Good morning. Welcome to the Lithia & Driveway Q4 2022 conference call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, there will be a question-and-answer session. I would now like to turn the call over to Amit Marwaha, Director of Investor Relations. Please begin. Thank you. With me today are Bryan DeBoer, President and CEO, Chris Holzshu, Executive Vice President and COO, Tina Miller, Senior Vice President and CFO, and Chuck Lietz, Senior Vice President of Driveway Finance. Today's discussion may include statements about future events, financial projections, and expectations about the company's products, markets, and growth. Such statements are forward-looking and subject to risks and uncertainties that could cause actual results to materially differ from the statements made. We disclose those risks and uncertainties we deem to be material in our filings with the Securities and Exchange Commission. We urge you to carefully consider these disclosures and not to place undue reliance on forward-looking statements. We undertake no duty to update any forward-looking statements which are made as of the date of this release. Our results discussed today include references to non-GAAP financial measures. Please refer to the text of today's press release for a reconciliation to comparable GAAP measures. We have also posted an updated investor presentation on our website, investors.lithiadriveway.com, highlighting our Q4 results. With that, I would like to turn the call over to Bryan DeBoer, President and CEO. Thanks, Amit, and good morning, everyone. We appreciate you joining us today and look forward to updating you on our business growth and how our differentiated strategy is progressing. We posted another record year of revenues and earnings. In 2022, we grew revenues to $28.2 billion, up 24% from 2021. Over the past 3 years, and since the launch of our 2025 plan, we have over doubled the size of our company from $12.7 billion in revenues and have nearly quadrupled EPS from $11.76 back in 2018 to $44.42 in 2022. Driven by a team and culture of high performance, a focus on customer optionality to attract and interact with customers, and investments in adjacencies to expand our profitability, we are well positioned for continued growth. We have constructed a nimble platform that combines our experienced, knowledgeable, customer-centric team with the most expansive and diversified nationwide network in North America. With a massive capacity to continue to scale the network, we are truly living our mission of growth powered by people. This foundation has been key to our consistent results, growth, and ability to consolidate a highly fragmented industry. What began as a regional platform is moving towards a global platform with innovative technology, diversified products, brands, and financial solutions. In the Q4, we reported adjusted EPS of $9.05. Our teams are navigating through the used vehicle market as it rebalances at a gradual and orderly pace, as shared on previous calls. Our vehicle operations, SG&A as a percentage of gross, was 60%, excluding the burn rates of our 2 adjacencies. Secondly, revenue was impacted by our new vehicle mix, having tepid volumes at 2 of our domestic manufacturer partners. New car inventory is also rebuilding, but at a less uniform rate and varied by OEM. After experiencing the lowest new vehicle SAAR since 2012, we anticipate SAAR in 2023 to be between 14.5 million and 15 million units. As perspective, the industry averaged a 17 million vehicle SAAR between 2015 to 2019, implying a future lift of 17% in addition to conquesting market share. We're pleased to have Chris back at home this call to provide additional color on the quarter in a few minutes. Our vehicle operations continue to lead the omni-channel auto retail evolution. Our quickly growing infrastructure of omni-channel options, ranging from physical store footprint to technologies offered by our stores to Driveway and GreenCars, combine to provide customers with a variety of flexible options throughout their vehicle ownership life cycle. Our core store operations' massive growth and performance remains strong and continues to produce 1 of the highest operating margins and lowest SG&A costs in the industry. Moving to our digital channels, our combined average monthly unique visitors reached 10 million in the quarter, an increase of 94% compared to last year, with our spend only increasing 33%. Driveway and GreenCars' traffic was particularly strong, growing 236% to nearly 2.5 million visitors per month during the quarter. Traffic across all digital channels continues to gain momentum, driven by a robust inventory selection and a variety of products and experiences. During the year, 22% of our vehicles were sold to customers utilizing our omni-channel technology in our stores, Driveway, GreenCars, representing just shy of $5 billion in revenue. Driveway, our innovative technology platform with a negotiation-free, fully online vehicle shopping and selling experience, generated revenues of nearly $900 million in 2022. This combination of in-store options and our Driveway experience expands the reach of our network with our stores interacting with over 90% of customers in the country being within 100 miles now. Driveway continues to conquest new customers with over 97% of its business coming from new customers to LAD within the last decade. Moving to our financing operations. Driveway Finance Corporation, or DFC for short, ended the year at over $2 billion in receivables, solidly positioning DFC as the largest lender in our network. The penetration rate rose 200 basis points from the previous quarter to over 13%, we originated over 19,000 loans in the Q4. Last week, we completed our 3rd ABS securitization, accompanied by an investment-grade rating by both Moody's and KBRA. We believe this reiterates the strength, quality and disciplined nature of our captive finance decision-making and the differentiation from