Sonic Automotive (SAH) 15 Feb 232022 Q4 Earnings call transcript

Good morning, and welcome to the Sonic Automotive Fourth Quarter 2022 Earnings Conference Call. This conference call is being recorded today, Wednesday, February 15, 2023. Presentation materials, which accompany management's discussion 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 of the Private Securities and Litigation Reform Act of 1995.

During this conference call, management may discuss financial projections, information or expectations about the company's products or market or otherwise make statements about the future.

and could a differ cause the made. forward-looking and of materially are statements that uncertainties actual statements subject number to risks from Such results to with are the These Commission. detailed and and Exchange uncertainties company's risks filings the Securities in

today. discuss Please filed Exchange In Commission. current measures as and to report the with company's the and non-GAAP on non-GAAP defined addition, certain earlier financial X-K the the by Securities Commission management Securities in Form may refer Exchange reconciliation tables

would introduce Smith, Executive may I to Officer, Sonic begin Chief like David Smith, now Mr. conference. Automotive. you Mr. your

very welcome fourth Automotive Thanks morning, Good call. much. everyone, to the earnings XXXX and Sonic quarter

I'm Smith, As company's Chairman David you and CEO. said, the

our the our our Mr. today is Officer, Mr. on Digital Dyke; Tim President, Keen; me our our of Officer, President call Danny and Chief Heath Wittman; EchoPark Wieland. Mr. Steve Chief Operating Jeff Joining Relations, Byrd; Investor Retail Vice Mr. CFO, Mr.

fourth Sonic XX% reported of full revenues up record period financial million, Highlights of $X.X year record record Today, quarter gross including fourth another and $XXX X% our up quarter billion, all-time performance quarter of year-over-year. revenues. quarterly include and year-over-year from fourth profit record results,

a non-cash net reflects impairment resulting charge, quarter per million of Fourth again, share. that's GAAP $X.XX a a $XXX non-cash loss charge EPS pre-tax impairment -- in

earnings Excluding the of share per $X.XX. adjusted non-recurring effects reported of the we non-cash other impairment charge, items, and

of up $XX year the of effects the impairment year-over-year all-time $X.X For of Full $X.XX, XX% annual all-time billion up year-over-year. non-cash was mentioned GAAP including XX% reported record full year, charge. gross billion, we and previously revenues EPS annual the profit record

year was record $X.XX, one-time adjusted all-time Excluding of annual adjusted our fourth EPS. EPS consecutive items,

these year manufacturers, capping without the the support achieved our our proud partners. extremely another We of Automotive. continued and not could incredible Sonic team's of I'm have lending guests, fourth for teammates, results in quarter, performance off

are and long-term excited momentum into executing delivering team XXXX. world-class Our to and plan, remains guest this a strategic experience we our committed to carry

quarter. ahead add Before I'd fourth like on the looking to XXXX, to some color

to production, volume we in our the higher volume the year-over-year. vehicle improvement retail and sales Outperforming franchise new industry dealerships. quarter-over-quarter see During change, new at quarter, both supported began which vehicle

profit offset volumes and F&I in declined quarter-over-quarter overall gross by profit, vehicle vehicle profit compression. per higher driving was gross and despite but year-over-year, New new incremental related gross GPU unit growth

concerns outperformed Our average buyer the volume change vehicle consumer. industry business a return used used Used vehicle affordable but decline, interest have diversified as monthly remain to selling our levels similarly average that affordability well business a required above result for begun for rates. in vehicle model current still despite is to the of the ongoing prices payment at to

environment, performance F&I and unit Despite retail continues record a higher rising unit. F&I interest near a to from volume retail benefiting strength, rate be per

fixed service customer being and remained repair business by improvements with complemented and operations transaction parts stable pay warranty Our strong margins volume. or volume and in

brand luxury in effect of our consumer in part and So the drive XXXX, could through half at demand ongoing We and the average and margins as sequential seasonal the far concerns least nature seen in this, GPU we due uncertainty macroeconomic XXXX. of on consumer rates of with inflation interest elevated volatility around vehicle and rising first volume believe coupled business result weighting. a declines new to our in vehicle have the of

believe favorably to changes we diversified to our positions progress through model business as market conditions automotive us retail XXXX. our adapt However, that in we

