Earnings Call: Q2 2021

Jul 27, 2021

Good day, and welcome to the Asbury Automotive Group Q2 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Karen Reed, Vice President and Treasurer. Please go ahead. Thanks, operator, and good morning, everyone. As she noted, today's call is being recorded and will be available for replay later this afternoon. Welcome to AbbVie Automotive Group's 2nd quarter 2021 earnings call. The press release detailing Asbury's 2nd quarter results was issued earlier this morning and is posted on our website at asburyauto.com. Participating with me today are David Holt, our President and Chief Executive Officer and Dan Clara, our Senior Vice President of Operations. At the conclusion of our remarks, we will open up the call Before we begin, we must remind you that the discussion during the call today is likely to contain forward looking statements. Forward looking statements are statements other than those which are historical in nature, including those statements relating to the duration and contemplated impact of the COVID-nineteen pandemic on our business and financial performance, The impact of the chip shortage as well as the financial projections and expectations about our products, markets and growth. All forward looking statements are subject to significant uncertainties and actual results may differ materially from those suggested by the statements, including potential impacts from the COVID-nineteen pandemic and the semiconductor chip shortage on us, our industry and our customers, Suppliers, vendors and business partners. For information regarding certain of the risks that may cause actual results to differ, Please see our filings with the SEC from time to time, including our Form 10 ks for the year ended December 2020, any subsequently filed quarterly reports on Form 10 Q and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward looking statements. In addition, certain non GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, we provide reconciliations of any such non GAAP financial measures to the most directly comparable GAAP measures on our website. We've also posted an updated investor presentation on our website, asburyautos.com, highlighting our 2nd quarter results. It is now my pleasure to hand the call over to our CEO, David Holt. David? Thank you, Karen, and good morning, everyone. Welcome to our Q2 earnings call. In our earnings release this morning, We reported adjusted EPS of $7.78 an all time record, up 2 0 9% over the prior year. Star continues to recover from prior year lows. Despite supply disruptions due to the chip shortage, this strong execution in the face of a Challenging macro environment enabled us to deliver a strong gross margin of 19.2%, an expansion of 240 basis points Versus the Q2 last year. We have also stayed disciplined in managing expenses, resulting in SG and A as a percentage of gross profit of 54.2 percent, an 850 basis point improvement versus prior year. Our total revenue for the quarter was up 79% year over year and total gross profit was up 105%. Our balance sheet remains strong due to our performance in cash flow. Our net leverage ended this quarter at 1.6 times. We are in a perfect position to deploy capital and are aggressively pursuing opportunities for growth. A quick update on our strategic 5 year plan As we announced 6 months in, same store revenue growth assuming 2020 annualized revenue for Park Place Is up double digits and is exceeding expectations. Regarding click claims, our unit sales are pacing ahead of our plan. Regarding acquisitions, we have about $400,000,000 in revenue under LOI right now. We are also reviewing other totaling over $8,000,000,000 in revenue. We are confident in our goal of $5,000,000,000 in revenue over the next 5 years. With these trending results, we maintain full confidence in our execution on our growth strategy. We will continue to provide quarterly updates on our 5 year plan. Finally, I'd like to thank all the hard working men and women in our company Who are focused on our journey to become the most guest centric retail automotive company. Their passion to serve is inspiring. Thank you. I will now hand the call over to Dan to discuss our operating performance. Dan? Thank you, David, and good morning, everyone. My remarks will pertain to our same store performance compared to the Q2 of 2020 and comparable stores in 2019 when applicable, unless Stated otherwise. Looking at new vehicles, based on current market conditions, we are focused on being opportunistic with our inventory and improving grosses To maximize profits, our new average gross profit per vehicle was $3,496 Up $15.99 or 84% from the prior year period. All segment margins were up significantly from the prior year period. At the end of June, our total new vehicle inventory was $226,000,000 and our day supply was at an all time low of 17 days, Down 35 days from the prior year. Some of our stores were at 5 day supply during the quarter as we experienced major challenges due to the lack of inventory. With no clear understanding of when production will return to normal levels, we expect the day supply to remain low throughout the remainder of the year. Turning to used vehicles. Our used retail volume increased 29%, while gross margin was 10%, Up two thirty basis points from the prior year, representing an average gross profit per vehicle of $2,635 As a result of our performance, our gross profit was up 96%. Our used vehicle inventory ended the quarter at 286,000,000 Which represents a 37 day supply, up 11 days from the prior year. We remain focused on sourcing inventory