Q1 2024 AutoNation Inc Earnings Call

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Carla: Welcome to the AutoNation first quarter 2024 conference call. My name is Carla, and I will be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand you over to your host, Derek Fiebig, Vice President of Investor Relations. You may now begin.

Speaker Change: Welcome to the Autonation first quarter 'twenty 'twenty four conference call.

Carla: My name is Carla and I will be coordinating your call today. During the presentation. You can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind. Please press star followed by two I will now hand, you over to your host Derek Fiebig, Vice President of Investor Relations you May now begin.

Derek Fiebig: Thank you, Carla. And good morning, everyone.

Derek Fiebig: Thank you Carla and good morning, everyone I'd like to welcome you to the first quarter 2024 conference call for Autonation.

Derek Fiebig: I'd like to welcome you to the first quarter 2024 conference call for AutoNation. Leading our call today will be Mike Manley, our Chief Executive Officer, and Thomas Szlosek, our Chief Financial Officer. Following their remarks, we'll open up the call to questions. Before beginning, I'd like to remind you that 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.

Derek Fiebig: Leading our call today will be Mike Manley, our Chief Executive Officer, and Tom <unk>, Our Chief Financial Officer.

Derek Fiebig: Following their remarks, we'll open up the call to questions.

Derek Fiebig: Before beginning I would like to remind you that certain.

Derek Fiebig: 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 <unk>.

Derek Fiebig: Such forward-looking statements involve known and unknown risks that may cause our actual results or performance to differ materially from such forward-looking statements. Additional discussions of factors that could cause our actual results to differ materially are contained in our press release issued today and in our filings with the SEC. Certain non-GAAP financial measures, as defined under SEC rules, will be discussed on this call. Reconciliations are provided in our materials and on our website, located at investors.autonation.com. With that, I'll turn the call over to Mike.

Derek Fiebig: Such forward looking statements additional discussions of factors that could cause our actual results to differ materially are contained in our press release issued today and under our filings with the SEC.

Derek Fiebig: Certain non-GAAP financial measures as defined under SEC rules will be discussed on this call reconciliations are provided in our materials and on our website located at investors Autonation Dot com with that I'll turn the call over to Mike.

Michael M. Manley: Thank you Derek and good morning everybody, and thank you for joining us today. I'm going to start on slide 3 and, as usual, provide some opening remarks before Tom takes you through our first order results in greater detail. Consumer demand for vehicles in the first quarter was robust, and, in fact, this is the first time we have had a quarterly increase in both new and used vehicle sales since the second quarter of 2021.

Michael M. Manley: Thank you Derek and good morning, everybody and thank you for joining us today I'm going to start on slide three and as usual provide some opening remarks before Tom takes you through our first quarter results in greater detail continue.

Michael M. Manley: Consumer demand for vehicles in the first quarter was robust and in fact this is the first time, we've had a quarterly increase in both new and used vehicle sales since the second quarter of 2021.

Michael M. Manley: Now, specific to new vehicles, you might recall that new unit sales were up 8% in the fourth quarter, and now we're up 7% in the first quarter. Now, as you know, new vehicles will start to fly will have various revenue streams. So these continued strong trends are certainly encouraging, I think, for our future.

Michael M. Manley: Now specific to new vehicles, you might recall that new unit sales were up 8% in the fourth quarter and now we're up 7% in the first quarter now as you know new vehicles not the flywheel of various revenue streams studies continued strong trends are certainly encouraging I think for our future.

Michael M. Manley: As expected, the average selling price for new vehicles decreased 5%, resulting in a new vehicle revenue increase of 2% per quarter. New vehicle margins were down $325 on a sequential basis, modestly better than the rate of decline we experienced in the fourth quarter and the rate I previously signaled for the first quarter. The new vehicle supply chain is in the final stages of recovery, and our inventory is also nearing normalized levels.

Michael M. Manley: As expected the average selling price of new vehicles decreased 5%, resulting in a new vehicle revenue increased up 2% for the quarter.

Michael M. Manley: New vehicle margins were down $325 on a sequential basis modestly better than the rate of decline we experienced in the fourth quarter and the REIT I previously signaled for the first quarter.

Michael M. Manley: E vehicle supply chain is in the final stages of recovery in our inventory is also nearing normalized levels.

Michael M. Manley: There does continue to be a wide range of inventory by model, make, and segment, with some approaching historic levels. New vehicle inventory, in terms of dollars, increased approximately 5% since the beginning of the quarter, compared to a rate of sequential increase approaching 25% for the past eight quarters. And you may see that as a signal of a declining rate of increase in new vehicle inventory on the ground. For used vehicles, same-store units decreased 2% from the same quarter a year ago, while total units were up 2%, reflecting the growth of ANUSA stores in the year.

Michael M. Manley: That does continue to be a wide range of inventory bimodal make in segments with some approaching its stock levels.

Michael M. Manley: New vehicle inventory in terms of dollars increased approximately 5% since the beginning of the quarter compared to a rate of sequential increase approaching 25% for the past eight quarters and you might see that as a signal with a declining rate of increase of new vehicle inventory on the ground.

Michael M. Manley: Used vehicle same store units decreased 2% from the same quarter a year ago, while in terms of units were up 2%, reflecting the grass valley and USA stores in the year sequentially used vehicle units were up 6%.

Michael M. Manley: Sequentially, used vehicle units were up 6%. Now, in the fourth quarter earnings release, we discussed the market factors impacting our used vehicle business, including type availability, a return to historical depreciation patterns, and lower demand for higher priced vehicles. We also discussed our planned action to align inventory levels and return rates with the market and shared our view that used vehicle PVRs would improve late in the first quarter. While the same market factors prevail, I'm pleased to note that the team has completed the inventory alignment actions, and we have experienced improvement in unit profitability in each month of the first quarter, as we had expected. The first quarter PDR of $1,473 was better than the fourth quarter, and we are encouraged by the March PDR exit rate. Customer financial services was again a strong point in the quarter.

Now in the fourth quarter earnings release, we discussed the market factors impacting our used vehicle business, including tight availability are returning to historical depreciation patents and lower demand and higher priced vehicles. We also discussed our planned actions to align inventory levels and the churn rate with the market and shared our view that used vehicle pvs would improve.

In the first quarter.

Michael M. Manley: While the same market taxes prevail I'm pleased to note that the team has completed the inventory alignment actions and we have experienced improvement in unit profitability in each month of the first quarter as we had expected.

Michael M. Manley: The first quarter PDR $1473 was back to it in the fourth quarter.

Michael M. Manley: I'm encouraged with the March <unk> exit rate.

Michael M. Manley: Customer financial services was again, a strong point in the quarter, our product attachment rates were solid.

Michael M. Manley: Our product attachment rates were solid, and our team continued to effectively navigate a challenging interest rate environment. Now I think the greater complexity of vehicles is leading to higher values per repair order, and this, coupled with the increased number of repair orders from a year ago, resulted in an excellent total. The strength of our balance sheet and cash generation continues to give us optionality on capital deployment. CapEx was stable for the quarter. We ended up passing on a number of M&A opportunities that did not meet our return requirements, but make no mistake; our appetite and capacity for acquisitions in our core space is strong.

Michael M. Manley: The team continued to effectively navigate a challenging interest rate environment.

Michael M. Manley: After sales delivered another outstanding quarter, and congrats to the team well done.

Michael M. Manley: <unk> revenue was up 8% split evenly well not evenly Randy.

Michael M. Manley: Across all product categories in gross profit as you can see was up 9%.

Michael M. Manley: I think the greater complexity of vehicles, these leading to higher values per repair order and this coupled with increased number of apparel just from a year ago resulted in excellent total performance.

Michael M. Manley: The strength of our balance sheet and cash generation continues to give us optionality on capital deployment Capex was stable for the quarter. We ended up costing on a number of M&A opportunities that did not meet our return requirements, but make no mistake, our appetite and capacity for acquisitions in our core space. It's strong also we continue to balance share repurchase opportunities.

Michael M. Manley: Also, we continue to balance share repurchase opportunities with targeted leverage levels. And as of yesterday, we repurchased $250 million of AutoNation shares in 2024, reducing share price. Our Board of Directors has also approved an additional $1 billion under our Share Repurchase Program. Now, aside from the solid course, from a financial perspective, there are a few other highlights I'd like to touch on.

Michael M. Manley: With targeted leverage levels and as of yesterday, we have repurchased $250 million of Autonation shares in 2020 full reducing share count by another 4% since the beginning of the year.

Michael M. Manley: Our board of Directors has also approved an additional $1 billion under our share repurchase program.

Michael M. Manley: Now aside from the solid quarter from a financial perspective, there are a few other highlights I'd like to touch on we continue to focus on developing our offerings enable us to realize a greater share of our customers' transportation state.

Michael M. Manley: We continue to focus on developing our offerings that enable us to realize a greater share of our customers' transportation space. AutoNation Finance originated over $160 million of loans during the quarter, and the portfolio balance now exceeds $560 million. We also continued with the rollout of our ANUSA footprint with four SOAR openings during the quarter.

Michael M. Manley: Autonation finance originated over $160 million of loans during the quarter and the pool of talking about balanced now exceeds $560 million.

Michael M. Manley: We also continued with the rollout of ion USA footprint with full store openings during the quarter three were in Florida, and one in Nevada, adding density to these markets and bringing our store count to 23.

Michael M. Manley: Three were in Florida and one in Nevada, adding density to these markets and bringing our store count to 20%. Our business model is clearly resilient, working well, and we continue to deliver strong financial performance. And this performance is, of course, made possible by our 24,000. Plus dedicated AutoNation associates who take care of our customers every day. With that time, I'm going to pass the call over to you.

