Sonic Automotive (SAH) 2 Aug 202020 Q2 Earnings call transcript

Good morning. And welcome to the Sonic Automotive Second Quarter 2020 Earnings Conference Call. This conference call is being recorded today, Thursday, July 30, 2020. Presentation materials, which management will be reviewing on the conference call, can be accessed at the company's website at ir.sonicautomotive.com. At this time, I would like to refer to the safe harbor statement under the Private Securities Litigation Reform Act of 1995.

management company's financial otherwise products about future. call, expectations information make conference the the about or this may projections, discuss or statements During market or risks and to results materially from a Such cause made. differ subject statements are that could forward-looking number statements of and the uncertainties actual to in and detailed filings the the risks These are Securities with company's uncertainties and Commission. Exchange

you in and the may measures begin on conference. filed as would the earlier Mr. tables Chief Securities Sonic introduce may financial non-GAAP report discuss to defined David today. to refer non-GAAP Exchange and company's your EchoPark's certain management Officer. Please Form addition, with Executive Smith, In and Commission. current the I the reconciliation Exchange Smith, like by X-K now Securities Commission Mr.

good welcome company's Smith David Automotive's Thank to Again earnings everyone the XXXX you, and Sonic call. and quarter second I'm CEO. morning,

our Executive our I'll Tim Jeff After Heath results an Joining digital expansion to trends we saw Byrd; on our President, into to XXXX, July, addition second me and Mr. for our within of today is discussing the on quarter partnerships CFO, Mr. the Today provide in take that VP EchoPark. of as we'll well Dyke; also questions. Operations, call update be plans an your announcement second for quarter accelerated as the on and and latest Keen. Mr. happy

in see improvement to As continued operating and the automotive second progressed, quarter consumer substantial conditions retail demand. we

us rate during and May GPU second month demand new with majority vehicles allowed saw vehicle certain repairs dramatic and unit results, our take improved for June and drove vehicle we May sourcing used and a recovery rising the a was markets. quarterly in of the Limited vehicle used advantage in higher benefiting we opportunities used challenging the in used new took April gross greatly inventory April weighed manage to of that in of per inventory consumer actions our to on brands While service our half in acceleration and June. of

increase EchoPark May in a new Some from increase used increase a sequentially XX% increase GPU, day, in both F&I XX% XX% unit, profit. quarter. contributed F&I of vehicle noteworthy improving achieving vehicle EchoPark financial controlling dealerships XX% per franchise in in and in throughout disciplined our pretax profitability franchise a profit gross remain operating our a stores June These liquidity, increase item. for improvements tax On franchise the XX% at compared in franchise to the quarter XXXX and gross adjusted we nonrecurring a consolidated and XXX% factors GPU, we $X.XX, $X.XX EPS expenses $X.XX per a used enhancing fixed in Sonic per operations reported the combined unit, benefit to Above second a increase a GAAP profit all include, from EPS second a quarter of of XXXX. to and of including XXXX, $X.XX basis, for

of $XXX other up of quarter XXXX, XX.X%, of SG&A XXXX; In operating XX,XXX $XXX June an decrease $XXX X%; XXX income EchoPark XX%; of as up million million sales million, from X%; million, of of EchoPark March of total which XXXX. increase retail segment available profit a XX, second or percent of as and SG&A was EPS include; million of volume $X.X addition reduction EchoPark revenues as compared quarter units, a to of of gross XX year-over-year, points; second up the XX% basis to highlights growth liquidity $XX

during as this building the learned more quarter, pandemic. on last financial our the to crisis, we during our recent improve efficiency, During continued as second well experiences operating lessons

I'd leaner, enabled Through $X more have We by to of a much these per expenses these million that Sonic pre-COVID-XX success levels. initiatives us annualized tremendous million operate profit to approximately to the profitable earnings to like $XX very pleased normalized which we pre-tax emphasize compared XXXX, return manner. this efforts, month more upside represents with of as decrease in are expects as in business or indicating levels. to our over adjusted SG&A XX%

to on our Moving operating segments.