we are returning and with results. our returns and to should the balance to we strong to levels. to pricing and new positioned a headwinds Coupled capital commitment began consolidated to used vehicle move inventory we the well sheet be a normal As believe and to profitability continue in revenue franchise may pre-pandemic rebalance vehicle the new to towards minimizing growth, any well tailwind to demand earnings level, generate downside we begins above EchoPark supply business stockholders, believe face

record Turning from were $XXX segment prior segment which now billion, to quarterly revenues our down interest up $X $XXX franchise to was rates million, dealership X% segment from Adjusted of the year-over-year for Total year quarter. period. the up XX% year. EBITDA income prior higher due all-time was an fourth was adjusted X% and franchise million the

X%. from same-store basis, up dealership prior XX% profit quarter was a On while the were franchise up revenues gross year fourth

profit a New driven used by X% gross a unit, offset X% vehicle retail increase in retail XX% by unit. to increase X% GPU gross down partially Used retail $X,XXX flat unit decrease per volume. a unit volume, a new XX%, by in GPU to with profit offset in $X,XXX was in vehicle was retail decrease per

Parts profit F&I segment quarter gross from F&I profit Same-store up service gross profit record XX% dealership by gross pay unit XX%, franchise year. and sales gross on with same-store profit fourth profit reported retail per higher of volume up customer prior $X,XXX, and increased unit retail warranty X% same-store and up XX%. the gross XX% increased

segment from at our the of the end to had of days' days' new third quarter, XX December level of December XX supply XX the approximately days' vehicle well pre-pandemic supply franchise dealership XX of typical but As XX, supply. below inventory, up

in-transit figure this aware, includes days' are you As inventory. supply

line heading days days' down from five franchise segment and third supply quarter. optimal approximately the our used into dealership in of quarter XX first target vehicle with Our inventory the had level

gross inventory to to as and constraints, continue new our and wholesale in outlook, managing in through profit vehicle we current declines XXXX. vehicle our market we recent levels volume disciplined pricing in used inventory, go be order ongoing optimize Given pricing

unit gross of sales affordability at up remains X% EchoPark of the XX% vehicle XX% quarter, units, per from million to still results. -- average XX% revenues above third quarter prior and price $XX,XXX XX,XXX was quarter target decreased profit from the year EchoPark record from million the selling fourth used year-over-year. We reported third well the for quarter let's from flat and but $XXX levels. EchoPark, volume turn quarter year-over-year. $XX the EchoPark up for Now retail

year We inventory vehicles old continue mix sourcing optimizing to EchoPark five on inventory. inventory including in expand focus our plus affordability our and by

the fourth represented from vehicle XX% our was flat vehicles For retail unit mix of the third of in was XXXX, the in XX% five nonauction sales plus sourcing used sales quarter EchoPark quarter and third to XX% year the volume, of old quarter. which compared fourth quarter,

of of loss million the EchoPark in fourth the million $XX For adjusted the an segment of during prior ago year $XX.X quarter losses quarter sequential a in reported in $XX.X quarter. compared loss This a loss to third million year. in the to to in in fourth loss compared which of resulted and quarter million than unit $XX.X used in vehicle the adjusted pricing EchoPark the vehicle increase we GPU reflects third in steeper the fourth quarter, million in $XXX per $XX.X used compared quarter, million segment the decline and a front-end of anticipated loss period. EBITDA adjusted reported third $XX.X EBITDA a decrease

end during the in the expectation supply vehicle inventory maintaining overall EchoPark supply and as benefiting is transition demand, pricing which period. the affordability but was segment of XXXX XX of of for days' supply further coming the We our a through critical used in consumer XX the declines pressuring months, proceed of quarter. December, At with we GPUs used had down end five potentially believe used at days' third day approximately the from vehicle inventory,

to As with expansion EchoPark reach the In on position investing approach take third the additional profitability capital are improve that our long-term our in EchoPark macroeconomic to our we brand priority discussed quarter measured continued platform locations. to a as we we liquidity us current overall to continuing light growth balance expand call, strategic, an the open outlook. maintain our to strong store to and of EchoPark interim, a plans will EchoPark our uncertain evolution of allow e-commerce without believe commitment

