Q1 2024 Asbury Automotive Group Inc Earnings Call
Operator: Greetings and welcome to the Asbury Automotive Group first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Chris Reeves, VP of Finance and Investor Relations. Please go ahead.
Greetings and welcome to the Asbury Automotive group first quarter 2024 earnings call.
At this time all participants are in a listen only mode.
And the answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Chris Reaps VP of Finance and Investor Relations. Please go ahead.
Chris Reeds: Thanks, operator, and good morning. As noted, today's call is being recorded and will be available for replay later this afternoon. Welcome to Asbury Automotive Group's first quarter 2024 earnings call. The press release detailing Asbury's first quarter results was issued earlier this morning and is posted on our website at investors.asburyauto.com. Participating with me today are David Hult, our President and Chief Executive Officer, Dan Clara, our Senior Vice President of Operations, and Michael Welch, our Senior Vice President and Chief Financial Officer.
Chris Reeds: Thanks, operator, and good morning as noted today's call is being recorded and will be available for replay later. This afternoon welcome to Asbury automotive group's first quarter 'twenty 'twenty four earnings call.
Yes release detailing Asbury first quarter results was issued earlier this morning and is posted on our website at investors Dot Asbury auto dotcom.
Speaker Change: Participating with me today are David Hult, our President and Chief Executive Officer, Dan Clara, Our senior Vice President of operations and Michael Welch, Our senior Vice President and Chief Financial Officer at the conclusion of our remarks, we will open up the call for questions and we will be available later for any follow up questions.
Chris Reeds: At the conclusion of our remarks, we will open the call for questions, and we will be available later for any follow-up questions. Before we begin, we must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature, which may include financial projections, forecasts, and current expectations, each of which is subject to significant uncertainty. For information regarding certain of the risks that may cause actual results to differ materially from these statements, please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2023, any subsequently filed quarterly reports on Form 10-Q, and our earnings release issued earlier today.
Before we begin we must remind you that the discussion during the call today is likely to contain forward looking statements forward looking statements are statements other than those which are historical in nature, which may include financial projections forecast and current expectations each of which are subject to significant uncertainties.
Speaker Change: For information regarding regarding certain of the risks that may cause actual results to differ materially from these statements. Please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2023, any subsequently filed quarterly reports on Form 10-Q, and our earnings release issued earlier.
Speaker Change: Today, we expressly disclaim any responsibility to update forward looking statements and.
Chris Reeds: We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed during this call. As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website. We have also posted an updated investor presentation on our website, investors.asburyauto.com, highlighting our first quarter results. It is my pleasure to now hand the call over to our CEO, David Hult. David
Speaker Change: In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call as required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website.
Speaker Change: We have also posted an updated investor presentation on our website investors got Asbury auto dot com, highlighting our first quarter results.
Speaker Change: It is my pleasure to now hand, the call over to our CEO, David Hult David.
David W. Hult: Thank you, Chris. Good morning, everyone.
David W. Hult: Thank you Chris.
David W. Hult: Good morning, everyone welcome to our first quarter earnings call.
David W. Hult: Welcome to our first quarter earnings call. I want to start by saying I am proud of the hardworking efforts of our team members who delivered our first ever quarter of more than $4 billion in revenue. As we continue to progress along our growth strategy, it is important to reflect on the performance of all of our team members, leaders, and platforms that are powering our path forward, including our first fully operational quarter with our new team members from the Koons Group. Thank you all very much.
David W. Hult: I wanted to start by saying I am proud of the hard working efforts of our team members, who delivered our first ever quarter of more than 4 billion in revenue.
David W. Hult: As we continue to progress along our growth strategy is important to reflect on the performance of all of our team members leaders and platforms that are powering our path forward.
David W. Hult: Including our first fully operational quarter with our new team members from the cones group. Thank you all very much.
David W. Hult: <unk>.
David W. Hult: In our second quarter 2023 earnings release, we said there would be integration-related headwinds to our parts and service business that would extend into the third and fourth quarter before improving in Q1 of 2024. This quarter's performance shows we are progressing, and we expect this portion of the business to grow at mid-single digits or higher through year-end. In the fourth quarter earnings call, we discussed our commitment to a more aggressive stance in our pre-owned sources. We maintain same-store PVRs quarter over quarter and increase same-store unit volume by more than 9% or 2,700 units versus the fourth quarter of 2023.
David W. Hult: And our second quarter 2023 earnings release, we said there would be integration related headwinds to our parts and service business that would extend into the third and fourth quarter before improving in Q1 of 2024.
David W. Hult: This quarters performance shows we are progressing and expect this portion of the business to grow at mid single digits or higher through year end.
David W. Hult: In the fourth quarter earnings call, we discussed our commitment to a more aggressive stance in our pre owned sourcing.
David W. Hult: We maintain same store P V r's quarter over quarter and increase same store unit volume by more than 9% or 2007 hundred units versus the fourth quarter of 2023.
David W. Hult: Now for our consolidated results for the first quarter.
David W. Hult: Now for our consolidated results for the first quarter. We generated $4.2 billion in revenue, had a gross profit margin of 17.9%, and our SG&A as a percentage of gross profit was 62.5%. We delivered an operating margin of 6.3%. Our earnings per share was $7.21, and our EBITDA was $259 million.
David W. Hult: We generated $4 2 billion in revenue.
David W. Hult: Had a gross profit margin of 17, 9%.
David W. Hult: And our SG&A as a percentage of gross profit was 62.5%.
David W. Hult: We delivered an operating margin of six 3%.
David W. Hult: Our earnings per share was $7 and 21.
David W. Hult: And our EBITDA was $259 million.
David W. Hult: As part of our multi-year capital allocation plan, we repurchased 240,000 shares for $50 million in the first quarter. We continue to be opportunistic with our capital deployment. Prioritizing the most strategic and accretive use of capital, we continuously evaluate the performance of our portfolio, making acquisitions or divestitures where it makes the most sense. We divested a Lexus store in Delaware during the first quarter, per our OEM framework agreement, and we will monitor opportunities to make other changes to the portfolio throughout the year.
David W. Hult: As part of our multi year capital allocation plan, we repurchased 240000 shares for $50 million in the first quarter.