that will generate a fair return. Turning to F and I. Our strong consistent and sustainable growth in F and I delivered an increase of $160 to $18.98 Retail from the prior quarter prior year quarter. In the second quarter, our front end yield per vehicle increased $14.48 per vehicle to an all time record of $5,004 Turning to parts and service. Our parts and service revenue increased 41% in the quarter. Gross profit increased 48% And total fixed margin was 62.3 percent, up 300 basis points. I would like to make a couple of additional Comments about our performance compared to the Q2 of 2019 on a comparable store basis. New unit sales were up 11%. New vehicle gross profit was up 172%. Used retail unit sales were up 10%. Used retail gross profit was up 88%. F and I per vehicle retailed increased $2.61 or 18%. Front end yield per vehicle retailed increased $18.31 or 64%. Parts and service customer pay revenue Increased 9%. And now I would like to provide an update on our omni channel initiatives. In 2016, we started focusing strategically on several omni channel initiatives. 1 of those initiatives is to increase organic website traffic. Through our sophisticated digital marketing efforts since Q2 2016, Our organic traffic of unique visitors to our dealership websites has increased by over 6,000,000 consumers, An increase of over 5,000 percent. Another initiative is to increase online service appointments. We achieved bookings of over 142,000 online service appointments, an increase of over 400% since Q2 2016 And an all time record. This component positively impacts service retention and increases the dollars per repair order. And of course, ClickLane, the latest evolution in our omni channel strategy, which was fully active at all of our dealerships for the complete quarter. Before I go over the ClickLane metrics, I want to remind you of the unique features of ClickLane as well as highlight our recent enhancements As we are constantly evolving the tool to provide our guests with a seamless and complete buying experience and strengthening that relationship. Penny Perfect Loan Payoffs, a loan marketplace which now includes more than 35 lenders. On average, 9 out of 10 customers that apply for a loan are approved through ClickLane. The ability to sign all documents online via DocuSign With 14 of our lenders now accepting documents executed via DocuSign. In tool service and collision appointment scheduler With ability to purchase parts and accessories within the tool as well. We recently partnered with Salty to deliver transparency and convenience By providing a one stop shopping experience for our guests to include their car insurance needs. Salty is an embedded For consumers that provides competitive personalized insurance quotes from over a dozen large national carriers. Click Link guest benefit from an intuitive platform that retrieves a competitive quote from major carriers and provides a custom built policy Tailored towards the consumers' wants and needs. Asbury customers spend over $350,000,000 in insurance every year. Through our partnership with Salty, we receive a commission on the premium of each auto insurance policy as well as any additional policies that the guest originates. We also partner with Insignia to enhance our accessories tool and to enable visualization within ClickLane. Asbury customers often look to 3rd parties to outfit their vehicles after the point of purchase. This new integration allows customers to add accessories The back end of their Clicklane account. This enhancement allows customers to fully visualize Accessories on the vehicle of their choice in real time. Now with a full quarter at all stores under our belt, We would like to share some performance metrics. Of our vehicles sold through Clicklane, 54% of them were new vehicles and 46% As a reminder, with Push Start 80% of our sales were used vehicles. We expect annualized volume through fleet of at least 30,000 vehicles by year end. 93% of our transactions this quarter were with customers that were new to Asbury's leadership network. Average transaction time is 8 minutes for cash deals and 14 minutes for finance deals. Average down payment for new vehicles is $10,252 more than 4 times our store average of $2,242 Average down payment for used vehicles is $4,716 more than double Our store average of $2,078 F and I PVR of $2,066 64% of new car customers and 68% of used car customers chose to take delivery at home, An increase of over 15% from the Q1. Average credit score is higher than the average credit score at our stores. Trades taken through Click Lane are averaging front end PBR of $2,392 Rates taken through ClickLane are turning on average in 19 days. As expected, ClickLane customers are converting at greater rates than traditional Internet leads. Not surprisingly, we are quite excited about the performance of Cliff Lain thus far as it is tracking ahead of targets. And finally, I would like to take this opportunity to express appreciation to all of our teammates in the field for their continued focus on the guest experience, Their commitment to continuous improvement and their perseverance. I will now hand the call over to Karen to discuss our financial performance. Karen? Thank you, Dan. I would like to provide some financial highlights, which marks yet another record quarter for our company. For additional details on our financial performance for the quarter, I refer you to our financial supplement in our press release dated today, July 27, 2021. Overall, compared to the Q2 of last year, our actions to manage gross profit and control expenses Resulted in