sales EchoPark omnichannel online, of with For end-to-end for market of to out the of nearly utilize from e-commerce X% sales. during platform sales sold up representing volume the XX% third retail e-commerce the of to the enhanced accounted EchoPark's as buyers quarter our new quarter. X% purchase XX% was in our experience fourth Furthermore, compared guests our through quarter continue volume unit in quarter, e-commerce third XX%

believe years, with measured the EchoPark U.S. platform, expansion by population next to allow three supporting combined this of goals continue of footprint XXXX, physical will over two e-commerce long-term to our We our our for omnichannel the to that reach XX% business.

used based in prospects We remain current continue to used continues as long-term market the to growth on vehicle vehicle EchoPark adapt normalize. and strategy the this conditions market segment's confident

the first throughout wholesale targeting We are away plus year five of inventory EBITDA our losses breakeven XXXX. vehicles, sourcing improve seeing our expanding to of offering auctions shift to the now and expect in adjusted inventory EBITDA old adjusted include XXXX, from and benefits quarter initial

effects updated EchoPark our of an gain conditions model we used made vehicle on provide market the strategic As we've adjustments EchoPark, at future further visibility guidance. we and long-term will and economic

As we which about earlier newly operating retail very diversifies morning, announced are segment, our this further we Powersports created portfolio. excited Sonic's

space optimistic Harley-Davidson Black Houston, Harley-Davidson like to this We are Horny Texas in the in teams in and the Texas; to and Mancuso Dakota, Temple, Hills growth South the Automotive we'd opportunity Sturgis, Toad from very welcome about and Team Sonic family. Powersports

XXXX, estimated annual with Powersports opportunity partnership reach historic we adjacent significant $XX in margins and million XX%. the Powersports in segment and retail In can X% in for this believe approximately expand EBITDA opportunities incremental realize this growth to our U.S. expected our $XXX an In revenues of worth brands, adjusted group and add between consolidation. with we sector is billion

We Now capital in in turning plan liquidity, including $XXX on to and allocation. cash sheet million the quarter balance deposits our fourth floor and ended hand. $XXX available with million

the our approximately or update of October shares $XX.XX million share. stock activity, XXXX, an XXX,XXX of for approximately X, per we on company's since As average share an repurchased $XX.X repurchase

per repurchased approximately million total, of representing as X.X end of shares, XXXX of the outstanding during an average for XXXX, of or In we shares share. $XX.X XX% million $XXX

market share today, total or of current remaining we representing so $XXX XX% of have million in of Sonic's repurchase a As authorization, cap. approximately

on our cash Directors to of record share all March approved to XXXX. a pleased Additionally, of stockholders that XX, report XX, Board XXXX, I'm dividend of on per $X.XX quarterly today payable April

In business remain long-term to continue strategy allocation macroeconomic the execute a to return changes backdrop. continue high Further, long-term and our committed automotive at environment we our returns. and XXXX adaptable disciplined closing, a to view maximize is retail capital based in balanced operate team to prepared a with stockholder to to in while remaining level

we Thank remarks, have. opening and look our any forward you questions answering concludes to you. may This

Thank you.

of We conducting will with session. line first with Our come Bank questions a the your Murphy Please questions. from John of proceed America. question-and-answer now be Instructions] [Operator

what and with if for planning where your of for Good leverage are I guys. may think What in here. GPUs question roughly? will of a Maybe go, XXXX, have assumptions broad XXXX could start SAAR quick kind sort morning, generally a the SG&A you that you

the John, a is Jeff it's big XX.X%, the year, Probably In the them quarter. question. somewhere $X,XXX what be to Certainly, and Margins going high-Xs. numbers. projecting Dyke. first over not our this we're in that XX.X% quarter, between is big where XX% they're in number is north in the of we fourth seeing to going saw -- the stay XX.X%, XX.X% increase we're

first continue the We in expect that to probably quarter.

year, will we as car increase. the time, through the But volume at down that that number into But in somewhere could the high-Xs, dip same ballpark. $X,XXX, go new

lower So we're sustained F&I car volume, new higher have we'll profitability. good margin, projecting that front-end

last sustain off and the really of our rest think going perspective. mix $XX about new through $XX, gross our year but targets where of volume, to should to year, $XX in less be ballpark year a car healthy change, are expect from The more we somewhere the to running just year. is I F&I the ran that that we for

You comment on to want SG&A?