David W. Hult: We continue to be opportunistic with our capital deployment.
David W. Hult: Prioritizing the most strategic and accretive use of capital.
David W. Hult: We continuously evaluate the performance of our portfolio.
David W. Hult: <unk> acquisitions or divestitures, where it makes the most sense.
David W. Hult: We divested Alexia store in Delaware during the first quarter.
David W. Hult: Our our OEM framework agreement and we will monitor opportunities to make other changes to the portfolio throughout the year.
David W. Hult: Looking ahead, there are factors like our brand mix that may influence our volumes for new vehicles and lead to near-term headwinds on performance. We are still in a tight market when it comes to sourcing quality used vehicles efficiently, and we will continue to prioritize profitable growth. I'd also like to highlight that we published our Corporate Responsibility Report this month. We invite you to read it if you haven't already.
David W. Hult: Looking ahead, there are factors like our brand mix that may influence our volumes on new and lead to near term headwinds and performance.
David W. Hult: We are still in a tight market when it comes to sourcing quality used vehicles efficiently and we will continue to prioritize profitable growth.
David W. Hult: I'd also like to highlight that we published our corporate responsibility report this month.
Speaker Change: We invite you to read it if you haven't already.
David W. Hult: Now, before I hand the call over to Dan, I want to say thank you again to our team members, as together we strive to be the most gas-centric automotive retailer. Now Dan will discuss our operational performance. Dan?
David W. Hult: Now before I hand, the call over to Dan.
Daniel Clara: I wanted to say, thank you again to our team members as together, we strive to be the most guest centric automotive retailer.
Daniel Clara: Now Dan will discuss our operational performance Dan.
Daniel Clara: Thank you, David, and good morning, everyone. I'll join David in also thanking our team members for driving our strong results and delivering a best-in-class experience. Now, moving to same-store performance, which includes dealerships and TCA, unless stated otherwise, starting with new vehicles. Overall, we were pleased with our new vehicle PBR performance given current market conditions; same store revenue decreased 1%, and new unit volume was flat to the prior year. The new average gross profit per vehicle was $3,988, and the new vehicle gross margin was 7.8%.
Daniel Clara: Thank you David and good morning, everyone I'll join David and also thanking our team members driving our strong results and delivering a best in class experience now.
Daniel Clara: Now moving to same store performance, which includes the dealerships and TCA unless stated otherwise.
Daniel Clara: Starting with new vehicles overall.
Daniel Clara: Overall, we were pleased with our new vehicle P D. Our performance given current market conditions.
Daniel Clara: Same store revenue decreased 1% and new unit volume was flat to prior year.
Daniel Clara: New average gross profit per vehicle was $3988.
Daniel Clara: And our new vehicle gross margin was seven 8%.
Daniel Clara: Our same store new day supply was 53 days at the end of March, compared to 43 days at the end of the fourth quarter, a trend consistent with industry-wide growth in inventories. We continue to manage an appropriate day supply and volume in new cars given our brand. Turning to used vehicles.
Daniel Clara: Our same store New day supply was 53 days at the end of March compared to 43 days at the end of the fourth quarter.
Daniel Clara: And consistent with industry wide growth in inventory.
Daniel Clara: We continue to manage to an appropriate days' supply and volume in new cars, given our brand mix.
Daniel Clara: Turning to used vehicles used retail revenue decreased 4% for the quarter as we expected due to lower cost of sale.
Daniel Clara: Used retail revenue decreased 4% for the quarter, as we expected due to lower costs of sale. Unit volume, while down less than 2% year-over-year, increased on a sequential basis, as David mentioned earlier. Used retail gross profit per vehicle was $1,647, roughly in line with the fourth quarter of 2023. We appreciate the progress of the team's performance on volume and gross profit in such a challenging environment. Our same store used DSI with a 25 day supply.
Daniel Clara: Volume, while down less than 2% year over year increase on a sequential basis as David mentioned earlier.
Daniel Clara: Used retail gross profit per vehicle was $1647 roughly in line with the fourth quarter of 2023.
Daniel Clara: We appreciate the progress of the team's performance on volume and gross profit in such a challenging environment.
Daniel Clara: Our same store used DSI was 25 day supply.
Daniel Clara: We still view 2024 as a challenging year to acquire pre-owned vehicles until supply returns, shifting to F&I. We delivered an FNI PVR of $2,218 in the quarter. Holden Resilient Amidst Continued Pressure on Consumer Payments On a consolidated, all-store basis, our PBR was $2,259. The Deferred Revenue Headwind of TCA contributed $67 of the $85 decrease in consolidated F&IPVR numbers year-over-year, and we anticipate this headwind to be impactful throughout 2025.
Daniel Clara: We still view 2024, that's a challenging year to acquire pre owned vehicles until supply returns.
Daniel Clara: Shifting to F&I.
Daniel Clara: We delivered on a finite P. B R. A $2218 in the quarter holding resilient amidst continued pressure on consumer payments.
Daniel Clara: On a consolidated all store basis, our PBR was $2259.
Daniel Clara: The deferred revenue headwind of TCA contributed $67 or the $85 decrease in consolidated if in IPD are number year over year, and we anticipate this headwind to be impactful throughout 2024.
Michael D. Welch: In the first quarter, our total front-end yield per vehicle was $5,080. Moving to parts and service, our parts and service gross profit grew by 6%, and we earned a gross profit margin of 56.9%. An expansion of 213 basis points versus the year-ahead first quarter, despite weather issues in several of our markets. The last several quarters, as we mentioned, were impacted by integration efforts, and it is encouraging to see our fixed operation business returning to growth.
Daniel Clara: In the first quarter, our total front end yield per vehicle was $5080.
Daniel Clara: Moving to parts and service.
Daniel Clara: Our parts and service gross profit grew 6%.
Daniel Clara: We earned a gross profit margin was 56, 9%.
Daniel Clara: An expansion of 213 basis points versus prior year first quarter, despite weather issues in several of our markets.
Daniel Clara: The last several quarters as we mentioned were impacted by integration effort and it is encouraging to see our fixed operation business returning to growth.