a 2nd quarter adjusted operating margin of 8.4%, an increase of 280 basis points above the same period last year And adjusted net income increased 211 percent to 151,700,000 displaying our resilience through these interesting times. For comparison to our pre COVID performance, thus compared to the Q2 of 2019 For all stores, our total revenue was up 43%, total gross profit was up 69% And total gross margin was up 280 basis points. New unit sales were up 20%, While used retail unit sales were up 21%, new margins improved 510 basis points, While used retail margins improved 260 basis points. Total F and I revenue was up 33%. Total parts and service revenue was up 30%. Our SG and A as a percentage of gross profit improved 13.80 basis points and our adjusted operating margin improved 3.70 basis points. Now back to current results. Net income for the Q2 2021 was adjusted for real estate net gains of $500,000 or $0.02 per diluted share. Net income for the Q2 2020 was adjusted for $1,200,000 or $0.05 per diluted Our effective tax rate was 24.7% for the Q2 2021 compared to 25.2 percent in 2020. Floorplan interest expense for the quarter decreased by $2,000,000 over the prior year quarter, driven primarily by lower inventory levels coupled with lower LIBOR rates. With respect to capital deployed this quarter, we exercised our purchase option on the Park Place properties, utilizing approximately $33,000,000 of our cash on balance With the remainder $184,000,000 financed through a mortgage facility. In addition, we spent approximately $15,000,000 on capital expenditures We repaid approximately $9,000,000 of debt. Also in planning for our new Plano Acura site, we sold and leased back Our Plano Acura facility resulting in incoming funds of $4,000,000 net of its mortgage payoff. As a result of our operational performance, our balance sheet remains in a very strong position and we ended the quarter with Also at the end of the quarter, our net leverage ratio stood at 1.6 times, well below our targeted net leverage of 3 times. As we look forward to the remainder of 2021, we anticipate similar conditions to what we have seen this quarter. New vehicle inventory are likely to remain low and unpredictable through at least the end of the year. Overall, as we did in Q2, We are still planning to a 16,000,000 star environment that will keep our business nimble and flexible with an emphasis on gross margins and SG and A expense management. One shift worth highlighting is that as the economy opens up more, we expect our parts and service business to return to its historical growth rate. In closing, I would also like to thank our teams across the business who continue to work During this unprecedented time to ensure our current and long term success. This concludes our prepared remarks. We will now turn the call over to the operator and take your questions. Operator? Thank Our first question comes from Rick Nelson with Stephens. Thanks. Good morning, Next quarter. David, I'd like to ask about the acquisition environment. You've got $400,000,000 now in LOI. If you could speak to the pricing that you're Seeing there in this additional $8,000,000,000 that's in active discussions, how does the pricing look there? Rick, yes, thanks for the question and good morning. It's really mixed. As you can imagine, there's a lot of different buyers excuse me, sellers out there right now that would like to work multiples off of COVID earnings. And the key from our perspective is to have a blended look at it and stay disciplined on our approach. So I would say it's a little bit all over the board. We've probably in the last 6 months walked away from $3,000,000,000 or $4,000,000,000 in business Because we just didn't feel like it was priced appropriately, we feel very confident about the $400,000,000 under LOI as far as the locations and brands and how they fit To our portfolio and the other $8,000,000,000 that we're assessing right now, it's actually closer to $9,000,000 It's the same thing. They're a little bit larger in size. So it's a little bit longer conversations and they're a little bit slower to proceed. So Still up in the air on what the multiples will be for there, but what we have under LOI, we feel really confident with where we've landed. Thanks for that. Also on the inventory, Yes, I can appreciate you don't have a lot of visibility as to when supplies will normalize from the current 17 days. But when things do normalize, do you think the OEMs will run tighter on inventory than they have in the past? Sure. Do they go back to their prior bad habits? It seems everybody is more profitable In a tighter supply environment? Rick, it's a great question and one that I certainly don't know the answer I would say they've done a fantastic job at managing the chip shortage and really trying to produce vehicles that consumers want to purchase. And we're very thankful for that and the partnerships. There is a lot of talk internally with the manufacturers about operating in this environment. I'm hopeful That when things normalize, we don't quite settle back in at the 70, 80 day supply we were in. We run a good 20 days below that. Too early to tell. I think next year is going to be a strong year for retail automotive and then we should start to see a lot of electric vehicles come into the market soon after that. So Interesting times. As you look forward, even with that coming back a little bit, I think you look at the transactions that are taking place online and how grow over time. There's still some opportunity with SG and A even if those margins come somewhat closer to pre COVID numbers. You