Q2 2022 AutoNation Inc Earnings Call
Okay.
Yes.
Good morning, My name is countries and I will be your conference operator today.
At this time I would like to welcome you to the alternation second quarter 2022 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 one on your telephone keypad.
If you would like to withdraw your question. Please press star followed by T.
Thank you I would now like.
To turn the call over to ice Shaw director of Investor Relations you May now begin your conference.
Good morning, and welcome to Autonation second quarter 2022 conference call and webcast. Please ensure that your lines are muted until the operator announces your turn to ask a question leading our call today will be like man, Li Our Chief Executive Officer, and Joe Lower our Chief Financial Officer also joining the call.
As Derek Fiebig, Vice President of Investor Relations. Following their remarks, we will open up the call for questions. We will be available by phone after the call to address any additional questions. You may have before beginning 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 constitute 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.
Discussions of factors that could cause our actual results to differ materially are contained in our press release issued earlier today and our SEC filings, including our most recent annual report on Form 10-K. Subsequent quarterly reports on Form 10-Q, and current reports on form 8-K with that I'll turn the call over to Autonation as Chief Executive Officer, Mike <unk>.
Thanks, and good morning, everyone and thank you for joining us.
Firstly, I really did want to just spend a little bit time to thank all of the team at Autonation for continuing to deliver great results in the quarter, which obviously enabled Gemini it's very cool another record performance.
As usual I was going to take you through the numbers in detail and then I'll begin with a general overview of performance.
From a substantially flat year over year revenue of $6 9 billion, we were able to increase our operating income by 5% to 558 million.
Which as I already mentioned is a record for the group our earnings per share for the quarter was also a record of $6 48.
Year over year increase of 34%.
Now as you can see total new volume was down 25%, which when you consider our low level of new inventory and a high inventory turn rates what was in my view purely a result continued constrained supply.
As you can see volume was substantially offset with strong margins up 47% compared to the prior year and stable quarter over quarter again, I think an indication that demand for new vehicles remained strong.
Revenue and of course is 13% above the prior year.
From a volume perspective total used sales were down 4% and down 9% on a same store basis.
And all of the volume reduction was in our entry selection of vehicles, which are priced at $20000 and below.
When you look at our performance mid and premium used vehicle categories. Both increased in volume year over year, which I think inquiry indicated the strength in demand in those <unk>.
Well it is clear to me.
Is that a year over year volume change, even though it was basically in line with the industry I do believe we add some volume upside, which frankly, we left on the table in the quarter.
Historically about 40% of ourselves of being in the entry category clearly that is a segment that is under pressure. We have already shown we can improve our mix, particularly in the mid price bands and the teams are now very focused on that and as I said these segments increased year over year.
Now you may remember during our last call I talked about our focus on improving used margins and as you can imagine I'm pleased with the progress we've made since the end of the quarter and this continues to be a daily focus.
Alright, F&I James continued to prove to the best in the business with another strong performance this quarter.
What is important to note is the main driver of our performance as the penetration we achieved with optional products such as service plans with extended warranties and as a result, the announcement we made today regarding our agreement to acquire <unk> financial Nevada complimentary to what we're doing today, but will also over time bring significant upside.
In previous calls I've made a point to talk about the structural changes we've made in our base.
In my opinion.
Sufficient recognition pool and the first is our ability to generate used vehicles. I think this is a considerable strength and an advantage over some of our single focus competitors.
During the quarter, we self sourced either from trades lease returns or very successful we buy your car program over 90% of our used vehicle inventory.
This strength continues to put more of our destiny in our own hands.
The areas of structural change in crude oil and <unk> operation.
Our intense focus on our customers create double digit growth of 11% and after sales gross profit.
11% and this is part of our business I think we have further upside in the <unk>.
We also discussed our disciplined approach to cost management and as you can see a gain in these results. The benefit this continues to bring to the business.
Moving onto Autonation USA business today, we announced our plans to open a new Autonation USA store in Georgia.
This will happen in the third quarter. It was about 12 store and just to remind everybody. Our objective remains to have over 130 of these stores in operation from coast to coast by the end of 2026.