Michael D. Welch: The hard work of our teammates and leaders is paying off, and we expect even better performance in the quarters ahead. Finally, on a same-store basis, we retail 10,832 units through Click, or about 16% of overall units. New vehicles represented 5,186 of these units, a 14% increase in new volume over the first quarter last year, and those vehicles are making up a larger portion of click lane transactions versus the first quarter of 2023.
Daniel Clara: The hard work of our teammates and leaders is paying off and we expect even better performance in the quarters ahead.
Daniel Clara: Finally on a same store basis, we retailed 10832 units through Cleveland or about 16% of overall units.
Daniel Clara: New vehicle represented 5000 and 186 of these units.
Daniel Clara: 14% increase in new volume over first quarter last year and those vehicles are making up a large larger portion or click lane transactions versus the first quarter of 2023.
Michael D. Welch: Consistent with recent trends, over 90% of customers are new customers to Asbury, and we remain committed to this key differentiating omni-channel tool. I will now hand the call over to Michael to discuss our financial performance.
Daniel Clara: Consistent with recent trends over 90% of the customers are new customers to Asbury and we remain committed to these key differentiating omnichannel tool.
Daniel Clara: I will now hand, the call over to Michael to discuss our financial performance Michael.
Michael D. Welch: Thank you, Dan. To our investors, analysts, team members, and other participants on our call, good morning. I would like to provide some financial highlights for our company. For additional details on our financial performance for the quarter, please see our financial supplement in our press release today and our investor presentation on our website. Overall, net income was $147.1 million, and EPS was $7.21 for the. There were no non-GAAP adjustments to net income for the first quarter of 2024 or 2023.
Michael D. Welch: Thank you Dan to our investors analysts team members and other participants on our call and good morning.
Michael D. Welch: I would like to provide some financial highlights for our company for additional details on our financial performance for the quarter.
Michael D. Welch: Please see our financial supplement and our press release today, and our Investor presentation on our website.
Michael D. Welch: Overall net income was $147 $1 million.
Michael D. Welch: And EPS was $7.21 for the quarter.
Michael D. Welch: There were no non-GAAP adjustments net income for the first quarter of 2024.
Michael D. Welch: Our 2023.
Michael D. Welch: As Cheney's percentage of gross profit came in at 62.5% versus 61% in the fourth quarter of 2023, driven by higher service loaner costs, elevated advertising expenses, and several Q1-specific costs, namely share-based compensation. For the year, we expect SG&A's percentage of gross profit to be in the low. The tax rate for the quarter was 24.9%.
Michael D. Welch: SG&A as a percentage of gross profit came in at 62, 5% versus 61% in the fourth quarter 2023.
Michael D. Welch: Driven by higher service loaner cost elevated advertising expenses as several Q1 specific costs, namely share based compensation.
Michael D. Welch: We expect SG&A as a percentage of gross profit to be in the low sixty's.
Michael D. Welch: Tax rate for the quarter was 24, 9%.
Michael D. Welch: And we estimate our tax rate for the full year 2024 to be approximately $25. TCA generated $19.5 million of pre-tax income in the first quarter, and we anticipate full year results to be between $30 and $45 million on a pre-tax basis. We plan to offer TCA across our remaining stores in Florida and Koons later this year.
Michael D. Welch: And we estimate our tax rate for the full year 2024 to be approximately 25%.
Michael D. Welch: TCA generated $19 5 million of pretax income in the first quarter.
Michael D. Welch: We anticipate full year results to be between 30, and 45 million on a pretax basis.
Michael D. Welch: We plan to offer TCA across our remaining stores in Florida insurance later this year.
Michael D. Welch: For the quarter, we generated $209 million of adjusted operating cash flow, a portion of which was used for our previously mentioned share repurchase activity. Excluding real estate purchases, we spent $26 million on capital expenditures in the first quarter. Can we anticipate full year spend to be $200 million to $225 million? Free cash flows of $183 million to the company. We ended the quarter with $712 million of liquidity comprised of floor plan offset accounts, availability on both our use line and revolving credit facility, and cash, excluding cash at the total fare outage.
Michael D. Welch: For the quarter, we generated $209 million of adjusted operating cash flow.
Michael D. Welch: A portion of which was used for our previously mentioned share repurchase activity.
Michael D. Welch: Excluding real estate purchases, we spent 26 million on capital expenditures in the first quarter.
Michael D. Welch: We anticipate full year spend to be $200 million to $225 million.
Michael D. Welch: Free cash flows of $183 million for the quarter.
Michael D. Welch: We ended the quarter with $712 million of liquidity comprised of floor plan offset accounts.
Michael D. Welch: Both our use line and revolving credit facility.
Michael D. Welch: Cash excluding cash in total Corrado.
Michael D. Welch: While we will continue to use our floor plan offset account to manage interest expense, we expect floor plan costs to remain relatively flat. Over the years, we balance the impact of rising inventory levels with the opportunity cost of deploying the cash to a more accretive account. Our pro forma adjusted net leverage was 2.6 times at the end of March.
Michael D. Welch: While we will continue to use our floor plan offset account to manage interest expense, we expect the floorplan cost to remain relatively flat through the year as we balance the impact of rising inventory levels with the opportunity cost of deploying the cast for more accretive activities.
Michael D. Welch: Our pro forma adjusted net leverage was two six times at the end of March and we will continue to be opportunistic in our capital allocation approach across share buybacks M&A.
David W. Hult: And we will continue to be opportunistic in our capital allocation approach across share buybacks, M&A, and organic investment opportunities. Finally, I would like to join David and Dan as we thank our valued team members and leaders for a strong quarter and start to the year. Thank you. This concludes our prepared remarks. We will now turn the call over to the operator and take your questions.
Speaker Change: Yeah, I can best opportunities.
Speaker Change: Finally, I would like to join David and Dan is we think our value team members and leaders for a strong quarter and start to the year. Thank you.
Speaker Change: This concludes our prepared remarks, we will now turn the call over to the operator and take your questions operator.
Michael D. Welch: Yes.
Michael D. Welch: Yeah.
Operator: Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from me. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. And our first question comes from John Murphy with Bank of America. Please proceed.
Speaker Change: Thank you ladies.
Speaker Change: Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Operator: You May press star two if he would like to remove your question from the queue.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: Okay.
Operator: And our first question comes from the line of John Murphy with Bank of America. Please proceed.
John Joseph Murphy: Good morning, everybody.