our other used-only retailers with captive finance arms. As such, we are extremely pleased with how this adjacency has laid the foundation for expanding our profitability in the future. I'd like to commend our entire DFC team and Chuck, who will be providing more color on the results and outlook later in the call. Turning to acquisitions. In the Q4, we made 4 notable acquisitions, including Glenn's Freedom CJDR in Kentucky, Ferrari of Denver, the sole dealership of its kind in the Central Rockies, Meador CJDR in the Dallas-Fort Worth area, further expanding our footprint in the Lone Star State, and finally, the Airstream portfolio we mentioned on our last earnings call. Far in 2023, we've kept pace with the momentum we built through 2022, acquiring another $50 million in annualized revenues to start the year off. We expect this to be another significant year of growth for the network. We acquired over $3.5 billion in annualized revenues during the full year of 2022, and nearly all public company M&A activity for the year, as shown on our slide 11 of our recently updated investor presentation. Since launching our 5-year plan in mid-2020, we have acquired a total of $13.9 billion, 63% of the total $20 billion originally targeted by 2025. Our patient, disciplined, and consistent approach towards acquisitions continues to generate massive value by maintaining our multi-decade long valuation methodology of 3-7x normalized environment earnings levels. We have made a conscious decision to utilize the majority of our cash flows towards acquisitions rather than redistributing them primarily towards shareholders or paying down debt. As such, we have and will continue to establish the foundation for massive competitive advantages in size, scale, SG&A cost leverage, interest costs, profitability levels, and most importantly, consumer optionality and attachment. As we hit the midpoint of our 2025 plan, we remain confident that our strategy is durable and have clear sight to achieving the $50 billion revenue target. Our portfolio mix, new adjacencies, and focus on profitability translates into better operating leverage with the ability for $1 billion in revenue to drive up to $1.20 in EPS by 2025, up from our historical ratio of $1 in EPS, and eventually achieve the $2 in EPS future target. Let me take a few moments and outline the drivers to achieve our 2025 plan. 1st, we continue to drive consumer optionality, operational efficiency across all platforms. We are prioritizing our profitability goals as we optimize and integrate our omni-channel options, which will result in improved margins and leverage our network and cost structure. In addition to continually driving high performance, this will help drive SG&A as a percentage of gross profit below 60% in a normalized GPU environment, enhance liquidity, and continue cash flow generation. 2nd, the investment in our financing operations, DFC, will grow our earnings power and diversify our portfolio. As demonstrated by DFC's capital structure moving to sustainable self-funding, DFC is maturing and effectively managing its growth. We are targeting a 15%-20% penetration rate at DFC, primarily driven by used vehicles, and we are well on our way to profitability later this year. 3rd, we continue our cadence of growing our network, the backbone of our plan through acquisitions. Growth of our physical network to reach 95% of our consumers within 100 miles creates the foundation of our business. It gives us the ability to physically reach customers throughout their ownership life cycle within a 2-hour proximity. Acquisitions continue to be the core competency of LAD to consistently generate strong returns while optimizing the network with timely, profitable, and strategic divestitures of smaller poor performing stores that lack strategic value to the network. Lastly, we remain financially disciplined with a strong balance sheet and committed to capital allocation strategy focused on the best risk-reward for our shareholders. We've reduced our leverage over the past several quarters while still growing through acquisitions. We invested in network growth, our omni-channel tools, growing our captive finance business, and generated meaningful shareholder returns through dividends and share repurchase. As crafted a half a decade ago, we continue to believe in a longer-term strategy while finding the balance between smaller, shorter-term gains and long-term strategic positioning. Lithia and Driveway is well underway towards building a differentiated, diversified mobility and transportation platform across multiple geographies. We're focusing on making the experience of owning a vehicle easy and hassle-free, with strategically designed and positioned options for all types of owners across our network and e-commerce platforms, including our captive finance arm. Core to our business is delivering highly profitable growth as we continue to execute on our 2025 plan to reach $50 billion in revenue and our longer-term ambition of $2 of EPS for every $1 billion in revenue. With that, I'll turn the call over to Chris. Thank you, Bryan. It's good to join everyone on the call today to provide a brief overview of our operating results and discuss our focus areas for 2023. Before jumping in, I'd like to congratulate our 2022 class of Lithia Partners Group winners, better known internally as LPG. These 56 leaders and their teams generated the highest performance levels among their peers last year, independent of store size, franchise representation, or geographic location. These stores led their market share with exceptional consumer satisfaction and solid profitability. They were also key supporters of Driveway, DFC and GreenCars, executed the majority of our mobile service and at-home pickup and delivery, all while growing future team leaders. We now have over 40% of our eligible store leaders attaining this coveted status, and we look forward to all of our teams attaining LPG status in