Earnings Call: Q3 2020

Oct 27, 2020

Ladies and gentlemen, and welcome to the Asbury Automotive Group Q3 2020 Earnings Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Mr. Matt Pantatoni. Please go ahead, sir. Thanks, operator, and good morning, everyone. Welcome to Asbury Automotive Group's 3rd quarter 2020 earnings call. Today's call is being recorded and will be available for replay later today. The press release detailing Asbury's Q3 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 PJ Guido, our Chief Financial Officer and Dan Clara, our Senior Vice President of Operations. At the conclusion of our remarks, we will open the call up for questions, and I will be available later for any follow-up questions you might have. Before we begin, I 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 as well as the financial projections and expectations about our products, markets and growth. All forward looking statements are subject to significant uncertainties and the actual results may differ materially from those suggested by the statement, including potential impacts from the COVID-nineteen pandemic 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 2019, 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 Thanks, Matt, and good morning, everyone. Welcome to our 3rd quarter earnings call. Thanks, Matt. Good morning, everyone. Welcome to our Q3 earnings call. We just reported an all time record Q3 despite the ongoing uncertainty in the economy. And even with Star well below prior year levels, we delivered an all time high adjusted operating margin of 6.6%. As a result of our cost control measures we implemented, we're able to achieve an adjusted SG and A as a percentage of gross profit of 61.1%. Our focus on gross profit and expense management once again produced a great quarter, with adjusted EPS of $4.08 up 75 percent over the prior year. In addition, this quarter continued to prove the strength of the new vehicle franchise dealer model. With significantly lower volume and constrained inventories, we increased our front end yield per vehicle by $10.45 over the prior year. We also flexed our cost structure down, managed our inventories to improve margins and maximize profits to deliver these record results. We also successfully closed on the highly strategic Park Place acquisition. We want to welcome all of our new teammates and thank all of our employees who worked on the integration to ensure we hit the ground running. Due to our strong performance and cash flow, our pro form a net leverage ended this quarter at 2.4 times, below our targeted range and well ahead of schedule after financing the largest acquisition in our history, which increased the size of our company by 25%. This will allow us to maintain a more aggressive acquisition pipeline and grow our business by strategically deploying capital. Our strong performance is the result of our pioneering omni channel that we launched over 4 years ago. In the Q3, 22% of our guests chose to buy their used vehicle online. While we are pleased with these results, we are focused on further building and refining our omnichannel tools to enhance the guest experience. In July, I said we'd have an update regarding our online buying software. We have completed the construction of our newly redesigned on buying platform and site, which will greatly enhance the guest experience. We have begun live testing on the new platform to work out any kinks we may have. We will have an Investor Day in mid to late November to walk you through the software in detail. In addition to building an industry leading online sales platform, 2 years ago, we began our journey to become the most guest centric automotive retailer. We have made incredible strides and plan to continue enhancing the guest experience with our omnichannel tools and investing in our people and our culture. We believe in the dealer franchise model. Amongst franchises, the only differentiators are, 1st, the level of service your teammates provide and second, a world class omnichannel strategy. These key differentiators create a seamless and transparent experience for our guests. Finally, I want to thank all of our teammates for their commitment during this pandemic. These results happen because of your passion and perseverance adapting to our new world. Thank you. I'll 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 Q3 of 2019. Looking at new vehicles. As we mentioned last quarter, our focus remains on improving margins and not chasing volume and we continue to pursue this strategy in the Q3. Overall, our new gross profit per vehicle was up $8.30 per car or 58% from the prior year period. All segment margins were up significantly from the prior year period. With the acquisition of Barclays, we increased our luxury mix from 33% to 49%, driving our all store PBRs up 41%. At the end of September, our total new vehicle inventory was 579,000,000 dollars and our day supply was 47 days, down 29 days from the prior year. We expect the day supply to increase gradually