John Joseph Murphy: Just David just one.
John Joseph Murphy: Good morning everybody. Just one quick question on the store that was sold per framework agreement. I'm just curious if you can sort of discuss what that brand is or was and you know how the framework agreements are potentially morphing or easing as you guys are on the acquisition pace and others are on the acquisition pace or maybe not changing at all.
John Joseph Murphy: One quick question on the store that was sold per per framework agreement I'm. Just curious if you can sort of discuss what that what that brand.
John Joseph Murphy: Is or was and how the framework agreements.
John Joseph Murphy: Or potentially morphing or easing as you guys are on the acquisition pace and others are on your acquisition pace or or or maybe not changing at all.
David W. Hult: Sure, John. This is David.
John Joseph Murphy: Sure. John This is David I'll take my best shot at it there's still ways to divest it up with the Lexus store.
David W. Hult: I'll take my best shot at it. The store we divested was a Lexus store. We are limited in every framework agreement we have with every manufacturer is different. And we're limited to only owning eight Lexus stores in the U.S., and that's consistent with the brand, whether you're public or private. So whenever we buy a group that has a Lexus store in it, if we're capped at eight and we have eight, it's always going to include a divestiture at some point in time.
John Joseph Murphy: We are limited yeah. Indeed every framework agreement, we have with every manufacturer is different.
David W. Hult: And were eliminated.
David W. Hult: To only one eight lexus stores in the U S and that's consistent with the brand whether you're public or private.
John Joseph Murphy: So whenever we buy a group that has a lexus store and if were capped at eight and we have eight there's it's always going to include a divestiture at some point in time.
David W. Hult: There are extreme differences within framework agreements between all manufacturers, so there's no easy way of stating it, but I'll tell you our framework agreements haven't changed in a while. Some have been updated in the last couple of years, and based upon the geographic locations of our stores and our brand mix, we're not governed at this point to grow other than with specifically the number of Lexus stores we have.
John Joseph Murphy: There's extreme differences within framework agreements between all manufacturers. So there's no easy way of stating it but I'll tell you our framework agreements have been changed in a while some of the net updated in the last couple of years.
John Joseph Murphy: And based upon our geographic locations of our stores in our brand mix we're.
John Joseph Murphy: We're not governed at this point to grow other than with specifically the number of extra stores we have.
John Joseph Murphy: Got it. Okay, that's very helpful.
Speaker Change: Got it Okay. That's very helpful. And then the used environment. It seems like its challenging from a supply standpoint.
David W. Hult: And then the used environment, there seems like it's challenging from a supply standpoint, given that we've sold so few new vehicles in the past three or four years. When is your expectation of that supply actually improving? It seems like that's more like potentially even a 26 event as opposed to a 25. And what can you do in the interim to deal with that shortage?
Speaker Change: Given that we've sold so few vehicles new vehicles in the past three or four years.
Speaker Change: When is your expectation of that supply actually improving it seems like that's more like potentially even at 26 event as opposed to a 25.
Speaker Change: And what can you do in the interim.
David W. Hult: To deal with that that that shortage.
David W. Hult: You know, generally, we've been focused on gross profit over volume. And as we said, in the fourth quarter, we're going to kind of pivot a little bit. Historically, our company purchases about 10% outside of our structure, cars to bring in to sell. Last quarter, it was about 20%, which obviously put pressure on our PBR.
Speaker Change: Generally we've been focused on gross profit over volume and as we said in the fourth quarter, we're going to kind of pivot a little bit historically, our company purchases about 10% outside of our structure.
Speaker Change: Structure are cars to bring into cell you know last quarter was about 20%, which obviously put pressure on our P. B or to your point you know really since Covid began up and step through three years forward, there's really a depletion of multiple millions of vehicles that didn't hit the market.
David W. Hult: To your point, really, since COVID began up through three years forward, there's really been a depletion of multiple millions of vehicles that didn't hit the market. So we're in that pool now, where this year, and I believe next year, too, is going to be a more challenging year. I think this is the toughest year. I think you'll get some relief next year with some fleet business from rental car companies and that stuff. But I would think normalization would be, you know, early 26, potentially end of 25.
Speaker Change: So we're in that we're in that pool, now where this year and I believe next year too.
Speaker Change: There's going to be a more challenging year I think this is the toughest year I think you'll get some relief next year with some fleet business from rental car companies and that stuff.
Speaker Change: But I would think normalization would be you know early 'twenty six potentially end of 'twenty five.
Daniel Clara: And then just one last one on parts and service. I mean, you know, 6% was great. It was actually up against a somewhat tough competition. As we think about the rest of the year, when the competition gets a bit easier, it sounds like you're making progress in acquired stores that are going into the base. You know, could we think about a 5% plus parts and service or sort of a high single-digit parts and service same store sales comp maybe for the remainder of the year and, potentially, maybe even beyond that? Good morning, John. This is Dan.
David W. Hult: Okay, and then just one last one on parts and service I mean, 6%. It was great. It was actually up against a somewhat tough comp as we think about the rest of the year that the comps get a bit easier it sounds like youre, making progress and acquired stores.
Speaker Change: There are three that are going into the base you know could we think about a 5% plus parts and service are sort of high single digit parts and service same store sales comp maybe for the remainder of the year end and potentially maybe even beyond that.
Daniel Clara: Good morning, John. This is Dan. I'll start and then David can add on whatever I missed. Yes, you know, we're very happy with the progress that the team members are making and have shown over the past few quarters as we integrate the new acquisition. And to answer your question directly, yes, I think that that's a realistic target as we continue through 2024, meaning 5% growth.
Speaker Change: Good morning, John This is Dan I'll start and then David can add on whatever I Miss.
Speaker Change: Yes.
Daniel Clara: Very happy with the progress that the team members are making and have shown over the past few quarters as we integrated the new acquisition and to answer your question directly yes, I think that that's a realistic target as we continue through 2000 24, million% to 5% growth.
Speaker Change: Yeah.
David W. Hult: No, John, I really don't have anything to add. You know, I would tell you we're pleased with the margin increase. You know, like everyone else, you know, in the first quarter, we suffered some shutdown of some days in the mountain states because of heavy weather. You know, between Colorado and Utah and Idaho, we have almost 40 stores; I think 38 stores, to be specific.