As I briefly touched on earlier today, we announced that we've entered into an agreement to acquire <unk> financial and subject to normal closing conditions, we expect to close in the next 90 days.
The acquisition of <unk> financial aligns with our strategic business model and singular focus on personalized finance and mobility solutions easy transparent and customer centric.
This acquisition provides capabilities footprint technology, and most importantly, a proven motivated team with great leadership CIB is everything related to scale and improve our financial performance with modest upfront investment and little risk.
Well. This is an important addition to our growth strategy. We have no present intention to displace will replace existing captive financing with our OEM partners.
Our intention is that we will focus on new captive finance house on the Autonation USA business and a great book of business that <unk> has developed with its many retail partners.
Now from high end USA perspective, there's already a strong overlap from a five.
Point of view from a geographic perspective, and a business development focus that has ensured the success and growth are C. G.
About the last two decades.
This will be a great addition to the group and as I mentioned, they will over time unlock significant upside in our already industry, leading F&I performance.
So I want to formally welcome the 160, new members of the Autonation family I can tell you. We are very much looking forward to this day that Joseph Orlando.
Yeah.
Thank you, Mike and good morning, everyone.
Before I get into my prepared comments I would like to welcome Derek our new Vice President of Investor Relations.
He will be an excellent addition to our team and someone you will enjoy interacting with moving forward.
Now onto the results.
Today, we reported second quarter total revenue of $6 9 billion, a decrease of 2% year over year, driven by a 14% decline in new vehicle revenue due to the continuing supply chain disruption to new vehicle production.
Mitigating this decline with total used vehicle revenue growth of 13%.
After sales revenue growth of 9% year over year.
Strong consumer demand and tightened new vehicle inventories continued to support new vehicle margins in the second quarter.
We expect demand to continue to outpace supply into the back half of 2022.
Additionally, as Mike touched upon our used vehicle margins improved sequentially from the inventory rebalancing efforts in the first quarter with total use PBR increasing by $349 per unit.
We're up 22% when compared to the first quarter of this year.
For the quarter total variable gross profit decreased 2% year over year. Despite total variable PBR growing to 6040 <unk>.
$436 per unit are up 17%.
Our sustained strength in CFS product penetration and attachment rates helped drive this improvement.
We also demonstrated strong growth in after sales gross profit, which increased 11% year over year taken together, our total gross profit increased 3% compared to the second quarter of 2021.
Moving to costs second.
Second quarter SG&A as a percentage of gross profit was 55, 4%.
Record low and a 110 basis point improvement compared to a year ago period.
As measured against gross profit compensation decreased to 190 basis points advertising was essentially flat and overhead was higher by 70 basis points, primarily reflecting investments and acquisitions and the expansion of and USA.
This overall improvement is the result of structural changes that we've made to our business model.
Taken together and combined with fewer shares outstanding we reported net income of $376 million or $6 48 per share.
34% increase year over year.
And an all time quarterly earnings per share results.
Our operating performance and cash flow generation continues to remain strong with cash from operations totaling nearly $900 million for the first half of the year.
This performance continues to provide us significant capacity to deploy capital.
To this end, we announced today an agreement to acquire <unk> financial as Mike referenced.
We agreed to a part of the business for $85 million and assumed certain liabilities a portion of which will be.
Be repaid at closing.
We are excited to add captive finance capabilities through this acquisition and look forward to working with the <unk> management team to grow and integrate the business into the Autonation family.
We also continue to invest capital to grow our business with the expansion of Autonation USA and remain on target to operate over 130 stores by the end of 2026.
We also continued to repurchase our own shares during the second quarter, we repurchased three 7 million shares or 6% of shares outstanding for an aggregate purchase price of $404 million.
Further we announced today that the board of directors authorized the repurchase of up to an additional $1 billion of Autonation common stock.
As of July 19, there were approximately 56 million shares outstanding.
We ended the second quarter with total liquidity of approximately $2 1 billion and our covenant leverage ratio of debt to EBITDA of one five time remains well below our historical range of two times to three times.
Looking ahead, we will continue to focus on operational excellence and a disciplined capital allocation to drive long term shareholder value.