future years. Now to the quarter. Overall, same-store gross profit declined 12% as the recovery in new vehicle volume trends did not offset the expected declines in vehicle gross profit per unit or GPU as we transitioned out of the COVID-fueled retail environment. New vehicle GPUs, including F&I, was $7,719 per unit, compared to $8,593 the prior year. Used vehicle GPUs, including F&I, were down to $4,028 from $5,341 in the prior quarter. F&I results were strong at just over $2,117 per unit, down from $2,162 the previous year. As a reminder, new vehicle GPU levels are still significantly above our historical levels from 2019 of around $3,600 per unit, while used vehicle GPUs have returned to pre-COVID levels. During the quarter, combined import and luxury vehicle sales were relatively strong, growing in the low single digits, offset by domestic sales, which fell over 10% on a same-store basis. While domestic OEMs make up about 27% of our new vehicle sales, we are starting to see a shift towards additional incentives from these OEMs on certain product lines, which we expect to continue into 2023 as normalization in the market continues. Used vehicle prices averaged $29,545, up nearly 2% from last year. As a top-of-funnel franchise dealer, we remain aggressive on retaining trades we are offered, as well as the continued procurement of inventory from all external channels, even as pricing pressure on used continues with the rising interest rate environment and recovering new vehicle inventory supply. Transitory issues and pricing pressure on used vehicles should have a minimal impact on 2023 as we carry less than a 60-day supply and the shortage of late-model used vehicles from the abnormally depressed new vehicle SAAR environment takes years to normalize. At the end of December, new and used vehicle day supply were 47 days and 55 days, compared to 39 days and 65 days at the end of the Q3. Customers appreciate our vast range of products at all price levels, including the option to purchase and service vehicles up to 20 years and older, as represented in our Value Auto segment, which is 17% of our used vehicle sales volume. Our nationwide network, aligned with the execution by local market leadership, casts a wide net across all geographies and allows us to service a diverse set of demographics and purchasing preferences with 1 team. Working together, we can service local markets individually or ship vehicles regionally or across North America, as represented by Driveway, where the average distance delivered is over 900 miles. Providing a negotiated experience in our local network and a negotiation-free process through the Driveway national channel allows consumers empowerment and the option to choose their pathway. As we continue to gain further insights on the consumers and the relationship between product demand by market, our stores are making better decisions to price and merchandise our product across platforms, resulting in better economics. Over time, this will translate to significantly more leverage in our network. Our after-sale business remains strong across all business lines, up 8.4% in the quarter. With our record units in operation and an average age of vehicle over 13 years, we anticipate continued growth throughout 2023. Shifting to SG&A, core operations, excluding adjacencies, generated SG&A as a percentage of growth below 60% on the quarter. However, even in the core business, there remains ample opportunity to improve our operating leverage in our lower quartile segments of stores, which vary across geography and size. We estimate there's upward of 250 basis points or $125 million in additional profitability we can achieve by solely moving this bottom quartile to an average level of performance. These focus stores are expected to continue to improve top-line growth, boost productivity, drive down costs, and enhance utilization of our innovative technology solutions. As illustrated, our best stores in this environment, aligned with LPG attainment, achieve SG&A gross of 48% or better. There's a cluster of stores operating at 75% SG&A growth, and our operations team is focused on improving the results at these locations. Over the past 3 years, we've divested nearly 40 locations with an average revenue per store of $42 million, and replaced them with larger stores averaging over $100 million in revenue and performance level in our upper quartile in many cases. We remain diligent on optimizing our network where it makes sense, and look forward to continuing our high cadence M&A growth trajectory. In summary, each day our team is rising to the challenge to aggressively meet the needs of consumers in the ever-changing future of automotive retail. We're motivated by the evolution in our core business and look forward to navigating through the transformation to become a more diversified, greater consumer optionality company. The team is looking to improve across all of our business lines, leveling up our digital retail readiness, leveraging our cost structure at new levels, and driving incremental profit to the bottom line that will eventually translate to $2 in EPS for every $1 billion in revenue we generate. Their efforts will continue to evolve our in-store and at-home solutions to meet consumers wherever, whenever, and however they choose. We remain humble and look towards another strong year as we remain laser-focused on achieving our plan. With that, I'd like to turn the call over to Chuck. Thanks, Chris. DFC posted a solid finish to the year and continues to be the premier lender for Lithia Driveway. Our business strategies remain consistent as we continue to maximize the economic returns by managing risks while leveraging the benefits of being a captive lender. We continue to move upmarket in terms of credit quality to help mitigate the overall risks in the portfolio. Our near-term objectives continue to be growing the portfolio, creating a systematic and scalable capital structure, and