Q4 2024 Lithia Motors Inc Earnings Call
Greetings and welcome to the Lithia Motors fourth quarter 2024 earnings Conference call.
At this time all participants are in a listen only mode.
A brief 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.
Speaker Change: It is now my pleasure to introduce your host Jordan had a meal senior director of Investor Relations. Thank you Sir you may begin.
Speaker Change: Good morning, Thank you for joining us for our fourth quarter earnings call with me today are Bryan Deboer, President and CEO, Adam Chamberlain, Chief Operating Officer, Tina Miller, Senior Vice President and CFO and finally, Chuck Lietz Senior Vice President of Driveway Finance today's discussion may include statements about.
Speaker Change: Future events financial projections and expectations about the company's products.
Speaker Change: Our kits and growth.
Speaker Change: Such statements are forward looking and subject to risks and uncertainties that could cause actual results to materially differ from the statements made.
Speaker Change: We disclose those risks and uncertainties, we deem to be material in our filings with the Securities and Exchange Commission.
Speaker Change: We urge you to carefully consider these disclosures and not to place undue reliance on forward looking statements. We undertake no duty to update any forward looking statements, which are made as of the date. This release.
Speaker Change: Our results discussed today include references to non-GAAP financial measures.
Speaker Change: These refer to the text of today's press release for a reconciliation of comparable GAAP measures. We've also posted an updated investor presentation on our website investors don't Lithia driveway dot com highlighting our fourth quarter results with that I would like to turn the call over to Bryan Deboer, President and CEO. Thank.
Bryan Deboer: Thank you Dr. Don Good morning, and welcome to our fourth quarter earnings call.
Bryan Deboer: Our lithium driveway teams continued to deliver strong results demonstrating the power of our integrated and scalable mobility ecosystem and the strength of our talented people.
Bryan Deboer: During the fourth quarter, we generated adjusted diluting earnings per share of $7.79.
Bryan Deboer: So the earnings power of our ecosystem and design is just beginning to reveal its potential. These results underscore the effectiveness of our strategy to serve our customers seamlessly across digital and physical channels leverage highly profitable adjacencies, while remaining grounded to our disciplined execution.
Bryan Deboer: Our ability to align our people platform and processes has enabled us to maintain momentum in unlocking our potential by increasing market share and driving differentiated operational efficiencies.
Bryan Deboer: Our focus on building customer loyalty through our diversified business model continues to drive profitability and strengthen our market position.
Bryan Deboer: Investments in our Adjacencies are now contributing meaningfully to our earnings trajectory.
Bryan Deboer: Our omnichannel ecosystem has driven substantial improvement in customer engagement and unit sales further reinforcing labs effectiveness.
Bryan Deboer: Looking ahead, our focus remains on loyalty potential and growth through disciplined execution and strategic investments. We are confident in our unique ability to deliver sustainable performance capture market share and unlock the profitability of our ecosystem.
Bryan Deboer: With our foundational strengths firmly in place to continue our growth as the world's largest auto retailer in 2025 and beyond we are well positioned to build our recent momentum.
Bryan Deboer: And continue our path to achieving $2 of EPS per $1 billion in revenue.
Bryan Deboer: Now onto key results for the fourth quarter.
Bryan Deboer: Lithium driveway grew revenues a record $9 2, billion% to 20% increase from Q4 of last year.
Bryan Deboer: We are pleased to see our first.
<unk> year over year operating profit increase in nine quarters. This increase is a result of continued market share gains and our disciplined cost management efforts, which drove the full realization of our $200 million in annual cost savings targets.
Bryan Deboer: Our teams have an embedded.
Bryan Deboer: Consistent cost discipline into our daily operations.
Bryan Deboer: We are seeing the benefits as we have now delivered two consecutive quarters of absolute sequential decreases in SG&A.
As we begin 2025, we see even more opportunities for market.
Bryan Deboer: Quest adjacency profitability and productivity improvements as we realize the full potential of our unique ecosystem.
Bryan Deboer: Our stores are well positioned to capitalize on a return to historical levels and we saw significant growth in new unit sales in the fourth quarter.
Bryan Deboer: We are now seeing total vehicle Gpus stabilize near our long term expectations. We saw improvements in our used unit sales trends, which continue to be a key focus and our after sales business delivered robust performance this quarter, which reflects the dedication of our team and our ownership.
Bryan Deboer: And making decisions closest to our customer.
Bryan Deboer: Our investments in Adjacencies are now integrated as a platform for sustainable and meaningful profitability financing operations delivered profitability for the full year demonstrating the strong earnings trajectory ahead.
Bryan Deboer: Additionally, we continue to refine our ecommerce strategies, bringing in new customers as part of our Omnichannel strategy.
Bryan Deboer: This quarter also delivered strong returns on our Wills investments and we look forward to realizing the synergies presented by our partnerships.
Bryan Deboer: In 2025, we continue to focus on unlocking the profitability of our ecosystem by decisively acting to create customer loyalty achieve our potential and unlock the growth in our ecosystem by delivering on our core strength execution.
Bryan Deboer: Yeah.
Bryan Deboer: The foundation of the lab strategy lies in our vast physical network support by the supported by the industry's most talented people high demand inventory and dense store footprint. We continue to expand this network, adding new locations developing key adjacencies and forming strategic partnerships all aimed at.
Bryan Deboer: Enhancing customer experiences and unlocking the potential of our platform.
Bryan Deboer: We operate as the largest retailer in one of the largest addressable retail markets globally, and our ability to grow profitability across every aspect of our business is now stronger than ever we believe being the most competitive buyer and one of the largest and least consolidated retail market is a key strategic advantage.
Bryan Deboer: Our steadfast strategy of delivering customer solutions that are simple convenient and transparent enables us to capture a greater share of the customer's wallet and create durable customer loyalty throughout their ownership lifecycle.
Bryan Deboer: These solutions are tightly integrated with our digital platforms, fostering a natural and lasting retention of our customers within our ecosystem, while brands like driveway and green car significantly significantly extend our reach to 50 times more customers than our core physical businesses provide.
The lab digital ecosystem continues to deliver positive momentum. We recently launched the my driveway portal offering customers 250, plus functions to provide more visibility and control why shopping and servicing.
Bryan Deboer: Our teams continue to deliver exceptional.
Bryan Deboer: Digital and physical customer experiences with a clear focus on extending our reach and expanding market share.