Michael M. Manley: Our business model is clearly resilient working well and we continued to deliver strong financial performance and this performance is a cool is made possible by our 24000.

Plus dedicated Autonation associates, who take care of our customers every day without Tom I'm going to possible either to you. Thank you Mike turning to slide four to discuss our first quarter P&L I'll cover this.

Thomas A. Szlosek: Thank you, Mike. Turning to slide four to discuss our first quarter P&L, I'll cover this.

Thomas A. Szlosek: This page is in a summary fashion, then we'll jump into the individual components on some of the later pages. Total revenue increased 1%, with the growth standing out in parts of service at 8%. Our growth in new vehicle revenues was largely offset by similar declines in used vehicle revenues. Gross profit of $1.2 billion, plus 18.5% of revenues, and, as expected, down in nominal dollars from 2023. The growth in our high-margin parts and service business partially offset the impact of declining new and used vehicle unit prices. Adjusted SG&A was relatively stable at $786 million.

Speaker Change: In summary, fashion and then we'll jump into the individual components on some of the later pages.

Tom: Total revenue increased 1% with the growth standing out in parts of service at 8% our growth in new vehicle revenues was largely offset by similar declines in used vehicle revenues grew.

Speaker Change: Gross profit of $1 2 billion or 18, 5% of revenues and as expected down in nominal dollars from 2023.

Speaker Change: Growth in our high margin parts and service business, partially offset the impact of declining new and used vehicle unit profit.

Speaker Change: Adjusted SG&A was relatively stable at $786 million corresponding was flat offset by higher spending for our expanded store footprint and advertising to aid our growth initiatives as.

Thomas A. Szlosek: Core spending was flat, offset by higher spending for our expanded store footprint and advertising to aid our growth initiative, as well as used vehicle acquisition efforts. This resulted in an adjusted operating income of $348 million for the quarter, which ended at 5.4% of revenue. Below the operating line, our first quarter results were impacted by higher interest expenses, mainly for floor plan debt, and benefited from lower income tax expenses. First quarter floor plan interest expense of $49 million was up from $27 million a year ago, a reflection of higher rates and inventory levels, as expected.

Speaker Change: As well as used vehicle acquisition efforts, which resulted in adjusted operating income up $348 million for the quarter, which ended at five 4% of revenue.

Speaker Change: Below the operating line, our first quarter results were impacted by higher interest expenses, mainly for floor plan debt.

Speaker Change: And benefited from lower income tax expense first quarter floor plan interest expense of $49 million was up from $27 million a year ago.

Speaker Change: Flexion of higher rates and inventory levels as expected.

Speaker Change: Net of OEM and salaries, which are included in gross margin new vehicle floor plan expense changed from a benefit of $4 million in 2023 to a cost of $15 million in 2024.

Thomas A. Szlosek: Net of OEM incentives which are included in gross margin, new vehicle floor plan expense changed from a benefit of $4 million in 2023 to a cost of $15 million in 2024. Income tax expense for the quarter was $63 million, compared to $93 million in 2023, reflecting lower taxable income and a slightly higher tax rate.

Speaker Change: Income tax expense for the quarter was $63 million compared to $93 million in 2023, reflecting lower taxable income and a slightly higher tax rate. All in this resulted in net income of $190 million compared to net income of $289 million a year ago.

Thomas A. Szlosek: All in, this resulted in net income of $190 million compared to net income of $289 million a year ago. Our share repurchase activity helped partially offset the EPS effects of the net income decline. Total shares repurchased over the past year decreased our average shares outstanding by 11% from Q1 2023. 42.3 million shares at the end of the second quarter, the first quarter in 2024. This was a benefit.

Speaker Change: Our share repurchase activity helped to partially offset the EPS it affects of the net income decline.

Speaker Change: Total shares repurchased over the past year decreased our average shares outstanding by 11% from Q1 2023 to $42 3 million shares at the end of the second first quarter of 2024. This was the best this of course was a benefit for our EPS, which was $4 49 for the <unk>.

Thomas A. Szlosek: This, of course, was a benefit for our EPS, which was four dollars and forty-nine cents for the quarter. And historically, return on our share purchases has been quite attractive. Let me move to slide five, five for some color on new vehicle performance for the quarter. New vehicle volumes, unit volumes were up 7%, including increases of 19% for imports and a 4% decrease in premium luxury. Domestic unit volumes were flat year-over-year

Speaker Change: Quarter and historical return on our share purchases has been quite attractive.

Speaker Change: Let me move to slide five five for some color on new vehicle performance for the quarter, New vehicle volumes unit volumes were up 7%, including increases of 19% for imports and a 4% decrease in premium luxury domestic.

Speaker Change: Domestic unit volumes were flat year over year.

Thomas A. Szlosek: On average, new vehicle unit revenue decreased 5% in the quarter, while new vehicle unit costs declined around 1.5%, resulting in a moderation of new vehicle gross profit, or PBR. The $325 sequential decline from the fourth quarter in new vehicle PBRs was largely in line with what we had called for and lower than declines in previous quarters, even with the seasonal sequential shift away from premium luxury brands that typically occurs in the first quarter.

On average new vehicle unit revenue decreased 5% in the quarter, while new vehicle unit cost declined around one 5%, resulting in a moderation of new vehicle gross profit PV ours.

Speaker Change: The $3 three.

Speaker Change: Sorry, the $325 a sequential decline from the fourth quarter in new vehicle <unk> was largely in line with what we had called for a lower than declines in previous quarters.

Speaker Change: Even with the seasonal sequential shift away from premium luxury brands that typically occurs in the first quarter.

Thomas A. Szlosek: New vehicle inventory levels, including vehicles in transit, increased from 21,000 units at the end of March last year to 38,000 units this past quarter. On a day's basis, we had total new vehicle inventory levels of 44 days, which increased from 25 days last year and 36 days in the fourth quarter. We had 69 days of domestic inventory, 44 days of luxury, and 30 days of imports. Slide 6.

Speaker Change: New vehicle inventory levels, including vehicles in transit has increased from 21000 units at the end of March last year to 38000 units. This past quarter on a days basis, we had total new vehicle inventory levels of 44 days.

Speaker Change: Increased from 25 days last year and 36 days in the fourth quarter. We had 69 days of domestic inventory 44 days of luxury and 30 days of import brands.

Speaker Change: Slide six and used vehicles, we had a volume unit increase of 2% from a year ago or minus 2% on a same store basis.

Thomas A. Szlosek: In used vehicles, we had a volume unit increase of 2% from a year ago, or minus 2% on a same store basis. These rates improved significantly from the negative 4% total store and negative 8% same store rates we experienced in the fourth quarter. Average used vehicle selling prices moderated year-over-year by 5%, reflecting the shift to lower-priced used vehicles.

Speaker Change: These rates improved significantly from the negative 4% total store.

Speaker Change: And negative 8% same store rates, we experienced in the fourth quarter.

Speaker Change: Average used vehicle selling prices moderated year over year by 5%, reflecting the shift to lower priced used vehicles.

Thomas A. Szlosek: Our same-store unit sales of vehicles priced under $20,000 increased 5%, and we might discuss the encouraging outcomes and use of Vehicle PVRs in the corridor driven by the team's realignment action. Used vehicle inventory levels decreased from 39 days in the fourth quarter to 31 days in the first quarter, which we feel positions us well for the second quarter. Used vehicle sales and profitability continue to be a big area of focus for us as we emphasize effective sourcing, pricing, and speed while optimizing customer satisfaction.

Our same store unit sales of vehicles priced under 20000 increased 5%.

Speaker Change: Mike discussed the encouraging outcomes in use.

Speaker Change: Vehicles <unk> in the quarter driven by the team's realignment actions.

Speaker Change: Used vehicle inventory levels decreased from 39 days in the fourth quarter to 31 days in the first quarter, which we feel because this positions us well for the second quarter.

Michael M. Manley: Used vehicle sales and profitability continue to be a big area of focus for us as we emphasize effective sourcing pricing and speed, while optimizing customer satisfaction.

Michael M. Manley: If we move to slide seven on customer financial services, a great story as Mike mentioned, particularly at a high interest rate environment, where fixed monthly budgets can hinder customer ability to pursue value added offerings, we've been able to maintain product attachment rates at our gross profit <unk> declined only modestly the majority of which is related to the <unk>.

Thomas A. Szlosek: We move to slide seven on customer financial services, a great story, as Mike mentioned, particularly in a high interest rate environment where a fixed monthly budget can hinder a customer's ability to pursue value-added offerings. We've been able to maintain product attachment rates, and our gross profit PDRs declined only modestly, the majority of which is related to the shifting economics related to AutoNation Finance lending. As a reminder, the accounting for customer loans from AutoNation Finance requires that we eliminate the upfront fees from CFS PDRs.

Michael M. Manley: <unk> economics related to Autonation finance lending.

Michael M. Manley: As a reminder, the accounting for customer loans for moderation finance requires that we eliminate the upfront fees from Cvs.

Michael M. Manley: <unk>.

Thomas A. Szlosek: However, over the course of a loan with AutoNation Finance, the profitability toleration is expected to be more than two and a half times that of a non-AutoNation Finance loan. Speaking of AutoNation Finance, Mike gave you some of the numbers. I'll expand on that a little bit here. The business is on track for over $700 million in originations in 2024, all from AutoNation stores. And we expect the portfolio to more than double during 2024. It is already the number one lender across the AutoNation enterprise.

