Welcome to the AutoNation First Quarter 2024 conference call. My name is Carla, and I will be coordinating your call today. During the presentation, you can register to ask a question by pressing Star followed by one on your telephone keypad. If you change your mind, please press Star followed by two. I will now hand you over to your host, Derek Fiebig, Vice President of Investor Relations. You may now begin. Thank you, Carla, and good morning, everyone. I'd like to welcome you to the first quarter 2024 conference call for AutoNation. Leading our call today will be Mike Manley, our Chief Executive Officer, and Tom Szlosek, our Chief Financial Officer. Following their remarks, we'll open up the call to 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 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 discussions of factors that could cause our actual results to differ materially are contained in our press release issued today and in our filings with the SEC. Certain non-GAAP financial measures, as defined under SEC rules, will be discussed on this call. Reconciliations are provided in our materials and on our website, located at investors.autonation.com. With that, I'll turn the call over to Mike. Yeah, thank you, Derek, and good morning, everybody, and thank you for joining us today. I'm gonna start on slide 3, and as usual, provide some opening remarks before Tom takes you through our first quarter results in greater detail. Consumer demand for vehicles in the first quarter was robust, and in fact, this is the first time we have had a quarterly increase in both new and used vehicle sales since the second quarter of 2021. Now, specific to new vehicles, you might recall that new unit sales were up 8% in the fourth quarter, and now we're up 7% in the first quarter. Now, as you know, new vehicles start the flywheel of our various revenue streams, so these continued strong trends are certainly encouraging, I think, for our future. Now, as expected, the average selling price for new vehicles decreased 5%, resulting in a new vehicle revenue increase of 2% for the quarter. New vehicle margins were down $325 on a sequential basis, modestly better than the rate of decline we experienced in the fourth quarter and the rate I previously signaled for the first quarter. New vehicle supply chain is in the final stages of recovery, and our inventory is also nearing normalized levels. There does continue to be a wide range of inventory by model, make, and segments, with some approaching historic levels. New vehicle inventory, in terms of dollars, increased approximately 5% since the beginning of the quarter, compared to a rate of sequential increase approaching 25% for the past eight quarters. You may see that as a signal of a declining rate of increase of new vehicle inventory on the ground. For used vehicles, same-store units decreased 2% from the same quarter a year ago, while total units were up 2%, reflecting the growth of AN USA stores in the year. Sequentially, used vehicle units were up 6%. Now, in the fourth quarter earnings release, we discussed the market factors impacting our used vehicle business, including type availability, a return to historical depreciation patterns, and lower demand in higher-priced vehicles. We also discussed our planned action to align inventory levels and the turn rate with the market, and shared our view that used vehicle PVRs would improve late in the first quarter. While the same market factors prevail, I'm pleased to note that the team has completed the inventory alignment actions, and we have experienced improvement in unit profitability in each month of the first quarter, as we had expected. The first quarter PVR of $1,473 was better than the fourth quarter, and we are encouraged with the March PVR exit rate. Customer financial services was again a strong point in the quarter. Our product attachment rates were solid, and our team continued to effectively navigate a challenging interest rate environment. After-sales delivered another outstanding quarter, and congrats to the team. Well done. Total store revenue was up 8%, spread evenly... well, not evenly, really, but across all product categories, and gross profit, as you can see, was up 9%. Now, I think the greater complexity of vehicles is leading to higher values per repair order, and this, coupled with increased number of repair orders from a year ago, resulted in an excellent total performance. The strength of our balance sheet and cash generation continued to give us optionality on capital deployment. CapEx was stable for the quarter. We ended up passing on a number of M&A opportunities that did not meet our return requirements, but make no mistake, our appetite and capacity for acquisitions in our core space is strong. Also, we continue to balance share repurchase opportunities with targeted leverage levels, and as of yesterday, we have repurchased $250 million of AutoNation shares in 2024, reducing share count by another 4% since the beginning of the year. Our board of directors has also approved an additional $1 billion under our share repurchase program. Now, aside from the solid quarter, from a financial perspective, there are a few other highlights I'd like to touch on. We continue to focus on developing our offerings that enable us to realize a greater share of our customers' transportation spend. AutoNation Finance originated over $160 million of loans during the quarter, and the portfolio balance