M&A Announcement

Sep 29, 2021

And welcome to the Asbury Automotive Group Investor Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Karen Reed. Please go ahead. Thank you, Katie. Welcome to Asbury Automotive Group's investor call. Today's call is being recorded and will be available for replay later today. The press release announcing Asbury's transformative acquisition of Larry H. Miller Dealerships and Total Care Auto, powered by LandCar, Was issued this morning and is posted on our website at asburyautos.com. In addition, an investor deck with an overview of the transaction, which we will be referencing during this call today, is also available on our website for download. Participating with us today are David Holt, President and Chief Executive Officer and Michael Welch, Senior Vice President and Chief Financial Officer. At the conclusion of the company's remarks, we will open up the call for questions. Before we begin, The company would like to remind you that the discussion during the call today is likely to contain forward looking statements. Forward looking statements are statements other than those which are historical in nature. All forward looking statements are subject to significant uncertainties and actual results may differ materially from those suggested by such statements. For information regarding certain of the risks That may cause actual results to differ, please see the forward looking statements section of our press release and the investor presentation referenced earlier, as well as the company's filings with the SEC from time to time, including our Form 10 ks for the year ended December 2020 and any subsequently filed quarterly reports on Form 10 Q. The company expressly disclaims any responsibility to update such forward looking statements. I will now hand the call over to David Holt to discuss this exciting acquisition. Mr. Holt? Thank you, Karen. Good morning, everyone. This morning, we announced that we have entered into a contract to purchase the Larry H. Miller Group and Total Care Auto, followed by Landkar. I'd like to walk through the presentation we sent out this morning. But before I do, I just want to hit on a couple of bullet points and then we'll certainly get into it. Our team has been working hard to thoughtfully grow our company, and this means finding groups that align with our vision, specifically related to serving our guests, While taking care of our partners, meaning our manufacturer relations and our shareholders. We believe the main differentiator in the franchise system is the level of service we offer, And we know Larry H. Miller perfectly aligns with this. This is a well respected group with a rich history of taking care of their employees, guests and giving back in their communities. Their density in these high growth markets would have taken years for us to build out. We are honored to be stewards of what Larry H. Miller and Gail Miller built. They have a tremendous leadership team and 5,300 professional and passionate team members who align daily to serve their guests. I would now like to hit on some bullet points And then Michael and I will take some questions. Briefly going through the slides, I won't hit every point. I'll just hit a couple of things. But the first slide on Asbury, looking at our current footprint in 91 locations, you can see the map and where we're at. We have a strong team that delivers best in class SG and A and operating margin, and we feel like we have a disciplined vision and model to grow the company thoughtfully. On Slide 5. Slide 5 is an overview of Larry H. Miller. They are the largest The 8th largest group in the United States, great brand diverse mix in high growth markets, with average revenue You per rooftop over $100,000,000 and you can see their annual sales and EBITDA numbers and revenue numbers, a very strong well run group. On Slide 6, this is a very interesting business for us and this further diversifies our model. This is buying Total Care. And I think that really that wheel kind of sums it up best, selling products to the dealership, The dealership receiving claims and then paying the claims money back to the dealership. So it's really a great business model That generates high margins for us, and we look to thoughtfully grow this into the Asbury platform as well. So plenty of potential there. On Slide 7, this kind of talks about some of the highlights. I think it's pretty much stated. Larry H. Miller It is a well known organization, for how they've been serving their communities and their guests, and we're just thrilled to be a part of this organization. We see this as an opportunity for us to leverage ClickLane and go from a coast to coast platform, And we're excited about that. And we're excited about TCA and to be able to scale that, TCA is the total care, within our business model as well. This is a strong, very profitable group, and we know it further diversifies us extremely well and positions us well for the future to continue our growth. This acquisition and we also noted in the release this morning we have another $900,000,000 under contract We'll certainly put us past our 5 year goal in the 1st year, but we will still continually look to thoughtfully grow the company over time. On Slide 8, this simply is a view of where everyone is at