achieving segment profitability in 2023. In Q4, the portfolio grew to just over $2 billion, driven by the measured growth in originations, which totaled $605 million. Quarterly loan originations had a weighted average APR of 8.2%, while our cost of funds rose to 4.8%, in line with recent rate increases by the Federal Reserve. We have continued to pass along rate increases to our customers at an incremental rate without degradation to our credit quality or underwriting standards. For the quarter, our financing operations achieved a net interest margin of $23 million with a loss of $8 million, including provision expenses of $19 million. In the Q4, DFC's penetration rate rose to over 13% and averaged just over 10% for the full year. Going into 2023, we expect penetration rates to remain stable between 12% and 13%. Our decision to adjust the pace of originations growth, particularly in the near term, stems from our goal of achieving profitability this year and maintaining our current portfolio risk profile. The average FICO score for loans originated in Q4 was 732, up from 721 in Q3. Total portfolio weighted average FICO scores increased from 700 to 708 during the same period. We reduced front-end LTVs for 3 consecutive quarters with Q4 originations at 97.2%, a reduction of nearly 200 basis points sequentially and over a 700 basis point reduction from Q4 2021. At the end of December, our allowance for loan losses as a percentage of managed receivables rose slightly, but in line with expectations to 3.1%, bringing our total allowance to $65.1 million. Overall, we're seeing some signs of stability in delinquency rates, especially at the tail end of Q4, where 30+ delinquency fell approximately 40 basis points to 4.1%. This is primarily driven by a combination of DFC's improved credit quality and deploying of an advanced telephony system in Q4. Net charge-offs increased slightly quarter-over-quarter, which was primarily a result of the rapid growth in our portfolio, but also a deterioration in net recovery rates as wholesale vehicle auction values declined. While the increase in net charge-offs due to the rapid growth of the portfolio was expected, we will continue to optimize vehicle recovery activities while waiting for 2022 originations with a lower average LTV to help mitigate reductions in used car values. Last week, we closed in our 3rd ABS term offering for $480 million. This offering was DFC's first where a tranche carried a AAA rating as rated by both Moody's and KBRA. The ABS term market was particularly receptive to this offering, with all tranches being materially oversubscribed, which allowed significant tightening of final credit spreads versus initial pricing guidance. DFC remains committed to utilizing the ABS term market as our primary near-term source of capital, as this is a critical step towards becoming a materially self-funding entity. Becoming a periodic programmatic ABS term issuer will lessen DFC's reliance on parent company capital, thereby allowing LAD to deploy forward-looking liquidity towards other growth initiatives. The 2023 business fundamentals across DFC should result in a near-term improvement in profitability. However, the negative impact of further volatility in either DFC's cost of funds or our credit performance results could impact DFC's profitability on a forward-looking basis. In closing, we are excited by the results DFC has achieved up to this point. We are constructive on hitting penetration rates of 20% by 2025 as LAD moves towards achieving $50 billion in revenues, which as a reminder, should result in excess of $500 million of pre-tax income once DFC reaches a steady state portfolio and normalizes the CECL reserves. DFC at end state will become a major contributor to LAD's future, where $2 of earnings per share is generated for every $1 billion of revenue. We are particularly excited about achieving segment profitability in 2023, and the breakout of our financial results is a foundational milestone to drive visibility as we look to meet this goal. Our prudent approach towards managing credit risk while balancing growth positions DFC to achieve our KPIs going forward. I'll now turn the call over to our Chief Financial Officer, Tina. Thanks, Chuck. Thank you again for joining us today. We have received great feedback from our investors and appreciate your support and patience as we outline the multiple financial levers we navigate within our 2025 plan. The growth and expansion of DFC. We have restated our segments to vehicle operations and financing operations, adding greater visibility to the operational results of DFC. As a result of this, we have added a financing operations income loss line to our income statement. This line represents the interest income earned, plus the interest expense associated with DFC, directly associated SG&A expenses, and the change in provision and depreciation from our leasing portfolio. Most of these items, except depreciation, were previously reported within SG&A. To assist in understanding the impact of these reclasses, we've added a reconciliation to our investor presentation on slide 24. During the Q4, we reported adjusted EBITDA of $421 million, down 22% from last year. The change was attributable to a decline in gross profits and higher interest costs associated with DFC as the portfolio grows. We ended the year with leverage at 1.5x, flat with the prior quarter, and providing substantial headroom for growth in 2023. During the year, we generated over $1.1 billion in free cash flow and deployed over $2 billion in capital. Of this amount, approximately half went toward acquisitions and a 3rd towards share buybacks. This resulted in the repurchasing of approximately 8% of our float in 2022. Our strong earnings year provided us the opportunity to concurrently return value to shareholders through share repurchases and an increased dividend while maintaining strong growth through acquisitions. For 2023, our outlook