Good morning. My name is Breka, I will be your conference operator for today. At this time, I would like to welcome everyone to the AutoNation Fourth Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by 1 on your telephone keypad. If you would like to withdraw your question, please press star then 2 on your telephone keypad. Thank you. I would now like to turn the call over to Derek Fiebig, Vice President of Investor Relations. You may begin your conference. Thanks, Breka. Good morning, everyone. I'd like to welcome you to the AutoNation Fourth Quarter 2020 conference call and webcast. Leading our call today will be Mike Manley, our Chief Executive Officer, and Joe Lower, our CFO. Following their remarks, we'll open up the call for questions. Before beginning, I'd like to remind you that certain statements and information on this call, including any statements regarding our anticipated financial results and objectives, constitute forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks that may cause our actual results or performance to differ materially from such forward-looking statements. Additional discussion of factors that could cause our actual results to differ materially are contained in our press release issued today and in our SEC filings. Certain non-GAAP financial measures as defined under SEC rules will be discussed on this call. Reconciliations are provided in our press release and on our website located at investors.autonation.com. With that, I'll turn the call over to Mike. Yeah, thanks, Derek. Good morning, everyone. Thank you for joining us. 2022 was a great year for AutoNation and four consecutive record quarters. Tremendous results driven by the entire AutoNation team, and I know many of you are on the call, so my personal congratulations to all of you. Joe's gonna take us through the results in detail, but I'm gonna just touch on some of the headline numbers. Q4 new vehicle retail industry was up 2%, with us posting a same store 4% increase over prior year. Used vehicle industry declined by 6%, which in my view was significantly driven by constrained used vehicle inventory, which also was a key driver of our used vehicle sales being down 11% in the quarter. Total revenue up year-over-year in the quarter to $6.7 billion, bringing our full year revenue in at $27 billion, up 4.4%. Notwithstanding the increased availability of new vehicle inventory in a somewhat choppy used vehicle market, both on the retail and wholesale side, our continued disciplined approach to unit margin can be seen in the quarter, particularly in our used vehicle margins. This, combined with another strong performance from our customer financial services team, delivered a total variable per unit margin of more than $6,300, which, despite being down from peak level a year ago, was essentially flat sequentially and an acceptable result in my view, given the market conditions. Coming into the year, we challenged our after-sales teams to consistently grow their business and their performance, and I'm pleased to report that they are making excellent progress as they deliver double-digit sales growth combined with margin expansion. With well-controlled expenses, which Joe will expand on in more detail, we delivered $1.4 billion of adjusted net income for the year with a margin of 5.2%. When I look back at 2022, I think you can now consistently see, as we've discussed before, the business drivers that I consider are structural improvements compared to pre-pandemic levels. These are clearly CFS, which is driven by our focus on product penetration, our intense focus on sales effectiveness, our drive for operational improvements in our after-sales business, and finally, our SG&A control, all of which have contributed to our record results for the year. Now, with a focus on cash conversion, which remained at nearly 100%, we generated strong free cash flow for the year in excess of $1.3 billion. This gave us significant flexibility to allocate capital in a disciplined way. During the year, we generated $1.7 billion in cash from operations. We invested more than half a billion dollars in our business, which included maintenance projects to ensure continued underlying performance from our core business, organic growth investments, which obviously included the additional AutoNation USA stores and the acquisition of key assets to expand our business. In addition, in the year, we returned $1.7 billion to our shareholders. Now, that return to shareholders was in the form of share repurchases, and during the year, we bought back 15.6 million shares at an average price of $110 per share, which I think is an excellent investment in ourselves. Given all our activity and our operational performance, we're able to deliver an adjusted EPS result of $6.37 for the fourth quarter, up over 10% year-over-year. We often on these calls talk about the future, and I think for the foreseeable future, the retail industry will continue to evolve, including how customers approach vehicle ownership and usage. It's an exciting time, frankly, to be in this segment, and we believe the evolving landscape offers many opportunities. AutoNation already has some excellent assets. First and foremost, of course, is our privilege of representing great OEM brands in strong territories, which has enabled us to transact with over 11 million unique customers from nearly 9 million households, another significant undervalued strength of our company. Notwithstanding the fact that we typically add around 300,000 additional customers per year to our database, we know that within our existing customer base, which, as I've already pointed out, is extensive. There are significant opportunities to grow our business by covering a broader part of the automotive value chain, giving us an enhanced opportunity to reactivate inactive customers, improve our retention of new customers, significantly expand the products and services we offer, and increase the frequency within which we interact with our customers. As a result, in addition to acquiring a select number of additional dealerships, we made 3 key acquisitions that were focused on expanding and extending