Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Lithia Motors Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Should you require operator assistance during the conference, please press star zero to signal an operator. Please note, this conference is being recorded. I will now turn the conference over to your host, Jadron Jaramillo, Senior Director, Investor Relations. Thank you. You may begin. Good morning. Thank you for joining us for our second quarter earnings call. With me today are Bryan DeBoer, President and CEO, Chris Holzshu, Executive Vice President, Tina Miller, Senior Vice President and CFO, Chuck Lietz, Senior Vice President of Driveway Finance, and finally, Adam Chamberlain, Chief Operating Officer. 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 reconciliation of comparable GAAP measures. We have also posted an updated investor presentation on our website, investors.lithiadriveway.com, highlighting our second quarter results. With that, I would like to turn the call over to Bryan DeBoer, President and CEO. Thanks, Jadron. Good morning, and welcome to our second quarter earnings call. Our Lithia & Driveway teams continue to drive results as we mature our unique and profitable mobility ecosystem. Our associates met the operational challenge we faced in the quarter and delivered much-improved operating results and execution of our strategy with an adjusted diluted earnings per share of $7.87, a 30% improvement sequentially, despite the CDK outage. We achieved our highest-ever quarterly revenue, our first quarter of profitability in financing operations, and laid the foundation for continued growth in our ecosystem as we serve customers wherever, whenever, and however they desire. We've strategically used the higher profits and capital of recent years to grow scale, revenue, and earnings by nearly 3x since COVID began, plus built, acquired, and funded all our crucial differentiating strategic adjacencies, Driveway, GreenCars, DFC, PVM, and now Wheels. These important design and scale advantages, built and assembled during a period of low-cost capital, have paved the highway to higher margin and a lower-cost business with unlimited potential to capture market share. We are now focused on growing this market share, leveraging our scale, realizing all the potential we have built, and delivering operational efficiencies through customer experiences across our ecosystem. This quarter brought a unique challenge when CDK faced a cyberattack that impacted many of ours and others' dealer management systems. I'm proud of the way our team responded, quickly pivoting to create solutions and continuing operations across our network. We will talk about the impact on results and operations in a moment, but I want to recognize the impressive efforts of our team members, who rose to the challenge, serving our customers 24/7. We continue to make significant progress with large sequential improvements in profitability even after the impacts of CDK. We've achieved the first promised stage of the sixty-day plan that aimed to create at least $150 million in annualized SG&A cost savings that will be fully realized during Q3. Looking forward, we now believe there is potential to double this amount, primarily driven from inventory reductions and are expected to occur by year-end. During Q2, we made significant progress in areas such as personnel, advertising, and corporate-level expenses, and implemented a redesign of leadership roles to focus on maximizing profitability while leveraging our ecosystem. We are pleased to announce that we have purchased a minority stake in Wheels in partnership with Marubeni Corporation. Wheels is one of, if not the largest, fleet management company in North America, with a best-in-class management team, strong performance, and surrounded by a robust competitive moat. This investment in a high margin and highly profitable fleet management operator has the potential to create transformative synergies between our retail and their fleet platforms. Alongside PVM and Pfaff Leasing, Wheels completes our global omni-channel strategy focused on a complete mobility ecosystem. Now, on to key results for the second quarter. Lithia and Driveway grew revenues to $9.2 billion, up 14% from Q2 of last year. While vehicle operations experienced headwinds as a result of the CDK outage, prior to the outage, Q2 had strong improvements in our same-store sales and delivered good momentum in our cost savings efforts. Diving into same-store sales performance, total same-store revenues were down 6.4%, and gross profits declined 12.5%. Consumers remain resilient despite recent trends that reflect challenges from affordability and higher interest rates, with unit sales in the quarter down only 3%. Total vehicle gross profit per unit remained resilient in the quarter at $4,762, similar to last quarter and down $951 compared to the same period a year ago. Our after-sales business was down 1.4% in the quarter. This decline is primarily related to CDK, which drove after-sales down almost 40% during the 12 days of the outage. We expect some of the work will be deferred into early July as our systems and processes return to normal. Our teams have been nimble and responsive, and we do not expect any long-term impacts. Our investments in adjacencies are maturing nicely as they move towards sustainable and considerable profitability. Financing operations produced strong results, with income of $7.2 million in the quarter, compared to an $18.7 million loss last year, achieving profitability earlier than