Bryan Deboer: The strength of our platforms financial discipline regenerative free cash flows.
Bryan Deboer: And a culture that inspires growth powered by people enables us to be agile in responding to customer needs and capitalizing on the tailwind the industry carries into 2025.
Bryan Deboer: Our strategic positioning and the rollout of the my driveway consumer portal allows us to increase touch points throughout the customers' lifecycle across our adjacencies and equip our stores with the tools to improve market share loyalty growth and ultimately profitability.
Bryan Deboer: Acquisitions remain a core competency and we continue our disciplined approach to look for accretive opportunities that can improve our network focusing on the United States, we target a minimum after tax return of 15% and acquire for 15% to 30% of revenues or three to six time.
Bryan Deboer: Normalized EBITDA.
Bryan Deboer: Life to date, our acquisitions have yielded over a 95% success rate and an after tax return of over 25% demonstrating that ladder is not your typical high risk roll up strategy.
Bryan Deboer: In the near term, we are watching acquisition pricing and remaining disciplined as we look for strong opportunities while balancing this with the attracting the attractiveness of our own share buybacks.
Bryan Deboer: Our capital generation and improving earnings allows us the flexibility to do both and are reiterating our expectation.
Bryan Deboer: That estimated future annual acquired revenues will be in the range of $2 billion to $4 billion per year.
Bryan Deboer: We remain focused on growth and view industry call. It consolidation as a driver of continued strong long term returns with.
Bryan Deboer: With the capital engine, we've built we were able to deploy our free cash flows to generate the highest returns remaining flexible to market conditions.
Bryan Deboer: We are maintaining our adjusted capital allocation to balance acquisitions, and buybacks equally, especially given the attractive relative values values of our own shares.
Bryan Deboer: During the quarter, we repurchased $93 million or <unk>, 9% of our outstanding shares we continue to evaluate acquisitions and share repurchases and we will focus on share buybacks in the near term given market pricing dynamics on acquisitions.
Bryan Deboer: These elements combined for a clear and compelling pathway to generating $2 of EPS for every $1 billion in revenue in a normalized environment as illustrated in slide 14 of our Investor presentation.
Key factors underlying our future steady state are now totally within our control and include the following.
Bryan Deboer: First continue to improve our operational performance by realizing the massive potential that we have built in our own existing stores.
Bryan Deboer: This includes increasing our share of wallet through greater customer lifecycle interactions sustained productivity gains cost efficiencies and growing each store's new used and after sales market share.
Bryan Deboer: Through these levers in our business, we see a pathway to achieve SG&A as a percentage of gross profit in the mid 50% range.
Bryan Deboer: Second optimizing.
Bryan Deboer: Our network by acquiring and driving high performance in larger automotive retail stores and the stronger profitability regions of the South East and South Central United States. This alongside our digital channels will bring U S market share to 55%.
Bryan Deboer: Today, we have a combined new vehicles, new and used vehicle market share a little over 1%.
Bryan Deboer: Third financing of up to 20% of units with DSC and maturing beyond the headwinds associated with seasonal reserves as you can see in our results.
Bryan Deboer: Our financing operations achieved full year profitability in 2024, and we expect meaningful profitability growth from here.
Bryan Deboer: Fourth through scale, we are driving down our vendor pricing with solutions like pinewood, leveraging corporate efficiencies and lowering borrowing costs as we path towards an investment grade credit rating.
Bryan Deboer: Fifth maturing contributions from our Horizontals, including fleet management, Dms software charging infrastructure and captive insurance.
Bryan Deboer: And finally, delivering ongoing return on capital to shareholders through increased share buybacks and dividends.
We are well positioned to grow our complete mobility ecosystem that leverages unique scale and capabilities to create more frequent meaningful and durable customer experiences throughout the ownership life cycle.
Bryan Deboer: With the foundational elements of our strategy firmly in place. We are now fully focused on execution and our confidence in our ability to drive to new levels of performance and establish a new standard for the industry.
Bryan Deboer: Now I'd like to turn the call over to Adam for an overview on key operating performance and how we are igniting our store and department potentials.
Speaker Change: Thank you, Brian and quota for our team demonstrated our ability to deliver exceptional customer experiences focus on cost discipline, and importantly grow market share.
Speaker Change: Our focused approach of having the right leaders and the right products resulted in clear sequential improvement in sales trends and we are confident in our ability to strengthen our opportunity areas, particularly used vehicle sales.
Speaker Change: I proudly stand by our leaders as they set a new bar for the industry in the months ahead.
Speaker Change: Like to focus today on three opportunities to drive profitability.
Speaker Change: Revenue growth inventory trends and SG&A execution.
Speaker Change: As Brian mentioned, we delivered our first year over year growth in operating profit and nine quarters with positive contributions from new vehicles. After sales value autos wholesales all supported by continued strength in SG&A execution.
Speaker Change: We are confident in our ability to continue delivering on our growth strategy in 2025.
Speaker Change: Let's now turn to our same store sales performance, while we saw a strong performance in new vehicles and valuable to us.
Speaker Change: Total revenues increased by three 1% and gross profits declined three 7% primarily due to the normalization of Gpus.
Speaker Change: Total unit sales increased one 7% year over year, while total gross vehicle profit of 40 535 was consistent with the prior sequential quarter and was down $444 compared to the same period last year.
Speaker Change: New vehicle units increased seven 4% year over year with particular strength in import manufacturers.
Speaker Change: Front end Gpus remained resilient at 308 to decreasing sequentially from 318.
Speaker Change: Used vehicle units were down four 3% year over year, we saw a strong performance in value autos, which were up 24, 6% year over year and we saw improvement in certified and unit trends front end Gpus for used vehicles are stable year over year at 1959 and declined sequentially by $177.
Speaker Change: <unk> used auto has continued to be the focus of our operations and whilst we are encouraged by our progress we expect to see significant improvement in the quarters ahead.
Speaker Change: An opportune fuel cell remains whether off sales performance and this will be a key driver of growth in 2025 and.
Speaker Change: In the quarter after sales revenues were up three 4% compared to the prior year delivering a 55, 8% gross profit margin.
Speaker Change: Warranty work was core to this growth with a 19, 9% increase in gross profit year over year.