remains constructive and optimistic. Overall, we expect new and used vehicle SAAR to grow 3%-5%. As a reminder, we believe earnings will be impacted by declining GPUs and are assuming the following: same store unit growth for new in the mid to low single digits and used in the high single digits. As we navigate this transitory environment with supply and demand normalizing, new vehicle GPUs will continue to moderate. Assuming a decline of about $200 per unit each month throughout 2023, this would average to a GPU of $3,800 and end the year a little above pre-pandemic levels. F&I per unit may be impacted by rising interest rates and consumer affordability and are estimated to be around $1,850 for the year. We expect service body and parts revenues to grow in the mid to high single digits, with margins consistent with historical levels. Finally, we target SG&A as a percentage of gross profit in the range of 61%-64%, which includes the impact of strategic investments we are making for the future. Given these assumptions, we estimate free cash flows net of capital expenditures and dividends to roughly exceed $1 billion in 2023. At our disciplined hurdle rates, deployment of all of our free cash to acquisitions would represent $4 billion in annualized revenues. Balancing growth and returns for our shareholders are pillars to us reaching $50 billion in revenue. Our proven, consistent ability to grow through acquisition underlies our strategy and provides us the size and scale to optimize our profitability and fully leverage our in-store and online channels. Incorporating adjacencies like DFC diversifies our business and lays the foundation for significantly expanding margins in the future. Our strong balance sheet and capital generation positions us well to continue the growth we have achieved since the launch of the 2025 plan. We see a clear line of sight to increasing profitability from our historical $1 billion in revenue, generating $1 in EPS to generating up to $1.20 in EPS by 2025, and in the long term, an ambitious $2 in EPS per billion in revenue. This concludes our prepared remarks. With that, I'll turn the call over to the audience for questions. Operator? Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press * 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press * 2 if you would like to remove your question from the queue. We ask that you limit your questions to one so that others may have the opportunity to ask questions. You may re-enter the queue by pressing * 1. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your 1 st question comes from Daniel Imbro with Stephens. Please go ahead. Yep, good morning, everybody. Thanks for taking our question. You know, Bryan, I wanted to start on SG&A. You know, I think given how strong GPU stayed, it was a bit surprising just some of the deleverage there. I think in your prepared remarks, you mentioned that burn rates at 2 adjacencies were at least a couple of 100 basis points of deleverage there. Could you maybe help quantify, other than DFC, maybe what the burn rate was from some of those adjacency growth? Looking forward, you know, what gives you that confidence to be able to get back towards that sub 60% SG&A to growth within your 2025 targets? Thanks. Sure, Daniel. Good morning, everyone. I think most importantly, what we saw in the quarter was those 2 domestic manufacturers that had massive drops in their year-over-year sales. It made up about. It made up about 20% of our total volume, and their gross on those manufacturers was down almost 35%. It was hard to outpace that. That made up, we're estimating about 30%-40% of the SG&A impact, which you think gross, and how does that impact SG&A? It does when the top line number goes down a fairly big amount, and it's a direct reflection on SG&A. We think about a 3rd of it is that, okay. The remaining 2/3 is coming from the adjacencies. Like we've discussed before, I mean, we really believe that those adjacencies are the right answers long term to be able to continue to aggregate the sector and really show, you know, a, a competitive advantage versus, you know, the rest of the marketplace. In terms of looking forward, we're still looking at an approximate $200 decrease in new GPUs throughout the year. As Tina mentioned on the prepared remarks, that gets us a little bit higher than pre-pandemic levels or about, you know, down about $1,500 for the year. Okay? Obviously, F&I, we're modeling a little bit down as well. All in all, I mean, if it wasn't for those 2 domestic manufacturers, Chris is gonna talk about it in just a little bit, but we're fortunate they're starting to react now to the higher inventories that may look a little different than some of the others in the space. If I could follow up on SG&A, Bryan. I guess just to clarify, I think it was my understanding this is the last quarter you can maybe write down any of the Shift options you guys had from that investment. Was there any charge on the P&L from that investment kind of flowing through? Was that an SG&A or was that somewhere else? Hey, Daniel, this is Tina. Any adjustments we make on the Shift investment, they actually flow through other, so it won't be within that SG&A line. The answer is I don't believe we had any for the quarter, and there's only about $7 million remaining on that investment on the books. I t was a minor amount. We called it out in the pro forma adjustments in the press release. Yeah. Got it. Perfect. I'll stick to 1 question and hop back in the queue. Thanks, guys. Next question comes from Rajat Gupta with J.P. Morgan. Please go ahead. Great. Thanks for taking the question. On DFC, it looks like, you know, the average coupon was, you know, greater than 10% in 4Q. You know, why is it taking a step lower in 2023, you know, to the 8.5%-10% range? Was a bit perplexed by that. Is it just more mix shift to higher FICO scores or is this something to do with the newer reviews mix? Any comment that would be helpful, and