expected. Driveway and GreenCars burn rates have also been reduced by 40% compared to a year ago, as we continue to refine our e-commerce strategies, improve operating and advertising efficiencies, and convert new customers. All in, we generated adjusted diluted earnings per share of $7.87, a decrease of 28% from Q2 of last year, with an estimated $1.10 impact from the CDK outage. We saw clear strength in operational performance in the second quarter, and we're on pace for nearly a 50% increase in sequential EPS. We continue to focus on unlocking the profitability of our ecosystem by decisively acting to meet customer demands and operate efficiently by delivering on our core strength, execution. Moving on to our unique and extremely difficult-to-replicate strategy. The foundation of the LAD strategy is our vast physical network, built upon the industry's most talented people, highest demand inventory, and dense physical network. We continue to build the most extensive physical network in North America and the U.K., adding new stores, foundational adjacencies, and strategic partnerships such as Wheels, to expand our customer experiences and diversify our portfolio. Operating in the largest addressable retail market in the world, we continue to strengthen our ability to profitably grow across all elements of our business. Our strategy to expand and create customer solutions that are simple, convenient, and transparent, allowing us to capture more of the customer's wallet share, remains unchanged. These solutions integrate digital solutions and create sticky, natural retention of customers within our ecosystem, while magnetic brands like Driveway and GreenCars provide access to 50 x more customers than our core physical businesses do. The LAD ecosystem, including Driveway, showed a 2% increase in total MUVs YoY, reaching 12 million per month, with GreenCars contributing over 900,000 MUVs. MUV effectiveness is also building momentum, where we saw over 38,000 digital units in the second quarter, up 5% compared to last year. Our teams have made great strides in our digital channels, with a Google rating of 4.7 out of 5 year to date, and renewed focus on reaching profitability and expanding market share. As emphasized by recent events with CDK, technology provides an avenue for sizable increases in productivity within our business. We are excited about the progress our Lithia UK platform is making with Pinewood Technologies as we continue to convert our stores there onto a single platform. Solutions such as Pinewood systems bring the ability to place customers and associates in the same ecosystem in order to increase productivity, substantially improve our current customer experience, and enhance our operational resiliency. This quarter, our investment in Pinewood Technologies generated a nice return, which reflects the market's positive view of the platform's possibilities. These strengths, combined with our mission, growth powered by people, financial discipline, and regenerative free cash flows, enable us to quickly respond to local market dynamics. This capability allows us to increase touch points throughout the customer's life cycle across our adjacencies and equips our stores with the tools to improve market share, loyalty, and ultimate profitability. Acquisitions continue to be a core competency, and we remain disciplined as we look for accretive opportunities that can improve our network focused on the United States. As a reminder, we target a minimum after-tax return on 15% or greater and acquire for 15%-30% of revenues or 3-6 times normalized EBITDA. We reiterate our expectations that estimated future annual acquired revenues will be in the range of $2 billion-$4 billion per year. To date, our acquisitions have yielded over 95% success rate and after-tax returns to over 25%, demonstrating that LAD is not your typical high-risk roll-up strategy. This quarter, we welcome 2 stores from the Sunrise Group in Tennessee and the Woodbridge Hyundai store located in the Greater Toronto Area to Lithia & Driveway. To date, in 2024, we have acquired $5.6 billion in annualized revenues. I would like to personally welcome all our new associates to the Lithia & Driveway family.... We are growth-oriented and see industry consolidation as a driver of strong long-term returns. With the capital engine we have built, we are able to deploy our free cash flows to drive the greatest returns responsive to market conditions. As discussed last quarter, we have adjusted our capital allocation targets to equally balance acquisitions and share buybacks. During the quarter, we repurchased $202 million, or 2.9% of our outstanding shares. We continue to monitor valuations on both acquisitions and share repurchase, and remain opportunistic. Weaving these elements together and assuming a normalized SAAR and GPU environment, we see more clearly a pathway to generating $2 of EPS for every $1 billion in revenue, as we illustrated in slide 14 of our investor presentation. The key factors underlying our future steady state are now totally within our control as follows: First, continuing to improve our operational performance by realizing the massive potential that we have built in our existing stores. This includes increasing our share of wallet through greater customer lifecycle interactions, sustained productivity gains, and growing each store's new, used, and after-sales market share. Increasing profitability with continued cost efficiencies, combined with the technology catalyst created by customers and team members coexisting in the same