dealerships the year-over-year a Our franchise April challenges performance of we May in faced early COVID-XX. result as reflects and

profit. very experienced momentum in month throughout recovery -- a happy used volumes, continued ahead fixed of the During vehicle well operations of accelerated June, this has margin the new report that the sales month second during date. to month of July to vehicle sales previous strong half forecast. and gross dramatic I'm new This and recovery gross of Sonic our the

Now turning to EchoPark.

and As V-shaped volume improved progressed. as recovery our June, profitability original a unit expected for experienced volume EchoPark quarter second EchoPark the forecast had sales the prepandemic surpassed month. in By sales

just model. cash the were its guests convenience EchoPark Notably more This EchoPark noted quarter Tampa our quality has potential realize second pricing, more all July second of leverage continued as into and XXXX, modern hassle-free car-buying the experience. press demonstrating our EchoPark As to in that operating stores our operation. income in a our full offer month tremendous in momentum flow enabling enjoy June stores this including segment our and of and profit guests morning, value in release store increased this the of positive XX%,

retailing digital to on our initiatives. Moving

accelerating As very key Darwin and its of this platform our expansion quarter the are by and proprietary of kind this morning our fourth to a with Automotive strategic about historic first user retailing EchoPark will interface digital excited partnership e-commerce year. we This Automotive we plans. be develop to announced Cox partnership

guest elevating online stores our match EchoPark dealerships to on-site experience retail dedicated have echopark.com. come at expect at great are at our experience guest franchise the our guests and to We to

of plan extraordinary Sonic announced brand. date EchoPark Based we environment has yet of on of model speak have tell, to business expansion about the begun performance strength the quarterly and potential we the brand. As you an revenues accelerating several EchoPark challenging outperform and this can EchoPark that original success full total and time, quarters, dramatically our unique operating its this billion believe are to to excited this profit $XX strategy reach our are leverage year, original rapid these brand. EchoPark potential. after our over EchoPark's EchoPark's decade. and results continues business unique past expectations, Since achieve in to strategy a EchoPark to demonstrating the actually extensive Further, growth growth expansion of review not to to the its this this that of model. very revised we our we Earlier is that revenue more grow scalable growth,

EchoPark buy will by utilizing and markets by billion and outlays have revenues. the and manner, national in on across last as a annually new EchoPark vehicle are or on expansion locations The account consisting hub our network an announced more delivery into centers, remain our overhead as in to By with mile echopark.com conducting existing to these quite past in internal and EchoPark nationwide plans highly retail announced this we've several allow flexibility retail experience events capabilities be of next on markets our on app sales annual now of newly objectives we short EchoPark greater team managing EchoPark believe online to and opening model levels the expenditure the While a adjacent out anticipated. to our COVID, term, to buy XX%. model, committed modeling, capital originally to in expand delivery centers months, proven our $XX a or footprint we've distribution EchoPark these into plan. most and excess X.X we investment customers models the a team, enhanced we center conservative the achievable capital-efficient costs, interface, centralized can of guest as at By our execute the realizing tools the sales build to inventory development new user capitalizing we has in the that efficiently Based quickly the us for over location. we are plans EchoPark place country hubs trained minimal well taking and proprietary returns appraisal, delivery procedures will of EchoPark's able very than shop on and recent e-commerce pricing the strategically been XXXX, nationwide mobile expect by based in XXX-plus retail we today and of even through generating and million on-site have capital

its Progress the delivered and buy in last and and underway Monday. is the coming forward for on South on several results markets our delivery opening progress first Friday first updates Our providing and to we vehicles Carolina Greenville look next opened over months. center well

to I guests, of EchoPark. our opening of am by teammates well our for happy our the your to meeting beyond. guests during challenging and questions, their take to get focus personally times as a to I to and thank of moment express care of proud remarks continues to teammates questions. be all our our would the future Before partners now like to commitment of and we'll we needs taking how their business our these the way continued and I way of take our our Sonic team the to on and want efforts as This each -- dedication of concludes