Michael M. Manley: However over the course of.

Michael M. Manley: A loan with automation finance the profitability toleration is expected to be more than two five times that of a non autonation finance model.

Michael M. Manley: Speaking of Autonation Finance, Mike gave you some of the numbers I'll expand on that a little bit here. The business is on track for over $700 million in originations in 2024, all from Autonation stores, and we expect the portfolio to more than double during 2024. It is already the number one lender across the Autonation enterprise.

Michael M. Manley: It's credit profiles delinquency rates and profitability also continued to improve and we're finding that autonation finances deepening the relationship we have with our customers. So far this acquisition is proving out nicely with attractive cash on cash returns on equity.

Thomas A. Szlosek: Its credit profile, delinquency rates, and profitability also continue to improve. And we're finding that AutoNation Finance is deepening the relationship we have with our customers. So far, this acquisition is proving out nicely, with attractive cash-on-cash returns on equity. Back on PBRs, we've also seen an increase in leasing, which represented 24% of new sales in the first quarter compared to 17% in the same quarter of 2023. This is a minor headwind for CVS PBR, as leased vehicles historically have lower CFS attachment rates. Now, let me move to slide eight.

Michael M. Manley: Back on <unk>, we've also seen an increase in leasing which represented 24% of new sales in the first quarter compared to 17% in the same quarter of 2023. This is a minor headwind for Cvs PBR as lease vehicles, historically have lower CFS attachment rate.

Michael M. Manley: Let me move to slide eight after sales represented 46% of our total gross profit for the quarter compared to 40% a year ago and continue to grow.

Thomas A. Szlosek: After sales represented 46% of our total gross profit for the quarter compared to 40% a year ago and continued to grow. Total store revenue increased 8% to nearly $1.2 billion, and same store revenue increased 7%. Warranty and Internal Pay both experienced double-digit year-over-year growth, and Customer Pay is also tracking well gross-wise. The value of each repair order is improving, and our total number of repair orders has also increased. Total store gross profit grew 9% year over year and by 8% on a same store basis.

Michael M. Manley: <unk> revenue increased 8% to nearly $1 2 billion and sustained same store revenue increased 7%.

Michael M. Manley: Warranty and internal pay both experienced double digit year over year growth in customer pay is also tracking well growth wise.

Michael M. Manley: The value per orders improving in our total number of repair orders has also increased.

Michael M. Manley: Total store gross profit grew 9% year over year and by 8% on a same store basis. Our gross profit margins were up more than 50 basis points from 47%, reflecting higher value repair orders and the scale benefits from an increase in the number of repair orders.

Thomas A. Szlosek: Our gross profit margins were up more than 50 basis points to 47%, reflecting higher value repair orders and the scale benefits from an increase in the number of repair orders. This high-margin business is a key part of our continued engagement with our customers, and we're focused on capacity utilization and technician development to support the continued growth of the business. Importantly, our total technician workforce increased 5% from a year ago on a same-end total store basis.

Michael M. Manley: This high margin business is a key part of our continued engage with our customers and we're focused on capacity utilization and technician development to support the continued growth of the business.

Michael M. Manley: Portland, our total technician workforce increased 5% from a year ago on a same and total store basis.

Thomas A. Szlosek: On slide nine, our adjusted operating income margin was 5.4% for the quarter, down from last year but flat sequentially, and up approximately 150 basis points from the pre-pandemic level. The decrease from 2023 mostly reflects a moderation in new vehicle gross profit per unit, which was expected and is consistent with the industry, as well as higher SGA. The growth in SG&A reflects investments for growth, including higher spending to support used vehicle acquisitions and the larger ANUSA footprint, as well as alternative transportation for after-sales customers, increased advertising spend, and inflation. However, normalized SG&A as a percentage of gross profit is expected to remain lower than the pre-pandemic level.

Michael M. Manley: On slide nine our adjusted operating income margin was five 4% for the quarter down from last year, but flat sequentially and up approximately 150 basis points from pre pandemic levels.

Michael M. Manley: The decrease from 2023, mostly reflects the moderation in new vehicle gross profit per unit, which was expected and is consistent with the industry as well as higher SG&A.

Michael M. Manley: The growth in SG&A reflects investments for growth, including higher spending to support used vehicle acquisition and the larger and USA footprint as.

Michael M. Manley: As well as alternative transportation for after sales customers increased advertising spend and inflation.

Michael M. Manley: Normalized SG&A as a percentage of gross profit is expected to remain lower than pre pandemic levels.

Michael M. Manley: Moving to slide 10, our adjusted free cash flow for the quarter was $257 million.

Thomas A. Szlosek: Moving to slide 10, our adjusted pre-cash flow for the quarter was $257 million, compared to $368 million a year ago. As you can see, conversion relative to our net income improved. During the quarter, we sharpened our focus on our cash cycle times across the business, which helped to achieve these conversion results. We closely monitor metrics for our key operating cycles and have resources and programs in place to drive efficiency. We expect new vehicle inventory levels to increase as manufacturer supply chains improve.

Michael M. Manley: Compared to $368 million a year ago as you can see conversion relative to our net income improved during the quarter, we sharpened our focus on our cash cycle times across the business, which helped to achieve these conversion results. We closely monitor metrics for our key operating cycles and have resources and programs in place to drive it.

Michael M. Manley: Fish and cheese and needs.

Michael M. Manley: And we expect new vehicle inventory levels to increase as manufacture supply chain improve we are focused on continuing to accelerate the velocity.

With which we turn our overall vehicle inventory during the quarter.

Michael M. Manley: <unk>, our used vehicle inventory balances and the related non traded floor plan financing by more than 15%.

Thomas A. Szlosek: We are focused on continuing to accelerate the velocity with which we turn our overall vehicle inventory. During the quarter, we reduced our used vehicle inventory balances and the related non-trade floor plan financing by more than 15 percent, consistent with the expansion of AutoNation finance. Our auto loans receivable related to loans originated at our own stores increased by approximately $150 million in the quarter.

Michael M. Manley: Consistent with the expansion of Autonation finance, our auto loans receivable related to loans originated in our own stores increased by approximately $115 million to $150 million in the quarter and as I mentioned, we expect continued growth in this portfolio.

Michael M. Manley: Capex for the quarter was $94 million level with a year ago. This resulted in adjusted free cash flow of $250 million and a strong conversion of 135% of our adjusted net income.

Thomas A. Szlosek: As I mentioned, we expect continued growth in this portfolio. CapEx for the quarter was $94 million, level with a year ago. This resulted in an adjusted pre-cash flow of $250 million and a strong conversion of 135% of our adjusted netting. Being a strong generator of cash provides optionality in terms of capital allocation.

Michael M. Manley: Being a strong generator of cash provides optionality in terms of capital allocation slide 11 shows our capital allocation for the first quarter compared with the similar period in 2023, Youll notice a year over year increase of almost $400 million and net debt paydown and almost $300 million decrease in share repurchases some of.

Michael M. Manley: This shift is timing in that shortly after quarter end as Mike mentioned, we executed more than $200 million of additional share repurchases.

Thomas A. Szlosek: Slide 11 shows our capital allocation for the first quarter, compared with a similar period in 2023. You'll notice a year-over-year increase of almost $400 million in net debt paydown and an almost $300 million decrease in share repurchase. Some of this shift is timing, and it's shortly after quarter end.

Michael M. Manley: But we are mindful of the need to maintain appropriate leverage levels in this dynamic environment, while pursuing maximum shareholder returns through a combination of M&A in our core space and share repurchases at.

Michael M. Manley: At quarter end, our leverage was at two five times EBITDA near the low end of our two to three times target and we continue to maintain our investment grade credit rating.

Thomas A. Szlosek: As Mike mentioned, we executed more than $200 million of additional share repurchase. However, we are mindful of the need to maintain appropriate leverage levels in this dynamic environment while pursuing maximum shareholder returns through a combination of M&A in our core space and share repurchase. At quarter end, our leverage was at 2.25 times EBITDA, near the low end of our two to three times target, and we continue to maintain our investment credit rating. As Mike mentioned, our board approved an additional $1 billion in share repurchase authorization. Now I'll turn the call back to Mike to provide some commentary on the path forward. Yeah, thank you, John.

Michael M. Manley: As Mike mentioned, our board approved an additional $1 billion share repurchase authorization.

Michael M. Manley: Now I will turn the call back to Mike to provide some commentary on the path forward.

Michael M. Manley: Thank you Tom.

Michael M. Manley: As he said I'm going to give you just a little bit more commentary before we open outside of the Q and I just can.

Michael M. Manley: I'll add some color.

Michael M. Manley: Somehow we have same things and some of the things that we're focused on so let's start on the new side of the business, where as we've said vehicle supply continues to rise.

Michael M. Manley: And I think inventory levels will continue to increase over the full goes to 2024, but as I kind of indicated in my opening comments not at the pace of the last two years.

Michael M. Manley: We can all see that leasing and retail incentives picking up yes.

Michael M. Manley: As you say, I'm going to give you just a little bit more commentary before we open up for the Q&A, just to kind of add some color in terms of how we're seeing things and some of the things that we're focused on. So let's start on the new side of the business, where, as we've said, vehicle supply continues to rise. And I think inventory levels will continue to increase over the full course of 2024.

Michael M. Manley: A lot of the pre pandemic levels, which I think gives the Oems quite a lot of dry powder and optionality as the year develops so I see I see that on a positive basis in terms of new vehicle sales.