mentioned electric vehicles. Do you think covered time that the OEMs with EVs that They start going direct to consumer and how do you think that impacts the traditional dealers like as Sure. We feel that the best model of supply to the consumer is through the dealer franchise system. These cars are very complex. People need to be able to communicate locally and I think we're in the perfect position to do that. It's a very mature system. The dealer body is embracing and welcoming electric vehicles and certainly making a lot of investments in training and equipment and materials. So We feel really strongly about the future for the franchise model, especially with the online transactions that are coming. I think the direct to Consumer is really all about the online transaction. And as the franchise dealer adapts to that, it seems like a winning model. And if you could speak to overall profitability of a Clicklane sale compared to an in store sale, The F and I attachment, how does that look relative to in store overall profits? Sure. The front end margin on ClickLane right now in the quarter ran about $2.50 to $300 below The store average and the F and I was mixed. It was a little bit higher on used F and I and a little bit lower on But averaged out similar. We're really happy with the growth rate of Clicklane with the sales and the adaption and We're the smallest public out there and you heard Warren pays for 30,000 sales and you've heard some of our peers. So we're excited about the direction And again, these are 30,000 sales that were 100% completed online. 9 out of 10 people are getting financed. 8 out of 10 are being done automatically if you will, instant approval. Of the 35 lenders, a little over 18 of them have instant decisioning. So They're getting their answers in 45 seconds, which is really fast. And now that we have a good handful or I should say a dozen Banks accepting DocuSign, it's making it that much more convenient as well. So very optimistic it's going to continue to grow And we see good upside and opportunity with our partnership with Salty as well. Thanks for all the color. Good luck. Thank you, Rick. Thank you. Our next question comes from John Murphy with Bank of America. Good morning, everybody. David, just on the inventory shortage, I'm just curious what you're seeing on vehicles in transit Coming in the next month or 2, I mean, it just seems like the inventory is crunching a little bit tighter. I mean, saying there's volatility in unknowns is kind of code for It's getting a bit tougher. And I'm just curious what you're seeing and how you're going to handle what seems to be a tightening situation On the new vehicle side, which is actually crunching sales in the July plus period. Sure, John. I'll start and then Dan can jump in if he wants. We came into this quarter anticipating July August would be probably the toughest months for availability in the sense of what the demand is going to be relevant to what we'll receive. What we're experiencing so far in July is just that. Again, the manufacturers are doing a great job with what they have in producing vehicles and getting them out to us, But it's difficult. I mean the demand is high right now and we anticipate this quarter to be pretty tough. Don't know about September, you get some seasonality adjustment after Labor Day. So we're hopeful that we'll see An incremental increase in day supply as we go into the Q4, but well behind where we anticipate we should be. Yes. The only thing I would add to that, John, good morning by the way is, we have July August is what we expected it to be The lowest month, but also to David's point, the good job that the OEMs are doing, building the inventory That the consumer wants is also allowing us to be very good at selling on order vehicles and delivering them As soon as they're hitting the lot. So a lot of benefit to that. Our turn rate is very high And we'll just continue to navigate throughout the next 2 months. And we know that we have the support from the OEMs on shipping us the inventory. That's helpful. I mean, and when you think about backfilling for this, I mean, is there enough used inventory To which you can transfer some of these customers over for, are you finding that consumers are willing to wait In sort of in some cases, an indeterminate amount of time for the vehicle that they want. I mean, what's sort of the capture rate on the used side? And is that used Inventory even available to kind of make that kind of push to the consumer? Yes. Great question. The inventory, Although it's a little bit harder to find, but it is available out there. And the great news is, like I mentioned earlier, we do have a Pretty good amount of sold orders coming our way. And the biggest stream of inventory for our used car department is coming from the trades. And then we also have specific items that are only available to the dealer body, 1st come, 1st serve, which will be your lease turn ins and also your Some of the loaner cars as well. So are consumers willing to wait for the vehicle of their choice? Yes, We're seeing a lot more patients from the consumer standpoint, waiting an additional few weeks for their choice It's definitely not an issue. And again, that goes back to what I stated earlier. It allows us to really have a very high turn rate when those new parts come in. Got you. And can you pre sell that used as well because you know what's going to be coming in trade? I mean can you work that deal ahead of time? Is that something that's possible? Yes, we can definitely yes, to answer your question is yes, we can market for lack of a