the reach of the AutoNation brand. Last fall, we acquired CIG Financial, creating AutoNation Finance and establishing an in-house CFS solution for current and future customers. This business, in addition to its legacy relationships, is currently focused on servicing used vehicle buyers at our AutoNation USA stores, but will expand to our franchise stores later this year. Obviously, as this business grows, we will have an increasing more recurring revenue stream. This January, we acquired RepairSmith, a mobile automotive repair and maintenance solution. The acquisition expands our range of services and creates meaningful after-sales business opportunities, including utilizing another channel to provide service to AutoNation's existing customer base and introducing additional vehicle owners who have purchased vehicles outside the AutoNation dealer network. RepairSmith also gives our ANUSA brand a unique service proposition and customer experience, offering a range of after-sales products and services that our standalone used car sales competitors frankly just do not have. As you know, we've consistently grown our after-sales business, which is more recurring revenue stream with a high percentage of customers bring their vehicles into service under warranty. The rate decreases rapidly after the warranty period ends. RepairSmith now expands our reach and provides a very convenient means for customers to service their off-warranty vehicles. Finally, we also improved our digital retailing experience with an enhanced digital storefront and our collaboration with TrueCar. All of these activities are targeted and focused to create a stronger, more competitive business that is less exposed to the cyclical nature of the automotive industry and places us in more control of our destiny. As I said at the beginning, what a great time to be in this segment. Now with that, I'll hand over to Joe, who will take you through the details of our results. Joe? Thank you, Mike. Good morning, everyone. Today, we reported fourth quarter total revenue of $6.7 billion, an increase of 2% year-over-year. AutoNation's new unit sales increased by 4% in the quarter compared to a 2% increase in the retail SAR. Strong performance in our higher-margin premium luxury brands helped support our new unit PBR, which was over $5,600 for the quarter. The overall new market remained very healthy during the quarter as more than half of our vehicles were sold at or above MSRP. This has trended down but is still far higher than historical levels. Total used unit sales were down 9% in the fourth quarter. PBR remains fairly constant from the third quarter and reflected discipline in our pricing strategy. We continue to focus on self-sourcing our used vehicle inventory, which represented 94% of our vehicle acquisitions in the fourth quarter. While good, this needs to increase, and we have ramped up our We Buy Your Car efforts to fuel greater used unit sales. After sales, gross profit grew 12% year-over-year on both higher revenue and increased margins as we continue to drive strong performance in this area of our business. While underappreciated by some, the recurring revenue stream from after sales alone increased full-year gross profit by more than $225 million to $1.9 billion in 2022, with a strong outlook for the future. CFS performance was also very strong, and we continue to lead the sector with PBRs consistently above $2,700. Moving to costs, SG&A as a percentage of gross profit on an adjusted basis was 59.2% for the quarter, significantly below pre-pandemic levels, reflecting permanent structural changes to our cost basis. Year-over-year, SG&A increased by only 1.5%. As expected in the fourth quarter, SG&A as a percentage of gross profit was slightly higher than recent periods, reflecting investments in technology and new business initiatives. Fourth quarter floorplan interest expense of $20 million was impacted primarily by rate and compounded by increased inventory levels. The quarterly expense increased from $11 million in the third quarter and $5 million a year ago. Reported net income for the quarter was $286 million or $5.72 per share. Adjusted EPS of $6.37 was a record for the fourth quarter and an 11% increase compared to EPS of $5.76 a year ago. The adjustments to this year's EPS include acquisition-related expenses, including upfront non-cash reserves recorded at the time of the acquisition of the CIG loan portfolio. Our operating performance and cash flow generation remain very strong, with record cash from operations totaling $1.7 billion for the year. This provides us significant capacity to deploy capital into our businesses and return capital to our shareholders. As Mike mentioned, for the full year 2022, we invested more than a half a billion dollars to expand our business. This included the acquisition of CIG Financial and the Moreland dealerships in Colorado, expansion of the ANUSA used retail footprint, and meaningful investments to enhance and expand our digital capabilities. We further expanded our business with the acquisition of RepairSmith, which closed last month. We continued to expand our AutoNation USA footprint, adding stores in St. Louis in November, as well as Austin and Albuquerque last month, bringing the current store count to 15. The AutoNation USA stores play an integral part of both our long-term growth plans and the achievement of scale, scope, and density in our markets to better serve and meet the needs of our customers. We have more than 20 additional facilities currently under development with an expectation that we will open 10 new stores over the next 12 months. We returned significant capital to our shareholders via share repurchase, as Mike mentioned. During 2022, we invested $1.7 billion, reducing our share count by 25% to 47.6 million shares at year-end. Full year share repurchases totaled 15.6 million shares, 4.6 million of which were repurchased in the fourth quarter alone. Thus far in 2023, we have purchased an additional 800,000 shares with more than $1 billion of remaining share repurchase authority. We entered the fourth quarter with total liquidity of approximately $1.8 billion. Our current leverage ratio of debt to EBITDA of 1.6 times remains well below our historical 2 times to 3 times range. Looking ahead, we will continue to focus on operational excellence and disciplined capital allocation, supporting growth to drive long-term shareholder value. With that, I will turn the call back over to Mike. Yeah. Thank you, Joe. Would you like us to do questions now? Yeah, I think that'd be good. Okay. Yeah. Operator, can you remind the audience how to queue up for questions, please? Thank you. If you would like to ask a question during the Q&A session, please press star then one on your telephone keypad. We will pause for a moment to compile the Q&A register. Hello, are you there? We have our first question from John Murphy of Bank of America. Great. Good morning, guys. Can you hear me? We can. Good morning. Great. Good morning. you know, just maybe a first question on the inventory front. you know, things are, you know, slowly returning to normal, maybe in aggregate, but are still a bit tight. There's, you know, some pretty big dispersions between the D3 getting, you know, closer to normal and the J3 maybe being very tight. I'm just curious if you can kinda comment where that stands, the inventory level stand for you and what you think the implications may be for GPUs as we go forward and maybe sort of the dispersion in GPUs in the different brands? Morning, John Murphy. I'll take this and then Joe Lower can jump in as well. I mean, you're exactly right. If you look at our overall inventory levels and our days of supply, it's still very, very low. What we are doing is we track it by all of the OEMs. Across all of our brands that we represent, our inventory levels as a% of national are still below our sales as a% of national sales. From a, if you like, from a balance perspective, I think even those that have been able to replenish inventory faster than other OEMs, we're still in a good shape. Joe Lower and I were talking over the last few days, obviously, as we prepare for this and really looking in detail at our inventory. I think the key for us is not absolute numbers of inventory, but how that translates into days supply as we go through the year. That obviously brings you on to one of the key questions, and that's what do we think is gonna happen with new vehicle volume. As I sit and look at this year, I think there's strong potential for new vehicle volume under the right circumstances to be above 15 million. I think we'll end the year with continued low, relatively low, very relatively low, frankly, when you look back at some of the previous years' inventory levels on a days supply basis. As a result of that, I think there will be some continued mitigation on new vehicle margin. Frankly, if you look at what happened over the period of 2022, really, I just see a continuation, you know, a continuation of that, but somewhat compensated by volume increases across the brand. Sorry for a wandering answer, but it obviously these things are all tied together. Joe, do you want to add anything? Yeah. Just, you know, kind of elaborating the same theme. John, if you look, you know, the days I thought were 75-90 days of inventory are long in the past. I also think periods of nine days are unsustainable. We're at 19. I think with cooperation from our partners, you know, a 30-45 day type normal is a pretty healthy place for everyone to operate. Whether we get to that by the end of this year, I don't know. To me, that would be a nice level that would serve everyone's interests, I think, exceptionally well. That's kinda how we're thinking about the business right now. Okay. Thank you. Okay. That's helpful. Just a second question, slightly multipronged on cap allocation, you know, and human capital allocation. You know, the finance business is going to grow. You know, I'm just kind of wanna understand where that goes and exactly what you really are intending to do there. RepairSmith, you know, is another sort of leg of the stool that, you know, that is new and might augment or should augment the aftersales business. Mike, you were saying something very interesting about reactivating customers, which I'd love to hear what that means and if RepairSmith helps there. Obviously, there's the share buybacks. If you think about, and AutoNation USA, if you think about sort of the flow of, you know, cap, and free cash flow to the finance business, to the aftersales and the extension there, AutoNation USA, and then buybacks, you know, I mean, how should we think about this going forward? There are new businesses that are kind of or, you know, adjacent businesses that are, that are popping up, that might be a draw on capital or may not even be that big a draw on capital, may be incremental on their own. Just how do you think about that? You know, John, the very first thing that we think about is what is the best use of capital for our shareholders' perspective. Clearly, you have seen over the last 2 years, given the market conditions and the overvaluation of assets out there, the best return was to return it to our shareholders, and we're very clear on that and that'll continue. Our discipline will continue to be with that in mind. Now I'm gonna expand on some of the things that you talked about. You know, really our approach is to firstly maximize the assets that we have in place, and in appropriate circumstances to add to that, it will broaden our geographical coverage. We're very deliberate. We have an embedded asset in the organization, a very significant customer base that over a long period of years has now, has built sort of significantly. The reality is that not all of those customers are active, and our share of their wallet is relatively narrow, new vehicle sales, used vehicle sales, and service. Their total spend on transportation or mobility, whichever buzzword you wanna use, is very, very broad. Our approach really is to expand our business, our geographical reach, so that we can continue to add more customers to our base, understand why customers over time, become inactive. That's typically because the age of the vehicle that they have gets beyond seven or eight