now exceeds $560 million. We also continued with the rollout of our AN USA footprint, with four store openings during the quarter. Three were in Florida and one in Nevada, adding density to these markets and bringing our store count to 23. Our business model is clearly resilient, working well, and we continue to deliver strong financial performance. This performance is, of course, made possible by our 24,000+ dedicated AutoNation associates who take care of our customers every day. With that, Tom, I'm going to pass the call over to you. Thank you, Mike. Turning to slide four to discuss our first quarter P&L. I'll cover this page in summary fashion, then we'll jump into the individual components on some of the later pages. Total revenue increased 1%, with the growth standing out in parts and service at 8%. Our growth in new vehicle revenues was largely offset by similar declines in used vehicle revenues. Gross profit of $1.2 billion was 18.5% of revenues, and as expected, down in nominal dollars from 2023. The growth in our high-margin parts and service business partially offset the impact of declining new and used vehicle unit profit. Adjusted SG&A was relatively stable at $786 million. Core spending was flat, offset by higher spending for our expanded store footprint and advertising to aid our growth initiatives, as well as used vehicle acquisition efforts. This resulted in an adjusted operating income of $348 million for the quarter, which ended at 5.4% of revenue. Below the operating line, our first quarter results were impacted by higher interest expenses, mainly for floor plan debt, and benefited from lower income tax expense. First quarter floor plan interest expense of $49 million was up from $27 million a year ago, a reflection of higher rates and inventory levels, as expected. Net of OEM incentives, which are included in gross margin, new vehicle floor plan expense changed from a benefit of $4 million in 2023 to a cost of $15 million in 2024. Income tax expense for the quarter was $63 million, compared to $93 million in 2023, reflecting lower taxable income and a slightly higher tax rate. All in, this resulted in net income of $190 million compared to net income of $289 million a year ago. Our share repurchase activity helped partially offset the EPS effects of the net income decline. Total shares repurchased over the past year decreased our average shares outstanding by 11% from Q1 2023 to 42.3 million shares at the end of the first quarter in 2024. This was a benefit. This, of course, was a benefit for our EPS, which was $4.49 for the quarter. And historically, return on our share purchases has been quite attractive. Let me move to slide 5 for some color on new vehicle performance for the quarter. New vehicle volumes, unit volumes were up 7%, including increases of 19% for imports and a 4% decrease in premium luxury. Domestic unit volumes were flat year-over-year. On average, new vehicle unit revenue decreased 5% in the quarter, while new vehicle unit cost declined around 1.5%, resulting in the moderation of new vehicle gross profit PVRs. The $325 sequential decline from the fourth quarter in new vehicle PVRs was largely in line with what we had called for and lower than declines in previous quarters, even with the seasonal sequential shift away from premium luxury brands that typically occurs in the first quarter. New vehicle inventory levels, including vehicles in transit, have increased from 21,000 units at the end of March last year to 38,000 units this past quarter. On a days basis, we had total new vehicle inventory levels of 44 days, which increased from 25 days last year and 36 days in the fourth quarter. We had 69 days of domestic inventory, 44 days of luxury, and 30 days of import brands. Slide six. In used vehicles, we had a volume unit increase of 2% from a year ago or -2% on a same-store basis. These rates improved significantly from the -4% total store and -8% same-store rates we experienced in the fourth quarter. Average used vehicle selling prices moderated year over year by 5%, reflecting the shift to lower-priced used vehicles. Our same-store unit sales of vehicles priced under $20,000 increased 5%. Mike discussed the encouraging outcomes in used vehicle PVRs in the quarter, driven by the team's realignment actions. Used vehicle inventory levels decreased from 39 days in the fourth quarter to 31 days in the first quarter, which we feel positions us well for the second quarter. Used vehicle sales and profitability continue to be a big area of focus for us as we emphasize effective sourcing, pricing, and speed while optimizing customer satisfaction. We move to slide 7 on customer financial services. A great story, as Mike mentioned, particularly in a high interest rate environment, where fixed monthly budgets can hinder customer ability to pursue value-added offerings. We've been able to maintain product attachment rates, and our gross profit PVRs declined only modestly, the majority of which is related to the shifting economics related to AutoNation Finance lending. As a reminder, the accounting for customer loans from AutoNation Finance requires that we eliminate the upfront fees from CFS PVRs. However, over the course of a loan with AutoNation Finance, the profitability to AutoNation is expected to be more than two and a half times that of a non-AutoNation Finance loan. Speaking of AutoNation Finance, Mike gave you some of the numbers. I'll expand on that a little