solutions, will help as well. Through these levers in our business, we see pathway to achieve SG&A as a percentage of gross profit with adjacencies in the mid-50% range. Second, optimizing our network by acquiring and driving high performance in larger automotive retail stores in the stronger profitability regions of the Southeast and South Central United States. We also expect further growth in our digital channels to increase our market share to ultimately reach a blended US market share of 5%. Today, we have combined new and used vehicle market share of 1.1%. Third, financing up to 20% of units with DFC and maturing beyond the headwinds associated with CECL reserves. Our financing operations achieved profitability in Q2 and is expecting to continue consistent profitability growth going forward. Fourth, through scale and size, drive down vendor pricing with solutions like Pinewood, improve corporate efficiencies to save costs, and lowering borrowing costs as we path towards an investment-grade credit rating. Fifth, maturing contributions from our horizontals, including fleet management, DMS software, charging infrastructure, and captive insurance. And finally, deliver ongoing return of capital to shareholders through increased share buybacks and dividends. We continue our journey in building a total mobility ecosystem and are well-positioned to maximize our unique and powerful scale and reach to deliver more frequent and richer customer experiences throughout the ownership lifecycle at global scale. Our original design elements are now firmly in place, and we look forward to focusing all of our attentions on execution to establish new levels of performance for our industry. Now, before we move on, I would like to share some organizational changes that I spoke to that are designed to support our evolving company, delivering at a high level of performance. I am very excited to announce the promotion of Adam Chamberlain to Chief Operating Officer. Adam's leadership as Chief Customer Officer and Eastern Regional President since 2022, combined with his extensive experience in automotive industry, positions him perfectly for this new role. Adam's commitment to improving operations and creating customer-centric culture will be instrumental in driving a more connected and convenient experience across our ecosystem. Dianna du Preez will step into the Chief Customer Officer role, partnering with Adam in operations, to continue to build out Driveway channel, along with our customer ecosystem and related experiences in our after-sales business. With these changes, Chris Holzshu will be handing the baton to Adam, allowing Chris to strengthen our ecosystem to spark growth and serve as the company appointee on the boards of Pinewood Technologies and Wheels. Chris has been instrumental in our growth, and we are excited to see his continuing contributions to expand our partnership and enhance the company. These changes provide the organizational leadership and design to deliver best-in-class results and continue to execute on our strategy, driving profitability through seamless customer experience across our unique ecosystem, and aligns our future success and differentiation. Congratulations, Dianna, Chris, and Adam. Thank you, Bryan. It's an honor to be stepping into this new role. I look forward to leading our drive to operational excellence and enhancing our focus on creating a customer-centric culture. Thank you also, Chris, for the operational foundation that you've built, and I'm excited to use this to springboard our company to the next level. We have the team and clear strategy to grow our market share and achieve store potential within a few years. I'm excited for the team to execute at high levels of performance and realize the massive profitability opportunity our ecosystem provides. Thank you, Adam, Dianna, Chris. I'm excited and looking forward to accelerating our journey to reach our potential.... Now I'd like to turn the call over to Tina. Thanks, Bryan, and thank you everyone joining us today. Our financing operations segment, primarily driven by DFC, continued its upward trajectory and achieved profitability earlier than expected, with income in the second quarter of $7.22 million, compared to a loss of $18.7 million in the second quarter of last year. This adjacency continues to grow, and we are seeing the benefits of diversity in our business model as we increase penetration rates and are now past many of the initial headwinds from CECL reserves. We continue to strategically balance yields, growth, and risk through our underwriting and focus on high credit quality loans at market rates of interest. The DFC portfolio balance has now grown to over $3.6 billion, with origination volumes of $562 million during the quarter. Originations were consistent this quarter in the prime credit quality band, similar with other quarters. Overall, our financing operations business continues to perform better than expected. We reiterate that we expect to continue profitability in 2024 and remain confident in the ability for financing operations to deliver long-term earnings growth with a fully scaled and seasoned portfolio. As a reminder, each loan originated by DFC is expected to contribute up to 3 x more profitability compared to traditional indirect lending and presents significant upside potential to our profitability and is a key element as we move toward our 2-1 EPS revenue target. Moving on to SG&A. Adjusted SG&A as a percentage of gross profit was 67.9% during the quarter, which reflects the impact of the