Sure. Yeah.

I XX run between you to the SG&A if think I still and as it business, mid-XXs franchise just think from perspective. company. I the in Overall, XX, look the upper in XXs expect at an we'll overall an be

and of markets, So some going certain technology of which and got -- discussed innovation be we're that's this that future. for forward in investments couple the some we've investments we've talking additional EchoPark where branding doing previously a about year. We'll

bit, driving up but that's those our are a now. So little for it forecast

That's incredibly you. helpful. Thank

running Just a adjacency. I into an not Powersports interesting sort this, business. of it second walking seems the it. like mean, question It's on you're into

relatively because the Just interesting? you it in size that scale goes and curious and sounds inside profitable pretty sounds company think where It fragmented? ultimately

times, Yeah. is Jeff of look, buying to again. X which mean, valued. X where I around in It's This fragmented. we're really we're kind is times and

few technologies, do We've of changes, in we You is and did some times XX volumes us. Horny a dealership some great buy have. think first that franchise put We We the purchase that setting our X in for to Toad we all-time Harley-Davidson. gone can plans, times. profits, they're pay a the stores record at in which and now rest

the XX playbooks, But to in processes, to XX said, we're going automotive technologies. months develop We're retail. you is next we to see technology here. what Their spend going months, walking far as behind

So But overall, diversity into for we what this walk us. really a -- a people, that over talented, think found we or there to months. just adjacent think very But we think portfolio, tuck-in be help it's we'll of to XX here the bright, that. very we acquisitions in could there XX There all made. super, fit And can just again, we do. just our I super as smart a the the I It's months great next we've is think move.

happen the year to the profitable and franchise And is a EBITDA into challenged. EBITDA perspective EchoPark better 'XX better or run an quarter. if you at EchoPark, from look going should and be year, the this the into little throughout what's here we get as business -- EchoPark And with more to with walk first diversification by we going becomes as

depreciation way everything the happen to happening continues a we're cars. projecting if happen, it's on what to preowned from So perspective,

like really see play but it valuations, XX a XX the idea. we good to months. great the think months fit, we'll by it's and how over here go things next So We

progress, mean what vehicle just for as self-sourcing? I'm reliant be your as one at And the as see is well vehicle year used on sneak I sourcing. last side? sourcing how you expectation I'll this on maybe franchise the side curious, EchoPark auctions just one I versus used would mean

wanted Smith. on up is This John. to David just Hey, Powersports. I finish the

that very of high Sturgis phenomenal Powersports has team historic very a Our going quality. Sturgis are and we to seeing We made It's that believe a acquisitions is. big remember a the -- what one being important that been very, the we involved, us for including experience the group to acquisition industry. are

they've million is the to -- or Sturgis. so got opportunity people And X.X go so

very a upside Harley-Davidson. at we all when with and and huge that phenomenon, as Horny Mancuso and that amazing It's we looked with saw profitability, well with but Toad

So opportunity the really new -- what we that seen we along and mean, every every when opportunities you them, week. we're we've talked about at ones -- day, see it. each numbers we've is and mean the look I coming it's have had the I

There's new opportunities it this Yeah. we'll shortage see goes. and great stores. nice no our how to buy but want profitability, way. it's right to is the of take do again, But is for us. it But -- this We revenue time,

about Just we're excited it.

we here We're go disciplined about be going from it. where to with

to So your earlier question on -- about... then and

into be a I EchoPark bit. more our new cars to availability more retail we're back the Yeah, more auction. going Look, vehicles sourcing and a us It street. as mix. the drop of off do prices from buying gets perspective, think at there's pre-owned rhythm

are surprise little drop wouldn't XX% into of to now, see some percentages XX% higher it me the a to range. the So