Stephens. is Rick ahead, from Please And with of sir. [Operator your question first Instructions] the line go Nelson

follow And to to up where attack these five-year to many you on points. have stores? XXX next you're locations, plan thinking It how don't five in Maybe you're I quite these year. for color this those speak Good distribution hubs of the delivery I around next guess year? Thanks. would morning. deck markets slide looks going like interesting about like you how could some

to probably -- open year. Dyke. plan. this That's year. three open Jeff Sure. our next get delivery it's We're Rick, centers Hey We'll XX buy going to and we'll four

great facility The $X those million maybe actually really there. anywhere already there. property opened store his to is last million of and market, versus news we going in rent medium-sized we'll As said it's We're million. cars a that's are and using to $XX opening to put comments, big $X But from that already. own Greenville delivering million week the million investment we up into quite $X store light We're a a EchoPark we $XX on an for that's BMW store David and property well already have $XX in so marketplace. facilities that small million our Greenville the

to a store and or into at centers Those store market. for month. X,XXX XXX So, at XXX When a add to it as It had month lot faster will do in buy rapidly to big out a us in revenue. you delivery world. get allows XXXX maybe across $XX XXX that we we medium makes country, can and very a large sense the and efficiently to and just brand XXX where the move move XXX much medium That's plus a all the effectively it the hubs as grow we markets anticipated. than unit by the originally billion the EchoPark's mark

about ahead and So, it's excited very, we're very well make that. these brand allowing go very is and to The us doing moves.

storage this And David, how to Jeff pickup and delivery many or locations? hubs do plan, achieve you how envision many

a will buy -- and delivery half and moving U.S. delivery again. three is of hubs XX us northern three a in range hubs it this the So, Jeff It in and to bottom start year five centers We'll buy part year. you'll the XX be see a probably of and attack yes U.S. the to the the year five But somewhere centers and around a terms of then year. first will into

Rick, this David. is And

is -- reconditioning centers big to about as the you the think if our Something model understanding stores our well. that this is it key retail are to hub centers, --

that's to So, And profitable allow that's they they're while highly very something important. us recondition vehicles.

Sonic do And is get the these the a to consumer or something to market, will... fee charge to vehicles you that

to that move XXX to we're is and We'll year look -- now, how no appetite. for on we'll Right miles. depend as consumer. fee to there going at out works the see going XXX forward play It's consumer that we see charge margins. us the by to Within that

with cars delivering the we're to charge So works. that. we'll already. market how see no Right of Greenville, now margins kind The that are There into is good.

But we'll year. already. So meeting expectations our by that play we're

as We lot see flexibility in works model we'll move the that of have forward. so how we a

driveways people's to come and... a deliver location you they Do or Yes. central to

neighborhood had of something come going lot not going complexity do. the We're to central No expense so a mile. not to to location. We're deliver and the where they're and you speak. we're to last to to of so to going a going that's lot That's deliver just a

it's now right where from the to have street the right property the lot marketplace. our again across across are they and there from going And But in the cars guests BMW-MINI a picking right street so Greenville, of in store we where do up. volume CarMax,

terms something location. So the and And that's there. our Atlanta in build eventually we'll marketplace quite from to delivering our of quarter reasonable the in Charlotte expense first

this is Rick, Heath. And

I the nothing true user off think signature. a car. than delivery, up value your that it's and a asking a vehicle is a this there's Bluetooth, delivery the you full and a in your someone important knows on handing a that's can to dropping think think It is complex having note about around product keys driving that off up give as not for better right? playing vehicle. someone walk we and someone vehicle knows dropping We the that experience and It's a hook and a truck that's car that can knowledgeable

anticipate as view you Yes. into markets, hub you Do it existing sales? your these you stores of do as incremental any push or cannibalization

incremental as view We sales.