bit here. The business is on track for over $700 million in originations in 2024, all from AutoNation stores, and we expect the portfolio to more than double during 2024. It is already the number one lender across the AutoNation enterprise. Its credit profiles, delinquency rates, and profitability also continue to improve, and we're finding that AutoNation Finance is deepening the relationship we have with our customers. So far, this acquisition is proving out nicely with attractive cash on cash returns on equity. Back on PVRs, we've also seen an increase in leasing, which represented 24% of new sales in the first quarter, compared to 17% in the same quarter of 2023. This is a minor headwind for CFS PVR, as leased vehicles historically have lower CFS attachment rate. Let me move to Slide 8. Aftersales represented 46% of our total gross profit for the quarter, compared to 40% a year ago, and continued to grow. Total store revenue increased 8% to nearly $1.2 billion, and the same-store revenue increased 7%. Warranty and internal pay both experienced double-digit year-over-year growth, and customer pay is also tracking well gross-wise. The value per order is improving, and our total number of repair orders has also increased. Total store gross profit grew 9% year-over-year and by 8% on a same-store basis. Our gross profit margins were up more than 50 basis points to 47%, reflecting higher value repair orders and the scale benefits from an increase in the number of repair orders. This high-margin business is a key part of our continued engagement with our customers, and we're focused on capacity utilization and technician development to support the continued growth of the business. Importantly, our total technician workforce increased 5% from a year ago on a same and total store basis. On slide 9, our adjusted operating income margin was 5.4% for the quarter, down from last year, but flat sequentially and up approximately 150 basis points from pre-pandemic levels. The decrease from 2023 mostly reflects the moderation in new vehicle gross profit per unit, which was expected and is consistent with the industry, as well as higher SG&A. The growth in SG&A reflects investments for growth, including higher spending to support used vehicle acquisitions and the larger AN USA footprint, as well as alternative transportation for after-sales customers, increased advertising spend, and inflation. Normalized SG&A as a percentage of gross profit is expected to remain lower than pre-pandemic levels. Moving to slide 10, our Adjusted Free Cash Flow for the quarter was $257 million, compared to $368 million a year ago. As you can see, conversion relative to our net income improved. During the quarter, we sharpened our focus on our cash cycle times across the business, which helped to achieve these conversion results. We closely monitor metrics for our key operating cycles and have resources and programs in place to drive efficiencies in each. While we expect new vehicle inventory levels to increase as manufacturer supply chains improve, we are focused on continuing to accelerate the velocity with which we turn our overall vehicle inventory. During the quarter, we reduced our used vehicle inventory balances and the related non-trade floorplan financing by more than 15%. Consistent with the expansion of AutoNation Finance, our auto loans receivable related to loans originated at our own stores increased by approximately $150 million in the quarter. As I mentioned, we expect continued growth in this portfolio. CapEx for the quarter was $94 million, level with a year ago. This resulted in adjusted free cash flow of $250 million and a strong conversion of 135% of our adjusted net income. Being a strong generator of cash provides optionality in terms of capital allocation. Slide 11 shows our capital allocation for the first quarter compared with a similar period in 2023. You'll notice a year-over-year increase of almost $400 million in net debt paydown and an almost $300 million decrease in share repurchases. Some of this shift is timing, and it's shortly after quarter end. As Mike mentioned, we executed more than $200 million of additional share repurchases. But we are mindful of the need to maintain appropriate leverage levels in this dynamic environment while pursuing maximum shareholder returns through a combination of M&A in our core space and share repurchases. At quarter end, our leverage was at 2.25x EBITDA, near the low end of our 2-3x target, and we continue to maintain our investment-grade credit rating. As Mike mentioned, our board approved an additional $1 billion in share repurchase authorization. Now I'll turn the call back to Mike to provide some commentary on the path forward. Yeah, thank you, Tom. As you said, I'm going to give you just a little bit more commentary before we open up for the Q&A, just to kind of add some color, in terms of how we're seeing things and some of the things that we're focused on. So let's start on the new side of the business, where, as we've said, vehicle supply continues to rise. And, I think inventory levels will continue to increase over the full course of 2024, but as I kind of indicated in my opening comments, not at the pace of the last two years. We can all see that leasing and retail incentives are picking up, yet both remain below the pre-pandemic levels, which I think gives the OEMs quite a lot of dry powder and optionality as the year develops. So I see, I see that on