through the fall and winter selling season. Turning to used vehicles. Our gross profit margin was 8.5%, up 170 basis points from the prior period, representing a gross profit per vehicle of $2,036 Similar to our new vehicle strategy, we focused on being opportunistic with our inventory and improving grosses to maximize profits. The second aspect of our used car business is wholesale, where we were able to increase our gross profit over $6,000,000 And as a result, our used revenue, including wholesale, was flat with the prior year period. Our used vehicle inventory ended September at 204,000,000 dollars which represents a 35 day supply, down one day from the prior year. Turning to F and I. Our strong, consistent and sustainable growth in F and I delivered an increase of $208 to $18.30 from the prior year quarter. In the 3rd quarter, our front end yield per vehicle increased $902 per car to an all time record of $3,992 Finally, turning to parts and service. Although our parts and service revenue decreased in the quarter, we continue to see the business improve each month. In the month of September, our same store parts and service revenue was up 8% over last year. Also, our parts and service gross margin declined 130 basis points to 60.8%. The decline in gross margin was primarily attributable to a $2,700,000 expense in our internal profit reserves for reconditioning and preparation work related to our increased vehicle inventory from the Barclays acquisition. We expect our margin to return to normal levels next quarter. I would like to take this opportunity to express appreciation to all of our teammates in the field and our support center for managing through this pandemic and transformational acquisition. I will now hand the call over to P. J. To discuss our financial performance. P. J? Thank you, Dan, and good morning, everyone. I would like to provide some financial highlights, which marks another great achievement for our company in a tough and still uncertain macro environment. For additional details on our financial performance for the quarter, will refer you to the financial supplement in our press release. Overall, compared to the Q3 of 2019, revenue was on par to last year despite a lower SAAR due to completed acquisitions and improvement in F and I PBRs, gains in wholesale revenue and a continued recovery in our parts and service business. Gross margin expanded by 2 30 basis points to an all time high of 18.2 percent driven by our proactive inventory management and focus on improving gross profit per unit. Moving down to P and L, we saw adjusted SG and A as a percent of gross profit decreased by 7 80 basis points to 61.1%. This is due to proactive expense reductions and efficiency gains on both personnel and advertising. Our actions to manage gross profit and control expenses resulted in an all time record adjusted operating margin of 6.6%, an increase of 2 10 basis points above the same period last year. Adjusted EPS increased by 75% versus the prior year period, which was also an all time record. Net income for the Q3 of 2020 was adjusted $24,700,000 gain or $0.96 per diluted share on the dealership divestiture, $1,300,000 or $0.05 per diluted share of acquisition related costs and a $700,000 or $0.03 per diluted share real estate related charge. Our effective tax rate was 24.8% for the Q3 of 2020 compared to 24.4 percent in the Q3 of 2019. Floorplan interest expense for quarter decreased by $6,000,000 over the prior year quarter, driven primarily by lower inventory levels and lower LIBOR rates. With respect to capital deployed excluding acquisitions, we spent approximately $10,000,000 on store improvements in real estate this quarter. During the quarter, we closed on the Park Place acquisition. We expect this acquisition to generate approximately $1,700,000,000 in annualized revenues. To finance the acquisition, we used cash on hand, our credit facilities and $200,000,000 in seller notes. Very shortly after closing, we issued $250,000,000 of debt as add ons to our existing senior notes. We added $125,000,000 to our senior notes due in 2028 $125,000,000 to our senior notes due in 2,030. We used the proceeds to fully repay the seller notes and pay down approximately $50,000,000 on our revolving credit facility. Also during the quarter, we divested our Greenville Lexus dealership as we reached our regional ownership path due to acquiring 2 Park Place Lexus stores. However, we are still under our total national cap for Lexus store ownership. This dealership generated approximately $90,000,000 in annualized revenue. As a result of our operational performance, our balance sheet remains in a very strong position and we ended the quarter with approximately $385,000,000 of liquidity comprised of cash, floor plan offset accounts and availability on both our used line and revolving credit facility. Also at the end of the quarter, our pro form a net leverage ratio stood at 2.4 times, below our targeted leverage range of 2.5 to 3 times. As a result of our strong