Q3 2022 AutoNation Inc Earnings Call
Again, I would just like to quickly welcome all of our new colleagues from <unk>.
After sales remains a key focus for us and we achieved a year over year gross profit growth in this area of 13% and we're now showing consistent gains in after sales and strongly believe that there is much more to come.
Remains a significant area for incremental revenue and margin, which has the potential to help offset new vehicle margin decline should that happen and obviously helped buffer the group from some of the inevitable cyclicality of the industry will face should we say a recession.
Moving on to costs, so youll see they remained well under control and once again, we posted SG&A results at under 60% gross profit.
It is clear we are and will continue to face inflationary pressures, but we remain committed to maintaining the discipline. The group has shown in this area and to continue to find operational efficiencies and eliminate waste.
I am USA continued its expansion with the opening of its 12 Autonation USA store in Kennesaw, Georgia, and although we are seeing some delays in our launch schedule as a result of challenging construction market, we have a significant number of projects underway and in our pipeline.
Now from a capital allocation perspective. In addition to completing the acquisition of CRT capital as I previously mentioned, we repurchased $3 8 million shares in the quarter.
Year to date through October 25th that means we've repurchased 13 6 million shares of common stock of 22% of shares outstanding at the beginning of the year.
We also requested and received board approval for authorization to repurchase up to an additional $1 billion.
Autonation common stock.
In other M&A activity during the quarter, we signed an agreement obviously subject to normal terms to acquire full dealerships representing nine franchises from the Moreland auto growth in Colorado, which will further strengthen our position in this important market.
And finally, we posted a record EPS of $6 71.
An increase of 23% compared to the first quarter 'twenty one.
Our embedded structural improvements in our performance such as off the sales growth and cost discipline I think create the opportunity to focus on the lifetime value of our customers and expanding and delivering solutions that enhance the customer experience.
As an example over 50% of our unit sales originated on our digital channels for the quarter.
We have built and are continuing to build a compelling customer value proposition through the combination of our digital tools and our physical assets I think that's critical it's really the combination of both of those things we leverage Autonation Express our integrated digital solution, which is powered by 11 million real time customer insights and we've created a personalized experience for our.
<unk> and I think it will have much more to come on this in the future.
With significant cash flow generation and a healthy balance sheet, we are committed to be prudent with our capital and deploy it to enhance shareholder returns while further positioning the company for the long term sustained profitability.
We expect and with that Joe I'm going to hand, it over to you. Please take everyone through the detail. Thank you Mike.
Good morning, everybody.
Today, we reported third quarter total revenue of $6 7 billion, an increase of 4% year over year.
Like the overall industry Autonation, both new and used vehicle unit sales were down from a year ago. However.
Our increase in new and used revenue per unit more than offset lower unit sales.
After sales revenue grew by 9% year over year.
I'll start with customer demand and lower new vehicle inventories continued to support new vehicle margins in the third quarter.
Shipments from some Oems have modestly increased with companywide new vehicle days supply now at 15 days. However supply continues to remain tight for the vast majority of our brands.
Used vehicle margins, while down from elevated levels, a year ago, when our lives sequentially with the second quarter of 2022.
For the quarter total gross profit increased 3% year over year as strength in after sales and CFS combined with new <unk> more than offset unit declines for both new and used vehicles.
Moving to costs third quarter SG&A as a percentage of gross profit remained significantly below pre pandemic levels at 58, 1%.
As expected it was slightly higher than previous quarters, reflecting increased investments in technology and new business initiatives.
Year over year on a reported basis SG&A increased by 5% with over 60% of that dollar increase resulting from the inclusion of SG&A from the franchise acquisitions, we completed last year.
The remaining increase was generally split between investments that we've made to support strategic initiatives and inflationary pressures.
Reported net income for the quarter was $5 $353 million or $6 31 per share adjusted EPS of $6 was a record for the third quarter and a 17% increase compared to EPS of $5 <unk> a year ago.
The adjustments to EPS include the gain on sale from three stores that we divested during the quarter that were part of our overall portfolio management strategy following the Peacock and priority one acquisitions.
Our operating performance and cash flow generation continues to remain very strong with cash from operations totaling more than one $4 billion for the nine months of this year.
This performance continues to provide us with significant capacity to deploy capital to and into our businesses as well as return capital to our shareholders.
As Mike mentioned, we completed the CIB financial acquisition at the start of this month.
<unk> will be reflected in our financial results starting in the fourth quarter.