better On a retail standpoint, we can market sold to the consumer, but we're not able to process any of the paperwork until the mother deal or the first deal is completed. Got you. And then if we think about the SG and A, the gross, I mean, obviously, you're getting the benefit of very high grosses, You're also clearly executing well. So it's a combination of the 2. I mean, as we step forward into a normal period, let's say, hopefully in 2022, How much of this front end yield do you think you can hold on to? And at the same time, how much of the SG and A savings do you think you can hold on to? I mean, obviously, there's a lot of variables in that equation or in that question. But when you think about things normalizing, I mean north of 5,000 on front end yield is $1500 to $2,000 higher than we would Typically think about this stuff and SG and A to gross is 10 points lower than we typically think about this stuff. I mean that's maybe even a little bit better than How should we think about those two metrics going forward in a normal state? It's tough to answer. It's a great question, John, and I'll try and answer as best I can. As we sit here today, I think we're a different company than we were pre COVID, both in the expense That we cut in the brand mix that we have being almost 50% luxury. So I think post COVID to use that term 2022 and forward will float well above our past margins pre COVID. And we see opportunities with SG and A going forward through our digitization of our sales online. So While margins may fall back a little bit, not back to where they were, but lower than where they are today, we believe there's upside in expense down the road. So we think we're in a very healthy position to still create strong returns, low SG and A and great operating margin. Okay. And then just lastly, I mean, on the 5 year plan, I mean, you're saying you're running ahead. If we strip out the pressures of The market dynamics at the moment, it's hard to disagree with and you seem like you're probably running on execution basis well ahead of plan. Clicklane It's firing fairly well. I mean, how do you think about reassessing the 5 year plan and maybe giving us An update or where do you think that will ultimately land? I mean, how should we think about that? Because that's now just given your performance, Not necessarily time, but just given how well you performed, it seems a little dated. It's a fair point. But I would also respectfully say patience is tough In these markets, we're only 6 months in. I would say depending upon how the chips fall on the M and A side in the next few months, That could certainly warrant an update. Our same store revenue is probably best to reassess when we hit the 12 month period. We're well ahead of that $2,000,000,000 target at this point in time. But we also don't want to get too far ahead of our skis and let 12 months to normalize To kind of see where we're at. But to your point, I understand it, where we sit here today, what we have under LOI, what we're looking at, The potential there to far exceed it is there, but I really don't want to get ahead of ourselves because it's not in the bank so to speak. Got you. Okay. Thank you very much, guys. I appreciate it. Thank you. Thank you. Thank you. Our next question comes from Adam Jonas with Morgan Stanley. Hey, everybody. Can you hear me? Sure can. Good morning. Oh, great. Great, great. I might have missed this. Did you actually disclose How many units were sold on Click Lane? No, Adam, we didn't. But I'll tell you, it was just under 4,500 units In the quarter. Okay. Thanks for that. And I don't know of the 4,500, How many would you say were kind of fully like digitally fulfilled kind of sorry to use the word, but Carvana Ask if you will, and I know they're not you know what I mean, like what you would describe as the most digitally fulfilled of the 4,500. Yes. So we quote that number different than push start because push start was more of a semi completed Online and completed in the store. And I'm going to use the rounded of 4,500. They were 100% completed online In the sense of it was paid for signed up. When we pull credit on ClickLane, they're hard pulls on the credit. They're instant approvals are real. The payoffs are done and the signage Through DocuSign. Now if they pick a lender and they sign up everything on DocuSign and it's a lender that doesn't accept DocuSign, then we're presenting some new documents On delivery. If the bank accepts DocuSign, it's all said and done. And payment online is via our Stripe relationship that we have. So they're all completed online. There's nothing additional coming in. If they start on ClickLane and then they come in the store And finish it, that is not a quick lane sale to us. All right. Appreciate the color, David. And just finally, Dave, from your experience, what can you say about the parts and service profile Or the revenue derived from parts and service and maintenance, etcetera, on the EVs Coming into your base versus the ICE equivalent vehicle. I didn't know if there was I realize the numbers are still But the parks are the park is growing geometrically and you'll get more and more of these units. I'm just curious what color you can give us. Sure. Every quarter, we kind of look at service in 3 different buckets, and we can't control warranty and internally is what it is. So we focus on customer pay. So from that standpoint, the 3 buckets are combustible engines, hybrid cars and then EV or complete electric cars. Right now and this is going to change, but right now, the last few quarters, it's very consistent that the highest