With that I will turn the call back over to Mike.
Yes, Thanks, Joe.
Thank goodness constraints Q&A.
Thank you.
As a reminder, if you would like to ask a question.
Press Star followed by one on your telephone keypad will pause here for my meant compile the Q&A roster.
Our first question comes from the line of Ricky.
Of J P. Morgan Your line is now open. Please go ahead.
Hey, good morning, Thanks for taking the question.
Maybe a first one just on the Capex and go to AIG.
Can you give us a bit more about the company what their customer or loan book looks like today.
And maybe what are the integration timeline that we should be expecting.
The accounting going to work when can we see this moving the needle on earnings et cetera.
Thanks, Paul.
Sure. Let me give you a project good talking to you. Let me just give a few points of reference and a little bit about our thoughts. So if you look at the again, Mike emphasized our focus in this acquisition was on capabilities.
Was on our management team and specifically frankly, we were not looking to acquire a big book of existing business. So the loan receivable today is just about $325 million.
$300 million of that has already been securitize. So the residual is relatively modest.
They originated about $195 million of loans last year 12000 loans.
They have an existing.
Large.
Network, primarily independent dealerships about 80 of which are independent our intention is to continue to serve those institutions.
Our integration plan is one that will be very deliberate on the strong overlap.
The credit profile, particularly within and USA.
They have a very strong proven record in both underwriting and in servicing which was a real attraction to us and so obviously, our first focus is closing, which as we indicated we expect within the next 90 days and then it will be a very deliberate integration.
Focused initially on and USA that will rollout over the next six to 12 months as we integrate that and look to build the business in a prudent fashion.
In the context of our existing business.
Got it great great. Thanks for the color.
Maybe you know you're shifting Gerry Ford this morning.
Yes.
The more electric vehicles ambition.
Could you give us a sense of.
How the conversations are with Florida and other Oems.
On how these vehicles will be sold.
Floor planning invoicing.
The implications for Gpus.
And Relatedly in your service base.
What's the OEM involvement looking like with respect to training tooling facilities technician.
And how far are you in that upgrade nation process. Thanks.
Or is it like.
I would tell you that obviously, we're having conversations with every every OEM and it's absolutely clear the transition is completely inevitable.
And this I think is twofold, firstly to not just use our size and strength to be a really strong partner for Oems, but we also think that there's an opportunity to build out while our mobility side that we're focused on in quarters.
Calls to come you'll hear more about that.
As part of the business model that.
We are developing.
So when I think about it we're heavily working and I'll take a chunk by chunk and if I've missed something then you can obviously redirect from an infrastructure perspective, I already talked about the fact that we're making significant investments to have up buildings ready from a charging point of view now thats going to create two things firstly and each individually.
Location, we will have our opportunity for customers to charge, but will create naturally our network of charging stations effectively within autonation and we are doing that.
In many instances in line or in advance of some of the requirements.
Working already in terms of training because we recognize that.
The sale of an electric vehicle on paper looks as if it may go through the same status, but the reality is.
We think and we've had experience from talking to European dealers already had its own experience of this that the sales process itself.
It is much more involved in much more educational so we're making sure that we are trained both on the front end with our sales executives.
The very beginning of this.
<unk>.
Hey.
Technician side as well.
There's a lot of discussion that will.
So this is my great Yeah, Tommy when you heard enough as well.
But you guys have already been discussions because.
Fact of the matter is that.
The hurdles for the Oems I think are high in terms of penetration of I'd say got a raised by the time. They it's 2026 and 2027 and the best way to get there is to be part of that solution for them and that's our intention.
Got it that's helpful.
Maybe just last one on F&I.
Obviously, you will hear more around CAGR.
The impact to the finance business, but I just had a question on service contract penetration.
No it's.
It's gone up quite a bit since pre COVID-19. If you can give us a sense of where we are today.
How do you see that sustaining one consumer maybe start to get a little more disciplined with their spending.
Thanks Raj.
Well candidly, we continue to see success, primarily in the product side and so if you look back historically at one point, we often talk about 60% of the composition of our CFS being product that's now up above 70%.