Michael M. Manley: Obviously, a lot of discussion about that product introductions.

Michael M. Manley: Introductions and customer interest and needs and I think it's going to be a key dynamic throughout the year and as we have seen and its true in everything.

Speaker Change: Excuse me.

Michael M. Manley: But, as I kind of indicated in my opening comments, not at the pace of the last two years. We can all see that leasing and retail incentives are picking up, yet both remain below the pre-pandemic levels, which I think gives the OEMs quite a lot of dry powder and optionality as the year develops, so I see that on a positive basis in terms of new vehicle sales. Obviously, there was a lot of discussion about bad product introductions and customer interest in them, and I think it's going to be a key dynamic throughout the year. And as we have seen, and it's true in everything, excuse me.

Speaker Change: It's all about balance and it does appear that Oems are adjusting their plans and actions to match demand more closely and from our point of view this is going to be well received.

Speaker Change: Hybrids do continues to do well in the marketplace and if you look at our brand portfolio that gives us great exposure I think to this evolution of the marketplace.

Speaker Change: I'm going to briefly touch on new margins, because obviously, we've said we expect them to continue to moderate over the course.

Speaker Change: Of this year.

Speaker Change: Probably a similar clients really to our experience over the last.

Speaker Change: Over the last two quarters, but I do remain very positive about new not new vehicle margins.

Speaker Change: Used vehicle margins remains constrained us away from soy market remains constrained.

Speaker Change: As we all know late model used vehicle availability remains limited and will be for a period of time.

Michael M. Manley: It's all about balance, and it does appear that OEMs are adjusting their plans and actions to match demand more closely, and from our point of view, this is going to be well received. Hybrids do continue to do well in the marketplace, and if you look at our brand portfolio, that gives us great exposure, I think, to this portion of the marketplace. I want to briefly touch on new margins because, obviously, we've said we expect them to continue to moderate over the course of this year, probably at a similar level really to our experience over the last two quarters.

Speaker Change: I think the team has been nimble in our approach to the market and very focused on the effectiveness of vehicle acquisition pricing nickels inventory turn.

Speaker Change: CFS as Tom and I, both mentioned earlier the strength of the organization and I really expect that to continue to perform well even with continued pressures coming from monthly.

Speaker Change: Monthly payments the vehicle makes our tools as well as OEM actions to support unit sales.

Speaker Change: Okay.

Speaker Change: After sale has been and is going to remain a significant focus for us for the year and you can see some of the results coming through and the efforts of the team in Q1.

Speaker Change: Obviously, we had some pretty good growth and great growth actually from the team in 2023 is the comps are going to become.

Michael M. Manley: But I do remain very positive about new vehicle margins. The used vehicle market remains constrained, and as we all know, late model used vehicle availability remains limited and will be for a period of time. But I think the team is being nimble in its approach to the market and very focused on the effectiveness of vehicle acquisition, pricing, and, of course, inventory terms. CFS, as Tom and I both mentioned earlier, is a strength of the organization, and I really expect that to continue to perform well, even with continued pressures coming from overall monthly payments for vehicle mix side tools, as well as OEM actions for support unit sales.

Speaker Change: Little bit difficult as we get through the year, but growth is really what we're looking at in terms of the dollar since and I think that business will continue to grow attractively for us.

Speaker Change: And obviously as you would expect to get focused on managing the things that we are more control of and those variables, which include cash flow and capital deployment.

So with that.

Speaker Change: Diving.

Speaker Change: The Q&A. Please yes, Carla if you could please remind people how to get in queue for questions.

Carla: Of course, if you'd like to ask a question. Please press star followed by one on your telephone keypad. If you change your mind with Westar followed by June.

Carla: Ask your question. Please ensure your devices Amit.

Carla: Our first question comes from John Murphy from Bank of America. Your line is now open.

John Joseph Murphy: Good morning, guys.

John Joseph Murphy: Two quick maybe quick ones here Mike.

Michael M. Manley: Aftersales has been and is going to remain a significant focus for us this year, and you can see some of the results coming through in the efforts of the team in Q1. Obviously, we had some pretty good growth and great growth, actually, from the team in 2023, so comps are going to become a little bit difficult as we get through the year, but growth is really what we're looking at in terms of a dollar sense, and I think that business will continue to grow attractively for us.

John Joseph Murphy: Hyperfocus on new Gpus, but I think when you look at sort of the the front end growth. So I think of just 5000, I think 40 941 for the.

John Joseph Murphy: Quarter.

John Joseph Murphy: <unk> to that although not additive as sort of a semi inflated new GPU, but it seems like a somewhat depressed.

John Joseph Murphy: <unk> GPU of $14 73, and then Theres the F&I PBR of 2015, it seems like on that $14 73 on used GPU. There is some opportunity on the upside to potentially offset some pressure on new GPU. So I'm. Just wondering if you could talk about that and then potentially the upside in F&I and then how it general manager managers ask because my understanding is they're managing there.

Michael M. Manley: And obviously, as you would expect, we're focused on managing the things that we are more in control of and those variables, which include cash flow and capital deployment. So with that, we'll dive in, Derek, for the Q&A, please.

John Joseph Murphy: Front end gross and the components of it so there might be some.

Derek Fiebig: [inaudible]

Derek Fiebig: Of course. If you'd like to ask a question, please press star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from John Murphy from Bank of America. Your line is now open.

John Joseph Murphy: Real.

John Joseph Murphy: Focus on offsetting that pressure on new GPU through these other components.

John Joseph Murphy: Basically you could talk about the opportunities on the other side.

Speaker Change: Okay. Thank you John.

Speaker Change: On the fourth quarter call.

Speaker Change: Used disk.

Speaker Change: Discussions as you use margin expectation.

Speaker Change: Frankly, with the way that demand throughout the quarter. So in my mind, we still have upside in terms of in terms of the actual pin margin as I call. It on the vehicle and I'll come back to the constituent elements obtain in San Francisco and how we monetize that business I think what's important is not to talk about obviously availability of vehicles and one of the things that is.

John Joseph Murphy: Good morning, guys. I've got two quick, or maybe quick ones here.

Michael M. Manley: Mike, you know, there's a hyper focus on new GPUs, but I think when you look at sort of the front-end gross, I think of just 5,000, I think 4941 for the quarter, the components of that, although not additive, are sort of a semi-inflated new GPU, but it seems like a somewhat depressed used GPU of 1473, and then there's the FNI PBR of 2615. You know, it seems like on that 1473 unused GPU, there's some opportunity on the upside to potentially offset some pressure on new GPUs, so I'm just wondering if you could talk about that and then potentially the upside in FNI and then how a general manager would manage this, because, you know, my understanding is they're managing the front-end gross and the components of it, so there might be some real focus on offsetting that pressure on So, you know, basically, if you talk about the opportunities on the other side.

Speaker Change: Changed I think talked about the agility of the business model.

Speaker Change: As a percentage of vehicles under seven years old and that part is the vehicle Congress is obviously very healthy and haven't seen big reductions in terms of big revised ability has gone up significantly. So if you looked at all used GPU as a percentage of margin.

Speaker Change: These vehicles, notwithstanding average selling prices have gone up.

Speaker Change: Are we going to see an impact.

Speaker Change: Older vehicles.

Speaker Change: Excuse me.

Speaker Change: Even though given the bump was moved over time.

Speaker Change: Probably much luck.

Speaker Change: You aren't seeing the impact on us.

Speaker Change: Vehicles coming through but.

Speaker Change: I think Pat.

Speaker Change: We took some good actions in Q1 I think we're in good place I think we see upside in all used vehicle margin.

Speaker Change: CFS.

Speaker Change: Obviously, it's a big big focus for us what we ask our general managers and sales managers to do really is to take a very balanced approach.

Speaker Change: In terms of how they view a transaction with the customer.

Speaker Change: First and foremost.

Speaker Change: Not every single customer, who will count and the power of their dreams from offshore and what we try and do is structure great value package for them some.

Michael M. Manley: Yeah, thank you, Josh. Well, as we said, you're on the fourth quarter call, and we had quite a lot of discussion in terms of the used margin and our expectations. I was pleased, frankly, with the way that it developed throughout the quarter. So, in my mind, we still have upside in terms of the actual pin margin, as I call it, on the vehicle. And I'll come back to the constituent elements of TIN and CFS and how we manage them in the business.

Speaker Change: That puts emphasis and focus on protection products some of that puts emphasis and focus on.

Speaker Change: Upon exchange I tried their home, where they exited its finance, but ultimately our general managers really.

Speaker Change: Just on delivering good customer service good market share and to create a package that enables our customers to feel that they have.

Speaker Change: Got value for that transaction can be done to us and that gives you a wide range of margin spread between tenant and CFS.

Michael M. Manley: I think what's important is a lot of talk about, obviously, availability of vehicles. And one of the things that's changed, I think, shows about the agility of the business model, is our percentage sales of vehicles over seven years old in that part of the vehicle park that's obviously very healthy and hasn't seen big reductions in terms of vehicle availability have gone up significantly. So if you looked at our used GPU as a percentage of margin on those vehicles, notwithstanding that average selling prices have gone up, you are going to see an impact of those older vehicles. Excuse me. Even though Derek's giving me bottles of water all the time, I've got a problem with my phone.

Speaker Change: And outside of that.

Speaker Change: I would encourage you to go to one of our dealerships this weekend to buy a vehicle and let me know how it once a year.

Speaker Change: I'll get on that and just one other quick one on the buybacks I agree your stock is incredibly inexpensive.