Speaker Change: Great.
Bonnie: Hey, Bonnie.
Bonnie: No Joe I really don't have anything to add you know I would tell you we're pleased with the margin increase.
David W. Hult: Everyone else you know in the first quarter, we suffered some shut down to some days in the mountain states because of heavy weather.
David W. Hult: Between Colorado, and Utah, and Idaho, we have almost 40 stores I think 38 stores to be specific and we had multiple days that we were shut down and you just can't make up for those fixed days, but as Dan stated the progress is certainly good it's continuing into this quarter and to your point the second half of the year as our comps get easier so.
John Joseph Murphy: And we had multiple days that we were shut down, and you just can't make up for those fixed days. But as Dan stated, the progress is certainly good. It's continuing into this quarter. And to your point, in the second half of the year, our comps get easier. So we should certainly see a minimum of 5% or greater. Very helpful. Thank you, guys.
Bonnie: We should certainly see a minimum of 5% or greater.
Speaker Change: Very helpful. Thank you guys.
Speaker Change: Thank you.
Operator: Our next question comes from the line of Rajat Gupta with J.P. Morgan. Please proceed.
Speaker Change: Our next question comes from the line of result capsule with J P. Morgan. Please proceed.
Rajat Gupta: Great. Thanks for the question. I just had a question on SG&A first. Yeah, it looks like there was some deleveraging here in the quarter because, you know, often weak domestic brand unit sales and maybe still a little slower growth in the service business, but Curious, you know, as the service business now returns to mid-single-digit type growth and whatever you're embedding in terms of new GPU expectations for the course of the year, how should we think about And I have a quick follow-up. Thanks.
Result Capsule: Oh, great. Thanks for taking the question just had a question on SG&A first.
Result Capsule: Yeah. It looks like there was some deleveraging here in the quarter because.
Rajat Gupta: Well some of the weak domestic Grand a unit sales and maybe a little slower growth in services, but.
Result Capsule: I'm curious you know as the service business now returns to mid single digit type growth.
Michael Welch: And whatever you're embedding in terms of this new GPU expectations are for the course of the area. How should we think about that SG&A to gross ratio.
Result Capsule: You know yeah moving forward from these levels.
Speaker Change: And I have a quick follow up.
Michael D. Welch: This is Michael. On the SG&A side, you know, we'll have the continued decline in new vehicle gross profit, which will put pressure on the SG&A, but to your point, the return of fixed ops to good growth and then a few items that are unique to the first quarter that we're going to be able to cut some cost out later in the year, we think we can hold these kind of low 60s levels for SG&A percentage of gross going forward.
Result Capsule: This is Michael I'm on the SG&A side, you know we will have the.
Michael D. Welch: The decline in new vehicle gross profit, which will put pressure on the SG&A, but to your point the return of fixed off to good growth and then.
Michael D. Welch: Few items that are unique to the first quarter that we're gonna be able to cut some cost out later in the year. We think we can hold these kind of low <unk> levels.
Result Capsule: For SG&A percentage of growth going forward.
David W. Hult: And Rajat, I'll just add to that, you know, while the domestic volume was not great, I still think PBR at like $3,900 is extremely healthy, and certainly you can maintain SG&A costs in that market. You know, brands are cyclical as far as how they go. We have a heavy mix of Stellantis, and, you know, it was a tough quarter for Stellantis, as everybody knows, and certainly was for us as well, but we know over time that will change.
Speaker Change: With that I'll, just add to that you know while the domestic volume was not great.
Speaker Change: I still think PV are like $3900 is extremely healthy and certainly you can make.
Speaker Change: Can maintain SG&A costs in that in that market.
Speaker Change: Brands are cyclical as far as how as they go we have a heavy mix of still and and you know it was a tough quarter for steel and as everybody knows and certainly was for us as well, but we know over time that'll change.
unknown: And what's the kind of GPU decline, like you're assuming the same pace for the rest of the year?
Speaker Change: And what's the kind of plagued GPU decline like you sort of assuming like the same pace for the rest of the year.
unknown: [inaudible]
Speaker Change: Our first quarter or.
unknown: Yeah, our assumption is, you know, 300 bucks a quarter, but you could have a plus or minus in any given quarter, but kind of that, you know, natural trend of kind of 300 bucks over the next.
Rajat Gupta: Yeah, our assumption as you know 300 Bucks a corner, but you know you could have a plus minus.
Any given quarter, but kind of that natural trend across 300 Bucks over the next few quarters.
David W. Hult: Got it, got it. And just just to follow up on capital allocation, you mentioned earlier on like, you know, you know, using the floor plan offset as like a lever to manage, you know, those floor plan expenses, but you just bought back some stock here in the first quarter. Like, how should we think about that decision between buyback versus M&A in the current backdrop and what you're seeing in your pipeline for deals today?
Speaker Change: Got it got it and just just to follow up on capital allocation. You mentioned earlier on like you know you know using the Floorplan offset as like when do you where do you manage those corporate expenses.
David W. Hult: Just buy back some stock here in the first quarter like how should we think about you know a bad decision between buyback versus M&A and the current backdrop and what you're seeing.
David W. Hult: And in your pipeline for deals today.
Speaker Change: Yeah.
David W. Hult: This is David Rajat. I would say, you know, our opinion. We're proud of our business and in our operating margins. And, you know, we think that, you know, the multiple is low. And, you know, generally, when you look at that, it seems like it's a better return to pay potential for stock buybacks. In the current market that we're in, there's certainly a lot of stores on the market from an M&A standpoint.
Speaker Change: I would this is David I would say.
David W. Hult: No our opinion, we're proud of our business and in our operating margins and we think that you know our multiple is low.
David W. Hult:
David W. Hult: Generally when you look at that it seems like it's a better return to potentially look at stock buybacks.
Speaker Change: In the current market that we're in there's certainly a lot of our stores on the market from an M&A standpoint, but I think we really want to be extremely selective.
David W. Hult: But I think, you know, we really want to be extremely selective. It's never been about growth for us and how large we get. It's really about returns for our shareholders and how well we run our business. So every month, we're constantly evaluating what's the best use of capital. But I would say from an acquisition standpoint, it would have to be something that is accretive for us and really interesting for us at this stage.