right now. A couple of the organizations just announced large acquisitions as well and we kind of put them in here into the mix as well. And then the pro form a The far right is trailing 12 months, both organizations through June. So it just gives you an idea of size Scale and where we sit right now. Slide 8 is really what's interesting for us. When we close this acquisition, and that's how you have to go through all the normal steps to do so with OEM approvals and everything else. But when we go through this, We'll be over 150 dealerships, but we're really laid out exactly where we want to be, the states we want to be in with the brand mix we want to be in. Tremendous high growth in certain markets as you can see below and it diversifies us well across the country. On Slide 8, the intent here with this slide, because when we did the Park Place acquisition, it was all about luxury. There is some luxury in this between Mercedes and Lexus, but what the thought process was here in these 7 states, We pulled data to show what are the top 10 brands in the 7 states where the Miller Organization does business. So we aggregated the retail sales for the last 3 years on average. And as you can see, they're ranked here by volume, Retail volume by brand and then down below you'll see the LHM dealerships, the number of stores they have within those markets. So not only is this a large dense organization, but the Miller Organization thoughtfully built out their model and bought the right brands in the right markets to align with what the consumers want. So it's really just a very strong brand mix and portfolio that completely aligns with the market. On Slide 11, this just breaks it down a little bit deeper. It shows you Where we're at, this does not reflect the $900,000,000 that we have under contract, simply taking the current Asbury footprint And adding LHM to it. So really strong brand mix. And then on Slide 12, this was a slide from last year, It just basically speaks to the acquisition silo, if you will, and where we're at on our goal for that $5,000,000,000 in acquisitions. I'm going to hand it over to Michael now to talk about Slide 13. Thank you, David. David has covered a lot of the details on the Larry H. Miller Group And the dealerships they have and the brands they have and which states they're located. So I'll skip through the kind of the first bullet of the scope And just skip down to the financial impact. We're going to pay $3,200,000,000 for this acquisition. That includes $740,000,000 of real estate. That reflects about a 6 multiple on the Leary H. Miller dealerships and a 10 multiple on the TCA. The 6 multiple excludes the real estate piece and it's just the dealership portion of that. For EBITDA, dollars 360,000,000 of EBITDA And most of that has some day 1 cost savings. We did not factor in any of the synergies from both TCA rolling out to Asbury or Clicklane Impacting the business of Larry H. Miller. So those are future benefits that we did not factor into the EBITDA. From an EPS accretion perspective, We have immediate accretion day 1 of 14%, the Larry H. Miller portion and 3 years of 2024 of 20%. That accretion assumes $600,000,000 of equity raised and also assumes that the excess cash was already spent On the other acquisitions, but we do not take credit for the earnings from those acquisitions in those accretion numbers. Financing will do a mix of debt and equity. We will do that when the market we'll watch the market over the next few months and Due to debt and equity raise sometime before closing at the end of the year. Just from the leverage perspective, our assumption is we'll be a little higher on the leverage than our current goal of 3 in 2022, But we will get back down into the 3 range by the end of 2023. As David mentioned earlier, This closing is conditioned upon the normal customary closing conditions, including OEM approvals. And we'll get those we'll get through that process by the end of the year as far as our goal. David also mentioned, we have an additional 900,000,000 Of additional revenue under contract, we expect to close those prior to closing the Miller transaction this year, but those are also subject to the normal closing conditions, Including OEM approval. The last bullet point, once we roll in those other acquisitions into the EPS accretion, That raises the number in 2022 from 14% noted above to 20% and then in 2024, so a 3 year look Moving from 20% to 28% accretion. Again, that accretion number does not include any benefits we have from Quicklane rolling out or TCA rolling into Asbury. I'm going to hand it back over to David for any closing remarks and then we'll take Q and A. Just in ending this, I've stated in the past, our goal is to grow thoughtfully and it wasn't about size or Scale, but it was aligning with the right groups. We're honored to be stewards or have the opportunity to be stewards of such a great organization. The last few acquisitions we've done in the last three years, we've retained 100% of the general managers, 95% of the employees. This business is all about the people. We would not be here today entering into this agreement if we didn't feel like we aligned philosophically with this organization and that we couldn't be good stewards of the business. The story of Larry H. Miller is