We see the penetration increasing.
On average in excess of two <unk>.
Products for customer and we'll see the profitability increasing as well. So it appears from everything we see really a sequential year over year basis. The demand continues to be strong because I think people see the value in it.
We obviously are continuing to look at ways to continue to improve that portfolio and as we mentioned the acquisition of <unk> G is just comp.
Complementary to an already strong piece of business. So.
We see it as a very positive trend and one that is growing because the customer does see value in the offerings we have.
And I'll just add just a couple of points to that.
As we've talked about before I think one of the biggest asset that automation have is they have a very detailed and growing customer base of over 13 million customers.
We know which of those customers are active and as you can imagine with.
Predominantly franchise businesses, we would see the similar decay that you see in the industry as customers migrate to different channels.
We're able to do in terms of that customer base is to use some of the offerings that Joe talked about to re target some of our customers and make sure. They stay in our family with another with a non cost associated with it for their vehicles.
That represents a very partially tapped opportunity and a great way to grow this business, even further from the product side.
Yes.
Understood that makes sense. Thanks, a lot for all the color and good luck and I'll get back in queue.
Thank you.
Our next question comes from the line of John Murphy of Bank of America. Your line is now open. Please go ahead.
Good morning, guys.
Three quick ones first on the <unk>.
Acquisition I'm, just curious what kind of competition. This may create for your existing lender lender partners and if they are there maybe any kind of pushback there and ultimately is this more of an autonation USA used vehicle underwriter or just kind of a full service.
The company that Youre, intending to really build and what kind of sort of size or penetration level. Do you think youll get to with <unk> is it's sort of a 510, 15% 20% penetration of vehicles sold I'm just curious how youre thinking about this.
Yes, we've been very clear internally and as we've as we've thought about this the focus initially for this organization is to be part of the growth story for Autonation USA as you know Rob rollout plan for that business as aggressive it's already growing significantly as I said, we're going to open another store in the third quarter.
I think about the style and overlap of this organization. It brings everything that we need for it to be a strong partner for the growth of <unk>.
Let me say non CPO used vehicles.
I think one of the things that I touched on before is you know.
The ship with our Oems and the use of their finance companies is going to continue in their focus for us and our franchise business. This is a separate business line and that will be that for sure will be our approach and my view is that we should be able to build to penetration levels at around 40% plus and <unk> USA. Once we do two things the first.
Thing is today, we have.
About 70% coverage in terms of licenses in footprint, where you're going to build that out and the balance of the year and then the second thing is that we have a great partnership with existing.
Businesses in high end, USA, which we will want to support so I was as Joe said I think we've got.
Phenomenal asset that has the technology won't which obviously is very scalable. It has experienced not just in terms of underwriting, but also securitization which was important to us.
Does the processes has been around through cycles, because it's now 18 19 years old for memory seen cycles and very importantly, it's got a great team of skilled people and great leadership and all of that as Joe mentioned comes at what I think is a really really good entry ticket.
It is prime perfectly to skywave, Diane USA initially and then as things develop we'll obviously talk about that in the future.
Okay. That's helpful. And then just a second question around SG&A performance was very.
Good in the corner, it's been very good for a while I'm just curious as volumes ultimately recover whenever that is probably late this year or sometime next year because of the supply coming on do you think you can hold.
These levels in the mid fifties or are we kind of going to drift back Joe you made a comment on Wednesday may Mr. Early in the call.
Go back to the sort of the 60% range plus or minus I mean, what is what is sustainable on SG&A as a percent of gross or is there a number that we should think about it as more of just an absolute dollar number to model going forward. It's just it's a big leverage point, it's been very positive for a while.
Yes, I think as a result.
So in many of the leadership team in the business. This has been an incredible positive trends for the organization really started pre COVID-19 that thankfully I get the benefit of they've been in place in <unk>.
Focus.
One of the things I would say is if you looked at our retail businesses in general it might be marginally up from my numbers correctly.
If I look at the biggest cost in those business, which is obviously our biggest asset our people.
<unk>, 75% of that is there.