a positive basis in terms of new vehicle sales. Obviously, a lot of discussion about best product introductions and customer interest in these, and I think it's going to be a key dynamic throughout the year. As we have seen, and it's true in everything, excuse me, it's all about balance, and it does appear that OEMs are adjusting their plans and actions to match demand more closely, and from our point of view, this is going to be well received. Hybrids do continue to do well in the marketplace, and if you look at our brand portfolio, that gives us great exposure, I think, to this portion of the marketplace. I want to briefly touch on new margins because obviously, we've said we expect them to continue to moderate over the course of this year. Probably at a similar place really to our experience over the last two quarters. But I do remain very positive about new vehicle margins. Used vehicle margins remains constrained. Used vehicle, sorry, market remains constrained. As we all know, late model used vehicle availability remains limited and will be for a period of time. But I think the team has been nimble in their approach to the market and very focused on the effectiveness of vehicle acquisition pricing and, of course, inventory turn. CFS, as Tom and I both mentioned earlier, is a strength of the organization, and I really expect that to continue to perform well, even with continued pressures coming from overall monthly payments, the vehicle mix I talked, as well as OEM actions to support unit sales. After-sales has been and is going to remain a significant focus for us for the year, and you can see some of the results coming through in the efforts of the team in Q1. Obviously, we had some pretty good growth, and great growth actually from the team in 2023. So comps are going to become a little bit difficult as we get through the year. But growth is really what we're looking at in terms of a dollar sense, and I think that business will continue to grow attractively for us. Obviously, as you would expect, we're focused on managing the things that we are more in control of and those variables, which include cash flow and capital deployment. So with that, we'll dive in, Derek, to the Q&A, please. Yeah. Carla, if you could, please remind people how to get in queue for questions. Of course. If you'd like to ask a question, please press star, followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from John Murphy from Bank of America. Your line is now open. Good morning, guys. I got two quick or maybe quick ones here. Mike, you know, there's a hyper focus on new GPUs, but I think when you look at sort of the front-end gross, I think it's just $5,000, I think $4,941 for the quarter. You know, the components of that, although not additive, is sort of a semi-inflated new GPU, but it seems like a somewhat depressed used GPU of $1,473. And then there's the F&I PVR of $2,615. You know, it seems like on that $1,473 on used GPU, there's some opportunity in the upside to potentially offset some pressure on new GPU. So I'm just wondering if you could talk about that and then potentially the upside in F&I, and then how a general manager manages this? Because, you know, my understanding is they're managing the front-end gross and the components of it. So there might be some real focus on offsetting that pressure on new GPU through these other components. So, you know, so basically, if you could talk about the opportunities on the other side. Yeah. Thank you, John. Well, as we said, you know, on the fourth quarter call, used, there was quite a lot of discussion in terms of used margin and our expectation. And I was pleased, frankly, with the way that it developed throughout the quarter. So in my mind, we still have upside in terms of in terms of the actual tin margin, as I call it, on the vehicle. And I'll come back to the constituent elements of tin and CFS and how we manage that in the business. I think what's important is a lot of talk about, obviously, availability of vehicles. And one of the things that's changed, and I think talked about the agility of the business model, is our percentage sales of vehicles over seven years old in that part of the vehicle park that's obviously very healthy and hasn't seen big reductions in terms of vehicle availability, has gone up significantly. So if you looked at our used GPU as a percentage of margin, in those vehicles, notwithstanding average selling prices have gone up, you are going to see an impact of those older vehicles. Excuse me. Even though Derek giving me bottles of water all the time, I've got a frog in my throat. You are seeing the impact of those kind of older vehicles coming through. But I think that, I think we took some good actions in Q1. I think we're in a good place. I think we see upside in our used vehicle margin. CFS, obviously, is a big, big focus for us. What we ask our general managers and our sales managers to do, really, is to take a very balanced approach in terms of how they view a transaction with a customer. First and foremost is we would, we would love every single customer to walk out in the car of their dreams from our showroom, and what we try and do is structure a great value package for them. Some of that puts emphasis and focus on protection products. Some of that puts emphasis and focus on, you know, their part exchange, their trade vehicle, and where they sit, if it's financed. But ultimately, our general managers really are