I have a follow-up. Thanks. Yep. Hey, Raj, this is Chuck. Thanks for your question. With regards to yields on DFC, we've had 8 price increases in the H2 of the year, and we're continuing to closely monitor what's happening in the marketplace as the Federal Reserve continues to increase rate. In terms of where we see our yields eventually leveling out in the near term is probably in that 9%-10%. We still got a ways to go to move that up as we continue to monitor. you know, we'll move as the market moves. Got it. Got it. A follow-up on just F&I. The $1,850 number, Tina, I think you mentioned, is that taking into account the fact that you'll have more DFC loans, or I'm just trying to understand, like it seems like a pretty sizable step down for a full year average. Just curious, you know, how that progresses through the year, and the impact on DFC on that. Good morning. This is Chris. I think operationally, what we're trying to anticipate is the impact in a rising rate environment, you know, what consumers are able to absorb in F&I and just trying to be a little bit proactive and probably a little conservative on what F&I might look like in 2023 at $1,850, which is about a $150 drop off of where we have seen things the last couple of years here. Really nothing to do with DFC. Next question comes from John Murphy with Bank of America. Please go ahead. Good morning, guys. I just wanted to follow up on the SG&A to gross, 'cause there's a kinda a lot of moving pieces here, and I think there's, you know, a lot of, you know, confusion. You know, as we think about sort of a standard, you know, forget about the adjacencies for a 2nd, decline in dollar gross, you know, there's typically sort of a natural response, particularly on new GPUs of about 30% just naturally on SG&A, I think. Correct me if I'm wrong. I just wanna clarify that. You know, how we really should be thinking about sort of aggregate, you know, GPU, if it's down, or gross, if it's down $100, should we think about SG&A sort of subsequently because of the way that, you know, variable comp works being down $30, right? I'm just trying to understand sort of a rule of thumb here. If we could also just clarify as we think about the adjacencies, you know, how much of that spend will go up on a, you know, sort of an absolute basis year-over-year in 2023 versus 2022, or does that level off? Good morning, John. This is Chris. I think you're right. I think the way that we look at kind of our overall gross profit decline or our gross profit improvement, the expectation that we have in our stores at a minimum is that 50% will be called throughput, meaning that for every incremental dollar in gross or every dollar that you lose in gross, you should see at least 50% of that, you know, impact the net profit either direction. As we laid out in slide 9 in the new slide deck, I just focused on the core operations for a minute. We realize there's a lot of opportunity now to reset kind of our cost structure off of where we've been kind of in the last couple of years in this COVID environment, where, you know, in high grosses, you know, lack of supply, things like that kind of impacted, I think negatively the overall productivity and compensation alignment that we have in the stores. Starting in late Q4, we launched a big initiative internally, operationally to focus on those stores. It's not all of them, but you can see that we have a number of stores that are falling well below even average in what kind of contribution they make on an SG&A to gross basis and bring profit to the bottom line. We expect that by the end of Q1, we should pick up probably 100 to 150 basis points annually in savings from the initiatives that we're launching in the core business. Okay. Outside of that, as Bryan and I both reiterated, that our core business is running right now at about a 60% SG&A to gross. That leaves about 3%, you know, that needs to be explained by the adjacencies and other factors. I'm gonna let Bryan kind of talk about the adjacencies. Thanks, Chris. John, I think as we think about going forward, which I believe was your question, it's important to understand that how we've built our entire model is built around the foundation that these adjacencies are gonna take us to a promised land someday, okay? Whether that's at a mid state of 2025 or a future state beyond that, we know that the adjacencies will yield the returns and higher advantages in the long term. We built those also to think about how you throttle those up and down. If we think about the 2/3 impact that came from adjacencies on SG&A in the quarter, okay, we know that most of that is still coming from Driveway, not Driveway Finance. Okay? Driveway Finance should be profitable in 2023, okay? Important to remember. The outside of, you know, the future of Driveway Finance is by 2025, it's gonna make $150 million to $200 million, which, you know, has a $0.10-$0.15 lift on EPS. The future state is a $0.30-$0.40 lift on EPS. We know where we're going on this. It's very clear. As you build CECL reserves, it's quite punitive, as you see. Okay, on the Driveway side, it does cost a lot of money to build a brand, okay? We're finding solutions of how to do it more efficiently, and we will continue to be able to throttle that up and down, depending on what the market conditions give us. Believe in the quarter that the decisions we made to some extent to cost ourselves 300 basis points in SG&A were fundamentally because of those decisions that we believe that an omni-channel solution that has the potential to get to $2 EPS. If you layer that over $50 billion in revenue, which we're on clear trajectory towards, you know, it starts to produce quite a nice number that's differentiated from others in the space. Thank you. Next question comes from Chris Bottiglieri with BNP Paribas. Please go ahead. Hi. Thanks for taking the question. 