XXX% Yes. Rick. It's incremental,

look our are you reach. – beyond existing sales, that markets of When targeting not we're most purposely that sales at – they're

Got Okay. you.

Your stores to hub buy the and takes how deck Page thoughts updated of as maturity maturity? centers it volume. Any to talks and types delivery the long reach of to slide about XX use

telling year a quarters or or store it's just a levels. maturity they feel we everybody keep to but – a the So it mature we get six so takes get store all we to where beating to like were that

profitable said in And first two look was it it David Tampa you of at months the earlier, operation. so

So ramp we four profitability they every that something nature. time for But maybe these volume we're up of of three years mature stores they to one learning opening and open quicker. faster keep

we like seems sort time. up then it from of cars ramp zero we so and to of And sort go XXX over immediately

is maturity four somewhere three range. full year think the I to in

in that Tampa opened is something store mind And to depths keep that COVID. in of right the

in So it quickly. the kind very and really mean it's became opened of not time like I profitable it opened still – worst

Exciting stuff. Thanks and good luck.

of Best Rick. luck,

Thank you.

is Please JPMorgan. next Your with go Gupta line the from Rajat ahead. question of

Good morning helpful. my really the Thanks. and deck. the and details question for They're appreciate I in slide thanks taking very all

Just question forward. on just profile on going here SG&A of the kind

talked You've million $XX about the expense reduction.

how the in here pro term, like I or within the years to EchoPark expanding we should how just with forma buy that in overall of management But things And overhead think the of follow-up. the experience guest should bucket marketing base. of SG&A kind centers the this this before in You as curious like gave least us dollars EPS – the managing initial cost forward or expenses strategy any growth about this Or you're Just step-up the are going into at expecting profile be delivery like of Thanks. company? things to, near here. like we expansion for have appraisals? maturity a costs overall as you and gross the plan locations, hit the they

previously, $X the Heath. buy Yes. we less we there's as some ramp been every This will that's million expenses up. and used store Obviously, there's about delivery indicate to dramatically is a and centers opening But be franchise EchoPark, we less is forward. going always that Obviously, we're look it for and at you And up finding models they growth are much well. if as lot the where what so is at so stores. EchoPark than But than both our and look you quickly. better the is ramping if leverages reported

it's we're going of And as to $XX the the it impact – buy with way the and the grow line. EchoPark, that is you. doing delivery we numbers with with is materially segment we've the leverage going that to to given not million so bottom centers not the straight again that But

EchoPark Rajat And they'll stores so well opening new stores. are the the also that of performing of the existing offset cost

going he's month the to million So straight a bottom line is right SG&A that the million $XX $X to in drop reduction.

year what did we – just could EPS add come that and a that model. with you to new up sort last You could of take

it. Got

that to So should forward gross number like XX% model terms like of... XX%, to the in SG&A a range be going good is

Yes.

it. Got it. Got

Okay. That's helpful.

made on the thing interesting that point advertising. the And you about

Our that drive advertising the And advertising brand all our not volume advertising, price is that not Internet media. to social advertising the allows bring of our some make us So more of TV, into and goes price do. competitors our It's right? it's more profit. down,

And so can we've we've every Over we deal XX,XXX that seen got leads more with that now. leads month.

what so segment price drives EchoPark that the profitability so And advertising is and quickly. that's that in

helpful. That's outlays stores, that business to just the of seems on much this latest the potential as It EchoPark attractive centers. separation is business, dependent in more this accelerated looks Does any function the for it. cash of the growth to Got this from this there. franchise it. flow just capital like franchise business. not Got what Can – plan. way is the And are curious It are the starting thoughts you improving. an delivery like accelerate Just business? a clearly is

any can thoughts on just – just So give that? you

Yes. we're the But grow that I and we're on this that to I'll think as we just – plan Thank put going to into that. put But out what-ifs to answer we'd want execute not rather going we business – get certainly, continue today. area. just the to you question. for in there possibilities out we it's and

new plan the add franchise five would that We've option. F&I spectrum actually full used -- the are are fixed that four-year-old than the top omni-channel on and all of improve that become gives the e-commerce we very well the the automotive as needs and we we industry. from the that EchoPark model. of think And become truly and the with side as We omni-channel Rajat, spectrum the on separated full that I got that choice. more omni-product of side believe we up option us the way expansion best-in-class on this open And strong as and e-commerce a that's

can you it or can do somewhere in on do You can online site, do you between.