Our ability to manage technician head count and drive operational efficiencies has positioned us well to meet ongoing demand whilst also maintaining a strong focus on providing exceptional customer experiences in our after sales departments.
Speaker Change: Now turning to inventory, while we saw an overall decrease of approximately $200 million on our inventory balances from quarter three.
Speaker Change: We continue to see opportunities to decrease our inventory balances and are targeting 50, DSO for new and 40 TSA for used inventory balances in the second quarter as we look to achieve further flooring interest savings.
Speaker Change: The execution on our original cost saving plan of $200 million was fully realized in quarter four.
Speaker Change: Our adjusted SG&A as a percentage of gross profit was 66, 3% during the quarter and 66, 8% on a same store basis. Despite the typically higher SG&A, we experienced in quarter four due to seasonality.
Speaker Change: Whilst we are pleased with two consecutive quarters of strong SG&A performance. We remain dedicated to achieve continued cost savings and maintain a focus on disciplined cost management as we move through 2025.
Speaker Change: Opportunities to improve our cost structure remain with a potential to achieve SG&A of 65, 5% to 67 five on a same store basis in 2025 through continued efforts in North America, and our U K network optimization remains.
Speaker Change: Our team's relentless focus on delivering exceptional customer experiences and achieving performance through people. This quarter is impressive.
Speaker Change: I am proud of the team's progress in 2024 and confident in our outlook for 2025 and look forward to inspiring customer loyalty, achieving the potential of our stores, adding 19 growth across our ecosystem.
Ciena: I'll now turn the call over to Ciena to walk us through our key financial highlights.
Ciena: Thank you Adam the clear momentum Adam outlined in our operation has enabled us to accelerate our focus on creating value through our financing operations segment efficient capital allocation and disciplined balance sheet management.
Ciena: Starting with our financing operations segment, primarily driven by Dfc, we continue to see solid progress with profitability of $9 million this quarter compared to a loss of $2 million in the same quarter last year the benefits of our diversification strategy our apparent as our season portfolio continues to grow and our capital and securitization efficiency improve.
Ciena: Moves with the market building confidence in our operations.
Ciena: 24 was the turning point with profitability of $15 million for the full year, we expect to continue to see this profitability trajectory in 2025, as we balance yield growth and risk with an emphasis on high quality loans and disciplined underwriting.
Ciena: Financing operations portfolio balance is now over $3 9 billion with DSC originating $501 million in loans during the quarter. Our portfolio quality continues to be strong with new origination FICO score is expected to average $7 30 in 2025 and sustained improvements in net interest margin, which increased to 100.
Ciena: 35 basis points year over year, and 55 basis points sequentially.
Ciena: Overall, our financing operations continues to deliver on our financial milestones ahead of schedule. The adjacency is a key element of our $2 EPS for every $1 billion of revenue target as each loan originated by Dfc contributes up to $500 more profitability than traditional indirect lending we remain confident.
Ciena: And this segment's long term earnings growth and expect increasing profitability with a fully seasoned portfolio.
Ciena: Now moving on to our cash flow performance and balance sheet, we reported adjusted EBITDA of $419 million in the fourth quarter driven by relatively flat net income as the higher unit sales offset continued GPU normalization and higher floorplan interest expense year over year.
Ciena: The quarter, we generated free cash flows of $180 million free cash flows were impacted by higher floorplan interest expense and an increase in capital expenditures compared to the prior year, mainly related to construction to meet manufacturer requirements at recently acquired locations.
Ciena: Our capital deployment strategy focuses on the efficient allocation of our businesses regenerative cashless preserving the quality of our balance sheet, while supporting our growth initiatives and allowing us to respond opportunistically to a complex environment.
This quarter, we continued our focus on closely balancing acquisitions of shareholder return as we see elevated pricing on store acquisitions, even as margins normalized compared to our Shares' current valuations.
Ciena: Respectively, we look to allocate 30% to 40% of free cash flows to share repurchases. Our capital allocation strategy is guided by M&A transaction pricing and as acquisition pricing normalizes, we will actively reassess capital expenditures have trended down and are now primarily related to network optimization and OEM requirements.
Ciena: Under this rebalanced our tests in the fourth quarter, we repurchased nearly 1% of our outstanding shares at a weighted average price of $377.
Ciena: $469 million remains available under our share repurchase authorization we.
Ciena: We ended the quarter with net leverage of two five times in line with our long term target of three times and well below our bank covenant requirement of 575 times.
Ciena: While we opportunistically allocated capital during Q4, we maintain our long term focus financial discipline to support our planned growth and target leverage below three times.
Ciena: These metrics adjusted for the impact of floor plan debt, which is unique to our industry and related to the financing of vehicle inventory. This financing is integral to our operations and collateralized by our inventory.
Ciena: The industry treats the associated interest as an operating expense in EBITDA and excludes this debt from balance sheet leverage calculations. Similarly, we have ABS warehouse lines and issuances to capitalize Dfc, which are also excluded from our leverage calculations.
Ciena: Our strategy is to achieve strong consistent growth and best in class shareholder returns through our Omnichannel platform. We have the right team tools and financial foundation in place to drive scale and profitability in our core business and Adjacencies.
Ciena: Our diverse and talented team is committed to delivering exceptional customer experiences to build loyalty and we have the foundation to Knight our potential as we grow in 2025 and beyond.
Ciena: This concludes our prepared remarks with that I'll turn the call over to the operator for questions operator.
Ciena: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Information tone will indicate your line is in the question queue you.
Ciena: You May press star two if he would like to remove your questions in the queue.
Ciena: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: Thank you. Our first question comes from the line of Brian Cingal with Greg Craig Hallum. Please proceed with your question.
Speaker Change: Hey, good morning, Brian Tina Adam.
I want to start with me around what Youre seeing in the current environment. So clearly sentiment has improved sars improved kind of towards the tail end of Q4. It seems like trends have continued in January despite some weather and various impacts but curious what you guys are seeing from a trend standpoint kind of how you view the new administration tariffs if there was any.
Speaker Change: And noise kind of recently, but just kind of a current market update would be great.
Speaker Change: Thanks. Thanks, Ryan This is Bryan I think we're pretty excited entering the year because we're finally seeing the tail winds of volume coming back whether those are driven by.
Speaker Change: Economic change of political changes where we.
Speaker Change: We definitely see a pathway by year end.