1 quick one, just a clerical 1 on follow-up to the couple questions on SG&A gross. Did the Driveway auto losses step up materially this quarter? Like I'm looking at my own model of the SG&A gross xDFC, and it's, you know, pretty big inflection over the last 2 quarters. Just trying to understand if Driveway auto, you saw, for some reason, a big step up in losses there this quarter. There was a step-up in losses 2 quarters ago. In Q3, we started to see increases in wholesale losses. We had ramped a few other things and our gross profits had been hit pretty hard, and that continued into Q4. Okay? Yeah. We believe that the market has stabilized, and I think we even mentioned this on Driveway, that we typically are going through seasonality in Q4, and it continues typically until about this time. Fortunately, over the last few months or few weeks, we've seen stabilization of valuations on used cars, which helps us in terms of our pricing and in terms of our wholesale valuations. Gotcha. Okay. That, that leads to my next question. Sorry, this is kind of part 1 and 1B. 1 of the industry consultants spoke to kind of used volumes being up in January. Seems like a pretty big inflection from Q4. Wondering what you're seeing. Like, what was the cadence of your used business throughout Q4 on a 3-year CAGR or 1 year, however you want to frame it? What have you seen kind of carry into January and February? Are you seeing signs that, like, we've somehow turned a corner on used, or is this just temporary as dealers were defleeting and clearing inventory out given pricing declines? I think, Chris, it's important to remember that on same stores, you gotta go back to the previous year to look at it. We had pretty good comps in Q4. The comps start to subside a little bit in Q3. We're looking at an annual same store sales increase of Of high single digits on used cars. Yes, we're looking at increasing our market share, and we believe the market will recover to some extent on used. As far as what's happening in January, we'll give you an update in April. Next question, Bret Jordan with Jefferies. Please go ahead. Hey, good morning, guys. Morning, Bret. As you look longer term, I guess on the Q3 call, you talked about GPUs on the new side, maybe getting back to a pre-COVID level or at least briefly maybe going below that. Do you think as you look out past 23 that we are sustainably above historic GPUs in new, or are incentives and inventory recovery is gonna take us back to the prior levels? Good morning, Bret. This is Chris. I think that's why Tina laid out kind of our forecast for kind of GPUs on new for the rest of the year, kind of dropping at about $200 a month, which, you know, the impact for that on an average basis will be about $1,200 this year-over-year. I will tell you though that specifically, as Bryan pointed out with 2 of our domestic OEMs, specifically Ford and Stellantis, you know, we saw a pretty big drop in our overall sales volumes in the quarter, which I think when 27% of our sales are domestic, you know, I think it had an outsized kind of impact, as Bryan alluded to, on our overall gross profit. I will tell you though, that starting in February, we've seen a pretty massive pivot in those OEMs as far as what they're doing specifically to move out 2022 model year inventory which is about 50% of the overall inventory we have. You know, our expectation now is that, you know, with kind of this supply and demand equation moderating in 2023, based on product lines, based on OEM, we're gonna see, you know, additional support that we haven't seen in the last couple of years in overall kind of incentives, rebates, that'll help us kind of moderate the impact that we feel in 2023. Thank you. Next question comes from Colin Langan with Wells Fargo. Please go ahead. Great. Thanks for taking my questions. Just to follow up, I'm kinda confused on the GPU per unit is down. It's because of Ford and Stellantis having lower volume. I would thought that would affect sales. If you had lower volume, wouldn't you be able to sell those at a higher GPU? I mean, maybe if you could kinda connect the 2. Sure. Sure, Colin. I, this is Bryan talking. On Chrysler, our GPUs, our overall gross was down 40% on Stellantis, okay? It was down 30% on Ford. Inventories are building, and as such, you're trying to move product to help reduce your interest costs and so on, and as such, your GPUs drop. Okay. In terms of the SG&A impact, it's just that the overall SG&A, you're not adjusting your cost structures as quickly to compensate and to be able to leverage the cost structure that you have. Got it. Okay. It's, you know, it's a lower GPU too for the those guys. Yeah. Just also up another question. You had talked about, you know, about 50% SG&A for every sort of $1 of gross. Is that accurate? 'Cause that seems quite high to me 'cause you're talking new GPUs are up, you know, since COVID, you know, $3,500. That would almost be like a $2,000 added sales commission. What are those variable costs that come out or from SG&A that we should be thinking about? Good morning. This is Chris again. I'd say that, you know, ultimately, the line of sight that we had on the recovery in both supply, and GPU has been pretty difficult over the last couple of years. Given that 75% of our SG&A is personnel, that is commission-based in most cases, you know, high GPUs translate to high commissions. Okay? That's high commissions not just for sales people, but for our management team, for our store operators, our general managers, our F&I managers. All of those things have been inflated due to kind of this unusual supply and demand equation. If you look back historically, though, you know, our expectation, because we didn't change pay going into that cycle, coming out of that cycle, if you kinda do the quick math on what that represents, from a commission basis on a drop in gross, when you think about the number of people paid on the GPU on a single car deal, for example, obviously, you know, it's gonna go the other direction as well as GPUs drop. O