CDK event, and 67% on a same-store basis, which excludes the higher expense profile of our UK business. We continue execution of our U.K. network optimization, including streamlining operations and divesting, merging, and closing targeted stores. Moving on to our balance sheet and cash flow performance. We reported Adjusted EBITDA of $435 million in the second quarter, driven by the impact of the CDK outage on unit sales, lower new vehicle GPUs as supply normalized and higher interest expense. We ended the quarter with net leverage of approximately 2.3 x, comfortably below our target of 3 x and our bank covenant requirements of 5.75 x. We maintain our financial discipline even with planned growth and target leverage below 3 x. These figures adjust for the impact of floor plan debt, which is unique to our industry and related to the financing of vehicle inventory. This financing is integral to our operations and collateralized by these assets. The industry treats the associated interest as an operating expense in EBITDA and excludes this debt from balance sheet leverage calculations. Similarly, we have ABS warehouse lines and issuances to capitalize DFC, which are also excluded from our leverage calculations. During the quarter, we generated free cash flows of $127 million. Free cash flows were impacted by declining EBITDA due to decreasing margins, the CDK outage in June, and an increase in capital expenditures compared to prior year, mainly related to construction at recently acquired locations to meet manufacturer requirements. Our capital allocation strategy focuses on the regenerative cash flows from our business, which preserves the quality of our balance sheet while supporting our growth initiatives and navigating today's complex environment. Earlier this year, we adjusted our capital allocation strategy to more closely balance acquisitions with shareholder returns. As a result of the rebalance focus in the second quarter, we repurchased 2.9% of our outstanding shares at a weighted average price of $256. Approximately $615 million remains available under our share repurchase authorization. Our vision and ability to deliver on synergies through acquisitive growth remains unchanged, and our team has the necessary infrastructure and tools to drive revenues and margins toward our long-term target of achieving $2 in EPS per $1 billion in revenue. Our culture and business is designed to grow and deliver consistent, strong performance. Coupled with the diverse and talented members of our team, this gives us the necessary foundation to achieve our plan and to continue driving value for our shareholders. This concludes our prepared remarks. With that, I'll turn the call over to the audience for questions. Operator? Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue, please press star two. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Ryan Sigdahl with Craig-Hallum. Hey, good morning, guys. Congrats, Adam. Thank you, Ryan. Good morning, Ryan. Bryan, I want to start with something you said in your prepared remarks. I believe I caught it right, that you said we're on pace for a nearly 50% increase in sequential EPS. I guess, am I looking at the $7.87 in the quarter into Q3 for that 50%? Or I guess some context around that statement would be helpful. Ryan, so the concept was, is that CDK cost us $1.10. Add the $1.10 onto the $7.87, and you get what our tracking would have been without the CDK event, which is almost 50% and, just a little over 40%, excluding the Pinewood impact. So that's Q2 versus Q1, correct? That 50%- Got it. Is what you're referring to? Exactly right. Okay. Yeah. Thank you. Thank you. Then looking at slide 14 for my follow-up, midterm, I believe is a new kind of statement in there, and it's for $40 billion-$50 billion of sales, which isn't far away from where you guys are today. So I guess any timeframe around what type of timeframe we're looking at for midterm? Or I guess, is it really just about reaching that revenue range, and you can get the $20-$30 of EPS? Yeah, I think when we think about midterm, we think 2-4 years, and if we think long term, it's 5-8 years. So I think that's the appropriate way to look at this. I think we're probably gonna be able to eclipse those numbers a little bit quicker, and as you saw in the quarter, we've got some pretty good tailwinds. We made some pretty good improvements in operations. And I think most importantly of the four peer groups that have been announced so far, our SG&A, as a percentage of gross, was the lowest on a same-store basis of all 4, which is much different than it was even last quarter. So you're starting to see the impact of the 60-day plan start to take hold, and that 60-day plan, you're gonna we're gonna be realizing most of that starting on July first, like we said last quarter. Good to see. I'll turn it over to the others. Thanks, guys. Good luck. Thanks, Ryan. Our next question is from Rajat Gupta with J.P. Morgan. Great. Thanks for taking the questions. I just had a couple. Just, you know, following up on the SG&A, and the cost reduction plan, you know, given, like, 60 days were complete on the $150 million, is there a good framework to think about, you know, SG&A to gross, in the third quarter? I think previously you had cited something like 64%-67%. Are we gonna be within that range in the third quarter itself, or is it gonna be, you know, later in the year or maybe next year? Maybe you could clarify that and I have a follow-up. Sure. Sure, Rajat, this is Bryan. Hope all's well. I think most importantly, when we think