cash flow generation, we were able to fulfill our commitment to reduce leverage on the heels of the Park Place acquisition well in advance of our original time strategically deploy capital going forward. In closing, I would also like to thank our teams across the business who continue to work tirelessly during this unprecedented time to ensure our current and long term success. We will now turn the call over to the operator and take your questions. Operator? And we'll go first to Rick Nelson of Stephens. Thanks. Good morning, guys. We were to ask you about inventory supply. Things have been pretty tight constrained. When you think that is going to normalize and the implications for GPU and SG and A? Good morning, Rick. This is Dan. To your point, we have seen the constraint in inventory. We're seeing inventory flowing back in slowly, but surely into the stores and we expect that to continue to grow as we go through the fall and the winter selling seasons and obviously into Q1. As business continues to come back around, we do expect some of our expenses to cost structure to go along for the ride as well. And I think there was one other question you asked and did I miss one? Yes. The GPUs, do you think we go back to pre COVID levels or can we normalize at higher rates next year? Rick, this is David. I would tell you, we're as we sit here today, we're still benefiting in our GPUs from the lower inventory. And we anticipate at this point to benefit throughout the quarter. The virus is starting to heat back up as we all know, assuming factories don't shut down at all. We anticipate at some point in the Q1 to get inventory levels somewhat back to normal. And at that point, you would assume you would feel it in the margins, but we don't see that happening in Q4. Okay. Thanks for that. And on the used car side, we're also seeing OLED GPUs. Do you think those follow wide step with the new car margin or is that give or take a different trajectory? I understand inventory is up to come up in these days also if you could comment there. Sure. There's a little bit of seasonality in that as well with what's going on with the heat up of the virus. Used car inventory for us is a little bit more available than new car inventory. We've seen a little bit of pressure this quarter in gross profit, but we don't anticipate it in the quarter falling back to levels of pre COVID at this point. But we too again think over time that those will start to normalize as well, just not in this particular quarter. That's good. Thanks. Finally, if I could ask you about Park Place, how that's performing relative to your expectations. There was an S-four filing that suggested first half EBITDA was down 23%, I think I calculated. If you could comment on the drivers to that decline and what changes are going into effect at Park Place? Yes. Park Place, it's very new. We closed at the end of August. But so far, they're exceeding our expectations in all departments, parts, sales, service, pre owned margins. We're very the part place like Asbury is benefiting from the low day supply and what's going on. And it's exceeding our expectations at this point. Very good. Thanks and good luck. Thank you. Our next question will come from John Murphy of Bank of America. Good morning, guys. Just kind of a first question on the parts and service recovery, which sounded like it was accelerating. Is that something you expect to continue to ramp in the 4th quarter as we catch up on some deferred maintenance and other work that may have been put off? Or do you think it's going to take longer until the economy miles driven rate pick back up to drive that? Yes. I would just John, I'll start with just a reminder first. In our parts and service numbers that we disclosed, collision is in there. Collision for us is running 12% to 15% back depending upon the market. So that's pulling back our CP numbers. We've been positive for the last few months in service specifically as it relates to customer pay and warranty. We anticipate that to continue and I keep putting this disclaimer on it, but depending upon what happens with the virus and how much that heats up, I would assume that could have a negative impact. But to this point in time, the last few months, we've been in the green as it specifically relates to parts and service excluding collision. And Dave, maybe if I could just follow-up, in green, does that mean sort of mid single digit or I mean, it does seem like there was a fair amount of deferral in the second quarter and then just this natural capture that you're getting on attachment of parts and service. It seems like, not to put words in your mouth, but you should be able to put up mid singles sort of naturally. So I mean, is that what's been happening? Or is it something better or worse than that? Yes. No, I think that's a fair number. As Dan said in his script, for September, we're up 8% in revenue. We had a little bit of a gross hit in the quarter, but that was more to do with how we handle reserves and increasing them for