-- terms non auctions. cars of of outside in the sourcing of In terms

prices the been So our certainly, see cars But is the one five play going that's be to predicting. how year more year. we'll old that available drop, This into we've category, through right to going goes and what to hands. are as in

call. quarter it on We the third have predicted

the May, That's April of months. flattened slope flatten as think than a trend start open us prices think And going that was The into would the again. that in depreciation happens, out will and the of door depreciation get When we from and couple we we model EchoPark. out were drop is where we But diversification to sub-XX,XXX fourth for that we for faster going quarter. our door we thought in profitability. and levels roll as get for happen. we'll to just now, it's opened the That's to of terms towards it's see back pre-pandemic to

too fourth flattening expect was nice the a we had in better, bit are XX% same. We prices growth. would And will big our with coming. of car the and getting with out February right it's February's used projecting, is EchoPark we've EBIT tracking but as play are between still which getting is And those the volume. a into is enough new come gap as rolling there. market, things volume not little EchoPark The high. but The happens, that and hands. up been quarter January yet, margins all back an from pricing perspective.

you the for in and business. franchise self-sourcing far in also the as dealers? franchise Jeff, thank -- I the business as I I'm mean, used that mean sorry,

we more But buy off now. we're We to more than street auction. starting have lot the some are cars -- cars a at right are ever we buying

just XXX X,XXX to running the in hold X,XXX number that quarter, the cars in a month running a that year. say rest cars Let's probably now. third was probably fourth And through It's the the of month. and will steady

lot a franchise. sourcing where off more our that's are helping and we the are and We margins from street cars

day marketplace, And such we any we're if can that low supply a quickly. in real in outrun tweaks the

we've think supply a there. I got XX-day

supply. is to Our the you Northwest that supply up actually acquisition, EchoPark XX. When puts XX-day add Motorsport us a RFJ from

impeccable at So both supplies EchoPark keep move as are we franchise we'll the our stores it through day shape XXXX. in way that and and both

We us But don't please. Return beginning sourcing will help one expect be franchise well. going of actually very the that's the as help in as at increases, that involved, more And returns that please, that as year. well. the large to to

Thank you very much Okay. guys.

you. Thank

proceed from your with come Please questions. the Imbro questions next with Our Daniel Stephens. line of

taking to up question. prior for on that just following start Thanks want morning. Good I Hey. answer. our

from right, curious early Is that EchoPark. prices do tax enough was car you a used demand -- notable is And What's driving up refund you at fallen I'm I standpoint spur think have say you think January just it have EchoPark? heard to to demand? what seen you we've XX% I or it said pickup? if think this demand that you head season? bottoming maybe enough fake seen is a data a at

is we answered jump a ago, -- it's Jeff on one, so that minute I this this fantastic. I'll And in because think really

the our internal drop vehicles. how became in some historic at than the the speed out happened, used other team as it's used were as than out some would thought exactly exactly of played you what how far thought of of a Other price values vehicles. played in If it's we EchoPark our meetings, that which -- it

don't a flattened the average quarter. fake. it's first the think selling in XXX%, It's Yeah. dropping. now XXX% head is That's out price the difference. retail

all the payment. about It's

an that January. cars little -- perspective in so a month the or the February. We've drop. We gone range of least positive puts to range X,XXX $XX,XXX end the from end per out X,XXX that $XX,XXX in down EchoPark in It's and Motorsports of flatten and by in EBIT March, non-Northwest somewhere But but going maybe to that, will of continue will do the and the rate. at in that quarter the what getting we us continues, April, until or cars that no sold the XX,XXX we're from going -- expect. there of and year more as quarter, breaking kind dropping the We'll first it this positive better start projecting end of fourth 'XX. X,XXX again. even And then to growth in and you're than than see It's

saying I think that well head to Look, coming a don't have help as It's the the that are drop Domestic new run tight valuations. you this happen. see on We've inventory continues, supplies increasing. trend across it's it's why supply. vehicle just But happen. is happens, increasing. also supplies in board. going long you that's So fake. car to our going we're a to can't and used And as going really back, but We're way, are been day a as

for just EchoPark. day probably past, we're you're you've caught this And as coming very If exciting have been we've it's have ready that. and up supply XX, ever We've disciplined your been got a now, the don't we today with in XX and XX, as as we for problems way. disciplined times right