focused on delivering good customer service, good market share, and to create a package that enables our customers to feel that they've got value for their transaction can return to us. And that gives you a wide range of margins spread between tin and CFS. And outside of that, I would encourage you to go to one of our dealerships this weekend and buy a vehicle and let me know how it was for you. I'll get on that. And just one other quick one, on the buybacks. I agree, your stock is incredibly inexpensive, but you were not that aggressive in the first quarter. But then as the calendar turned, you know, just post-March, you got pretty aggressive in buying back. I mean, and the share price in the first quarter was $147, roughly on average, and post the quarter close, it was $157, so the stock went up a bit. I'm just curious how the decisions are getting made on, you know, the sort of the speed and sort of voraciousness of the buyback. I mean, is there a grid that you guys are using? Because, I mean, the stock went up a bit, and you actually got more aggressive in buying back. Just kind of It's a small nit, but I'm just trying to understand what's going on there. So I think you summed it up in your last comment. It's a very small nit. I mean, if you look firstly, our job is to run our business for, on behalf of our shareholders, and we take that very, very seriously. I think if you look at our track record in terms of buybacks over a reasonable period of time, you'll see that indeed, we have been fortunately very well positioned with the buybacks as we came as normal towards the end of the quarter, when we're trying to balance potential M&A opportunities on the table, where our share price is at the moment, how we're thinking about the use of the capital that we're generating in our free cash flow. We obviously, particularly during blackout periods, building optionality for us that matches our aspirations in terms of trying to give the best value to our shareholders. As the market, and we all know what happened in the market, towards the end of the quarter and early this quarter, felt some pressure. Fortunately, we had enough foresight to put a plan in place that meant we could use a mechanism to return some capital to our shareholders, and that's our job. Tom, I don't know if you want to add? No, the only thing I'd add, John, is, you know, the first quarter can be a little wonky. I mean, we've been blacked out. Just the blackout is, you know, six weeks long. So yes, we do have 10b5-1 plans in place. And yes, they do have, you know, the grids that, you know, you referred to, and they definitely kicked in. So, our opportunities were somewhat limited, but it does remain a key part of our capital allocation strategy. Thanks, Tom. All right, it's a very good one. Thank you. Our next question comes from Rajat Gupta from J.P. Morgan. Great. Thanks for taking the question. I had one on the AutoNation Finance. You know, any updated thoughts on, you know, how we should think about, you know, the cadence of, you know, the, the net loss there, you know, as you ramp up the portfolio, through the course of 2024 and maybe into next year? And relatedly, you know, how much equity are you putting in using your balance sheet, you know, to, to fund these receivables, you know, in the near to medium term? I have a follow-up. Thanks. Hey, thanks, Rajat, for the question. Yeah, we've been quite pleased with how that acquisition has progressed in the quarter. As you know, we financed over $160 million of new originations. The delinquencies are, you know, behaving, you know, quite nicely. Team's doing a great job there. You know, the interest margins are quite attractive. And, you know, overall, we're satisfied with the performance. As you know, when you're building a portfolio, the accounting around the loan loss reserves is pretty punitive. You're basically booking upfront all of those loan loss reserves. So when we're doubling the size of our portfolio, you're going to have a lot of upfront charges. You know, until the portfolio kind of stabilizes, you'll be experiencing those losses. But, you know, from a net margin perspective, we're quite happy with how the business is performing, actually ahead of our expectations, you know, for the quarter. Things look well in terms of penetration. They've got to compete with the other financing alternatives, but the team's doing a nice job. Penetration continues to grow. And so the path forward is quite encouraging for us. And I think, you know, it will be at a point of break even, you know, certainly, you know, into early 2025. When I look at the funding, it's—you have to remember that, you know, we still have a portfolio that's comprised of, you know, some pre-AutoNation acquisition-related receivables. It's probably, you know, 40%-50% of the portfolio. Those were of a different, you know, FICO score and credit profile. And so the funding levels on those are probably not as good as what you see on the path forward. As you look at the portfolio going forward, once it migrates to, you know, completely AutoNation-originated loans, you'll see the funding rates will be, you know, quite attractive. And it'll really prove itself out when we do our first securitization. I don't expect anything in 2024, and our portfolio needs some time to season before the market will be interested. But, you know, in 2025, I expect to get, you know, pretty attractive, you know, funding for the AutoNation-related