two us so And between and are synergies companies what we the valuable. makes think there that's

franchise previous is have of at able as lot we then as things our value that there's of one profit talked to that at retail retail us are stores. the we've of call And that that EchoPark share we lot to well stores that a lot about in come vehicles lot added our do to a -- a a

And just more Got update. how you SG&A curious on are how on you outlook planning for thanks? doing for sourcing gross. Thanks trend terms -- are it. within -- helpful -- You of -- question. just the like your what in to GPUs color the for to like a use That's near-term like the lastly on of here could July you what's know planning just -- near-term August? of And like the how auction spending month? just in And the do the pricing, And what pricing? -- rest just your

is been far. So, great June. is lot a -- a this so Jeff. It's month it's Look July like, just

I put think deck. in out our there we it

New our to to XX% of and single XX% great Used the on going that up ballpark. somewhere vehicle But XXX% be single-digits. the in low profitability Down same operations. or is digits so. that July in in up is car in the it's the in range volume news fixed is about the low up volume

I -- it range would. And that upper There's going is It's no like so in us on model into -- car getting we SG&A holding it's inventory would and said for believe there. new to XX% the of be to better. in the So the August terms is reason September. just

as volume forward. So board. the we new are move will improve across Margins car good

quarter great third be the quarter for should a So us.

the this you Heath. that believe of -- I'll add. at at you look is XX XX slide and look I this When months. And each

think the at very always can't Obviously, those June because was when operational and it's and compare metrics July stronger. June quarter-ending I telling. month you you look a are

reduction guess, looking obviously, July of own with. extremely And with So very last strong. pleased our XXX% SG&A its I year's on we're pre-tax is

our basis. a planning September to continue of, for mid-September, for of we're We'll think update send I everybody week out on update monthly guys. slides a sort third you

can we you lot what's in color on performance. keep speed up going of to a you So our and keep kind coming at of terms on of

helpful Great. luck. good it. And Those again and recently. thanks have super Got been

Thank you so much.

Thank you.

line Please Your question of with Sinkevicius Armintas Stanley. go from next ahead. is Morgan the

Great. Thank you question. for taking the

us $X.XX a of lot to provided I $X.XX -- effectively you EPS. results was know, onetime from continue more between to the tax that to $X.XX mid-June drove the the $X.XX already And $X.XX the You about a know what the with happened minus better but in surprise that What to $X.XX than talked update get and up whole you first targeting excluding to color bit little quarter benefit? hoping on to upside. acceleration,

it we history in think, I it. it And Yes, non-December June Maybe the us. month and together June on and month was about our when happened. name best if -- gross, of you you volume, we just had the an all alone. $X.XX, our our books think outstanding It June into kind all made month. $X.XX $X.XX we went SG&A came It for was profit in of company's in

And and best so of in a just volume across cylinders. it EchoPark's all the month hit in had profitability. fantastic terms month We history single on we've EchoPark was board. the was it

level -- standing third in just for in Even nothing, very the Texas Florida COVID, are a to did unit at in mean, the and point. and continue executing location very, gold we seeing going of, store with almost high this just averaged outstanding. EchoPark. $X,XXX we learning. we're We're per think expect numbers. And standard expenses quarter. of cars something on we're that's it I Those way happen. averaged continue opening the with the just and in in to at profit sort into $XXX,XXX up a profit XXX our July rest to per hotspots are There's I in in that