Under current accounting rules, we will recognize a noncash onetime charge during the fourth quarter of a lifetime expected losses of the acquired portfolio under the seasonal accounting standard.
Going forward as we grow the business ongoing seasonal adjustments will impact our reported results for this business line. However, we do not expect this to have a material impact to our near term results.
We also continue to invest capital to grow our business with expansion of Autonation USA.
As Mike mentioned, we opened our 12 store in Kennesaw, Georgia during the quarter.
The pace of store openings has been impacted by the construction environment.
And we have two dozen facilities currently under development as we continue to move towards our longer term goal of over 130 stores.
We also continue to repurchase our own shares during the quarter, we purchased three 8 million shares or 7% of the shares outstanding for an aggregate purchase price of $428 million.
Share repurchases continued in October as.
As of October 25, there were approximately 50 million shares outstanding.
Today, we also announced an additional $1 billion of share repurchase authorization, bringing our current authorization to $1 4 billion.
We ended the third quarter with total liquidity of approximately $2 2 billion, our covenant leverage ratio of debt to EBITDA of one 5% remains well below our historical two times to three times range.
Looking ahead, we will continue to focus on operational excellence and disciplined capital allocation to drive long term shareholder value.
With that I will turn the call back over to Mike.
Yes, Thank you John .
Just quickly before we open up for questions I, just want to say a few months regarding power Canadian which is everybody knows Unfortunately made landfall as a category four hurricane in southwest, Florida in late September .
Hmm.
While we didnt really sustain significant property damage nothing was minimal heart wrenching really for us than the stories.
Coming from the communities and how many associates frankly, who lived in the path through lost times vehicles power water and obviously in some tragic incidents is much more.
Just wanted to say, thank you to our team members across Florida and in other regions.
As I have always done just jumped in to help provide critical essentials, which range from broader hot meals clothing temporary housing.
And since I've been in the group up towards a little bit about.
The way this group just involved in the communities, whether it's through the drive pink initiatives, which are really truly grassroots and associate driven.
But again the way that.
Associates within automation, particularly in Florida responded no none.
We're very proud moment for me before we get in queue and I did just want to.
Say, thank you to everybody again, and so a lot more work to do so thank you with that.
John if you want to kind of do some question Sheila we're ready.
Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
Pat.
So Justin I met compile the Q&A roster.
And our first question today comes from John Murphy of Bank of America. John . Please go ahead. Your line is open.
Good morning, guys.
My first.
First question I mean, so the elephant in the room here is that there's not enough inventory in your your partners. The automaker side are having a tough time.
Ramping up so I am just curious how that's obviously depressed new vehicle sales to some degree.
But when do you see inventory.
Normalizing.
If it all sort of what are the levels and what is sort of at a Korea that when do you think gpus normalize on the new vehicle side, and what does that normalization mean levels of inventory.
Ventura gas.
Yes, good morning, John .
Why don't you start with an easy one.
So.
We're not when I stand back and thinking about it I think obviously, there's multiple moving pieces and it's interesting isn't it that some parts of the industry. Your science at recessionary levels, which is a new vehicle volume.
We told in the past about the Saar actually being a reflection of supply what time does it begin to shift over to the demand driven.
Driven again and I think as we get into next year, we're going to see that progressively happen as I think supply chains.
Chips begin to get diverted back to automotive.
But the real question is.
Are we going to continue to see a balance that enables.
Reasonable margins both for us and.
The Oems will be returned to the situation that we saw post 2019, where inventory levels significantly.
Significantly were elevated compared to demand and therefore.
You saw as a result of that the margins that we're not just with us but also with the Oems.
It's a difficult question to answer when we total Oems what is clear is they recognize that they are improved margins are something that they are enjoying they recognize that the balance of.
Supply and demand is a good thing for them a good thing for retailers and also frankly, a good thing for customers.
Because of the consequential impact on residual values.
So when we say return to normal I, frankly don't think margins will return to.
<unk> 2020 levels, because I do believe that we are going to see discipline and the inventory levels and one of the reasons I believe that is if you think about the transition the Oems are going to go through.
Coming years, Theyre going to have enough margin pressures from the cost of electrification in the transition to want to avoid one that can be avoided and not self inflicted on themselves and on us and I think that when they talk about they recognize.
Inventory levels are something that a balanced properly can.
Relieve pressure on margins not add to the pressure of the transition that they are going to see so I think you will see some mitigation in margins as we get middle to end of next year, but I think.