that's you've think to of picking learned the few the was older what great these as vehicles? a update. kind more And Last Thank it's you. years, And as then have what X% plug guess of that a demand, your X% I do given you mix long-term to it headwind. up, long-term about mix fit? economics coming back, profitability you the that affordability means And about that ultimately higher on you meet units? X% to see could core those what for learned where X%

be going it's Look, to maybe XX%. Yeah. XX%,

be sell five historically percent will a to think as it's not our higher the at And margin, EchoPark Our ever back, to you, it eight lot and and away, to to I year to stores. year a see big lot as and five them old is but year our old the comes as one one great lot to mix works The mix. it We five a every inventory the you'll day franchise the going model. easier It today. like proven it's harder go be EchoPark that. a in because is complexity that sell and brings we've than more it's a won't we cars, of drop we just overall they're with a old we're get, them lot and whole margin. cars agree in business, But it now in been it's selling there, of model

So I'd somewhere call in that ballpark. XX%, XX% it to

Got one it. for then And last me.

impacts your business of the Just Trying to maybe in decline EchoPark. lease few the long-term in to on last big side the penetration the understand years. from franchise

and you decline from the last three year sourcing through and service high that luxury the it underwritten seen big hamper that this Just which lease I'm years. mix, guessing your think Does fewer to to fall, -- at leases higher. are parts business, that times? less trying impacts of four means in hamper EchoPark? two, customer back lease couple returns as Does penetration the Given your was fewer coming in comes the We've years? what

hurts. It Yeah.

say any other way. it can't Just you

inventory this for EchoPark. of could big higher It XX% high nature. increases that. lane be that they're to chunk big than cars our the usually primarily franchises. see something the in to overall used I driving of certainly are our leases overall That's that think It the volume. business. line be XX% lease that will auction around hurt it in And but represents we'll year, markets a for stores of XX% And too car XX%

So it certainly us. hurt

But than in and coming inventory can buying that elsewhere as to pricing showing that that. we with come today and the continue down. in a more the decline back, bought do cars and find we We're inventory we're long to EchoPark able we'll time be prices at

MSRPs used be prices happens, between us. thing between that gap on gap when are of a down. That important XX% going vehicle payment a prices That needs have new make new to payments for that being on up, game most the So you the are payments and is and a the vehicle increased, going XX% it's payment. coming gap new vehicle. is vehicle And made are the vehicle that up, used why on

it. Got

to used clear, not returns forward? can you're a be to core franchise so headwind? will And be lease You lack of volume that going hindrance overcome the thinking the

than and going car, them. customer the I hindrance, The buying customer. and we're and But gone. a it sourcing there from mean, been inventory from that car it's that that inventory It's They is the have any buying lease the a not continue. with more months. XX job out. that's sourcing Not and expect still a already in been in we're last that has good to doing we it

just a off leasing as lease So to it's buy big just help that's the moving hindrance. street. to off the a then comes back, from industry, not And

Yeah.

David. this You -- is said

team, is You our traffic our to management, and changing ever said reach that. how emphasis better to become our up. our I on -- acquire following And customer been adapt Jeff, before we than and base market. our about how call, they've those our the unprecedented It's cars. team the business It's think about they

thanks for all of Well, luck. best and the Great. color

Thank you.

you. Thank

Gupta your proceed questions from with line Rajat with next questions. Please of JPMorgan. the come Our

Great. Thanks the questions. for taking

following time much of last X,XXX Just cars level was like in to were up EchoPark. The that you profitable a on month. X,XXX at business lower per volume,

Is stores? it And trying not base close or closer to follow-ups. difference it's understand expenses a XX,XXX. there higher of Just fixed -- suggesting I to couple the the have X,XXX the You're should primarily in more to because bridge be of there.