remarkable, And it's one that will be respected for many years to come, and it's our job to make sure that legacy and history continues, and we're proud to partner with them to do that. So We're honored and humbled to be here. We will be great stewards. It perfectly aligns with our North Star taking care of our teammates, taking care of our guests And our partners are our manufacturer partners and our shareholders. And we think today, we've added a tremendous group of people, stores and assets to our organization as we continue our journey. We'll now hand the call over and answer any questions you may have. Thank you, sir. To allow your signal to reach our for questions. Thank you. Our first question comes from Rick Nelson with Stephens. Thanks. Congrats on getting this deal to the finish line. It looks like a good one. I'm Calculating EBITDA margins below Asbury, if you could speak to the opportunity to narrow that gap. Sure, Rick. I think when you look at it, when We look at our pro form a model going forward and how we handle expenses and things. We think that this will be accretive. We don't Look at acquisitions in any other way, it has to be equal to or greater than our current margin levels. So I think as We transition it to on to Asbury's P and L and a forward look. I think you'll see that it aligns with our current operations. Hey, it seems to be a big opportunity on the insurance side of the business, You could speak to that. I know it's not included in the numbers you provided, but It seems layering that into the Asbury platform. It's extremely exciting to us, very hard to build an insurance company. It just speaks to their amazing vision over 30 years ago building this insurance company on a HAME Best rated insurance company. Extremely well run. The opportunity instead of us buying products and just making a margin on the product, Now making margins on both sides for lack of a better term and diversifying our business model with 20 plus percent margins up to 30% margins In some cases, really is exciting to us. And when you think about it, right now we're buying the product, we're making the margin. And then if we get the service work back with that particular policy, there's additional work there. On this ecosystem, DCA is selling the contract to the dealership. The dealership is selling at making the margin. The premium goes back to the insurance company. They reserve the money over time. They They pay 90% of their claims back to the dealership. So that money all stays in house or a good majority of it. So it's very exciting when you think about that. And now that opportunity to scale that within Asbury at that margin level really puts a Nice business model together for us and really stabilizes our organization. And just, David, taking a step back From the financials, why do you think now is the right time to be buying dealerships? We've Got record profitability record GPAs. And how sustainable do you think that is? And Overall, why now? Well, it's a great question, Rick. And I'll tell In our franchise system, 90% of the deals, as you know, are privately held. So we've been looking the why now makes sense because the deal is being announced now, but we've been looking at deals for years. And there's a lot of deals we just simply don't enter into and negotiate on or show interest in because they don't think they align with us. And when we feel like an organization comes up and we have an opportunity to participate where we think we could be a good steward of the business and aligns with us, we aggressively go after it. So the Park Place Why Now, it became available at that moment in time. This organization became available. We're highly interested in it. I think there's going to be consolidation as time goes forward. But again, thinking about our partnerships, There has to be a win win. We can't walk into this acquisition and not take care of the employees and keep them because they're the ones that are running the business. We had to take care of the manufacturers and make sure we're good stewards of the business and that we can operate the business without it going backwards at all. So I think that we're very thoughtful about our approach, that we're just not looking to buy revenue, but we're really looking to buy Organizations and people that align with us where it can be a win win, and we'll continue to do that and build it out. As to the margins to your point and where it currently exists, of course, it's not going to last forever. But I think if you go back to 2019, which is probably one of the worst years for front end margins in many, many years, We had the highest operating margin then. Your domestic and luxury have high margin business. When you look at the brand mix In the markets that we're doing business in, whenever the margins settle down, we'll settle down at a higher number than we were. So we think we're a much stronger and more stable company. And now you layer on that insurance company on top of this. I think that We're really thoughtfully building this out and making us a stronger organization, and we'll continue to look for these acquisitions. And whether that means we don't Acquire anything else for the next year or 18 months or 6 months, I don't know. But I can tell you we won't acquire something that we don't