the Park Place acquisition. So we actually improved if you pull out the reserve, our margin in the quarter as well. So I would say mid single digits at this point is fair to say we're back on track with that. And again, assuming nothing dramatically changes with the virus, we should stay on that trend. And then just another question on used. I mean, you're going after this with PUSHSTART leveraging your existing assets. I mean Q Auto was started and stopped. It sounds like for good reason, at least a quick quarter, whether you're operating it, I thought what you could do there. How much opportunity do you think there is? I think there's 23, you can do I think was the number in the quarter to maybe drive that up significantly higher. And as you really leverage Puskar and these omnichannel efforts, could you get significantly above 1 to 1, and could this be a big growth driver just off year to your asset base? There's no question, John. I mean, everything you said is accurate. Our biggest opportunity is in pre owned sales. I'm not making excuses, but it was a busy quarter for us. Adding that large acquisition, I think when you see on Investor Day what we've done with the digital tools, how significantly different they are, it's been a busy quarter for us. But having said that, we don't think the tool is the end all be all. There's still people that will want to come in person. We just think that we've thought this thing through and we're going to be industry leading with a lot of tools that don't exist in the market today as it relates to the acquisition online. To answer the end question, can we get above one for 1? There's no question about it. I would tell you that many of our operators in the quarter purposely dial back volume to really take a chunk at margin and that was the focus. We really just didn't feel like with what was going on in the quarter, it wasn't about driving unit sales, it was about driving gross and net profit. Makes sense. And then just lastly, how do you think about sustainable front end yields, approaching $4,000 here, $3,000 to $3,500 was pretty good before, right, those are good solid numbers. What do you think the all in is sustainable? And what's kind of a glide path there? I mean, are we in another quarter or 2 of having very high funding yields? Or is that going to save reasonably quickly? Yes. So again, I wish I had a crystal ball, but I'll give you my personal opinion on the way I see it. I think this particular Q4 will remain elevated on our total yields compared to what pre COVID levels are. I think when inventories get back and the world gets back to normal, I'm sure that will come down a little bit. But even when you go pre COVID, if you look back, even though we had pressure on our new car margins, we were still raising our total yield slightly every quarter. And now with the material acquisition of Park Place and their PVUs or PVRs, excuse me, we expect some natural lift there as well. So I think we'll remain elevated in the Q4. Will it be as high as Q3, I'm not sure, but certainly elevated to pre COVID. And then even when the dust settles, I expect us to settle in at a higher number because of the impact of ParksPlace as well. Okay. That's very helpful. Thank you so much. Thank you. We will now go to Adam Jonas of Morgan Stanley. Hey, everybody. Can you give a bit more of the KPIs on digital? I know you have a number internally that you share on percentage of your sales that are done of the used sales that are done 50% to 100% online. I don't know if you could give that number for the Q3 and how that compared year on year? Good morning, Adam. This is Dan. So for the quarter, 22% of our used vehicle sales were transacted fully online through Pushstart. And just as a reminder, we define a full online sale when a customer completes the entire process online and has the option to receive a home delivery. This process must include selling their trading, purchasing insurance products, receiving financing and signing all the documents online, not requiring a wet signature by state law. And then addition, one of the things that we continue to see is surprisingly most of our customers select to pick up the vehicle at the dealership. Adam, just to follow-up on that. I mean, in this day and age, 95% of their people are looking online first. I mean, that's the new newspaper for lack of a better term. We're not counting that. We're the people that utilize the PoorStar tool and come down the channel with the tool. And what was the prior year just so we can get the comp? The 22% this quarter, what was the last year? It was Adam and C. J. It was 8% last year. Okay. Just 8%. Okay. And any color on front end or attachment rate or GPU of that of the online or what you define as online through push start versus the in store sales? Yes. It runs about the same, Adam. I mean, when you look individually at each individual store, you'll see a couple 100 up or down, but when you aggregate it, it's averaging about the same. That's great. And then finally, SG