Yeah. growth. EchoPark It's above. I we've for mean of all the built

our corporate were the money which the X,XXX us are that. to expenses more margin is X,XXX it breaking we higher -- number, year range. the when with. then or were so over to like breakeven in even we be significantly role gets they And than to before at X,XXX expect And month in the big making plays front-end It's a

us. As a mark below prices $XX,XXX to down get then difference depreciation the depreciation out the the $XX,XXX more schedule, flattens for to normalized towards and that's going make a huge

us something volume. very goes it think didn't works, great We've changes franchise we're was business overhead. built pull can't reduce with model thing we that awry, can that pull here excited heavy maturity. that. along The to But right just mean and strong triggers very if It we do. or to doesn't real We're that a the got about to do

answers hopefully, So question. that your

David. Yeah. This is

to making addition that We're got seeing a in a we investment at teams, look and the it -- seeing that, experience. the long-term numbers. guest in as investment. In training, world-class it -- our we've EchoPark in we're hiring in EchoPark We're and

It's it investment. our building e-commerce not platform. You It's our feedback. a can quarter-to-quarter. build in see -- e-commerce out We're long-term to continue the

rates the over and $XX point the of We've there. to year that Danny. to the floor One higher months. probably five three more this this about last $XX EchoPark come top volumes, got anticipate higher million seen is Rajat, higher add million of to plan volumes to And interest with at we've on experienced headwind

breakeven piece So of that what helped overall targets. or volume us us that's to another has caused raise

branding. the And

Texas We'll brand in launch Yeah. starting in the this March. Houston, month in EchoPark

and And some location, move will this goes perspective volume returned to at that's which Thornton something incremental It's a a did we almost along that start enterprise is so be just back brand. to seeing from store Denver we profit expect that really we there in our that entire the across expense year. as with a And through pre-COVID levels that perspective. launching

you it on it. in -- just gross point side, moderating -- terms franchise the or investments? of And that buckets other or GPUs primarily there GPU was 'XX, any Got increase in anything is XX% the mid-XXs out for -- the you else that driving 'XX. that said Is would

EchoPark as that your the franchise It's investment in The things. innovation the is be only growth. incremental biggest a across driver to going really denominator decrease we're IT of the and couple doing is spread -- in we that

Got it.

in color in Any maybe very give playing of here and different out terms trends Thanks. parts you lastly, puts for year. segments? how across Obviously, XXXX XXXX do there? and takes But you the exiting Just can see services. strong

little sourcing where We there, is growth, of This I on couldn't going fixed a growth, And are to digit really overall a technicians, internal Jeff. We've lot projects piece in think, we Yes. including if which January. of this we be about high-single Mid- more a is a not got better. saw excited important XX% perspective. from mix.

year should from a a it And fixed be fantastic perspective. so

a level, manufacturer internal projects these to with. marketing, focus management upside we're the us it things the be even is on service first as that time innovative to putting relates honest, traffic at really And helping that some is the

in in really have them a there's retaining we past. lot and the bringing on more than focus customers done So

off as pay well. that see we'll think I So

Got it. color. for Thanks the Great. all

Thank you.

Thank you.

of proceed come your questions. Jefferies. Please the Jordan with with Bret questions line next Our from

guys. morning, Good Hey.

morning. Good

the Could what business sort and and that Powersports service look maybe a in GPU little used? does space? you for give color segment, ranges new of on the like more ASP And

I to business amazingly, margins front-end range, $X,XXX margins the Hills And in and big fantastic. that on. margins working think Powersports way little margin. in $X,XXX, we're are are in averaging It's back mean a we're somewhere that around things can different Mancuso, the that there in to Black we a help from $X,XXX the the nature front-end in warranties know, with ballpark. of we other You

been sell in Polaris. And volumes, or We sell it we mean, data metric, talking since sell solid, Harley about everything purchase. you're different items. I we volume kinds which all is the depends. and In of else. we're But talking it's is solid the Sea-Doos, the Mancuso, if about

there don't So I I expect pent-up that desire but that would to call certainly a it lot for continue. we demand, that are product. know of

idea of sales on profitability, just we great That's us. year, new because bit, see little cars, the didn't haven't on the sell up to product have been multiples. see that car kind loosening we same to margins, get great just The it to new but manufacturers like where great volume, great a able you and last the

see opportunity. Again, an as said then we'll -- spend processes, we just And months XX and us. into walking think our XX next now. we're playbooks, But we've our to our those we we'll installed, So in this, technology, months holds future got what developing earlier. locations the XX it's the all again get for

we And and would their and there, that I the loyalty headed. our that, did add I Harley-Davidson. leadership, love it's loyalty, we the they're we love met the team just research. this earlier, mentioned that to customer We absolutely -- incredible. where also with brand David, is

into that with to we we did -- tried we it best, notch, top with -- bought so stores really the tried the we the best buying the that there's and we far. get So of think again,