think we could be a good steward of. Great. Thanks for all the color and good luck. Thank you, Rick. Thank you. Our next question comes from Ryan Sigdahl with Craig Hallum Capital Group. Good morning, guys. This is Matt on for Ryan. Thanks for taking our questions. Just curious if you believe that The incremental revenue from the deal here is incremental to your click lane estimate, and if LHM Adds to or synergizes with that. So yes, we have not layered in any click And into our numbers, we believe with how well their operations are run layering in the software And allowing them and their guests to utilize this transformative software, we believe, is only going to be accretive for all parties. The guests in that market, the transparent speed and transaction time, and certainly the Miller Organization. So I think they're certainly ready for it. They're an innovative adaptive company, and I'm sure they'll welcome the software, and that's all plus business to us. And when we announce earnings, because we're really going to be 2 quarters into ClickLane, full quarters, I think you'll see the progression of ClickLane even in this Low inventory model, how well it's being received by the consumer. Great. And so you mentioned that you're still going to kind of look to grow thoughtfully over time after exceeding your M and A target just Here in the 1st year, do you feel like you may revise your target or does this change your thoughts On the M and A target at all in the next 3 years? Sure. I would generally say it's always tough to predict the future. Whenever We put numbers out whenever we put guidance or a plan out. It's a very conservative model, because we want to make sure we can attain it. Others have had much lot of your goals and understand it and maybe $5,000,000,000 wasn't an aggressive goal. It's tough to put a number on something and you don't know what's going to come up for the market. I would tell you our growth going forward will really be opportunistic. We'll really be looking for the right organization that aligns with our philosophies in the markets that we want to do business in. It will be very difficult to know what that cadence will be. Really the end of this year will be 1 year into our 5 year plan. Our intent was in our January earnings to really refresh our 5 year plan as far as where we're at on same store growth, Acquisitions and on Clicklane and kind of model that out a little bit further. So you will see new guidance, but again, we're months into it. And I think that the main goal right now needs for us to get the manufacturer approval, and really I get to know the Miller organization and layer them into our company and make sure that it's a really smooth transition for all of them, As it was at Park Place, and we can continue to move forward as one. Great. And then Kind of a little bit more of a math one, but just you mentioned that the average revenue per rooftop is over $100,000,000 There's I think 61 Rooftops locations, that's a little bit more than the $5,300,000,000 of TTM revenue for LHM, does that kind of square? No, it's a great point and I should have clarified that. Thank you. We looked at the 54 stores, and didn't really think about the used car operations. Clearly, they add a lot of revenue to it, but It always seems like people tend to focus on the franchise side of it, so we simply took the revenue divided by the number of franchise. Great. Thanks for clearing that up. That's it for me. I'll pass it back to the queue. Thanks. Thanks, Matt. Thank you. Our next question comes from Rajat Gupta with JPMorgan. Great. Thanks for taking the And congrats on the announcement. Just had like a couple of like housekeeping follow ups to some of the questions before. The $360,000,000 EBITDA, that's a day one number, I assume. What does the 2022 on 2024 EPS accretion assume in terms of where that EBITDA goes For those 2 years, the only reason I ask is because we're obviously running at a pretty elevated level of GPU Across the country. So just curious as to what's baked in, in terms of that EBITDA into the forward years? And I had a follow-up on the TCA business. Thanks. This is Michael. And yes, good question on the EBITDA. On the EPS accretion, we kind of baked in 2022 similar to 2021. And then 'twenty three and 'twenty four, getting back down to Normal inventory levels or new normal inventory levels and the margins on that business as well going down. So that's kind of baked into the model. So we do assume that the margins come down, the inventory goes up and that factors through the system. The $360,000,000 is a year 1, but it's that EBITDA rise up a little bit in the out years, but it does impact get Tagged by the margin impact of the of just the inventory return to normal. But again, Rajat, as you think about it, we're not including In those numbers, any roll in of Total Care into Asbury or any upside in Clicklane? Got it. Yes, yes, that was going to be the next question. My sense is that average service contract roughly is $2,500,000 $3,000 per vehicle. You have like 40%, 45% penetration. So is there any way to quantify like the dollar amount benefit by having this captive And how is, just so we can get a sense of what the long term opportunity is? We kind of gave out the EBITDA margin on that business and so that's