Speaker Change: But you were not that aggressive in the first quarter than in the calendar turns just post March you've got pretty aggressive in buying back.

Speaker Change: The share price in the first quarter was 147, roughly on average and post the quarter close was 157% of stock went up a bit I'm just curious how the decisions are getting made on.

Michael M. Manley: You are seeing the impact of those kinds of older vehicles coming through, but I think that, I think we took some good actions in Q1, I think we're in a good place. I think we have upside in our used vehicle market. The CFS is obviously a big, big focus for us.

Speaker Change: That's sort of the speed and sort of operation is on the buyback in Missouri grid that you guys are using because I mean, the stock went up a bit and you actually got more aggressive in buying back just kind of it's a small niche, but im trying to understand what's going on there.

Michael M. Manley: What we ask our general managers and our sales managers to do really is to take a very balanced approach in terms of how they view a transaction with a customer. First and foremost, we would love every single customer to walk out in the car of their dreams from our showroom, and what we try and do is structure a great value package for them. Some of that puts emphasis and focus on protection products.

Speaker Change: No I think you summed it up in your last comment it's a very small net.

Speaker Change: Lastly, our job is to run our business on behalf of our shareholders and we take that very very seriously and I think if you look at our track record in terms of.

Speaker Change: On buybacks.

Speaker Change: A reasonable period of time Youll see that indeed, we have been fortunately.

Speaker Change: Well positioned with the buybacks as we came as normal towards the end of the quarter. When we were trying to balance potential M&A opportunities on the table, where our share prices at the moment, how we're thinking about the use of the capital that we're generating enough free cash flow, we oversee particularly during blackout periods build in optionality for us that matches ours.

Michael M. Manley: Some of that puts emphasis and focus on, you know, their part exchange, their trade vehicle, and where they sit if it's finance. But ultimately, our general managers really are focused on delivering good customer service, good market share, and creating a package that enables our customers to feel that they've got value for their transaction can return to us. And that gives you a wide range of margins spread between TIN and CFS. And outside of that, I would encourage you to go to one of our dealerships this weekend, buy a vehicle, and let me know how it was for you.

Speaker Change: Operations in terms of trying to give the best value to our shareholders and as the market.

Speaker Change: Now what happened in the market.

John Joseph Murphy: I'll get on that. And just one other quick one on the buybacks. I agree, your stock is incredibly inexpensive, but you were not that aggressive in the first quarter. But then, as the calendar turned, you know, just post-March, you got pretty aggressive in buying back. I mean, the share price in the first quarter was $147 roughly on average, and post-quarter close, it was $157. So the stock went up a bit.

Speaker Change: Towards the end of the call will turn early this quarter.

Speaker Change: Some pressure Fortunately, we had enough for site plan in place that meant we could use a mechanism to return some capital to our shareholders and that's our job somewhere around if you want to add one other thing.

Speaker Change: I would add John is.

Speaker Change: First quarter can be able to walk you I mean, we've been blacked out just the blackouts six week long. So yes, we do have <unk> one plans in place.

Speaker Change: They do have the grids.

John Joseph Murphy: I'm just curious how the decisions are getting made on, you know, the sort of speed and sort of voraciousness of the buyback. I mean, is there a grid that you guys are using? Because, I mean, the stock went up a bit, and you actually got more aggressive in buying back. It's a small company, but I'm just trying to understand what's going on.

Her two and they definitely.

Speaker Change: Kick things off.

Speaker Change: Okay.

Speaker Change: Ltd.

Speaker Change: But it does remain a key part of our capital allocation strategy.

Speaker Change: Thanks, John.

John Joseph Murphy: Thank you.

Our next question comes from Rajat Gupta from Jpmorgan.

Michael M. Manley: I think you've summed it up in your last comment. It's a very small net.

Rajat Gupta: Great. Thanks for taking the question.

Michael M. Manley: Firstly, our job is to run our business on behalf of our shareholders and we take that very, very seriously. I think if you look at our track record in terms of buybacks over a reasonable period of time, you'll see that indeed we have been fortunately very well positioned with the buybacks as we came as normal towards the end of the quarter when we're trying to balance potential M&A opportunities on the table, where our share price is at the moment, how we're thinking about the use of the capital that we're generating in our free cash flow.

Rajat Gupta: I had one on automation finance.

Rajat Gupta: Any updated thoughts on how we should think about the cadence.

Rajat Gupta: The net loss there.

Amp up the portfolio.

Speaker Change: In the course of 2024 and maybe into next year.

Speaker Change: Basically how much equity are you putting in using your balance sheet to fund.

These receivables.

Speaker Change: Okay.

Speaker Change: Helpful. Thanks.

Michael M. Manley: We obviously, particularly during blackout periods, build in optionality for us that matches our aspirations in terms of trying to give the best value to our shareholders and as the market, and we all know what happened in the market towards the end of the quarter and early this quarter, felt some pressure. Fortunately, we had enough foresight to put a plan in place that meant we could use a mechanism to return some capital to our shareholders, and that's our job. Tom, I don't know if you want to add to that.

Speaker Change: Hey, Thanks for the question.

Speaker Change: Yes.

Speaker Change: Ben.

Speaker Change: Quite pleased with.

Speaker Change: That acquisition has progressed in the quarter.

Speaker Change: As you know we financed over $160 million.

Speaker Change: Of new originations.

Speaker Change: Delinquencies are behaving quite nicely teams doing a great job there.

The interest margins are quite attractive.

Speaker Change: And overall, we are satisfied with the ports as you know when you're building a portfolio.

Thomas A. Szlosek: The first thing I'd add, John, is that the first quarter can be a little wonky. I mean, we've been blacked out. Just the blackout is six weeks long. So, yes, we do have 10B51 plans in place. And, yes, they do have the grids that you referred to, and they definitely kicked in. So, our opportunities were somewhat limited, but it does remain a key part of our capital allocation strategy. Thanks, John.

Speaker Change: The accounting around the loan loss reserves is pretty punitive.

Speaker Change: Youre basically booking upfront all of all of those loan loss reserve so over doubling the size of our portfolio.

Speaker Change: Youre going to have a lot of upfront.

Speaker Change: Charges in.

Speaker Change: With a portfolio of kind of stabilizes, we'll be experiencing losses, but from a from a net margin perspective, where we.

John Joseph Murphy: Thanks, John. All right. It's a very good one.

Speaker Change: We're quite happy with.

Speaker Change: How the business before we actually ahead of our expectations.

Derek Fiebig: Our next question comes from Rajat Gupta from J.P. Morgan.

Rajat Gupta: Great. Thanks for taking the time to answer the question. I had one on AutoNation Finance. Any updated thoughts on how we should think about, you know, the cadence of, you know, the net loss there, you know, as you ramp up the portfolio through the course of 2024 and maybe into next year? And relatedly, you know, how much equity are you putting in using your balance sheet, you know, to fund these receivables in the near to medium term? I have a follow-up.

Speaker Change: In Florida things things look well in terms of penetration.

They've got.

Speaker Change: We've got to compete with the other.

Speaker Change: Financing alternatives, but it seems doing a nice job penetration continues to grow.

Speaker Change: And so the path forward is quite encouraging for us.

Speaker Change: And I think.

Speaker Change: It will be at a point of.

Thomas A. Szlosek: Acquisition has progressed in the quarter. As you know, we financed over 160 million dollars of new originations. The delinquencies are behaving quite nicely, and teams are doing a great job there.

Breakeven certainly.

Speaker Change: Into that.

Speaker Change: 2025.

Speaker Change: When I look at.

Speaker Change: The funding.

Speaker Change: You have to remember that we still have a portfolio that's comprised of there's.

Thomas A. Szlosek: The interest margins are quite attractive, and you know overall, we're satisfied with the performance. As you know, when you're building a portfolio, the accounting around the loan loss reserves is pretty punitive. You're basically booking up front all of the all of those loan loss reserves. So when we're doubling the size of our portfolio, you're going to have a lot of upfront charges, and until the portfolio kind of stabilizes, you'll be experiencing those losses.

Speaker Change: Some pre Autonation acquisition related receivables, it's probably 40% 50% of the portfolio those those were of a different.

Speaker Change: FICO score and credit.

Speaker Change: Profile and so the funding levels on those are probably not.

Speaker Change: As good as what we see on the on the path forward as you look at the portfolio going forward once it migrates to completely autonation originated loans youll see the funding rates will be quite attractive.

Thomas A. Szlosek: But you know, from a net margin perspective, we're quite happy with how the business is performing. We're actually ahead of our expectations for the quarter. Things look well in terms of penetration. They've got to compete with the other financing alternatives, but the team's doing a nice job. Penetration continues to grow, and so fast forward is quite encouraging. And I think, you know...

Speaker Change: And it will really prove itself out when we do our first securitization I don't expect anything in 2024.

Speaker Change: Portfolio need some time to season before the market.

Thomas A. Szlosek: It will be at a point of breakeven, certainly, you know, into early 2025. When I look at the funding, you have to remember that we still have a portfolio that's comprised of some pre-AutoNation acquisition-related receivables; it's probably 40-50% of the portfolio. Those were of a different FICO score and credit profile, and so the funding levels on those are probably not as good as what you see on the path forward. As you look at the portfolio going forward, once it migrates to completely AutoNation-originated loans, you'll see the funding rates will be quite attractive.

Speaker Change: Be interested but in.

Speaker Change: In 2025, I expect to get.

Speaker Change: Attractive.

Funding for elimination.

Speaker Change: Originations, probably north of 90, 95%.

Speaker Change: Got it got it.