Speaker Change: Exiting the year at a 17 million Saar and more likely that we believe that there could even be an $18 million year in the future knowing that theres about 11 to 12 million units that have been suppressed are not sold over the last five years that things look pretty good now if we're looking at other Mac.
Speaker Change: Crow issues I think tariffs is probably one of the larger things you know and I'd I'd, probably never thought I'd be sitting here, saying I'm glad I have an extra 20 days of inventory over most of the industry, but you know we are sitting in a nice in a nice position with inventory of terrorists do end up coming in the tariffs.
For us we have about 36% to 38% of our vehicles, we estimate that could be impacted by tariffs and being that we've got a 50 plus day supply we should be sitting quite nicely to be able to work through any negotiations that are happening between the two countries or three countries or four countries.
Speaker Change: Or whatever it ends up being at so all in all the market is there okay and I think in terms of our performance. This quarter I don't believe that we captured all of our opportunity. Okay. We did a solid job in the new cars, okay, but that gives indication that there was a market there that we did not capture on used.
Speaker Change: Cars, Okay, I believe that it's highly likely that we could we could see double digit same store sales growth on used cars in the coming years, okay as well as possibly on new cars and that's a good sign for the industry as well when it comes to after sales.
Speaker Change: Again, I think our warranty business filled our shop set up 20% and our customer pays were sacrificed because of it up only 2%. Okay. We've got to be able to walk and chew gum and our service departments at the same time, meaning that when warranty goes up we're still servicing our customer pay work so all in.
Speaker Change: Lots of opportunity for us knowing that our ecosystem is fully built and grounded where 100% focused on capturing that opportunity.
Speaker Change: That's great My follow up question, just looking at your 2025, new vehicle GPU outlook it.
Speaker Change: It seemed a little more pessimistic or or maybe conservative I guess, however, you want to view that versus some of your peers that are saying we're closer to the bottom.
Speaker Change: A new normal then we are kind of needing a lot more normalization to go I guess the question is what are you seeing in terms of is it industry dynamics is a conservatism.
Speaker Change: And then kind of secondly to that is the 2500 to $2700 of new vehicle GPU is that the target new normal, which I think you've said in the past or is that the average that you expect for the year from a guidance standpoint.
Speaker Change: Ryan I think when we think about Gpus that I think this this has been the theme probably for the last four or five years that we were a little bit more conservative on Gpus.
Speaker Change: We think if we don't do that then people get out of control on their cost structure, so with our right sizing plans and our 60 day plans in place. It's imperative that we match Gpus with our cost structure. So we probably are a little more conservative because of that reason in terms of the 25 to 2700 that is.
What we're looking at for.
Speaker Change: For the year, we believe that the normalized level is somewhere in the 23% to 2500 dollar level, Okay and add another $2000 and F&I gets you to the 43 to $4500. Okay. So there is some that will come out, but I really believe if demand is that where it's at today and we're in the middle of winter.
Speaker Change: Okay, I really believe that we've got a lot of upside when it comes to Q2 Q3, when seasonality for us really starts to take hold.
Speaker Change: Nice job guys. Good luck.
Speaker Change: Thanks Ryan.
Speaker Change: Our next question comes from the line of Bret Jordan with Jefferies. Please proceed with your question.
Hey, good morning, guys.
Speaker Change: I think you've talked about significant improvement in used and I guess could you parse out what is volume versus GPU, there should a where you see us in the used profit cycle.
Speaker Change: Yeah I think.
Speaker Change: I think we're obviously pleased with our valuable because as I said in the remarks with solid growth both through the quarter and unemployment basis up double digit as well.
Speaker Change: But overall, we have to be disappointed with the decline in deployment.
Speaker Change: A significant focus on driving used in 2025.
Speaker Change: Especially when.
Sure wrap out new cost, 55% of all used cars are sourced through trade and so there's no. There's no logic trial to say why we should be why we should be different unused.
Speaker Change: If that makes sense.
Speaker Change: In terms of GPU.
Speaker Change: <unk> unused cost we saw a lot of volatility in pricing in 2024, if we look at historical norms, we think that may still be a slight upside.
Speaker Change: On used cars.
Speaker Change: That remains to be seen as we kind of try and drive volume back as well.
Speaker Change: Makes sense.
Speaker Change: Thank you and I guess, you also mentioned in prepared remarks.
Speaker Change: Moving UK efficiency on SG&A could you just give us an update where you are with it.
Speaker Change: Getting there.
Speaker Change: Sure sure Brett This is Bryan again.
Speaker Change: We're actually quite pleased with what's occurring in the U K relative to market conditions. It's obviously, a little softer market and you probably saw that from some of our peers as well, but we have improved our position when it comes to cost management I think we were around just over 80% SG&A as a percentage of growth, which as you know.
Speaker Change: Still far from the 75% that we're targeting okay, but going through the winter months and knowing the knowing those gloomy days over the United Kingdom are there, we're pretty positive about where we're at we've right sized that part of the organization. So you'll start to see that come into same store sales. This.
Speaker Change: This quarter, Okay. So you'll get to see some some of those improvements, but all in all we're really pleased with the investment we are getting our feet on the ground a little bit when it comes to reporting and it comes to that idea of performance through people and managing people, but you know what we've got great leadership over there with Neil and his teams in.
Speaker Change: We're excited with what the future holds lastly, we also have cleaned up entire the entire mess that I would say that we bought if you recall there was a 30 to 50 businesses that were too small to operate all of those have been shattered now or they have been sold.
Speaker Change: We monetize on all of them, but two and the remaining two will get monetized by the end of March.
Speaker Change: So we're pretty pleased with where we sit on that in terms of the associated real estate are leaders in the U K did a nice job where almost 100%.
Speaker Change: <unk> gone on selling all those properties in terms of the lease properties.
Speaker Change: Got worked through almost 70% of the equivalent pounds that those costs. So we're real pleased where we sit on that as well.
Speaker Change: Great. Thank you.
Speaker Change: Our next question comes from the line of Rajat Gupta with Jpmorgan. Please proceed with your question.
Speaker Change: Great. Thanks, Thanks for taking the questions just.
Speaker Change: First one on the SG&A.
Speaker Change: I think Adam decided likes to have more opportunities there.
Could you elaborate what areas that might be.
Speaker Change: Is it more in the UK versus the U S.
Speaker Change: Just curious if you could.
Speaker Change: The deeper there I have a quick follow up.