an incremental margin that would be on that F and I income. The other thing that, because of their ecosystem, their VSC penetration tends to run a little bit higher than maybe what our historical Our penetrations are. And so it seems like from an SI Products perspective, they do a little better job of selling that product because of the whole Ecosystem on that kind of chart. And as you can see, they have a full suite of products beyond the service contracts Well, so the time line for earn out on those is a lot faster than the service contracts. Yes. Got it. Got it. There's just one last one on the used vehicle business. Are you looking to maybe venture back into standalone stores? Just curious as to what's The plan with the standalone stores that are coming with the acquisition. That will be all. Thank you. Rajat, absolutely happy to answer that question. No, we will not. We believe that bifurcation is not healthy and it doesn't Support the franchise models within the markets. We believe the value proposition is offering certified cars from manufacturers, and that is Meaningful when you think about the cost of sale of a used car and how it goes up. Our goal is to grow the revenue through the rooftops we have. Our omni channel approach and our click lane tool allows us to do that. Having a standard or a standalone brick and mortar facility That costs $10,000,000 to $15,000,000 to budget when we can do that same book of business through the branded store, and in this case, an LHM store. We would never think of doing that. We want our folks to enjoy the revenue that we can generate through the rooftop. And as we grow that, everyone within the store benefits from that. So We'll stay hard and true to that model. Got it. Great. Congrats again and look forward to hearing next month. Thank you. Thank you. Our next question comes from Glenn Chen with Seaport Research Partners. Good morning, gentlemen. Congratulations and ladies. Thanks, Glenn. So just some questions around your network and footprint. So first, Do you anticipate any pushback from the OEMs relative to your framework agreements? And do you anticipate having to Sure. I'll take that question, Glenn. We've already had some light conversations with some of the manufacturers. Yes, I can't stress it enough. We're a franchisee, And our lifeline is our manufacturer partners and we value that. So we will always align with them. We'll work through this process with them, But I couldn't sit here today and tell you will one store be sold, 2 stores or no stores. Our intent is to acquire the whole group and not sell anything. But through thoughtful conversations over the next couple of months and aligning with our partners and what's in their best interest will be great. There may be one framework with 1 manufacturer that will bump into an issue, but the rest of it is more about conversation. Okay. And to be clear, David, This does include the entirety of the Larry Miller Enterprise. There's no 1 or 2 stores that were left behind? That's correct. It includes all of their franchise stores, all their collision centers, all their stand alone used car stores that they have, And it also includes ToyotaCare and Saxton Horn, which is their advertising agency. Okay. And then given your new pro form a Brand and geographic footprint, any areas where you think you still need filling out, David? Yes, I would tell you, we it's the right way to look at it. I would say and we've talked about wanting to enter into Colorado or in Arizona and Utah in certain states. There have been other stores and things that have come up for sale in these states that we just didn't participate in. So it's the state And the operation or the folks that own the business to see if there's alignment there. So, we like these brands and We showed the top 10. There are no luxury brands in the top 10 in these 7 states from a volume perspective. So how we grow it out, we There isn't a plan. We want 2 more of these brands, 3 more. We don't look at things that way. We look more at the people in the organization and say they're a good fit For us, there are certain states that we try to avoid, not because there aren't a lot of car sales there or good people there, but sometimes Between the franchise laws and state laws and then your actual fixed costs, one of the biggest benefits of the franchise model system is it's like an accordion on the expense side. Most of your expenses are collapsible, so you can really adjust to economic conditions. When you operate in some of the more expensive states, you cannot run your fixed expense. So we really try to be thoughtful about where we grow in scale. Okay. And then last question, sort of the other side of a question that was asked earlier. I I don't suppose there's anybody from Larry Miller on the call, but my question would be why now? I don't suppose you could speak on their behalf. Is it Is it purely price or is it do they see writing on the wall with upcoming investment, risk from EVs or investment required for EVs, etcetera for operating capabilities. Yes. I understand your question. I have such I've been in the automobile business 35 years, actually 36 Next in December. I have so much respect for this organization and what that family has built and what they've done. I would never speak on their