Speaker Change: Just to follow up on parts and service.

Speaker Change: Obviously pretty strong trends here.

Speaker Change: The second quarter in a row.

Speaker Change: Worsens like your peer group.

Thomas A. Szlosek: And it'll really prove itself when we do our first securitization. I don't expect anything in 2024. Our portfolio needs some time this season before the market will be interested. But, you know, in 2025, I expect to get, you know, pretty attractive funding for getting AutoNation related origination, probably north of 95.

Speaker Change: Could you help us quantify how much was how much of a year over year growth was driven by.

Speaker Change: Just to mix and price on the orders, we're seeing just the traffic at the stores and how should we think about.

Speaker Change: The growth rate at this point.

Speaker Change: Same store basis for that for the remainder of the year.

Rajat Gupta: Got it, got it. And just to follow up on, you know, parts and service, you know, obviously pretty strong trends here for the second quarter in a row versus your peer group. Could you help us quantify, you know, how much of the year over year growth was driven by, you know, just the mix and price on the orders versus, you know, just the traffic at the stores? And actually think about, you know, the growth rate, at least on a

Speaker Change: Yes.

Speaker Change: Yes, absolutely.

Speaker Change: Also the growth rate.

Speaker Change: Kind of where the growth came from and then they will give a little bit of commentary on how Christian in the same thinking yes.

Speaker Change: It was solid performance.

Speaker Change: Characterize it probably is.

Speaker Change: Yeah.

Speaker Change: Not.

Speaker Change: It related to.

Speaker Change: Traffic and volumes across the different.

Speaker Change: Our revenue streams.

Speaker Change: I'd say the balance is higher value orders.

Speaker Change: The complexity of.

Thomas A. Szlosek: Yeah, Tom, if you answer the growth rate, give them kind of where the growth came from, and then I'll give a little bit of commentary on how Christian and the team are thinking about it. Yeah, no, it was a solid performance.

The orders that.

Speaker Change: Will it come through are creating.

Speaker Change: The higher revenue and better profitability.

Speaker Change: It's probably a third two thirds, so I would think about it.

Thomas A. Szlosek: I mean, I'd characterize it probably as, you know, a third, related to, you know, traffic and volumes across the different revenue streams. I'd say the balance is, you know, higher-value repair orders, the complexity of, you know, the orders that come through are creating, you know, higher revenue and better profitability. So I'd say it's probably a third or two thirds of the way I think about it. Just a little bit of commentary if I could get it quick on how Christian and the teams are thinking about the year. It was a good year last year, no doubt.

Speaker Change: Just a little bit of commentary if I may quickly on I don't know Christian and the teams are thinking about thinking about the yen.

Speaker Change: It was a good year last year no doubt we added about I think from memory something like 300 net.

Speaker Change: Net technicians across the various.

Speaker Change: Certification brands into the business and that excludes mobile services just purely that.

Speaker Change: Efficient really into into our dealerships.

Speaker Change: We still have.

Speaker Change: Quite a lot of capacity in terms of buys the investments <unk> made in their dealerships over the years has created that.

Michael M. Manley: We added about, I think, from memory, something like 300 NET technicians across the various certification bands into the business. And that excludes mobile services, just purely technicians really into our dealerships. We still have quite a lot of capacity in terms of bays. The investments that AutoNation has made in their dealerships over the years have created that bay capacity for us, which is great because they're certainly upside in the vehicle park. And I think what we're working on is to try different things to see how we can penetrate older vehicles, bring them back into that franchise environment, and continue to grow. That will require additional technician resources, so working hard on the career path for those guys and girls in the business to keep them, because, as you know, it's a very limited and heavily sought-after resource out there, and we need to make sure we continue to work on those elements as well as So, big focus again for Christian and the team coming off of what I think was a good quarter.

Speaker Change: Bank capacity for us, which is great because there's certainly upside in the vehicle Park and I think what we've what we're working on is to try different things to see how we can penetrate older vehicles, bringing them back into that franchise environment and continue to and continue to grow and that will require additional technician measles.

Speaker Change: We're working hard on the career path for those guys and goes in the business to keep them because as you know, it's a very limited and heavily sold off the <unk>.

Speaker Change: We know what's out there and we need to make sure. We continue to work on those elements as well as well as communicate well to the vehicle to get them into our showroom. So big focus again for Christian Entertainment coming off of what I think it was a good quarter for them.

Speaker Change: Got it got it thanks for the color I'll get back in queue.

Speaker Change: Our next question comes from Bret Jordan from Jefferies.

Bret David Jordan: Hey, good morning, guys.

Bret David Jordan: Could you talk about the contribution of the mobile service initiatives the parts and service is that gaining scale.

Bret David Jordan: Yes, let me let me cover that so as you know we were at the end of last year, we rebranded that business now also mentioned mobile services.

Rajat Gupta: Got it, got it. Thanks for the call. I'll get back to you. Our next question comes from...

Bret David Jordan: We.

Derek Fiebig: Our next question comes from Bret Jordan from Jeffreys. Hey, good morning, guys. Did you talk about the contribution of the mobile service?

We continue to integrate it into our market areas, where we have density.

Bret David Jordan: Still.

Bret David Jordan: Working through the technical integration of that business into all of our legacy systems within here, but I would tell you that it is gaining traction in terms of revenue it doesn't breakeven process at this moment in time, we never expected it to for the balance of this year.

Bret David Jordan: Yeah, let me cover that. So, as you know, towards the end of last year, we rebranded that business. It's now AutoNation Mobile Services. We have continued to integrate it into our market areas where we have density. We are still working through the technical integration of that business into all of our legacy systems here, but I would tell you that it is gaining traction in terms of its revenue. It doesn't break even for us at this moment in time, but we never expected it to for the balance of this year.

Bret David Jordan: It is doing is introduced over 120, new customers two autonation that new completely new to us as well as now the programs. We've put in place in terms of if you're using it to support <unk> USA.

All beginning to kick in that will take some time, because that's a slow burn as you can imagine people.

Michael M. Manley: But what it is doing is it's introduced over 120,000 new customers to AutoNation. They're new, completely new to us, as well as now the programs we've put in place in terms of using it to support ANUSA are beginning to kick in. That will take some time because that's a slow burn, as you can imagine.

Bret David Jordan: I believe somewhere between 10 and 15 months before.

Bret David Jordan: Good service, but obviously it can be there to pick up the rebrand and when do you think that Autonation USA Sunpower is solid about 75000 cars.

Michael M. Manley: People invariably are somewhere between 10 and 15 months before they need service, but obviously, it can be there to pick up the repairs. When you think that AutoNation USA has so far sold about 75,000 cars, even if you think 50% of those cars find their way into one of our franchise businesses, it's creating quite a healthy path for mobile services to go and provide service and warranty for. So I think we're probably behind where I'd wanted to be with mobile services at this point, but I do see our traction improving and picking up.

Bret David Jordan: Even if you think 50% of those costs on their way into one of our franchise business is creating quite a healthy part who mobile services to go in to go and provide service and warranty pools.

Bret David Jordan: I think we'd probably behind where I had wanted to be with my boss answers at this point.

Bret David Jordan: I do see our traction improving and picking up and I do see.

Bret David Jordan: How it is now beginning to introduce a lot of customers, which is exactly what we wanted it to do.

Speaker Change: Okay, and then can you cite any regional dispersion I've always there's a lot of mixed dispersion or you're seeing some markets performing better than others, just sort of as like as an economic indicator.

Michael M. Manley: Okay, and then can you tell me about any regional dispersion? I know there's a lot of mixed dispersion, but are you seeing some markets performing better than others just sort of as like an economic indicator? Are you talking in general, or are you talking from a...

Speaker Change: Are you talking in general are you talking for mobile service in general, Yes from a really from a from a vehicle sales standpoint, or some markets, particularly stronger than others.

Michael M. Manley: In general, yeah, really, from a vehicle sales standpoint or some other market... [inaudible] So from my point of view, I would tell you that we don't see any markets particularly stronger than others. If you think about where we have the majority of our businesses, obviously, California, Arizona, Texas, Florida, those states are particularly strong and have been very resilient. This time of year, obviously, as we come into spring, is the heavy truck season. So obviously, for us, trucks have been a big focus, particularly in those domestic franchises that we have.

Speaker Change: Yeah.

Speaker Change: So from my point of view I would tell you that we don't see some markets, particularly stronger than others.

Speaker Change: Think about our web.

Speaker Change: We have the majority of our businesses, obviously, California, Arizona, Texas.

Speaker Change: Florida.

Speaker Change: Those types of particularly strong has been very very resilient.

This time of year, obviously is as we come into spring as heavy truck season. So obviously <unk> been a big focus, particularly in our domestic franchises that we have but when I look across our businesses I think we have further opportunity in Texas, but there is nothing to do with the market, it's more opportunity for footwear.

Michael M. Manley: But when I look across our businesses, I think we have further opportunity in Texas, but it's nothing to do with the market. It's more opportunity for where we are. Florida continues to be strong for us. Our market president here is one of our key talents in the marketplace, and he always looks for improved performance. But Tom, unless I'm missing anything, I think we have a really reasonably balanced performance. Yes, I think so.

Speaker Change: Florida continues to be strong for us our market President here is one of our one of our key talent in the marketplace and he always looks fine looks for improved performance, but Tom unless im missing anything I think Tim really quiet.

Speaker Change: Recently balanced performance.

Great. Thank you.

Derek Fiebig: As a reminder, to ask a question, please press star followed by 1 on your telephone keypad. Our next question comes from Douglas Dutton from Evercore.