dollar spent are on electric vehicles. And I think it's 1st generation technology. There's a lot of software glitches and issues with that. We think that will change over time, But we're also of the belief that our service retention will go up double digits because that consumer will have to come back for us for service Because of the complexity with the vehicle. So we're very excited and bullish on electric vehicles and where we're going. We're already working on them in our collision center. We certainly we're touring last week in several of our stores. We saw a lot of EV cars in there for maintenance. So we think we're well positioned. And I think over time the dollars will come down, But they still need brakes, batteries, excuse me, brakes and everything else tires that go along with it. Yes. We have actually already replaced some of those batteries. So when I brought that up, it is true. But the oil change in that sense, combustible engine Made so well nowadays, there really isn't a whole lot of breakdown and there's really no money to be made in oil changes. I appreciate extra color there. Maybe I can slip one more in. Are the OEMs that are using franchises to distribute EVs, are they Coming to you with a bit more stringent, if you want to be the authorized retailer of Hummer or electric Corvette or whatever it might be That you need to make investments in people and technology, diagnostic software, etcetera, At the point of service and sale in order to get authorized, are you kind of seeing that? I would imagine that could play to your advantage too Versus a lot of the mom and pops. We do see that. And we've made a lot of investments And we'll continue to make more investments both in physical training and equipment. But naturally that would be requirements from the OEMs as you'd expect. I mean If you're going to have the opportunity to sell the vehicle, you certainly have to be trained and have the equipment to work on the car as well. Thanks, Ed. Thank you very much. Thank you. Our next question comes from Rajat Gupta with JPMorgan. Hi, good morning. Thanks for taking the question. I just had a follow-up question on Toyk The 30,000 units that you mentioned for the full year 2021, if we exclude click Units from the overall business, would the same store units still be up For 2021, just trying to get a sense of how much of the units being sold on ClickLane is incremental to what your existing business would have done either way. And I had a follow-up. Thanks. Sure. As Dan stated in his script, 93% of the ClickLane customers were new to Asbury, so we hadn't sold them a vehicle before. We think that number will change over time, but it's a new tool and it's 4,500 sales in the quarter. I can tell you in the quarter it was growing at a little bit over 20% a month from April to May and May to June And we're continuing to see that growth in July. So it's just a logical full transactional tool. They're not soft pulls on credits. There's no issues with the lending. We do have 35, but only about 18 of them have instant decisioning And only a dozen of them are accepting DocuSign. So still we have progress to go there. But between Instant Decisioning and the banks that do accept DocuSign, it's a very seamless transaction. And logically, if you can do the transaction 14, 15 minutes at home, have it delivered to your house, Why would you sit in the showroom for 2 hours? And I would tell you for lack of a better term nationally in the quarter the country opened up, Traffic and everything got back to normal, yet the home deliveries went up 15% over the prior quarter to 65%. So we certainly see the benefit and our consumers are seeing the benefit in the tool. Got it. So you're saying, I mean, in that 30,000 target that you hit for full year for QuickLane, new and used combined, I mean, on a run rate basis, it seems like almost 15% of your units overall. And all of that is like incremental to the business basically or at least majority of that. And The in store business can also grow simultaneously. Is that fair, Suzyun? It is fair. Again, this tool is new. So does the 93% stick for the next 3 quarters the next 3 years, I couldn't give guidance on that. I would just logically say that tool is going to continue to grow as awareness gets out there It's a little challenging right now with low day supply to see what you could really sell. It's hard to sell something online you don't have. And you have the sophisticated sales professionals that we have in the store that are selling deep into the pipeline, meaning well before these cars arrive. Got it. Great. Thanks for the color there. And just had a question on just the employee headcount, just Following up on the SG and A productivity question, what's the current employee count of the company? Could you remind us Including Barclays, where do we stand today, also taking into account some of the layoffs that you had last year? Just over 8,300 associates currently on staff. Got it. Got it. That's helpful. And just one last one on parts and So really nice recovery here in the Q2 customer page in particular. You mentioned last month that I am having some parts supply shortages, which was holding warranty. Could you give us a sense where we are there? How do you see that coming back? And can we expect this kind of growth rate that you saw on a 2 year comp basis We absolutely expect The parts and service numbers continue into the Q3 that we're currently seeing. Some of it is people have been sheltering in place for a year and they're just catching up on maintenance from the car sitting. And some of it is planning