behalf. I'm sure at the appropriate time, they'll discuss it. And any conversations I've had with them, I wouldn't be willing to share. I just don't think that's respectful or appropriate. Perfectly understood. Okay, very good. Thanks again and congratulations all. Thank you. Thank you. Our next question comes from Stephanie Moore with Truist. Hi, good morning. Just wanted to talk a little bit on the synergy opportunity with the acquisitions today. You know, I think you're immediately looking at some day one cost savings and maybe talk through some of those and maybe the opportunity in the Future as you looked at this deal for additional synergies. I know you mentioned some revenue synergies just with The cook lane opportunity and TCA, but if you could talk a little bit more on the cost side, that'd be helpful. Thank you. On the cost side, that's just taking 2 large organizations and merging that into 1. So some of the, I'll call the high level management overhead cost at the top of the house just comes out with that. We also have some opportunities I mean, in used vehicles and things like that to deal with, but most of it's just the cost of that kind of dual management structure On 2 large companies and that just comes out of the mix kind of day 1. The synergies are more the opportunities in Clicklane And then also in TCA rolling out to the Asbury model. And again, those are not baked into the numbers that we've put out there. The only thing we baked in were The day 1 cost synergies and a little bit of growth in both used vehicle and fixed ops. And I'll add on to that just to clarify. Like the Park Place acquisition, we don't go in there and eliminate people. We take on everybody because the success of the organization is the people and our intent we will do the same here. When Michael talks about the top of the house, he's referring to naturally the family, and the executive team that sat over Miller Enterprise and all the different businesses that they have. But the senior leadership, their CEO of automotive and their entire management team, We clearly want them, and we value them and what they've built and respect that and just simply want to partner with them. Our opportunity is bringing great minds together and growing the business thoughtfully, sharing Clicklane and other things that we can learn from each other That benefits the employees and certainly the guests. And we think like any, the best business in the world has tremendous opportunity, And that's what we strive for every day. How do we be better tomorrow than we were today? No, absolutely. That's helpful. And then First is just a housekeeping item. Can you give us what the new and used mix is for the Larry H. Miller franchises? And then Maybe as you look at this, was there anything on potentially the service side or youth side that you thought that they did better, That you could adopt across your footprint or maybe vice versa and an opportunity to expand there. I think when you did the Park Place deal, there was an opportunity to enhance some of the service capabilities using their methods. So anything you learn there would be helpful. Sure. The 115,000 unit sales, the way that breaks down is basically 0.8 to 1 is the used ratio, used to new ratio. So you can figure out the calculation there. This is an extremely well run group. Their F and I numbers are strong, their parts and service numbers are strong, their sales numbers Their profitability is strong. They have a lot of tenure. They have low turnover. But having said that, and I'm sure they would say this Well, there's always an opportunity for more and to get better, and that'll be the fun part of working together to creatively figure out how do we get better, how do we raise our service retention number. So, we're excited to be here today. We're on for the opportunity, but there's a lot of work to do. It's very easy to look at a P and L and see a number that looks off or doesn't look right or sees opportunity, but you first have to seek to understand. So the first thing we'll do is spend time and see the world through their eyes and align with them and figure out how we can grow the business thoughtfully. Got it. Well, thank you so much. Thank you. Thank you. Our next question comes from Bret Jordan with Jefferies. Hey, good morning, guys. Good morning. On TCA, is there any, I guess, sort of penetration color you could give us? Does that product work Well, with midline or luxury and how does VSC sell better in one place than another? Yes. We don't want to break into But what I'll tell you is, their overall service contract penetration numbers are higher than Asbury. They just are these two companies, even though they're in separate silos, are so intertwined so perfectly, And they feed off each other extremely well. And if you think about it and spending time with them, they've educated me. This really helps in the retention of their customer base. So it's really a win win to be able to control the claims process and take care of your customers It's powerful, because the average dealer can't do that. Okay, great. And then I think you To address this, but the $900,000,000 under contract, there's no barrier to closing that prior to 23 when your leverage ratio is below 3, right? You're willing to go higher on leverage nearer