That's still going to remain healthy and elevated because I do believe you will see balance.
That's my current view.
Okay.
Yes, no that's incredibly helpful and just a second question around share count.
It's down over 40% since the end of 2019 or pre pandemic.
Got a big authorization out there at $1 billion.
I mean I would.
Imagine you keep going on this but I mean relative to other opportunities on Autonation USA and other stuff that youre working on.
Internally in CIB.
How do you think about sort of cap allocation.
And where this.
Amazing sort of reduction in share count will go or continue to go relative to those other incremental investments.
I'll answer first and then John can correct the mistakes of modest size, but.
And youre going to get the stock answer and that is every management team believes that they are allocating capital in the most appropriate way for the shareholders.
We try to be very disciplined in trying to evaluate the best use of the best use of capital, we think that values of assets in the marketplace has been elevated.
And we will over time come back down and therefore represent good value organic growth such as Autonation USA continues to be fully funded.
That's funded ahead of many of the other investments that we have made and will make.
But investment in ourselves and.
Therefore buying back our shares has represented in the in the in the market with the pressure we've seen across the segment a great investment for us and the right investment for our shareholders.
<unk>.
Cost was really to maintain maximum flexibility as we go through the balance of this year and get into next year.
That flexibility does not mean decided that we will exhaust the authorizations that we had but it's important for us as a management team to have that flexibility and the board and dose. It. So that we can continue to assess opportunities because.
You will see moves as we get into next year.
Different types of assets become very attractive and we.
We make moves on those rather than.
Just purely share repurchases. So again in our view, it's a balanced approach with the shareholder in mind.
And I would only add Mike I think nailed it but I would only add kind of from our perspective it starts with extremely strong cash flow.
And a very strong balance sheet. So as you look historically through any economic scenario. We've continued to generate positive cash flow, which gives us tremendous capacity to deploy it across a number of fronts and.
And the point that is probably pretty obvious to you all is from a relative valuation standpoint, our stock today is incredibly compelling.
So as we look at it from a return basis, which is the fundamental metric that we use share repurchases continue to remain very attractive.
As we also look at other alternatives like and USA and others to continue to reposition the business.
I think Mike hit on the same page it starts with a lot of capacity on our strong cash flow and a balanced approach to deploying the capital.
Yes, I would absolutely here with you on the shares just just a follow up on that on the <unk> I mean, how much capital to get poured into that and then ill pass it on I mean, how much would be needed to grow that over time, how do you think about that as far as sort of cap allocation as well because that could be a big big business overtime and draw some significant capital, but maybe not.
Well.
So the answer there is as we've said many times first of all we're going to take a very deliberate approach and we've talked about crawl walk run, which we fully intend to do and do not anticipate it to be a significant draw on capital over the next 12 months 18 months, but as it does feel we've already looked at various conduits and facilities.
It will allow us to.
Maintain a strong investment grade balance sheet, while we continue to grow the business.
Which will continue to evaluate as we go so I don't anticipate that being a significant draw on our capital and dilutive and kind of the credit metrics that we hold today.
Great. Thank you very much guys.
So notwithstanding the fact as I mentioned in my.
As I mentioned in my opening comments.
We're already providing financial services through <unk> and into.
Autonation USA, which is exactly what we said we would do the deployment and the relationship between CIB.
Let's say God historically employees, we now obviously have a sections of autonation and our teams in the USA stores.
Excellent.
I am pleased, albeit three weeks it at how fast.
They have moved.
Think the flexibility that we have in terms of sources of capital and the strength of our balance sheet means that.
Joe will be out of appropriately.
Manage that going forward as he mentioned.
Great. Thank you very much.
Welcome.
Thank you and our next question does your Danielle Daniel <unk> of Stephens, Inc. Daniel. Please go ahead. Your line is open.
Yeah, Hey, good morning, guys and thanks for taking my questions.
I wanted to ask you talked about new but I wont talk about the used inventory side. It looks like you guys nicely controlled that narrowed the inventory Gpus well controlled I'm curious the step down in inventory reflects more of a difficulty sourcing or is that more of an intentional strategic decision. Mike by you guys to carry leaner inventory and Thats falling price backdrop, and then with.
That are you comfortable with your inventory at today or would you actually have to pull it in further just given the volatility in wholesale prices we are seeing.