David W. Hult: It's never been about growth for us and how large we get it's really about the returns for our shareholders and how well we run our business.
David W. Hult: So every month, we're constantly evaluating what's the best use of capital.
David W. Hult: But I would say from an acquisition standpoint, it would have to be something that was accretive for us and really interesting for us at this stage.
Michael D. Welch: And on the floor plan expense side, you know, the increase in inventory over the rest of the year, and then some of the cash will be able to be put to the offset account. We think that floor plan expense number for the first quarter will continue through the rest of the year. Again, increased inventory, then a little bit of cash going into the offset account. Got it, got it.
David W. Hult: And on the floor plan expense side, the increase in inventory over the rest of the year and then some of the cash will be able to put to you also count we think that floor plan expense number for the first quarter will continue through the rest of the year.
Michael D. Welch: So again increased inventory than a little bit of cash going into the offset account.
Rajat Gupta: Got it, got it. That's clear. Great. Thanks for all the coverage. Thank you.
Speaker Change: Got it got it that's great. Thanks for all the color.
Rajat Gupta: <unk>.
Operator: And our next question comes from the line of Ryan Sigdahl with Craig Howell Capital Group. Please proceed.
Speaker Change: And our next question comes from the line of Ryan Seagull with Craig Hallum Capital Group. Please proceed.
Ryan Ronald Sigdahl: Hey, good morning, guys.
Ryan Ronald Sigdahl: I want to stay on your side. So you have challenges with the used vehicle supply. That's fairly obvious across the industry. Your GPU is down sequentially, despite favorable industry seasonality, your peers being up, etc. So I guess, curious to dig a little bit deeper on your takeaways, kind of early metrics, positive and negative, from leaning more into volume, relative to your internal expectations when you made that strategy pivot.
Ryan Ronald Sigdahl: I want to say on the <unk> side. So you have challenges on the used vehicle supply.
Ryan Ronald Sigdahl: That's fairly obvious across the industry your GPU was down sequentially.
Speaker Change: Despite favorable industry seasonality your peers being up et cetera. So I guess curious to dig a little bit deeper on your takeaways kind of an early metrics positive or negative from leaning more into volume relative to your internal expectations. When you made that strategy pivot.
David W. Hult: Yeah, I mentioned it earlier. I would say, percentage wise, we doubled the number of cars we purchased. But we make significantly less gross profit on a vehicle that we have to purchase because we're competing to buy it within the market. When we trade in a vehicle, we're still north of $2,000 a vehicle. And we think that's very healthy. Some of the benefits, I'm sure our peers have discussed this in the past, are your parts and service increased business from reconditioning costs, and the F&I income that you pick up as well.
Speaker Change: Yeah, and I mentioned it earlier I would say.
David W. Hult: We percentage wise, we doubled the number of cars we purchase are.
David W. Hult: We make significantly less gross profit on a vehicle that we have to purchase because we are competing to buy it within the market.
David W. Hult: When we trade in a vehicle, we're still north of $2000 a vehicle.
David W. Hult: And we think that's very healthy it's some of the benefits I'm not sure our peers have discussed it in the past.
David W. Hult: Is your parts and service increased business from reconditioning cost in the F&I income that you pick up as well.
David W. Hult: But there still has to be a healthy balance, and you really have to make sure you maintain what we would consider a healthy front end margin on pre-owned. Dan, I don't know if there's anything you want to add.
David W. Hult: But there still has to be a healthy balance and you really have to make sure you maintain what we would can think what we would consider a healthy front end margin on pre owned do you know if there's any you want to add.
David W. Hult: Okay.
Daniel Clara: I'll just add a little bit more color, and yes, you know, we saw sequentially dropping I think from 1666 to 1647 from a PVR standpoint, back to your point, but then from a used car standpoint, I believe we increased it 9% sequentially, quarter over quarter, and that just goes to validate the strategy adjustment that we made that we announced at the end of Q4 in 2023, that we were going to get more aggressive, go after the volume, because we know back to what David stated, the benefits that it brings to our internal gross profit in parts and service, F&I, and then obviously putting another unit in operation out there that we can service down the road.
Dan: I'll, just add a little bit more color, yes, we saw sequentially.
Daniel Clara: Sequentially dropping I think from 16, 66% to <unk> 47.
Daniel Clara: From a PBR standpoint back to your point, but then from a from a new car I mean from a used car standpoint.
Daniel Clara: Believe we increased 9% sequentially quarter over quarter and that just goes to validate the strategy adjustment that we made that we announced at the end of Q4 and 2023 that we were going to get more aggressive go after the volume because we know back to what Dave has stayed at the benefits that it brings to our.
Daniel Clara: Internal gross profit in parts and service F&I.
Daniel Clara: And then obviously, putting another unit in operation out there that we can service down the road.
unknown: Helpful. Anything else from a regional standpoint? I know you called out some weather impact, but anything southeast, southwest, or Texas to call on? No, I would say, I mean, for us, it was
Speaker Change: Helpful anything else from a regional standpoint, I know you called out some weather impact, but anything southeast southwest, Texas to call out.
Speaker Change: No I would say I mean for us it was fairly.
David W. Hult: No, I would say, I mean, for us, it was fairly stable. You know, we saw a little bit of a hit for us in full-size trucks from a year-over-year perspective, but the imports performed extremely well. We have a very low day supply of them, and probably could have done better there as well. We had a tough headwind for Stellantis, but the other two domestic brands held up pretty well in the quarter, and luxury is very stable for us. So, all in all, based on the market and what went on in the first quarter, we're pleased with what the team did from a performance standpoint.
unknown: Table.
David W. Hult: You know, we saw a little bit of hit for us in full size trucks.
David W. Hult: From a year over year perspective.
David W. Hult: But you know the imports performed extremely well we have a very low day supply of them probably could have done better there as well.
David W. Hult: We had the tough headwind first Atlantis, but the you know the other two domestic brands held up pretty well in the quarter and luxury is very stable for us. So all in all based upon the market and what went on in the first quarter. We're pleased with what the team did from a performance standpoint.
David W. Hult: Yeah.