Speaker Change: Hey, Richard Thanks for the question yes.
Speaker Change: Yes, I think I think if we look at.
Speaker Change: If you remember we had a 60 day plan I think we talked to you about it.
Speaker Change: In the late summer last year, we kind of realized.
The measures identified and not through the fourth quarter, we took out a further $200 million in inventory. So that was that was promising I think we still believe there's another $50 million to $70 million and vehicle inventory to kind of.
Speaker Change: Clean up and manage through the quarter into quarter, two and then.
Speaker Change: I think we're in good shape, but of course, the underlying premises we remain we remain disciplined.
Speaker Change: As we move forward through our store leaders are obsolete is to make sure that we don't just jump back and add the cost and so I think we talk about SG&A discipline as a kind of everyday buzzword now but to be specific to your question. The new car inventories, we should it should decline by another 50 to 70 and I think Brian probably is best positioned to come in on UK much Yeah, you bet in fact.
Speaker Change: Let me just recap a little bit on the entire organization. If you remember we finished $200 million in cost reduction there is another $50 million to $70 million in interest cost savings coming from <unk>.
Speaker Change: Inventory, we also found another almost $50 million in personnel costs at the support functions, okay as well as tech costs those will be realized in the first half of 2025 for an aggregate total of almost $320 million. There is another $20 million to $30 million.
Speaker Change: In the U K, but like I said, you'll see that in the same store sales results.
Speaker Change: This coming quarter I think most importantly, when you think about driving down SG&A, we're talking about approximately one 5% SG&A reductions over the coming five years, okay to drop it into that mid 50% range, Okay, that's going to come through growth of.
Speaker Change: Top line. So it's imperative that we're able to grow our same store sales growth and then do it in a way that it is cost efficient we announced the release of the driveway portal and those 250 functions that help our team members and associates do things easier and gain productivity that's part of it okay. If our customer.
Speaker Change: <unk> can do their work and have transparent simple and empowered experiences within that portal that relieves some of the pressure in the service departments in our sales department as well.
Speaker Change: It's a combination of those two elements topline growth and disciplined reductions that are coming from the uniqueness of our ecosystem that we're going to be able to get to that that mid 50% SG&A costs.
Speaker Change: Thanks Roger.
Speaker Change: Okay.
Speaker Change: One follow up I had and thanks for all that color.
Speaker Change: Parts and services.
Speaker Change: You had pretty good warranty growth good.
Speaker Change: You talked about some a little surprised to see.
Speaker Change: No just three and a half.
Speaker Change: Revenue growth four 5% gross profit growth I'm curious you know.
Speaker Change: How do you accelerate that to the mid single digit guidance.
Speaker Change: For the full year you also have some easy compares from the CDK <unk> I would imagine.
Speaker Change: Could it be higher than the mid single digits, but.
Speaker Change: Any more color you can give there on the initiatives in that business, where you are in technician ads et cetera.
Speaker Change: That can give us some comfort that the acceleration. Thanks sure sure Rajat. This is Bryan I think after seeing our peers, we're not happy with 3.5%, Okay that that didn't meet market, Okay, which is important the exciting thing is I think I can I think Adam and I can bolster sit here and say that.
We've got the challenge out there for our after sales leaders.
Speaker Change: To be able to reach higher okay. It won't turn in months it will turn in a few quarters, but we've established multiple things of how we can actually grow warranty and grow CP, it's not a tech issue. Okay. Its more of a mindset issue from the service advisers in the organization and management.
Speaker Change: They believe that there's only so many hours there and they can find the efficiencies. Okay. We just.
Speaker Change: We announced the release of what we call our lithium driveway partners group that was at a store manager level only okay. That's now getting rolled out to department level managers, and that's something that's going to grow the pride for performance within our stores that and that should that's tied directly.
Speaker Change: Two a departmental potential exercise, which is setting a higher bar that again is establishing that there's a market there we need to capture it.
Speaker Change: So I really look at that we could we could be high high single digits low double digits again like we were pre COVID-19 within the within the coming I would say three to four quarters. The marketplaces, there and the optionality that we're providing through the portal or through in home service functions should be able to.
Speaker Change: Take market share and grow that business without run I would say the regional differences in population growth. Okay. There isn't really big differences any longer. So there is not a good excuse for why we were at $3 four and others were pushing.
Speaker Change: High single digits. So we will get there Roger thanks for pointing that out.
Speaker Change: Thank you. Thank you for all the color and good luck.
Speaker Change: Our next question comes from the line of Chris, particularly Aerie with BNP Paribas. Please proceed with your question.
Chris: Hey, thanks for taking the questions.
I guess first of all I'm Gonna, Hey, Hey, guys.
Chris: What are your thoughts the first one on the guidance for 'twenty fives on the gross margin rate for service.
Chris: Looks like you know you've been doing really good like 56% grosses. It looks like you have that dropping for some reason next year to <unk> 52 to 55 is that just mix with customer pay or is that do.
Chris: Anything you do with wheels for next year, just trying to understand why Chris This is Brian yeah.
Chris: Yes, it's more of a mix between the labor part of the after sales and the and the inventory part so service versus parts, we believe that as as cars become more complex and more rip and replace that Theres a bigger parts content on cars and then there is a labor can't.
Chris: So youre going to generally see us lean towards margin reductions because of the bigger parts mix. Okay. It's not that we got smaller business. It's purely just the mix of those and it may end up happening.
Chris: Lower than what we expect but we do we do hedge that on the more conservative side because of the parts mix.
Chris: Gotcha Okay.
Chris: And then two just wanted to kind of get a sense for the GPU guide.
Chris: If you look at the GPU guide on the used side.
Chris: Good.
Chris: <unk> thousand 880, 800 2300 same store guide.
Chris: Pretty wide range, but you have a UK slipping into the comp base.
Chris: 700 in Q4.
Chris: <unk> hundred in Q3.
Chris: So at the midpoint is a pretty big snapback relative to 'twenty four just trying to get a sense, whether like underappreciated headwinds in 'twenty five 'twenty four like inventory write downs.
Chris: Or anything that maybe you weren't calling out that kind of gives you visibility to the snapback in 'twenty five or in your view, what drives that recovery and to use G. P. Then I guess similarly, F&I. So you've got a little of a snapback in 'twenty five guide.