years, and they therefore, believe it's the right thing to do for them to move out of a franchised environment, or they moved outside of a 25-mile radius of our stores and therefore our penetration in the aftersales part drops off. RepairSmith is an ideal solution for that because not only are they incredibly convenient and overcome that geography limitation, they're also able to package their services in a way that they're not underselling their services, but when you value the convenience of them coming to you, it means our customers are likely to think about them as well. The other consequence of RepairSmith, frankly, is it provides for our AutoNation USA stores a great USP, because imagine now not only being able to buy a phenomenal used vehicle where it's backed by AutoNation, you now have access to a team of professional service providers that will give you the most convenient service option in the used car business, in our opinion. When we think about the businesses that we buy, what we're thinking about really is the needs of our existing customers. If you imagine, not even including the sometimes up to 300,000 customers that are added to our base each year. Our approach really is to reactivate those customers that are looking for a different type of service that is not traditionally provided by a franchise store, and we're adding businesses, and we're adding both internally, growing them as well as buying them, that will help that to make sure that we can reactivate those customers and then broaden the services we offer. I think it's hopefully that's relatively clear in terms of what we are doing. I think the acquisitions that we've made and the businesses that we're trying to grow internally are really directed at that. Yeah. If I can just add... Any intention on the financings, but. Well, let me. Yeah, John. Let me just add a kind of boring finance answer to some of this. because strategically, Mike was, I think, very clear and articulate as to what we're trying to do. When you match that with the financial or capital strategy, you know, we have a first-class problem. We have robust cash flow and a very strong balance sheet. The question is, how do we utilize that and maximize the benefit of it? It's not surprising to most, it's an IRR-driven approach, and we look at what the return is on each opportunity. you know, we have obviously, as Mike mentioned in the recent past, viewed share repurchases as an extremely as-attractive opportunity. as we look forward, we have found some opportunities that offered very, very compelling returns. As we think about capital going forward, we will deploy it in identifying where there really is truly incremental value. I think you were gonna ask about the finance business, and I think we've been very clear that, one, we're gonna be delivering its growth, and we will utilize facilities that we are not funding all of that directly from our balance sheet, as is typical in some ways similar to the way you think about floor plans. We're not gonna be putting dollar for dollar behind the capital business at the expense of other opportunities. Let me just follow up on that. I think, Joe, in the past, John, last year when we talked about CIG was clear that we are going to grow that business. That business has been around for 35 years and has been successful during that period. Our intention is to grow that business at a speed that we believe is very manageable on pace with the growth of our ANUSA businesses predominantly. We have good relationships in our franchise businesses with our OEM captives, and that will continue. We really wanted to focus on the growth of ANUSA. It's gonna grow slowly, it'll grow deliberately, and it will grow in a way that we think is manageable. RepairSmith is a phenomenal startup business. It's a much younger business full of dynamic people really trying to forge a new way of trying to provide convenience and great service to their customers. They are that. They're a startup business. They've grown well. I think they've been very deliberate in terms of their growth. There's a lot of things that need to continue to happen to make that business grow to scale. Again, don't expect RepairSmith in the course of the next 2, 3, 4 quarters to suddenly become a dominant force. It is about a deliberate, progressive approach to growing our business in ways that we think will deliver over time a really good balanced result. Mike, just real quick to follow up. It's fair to say that these are good incremental opportunities that are not gonna be, you know, very material calls on capital that would crowd out share buybacks that have been a big part of this story, and there's probably room for everything. Is that a fair way to think about this? I think that's a more eloquent way than I could have put it. Thank you for your answer. Okay. Thank you very much, guys. Thank you, John. Thank you. Your next question comes from the line of Daniel Imbro, Stephens. Your line is open. Yep. Hey, good morning, guys. Thanks for taking our questions. Joe, I wanted to follow up on one of the answers to the last questions. I think you talked about confidence in the OEM partners. Maybe just, you know, the high thirties or forty days. I'm just curious, what gives you guys the confidence that the OEM partners are gonna be disciplined this cycle? You know, historically, if I think through it, maybe they've been a little less disciplined as supply comes back online. Curious maybe what's changing in the conversations, what gives you confidence in that? Then to dovetail onto it, if that is what you expect, kind of where would you expect new GPUs to shake out maybe for the year or what's the exit rate you're planning on for 2023 just based on that day supply outlook you provided? I mean, you may think it, we actually don't have daily, weekly, monthly conversations with the OEMs about, you know, this complexity of inventory levels. We talk to them periodically so we can understand what their hopes and aspirations are, both on a volume market share, also then the production to support that basis. I tell you what, when I look back, what I think has been really