ur expectation is that 50% throughput. We've done it historically. We manage it operationally. And while we didn't see it at the level that we thought we should have in Q4, that's why we launched our whole operational team to focus on those stores that didn't get that. As you can see on slide 9, it's not all of them. We had several stores, especially in our larger store footprint, that were running 46% SG&A to gross through last year. I think that, you know, what we also see is the other side of that, which is stores that are between 70% and 85%, 90% SG&A to gross, and those are the stores that we're focused on fixing. That'll translate to getting us quickly back to that 50% throughput number. Next question comes from Adam Jonas with Morgan Stanley. Please go ahead. Hi, this is Daniela Haigian on for Adam Jonas. We heard a question about used volumes. I wanted to ask about used prices. Recent Manheim prints and conversations with some Good morning. This is Chris again. I think the biggest driver that we see right now is just seasonality. I mean, it was nice to see the moderation in, you know, the Manheim Index. You know, good news for us is as we carry only, you know, a 50, 60-day supply of used car inventory, the fluctuations in both directions get cleared pretty quickly through the pipeline. I think ASPs in the quarter were still up, like I don't know, Tina can tell you, but I think it was about 2% or something. Our bigger fundamental is as you start to see a recovery in new car inventory, you know, how does that impact CPO? How does that impact trades? How does that impact our ability to continue to drive used car volumes, which is really our biggest driver in profitability, because it's all about gross profit, which might actually be advantageous for us because consumers that have held their vehicles longer are gonna fall more into those core and Value Auto product lines, which generate a much higher return on for us. You know, we're very optimistic about the recovery and volume. We feel like that's not just gonna be great for new, but it's gonna be great for used and F&I. Next question, David Whiston with Morningstar. Please go ahead. Morningstar, please go ahead. Morning, David. Hey, everyone. I guess just a question I wanted to ask you guys, 'cause I'm getting this from clients, is that they're hearing some critics out there saying, "Well, Lithia can't get to their $50 billion goal because of factory approvals, too much brand concentration, 1 geographic market." I'm sure you disagree with that, but I'd love to just hear your take on that. Sure, sure, David. Haven't they been saying that since we were at, $13 billion 3 years ago? I think so. Yeah. It's fun. We've actually run all the modeling and have the actual data. We should be able to achieve domestic revenue of between $70 billion and $90 billion, okay, based off framework agreements that we currently have in place, okay? We believe that some of those framework agreements, you can grow beyond that through market share. We can easily get to those numbers. It does require a little bit of optimization that you've seen over the last few years to really be able to maximize that performance. The $50 billion, we believe is still quite achievable, okay, by 2025. As you've been doing this then, given the frameworks you're citing, you're getting absolutely no resistance from the factories then, right? I mean, we're back to the same excuses that the other peer group usually make as to why they can't buy deals. It's because they're not structurally involved with every seller that that is what we would call attractive in the country. Because Lithia typically buys about half of all public deals over the last 10 years. I mean, look at this slide. What slide are we on? 13, I think it was. Slide 13 illustrates that. Again, it's the same, it's the same messaging that we heard for, you know, for the decade before 2021 when some other public spots and deals that do have problems with manufacturers. We do not have problems with any manufacturer, okay, and we'll continue to grow towards the $70 billion to $90 billion domestically. Okay. I appreciate the clarity. Can I just ask 1 question on used real quick, which is on Value Auto? The ASP there is about $18,000 now according to the slide deck, and that's just about pre-pandemic ASPs for the overall national used average, a little less. I'm just curious, how much is that particular customer demographic struggling right now relative to your other used vehicle customers? David, it's Bryan again. I think what we're seeing is it's quite difficult to buy those cars just like it always has, and we're getting less of them through the channel than we typically would. I believe pre-pandemic in our value bucket, we were $14 million to $15 million, or $14,000 to $15,000 per unit. Okay, so at the $18,000, that's still higher than what we typically would want. Really it's a matter of the cost of the cars are just more expensive. You know, and unfortunately, affordability is still difficult. Even though we have, you know, almost a 5th of our sales coming from the 9-year-old and older vehicle, it's not as affordable as it used to be. You know, we try to do everything we can to be able to bring consumers in at all price points. Hey, 1 other kind of fun little note is we sold about 8% of our cars that were sustainable, okay, which is pretty cool for the year in BEVs. You know, even though they're a little more expensive, an average BEV over an ICE engine car that we sell is about 50% more expensive on a monthly payment, about $900 instead of $600, or $300 more. Kind of fun little tidbits as we learn, but it quickly grew to, you know, 7.5%, 8% of our total volume. Thank you. I will now turn the floor over to Bryan for closing remarks. Excellent. Well, thank you for joining us today, and we look forward to updating you on Lithia & Driveway's Q1 results in April. All the best. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.