Okay. and more but now of Are about or Great. you're you talking big activity. was promotional other that increasing supply comes question incentives. not on Obviously, a it then in across back as And really localized? is peers brands one Stellantis, seeing broadly Ford pretty your

line seeing do are stop And certainly Dave that the Chrysler fall. where world. We store they've service happen the X,XXX not sales that's store turn out to that bit Chrysler is got largest be little is and large trucks. as It on going just inventory going just and going X,XXX And Incentives on back. really High to and a inventory, and rising to very as brands. of that have margins in starts We're back are leasing. incentivize to comes Smith which Motors, one come It's localized. the to to may

at with to And And that right high. ourselves. of say agree that. they that they days heard make are with the one this way is business. call understand haven't days We're all I at a partners reasonable XX way to working them because think to to pre-pandemic XX all-time run level, to the sure manufacturer don't profits that up keeping they that supply is I XX only screw instead our they XX of

and I move the so job we And as MSRP in good think forward. down incentives recognize which do that, a manufacturers to keep they'll the of trying range somewhere keep will pricing

to don't were you're historically, the Okay. that there maybe cars dealership? older franchise help or to an case EchoPark. And at from internally inventories franchise Is of a opportunity feed to know sell still you is dealerships you then some moving to EchoPark not one source getting that question. the inventory want last I

push we case. to the the still franchise auction. unless We everything to that's at it No, sell have an dealerships

did that So the between We inventory really didn't around the life We still move I case. typically a did that don't work. that in Keane two. different and and that's Tim

what And is great away so a their stay idea. franchise end that. tried you out up and stores you But the volume rhythm. on to doing we've from lose mess It's up

And absolutely that to it's not unless prefer so just we necessary. do

Yes. to on stores be own, the EchoPark to We they do. survive what able wanted their

Right. Thank you.

[Operator questions your Diego next proceed you. Stanley. Please from question. Morgan with with Ortega come Our of Instructions] line the Thank

here I'm behalf Adam Jonas. morning. of Good on

going is I'm starting and are I consumer So a the borrowers on showing pressure. data quick that your have some feel on view question. to into XXXX. demand the ABS auto curious

views especially consumer higher be the volumes just with that into going but of curious mentioned the was and payment, on monthly should I affordability increasing Thanks. year. You your

dropping consumer I that mean way demand tell just is we us seen haven't that off. would anything yet

average has volatility with and point, has going certainly in be more recent It what number than do rates certainly year think to a as this some plan cause selling can to forward. is hell a higher the lot floor can been move floor our than because at issues cause this rate, years. it plan lot the I it the interest price retail happens we of vehicle depending on with does it

cars role we've just on there, there. that certainly as can seen $XX,XXX price luxury But play overall, financing just an and that a a dropping, franchise vehicle, not it and pre-owned seen is that. yet. EchoPark retail And both or that starts Certainly, play high you're pent-up line haven't The a our if it demand we'll role. average demand there's see for business. can car We

at a media, I do look a that go If the penetration. general finance way. of so you it think economy. this if is my concerned. the up, is XXXX affordability. concern And definitely industry I one rates more [indiscernible] in bit look impacting into And going potential People around credit has is affordability little It's as is tightening and shop and absolutely

it at materially We haven't of is impact the us seen our concerns point, year. but this it into going one

been been been soon to that got have jump going that come as to they've car saying. that the imagine waiting market it -- you've people waiting price buy the And to does, used as as to down, have for And who and car they're people right, in buy. we've been

we're XX% little business February, seeing in the strong is volume, the EchoPark prices pent-up trending really strong. mean look even get definitely as That drop continue as franchise like our because there's will stronger used business at in said, And better. January, really the to now. you if same a I I there. And that demand is well it's not up,

you. Thank Great.

you. Thank

Thank you.

to for any our now reached closing comments. hand I of to have like the call session. Smith end the We would question-and-answer David back over

great being everyone. on the you, day. call. you Thank Great. We Have appreciate a

This We today's teleconference. Thank appreciate conclude you. participation. your does

rest this You the time your may day. at disconnect lines and enjoy of your