Chris: Yeah, Chris This is Bryan again, I think when it comes to the Gpus. The major factor is the U K, okay, because obviously, they're considerably lower the other thing is in the U K F&I as much lower as well so that has implications on that I do believe that there is opportunity.
Chris: To grow our F&I, you know and obviously when we were.
Chris: We're targeting that $2000 number, but as asps get higher the financing amounts get higher as well and obviously that drive F&I profitability. So I do believe that there's some nice upside that we could also realized and again, we try to be realistic as we can with what we see in the current marketplace.
Chris: Okay. Thank you.
Chris Aerie: Thanks, Chris.
Chris Aerie: Our next question comes from the line of Jeff linked with Stephens. Please proceed with your question.
Speaker Change: Good morning, Brian and Adam and Jordan.
Chris Aerie: A couple of months.
Chris Aerie: First question that your store count went from 467%.
Speaker Change: There really wasn't any press releases kind of highlighting that I don't recall you talking about could you elaborate on.
Chris Aerie: What drove what were those stores.
Speaker Change: You know why.
Speaker Change: Went backwards in that regard and then also on the on the after sales guidance I was just curious that 52% to 55 years.
Speaker Change: What are the puts and takes like what would cause you to be closer to 52 versus closer to 55.
Speaker Change: Sure. So on store count that as is purely the divestiture and closures of stores in the U K that were disclosed a year ago. Okay. So those those got finalized which is <unk>.
Great to have that a lot cleaner in terms of the 52 to 55 the biggest variances.
Speaker Change: Typically are what happens on recalls and how much of its parts. Okay. So as I like I just went through a few minutes ago that parts mix is why we give that range I do believe that a 54% to 55 is probably appropriate for the near term. So you shouldnt see much you shouldnt see I wouldn't even call it Margaret margin degradation.
Days and I'd call it mix change, okay, because remember on parts our profitability level is about 30% and on labor sales in the service Department there, 65%. Okay. So big difference is that purely that can move things pretty quickly. If you have an aro that happens to be 60% parts versus 60.
Speaker Change: Percent labor.
Speaker Change: And then just a couple of quick follow up clarification is for Adam.
Adam Chamberlain: You mentioned, 55% of new <unk>.
Speaker Change: That statistic that you were referring to that.
Speaker Change: 55% of the new deals come with the tree because I don't think that you weren't implying that 55% of your used to source. It's a source of yes, it's a great question.
Speaker Change: Do you have a source of Troy is a source of.
Speaker Change: I use costs of 55% of source from customer trade ins pivotal vote in Utah trading trade war with.
Speaker Change: We're trying to sell up here.
Speaker Change: Here's the accident, here's our breakdown, 55% trade in 1% buying them off the service drive, 4% leased 8% private party and 2% through driveway for a total of 70% that comes from the consumers.
Speaker Change: The rest is service loners dealer from other dealers wholesalers rental companies and auctions.
Speaker Change: And then one last quick one when you mentioned Adam that the SG&A benefits were fully realized you were referring to just this quarter or are you still have a couple more quarters to go where yes, we're going to be right.
Speaker Change: Plus group.
Speaker Change: Great question, I think Brian talked about that.
Speaker Change: For the quarter.
Speaker Change: We still see opportunity in inventory floor plan as I talked about $50 million to $70 million and then as we grow top line.
Revenue growth, we see an opportunity as Brian said to decrease sequentially across the coming years.
Speaker Change: Also congrats on a great quarter and give my best is dead.
Speaker Change: Will do thank you.
Speaker Change: Our next question comes from the line of John Murphy with Bank of America. Please proceed with your question.
John Murphy: Good morning, guys.
Speaker Change: Without the exact data in front of me, but I think it's been I think it's fair to make a statement that you guys have been one of the biggest or the biggest acquirer in last few years in the market in the statement that you are making.
John Murphy: Now that the multiples are a little bit on the high side.
Speaker Change: Currently and that your stocks a little bit more attractive.
Speaker Change: It's a pretty big statement for the entire market. So Brian I was just curious.
Speaker Change: What you don't want to hi means I mean, you mentioned, 15% to 30% of sales were three to six times EBITDA do you do you need to market. How rich do you think the market is right now and how do you think it gets normalized hopefully over the coming quarters.
Speaker Change: Great question, John I think you probably heard some confidence in my voice 90 days ago on the call that we thought things were softening a little bit and pricing.
Speaker Change: I guess I'm sitting here.
With a little bit different perspective that there's been some pretty high prices paid for transactions.
John Murphy: The difficulty of what we're seeing John is that when you're talking about us buying at a three to six times normalized earnings multiple you've got two factors happening, though theres high multiples of six to 10 times in many places in the country still because there is still a lot of cash out there and then you add.
John Murphy: Add another 50, depending on manufacturers I said say another 15 to double the earnings levels, even on a three year look back you start to get into multiples and returns that are low to mid single digits that it just doesn't make sense for us and when we sit and trade at a forward looking multiple of somewhere around high <unk>.
John Murphy: <unk> digits low double digits. It just doesn't make any sense for us to do that when we know that our ecosystem is built we know that the $15 million that we made in dfc is going to be $50 million to $60 million. This year, and we know that long term, it's $500 million.
John Murphy: At a 20% penetration rate. So these are things that we're not even realizing in our own earnings potential. So why would we just not buy our shares back and that's where we are actually in a nice position that we're generating lots of capital that when the market turns acquisition Wise, then we can turn our attention.
John Murphy: Back to that I do believe it's probably still a few quarters away I think we can probably hit $2 billion in total revenue for the year, Okay, but and again, that's going to be in the United States, 90% of it okay, but we have to pick and choose those opportunities of <unk>.
John Murphy: Tours that really haven't realized the profit potential that we're able to find for that three to six times normalized earnings, which is where we're really going to be sitting so it may take another few years for a truly to normalize because people. They made a lot more money than what they typically had.
John Murphy: And that's something that we try to tell them you already got that money, we're not going to pay twice for something when your earnings or our normalized so we typically do ask for financial statements for the last few months and then try to look at the trajectory and explain that to them and hold their hand through it. So they can still monetize the important thing to remember that is.
John Murphy: That is lithia, we have done about half of the transactions over the last decade, and a half that have been done by public companies. Okay, and we are sitting there as a buyer that is closed every single one of those transactions other than two.