interesting is nobody knew what would happen if all of a sudden there was a industry-wide correction of inventory. Nobody had any clue. Everybody was too scared to do it because if you do it as an individual OEM, you get crushed. Circumstances created a situation where everybody got affected at the same rate and there was a reset across the industry. Prior to that, in my life anyway, and, you know, I'm not, I'm not the best example, frankly of this, but prior to that in my life, you know, your whole concept of profitability was keep your plants churning as hard and fast and as efficient and, you know, as you can churn, shove it out. Let your sales guys, you know, fight in the marketplace for share. That was, if you like, that was a predominant. Again, I have to speak for myself. I can't speak for the OEMs. You guys talk to those. That was a predominant view on the future. You get this opportunity to reset it, right? That opportunity comes, and people suddenly realize that, yeah, you know, this whole concept of supply and demand actually may be something in there. Well, I think it worked for everybody. I honestly think that people learn. I wouldn't say, you know, is your confidence level 100%, Mike? Do you want to, do you wanna go on to FanDuel and take a bet? No, I actually don't wanna do that. I do believe that, you know, within the different pressures that are on an OEM, remember they have very large union relationships, very large investments, that they recognize that there's a balance. That's what I believe. I think they're all intelligent people. They wouldn't be able to run those complex businesses if they weren't. I'm hoping that that prevails. Got it. Joe, any follow-up question on kind of where you expect GPUs to end this year given that inventory kind of expectation? Obviously not gonna predict an absolute level. Obviously there is some talk and expectation of some level of pressure as inventory builds, but consistent with a view that the business can be run in 30-45 days, that's consistent with an expectation that PVRs while moderating are gonna be above pre-pandemic levels. That should be a sustainable model provided everyone cooperates in much the way that Mike kind of alluded to. We're cautiously optimistic, but also very pragmatic about the whole thing. Yeah. We're not. Got it. I think we are cautiously optimistic. We're cautiously optimistic. What we ain't gonna do is bet the farm on it. Got it. Makes a lot of sense. Maybe just to follow up on something more in your control on the used side of the business. It does feel like you guys have improved your sourcing, kinda customer sourcing the last few years, maintaining higher GPUs. You know, unit sales were a bit light there, kinda relative to the group. Kinda curious, is it becoming more difficult to buy from consumers as vehicle equity normalizes? Or what are your expectations there around your ability to continue self-sourcing enough units to drive, you know, outside used growth in the future? I have 100% confidence in our ability to self-source vehicles. I think in Q4, Joe, we were somewhere around 94% self-source, about 90% anyway. I have absolute confidence in that. That's not the real answer to the question, I don't think. Firstly, I do think you're gonna see an increased new vehicle in-industry as we talked about. Obviously, as a large player in the franchise new vehicle retail business, that's gonna help us in terms of our sourcing, and that's a competitive advantage against those standalone used car players, which I think has been pointed out multiple times. The reality is that roughly 90% of all of the vehicles that are sold, used vehicles that are sold either through franchise dealers or publicly traded used car dealers are under 10 years old, roughly 90%. Of that, 40% of those vehicles are sold between 2- and 3-year-old vehicles. Those vehicles have to be put in the market 2 and 3 years old, 2 and 3 years ago to be available. It's absolutely clear that unless the sales profile that's been in the used car market in the United States for years is gonna dramatically change. We are entering a period of tight supply on 2 and 3 and 4-year-old vehicles, which make up the majority of the used car sales. That's going to impact wholesale prices and ultimately retail prices. Margins, I think are gonna be fine. They're gonna bounce in and out through, you know, the, the bandwidth that they always bounce in and out because as wholesale prices move, retail prices move. You all know the dynamics. The reality is that those vehicles are going to be in short supply for a period of time, which will impact those prices. You know, for us, what we're gonna do is we're gonna obviously continue on our strength of We Buy Your Car, continue to maximize the trade-ins that we get through our franchise new vehicle sales, and make sure that what we're doing is appropriately playing in that market to get what we hope is more than our fair share of those vehicles to maintain our sales velocity. We won't overpay. We will maintain, hopefully, a 30-day-ish, 35, maybe 40-day-ish supply on used vehicles so that we can be reactive. What that may mean is that our volume may come down, but in response to that, our teams know that if your volume's coming down, your margin better reflect that scan supply. That's the dynamic that we're in. It began, I think, a few months ago. It's gonna continue into this year. Is it bad news? I don't think it's bad news because, you know, if we see the same net price that we're seeing, net transaction price on new vehicles, you know, a solid used vehicle wholesale and retail price is gonna help bridge that balance to pay for our customers. You know, I think it's just the reality of the business and it's one that we'll be facing for the next six months. It's not bad news. It is what it is. You know, you just react to it. Really helpful color. Appreciate it and best of luck. Thanks. Your next question comes from Rajat Gupta with JPMorgan. Oh, I apologize. No, no. Our next question comes from Bret Jordan of Jefferies. Hey, good morning, guys. Hey, Bret. Could you talk a little bit more about RepairSmith and maybe what the