Speaker Change: As a reminder to ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: Our next question comes from Douglas Button from Evercore.

Douglas Dutton: Hey, team. Congratulations on the nice quarter here. I just wanted to ask one on SG&A, and you know, it remains around that 65 or 66% area, which is understandable given some of the customer-facing initiatives that you're working on. But in a more normalized state, can you remind us where you'd like to see SG&A as a percentage of gross and maybe what's the loose timeline you would aim for there?

Hey, Tim Congrats on the nice quarter here I just wanted to ask one on SG&A and it remains around that $65 to 66% area, which is understandable given some of the customer facing initiatives that youre working on but in a more normalized state can you remind us where you'd like to see SG&A as a percentage of gross and maybe whats the loose timeline.

Speaker Change: You would aim for there.

Thomas A. Szlosek: Absolutely. Tom will be happy to do that.

Speaker Change: Absolutely Tom will be asked to do that no.

Thomas A. Szlosek: In the short term, I think the performance in the quarter, just north of 66, I see that as sustainable for the next few quarters. We do have a fair amount of moderation in the new and used PBRs that's impacting gross profit. If you look at SG&A itself, it's actually close to flat year-over-year from a spending perspective. It's set up nicely to have a decent correlation with gross profit when it comes to incentives because compensation is probably the largest element of SG&A, so our compensation structures There's moderation. It moderates as well.

Tom: But you're right I think short term I think the performance in the quarter, just north of 66, I see that as a sustaining.

Tom: For the next few quarters, we do have.

Speaker Change: A fair amount of moderation in there.

Speaker Change: New and used PBR is that impacting gross profit if you look at the SG&A itself.

Speaker Change: It's actually close to flat year over year from a spending perspective, and it set up nicely too.

Speaker Change: You'll have a decent correlation with with gross profit when it comes to incentives.

Speaker Change: This compensation is probably the largest element of.

Speaker Change: The SG&A so.

Speaker Change: Compensation structures are meant to.

Speaker Change: Reward excellent performance and when there is.

Speaker Change: There is moderation.

Speaker Change: It moderates as well.

Thomas A. Szlosek: I'd say the other parts of SG&A have behaved probably very efficiently. We're seeing good traction in some of the initiatives that we have to reduce costs in areas where we spend indirectly on things like insurance, real estate, and other things. So it's a good focus on driving productivity there. And we're going to continue to have elevated marketing expenses or growing marketing expenses as we pursue some of these new initiatives. So on balance, I'd say probably the mid-60s is where I would see, on a longer term basis, SG&A as a percentage of gross profit, but again, with a good focus on keeping, you know, the fixed elements of it fixed.

Speaker Change: I'd say the other the other parts of SG&A.

Speaker Change: Have.

Speaker Change: Behaved probably.

Speaker Change: Very efficiently.

Speaker Change: We're seeing good traction in some of the initiatives that we have to.

Speaker Change: Reduced cost.

Speaker Change: In areas, where we spend indirectly on things like insurance real estate.

Speaker Change: And other things so we focus on driving productivity there.

Speaker Change: And we're going to continue to have.

Speaker Change: Elevated marketing expenses are growing and marketing expenses as we pursue some of these.

Speaker Change: New initiatives, so on balance I would say.

Speaker Change: Probably.

Speaker Change: Mid Sixty's is where I would see.

Speaker Change: On a longer term basis SG&A as a percentage of gross profit, but again with a good focus on keeping.

Speaker Change: The fixed elements of it fixed.

Michael M. Manley: So, I'm just going to add a little bit of my costume to Doug as well, just to pick up on that. Obviously, there's trade-offs in terms of some of the investments that we're making, and for example, even though Total SG&A on a dollar basis, Tom, I think gave you the right color on that, what we've seen is increased investment in certain areas to drive our business, for example, courtesy and loaner vehicles.

Speaker Change: How much that's okay, I'm, just going to add a little bit monitoring to doctors as well just to pick up on that.

Speaker Change: Obviously, there are tradeoffs in terms of some of the investments that we're making for example, even though total SG&A on a dollar basis.

Speaker Change: I think gave you the right color on that what we've seen is increased investment in certain areas to drive our business for.

Speaker Change: For example, who kind of stand alone of vehicles, we have.

Michael M. Manley: We've made progressive investments over the course of last year and will continue into this year as we try to grow our service offering, and obviously, we've seen the benefit of after sales growth, but we're also seeing some reduction in terms of the investments we're making in some of our new initiatives. We spent a reasonable amount of money investing in our micro-lease business, for example, last year, and that's now at the stage where we're going to integrate it more into our business, which will reduce the standalone investment in that.

Speaker Change: Progressive investments over the course of last year and continue into this year as we've tried to grow also have this offering and obviously we've seen the benefit of sales growth, but we're also seeing some reduction in terms of the investments we're making in some of our new initiatives. We spent a reasonable amount of money investing in our micro <unk> business for example last year.

Speaker Change: And that's now at this stage when we are going to integrate it more into our business, which will reduce the standalone investment in that and we've traded that investment for other.

Michael M. Manley: We've traded that investment for other areas such as that courtesy car and loaner and that's something really that we're trying to do internally is recognizing we would like to invest in new initiatives and schemes, but also making sure that the core business gets what it needs as things become more available and as you know, last few years, we've very tight vehicle supply, courtesy cars were under pressure as that easing of it, we're now able to give that service to our customers and then the other area that we invest in is obviously on our people and we're seeing not just inflationary increases in terms of people, but also some of the other things that we're doing to try and make sure that we reduce turnover and improve engagement in our team. So it is a balance, but within that range that Tom talked about, hopefully that, Carla, that helps.

Speaker Change: Areas, such as that courtesy car alone are not something really that we're trying to do internally recognizing we would like to invest in new initiatives since gains, but also making sure that the pool business gets what it needs.

Speaker Change: As things.

Speaker Change: <unk> become more available and as you know last few years with very tight vehicle supply cut as you guys are under pressure or is that easing a bit now, but able to give that service to our customers and then the other area that we invest in is obviously on our people and we are seeing not just inflationary increases in terms of people, but also some of the other things that we're doing to try and make sure that we.

Speaker Change: Reduce turnover and improve.

Speaker Change: Improve engagement.

Speaker Change: It is a balance but within that range that Tom talked about hopefully that color Doug houses as well.

Douglas Dutton: No, excellent. That's great detail. I appreciate the detailed answer here. Just a quick one on CFS, too. You said there were good attach rates there, about $160 million in new loans this quarter, and the portfolio is now at about $560 million. Do you expect a similar cadence going forward on originations and penetration? Or how should we think about that growth as we progress through the rest of the year and next year?

Speaker Change: Excellent that's great detail I appreciate the detailed answer here just a quick one on CFS too.

Speaker Change: Theres going to attach rates, there about $160 million in new loans this quarter and the portfolio is now at about $560 million.

Speaker Change: Do you expect a similar cadence going forward on originations in penetration or how should we think about that growth as we progress through the rest of the year into next year.

Thomas A. Szlosek: Yeah, great question. Doug, I don't think you can expect the portfolio to double every year. I mean, you know, we are dealing with, I mean, the reason we use the word captive is it's a captive market for us in that, you know, we're dealing with the 300 million, or sorry, 300 or so, you know, AutoNation stores. And the name of the game is to get as much penetration as we can in the, you know, financing business. But there is a limit to that.

Yeah.

Speaker Change: Great question, Doug I don't think you can expect the portfolio to double every year I mean, we are dealing with these.

Speaker Change: These were captives.

Speaker Change: <unk> market for us.

Speaker Change: And that we're dealing with the 300 million or so 300 or so.

The Autonation stores.

Speaker Change: And the name of the game is to get as much penetration as we can on the financing business, but there is there is a limit to that I do think the earlier years of <unk>.

Thomas A. Szlosek: I do think in the earlier years of finance, you'll see, you know, very, very, you know, outsized growth rates. But I think the portfolio doubling this year, you know, that just mathematically can't happen every year, but it will give us good growth. And as I said earlier, I do expect once we get to a normalized portfolio size and we begin to do some securitizations, I think you'll see some nice accretions from an earnings perspective to the company once we get to that point of stabilization. So we're all in on it. It's highly supported by our operating teams, and it really is improving the relationship we have with our customers. Yeah, it's got massive, I mean that business has got massive.

Speaker Change: As Youll see.

Harry outs.

Speaker Change: Outsized growth rates.

Speaker Change: But I think the portfolio doubling this year.

Speaker Change: Yes.

Speaker Change: Mathematically can't happen.

Speaker Change: Every year, but it will give us good growth.

Speaker Change: As I said earlier I do expect once we get to a normalized portfolio size and we get we begin to do some securitization.

Speaker Change: I think I think you'll see.

Some nice accretion from an earnings perspective.

Speaker Change: Once we get to that at that point of stabilization. So we're all in on it.

Speaker Change: Supported by our.

Speaker Change: Our operating teams.

Speaker Change: And it's it's really is improving.

Speaker Change: Should we have with our customers.

Speaker Change: It's not massive I mean that business got massive SG&A leverage.

Thomas A. Szlosek: It's got massive, I mean that business has got massive SG&A leverage; I mean all the pipe works there. So it is about now really increasing the throughput in a very deliberate and thoughtful way.

Speaker Change: The pipeline today. So it is about now.

Speaker Change: Really.

Speaker Change: Increasing the throughput in a very deliberate and thoughtful way okay. Thank you.

Thomas A. Szlosek: Makes sense. Thanks, Tom. Thanks, Mike.