So what I would tell you is I am comfortable with I am comfortable with their overall levels of inventory given where we are back as I mentioned to whatever size more traditional kind of depreciation in fact slightly elevated than we would say historically and that is what's happening in the wholesale market.
Until they feel a fail in the retail market, but.
As we all know in our business you used inventory can be one of your biggest fastest but it also can bite you. So havent 30 day supply keeps flexibility I would say I prefer I would say I would prefer a slightly better mix because when I think about used vehicle inventory, we break it down into the categories, we talked about $20020 to 40040 thousand plus.
Each of those categories, obviously have different ton rates as you would expect we are short on what I would call. It really good quality under 20000 dollar priced vehicles.
Notwithstanding the fact, there's a focus for us in our re Biochar teams. The reality is that you don't want to be behind too deep because you end up buying.
That inventory that frankly costs way too much to get prepared for the right quality to retail so I would like to see some improvement in the inventory.
Turn rates in that segment for us a very high.
But overall at 30 days I'm comfortable going into into the end of the year.
I think it gives us the flexibility, but frankly, it's something that.
We need to watch carefully because as I mentioned wholesale prices really haven't completely yet.
Come through into retail prices that will happen and when it happens and how quickly. So our teams are very cognizant of that.
Got it that's helpful and then one on <unk>.
And I think for F&I per unit.
Step up and actually a bit better than some of your peers. This quarter, just specifically within that line is it a higher loan value that the product penetration of what's driving that up and then how does that change over the next 12 months and maybe consumers budget pressure higher rates limit that monthly budget.
The kind of what's driving F&I per unit and what's kind of that outlook continues to continues to go up.
Yes, so its economy, let me try to answer that on a couple of fronts, So first and foremost.
First a improvement in penetration so our penetration.
Continues to improve and I think as we've mentioned before 70% plus of our F&I is associated with product rather than financing.
Financing rates have gone up slightly which has resulted in a slight.
The increase in <unk>.
Payment and obviously the slight increase in prices is also benefited but what I would point out if you look at CFS historically and we've looked at all the way back through <unk> nine.
We've never seen that materially drops correctly drop at all and it continues to be a source of strength as I believe people fundamentally believe in the value of the products.
We're offering and so we don't anticipate.
Despite interest rates or being a adverse impact that our CFS efforts going forward and we clearly are not seeing that today in the business.
Got it and then last one for me just to clarify are you talked a little bit about the storm response by the team, but and in the lack of cost where there any lost selling days or any other impacts on the results from hurricane even towards the end of the quarter.
Okay.
I mean, clearly there was there was an impact because when you have a large part of your business in the state and its affected and you get the complete uncertainty really that happens as a hurricane approaches it causes.
It causes people to focus on more important things than when the immediately thought of vehicles. So there was an impact frankly.
There's nothing that jumps out.
It was worthwhile pointing out that there was some cost in the business some potential loss of revenue.
<unk> as I mentioned before with.
The communities get back on their feet. So nothing that we have.
Interested in reporting.
Yes.
Great I appreciate all the color and best of luck through year end.
Thank you.
Yeah.
Thank you and our next question Gucci Bret Jordan of Jefferies. Bret. Please go ahead. Your line is open.
Hey, good morning, guys.
Following up on that question on used days sales in inventory could you talk about how you see the cadence of used vehicle values on obviously softening, but I think the Mannheim economist is thinking that they stay on absolute high level. Do you think we are going back to sort of Ah I.
I used pricing environment looks more like pre COVID-19 or are we for ever higher.
Again, it's a supply and demand question isn't it and I think because we've seen prolonged periods of new vehicle volumes remaining long. The reality is that inventory levels and that will impact the inventory levels and use and ultimately it will maintain.
Elevated used values I think for a period of time, but I think we are coming down we are coming off of suddenly our.
My analysis shows that we are coming off.
The high values that we saw before but interestingly.
My view.
On the used market really is that you don't.
Don't see a material change.
From a timing impacts on margins that are retained.
Used vehicles, unlike new vehicles, where you can see dramatic shifts in margin depending on the dynamics present, usually you tend not to see that you see obviously margin changes.
Retail moves.
With a slight delay in sync with wholesale and mine experience.
I think you will see the shall answer apologies.
My apologies is the thing you will see elevated.
I think they have mitigated from that peak, we just need to make sure that as we see normal levels, maybe slightly elevated levels of depreciation come in that we manage our used inventory.
Okay.
My question.