Variable so as our business scale is a big portion of the cost of the business will scale and that nature and then obviously also works if if we do at some point hit a downturn in the opposite direction.
I think that positive business it represent opportunity for us I talked about after sales and the fact that I would like to see improve penetration.
The right time, and the right initiatives, we will be adding resources into that on a more fixed basis, but a great believer in less stress. The system first and then when we're fully confident that we are in the right direction for the results and so my expectation is you will see some slight growth as a percentage as we do some of that structural stuff, but Josh.
Very very focused on keeping it under that number it keeps talking about so anything you want al I think you summarized it well were finding a balance we.
We have made structural changes to the business, which will clearly.
Sustained through any changes in kind of the market if you will.
And we have a very.
Fixated mindset and how we continue to leverage business. So we are going to make investments as Mike indicated that will cause a modest amount of pressure, but I think you will see us on a very sustained basis, well below pre pandemic levels.
Okay, and then just lastly on the consumer I mean, obviously, there is lots of cross currents and conflicting signals of the health of the consumer you guys are dealing with these folks.
On a daily basis in your dealerships.
And Joe what do you.
What would you call the health of your consumer and if you were to kind of think about sort of your backlog of orders our wait times on vehicles, maybe you could give us.
Some metrics or even even anecdotal data to understand how tight the market is and how strong or not strong the consumer may be.
Yes.
Nothing different pockets that I would talk about.
If you take new vehicles across our three.
Across our three divisions.
Divisions, as domestic import and premium luxury.
Obviously demand is strong as we mentioned inventory levels still incredibly high churn rates and really sustain margins.
Over the last few quarters.
In the first quarter from memory I reported something like.
50% of incoming three months inventory was solved I would say that on.
The domestic side that is now down to about 35%.
In both it is sustained and on premium is also largely sustained and I think on the domestic side is really as a result of some improved flow that we saw whether that continues or not we will have to see because I think supply is still one of the big variable.
With that we will not entirely stabilized Steven stabilized lower level on the used side as I mentioned.
<unk> volume was down we went down as.
As much as the industry was but still I wasn't particularly pleased with that and when we looked at that in detail.
All of it is in top $20000 all of it is about $20000 and in fact.
1% to 45 is flat with high close rates about 45000 is still from a demand perspective slightly up year over year and again with high close rates for us.
Historically, that's about $20000 price range has been about 40% of the business, which is more really than you see in some of our competitors I think we can rebalance and push some of that with a better performance with a better performance in our mid price band.
We'll try and try and address what I think will be continued pressure in that price point.
We are seeing also.
The increased interest rate getting passed on to consumers because that's always been a question that we've been asked and I would guess about 50 basis point Theres been passed on at this moment in time, but to mitigate that but we've also seen is the average length of loan has already extended.
By one month now that might not seem a lot, but that is the average length of your own across our portfolio. So I think what's happening is you're getting other leave us pull to keep monthly payments in balance, but notwithstanding that as I said this pressure on sub 20000 bar.
It will switch.
Confident in the team.
Very focused on as I said to change our mix. So that we can mitigate some of the impact on us.
So you want to add any more flavor. Obviously on office I was very pleased that I didn't set up I think miles driven miles driven has gone up and that combined with the focus of the things that helped us there and I think that will continue for sure. So I would tell you were saying no I think that's.
Clearly driven by customer pay which has done very well.
The only thing I would just put in context, and Mike talked about the pre order levels.
Just a perspective pre pandemic that was 5% to 10%. So we still are at extremely high extremely high levels, indicating both I think the demand as well as the available reinforcing the availability so.
Hopefully that will get some pretty good color outsourcing.
So would it be fair to say that you see a tiny sequential erosion and the strengthening consumer but the consumers still wildly strong relative to the pre pandemic.
And sort of relative to supply is that is that a fair way to characterize that.
I think it is I think that's very fair.
Okay, Alright, thank you very much guys I appreciate it.
Thanks Keith.
Our next question.
Comes from the line of Daniel embargo of Stephens. Your line is now open. Please go ahead.
Okay.
Yes. Good morning, guys. Thanks for taking my questions and congrats on the quarter.