originations, probably north of 90, 95%. Got it. Got it. And just to follow up on, you know, parts and service, you know, you know, obviously pretty strong trends here, you know, for the second quarter in a row, versus like your peer group. Can you help us quantify, you know, how much was—how much of the year-over-year growth was driven by, you know, just the mix and price on the orders versus, you know, just the traffic at the stores? And how should we think about, you know, you know, the growth rate, at least on a same-store basis, you know, for the remainder of the year? Thanks. Yes, Tom, if you answer the growth rate, give them kind of where the growth came from, and then I'll give a little bit of commentary on how Christian and the team are thinking about it. Yes. No, it was solid performance. I mean, I'd characterize it probably as, you know, a third related to, you know, traffic and volumes across the different revenue streams. I'd say the balance is, you know, higher value repair orders, you know, the complexity of the orders that come through are creating, you know, higher revenue and a better profitability. So I'd say it's probably a third to two-thirds is the way I think about it. Just a little bit of commentary, if I may, quickly on how Christian and the teams are thinking about the year. It was a good year last year, no doubt. We added about, I think from memory, something like 300 net technicians across the various certification bands into the business, and that excludes mobile service. That is just purely technicians really into our dealerships. We still have quite a lot of capacity in terms of bays. The investments that AutoNation have made in their dealerships over the years has created that bay capacity for us, which is great because they're certainly outside in the vehicle parks. I think what we're working on is to try different things to see how we can penetrate older vehicles, bring them back into that franchise environment, and continue to grow. And that will require additional technician resource. So working hard on the career paths for those guys and girls in the business to keep them, because as you know, it's a very limited and heavily sought after resource out there, and we need to make sure we continue to work on those elements, as well as communicate well to the vehicle owner to get them into our showroom. So big focus again for Christian and the team, coming off of what I think was a good quarter for that. Got it. Got it. Thanks, thanks for the call. I'll, I'll get back in queue. Our next question comes from Bret Jordan, from Jefferies. Hey, good morning, guys. Could you talk about the contribution of the mobile service initiative, the parts and service? Is that gaining scale? Yeah, let me, let me cover that. So as you know, toward the end of last year, we rebranded that business. It's now AutoNation Mobile Service. We have continued to integrate it into our market areas where we have density. We are still working through the technical integration of that business into all of our legacy systems within here. But I would tell you that it is gaining traction in terms of its revenue. It doesn't break even for us at this moment in time. We never expected it to for the balance of this year. But what it is doing is it's introduced over 120,000 new customers to AutoNation. They're new, completely new to us, as well as now the programs we've put in place in terms of using it to support AN USA are beginning to kick in. That will take some time because that's a slow burn, as you can imagine. People invariably are somewhere between 10 and 15 months before they, they need service, but obviously it can be there to pick up the repairs. When you think that AutoNation USA, so far, has sold about 75,000 cars, even if you think 50% of those cars find their way into one of our franchise business, it's creating quite a healthy part for mobile services to go and, to go and provide service and warranty for. I think we're probably behind where I'd want it to be with mobile services at this point, but I do see our traction improving and picking up, and I do see how it is now beginning to introduce a lot of customers, which is exactly what we wanted it to do. Okay. And then could you tell me about any regional dispersion? I know there's a lot of mixed dispersion, but are you seeing some markets performing better than others, just sort of as like an economic indicator? Are you talking in general or are you talking from mobile services? In general, yeah. From a vehicle sales standpoint, are some markets particularly stronger than others? So from my point of view, I would tell you that we don't see some markets particularly stronger than others. We. If you think about where we have the majority of our businesses, obviously, California, Arizona, Texas, Florida, those states are particularly strong and been very, very resilient. This time of year, obviously, is as we come into spring, is heavy truck season. So obviously for us, trucks have been a big focus, particularly in those domestic franchises that we have. But when I look across our businesses, I think we have further opportunity in Texas, but that's nothing to do with the market. It's more opportunity for where we are. Florida continues to be strong for us. Our market president here is one of our key talents in the marketplace, and he always looks for improved performance. But Tom, unless I'm missing anything, I think really quite