John Murphy: So over our three decades of of purchasing we've only had two transactions out of almost 600 transactions that fell apart. Okay. That's not typical in the industry typically about four out of 10 transactions get completed even ones that are contractually committed meaning that six fallout out of 10.
John Murphy: That's helpful. Just one follow up on one of the other comments you made you said, 95% success rate, which indicates 5% don't work out as well as expected does that mean that those stores eventually falling into divestiture or the stores that get closed or fixed.
John Murphy: You nailed it in the U S. We haven't really had to close stores in U K. We did because they were just so microscopic in size, but in that 95% what makes up that 5% typically what makes up to 5% is thus not missing a target on an acquisition. If that's buying a group that may have had one or two underperforming stores in it and then.
John Murphy: It's just a matter of trying it for six to nine to nine months and if it doesn't meet our thresholds and we typically divest it.
John Murphy: Got it and then just one last quick question on the outlook when Youre talking about the front end growth of 4100 4300.
John Murphy: Mentioned, there might be some downside in the new GPU, but it sounded like youre pretty comfortable with the other two components.
John Murphy: Components, they are being used and F&I.
John Murphy: As we think about that front end gross going forward, which is the most important number out of those those four there because youre working a deal.
John Murphy: Do you think thats going to settle in closer to 4000, plus or minus I mean, because that's really the number you run the business on so.
John Murphy: Whats the upside downside on that in the range do you think is normal.
John Murphy: Yeah, John that's a great questions and I think I'm going to answer this from a lithium driveway standpoint, not from an industry standpoint, because it's imperative to remember that lithia pre COVID-19 had a lot of its business in the western states and a lot of small stores that didn't generate GPU.
John Murphy: Okay. So we not only purchased a lot of luxury stores and doubled our mix percentage of luxury we also purchased stores in the southeast and south central that have about $1000 higher Gpus and the rest of the country. So our lift in Gpus is different than what the industries.
John Murphy: Lift is so we're not looking at what the industry is doing we're looking at what we're doing when we say 42 to $4500. Okay, now where does the variation come from we believe that we've already trough on used and Theres a lot of upside on used vehicle GPU that should come back.
John Murphy: Over time, Okay. So in our modeling were assuming that there is two to $400 of improvement in front end gross profit on used vehicles that will offset some of the reductions in new vehicles, because we are still sitting at about $1000 higher as an industry we think.
John Murphy: Because of our mix, we're only sitting about five to $600 higher Okay. And then obviously add back in the F&I lift of another couple of hundred dollars and you get to the 42% to $4500.
John Murphy: And Thats do you think the quote unquote normalized range for you probably over time, we'll see how the market do.
John Murphy: <unk>.
John Murphy: Based on our new footprint and growing footprint, okay. So the mix and the footprint are the main reasons why we move from $3700, which was our pre COVID-19 level to almost $5 to $800 higher okay. Remember on F&I. Two we typically had grown F&I about 60 to $70.
John Murphy: Been five years at 300 Bucks, Okay that you can apply to it. So there is not a big lift here, it's truly we're at the point.
John Murphy: Our goal as leaders is to be able to change the mindset of our department and our store leaders, Okay and I think this idea of performance through people, we've got to help paint a picture for our store leaders how do they find their next year because I think we're all in this rut that believes that the market's still.
John Murphy: Maybe a little soft we know it's not okay that Saar is going to return and Gpus are still quite strong, especially with upside and use in the used vehicle area and obviously F&I is always there.
John Murphy: Commanded and to be captured through better people and better performance.
John Murphy: That's great and thanks for taking 18 million units in the next couple of years, because that's what our forecast is an area of things, where we're way too high but I'm certainly seeing mindset I think we're going to get there in 2007, and 28, alright, well, we will have data on when that happens okay, hopefully it rather than five quarters wheelchairs that thank you.
Alright, John take it easy.
Speaker Change: Our next question comes from the line of Colin Langan with Wells Fargo. Please proceed with your question.
Colin Langan: Oh, great. Thanks for taking my questions.
Speaker Change: Just wanted to and I'm not sure if I missed this in your commentary.
Colin Langan: New Gpus were down sequentially and others that have reported have been flat to up.
Colin Langan: Any explanation of sort of the relative performance being different is such a U K factor driving some of that or.
Colin Langan: Why not seeing that seasonal help that others have seen.
Colin Langan: It could be a little bit of GPU, Collin, but I I think I think it might be mix differences of manufacturers, but you know what all own it Adam alone. It. It's us okay, there's opportunities and we've got to get out of our mind that somehow the market is soft when the market is quite robust.
Colin Langan: So that's.
Colin Langan: That's just something that I think after reflecting on the peers. It gives us upside as the largest retailer in the world that you know.
Colin Langan: What if we can figure that out and we can change the mindset of our people and inspire them to find the next gear and we're going to we're going to be able to exceed so I don't want to really assign a reason, but I would say that that's it's probably more us than anything else and let's own that and move forward and capture that.
Colin Langan: <unk>.
Speaker Change: Okay Alright.
Speaker Change: I just wanted to follow up on a prior question you know I think it was asked about the 2025 outlook on used and F&I.
Speaker Change: I mean, if I look at consolidated which is going to be the same store base, you're at like 1700 unused in Q4 and the guide it's 18 to 21.
Speaker Change: Prior answer sounded sort of explain why it would be down but the guidance would imply that improves so just trying to make sure I understand what is driving used enough on I Steve.
Speaker Change: Even at the mid point on F&I, a bit better what is driving it better so that at least for Q4 rates that we're looking at currently so really quickly on F&I. It's truly people performance. Okay. It's managing the performance of the people when it when it comes to the used car market Collyn, we do have seasoned.
Speaker Change: <unk> and used vehicles on Gpus and as we all know it's been quite volatile over the last few years that have been driven off of the inventory demands or lack of demand on on supply of new vehicles. So I really believe that that's going to normalize we've got.
Speaker Change: Q2, Q3, coming which usually means strengthening of used cars.
Speaker Change: I believe that you know, we've got a lot of opportunity internally to be able to improve and find scarce vehicles and effectively use our AI and our reporting tools to look at price to market and cost to market to be able to grow our performance and.
Speaker Change: That's that's really where our opportunities lie and why we believe <unk> hundred isn't an appropriate level.
Speaker Change: On a normalized basis I think thats.