about SG&A going forward, I think what you're seeing is the momentum start to build. Remember this, in Q3, I would say that we'll probably end up somewhere around where we were this quarter in Q3 for two reasons. Even though right sizing and the 60-day plan are taking hold, okay, and I can give you some specifics on that in just a second, it's important to remember that we still have the possibility that new car GPUs are a little bit inflated still, so that could offset it, and by the time you hit September, October, you start to feel that going into the winter seasonality. I would also say this: So we did eclipse the first half of what we've now called the 60-day plan. We've earmarked $150 million, and we eclipsed that on July first. I got the report yesterday. We're now over $200 million that will be realized, primarily mostly in Q3, okay? With the remaining difference of about $100 million coming primarily from inventory reductions, which we've got lots of opportunity to improve there, and it may take us closer to the end of the year. So I would say, if we're lucky, we'll get to realize some of that in Q4, but definitely into 2025, we'll get the benefits of most of that. Got it. That's very clear. And then just from parts and services, clearly, you know, June was impacted, you know, by CDK. I was curious if you could give us a sense of the run rate you saw in April, May, and maybe, what are you seeing in July. And also, you know, I would love to know, like, if there's any opportunity to take more price, and perhaps some of the acquired stores over the last couple of years, you know, where they might not have been as proactive or opportunistic, you know, like the legacy stores. Thanks. Yeah. I think if we think about our potential, which I think is what you're indicating on the newly acquired stores, we've spent now, what, 4.5 years being able to add almost $25 billion in revenue of some good stores, but a lot of stores that have massive potential. I think to highlight that, if you get a little more detailed into our numbers, our Value Auto sales, which is over 9-year-old vehicles, is now only 12% of our mix. It used to be in the mid-twenties percent of our mix, meaning that we're not selling those things that Lithia typically does. So that's one of the opportunities. Obviously, in service, body and parts, there's further opportunities to be able to grow that, and obviously, the leverage of the whole gets there. Now, in terms of parts and service, which was the first part of your question, pre-CDK event, we were tracking in the mid to low single digits on a same-store sales basis. And then obviously, when you're handwriting ROs, it's a little bit more difficult that we did, we did get most of the business that we had during that 12-day period into the books in June. However, there was a little carryover for the first 10 days or so. So we are seeing a little bit of lift in July. However, July also has 2 extra days relative to last year, so anything that I give you, it automatically should be up about 8% or 9% just because of the fact that we've got 23 days instead of 21 days in July. Thanks, Rajat. Got it. Thank you. Our next question is from Bret Jordan with Jefferies. Hey, good morning, guys. ... Hi, Bret. Bryan, I think you just said the quote, "The possibility that new car GPUs are a little inflated still." Could you sort of talk about where you see that glide path now and maybe the cadence in the quarter on GPU? Sure, sure. We were fortunate that June ended up looking pretty darn good, and if you look sequentially quarter-over-quarter, we were basically the same as we were last quarter on our total vehicle GPU. Now, going back five years, okay, we were about $3,500-$3,700 in total GPUs, including F&I. Today, we sit at $4,700 still, okay? We do know that our F&I is structurally different than it was before, because of the ability to improve for five years. So we think that there's a couple hundred dollars there that would've taken our F&I from $1,600 up to about $1,800. Then the single biggest difference, and this is a big difference when you start to think about your SG&A as well, is we now have a good portion of our business in the high-margin regions of the Southeast and South Central, which has higher F&I, less regulation, a lot higher average store size, which really helps us a ton. So we think that our normalized total vehicle gross profit with F&I is somewhere between $4,200 and $4,500, meaning that if we're still sitting at $4,700, there's a chance that $200- $500 still has to come out, but we're gonna do everything in our power. And I would say this: we believe, we're starting to believe that we could be at the bottom, which is great. Now, we can actually build back up because everything that we're talking about does get diluted a little bit by this overhang of GPUs. But I do think that we've got the ability to be able to power through this now and be able to grow earnings and grow our same- store sales base from this point forward. Okay, and a quick question on the $10- Adam, Adam had a little bit more to share with you, too, on that, Brett. Okay. Hey, Bret. Hey, Bret. Yeah, just, just to add to that, you know, pre-COVID, we were seeing incentives of percentage of MSRP in the kind of 10%-11% range. Right now, we've, we've climbed kind of slowly through the year and running about 6%-6.5%. So if you take then the delta to pre-COVID levels of about 4%-5%, that could be another $2,000-$2,500, based on the average selling price of a car, sort of mid- to late 40s. Does that make sense? So there's