trips for the summer and doing different things like that. So we anticipate a very strong summer for parts and service. As far as the parts business, again, the OEMs are doing a really great job. It's hit or miss and we certainly do have some parts issues with some brands. But overall, I wouldn't say it's materially holding us back at this point as a company. Got it. Great. Thanks for all the color and good luck. Thank you. Take care. Thank you. Our next question comes from Stephanie Moore with Truist. Hi, good morning. Thank you for the question. Good morning. I wanted to touch on your QuickLane platform again and If you could kind of give us an update on where we stand on marketing the platform in your existing territories as well as some of your Plans to expand the platform into some territories that are not legacy Asbury market. So any update there would be helpful. Thank you. Sure, Stephanie. Right now, and I'm sure it's the same for all our peers, I don't think anyone is Spending a tremendous amount of dollars on marketing simply because the inventories are so light. You're marketing to some you can't sell. So I think we'll keep the marketing dollars Governed right now until we can see inventory return. To your point about entering a market on the pre owned side that we don't currently Occupied brick and mortar and we absolutely intend to do that. That is part of our omni channel approach. That is part of our SG and A benefit. We think we can do it More efficient, faster and retain more dollars by doing it this way. I would say somewhere towards the end of the year, Great. Thank you so much. And that's it for me. Thank you. Thank you. Our next question comes from Bret Jordan with Jefferies. Hey, good morning guys. Good morning. On the Click Lane, could you talk about I guess, 93% new customers, could you talk about geographic reach? Now how far are you Sending these cars out and I guess you said 65 percent home delivery. Is there a Dixie Cup Circle that you're working in that you can't go outside of? And I guess the same kind of question on new vehicles. Is there any restriction as far as selling cars in markets where you don't own franchises? Good morning, Brad. Great question. To your point, I mean, 65% of our consumers are electing to Take delivery at home. We're not advertising outside of our primary area for a lack of a better term. We stay and abide by all the OEM rules when it comes down to that. We have seen the Vast majority of our in home deliveries that we're seeing is taking place, I would say probably around a 50 mile radius, But we have seen deliveries that have for lack of a better term that have gone from Greenville, South Carolina to Texas And from Georgia to Florida, so we have seen that as well in several locations. I would tell you Brett just to follow-up on that. Being a franchisee, we if we have a Toyota store in Atlanta, we can't market Toyotas in Chicago or New York. However, we spend a lot of money optimizing our sites and if people find us in other states And they choose to buy a car from us and ship it up, we certainly do that. But we very much adhere to our relationship and our policies with the manufacturer. What do you think I guess do you have an average distance that your buyer is coming in from for the ClickLine? Yes. I would say in the quarter, I know others have recorded some long distances. We're under 75 miles is 80% of our business. And we actually think that's a great thing because we don't want to just sell the car. Carvana's model is great The car making some money in the front and back, but the parts and service business is really where it's at. So in a perfect world to us is doing that transaction online locally and having them do the maintenance Okay. And then one final question, I guess, on the used inventory, could you give us the percentage, I guess, that you're sourcing in house versus auction? Yes. Absolutely, Brett. So the less than 10% Of the cars that we acquired in Q2 were acquired at the auction. The rest of it, like I said, the vast majority of it comes From trades, lease turn ins, loaner cars and also acquisitions at the store level And I would tell you, that's a credit to the other general managers in our stores and the used car managers. Pre COVID, We've been very disciplined in not buying more than 10% of our cars from auction. You get in that bidding process, you walk away with cars no one paid more than Margin nowadays is about the acquisition price. So they're tremendously talented at sourcing local vehicles direct from consumers and service drives and loaner cars and other things, which is getting us the healthy margins that we're seeing. Thank you. Thank you. Our next question comes from Ryan Zikko with Craig Hallum. Good morning, guys, and congrats on the strong results. Thank you. Thank you. Just one follow-up question from us. So as Barry looking back 2 decades ago in the IPO, you have a similar number of stores, a few more today, but you've spent you've done a decent amount of Rationalization, divesting, adding, kind of offsetting each other. I guess, one, how do you feel about your current store base today? Is there more rationalization that's needed? And then 2, given the importance of scale and really a nationwide footprint, and you mentioned kind of the close proximity even on ClickLane for those customers. I guess, But even on Clicklane for those customers, I guess why not accelerate that M and A cadence to really build scale faster? Thanks. It's a great question. We're one of the smaller companies and there's only so much capital to deploy and so much leverage that