Our ever throughput it's is been. better than

at selling XX are were associates at that cars to XX. sales associate EchoPark XX Our and now XX XX sales are per

XX units per store best performance our I sales is at our Charlotte associate. think

-- than we this. in better having just are blast a getting it So

of year. it's going the rest for be a quarter the great to run the final part the so into and of And

this It happen is -- David. And

not a stores that that two have and regionally down of have team a just think five And -- a very turnover. our our is are top or -- been our guys four I big and into lot our leaders the part in the the -- of and that. have these all through financial us long we low been time with all of very leadership crisis

out very fewer this So right? four reductions not about some like stores It's on pandemic to the executed, and when they're and -- raised it's it it's do and in. And do again down is And team believers now or five implemented really necessity people. into with that when it. was just it have more and productivity the and do our jumped could as these it. and hit they and invention, Jeff It's per the just mother not just know saying excited They bar of -- look found for of they're you people execute they they're it can top they the actually bought the person.

EchoPark were flowing. making our flow were the Tampa, I'll money Long stores That's that June positive. also all cash Beach in were first add young like cash even stores

And get big months weeks. say a six and going We getting nine them to eight we're that's profitable looked in it's deal So to us. profitable. them for take we months,

on go is expansion So going that's paying perspective. the we're this really from us an off tariff model for to and why

how Tampa more stores. goes Because like had we efficient. on much open we store as It's it open or better If been in profitable. the getting -- three we to used opened years one two keep the ago, time wouldn't have we

and and how is the So really team figured open profitable pandemic out a to store has learning fast. in the even get

then cannibalizing and Greenville to volumes start store. will volumes the and will Is new about the with on way a your sounds that franchise it That it then the think And the up use EchoPark delivery one from in use. the deteriorate right ramp centers mentioned to franchise really like you that located start Okay. volumes? the at buy is BMW-MINI

Quite the opposite.

It's customer. different a

Yes. And remember inventory. sharing we're

EchoPark. at the to going having to trade-ins in look having market record our at don't Denver point numbers our Denver record record only So X-year-old having stores Denver that our are in volume you franchise BMW X- sell store and all we volume we because is get EchoPark if sell that are numbers. at stores this stores And our

that our profit month think is the like And growing with something their record Denver cars so, franchise market use having a selling XXXX business. along I stores car

the sell it's cars why stores work franchise even together. keep stores delivery we We of So do continue quite with to these we'll buy They out and harmony that lot together. opposite. of a That's in the and centers.

I bit considered Okay. the us and on past. the been then little share maybe there to Automotive know in just something hood With and the you've last digital has one regards your get partnership. a here. And digital you could under thoughts the Cox the Darwin

That thought was maybe are And bit. down again. the you we a last the got something think I road do November. kicked here

do it you you what's So how result the envision to the just point? end looking like? And being do What been this holdup differently? envision

e-commerce by I'll Heath. online. completely our isn't e-commerce isn't from It that's is the is someone perspective, - just a just saying shops off This buy spectrum. Sure. car start and

financing. of down putting parts experience. In paperwork fact that is done. in payment, spectrum It it that getting and And their rarely at a product. price, happens is different from down world. competitors of out it's And getting in e-commerce it is very the getting is It people go it the It even is getting getting our exists credit, is -- shopping. the

with stops And And site. third infrastructure have to is support transfer an remotely have Darwin so those use that our already on you right? the to on-site step, or We on if you so to can centralized elements. typing. Darwin cost right now can customers someone that handle of each And service easily our

so an pair in that we online very at that world. that's two calls not or never Darwin that easily like lose talk point at a someone a that automotive of buying right? stops can so with takes world online part into And There's So e-commerce someone deal very, and convert comes we right? to shoes, strategy e-commerce wants that the parts. important credit of on-site This is an and

and And allows us agreed Darwin for we research have built single never were so And to with settings. of system did dealership a -- we proprietary that of going there. those forth that. every back are group out then in looked Cox and Automotive. company they've They move any do to piping and We we