I wanted to follow up on the used business and really the tradeoff between inventory and GPU. After <unk> you guys sacrifice in GPU and <unk> and you drove stronger comps this quarter. It looks like comps you said, we're a little bit lighter than expected, but GPU stepped up but we ended the day back at 40 days of supply. So I'm curious you know what is.
The optimal days' supply youre targeting there would you expect to work that back down in <unk>, maybe give back some GPU or or kind of how are you thinking about that trade off in this environment.
Yes. This is Daniel for me, it's very simple it's about your turn rate.
How pressure able to Kate your day supply so as the demand levels that we feel uncomfortable with where our days supply is right now.
Consequently work on obviously analytics to try and make sure that it's in the right place from a both a price and a product and a geography perspective, but without carrying too much too much logistics costs.
We mentioned in Q1, one of the things that we're working on with actually IAG, because we had pockets of origin, which we completely removed in Q1, and we got the benefit of I would say fresher inventory in Q2, that's going to fly.
I would now into Q3 and in fact, if we look at.
If we look at the moment, we ended Q2 with the continue so far.
Into the month, but.
Obviously that is the biggest the biggest focus.
I think the sequential comps are more.
Is limited this year rather than year over year comps because last year. We were as you know we were in a very unusual situation where used car prices were actually increasing so the value of the inventory on our loss was going up and obviously the cost was fixed and therefore margins.
The bump as a result of that we're not in the same dynamic now we're seeing a more traditional even though slightly delight movement of prices, both up and down in the used market onside multiple conditions than a year ago.
Okay. That's helpful and then maybe moving to the new side I had a question just on the supply backdrop within premium luxury you guys have a decent exposure to some of those German brands.
Are you hearing anything from them around how this energy shortage potential issue is going to impact production seeing headlines of 15% national reductions in energy use could that be another headwind to vehicle.
Production and inventory building or any change in visibility from those OEM partners.
None.
Okay.
Easy enough.
And then last follow up on <unk> it sounds like it's small today, but growing.
This growth will tie up more capital as you build the loan book and does that impact your ability to do share repurchase or or deploy capital in other parts of the business what are the capital needs of that as it grows.
Well Thursday is interesting.
We spent some time talking about how we think how we think people should think about scale with regard to this what we did want to do with the Big book.
All of the capability Natus right and.
Relatively low end.
Entry ticket that comes with low risk. So I think about scale, we will in a very different way of what we wanted as I said with proven capability.
Technology experience been through the cycles with great coverage that matches ours.
At the lowest possible entry ticket because we're obviously very focused on capital deployment and I think.
Joe and the teams did a great job frankly.
Do you Wanna types of a balance sheet question.
Yes, I would.
I would refer to a number of points. We've tried to make in the course of this call and the announcement that kind of hopefully indicate a little bit of our attention. One like this obviously reinforce the size of the book.
Reinforce their ability to have a proven securitization process.
We would fully intend to do that to minimize the amount of capital that we're deploying we also were very deliberate in the share repurchase announcement, which hopefully reinforces our commitment to a balanced deployment and obviously share repurchase has been very.
Valuable to us I think very much appreciated by our shareholders and we continue to have that balanced approach going forward. So.
I don't expect to see significant changes in that.
That's great Mike Thanks for the color and best of luck going forward.
Thank you.
Our next question comes from the line of Evan.
Silverman of Morgan Stanley . Your line is now open. Please go ahead.
Hey, it's Adam Jonas actually on for Evan I believe its silverberg, but I like Silverman that sounds nice how's everybody.
I just got a couple of questions Mike.
I'm curious what percentage of your sales across all your stores, our preordered right now and how that's trended.
And I'd love any color on where you see the that order to delivery time or your customers having to wait longer than they did a few months ago shorter or is it kind of stabilized in terms of that order to delivery time.
Add to that and we're going to do the same as you did the orange.
This is actually Joe on for Mike.
[laughter], Hey, Adam how are you.
Hey, Joe.
Don't sound like Mike, but.
Anyway, how are you.