a reasonably balanced performance. Yeah, I think so. Great. Thank you. As a reminder, to ask a question, please press Star, followed by one on your telephone keypad. Our next question comes from Douglas Dutton, from Evercore. Hey, team, congrats on the nice quarter here. I just wanted to ask one on SG&A, and, and, you know, it remains around that 65% or 66% area, which is understandable, given some of the customer-facing initiatives that you're working on. But in a more normalized state, can you remind us where you'd like to see SG&A as a percentage of gross and, and maybe what's the loose timeline you would aim for there? Absolutely. Tom will be happy to do that. Yes. No, you're right. I think, short term, I see that as sustaining, you know, for the next, you know, few quarters. We do have, you know, a fair amount of moderation in, you know, the new and used PVRs that's, you know, impacting, you know, gross profit. If you look at the SG&A itself, it's actually close to flat, you know, year-over-year from a spending perspective. And it's set up nicely to, you know, have a decent correlation with gross profit when it comes to, you know, incentives, and, you know, because compensation is probably the largest element of the SG&A. So, you know, our compensation structures are meant to, you know, very reward excellent performance. And, you know, when there's moderation, you know, it moderates as well. I'd say the other parts of SG&A have, you know, behaved probably very efficiently. We're seeing, you know, good traction in some of the initiatives that we have to, you know, reduce costs, you know, in areas where we spend indirectly on things like insurance, real estate, and other things. So it's good focus on driving productivity there. And, you know, we're gonna continue to have, you know, elevated marketing expenses or growing marketing expenses as we pursue, you know, some of these, you know, new initiatives. So on balance, I'd say, you know, probably mid, mid-60s is, is where I would see, you know, on a longer term basis, the, the SG&A as a percentage of, of gross profit. But again, with a good focus on, you know, keeping, you know, the, fixed elements of it, fixed. Doug, Tom, if it's okay, I'm just gonna add a little bit of my color- Yeah, sure. to Doug as well, just to pick up on that. Obviously, there's trade-offs in terms of some of the investments that we're making. And for example, even though total SG&A on a dollar basis, Tom, I think, gave you the right color on that. What we've seen is increased investment in certain areas to drive our business, for example, courtesy and loaner vehicles. We've made progressive investments over the course of last year and continue into this year as we try to grow our service offering, and obviously, we've seen the benefit in after-sales growth. But we're also seeing some reduction in terms of the investments we're making in some of our new initiatives. We spent a reasonable amount of money investing in our microlease business, for example, last year. That's now at the stage where we're going to integrate it more into our business, which will reduce the standalone investment in that. We've traded that investment for other areas such as that courtesy car and loaner. That's something really that we're trying to do internally, is recognizing we would like to invest in new initiatives and schemes, but also making sure that the core business gets what it needs, as things become more available. As you know, last few years, with very tight vehicle supply, courtesy cars were under pressure. As that's easing a bit, we're now able to give that service to our customers. And then the other area that we invest in is obviously on our people, and we're seeing not just inflationary increases in terms of people, but also some of the other things that we're doing to try and make sure that we reduce turnover and improve engagement in our team. So it's a balance, but within that range that Tom talked about. Hopefully, that color, Doug, helps as well. No, excellent. That's great detail. I, I appreciate the detailed answer here. Just a quick one on CFS, too. You know, you said there's good attach rates there, about $160 million in new loans this quarter, and the portfolio is now at about $560 million. You know, do you expect a similar cadence going forward on originations and penetration, or how should we think about that growth as we progress through the rest of the year and into next year? Yeah, you know, great question. Doug, I don't think you can expect the portfolio to double every year. I mean, you know, we are dealing with... I mean, it's the reason we use the word captive is it's a, it's a captive market for us, in that, you know, we're dealing with the 300 million, or sorry, 300 or so, the AutoNation stores. And the name of the game is to get as much penetration as we can on the, you know, the financing business, but there is a limit to that. I do think the earlier years of AN Finance, you'll see, you know, very, very, you know, outsized growth rates. But I think the portfolio doubling this year, you know, that just mathematically can't happen, you know, every year, but it will give us, you know, good growth. And as I said earlier, I do expect once we get to a normalized portfolio size, and you know, we begin to do some securitizations, I think you'll see, you know, some nice accretion from an earnings perspective, you know, to the company once we get to that point of