Speaker Change: Makes sense, thanks, Tom Thanks, Mike.

Speaker Change: Yeah.

Speaker Change: Okay.

Colin M. Langan: Our next question comes from Colin Langan from Wells Fargo.

Speaker Change: Our next question comes from Colin Langan from Wells Fargo.

Colin M. Langan: Thanks for checking my questions. Can you remind us of your latest thinking on where new gross profits go? I mean, I think the comments in the past were that you thought it would get back to, on a percent basis, you know, historic levels. Is that still the thinking, and any concern that maybe we kind of overcorrect as things continue to normalize?

Colin M. Langan: Oh, great. Thanks for taking my questions.

Colin M. Langan: Can you just remind us your latest thinking on where new.

Colin M. Langan: Gross profit scale I mean, I think the comments in the past that you thought it would get back to an.

A percent basis.

Colin M. Langan: <unk> level is that still the thinking and any concern that maybe we kind of overcorrected things continue to normalize.

Michael M. Manley: Yeah Colin, thanks for the question. I'm going to answer it now.

Speaker Change: Yes, thanks for the question.

Speaker Change: <unk>.

Speaker Change: I'm going to answer it so.

Michael M. Manley: So, um... As I think about new vehicle margins, there's a number of dynamics I'll just very briefly touch on. You're right in terms of percentage margin. What you've seen since, let's take 2019 as the... as the pre-pandemic year.

Speaker Change: As I think about new vehicle margins, there's a number of dynamics I'll, just very briefly touch on right in terms of a.

Speaker Change: Percentage margin, what you've seen since let's take 2019 as.

Speaker Change: As the pre pandemic year, what you've seen since then and now is obviously significant increase in ISP and I don't say, even though I see Isps motor racing.

Michael M. Manley: What you've seen since then and now is obviously significant increase in ASPs. And I don't see, even though I see ASPs moderating as we go forward, as mix comes back into a more normalized level, as OEMs continue to gradually increase their incentive to stimulate demand, I don't see ASPs returning back to the 2019 level, which inherently, if you're able to hold obviously the percentage margin means from a dollar perspective on a per unit basis, we should and can probably expect, higher dollar margins than we saw pre-pandemic, even if we return to that percentage margin that you mentioned at the beginning.

Speaker Change: As we go forward and mix comes back into a more normalized level as well.

Speaker Change: We.

Speaker Change: Continue to gradually increase their incentives to stimulate demand I don't see Isps returning back to the 2019 level, which inherently if you're able to hold obviously the percentage margin means from a dollar perspective on a per unit basis.

Speaker Change: We should probably expect.

Speaker Change: Higher dollar margins and we saw pre pandemic.

Speaker Change: Even if we return to that percentage margin that you mentioned at the beginning obviously as we transition as an industry into.

Michael M. Manley: Obviously, as we transition as an industry into higher levels of electrified vehicles, we know from the impact that we saw in 2023 and still see in terms of tin margin, and tin margin, for me, is purely what's attributable to the vehicle excluding everything else. Tin margin came under pressure, particularly in fully electrified vehicles, as OEMs, dealers, all of us were trying to stimulate. Take away that to some extent, as I've mentioned, the balance at the beginning of my opening comments is why we are thinking favorably about that, but that is a dynamic that will have an impact on our business until OEMs are able to drive the cost of those vehicles down.

Speaker Change: Higher levels of electrified vehicles.

Speaker Change: We know from the impact that we saw in 2023 and still see in terms of 10 margin 10 margin from me, it's purely what's attributable to the vehicle excluding everything else Tim.

Speaker Change: Margin came under pressure, particularly in fully electrified vehicles.

Speaker Change: As.

Speaker Change: OEM dealers all of this we're trying to stimulate.

Speaker Change: Take rates that to some extent as I've mentioned the balance at the beginning of my opening comments I think as well.

Speaker Change: We.

Speaker Change: I think you'd favorably about that but that is a dynamic that will until July until the Oems are able to drive the cost lower in those vehicles.

Speaker Change: On our business.

Michael M. Manley: But what has changed is if you look at the lease rates of electrified vehicles, they've doubled in the last 12 months, and leasing electrified vehicles, in my view, more balances the contribution to the ASP in the marketplace that customers are happy or are more prepared to accept. Quite a lot in my answer, apologies for that, but that's kind of my thinking on new vehicles in total.

Speaker Change: But what has changed is if you look at the lease rates of electrified vehicles that doubled in the last 12 months and leasing electrified vehicles in my view more balances.

Speaker Change: <unk>.

Speaker Change: Contribution to the ASP in the marketplace with our customers.

Speaker Change: I'm happy to provide.

Speaker Change: To accept.

Speaker Change: Quite a lot in my answer I apologize for that but that's kind of my thinking on new vehicles in total.

Colin M. Langan: And any, you know, given the, we've seen you kind of indicated, I think, you know, 69 days of domestic supply, how has the profitability of certain brands already kind of returned to a normal level of profits? And is that consistent with the thinking that, on a percent basis, they're kind of similar to pre-COVID levels for those that are kind of getting closer to being fully vaccinated?

Speaker Change: And given the we've seen you've kind of indicated I think 69 days of domestic supply how does the profitability.

Speaker Change: I have certain brands already kind of returned to a normalized level of profits.

Speaker Change: Is that consistent with the thinking that on a percent basis, they're kind of similar to pre COVID-19 levels for those that are kind of getting closer to being fully back.

Michael M. Manley: I mean, it's very fluid at this moment in time, and so if you look at our portfolio, we have 31 brands across our portfolio, so we get quite a very broad view of what's going on in the marketplace. And there are certain manufacturers whose days of supply are not back to where they were in, say, 2018, 2019, from a days of supply perspective, but neither is the overall new vehicle market. So obviously, we have seen different dynamics in terms of margin by OEM, still some of that driven purely by the supply and demand curve, but as OEMs have been able to fill up their pipeline, and we've got more mix on the ground, you've also seen an incremental increase in terms of their incentive, in terms of the use of leasing, rather than pure finance.

Speaker Change: I mean, it's very fluid at this moment in time and so.

Speaker Change: So if you look at our portfolio, we have 31 brands across our portfolio. So we get we get quite a very broad view of what's going on in the marketplace.

Speaker Change: Certain manufacturers, whose dieses.

Speaker Change: Days of supply and not back to where they were.

Speaker Change: In say 2018, 2019 from a days of supply.

Speaker Change: But neither is the overall new vehicle market. So obviously, we are seeing different dynamics in terms of margin by OEM still some of that driven purely by the supply and demand.

Speaker Change: So as the Oems have been able to fill up that pipeline and we've built more mix on the ground. You've also seen an incremental increase in terms of their incentive in terms of the use of leasing rather than pure finance and as such we do see an impact on our margin, which you see in our P&L.

Michael M. Manley: And as such, we do see an impact on our margin, which you can see in our P&L. But from my point of view, our net result on what I've said suggests that even with those supplies that will continue to increase from a dollar perspective per unit, even though it's going to moderate for sure during the balance of this year, I don't see anyone quite yet back to exactly where they were on 18, 19, 2018.

Speaker Change: But from my point of view on net result, and what Ive said suggest that even with that supply that will continue to increase from a dollar perspective our unit.

Speaker Change: Even though it's going to moderate for sure during the balance of this year.

Speaker Change: Sandy one quite yet exactly where they were 18 19.

Colin M. Langan: Got it. All right. Thanks for taking my questions.

Speaker Change: Got it alright, thanks for taking my questions.

Derek Fiebig: And that was our final question, so I will now hand you back over to Mike Manley.

Speaker Change: And that was our final question I will now hand, you back over to Mike Manley.

Michael M. Manley: Yeah, thank you, everybody. And again, thank you very much for taking the time to be on the call with us today. As we mentioned, you know, I think AutoNation once again delivered solid operating results in the quarter, and our efforts resulted in strong cash conversion, which, as we've discussed on this call, provided us with the flexibility to deploy capital for our attractive returns. Obviously, we're going to continue to invest in the growth of our businesses.

Michael M. Manley: Yes. Thank you everybody and again, thank you very much for taking the time debate on the call with US today as we mentioned.

Michael M. Manley: I think autonation once again delivered solid operating results in the quarter and our efforts resulted in strong cash conversion, which as we've discussed on this call will provided us with the flexibility to deploy capital for attractive returns. Obviously, we're going to continue to invest in the growth of our businesses, we look to optimize our operations build on the fantastic.

Michael M. Manley: We look to optimize our operations, build on the fantastic footprint and portfolio of stores that we've had. And in closing, I would say that although I'm certain 2024 will continue to bring its normal mix of headwinds and tailwinds, I think the AutoNation team understands what we would like to deliver and is very focused on delivering that. And ultimately, that will result in what I am determined to deliver, and that is great shareholder returns. Thank you.

Michael M. Manley: <unk> footprint and portfolio of stores that we've had and in closing I would say that although I'm sorry in 2021, we will continue to bring a normal mix that headwind and tailwind.

Michael M. Manley: The Autonation team understand what we would like to deliver very focused on delivering.

Michael M. Manley: And ultimately that will that will.

That will result in what I am determined to deliver and that's great shareholder returns. Thank you.

Operator: And this concludes today's call. Thank you for joining us. You may now disconnect your line.

And this concludes today's call. Thank you for joining you may now disconnect your lines.

Michael M. Manley: Yeah.

Michael M. Manley: [music].

Michael M. Manley: Yeah.

Michael M. Manley: Okay.

Okay.