scope of services that you can offer on a remote basis are? Are there any regional restrictions there, you know, as far as, you know, outdoor work or driveway repair? You know, how you sort of envision that. Yeah, it's a great question, Bret Jordan. I mean, obviously, there's a limited range of services and repairs that can be carried out on someone's drive or in a car park or those elements and those. It's still incredibly broad if you think about, you know, servicing oil changes, filter change, cabin change, all of those things. They can do repairs, a whole host of different repairs, which includes vehicle diagnostics. You know, they can also provide There's a lot of business. I give you one of the things that to me is always a great area. There's a lot of business of private one guy selling a car to another guy or one girl selling a car to another guy. Those private sales. Some of those people actually wouldn't mind a technician turning up for a relatively competitive fee and doing a quick diagnostic on the car they're buying. Gives them a lot of protection in that C2C market, you know. There's a whole host of things that RepairSmith are exploring and working on. They also have great relationships with fleet companies because it's incredibly convenient for these large fleet operators to have their vans, their transport vehicle serviced at night when they're not using them. I mean, the breadth of services that they can provide is phenomenal. Now add that to all of the physical infrastructure that we have. If you turn up at your house, for example, and, you know, you've asked us to come in to do a diagnosis, and actually you need a new transmission, we ain't gonna do that at the side of the road. That's clear. RepairSmith now have access to tens of thousands of ramps around the country where they can go and do that for you. You get the benefit of if they're able to repair it at your door, they can repair your door. They can certainly diagnose it for you so you know what you're in. By the way, if necessary, we can get you to a ramp. I don't actually see much limitations based upon what you've said, with the exception of obviously the further north you go in winter, the less, I would say the less likely you are to do what I would call prolonged jobs. Again, if you look at RepairSmith's current footprint, our current footprint, how we're gonna grow together, that's obviously been part of the thought process. Okay, great. One quick question. You commented that 50% of transactions were at or above MSRP. Could you give us the% above MSRP and maybe what's the cadence in that mix? It Above MSRP has really not changed, you know, really through the entire pandemic. We need to clarify this. There's not. Never ever has there been 50% of transactions done above MSRP. No, at MSRP. At MSRP. Thank you. No, your comment was at or above, and I was trying to get the above. Yeah. Good clarification. My misspeak. Very clear. Above MSRP through really the pandemic has never been much above 3, and today is slightly below 2%. That is really a company policy and approach, which we've maintained. Think of 50% or thereabouts at MSRP and less than 2% above. Thanks for clarifying that. Okay, perfect. Thank you. Thank you, Bret. Your next question comes from Colin Langan of Wells Fargo. Your line is open. Great. Thanks for taking my questions. Can you just go into what drove the new GPU decline? I think it was down about $300 quarter-over-quarter. Is that customer mix? You know, what is causing that decline, and how should we think about that as we go forward? Is that rate gonna continue? I think the reality is that new GPUs are never gonna be sustained at the level. We've been talking about it for a long period of time, that as new inventory levels begin to restore in the, in the franchise networks, that you're going to see a better balance. I say better because it brings some volume back in, GPUs drop, but ultimately what you're trying to do is maintain an overall level of profitability. It was really driven by the fact that inventory levels across certain manufacturers began to recover, and I would say well expected moderation of new GPUs. That's how I would describe it, and I think you will see that in this year as well, and I don't think it should come as a surprise to anybody. Got it. How should we think about F&I? There were some articles about dealers getting concerned about with rising interest rates, people may scrutinize that line item, that payment. You didn't see much pressure in the quarter. I mean, how should we think about that as the year kind of progresses? I think what you'll see when you, when you get rising interest rates and it gets passed on through F&I rates will tend to happen is penetration levels begin to drop a little bit because other providers become more attractive and I think that's what happens. Often it gets mitigated by an extension of the term, or and/or an increase in terms of deposit. The good news for us is our big focus really has been our focus on additional products within our CFS performance, so that we have a very balanced performance that, as you've seen in our results consistently has been at what I think is great levels. As interest rates continue to go, you see movement up the FICO range away from deep subprime up through mid and into prime. You see obviously the rates passed on. The last time I looked at the industry, I think about 2% of rate is now embedded in all of the finance that's written in the United States. You see a mitigation on penetration levels from captive or pseudo-captive finance companies. That's how you should think about it. That just as it says, reinforces our focus on the additional products that add value to our customers that are not linked to an interest rate. Yeah. The only thing I would add, just to further clarify, you know, more than 70% of our CFS is actually coming from product rather than financing. As Mike indicated, a real focus on increasing penetration, increasing profit per product is clearly our focus and I think underlies the confidence we have in being able to maintain that going forward. just to be clear on that, those