Im working on working on the accent. So let me give you some perspective on the buckets in the preorder and then I'll give you a little bit wherever I can on the timing. So preorder if you go back domestic.
Domestic Q1, when we said it was about 50%.
And then as Mike referenced that's probably 35 to 40 is always going to vary.
Again, you'll see a little bit a little bit of contraction. There import we mentioned Q1 was 50%.
About 50% today, so we really have not seen a significant deterioration there.
Luxury was up 70% at Q1 at $60 65, I mean, it's in it's in range down just a tick.
As I mentioned and as you know those are all significantly above kind of pre pandemic level. So again demand remains I think the comment made earlier, maybe slight slight downtick, but still remarkable in the absolute sense.
As far as delivery times I would say, it's obviously going to vary but just by brands by model.
I'd say they are seeing some slight improvement.
But nothing that I would want to highlight you can probably still still longer than people. Appreciate so have not seen a notable change there that I would want to call out.
Alright, I'm, just I just want to add.
One thing if you look at our.
Closing inventory sequentially, it's up slightly and back when you dig into it was purely a timing.
Timing thing from our perspective, because we.
<unk> got some inventory delivered to our dealerships that there was not enough time for us to appropriately against that and get them out to our customers I can tell you that.
They were delivered very early in the in the in the following months.
I don't think anything really driving into that at this moment and if it changes obviously in the next call we can talk about it.
Great Mike I, just wanted to follow up you can take a stab at it if you can give it to Joe do whatever you want but.
Given your experience with the Oems.
I would value your insight.
Your margins and margins of your peers on the new have kind of a round number tripled over the last couple of years.
The operating margins in North America of the of the producers of the vehicles have been kind of stable maybe up a bit.
So why aren't they Oems, increasing invoice prices when I talk to dealers and I said why don't these guys while the Oems got to pay a massive UAW Bill next year, it's gonna be like historic increase.
You guys are crushing it there kind of hanging on we're going to start cutting pad soon why have they taken a why aren't they kind of repricing some of the stuff.
On those preorders and the answer I tend to get at is they don't know what theyre doing and they can't do it or.
There's like a laws are just they're not organized enough I don't really buy that but I'd love Your view, Mike what what's going on or are they repricing I bet.
Wow.
What I see is something slightly different.
The net price back to them has increased because of the work that they've been doing on the incentive front.
And.
My the last time, the last time I looked through that a couple of things that happened a lot of the.
Incentive subsidies on leases has not been completely taken away, but had been reached that effectively increasing at least MSRP and a number of the programs that we're supporting retail business. We're also either reduced or removed and increase the net.
Back to the Oems.
That should be pretty easy number to look at and that's the first thing that I would go to but Thats. My view I think what they did was they took the opportunity to.
Reset the net transaction price of their vehicles, which will have a consequential impact on the residual values and that under a long term is a very strong move from the Oems Notwithstanding your point is well made regarding.
Some of the costs that are going to hit the business okay.
Haven't looked at it in that detail from that point of view and a couple of months, but <unk>.
Next time, you're in town when you look at it together.
Look forward to that thanks, Mike Thanks, Joe.
Thanks.
Thank you that's all the questions. We've got time for now so I'd like to hand, the conference over to Mr model at this time.
For closing remarks, great. Thank you alright.
Alright, Thank you and again, thanks for your time and thanks for coming to the call I really just wanted to and one of the comments that I made.
It's great.
It's great for Gemini to have to come and talk about record quarter and the fact of the matter is.
The large number of dealers that we daily shifts that we've got in the law.
Large group of people that are working everyday is down to them. So I'm actually going to end by thanking them again Oleg.
The 22000 people that work at Autonation I think notwithstanding the fact that obviously the things that had been happening in the industry and the economy. This is the <unk> consecutive record quarter for the team and that business that business. My recognition every single day. So.
I know a lot of the guys and gals are listening to this and I want to thank you for your commitment to our customers each other and particularly the communities with our drive Pink campaign and thank you for what you do let's keep it going.
This now concludes today's conference call you may now disconnect your lines.
Yeah.
Okay.
Okay.
Okay.
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Yes.