experience. As resources automotive got you they've the know the technology

on experience. building And so to are they user top Darwin be going of that best-in-industry

down to funnel go similar to or it easier. be look makes e-commerce it going is intuitive. a easy companies So very of It's use. It's other e-commerce lot as be to going spectrum it to that and to people going

they say want you're not We in it our that And where it shop right. so it to should and put this that out something e-commerce. We a can want there time the something combination just quickly. is to throw whatever --we name together to you and way want do customer took slide together you the do so can you isn't just and because it's throw something

time And product to be. were so making the very specific needs we taking on our about that it

in on will rolling be be -- that And Automotive now an Darwin's fourth Cox XXXX. be Darwin in going it's and of Darwin Timing-wise, the the they store the the product combination will Automotive customers. option in August. industry believe we And side. in Cox into anticipate omni-channel is going out for have quarter the experience EchoPark our our we leader rolling right With of to with will out franchise and we

it. appreciate I Great. Okay.

very competitors is to is. this market. fraction so this have a the small how big David. It's And market the of And even largest remember important just

have are market. -- be deals. served be EchoPark These very these that they So deliberately make that our the part thought our choose is we've can just mentioned by new are said, this where pace -- as in new we our people and who of these way. at customers on been to profitable -- love going stores. the people this be rolling return And shop we XX% extremely the will it to we The could to customers as shopping e-commerce of coming which Heath existing again out

very got We got it being diligent get with EchoPark will that. to be as we of a make history to and this been And And diligent very all it industry-leading. We've want right well. process we've it done of make we're that. when with

Appreciate great. it. Okay,

of from Jordan Your is next Jefferies. Bret line question with the

Hey Bret.

offset Ethan morning. year, things new GPUs? by for And taking in Huntley Looks expected those levels my here we guys is like of to in the of to normalize? sort of this then question. for expect Bret. on when back half should Thanks you This weigh higher lack see continue is actually Good on sort supply the vehicle to

inventory I Yes, July are to normalized some right. margin. look is improve to supply for That's is get rapidly. just August tough this low inventories exactly going a for be time September They're to It's going October would great not this the levels. Jeff. road improve. And equals seeing although frame we November high news

making and from great making perspective. a certainly And so up we're margin gross

New models are coming out.

towards move favor in our all so the year. it -- -- that as all And we work of end the it's

with some regions lately? in any you then And great. where again, be guys seems seeing demand any up pockets country changes particular to COVID are flaring the you, of Got

than bit in for right been the we're have things. more COVID guys Texas it inventory the It's is on of the that, there But earlier, like all doing I things our precautions, to doing of Florida right said a trend on on you that. -- vehicle our the can more little little from associates, come as and the Coast. West not than and charts. our see for just adjusted taking affected what really And fixed right kind That's monthly guests difficult A all you perspective basis the Coast. back business. the our a a other on there It's West flare-ups all kind bit we've new

So much the in we're we as are in finding be shortages to the inventory Coast. detriment not new particular to as on a really East that business vehicle

you will Got think you. you for XXXX? maybe Star shake out internal on where guys sort And level. have just then of Do and XXXX projections high any

she XX% companies retail XXXX. look be XX%, impacted all is rental be the she steady for particular as it it's But the big and -- The just cars probably demand because to again comes you perspective. new that a same and the see there problems in goes car car from in the is goes as the XX% yes, the cetera. From XX% inventory with going steady Fleets inventory right retail will et Hertz, as most a back. because comes back,

Great. That's very Thanks for all much I have. taking questions. my

You bet.

Thank you.

[Operator with line the of Bank John Instructions] Murphy from is Your America. question next of

Good morning guys.

