inventory constraints continue to draw.
<unk> margin up and create the inflationary issues that we're seeing.
David as you as you think about it this way from as of yet as an industry. Our manufacturer partners are motivated to keep the inventory levels.
At a lower.
Day supply than historically have because they are they are having to spend less money on incentives and.
And so if they can keep it didnt keep a good balance of.
Inventory week every.
Body wins.
In our industry.
This is Daniel Island to take David One step further if you look back at the first two quarters of last year.
First quarter, we ran in or around a 40 day supply of new cars for Sonic and we were just shy of $3000 in new GPU.
Second quarter was $25 30 day supply and we were just shy of $4000 of new GPU.
If you take David pointed out what the manufacturers are saying about BMW.
BMW said low.
Low 20 days somewhere in that range theyre kind of 15% to 18 somewhere in that ballpark. So you talk about what the manufacturers are saying about inventory levels going forward and somewhere in that 3000 and $4000 range seems like the longer term number that we settle into the question is just when when are they able to rebuild beyond the supply chain issues and not run the existing <unk>.
<unk> for new cars to get back to that level.
But still significantly higher than pre COVID-19 .
Great. Thank you very much I really appreciate the color here.
You bet. Thank you.
Thank you Ethan we now have Janet Anderson from Stephens. Please go ahead some already.
Hi, guys. Thanks for taking my question.
So for Echo Park after seeing some results from the quarter longer term, how long how how large are rethinking the five to eight year old and maybe nine to 10 year old vehicles can be.
As a percentage of the mix and then are you seeing any signs of older mix on the franchise side and then as a follow up.
As vehicles are getting older how would that impact parts and service over the coming years.
As the car part gets older and you have less warranty repairs.
Yes, so the final question.
All of the vehicle the more cars are going to go through the service drive and we're going to have higher.
Service throughput.
And with capacity Thats fantastic that all works.
On the franchise side, absolutely I mean, we're seeing customers keep their lease returns I've seen a lot of that that's part of the.
Sort of our volume Miss because it was a big.
<unk> centre at a volume center for Us.
In lease returns, especially with BMW Mercedes Lexus and they are a large part of our mix.
<unk>.
And so the car park inside our inventory for sure is is moving up in H Theres. No question about that were trading for more cars the franchise side of the business, but very very few.
Vehicles from auction in the first quarter and what I'll tell you a few less than 500, maybe 1000. It was a ruling low number.
<unk> pointed out that it was 6% of our overall mix self source was 94% of the franchise, but from a franchise perspective. So yes. The age of the vehicle that we're selling is certainly growing and what level or percentage. We can turn that ended Echo park, we're just starting to keep those traits.
Instead of sending him off the auction.
And.
We're just now beginning to sell those trades, but if you were to take a look at our San Antonio market, where we sell 1% to eight year old vehicles, Tim I think it represents half half the inventory something of that nature. So.
50% of the inventory, so we might be able to grow it to that and were having lot growing.
Vehicles and purchasing vehicles off the street, because we've expanded from the one to four year model. So we're going to be able to buy more cars off the street and that that kind of fits into the glove of what we're trying to create.
Now in particular over the next few quarters and maybe into the middle of next year as we figure out what's going to happen in the used car inventory environment. So it could go as high as 50% would be my guess I don't think it would be higher than that.
Yes. This is David I think it's really important to remember that if you look at it from a customer first standpoint, and you look at the incredible.
Guest experience that our stores their auto parts stores are delivering we're trying to look at what our customers want.
They absolutely want with five to eight year old cars. There is a lot of demand for that because the pricing and other brother Athens and payment and so we're trying to fill that demand we were talking before about demand. There is just a huge amount of demand. So we want we want to meet that rather than sitting that out by just focusing on the one to four year old cars.
And this is heath add to that if you look at the total annual.
Used vehicle volume.
Segment outperformed secured is about 18%.
That is historical and to David's point as one deploy roles, which is about $15 million of the total.
People are moving from that one.
Slide 16, eight year old vehicles.
So thats sort of from a bid perspective.
Those older vehicles was about 18%.
That's super helpful. Thank you guys. That's all for me.
Yes, Sir thank you. Thank you.
Thank you as a reminder to ask any more questions. Please press star followed by one on your kind of thank you Paolo.
We now have a follow up question from Rajeev <unk> of Jpmorgan. Please go ahead when you're ready.
Great. Thanks.
The other question.
Just wanted to get an update on <unk>.
Probably the comments that you made last quarter.
I think you mentioned <unk> should be around 15% just curious.
Has anything changed there in terms of the thought process.
Alright good.
This language.
Confirm that he did.
You say the seasonality of earnings.
Yeah.
Yes, yes.
Upward.
Sharon this is Danny.
Pointed to 15% to 20% of the first.
Full year EPS typically comes in the first quarter.
I think with what's going on with the elevated Gpus and the uncertainty for production in the back half of this year you could see that vary somewhat but I think that.
We had a pretty good understanding internally if the quarterly cadence that we see and particularly the luxury mix I think what may be buried this year.
Is that because of the delay in delivery vehicles that luxury mix than we would normally sold in the fourth quarter. We did some of the deliveries some of those vehicles into the first quarter and Youre seeing elevated gpus in the first quarter was normally those would go backwards.
And I think all in all we expect for that generally to hold true to where the first quarter as our lease contribution for the year.
Second third or generally.
Nearly equivalent and then the fourth quarter is our biggest quarter because of that luxury related and if we start to see inventory improve if not come back that improve throughout the year. Then we will get that similar kind of seasonality as we go and obviously the Echo park component of that is a little bit of a variable.
I think with a little bit of a disconnect in the first quarter actuals and I do think that Dan's point. The fact that we had pre sold to these vehicles. So we pull basically cars that were sold last year really are recognized in the first quarter. So this may be a very unique you are aware the percent that we earned in the fourth quarter is higher little bit higher.
Normally when we defined what a little bit higher is call it 23%.
In that range versus the 19% that we gave you back in February .
And there are some people that listen to what we have to say, it's great. There's others that are <unk>.
So far off the radar screen that they are obviously not paying attention and we can fix that we can we came about that so somewhere right in the 20% to 23% range, we're going to be in.
Yes, <unk> got it up 22% in the first quarter of 24% and 25% in the second and third and we'll see what happens once we get to the fourth quarter, but we gave that kind of feedback in February .
Sticking to that that same number the same story.
And we'll see how things shape up for the year.
Understood great. Thanks for the color.
Is there.
Thank you.
I would like to now hand back to David for.
For some closing remarks.
Thank you and thank you everyone and we appreciate your participation on the call.
Thank you. This does conclude today's call. Thank you for attending today's presentation you may now disconnect.
Okay.
Yes.