products, those products in addition to the financing, those are still embedded into what the person pays. When someone's shopping the payment to keep those products, the payment would still be higher, right? In most cases, yeah. You can buy them standalone. Okay. Most cases, people like to pay it on a monthly basis as well. Okay. Thanks for taking my question. No, thank you. Thank you. Your next question comes from the line of Adam Jonas of Morgan Stanley. Your line is now open, Adam. Hello, this Daniela Haigian on for Adam Jonas. you know, we heard you talk about the dynamics at play in the used car market. We've heard similar things with our conversations and industry contacts and recent Manheim prints, including the print from this morning. You mentioned tighter supply. Is that the sole driver of this kind of 180-degree turn in the used market? Are there other dynamics at play? Are you seeing anything on changes in consumer demand heading into kind of a macro uncertainty this year? Thank you. Hey, Daniela. Firstly, I hope Adam's well, and that, you know, you're not on because he's ill. When you talk to him, give him my regards. Just, there's obviously a range of things that impact it, one of which is the availability and as you've seen, we saw used car prices begin to drop at the end of last year, and that has now kind of mitigated and stopped. It's also been impacted on the demand side because depending on the age and the profile of the customers buying it, there is no doubt that what we've seen in terms of interest rate increases also affects the demand side of it. It's a combination of things. I think when I... My opening comments really were when we looked in, and obviously we do it on a very regular basis, when we look at our performance and we, like, try and identify the key driver, for us, it was around that very tight supply and not wanting to buy deeper at the expense per se of, growth. Hopefully that's an answer. Thank you. Thank you. Your next question comes from Rajat Gupta of JPMorgan. Your line is open. Great. Thanks for taking the question. I had a question on just SG&A going forward. Obviously the GPU trajectory is a bit uncertain in how to predict, but how should we think about, you know, the SG&A drop-through as those gross profit dollars come down over the next, you know, 12 to 18 months? Maybe if you're willing to, can you give us a range of SG&A gross profit that you're thinking about for 2023? I have a follow-up. Thanks. Sure, Rajat. Good talking to you. SG&A, as you kind of saw in the, in the release, in my comments, maintain strict discipline as we think about it. You obviously have a fluctuation primarily in comp associated with GPUs. Think of the flow through, you know, your SG&A per dollar of gross is somewhere between $0.25 and $0.30 per dollar. Beyond that, what we're trying to do is obviously be very efficient in our advertising and marketing, and you can see relatively flat sequentially, and then really controlling the store and corporate overhead, which again was essentially flat sequentially. Result of that as you can see, is it's still below 60%. I think there is some slight pressure on that going forward, but in a strong intent on maintaining our discipline. I mentioned the investments, which was maybe 100 basis points as a percentage of gross this quarter. I don't see that getting much beyond 200 basis points in the course of 2023 as we make what I think are absolutely essential investments to ensure the longevity and well positioning down the road. I can kind of give you a range. I mean, we clearly intend to stay below 65% this year, with a target to be at the lower end of kind of the 60-65 range. That will fluctuate somewhat with the GPUs. The other measures, including overhead and advertising are elements that we're gonna maintain strict discipline on. That's how we think about it, and that's how we manage it every day. Got it. Got it. That's helpful color. Maybe just to follow up on the prior question, you know, around like the Manheim print and like just, you know, used car prices turning. Are you able to comment on, you know, how first quarter or, you know, or January and, you know, February months to date has been in terms of demand or like just unit comps for you know, both new and used? I'd say the interest in buying a used car is very strong. That converting into sales is, as I mentioned, still be and will continue to be impacted by availability of inventory, particularly in those age profiles that historically have been the bulk of used vehicle sales, for franchise and public and traded dealers. We're seeing that. Joe mentioned it in his opening remarks. You know, we like, I think all of our competitors are recognizing this, we've redoubled our efforts. That redoubling of efforts means that, you know, prices is for sure stabilized. You'll see some upward pressure on prices, I think. Don't think it's gonna necessarily impact margin because it's just a relatively short time before that hits retail. You know, what we saw in Q4 continues in Q1, you know, it's an area of great focus, we've got our teams focused on that every day. That's how it started. Hopefully that helps. No, that's helpful. Great. Thanks for taking the question, and we'll get back in queue. Thanks. Thank you. We have time for one more question. Our final question comes from David Whiston of Morningstar. Please go ahead. Your line is open. Thanks. Good morning. I guess first looking at the segment income, domestic was down especially hard, about 25%. Just wondering, kind of related to that, you've got a large brand X decline from Ford. At the overall segment level for domestic, was there just lack of inventory from Ford or others, or was it more due to unfavorable pricing? Well, you know, there's no doubt that you had some interesting movements in from all of the domestics, both up and down. I think there are three things at play. For sure, inventory. There's no doubt about that. Inventory still was for the areas really that they're mainstream brands. I'm not talking about the premium parts of their brands, Lincoln and Buick and Cadillac, but the main parts of the brands, you