stabilization. So and we're all in on it. It's highly supported by our operating teams. And it really is improving the relationship we have with our customers. Yeah, it's got massive I mean, that business has got massive SG&A leverage. Yeah. I mean, all the pipework's there. So it is about now, really, really increasing the throughput in a very deliberate and thoughtful way. Okay, thank you. Makes sense. Thanks, Tom. Thanks, Mike. Our next question comes from Colin Langan from Wells Fargo. Oh, great. Thanks for taking my questions. Can you just remind us your latest thinking on where new, you know, gross profits go? I mean, I think the comments in the past were that you thought it would get back to, on a percent basis, you know, historic levels. Is that still the thinking and any concern that maybe we kind of over-correct as things continue to normalize? Yeah, Colin, thanks for the question. I, I'm gonna answer this. So, as I think about new vehicle margins, there's a number of dynamics I'll just very briefly touch on. You're right in terms of percentage margin. What you've seen since, let's take 2019 as the pre-pandemic year, what you've seen since then and now is obviously a significant increase in ASPs. And I don't see, even though I see ASPs moderating. As we go forward, as mix comes back into a more normalized level, as OEMs continue to gradually increase their incentive to stimulate demand, I don't see ASPs returning back to the 2019 level, which inherently, if you're able to hold 18% margin, means from a dollar perspective on a per unit basis, we should and can probably expect higher dollar margins than we saw pre-pandemic, even if we return to that percentage margin that you mentioned at the beginning. Obviously, as we transition as an industry into higher levels of electrified vehicles, we know from the impact that we saw in 2023 and still see in terms of Tin margin, and Tin margin for me is purely what's attributable to the vehicle, excluding everything else. Tin Margin came under pressure, particularly in fully electrified vehicles, as OEMs, dealers, all of us were trying to stimulate take rates. That, to some extent, as I've mentioned, the balance at the beginning of my opening comments, I think is why we are thinking favorably about that. But that is a dynamic that will, until OEMs are able to drive the cost lower in those vehicles, be an impact on our business. But what has changed is if you look at the lease rates of electrified vehicles, that's doubled in the last 12 months, and leasing electrified vehicles, in my view, more balances the contribution to the ASP in the marketplace, that the customers are happy or are more prepared to accept. So quite a lot in my answer. Apologies for that, but that's kind of my thinking on new vehicles in total. You know, given the, we've seen you kind of indicated, I think, you know, 69 days of domestic supply, how does the profitability have the... Have certain brands already kind of returned to normalized level of profits? And is that consistent with the thinking that on a percent basis, they're kind of similar to pre-COVID levels for those that kind of- are kind of getting closer to being fully back? I mean, it's very fluid at this moment in time, and for our... So if you look at our portfolio, we have 31 brands across our portfolio, so we get quite a very broad view of what's going on in the marketplace. There are certain manufacturers whose days of supply, they're not back to where they were in, say, 2018, 2019, from a days of supply perspective, but neither is the overall new vehicle market. So obviously, we have seen different dynamics in terms of margin by OEM. Still some of that driven purely by the supply and demand curve. But as OEMs have been able to fill up their pipeline and we've got more mix on the ground, you've also seen an incremental increase in terms of their incentive, in terms of the use of leasing rather than pure finance. As such, we do see an impact on our margin, which you see in our P&L. But from my point of view, our net result on what I've said suggests that even with those suppliers, that will continue to increase from a dollar perspective per unit, even though it's going to moderate for sure during the balance of this year, I don't see anyone quite yet back to exactly where they were 2018, 2019. Got it. All right. Thanks for taking my question. That was our final questions. I will now hand you back over to Mike Manley. Yeah, thank you, everybody. And again, thank you very much for taking the time to be on the call with us today. As we mentioned, you know, I think AutoNation, once again, delivered solid operating results in the quarter, and our efforts resulted also in strong cash conversion, which, as we've discussed on this call, provided us with the flexibility to deploy capital for attractive returns. Obviously, we're going to continue to invest in the growth of our businesses. We look to optimize our operations, build on the fantastic footprint and portfolio of stores that we've had. And in closing, I would say that although I'm certain 2024 will continue to bring its normal mix of headwinds and tailwinds, I think the AutoNation team understands what we would like to deliver. It's very focused on delivering that and ultimately that will result in what I am determined to deliver, and that's great shareholder returns. Thank you. This concludes today's call. Thank you for joining. You may now disconnect your lines.