term to do those deals? The leverage ratio that we quoted includes the spend on those acquisitions already. So that's kind of baked into that overall leverage number. Okay, great. Thank you. Thank you. Our next question comes from David Whiston with Morningstar Equity Research. Thanks. Good morning. Staying on that service theme from the last question, Not knowing Total Care myself, can you help me understand something like when a if a customer enters into that contract, are they Much more likely to then have their vehicle serviced by that exact same dealership where they bought the vehicle. Are they locked into that dealership? Or can they go to, say, I need Toyota dealer This will do it. Sure. It's a professional standalone insurance company that covers the consumer anywhere they go within the United States, So they can take their vehicle anywhere. But again, because most people live local, service local, they're right around 90% retention As it relates to the service contract claims. So for every 100 claims, 90 of them Come back through the LHM organization or franchise stores, and then on average 10% will seek other avenues, whether they're out of state, they moved away or they're Travel wherever they're doing. And that's for all service work or just if there's Like an accident collision repair or? Yes. So when you talk about service contracts, it's for mechanical breakdown. Now they sell prepaid maintenance plans where the consumers purchase those plans and come naturally come back for the prepaid maintenance that they already paid for, But the service contract is for mechanical breakdown. So once they warranty, an example, if you buy a new car and a year later, you have a warranty issue, Bring it back to the dealership for the warranty issue. These extended plans basically take that beyond their warranty period. So when there is a mechanical breakdown, they would bring it back and be serviced at an LHM store. But the customer doesn't have to go to an L. A. Jump store, right? Yes, that's correct. Yes, that's correct. Yes. But their 90% retention rate as far as that goes only speaks to the level of service and the consumers wanting to do business there. Yes. As a reference again on Slide 6, for the 54 franchise stores and 7 used car stores, there's over 2,000,000 outstanding contracts. So it's a big dense business. Okay. And earlier, I think it was your last question to Rajat, you were talking about Used vehicles and the value of selling those at the franchise stores. So do you want to keep the used only stores you're buying? Oh, absolutely. Yes, it's part of their culture. It's part of their DNA. It fits into the fabric of who they are. When we acquire something, their goal our goal is not to have them align with us, it's us to align with them. Every opportunity in an acquisition is an opportunity for us to learn and grow and align with them. But when we go out and acquire something, we're buying it because of their business And can you just speak at a high level as to How this deal came about, if you guys had maybe approached Gail and her family or her broker approached you? Did this happen over a couple Yes, I would say they were represented by JPMorgan. And I couldn't honestly tell you how many different parties they talk to get to this point. Again, it wouldn't be fair for me to say. I don't have inside information to know that answer anyhow, but the transaction was facilitated by JPMorgan and Either them or the Miller family would have to let you know that answer. Okay. And I just want to clarify something on the 2025 Guidance, it sounds like what you were saying earlier in the call that you're going to update in January, but for now you're just going to remain very conservative on the outlook. Is that fair? Well, I think it's stated, David. I mean, we've exceeded the acquisition target. We haven't closed on it yet. Our assumption is that we close on It's a busy year in acquisitions. There's a lot for the manufacturers to process these deals. It's extremely important to us that we close everything before the end of the year and that's our main focus. So that's where all our priority is going to be. We have our core group of stores running the business every day, Performing extremely well, putting best in class operating margins out there quarter after quarter. That's not going to change, But we want to focus on integrating these stores at this point in time. So when we get them integrated and we close by the end of the year, I think January is the logical time To update that 5 year plan. Right now, it's getting ahead of ourselves because we haven't closed on any of this. Okay. And you did say the $900,000,000 of other revenue closes before Larry Miller? That's correct. Okay. Thanks a lot. Thank you. Thank you. This concludes today's Q and A. I would now like to turn the call back over to Mr. Holt for closing remarks. Thank you very much. We're very thrilled and excited to be here today and we're looking forward to this transaction and bringing on a lot of great new team members to our organization, and we appreciate the opportunity and the stewardship. We appreciate your time on the call today And look forward to talking to you soon on our next earnings call. Have a great day. Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.