had pockets of inventory that were not available. You had movements in terms of net price position. It's incredibly competitive. I also think, you know, all of the OEMs are heading towards the end of the year, and what they like to do or look to do is to plan not just the end of the year, but how they're gonna start the year. Those dynamics resulted in what we saw. You've already, I think, seen some of the OEMs talk about how they finished off the year. That'll all be wrapped up. Then, you know, I don't want to comment for them on how the year, the new year started. The great thing is that invariably there is not just one silver bullet that did it, and that's why this business is beautifully complex. Okay. On, on service, that's from a growth perspective, that's a positive outlier. I'm just curious, are there just a lot of people coming back to the market now who have deferred for a long time? Is the growth mostly customer pay or warranty? Yeah. Growth is coming mainly through customer pay. It isn't about significant volumes of additional customers coming into your dealerships, our dealerships, at least. I think it really is a reflection of the fact that there have been more miles driven. There's a direct correlation between miles driven and expense to keep the vehicles on the road in a safe fashion. What you're actually seeing is you're seeing the revenue and the gross per repair order actually drift up for a largely stable number of customers that are coming in. It obviously varies dramatically dealership by dealership, depending on their penetration of their after-sales part. Broadly across the piece, that's what you're seeing. Internal work as well, which obviously has an impact, is continuing to improve as well. Broadly, as I said, more miles driven, more repair and maintenance. Mike, just a higher level question. Having worked at both OEMs and dealers, I'd love to hear your perspective on contrasting the direct sale model that the EV starts are doing to the franchise model that you guys do. In your opinion, where is the key value for in having the dealer franchise model versus a direct to sales model, direct to consumer model? Well, when you buy me 4 beers and dinner, I'll give you an answer to that question, because it's an incredibly complex question. What I can tell you is that dealers are an invaluable part of the supply chain. Not only are they connected to the community, but the reality is that customers, given the amount of money that they are spending on vehicles, and that price is going up and up, having a relationship that they can trust on a local level where they know that their needs are going to be looked after, whether it is an emergency service repair or something else, adds significant value. At the end of the day, each of these OEMs are establishing their own individual brand position, and those brand positions are enhanced and developed by their dealer bodies. Therefore, dealer bodies, the dealers and how they work with their OEMs, in my opinion, is invaluable and will always be invaluable and will not be replaced with a car turning up on the back of a truck. Well, I appreciate that. I have a bar in my living room. You're welcome anytime. Thank you. Just email me the address. I, and I, you know, I say, and I don't mean to be flippant. It's obviously a complex question. I think, you know, there are lots and lots of OEMs who have talked about the valuable nature of their dealer body. Working together, our ambition as partners of our OEMs is to just make sure that the customer journey is as seamless as it can possibly be, that it really does represent the brand that the OEM has spent years and billions of dollars to develop. It's done in a transparent way that means the customer feels that their continued support is not just through the purchase but through the after-sales experience as well. You know, there's always moving pieces, but that's my genuine view on it. With that, I think we are done. That was the last question. Yep. Right? Yep. Again, thank you all for joining us. You know, our fourth quarter results, as we've just discussed, were capping off a record year for us. We've really focused this year not just on our earnings, but also our customer experience. I'd like to just say to our associates who are on the call, thank you for the things that you have done. You know, there's no doubt we continue to perform in this current environment, but we are also taking the steps that I touched on at the beginning so that we can really be a big player and take part of the industry transformation that is coming. The expansion of our footprint, the additional transportation solutions, how we thought about our cash flow and the investments that we've made, including return to shareholders, I think are all examples of that. Now, one of the things that we launched in our organization last year with all of our people was a mantra of Go Be Great. We like that because what it means is, it, it means Go Be Great, whether that is in your performance in the business, in the way that you deal with customers, and also in how you get involved in the communities that we're in. That's a big strength for AutoNation. I said very openly when I joined this company now nearly... Well, that's nearly a year and a half, maybe a bit longer than that ago, understanding the culture in the organization and how they constantly are looking to give back to communities, whether it's through their Drive Pink initiatives or whether it's just through the engagement that they have in each of the individual markets. It's been, for me, a fantastic part of the organization. Frankly, last year, I think, the guys and girls in Drive Pink, over $35 million. These things, I think, are important. These things are important. Notwithstanding the fact that this is a quarterly call, I think it's important that we call those things out because it isn't Mike Manley doing that. It had nothing to do with me. It is grassroots from our people getting involved. Thank you all. With that, I'll give you your days back. Thank you, everyone. Bye-bye. Thank you. This concludes today's conference call. You may now disconnect.