The FTC has made some statements recently or proposals how do you see that impacting the ability to sell in the 70% of your mix, it's product or any of those addressed by the FTC and I guess from a record keeping standpoint, obviously you are not.
Taking advantage of the consumer but does it make it more expensive in the F&I business to to have our records requirement like they are proposing.
I think I mean, my view, obviously, we as many others have had an opportunity to comment and we submitted our comments on this and all of us.
Transparency frankly, we've had.
I have been appointed transparency anyway, just good business. So from that point of view now issues. What worries me frankly is we just need to make sure that we're not going to do is significantly impact consumer convenience.
We'll come a button the button for us Canadian.
We'll deal with whatever the result is but.
I'll just need to make.
We would want to make sure that the.
A level of transparency that is already there is reflected in whatever the decision is and we don't obviously both on the consumer.
As a result of this but.
We don't anticipate a material change too.
Our performance in this area and obviously, we will we will.
We will comply with whatever is the result, but.
And just to reemphasize.
Practices are as transparent as I, possibly can be.
Mike the process.
As seamless as it can be and I think it's that balance that hopefully will be the result of it.
Great. Thank you.
Yeah.
Thank you and the next question Gucci Rajat Gupta of Jpmorgan. Please go ahead. Your line is open.
Great. Thanks for taking the question.
Just wanted to get an update or a better sense of normalized SG&A to gross.
And any near term or 2023 guideposts.
If you can provide.
In a scenario where used car do you think are already on the way back to normal in the scenario, where new car GPU also move back to normal.
It's actually an environment where volumes for the industry did not grow next year.
<unk>.
And gave that turns out to be true.
Rational SG&A to growth that you believe the business will not exceed.
Given all the changes that have happened and the productivity initiatives are in place.
And we continue to expect further.
Average as well in such a scenario.
We're already starting to take any cost actions today.
Thanks Raj so.
End of my comments I will actually give you a number which I know, which is what you want but I'm going to make you endure kind of my perspective on this.
But we'll talk about it a lot.
SG&A and cost is not it is a journey right. It's not a destination. This is not a one and done exercise.
So if you take a step back we fundamentally change the cost structure over the last two and a half years.
It was through the selling and service organizations, whether it was advertising and marketing, but it was the administrative.
Back office functions and we've.
Maintaining that discipline with.
Average less fewer than 10%.
10% reductions across the workforce.
And most of our functions.
To maintain that through disciplined in the use of technology and process improvement.
So as we move forward I mean, there is really kind of three drivers that we're confronting right we have the inflationary dynamics.
We have investments that we feel we need to make to position ourselves for the future Thats, a both in technology and capabilities.
And then as you mentioned, we have relatively high CVR environment and so for us it's a matter of continually embracing ways to take out this cost.
And the stores, we've deployed a new CRM system and it'll be finally deployed by the end of this year that puts up much more usable data in the hands of our sales and service associates.
We have deployed customer 360, which we've talked about in the past.
Such as our proprietary data.
Mm tool.
That allows for me.
To be more efficient.
And to.
Serve our customers more effectively.
We're deploying technology in our digital storefront, we're using data and data analytics to more effectively acquire price in place used vehicles.
And we're continuing to drive efficiencies through our shared service center through the process.
<unk> improvement so it's a long winded answer to say, it's a continued journey and trying to mitigate the pressures we face and are good.
<unk> is to maintain SG&A as a percentage of growth in the low 60% as.
As we continue through the cycle and it's going to be the result of the continued focus on cost discipline that will enable it.
Sorry about that.
Got it thanks.
So the low <unk> percent.
Do you think you would probably exceed that in the near term before you get back there or.
It probably doesn't go higher than that.
In the foreseeable future.
In the immediate near term I think we're going to be in there about where we're at today I think longer term again, we will just continue to kind of balance the pressures I mentioned against the mitigation that we will continue to deploy.
So just a quick comment from me John .
The other thing that I think we.
We've talked about before and each recognizes how much of the SG&A in our business is actually variable we have a high percentage of variable SG&A.
Which to a large extent.
So dependent on the economic conditions.
Renovation so that also helps.
Yes, we will control of that percentage.
Thanks, Mike.
Got it got it that's great.
Maybe.
Just on the long term outlook, Joe I know you spoke like back in June .
On the restaurant Paul you mentioned that you would expect 2025 bps on the company higher than what's perceived to be peak earnings.
2022, and the current run rate.