Speaker Change: Thats a depressed level still that's dropped out now for almost six to eight quarters, Okay, and it's time to to capture the opportunity. That's there in respect that we've got the scarcity cars in the country and they should command more money and let's let the world see those through driveway and green cars.
Speaker Change: Find those 50 times more customers to help drive price to market up.
Speaker Change: Got it alright, thanks for taking my questions.
Colin Langan: Thanks Colin.
Speaker Change: Our next question comes from the line of Ron Josey with Citi. Please proceed with your question.
Speaker Change: Great. Thanks for taking the question, Brian I wanted to ask just a little bit more about the online approach that you all have I know we pulled back some in 'twenty four so any insights on the vision here would be helpful. In terms of how youre thinking.
Speaker Change: Online you can grill, particularly from a use perspective, just given the importance of use with trade with profitability. After service and then do you think we'll get to online growing as a channel here in 25 or is that more of a 2006 and beyond thank you.
Speaker Change: Thanks, Ron.
Speaker Change: It's a big part of our ecosystem of how we thought about the design and that idea that you have the potential of 50 times more customers I think what we've done is we've relaxed the pushing of our physical network.
Speaker Change: To actively involved if they don't get it they're going to fall behind because our internal and our external approaches to our online business are growing okay. We're quite excited to see what's happening in green cars and drive way. It is an integrated model that is integrated now fully into the stores.
Speaker Change: We developed some new reporting on what we call. It ecosystem effectiveness that include some loyalty metrics and sales and service. It includes some online functionality. It includes now the my driveway portal, Okay and this idea that customers are going to be able to now easily access.
Speaker Change: Our online services.
Speaker Change: We didn't talk a lot about the my driveway portal, but we're gonna be dumping almost 70000 customers into that portal come March which are all of our DSC customer base, so they're going to be making a payment through there they're going to be doing all payoffs through there they can get their valuations through their customers can already book service.
Speaker Change: Appointment they can attach themselves to any store through there. They can have different cars attached to different stores, it's quite functional and it's really empowering. So we really believe that the snowball effect that will occur from the my driveway portal will help integrate everything together to make those customers.
Speaker Change: Experiences more seamless we are targeting some pretty good lift in driveway and green cars. This year to the tune of about 50% lift okay, and we're starting to see that in the early part of the year through just figuring out efficiencies and again managing performance through people to be able to really improve we've.
Speaker Change: Also changed compensation plans.
Speaker Change: In our e-commerce businesses to help motivate people to do more with less.
Speaker Change: We're also looking at how do we align our stores compensation plans with the ideas of loyalty potential and growth. Okay and those are things that over the next coming years will be working on with new departmental leaders in new store leaders as they come into the organization to align.
Speaker Change: That top line growth as well and make sure that it <unk>.
Speaker Change: Follow through with SG&A costs improvements. So hopefully that gives you a little bit of color Ron on where we sit on the online approach, but we're pretty excited of reaching this point, where the ecosystem is built now it's a matter of leveraging it.
Speaker Change: It does thank you Brian.
Speaker Change: Our next question comes from the line of David Whiston with Morningstar. Please proceed with your question.
David Whiston: Thanks, Good morning, Brian you've talked to a couple of times about.
David Whiston: A mindset change being needed such as warranty crowding out customer pain, having customer pay underperform like can.
David Whiston: Can you be a little more specific as to what you mean by that when actual action items do you want to see happen to have this change take place.
David Whiston: I think it starts with with believing in your North Star, which is potential. Okay. We went through a potential exercise in November and December and there is a lot of of low bars being established when there is units in operation.
David Whiston: <unk> in those stores. So that's that when I talk about mindset change. It's our RVP is our group leaders and our regional president sitting down with general managers, and departmental managers and diagnosing where the opportunities lie and building plans.
David Whiston: The mentally how to take the actions to capture that market share.
David Whiston: It's a smaller things as and after sales what is my percentage of vehicles that are driveway repair, meaning I'm repairing a car in someone's driveway or its driveway pickup, meaning I'm picking up the car from someone's driveway and I'm, taking it back to the store and fixing and if theyre not involved with those things there.
David Whiston: <unk> involved with automotive service retail today, because there is not an optionality and David there is theres, probably 30 things in each of the key departments that need to be done, but it starts with that ability to engage leaders to see things that theyre not seeing today.
David Whiston: Okay, we have something that we call store visits you, obviously know about our store performance scorecards that lays out the foundation to what is high performance look like underpinning all of that our second tier reports that get into the details of these in store visits that are pointing.
David Whiston: Those leaders towards that the mindset that we need to change above the store is if theres not movement within 60 to 90 days of doing that sit down then that person that's in that departmental role or that store roll. They don't belief, which means we need to be looking for a way to change their mind again.
David Whiston: Again or exit them from that leadership position that may mean that they can find another position in the company, but there has been way too soft of management, when and lip service coming from the stores. If the performance isn't getting changed quickly it's never going to get changed 60 to 90 days is orange.
David Whiston: Mantra, Okay. It was that way five to seven years ago that way again, and I know Adam in the Rps and Rvp's believe in that strategy. They've just got to go execute on it again, okay in our store leaders need to understand the change management is a mindset, it's about helping people see.
David Whiston: Things that they can't see on their own it's about shifting them into the next gear and helping them find that gear and then looking towards that next year on top of that to be able to continuously improve in our organization.
David Whiston: Hopefully that gives you some insights David if you want to take it offline. We can sure talked to you about it at a departmental level and what the key drivers are that we'll be working on.
David Whiston: I really appreciate you are flushing out that's helpful. Just to be clear then youre not really short tax in short service base.
David Whiston: No I mean, that's that's more of a symptom in some locations, but it is not the effect okay.
David Whiston: We don't have the ability to have tax shortages, because we grow techs internally, yeah, and maybe Texas. There's some there's some soft spots still but outside that that's not the reason it is truly a mindset of the people in the stores that believe that they cant do more with less and they can.
David Whiston: They can do more with less we've just got to help them see it.
David Whiston: Great. Thank you.
David Whiston: David things.
Speaker Change: Mr. <unk>, we have no further questions at this time I would like to turn the floor back over to you for closing comments.
Speaker Change: Thanks, Christine and thank you everyone for joining US today, we look forward to seeing you on the lithium driveway first quarter call in April and April all the best Thanks, everyone for joining us.
Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.