we're willing to take on. The other thing that I would say and just doing this for 35 years and mostly as an operator Running and integrating stores that people above me have purchased. It's a lot easier to buy things than it is to run it. We think that we're the healthiest that we've ever been from a brand mix. We really like the platforms that we have, the states that we do business in and the leadership that we have in the field because that's The results are happening. They're not happening here. We're disciplined. We're going to be thoughtful. We do have the $400,000,000 under LOI. We are looking at more, But we're also not getting enticed by just the revenue number. We're really saying is this going to be a good part for us going forward? And is this something that we can integrate well into our And continue the synergies that we have. We have the highest operating margins and lowest SG and A in the space and we're proud of that and we're not the biggest. And we think we can keep those 2 credits as we continue to grow the company thoughtfully. As far as expanding in I don't know that that's our goal. It truly isn't. Our goal is to kind of for lack of a better term skate to where the puck is going. Not every market is maybe ideal or perfect for us. We want to grow thoughtfully in the markets we want to be in And be dense and have meaningful relationships with our consumers through service retention and market share within the markets we do business in. You'll see us expand in new states for sure, but the goal isn't to be in every state. Still there, Ryan? That's it for me. Thanks guys. Just had the 1. Good luck. Thank you. Thank you. Thank you. We'll take our last question from David Whiston with Morningstar Equity Research. Thanks. Good morning. I guess first on you're talking about how Great DocuSign is and I certainly agree with you, but as of today, are there still states that require a wet signature? Absolutely, especially on the DMV side. There's actually only a couple of states that are digital on the DMV and there's many more in process right now. But you know the bulk of your documents are more to do with lending and the vehicle and trade in vehicle itself. So there are some documents to your point that we have to redo. The way we've designed Clicklane, Regardless of what the state requirements are, every single possible form is in ClickLane and every single form is signed through DocuSign. There's two main reasons for that even though we're redoing them. 1, we want the customer's visualization to go through the entire process and see all the documents, no Surprises on delivery for lack of a better term. And then their awareness of the transaction, the numbers that take place. So when we go to again 65% of the time when we're delivering the vehicle at the home, it's a very smooth transition to the few signatures that we may need. In some cases, 1 or 2, in other cases maybe 6. It just really depends upon the state. But to us, it's the experience. People create the experience, software creates Convenience and that's where we're focused. Okay. So any document that does require a wet signature, you just have when you actually see the customer Regardless of where the customer is, that's when they actually physically sign that piece of paper, correct? Yes. So if there's a again, if Georgia requires the wet signature on a DMV form, They're signing that form on DocuSign, so they can visually see it. But then when we show up, they're going to sign that DNB form again with a wet signature. Okay. Yes, that makes sense. On the 65% home delivery, was that just ClickLane or the entire company? That was just Clicklane. Okay. It was single digits for its regular store. Okay. And the Biden administration is talking about possibly raising the federal tax rate. I know you're in between CFOs, but can you comment at all if federal statutory increase would be a one for one increase in your own tax rate? Really haven't looked at that yet to be honest with you, David. So I couldn't comment on it. Okay. And I guess One more question on the domestic GPU over 4,000 a unit. Obviously, it's Probably inflated a bit due to the inventory situation, but was there just a total massive decline in discounting this quarter or Is mix playing a role there too? It's The margins that we're seeing, it's all related to the well, a lot of it is related to the lack of inventory. It's a supply and demand equation and the level of discounting that you're seeing right now It's very, very, very minor if any at all, just because again, just a simple supply and demand equation. But I'd also tell you it's a little deceiving because those numbers could actually be higher. Our lack of truck inventory on the domestic side is significant. And that's really harboring or governing our sales if you will on that side. But if you go post pre COVID excuse me, we've always had healthy generally healthy PVRs on our domestic vehicles. And speaking of trucks, are you getting any feedback from customers on early interest in the F-one hundred and fifty Lightning? Yes, I mean there's been a lot of positive reaction as you would imagine. There's also not only excitement from the consumers, but also within the stores that represent That truck. We're excited about the EVs that are coming. We've had the opportunity to drive and see a lot of them and Some really impressive vehicles coming down the road, so exciting times. Yes, I agree. Thank you. Thank you very much. This concludes today's discussion. We appreciate your participation and we look forward to speaking with you in October. Have a great day.