Curious like that PA process. So holds given how the macro is changed.
And what are you seeing.
In terms of like Gpus, or any potential moderation going forward.
Just a quick comment on that would be helpful.
Thanks.
I think I think in the context that we're talking about the relative impact of.
<unk> as much as anything that I was talking about the other drivers of our business.
It continues to perform extremely well.
Even if you take out the effect of new PBR. So I don't have a perspective per se at this point, but I'm going to state on 2025 what.
But I do believe though is again as we've talked about if you look at that.
The elements like after sales if you look at CFS, if you look at the.
The change.
Changes, we've taken to the cost structure over time, I think those are significant mitigates and offsets to the new CVR environment that we're currently experiencing and provide us a very stable base of earnings going forward.
Yes.
Obviously fast now you've got it.
Discussion.
Last night by the discussion of that.
<unk> and what they what they will return to I think.
At the end of the data many reasons why PBR will remain robust.
In metals, we saw.
2019, 2019, and notwithstanding that by the way the current software oriented stupid on 2008 if.
If I remember well, we went down a 14 million ton 2030.
<unk> five.
So there's a lot of the dynamics that will play out, but I think making sure. The business is underpinned by more controllable revenue and growth which is for us after <unk>.
And we've.
We've shown that we can consistently improve that as well as the ongoing control on expenses I think is.
Mainly a good buffer against what may come in 'twenty three 'twenty four.
Yes.
Yeah.
Got it that's fair thanks, a lot for all the color and good luck.
Thank you and as a reminder, if you would like to ask a question today. Please press Star then the number one on your telephone keypad.
Our next question Daiichi Colin Langan of Wells Fargo. Colin. Please go ahead. Your line is open.
Okay.
Hi, This is Tim actually.
Colin.
Just.
Quick question.
First on regarding pre salt levels of vehicles.
Company I know you guys gave some details about that last quarter in the corner. Prior so I'm curious if.
You could provide any further updates there.
Yes. So this will be a test of my memory, what we said on pre sales that we have significant levels of 3000 about 60% of our luxury premium.
<unk> supplied from something like 50% for our inputs not domestic.
As we sit today I would say across the board is now between 45 and 50%.
Slightly lower than we saw in the middle of the year down by probably 10 percentage points.
And I would tell me still.
More pre salt in luxury premium, but probably.
Probably about 10% down from where we saw the mistake is that 100% on thanks Dan.
So I'd say, that's kind of where we sit today.
Very high elevated churn rates and obviously off.
I will just niche products, but also iconic products.
Basically sold out.
Demand for.
The demand for.
Both products really is still very significant.
Okay great.
That's really great to hear and then just one quick follow up.
Wondering in terms of as investors investors are looking at.
Prospectively recession risks on the horizon.
And looking at potentially a down down case scenario.
What are you thinking about kind of your us business in terms of Gpus, there sort of prices normalize.
I talked a bit about used gpus.
And again.
I'll say this and I'll reiterate this is Mike isn't my 30 years' experience in selling used cars in one form or fashion the dynamic between the wholesale market in the retail market there might be a time delay, but ultimately they say to each other the margin element.
The margin element remains broadly the sign in terms of the auction.
The magnitude of used margins from my point of view the times that becomes suppresses when it happens periodically even in the best run businesses. When you when you get an imbalance between.
How you manage your inventory used inventory turn rates and the quality of inventory that you see so that's one of the reasons why we talk about and others frankly talk about the fact that we are seeing slightly enhanced depreciation levels than normal for this type of year, but we're coming off elevated wholesale prices that will feed it's why hasnt completely Fedex bitrates.
Retail prices, yet, but it will do which is why there is a lot of folks at this moment in time and maintaining something around a 30 day supply. So that we can very flexibly work our way through any inventory pressures that common restart with vehicles that would be appropriate wholesale price. So.
Probably it.
For an answer to the question but.
That's one of the markets that tends to that from a margin point of view less massive fluctuations that you see in other areas.
Okay, great. Thank you so much.
Thanks, Ed.
Yes.
Thank you there are no further questions at this time, Mr. Manley I turn the call back over to you.
And thank you again, just thanks for taking the time to come on the colon is an incredibly busy reporting season. We're pleased that you said your time with US. This morning, hopefully you can.
The benefit from the call and we'll see you.
We'll see you on the excellent thank you Rob.
Thank you. This concludes today's conference call. Thank you all for joining you may now disconnect your lines.
Okay.