and A, 61.1% in the quarter, obviously helped by the kind of juicy, meaty GPUs. But if I were to ask you high level, how much of the year on year improvement would you say is related to, let's just call it unusual growth versus structural and sustainable? Thanks. Sure. I would tell you some of the tailwinds and some of the headwinds that we potentially could have. From a tailwind perspective, you learn over time as an operator, never let a downturn go to waste. This gave us an opportunity to really increase our production per employee. We believe that's sustainable when we get back and we'll get a natural lift from that. Some headwinds could be the normal stuff that you expect medical expenses, insurance costs, that kind of stuff. Those always seem to creep up every year and something that we're trying to get aggressive on. The advertising, you could make a case that we've trimmed it so much to the bone, it might be affecting our volume to a certain degree. And we may take a look at that and play with that. Later on in November, when you get a real very detailed walk through of the software, it won't be screenshots, it will be the actual video of the tool. If we get the conversion right there, there is opportunities on the cost structure side again, But I'd be getting ahead of myself with that until we really get it implemented and see what the data looks like. I look forward to that. Thanks, David. Thank you. We will now take our next question from Rajeev Gupta of JPMorgan. Hi, good morning. Thanks for taking my questions. Just had a broader question on electric vehicles after the recent Hummer announcement. It looks like your 2 GMC dealers in Florida and Indiana on the program. How do you think the dealer channel is likely to be impacted as more of these OEMs start to offer 1 price vehicle to their website? I mean, how do you think this could change the profitability profile on the new vehicle side? I mean, GM also noted that they're trying to renew efficiencies of the dealer channel, while doing this. So but it's a bit unclear to us like how the economics might look like if this becomes the norm, not just for electric vehicles, but for other marquee vehicles too. I think we'll still get the service side of the business, but just curious as to what changes might happen here from like a supply chain perspective and economics going forward? And I have a follow-up. Thanks. Yes. This is David. I'll give you my perspective as a dealer with the manufacturer. I guess, I don't interpret it the way you do with as it relates to specifically to General Motors. In my career, I have seen a lot of manufacturers in a lot of different states try to direct sell and it doesn't work well. The supply chain, the way it currently works and local dealers servicing and selling vehicles tends to produce the best results, and I don't see that changing. Specific to electric sales, look, they're coming and it's coming over time. But as the current world as we sit here today, it's still a push sale. It still has to be dramatically incentivized by the government with credits. It has to be heavily incentivized from the manufacturer. It's not a profitable solution at this point in time. And because of the push of it, the gas is so cheap, big SUVs are selling and big trucks are selling with big engines right now. But again, that's going to change over time. There's a lot of work that has to be done to the infrastructure. We think the franchise model works really well and we don't see that materially changing. All the start up electric companies that are going direct, time will tell. How many of them make it? How many of them don't? How many consolidate and what their success looks like? Understood. I mean, I think GM also talked about like signing participation agreement, can only have their GMC dealers are going to be on the network. Like, can you give us a sense as to like why one would decide to participate or not or like just demographics or like economics or like investment requirements, like any color on that? I couldn't give the insight as to how dealers would think and what the decisions are that they make. Anytime you become part of something, there's investments that have to be made in the infrastructure and getting ready for specific products. We see the value in it. We anticipate doing it, but I couldn't speak to as what other dealers might be thinking and why. Got it. That makes sense. Just last one on capital allocation. Your balance sheet is a little levered currently on a pro form a basis. It still looks fine. You talked about looking out for some strategic opportunities. Can you give us a sense of what those might look like? Is it more trying to expand your regional identity or your brand mix further? Or any sense of what those priorities might look like going forward? That would be all. Thanks. Sure. I would say and I've said this in the past, we look at a lot of deals and don't acquire many, because we're really looking for the right fit for us. It's easy to buy something