Operator: As a reminder, ladies and gentlemen, if you would like to ask a question, please press star one on your cell phone keypad. And our next question comes from the line of Bret Jordan with Jeffries. Please proceed. Hey, good morning, guys.
Speaker Change: Thanks, Good luck guys. Thank.
Bret David Jordan: Thank you.
Bret David Jordan: As a reminder, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad.
Operator: And our next question comes from the line of Bret Jordan with Jefferies. Please proceed.
Bret David Jordan: Good morning, guys good morning.
Bret David Jordan: Morning. New GPUs. I think you talked about 300 a quarter for the next few quarters. Is it reasonable to think then that 3000 ish is what you expect to be the new base level for new GPUs?
Bret David Jordan: Our new Gpus, I think you've talked about 300, a quarter for the next few quarters is it reasonable to think then that 3000 ish is the is what you expect to be the new base level for new Gpus.
David W. Hult: Yeah, Bret, this is David. You know, it's really tough to navigate. You know, will there be rate drops throughout the year? How aggressive do the incentives get? It's the old adage of supply and demand. You know, right now, demand is high for imports, and day supply is low, so the margins are holding up really well. In the near term, we don't see that dramatically changing, so we think that holds up pretty well.
Bret David Jordan: Yeah, Brett this is David.
David W. Hult: It's really tough to navigate them.
David W. Hult: Will it be rate drops throughout the year.
David W. Hult: So the incentives get it's at seal data just supply and demand.
David W. Hult: Right now the demand is high on imports the day supply is low so the margins are holding up really well.
David W. Hult: In the near term, we don't see that dramatically changing so we think that holds up pretty well.
David W. Hult: Even back in 19 and before, our domestic gross profits were always pretty healthy because now the amount of domestic stores we've added out in the mountain states, we anticipate that will do well and certainly above what 19 did. And luxury is going to be mixed as well, but that's a pretty resilient market. Our margins are still really high. There may be some fall-off, but we think wherever the fall-off is, it's significantly above where it was in the past.
David W. Hult: Even back in 19 and before our domestic gross profits were always pretty healthy because now the amount of domestic stores. We've added on the mountain States, we anticipate that will do well and certainly above what 19 did and in luxury is gonna be mixed as well, but that's a pretty resilient market our.
David W. Hult: Our margins are still really high there may be some falloff there, but we think wherever the falloff is it's significantly above where it was in the past, which gives us a good edge into keeping our SG&A down.
Daniel Clara: Okay, and then on ClickLane, you've talked in the past about those transactions usually being pretty physically close to the selling dealership. Is that still the case, and what are you seeing as an F&I attachment in those online transactions?
Daniel Clara: Okay, and then I can collect clean you've talked in the past about those transactions usually physically close to selling dealership is that still the case and I guess, what are you seeing in F&I attachment and those online transactions.
Daniel Clara: Good morning, Brett. This is Dan Yes, we are still seeing the average delivery distance in Q1 of 2024. It was 49 miles so pretty consistent to what we have seen you know in Q4 'twenty three that was 51 and then just as a reference point in Q3 of 23 was 40 miles so pretty.
Daniel Clara: Good morning, Bret. This is Dan.
Daniel Clara: Yes, we're still seeing the average delivery distance in Q1 of 2024 was 49 miles. So pretty consistent with what we have seen, you know, in Q4 of 23, that was 51, and then just as a reference point, Q3 of 23 was 40 miles. So pretty consistent with what we're seeing there. From an FNI PBR We are looking at for the Q1 of 24, we finished around 2,190 a car, which is slightly below about 1.3% below sequentially and about 3.7% behind last year. So we are happy with the numbers. Like I stated in my script earlier today, we're committed to this omni-channel, and we strongly believe that it is going to continue to enhance the guest experience.
Daniel Clara: Consistent with what we're seeing there from a.
Daniel Clara: F&I PBR.
Speaker Change: We are.
Daniel Clara: We're looking at for the Q1 'twenty four we finished around $21 90 a car.
Daniel Clara: Which is slightly below about one 3% below sequentially and about three 7% behind last year. So.
Daniel Clara: We are happy with our with the numbers.
Daniel Clara: Like I stated in my.
Daniel Clara: In my.
Daniel Clara: My script earlier today.
Daniel Clara: We're committed to this omnichannel and we strongly believe that it is going to continue to enhance the guest experience.
Bret David Jordan: Great. And I could slip one more in there too.
Speaker Change: Right and I could slip one more and I guess, what are you, saying that the OE lease promotions or are they ramping up lease focus we are in the lines, where inventory is building or is that pretty stable.
Daniel Clara: I guess, what are you seeing on OE lease promotions? Are they ramping up lease focus in the lines where inventory is building, or is that pretty stable? We are starting to see
Speaker Change: We are starting to see yes, increasing slightly and obviously it depends by by OEM as well.
Daniel Clara: We are starting to see, yes, a slight increase, and obviously it depends on the OEM as well, but to answer your question directly, yes, we're starting to see a slight increase.
Daniel Clara: But to answer your question directly yes, we're starting to see a slight increase.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Daniel Clara: <unk>.
Operator: And our next question comes from line at David Whiston with Morningstar. Please proceed.
Daniel Clara: And our next question comes from the line of David Whiston with Morningstar. Please proceed.
David Whiston: Thanks. Good morning.
David Whiston: Thanks, Good morning.
David W. Hult: First, a two-part question on consumers' willingness to spend. Unit volume for luxury was down just a little bit, whereas, as you noted, imports are doing quite well still on the volume side. And so, is there any hesitation with luxury customers about spending money in any way? And then also, across all of your segments of volume or luxury, is there any hesitation among consumers in terms of not getting a vehicle option they would have a few years ago or not doing TCA or not getting an F&I product attachment they would have had earlier?
David Whiston: First a two part question on consumers' willingness to spend.
David W. Hult: Unit volume for luxury was down just a little bit.
David W. Hult: Hmm.
David W. Hult: Whereas as you know.
David W. Hult: And important is doing quite well so on the volume side and so is there any hesitation with luxury customers on spending money in any way and then also across all of your segments volume more luxury is there any hesitation on consumers in terms of not getting a vehicle option. They would have a few years ago are not doing TCA youre not getting an F&I products attachment they would've earlier.