Hey, John.

of recon they this curious Darwin development. They auction an and look you year vehicles just as the I'm sort Cox there. smarter your due that at a that with and the talked But quickly of mean, just on Manheim. really about vehicles can you're this mean then you them. of -- of leverage about back is And lot very help million from to increase and kind interface source interface turnaround and on I and retail to turns a And centers? Manheim? them up just directly wanted and like a end five and I seems tying like. delivery I kind is recon Cox up somebody you follow out buy it there opportunity and an and really

that to them lines, They that. Yes. improvements. partner on source do we through like in it and them I them On those stores. as right? a some made us. particular they're job already inventory is, with are of certainly worked had that for several our a a great our close reconditioning It's we've we've mean, with centers projects great majority discussions They've

and buyers farfetched country. the something of terms in good if one So their not of we're thinking. that's it's But -- top that's not in we're sourcing,

a our have we do them. us of majority great we great the them. and inventory They with a through relationship job so source And for

that a And never this it's before. to really done like important remember partnership they've is

for Yes. But built a anybody. that And there's of instrument there. they've proprietary They've a -- historically. out lot competition to never been unwilling they just are do

that a with which swimming the is their with two product to piping minds those you interface of when a consumer things a it's what how if internally, Darwin, user combine built already think be we've to great are changing works, from pool them for perspective. I combine and sort on the going you will. you When

discussion also there internally And is mean, of any finco? used or on thought captive I building out the car Okay. then a wing,

that which we've tip made job to a mean, little if sort I June I and hat has us, be done F&I JM&A bit just with higher all and best, my No. a mean, great great on us. that. I who's PUR, an look you in job I our in. industry the I for I all-time mean automation may a at progress that's with think us. done of think than XXXX numbers we're over a record is all little Ally

create you go when into to and doesn't sense get a really so level lot whole capital thin take coat. make And off of the that a

So that's…

taking the risk. the eliminating risk. We're That's

in risk It running doesn't doing Yes, We've with do out know us just what and no with for and you anything for more banks. as paying off. a now relationships got of got here all we've we laid down -- It's It And complexity. that. hate complexity. it adds today. off terms we handful It there's and and us. just we're appetite slows what great

complexity in lot not So that interested we're that add of having. a would just

is looked have we've not just you return see unless a actually population. sub-prime we've several have at high it population we times the capital John, on high a do low and so And sub-prime

it. Got

in far be higher just curious used full on to the And which direction Okay. going I think on that? folks the car And new kind you kind going of some new used of that's there makes activity, in expanding you just here side? of any lot side, lastly, that as sense. the But margins I then doing is forward? there's where you're higher opportunity activities in than what much as going that growing more direction, just or focused to what's the mean, the And going in at seems mean, acceleration opportunity as it's and is on returns, franchise you car an side of a business do what on do rapidly about more throttle the are in think market, some after? it set look kind what M&A are go other you're the the why different of

capital happens, It's This EchoPark, see It's put If you a name EchoPark you those facility but may out -- mean a deals lot a it. looking it's to us. more makes a sense take we'll couple is do cash a every We here fantastic. deal We're lot day. us are at versus not -- returns a at we're the And matter have we'll into a now put cash won't deal. And see returns us do of just of the to won't invest so the as look or opportunities right the we'll EchoPark. cost-effective Jeff. there what them that fact. look at the more we dollars does for to at It high into we We but buy there. franchise for But in that to love business. you your them. machine getting there's that

David. is this And Yes.

of better is capital We're the that history the ever really our understand of investors allocating how our ROI our on have we the focused things team we on that. than focused want one I think to and company. in

those thing those just an of if return this it's XX% it's to it's talk emotional with hard in we about our difficult And are so new -- impossible really a very when just beat not simply returns -- not -- on echopark.com returns EchoPark business. model and kind it's

very Thank you Great. guys. much

you. Thank

And Smith. at this are back showing Mr. further turn over I'm the time, there I'll call you to questions. no

Have very you. everyone rest of Thank a Great. great thank appreciate your week. and We much. you

call. does And conference this conclude today's

disconnect. now may You