much harder to operate it and we try to be thoughtful about that. It's an interesting time with the election coming up. There are deals out there right now. We've looked at some deals. They're not deals that excite us or think that it's worth the time or investment in capital in them right now. It's a more competitive space with all the private cap money that's coming into it as well. But there's a lot of stores that are coming up in certain markets that just don't interest us. We generate a lot of cash. We'll generate a lot more cash now with Park Place acquisition. We still have some mortgages to pay down over time and we'll certainly chip away at that and deploy capital to the highest return. But we're very focused on certainly getting our debt down in the meantime. But we're opportunistic with acquiring. We'll certainly look at every deal that comes our way and put the time into it. But we're not going to jump on it if we don't feel like it's accretive for us. Understood. That's super helpful. Thank you so much and good luck. Thank you. We will now go to Stephanie Benjamin of Trist. Hi, good morning. Good morning. I was hoping that you could update us a little bit on the integration plans with PartPlace, obviously, closed late in August. So maybe what was implemented at the end of the quarter and what's on deck for the Q4 here? Yes. This is David. I would tell you the integration piece, the biggest part early on is all the accounting and standard chart of accounts and doing all that integration. From an operational standpoint, we didn't change anything at Park Place. We didn't change their infrastructure. We didn't change their support structure. We wanted to keep them whole. They were a very profitable, well run organization. So we kept their ecosystem the same and kind of plugged into ours. So I would say for several weeks where for lack of a better term, business is normal. In the 1st couple of weeks, we certainly had the normal challenges with phone lines and software issues and integrating certain things like that in circuits. But we've worked through all those kinks and everyone's back to normal operating. Got it. Thank you. And then in terms on inventory, I think you noted that you're seeing some of it start to slowly come back on the news side. Is there any difference between your luxury import or domestic divisions where you're seeing inventory return at a slightly faster rate? Good morning, Stephanie. This is Dan. We are yes, there is a slight difference on the different segments, whether it is luxury, import or domestic. There was some of the domestic, as you know, were affected by the strike pre COVID-nineteen and obviously that is carrying over to where we are today on our inventory coming in because you double that with the COVID-nineteen impact. And then some did not go through that. And so we're seeing a better influx in some of our luxury and some of our imports and then some of the domestic maybe a little slower than we would like it to be. And the only thing I would add to that, some of our luxury stores in the quarter had less than a 20 day supply of cars at times. And when we talk about a 20 day supply, that's overall all models included. We had some models where we didn't have any cars in stock. So naturally that dramatically impacted the unit counts as well. When you think of the domestic side and even the import side, it was kind of the same story. Even though you had a light inventory, there are certain models, no different than our peers, I'm sure. You just didn't have them. You just didn't have the inventory to sell. Got it. That's all I have. Thank you so much. Thank you. And now we will take the question from Bret Jordan of Jefferies. Hey, good morning guys. Good morning. On the wholesale growth, is that driven by greater demand for used vehicles and pricing? Or is that because you now are putting more cars through your own auctions acquired with Park Place? I guess, if you could give us an outlook, what you think you're going to be doing with owned auctions now, I think, as you expand? Sure. Yes. No, it's just kind of like the daddy Assepa with Manheim. I mean, the auction prices in July August are ridiculously high. The last few weeks, they've tailed off a little bit, but they've tailed off to a still a high number. The auction that we acquired, again, forget about the last week of August because there was a lot going on. We had it for the month of September. We really just observed for the month. We really want to see what it did, how it did it, how it operated and what the potential is. We certainly went into it with the mindset of what we thought our potential is and we're even more convinced today than we were pre closing of our potential with that auction. So we anticipate growing that auction and maybe doing more down the road besides that. Okay, great. And then a question on omni channel. I mean, clearly, it seems to be applied to use pretty effectively. Can you do an omni channel new or are you going to be restricted selling