David W. Hult: David, it's a great question. You know, I would tell you... with any new hot luxury vehicle that comes out, regardless of the price point, they sell right away. They're pre-sold, so I think it's more of a timing issue. From our perspective, you know, we viewed the first quarter as being stable, and we actually thought it was pretty good. There's still some transitioning within the luxury brands with the model mix and timing, and you never have enough of the SUVs, and you might have a few extra EVs, and that's balancing out as well.
David W. Hult: Yeah, David It's a great. This is David it's a great question.
David W. Hult: I would tell you.
David W. Hult: With any new hot luxury vehicle that comes out regardless of the price point they sell right away. They are pre sold so I think it's more of a timing issue.
David W. Hult: From our perspective, you know we view the first quarter as being stable and we actually thought it was pretty good there's still some transitioning within the luxury brands with model mix and timing and you never have enough of the Suvs and you might have a few extra evs and that's balancing out as well, but I think it's pretty healthy there and that luxury customer.
David W. Hult: I think it's pretty healthy there, and that the luxury customer is pretty resilient. When you get to the import side, and even domestic, Dan could add more color to this than I can, but you're reaching a price point.
David W. Hult: It's pretty resilient when you get to the import side.
David W. Hult: And even domestic and then Dan could add more color to this than I can but youre, reaching a price point with those interest rates where they are.
David W. Hult: With those interest rates where they are, you know, it's affecting the F&I numbers a little bit. It's affecting the cost of sale. You've seen it come down. I think our cost of sale unused was back to 22 at a high of like 32.5. So it's down dramatically and continuing to come down, but on the new side, it's only coming down slightly because the build probably hasn't caught up yet. So there is a little bit of pressure, but still, again, on the import side, if there's a new product coming out, like anything else, the demand is higher than supply, and the margins are holding up well. We've the market, we feel has been pretty resilient. We don't think that we can, you know, Unknown Executive, Rajat Gupta, Unknown Executive, Rajat Gupta, Unknown Executive, Rajat Gupta
David W. Hult: It's affecting the F&I numbers, a little bit it's affecting the cost of sale you've seen it come down I think our cost of sale on us. It was back in 'twenty two at a high of like 32, five so it's down dramatically and it's continuing to come down but on the new side, it's only coming down slightly.
David W. Hult: Because the build probably hasn't caught up yet so there is a little bit of pressure, but still again on the import side, if there's a new product coming out.
David W. Hult: Like anything else the demand is higher than supply and the margins are holding up well so.
David W. Hult: With the market, we feel it's been pretty resilient. We don't think that we can you know the sustain another rate increase or two I think that'd be a little painful for us.
David W. Hult: But so far I would say generally speaking the customer base has been fairly resilient.
Speaker Change: You want to add I agree I have nothing to add.
David Whiston: Okay, thank you. With the balance sheet and capital allocation, you know, there's buybacks and M&A, but there's also possibly debt reduction with earnings normalizing. Do you feel the need to accelerate debt reduction at some point this year?
Speaker Change: Okay. Thank you.
Rajat Gupta: With the on the balance sheet.
Rajat Gupta: And capital allocation buybacks and M&A, but theres also possibly debt reduction was earnings normalizing do you feel the need to accelerate debt reduction at some point this year.
unknown: Our stated range is kind of between two and a half and three. If we don't find anything...
Speaker Change: No I mean, our our stated range is kind of two five to three we don't financing.
unknown: And I would say, you know, the stacks we have out there with the bonds, you can only chip away at so much of it. And the big stack that's in 26 is really mortgages that, considering the rates in the market, are significantly lower than what the market rates are. So it's really tough to justify taking that capital and paying off 3% debt.
unknown: Good returns and we.
unknown: I don't mean, good but share buybacks acquisitions or a good allocations, but we don't need to go down kind of into the below two five but we'd like to be in this.
unknown: Mid two range with the EBITDA coming down out of the gross profit coming down the new vehicle side.
unknown: I'd say the stacks, we have out there with the bonds. You know you can only chip away at so much of it and the big stack. That's in 'twenty six is really mortgages at considering the rates in the market and significantly lower than what the market rates are so it's really tough to justify taking that capital and paying off 3% debt.
unknown: Okay, and on. You mentioned you probably can't handle interest rates going up much, but if we were to actually get even one rate cut, is that going to matter in your opinion this year? Or do we need multiple rate cuts for the consumer to feel better? Yeah, this is just an opinion, obviously, no way of knowing, but I don't.
unknown: Okay and on you mentioned, you probably can handle rate rates going up much but if we weren't actually get even one rate cut is not going to matter in your opinion this year or do we need multiple rate cuts for the consumer to feel better.
David W. Hult: Yeah, this is just an opinion, obviously no way of knowing, but I don't think one rate cut is going to, you know, it's a nice spark, it'll probably do well for the market for the day or so, but from our standpoint, it probably needs two or three rate cuts for us to really get what I would call a tailwind for us.
David W. Hult: Yeah. This is just an opinion, obviously no way of knowing but I don't I don't think one rate cut is kind of you know it's a nice park it would probably do well for the market for the day or so but from our standpoint, it probably needs two or three rate cuts for us to really what I would call a tailwind for us.
Operator: Ladies and gentlemen, this concludes the question and answer session, and I'd like to turn the call back to David Hult for closing remarks. Thank you all.
Speaker Change: Okay. Thank you.
David W. Hult: Thank you very much.
David W. Hult: Thank you.
David W. Hult: Ladies and gentlemen. This concludes the question and answer session I would like to turn the call back to David Holt for closing remarks.
David W. Hult: Thank you operator. This concludes our call today, we appreciate everyone's participation and we look forward to speaking with all of you at the end of the second quarter have a great day.
David W. Hult: Thank you, operator. This concludes our call today. We appreciate everyone's participation, and we're looking forward to speaking with all of you at the end of the second quarter. Have a great day.
Speaker Change: This concludes today's conference.
Speaker Change: May now disconnect your lines at this time enjoy the rest of your day.
David W. Hult: Okay.
David W. Hult: Yeah.
David W. Hult: [music].
Operator: This concludes today's conference. You may now disconnect your lines at this time. Enjoy the rest of your day.
David W. Hult: Sure.
Operator: [music].
unknown: [inaudible]