new vehicles to markets where you don't own a franchise? I mean, could you sell La Prairie from Park Place into California or would you get pushback on that? Sure. I'm going to address that in a couple of different ways. And if I don't hit it, please come back. We felt the 22% because it's the highest number. On the new car side, we're running about 13% with the push start tool. We have franchise laws with our brands and we have framework agreements. I cannot market a brand new vehicle of any kind in Los Angeles. Can someone from Los Angeles reach out to us and want to buy a car from us? The answer is yes. I just can't market there. So there's some semantics there. I think you'll participate in the Investor Day and if you purchased a car from, say, a Carvana, you'll see some dramatic differences in the tool and dramatic differences from what we currently have in the Push Start tool. Full disclosure, there's some things in that Push Start tool that just don't exist that need to enhance the experience and fully bake the sale for lack of a better term. We know we've solved for those equations and we're excited to show that in a few weeks. But to answer the question more direct, the way we look at omni channel, there's an opportunity for lack of a better term, if down the road we chose to target certain markets with pre owned and utilizing this tool and having more of a distribution hub in that part of the country at a lower cost than say having a franchise or a showroom, just to create a distribution system. There's a lot of opportunities that we're looking at. We think the benefit through a digital tool is the fact that you don't need brick and mortar and how do you maximize that for flow through. And that's through the tool and what the ability of it and what it can do. Great. Thank you. Thank you. Now we'll go to David Whiston of Morningstar. Thanks. Good morning. Just first on the special items for the quarter, the $700,000 in real estate charges for GAAP, was that booked in other income? Yes, this is PJ. Yes, that's booked in other income. Okay. And can you just talk a bit about what drove F and I GPU up 11% year over year? Good morning, David. This is Our F and I team is doing a very good job consistently training. As you know, we have our bottom of the stores that we continue to focus and that we continue to train and we're seeing improvement there. Our top producers, they're consistently performing, don't see much more an uptick with the top producers, but strategically focusing on the bottom ones and strategically training them on a week to week basis and following through to ensure that that consistency is maintained at the store level. Okay. And do you still think there's a lot of room for improvement on that bottom end? Like I said, there's always the bottom half that we focus on and there's always opportunity and room for improvement in those bottom half, yes. The top half, like I said earlier, I would say there's not much more room to go in the top half. Okay. And on the looking at the GMC Hummer pickup from a different angle beyond the distribution logistics discussed earlier, I'm more interested in just the fact that a lot of automakers, both legacy like GM and a lot of startups like Tesla and Rivian, Bollinger are all going after this pure electric, very high end premium pickup truck niche. They're really creating a new segment. And it's obviously going to be a low volume segment given the price point. So I just like to hear, I mean, you're in touch with the customers there. I mean, do you think there's a lot of interest for vehicles at that price point or especially all electric ones or will people are they waiting for something that perhaps even though they're open to a BEV pickup truck, they want something a bit more reasonably priced but maybe the F Series will be in a few years? David, I'll take a shot at this and Dan can clean it up. I think of the traditional truck buyer and how long they've been buying trucks and I'm very curious and interested to see when the electric trucks start to come out, if that buyer shifts at all and what happens. I will tell you I will just talk about a traditional domestic truck right now. And it's probably a lot to do with the pandemic and people have more discretionary cash available. The more expensive the truck is today, the faster it sells. We will sell a $75,000 pickup truck faster than we will a $50,000 pickup truck. Now I don't know if that's sustainable over time, but it's been creeping that way for a while. So I do think there's an appetite. I don't think there's again, it's just one person's opinion today as I sit here. The truck market seems to have a watermark from what I can see. And it's somewhere in the $75,000 to $80,000 range. When you start to see trucks much more than that, the sales become very small. Okay. Thank you. That's helpful. Appreciate it. Thank you. Thank you. This concludes today's discussion. We appreciate your participation and look forward to discussing the next quarter. Have a great