kind of... There's kind of offset between the two, whether, whether we, we decrease a little bit sequentially, but we also expect with base supply, we expect some of the OEMs to be stepping up incentive levels as well. Okay. All right. On the CDK downtime, as far as business interruption insurance, or is there a piece of that you can bring back and maybe timing that... Is that gonna fall within this year if you get some recovery? Yeah. Brett, this is Tina. We do have cyber insurance, and obviously are gonna work with our carriers around that. It does take some time to put that claim together and work that through. So, you know, hopefully, there's something there, but we didn't record anything in the second quarter. All right. Thank you. Our next question is from John Murphy with Bank of America. Good morning, everybody. I just had two questions for you guys. You know, first, Bryan, on the Wheels Inc. acquisition or sort of tie-up here. I'm just curious, when you think about fleet management, you know, how does it kind of dovetail into the core business? Is it, you know, something where, you know, you sell the new vehicles and you manage them, and then you're able to sell them out of the fleet into your business and then retail them? I mean, what's the general take here on fleet management? Yeah, I may have—Chris, jump in a little bit on this, but let me take a shot at this, okay? I think most importantly in the relationship, we look at the synergies first. However, they have very high levels of service expectations for their drivers, and I challenge all of us on the Lithia and Driveway teams to be able to meet those demands because it is a different level of service than probably even what our retail customers get. So most importantly, for us to realize the synergies in the partnership with Wheels, which are primarily the ability to sell some new vehicles to them to help embellish the fleets that they service, okay? That's an important thing. They divest somewhere around 100,000+ vehicles a year, which, if we can do a good job and play pay market and build Driveway GreenCars in the Lithia, you know, channels, to be able to attract more customers, then obviously, we've now got a pipeline of vehicles that maybe competitors don't have. Ultimately, we'll have to be the highest payers for those, but those relationships can grow and build relationships and bond. In addition, they maintain all those cars, okay? And that is maintained through multiple different networks of retailers today. If we could get some of that business or all of that, it's a massive lift to service and parts long term. That's where we start with the synergies. The other neat part about it is, when I talk about the service level that they provide their drivers, we were inspired, Chris and I, when we met with them, what? Almost 16, 17 months ago now, at their ability to provide services to consumers, to their drivers, that we have never even contemplated, okay? They've got the relationships, the APIs in their apps, the pricing methodology and the contracts negotiated, where you get into more of subscription services, like what we try to do with service contracts, but these are big dollar amounts. Their business is based off small dollar amounts, such as selling people toll services, where a customer says, "I want my tolls to be done on my app. Okay, I want to pay for everything in one spot," rather than to have to go into the toll companies or those municipalities, they don't have to do that, okay? And they negotiate with municipalities, discounts off that, on that, and then pass some of the discounts along to their users. So it's pretty exciting. There's probably a half a dozen examples like that, that we believe could be monetizable within the Lithia & Driveway portals, to be able to access and be a, you know, a conduit to further growth in our F&I products or our subscription services, creating greater ties with our consumers and more touch points than what we currently have. That's incredibly helpful. And just a second question on interest rates, which is an obvious question, but you guys have not really addressed too much. I think, I mean, if you look at what's happened in the last 2.5 years, we have basically about a 400 basis point or maybe a little more, you know, rate increase to the auto consumer. And you know, everything that you've done over that timeframe is just better and better, and the industry is putting up record profits. There's no real discussion about how big a benefit that could be as rates come back down. You know, people look about, you know, ASPs and your GPUs, and say they're just not sustainable, but they've been sustainable and very strong in the face of that. You know, effectively, you're looking at something that's almost a 15% hickey or incremental to the ASP. So I'm just curious, you know, as on the good guy side of this, you know, how do you guys think about what the potential could be here? You know, I think you're maybe conservative on your GPU and ASP assumptions in the face of this. What's your take? John, this is Tina. I mean, on the interest side, and I'll start maybe with just our business, right? We obviously have several results of the variable debt, so there is a tailwind that we can get as rates get cut from that perspective. You know, around consumer affordability, you know, it's impacted, and we've talked about that in the past, around what that monthly payment is. And then I think that gives, you know, a good strength and tailwind for consumers going forward since they're monthly payment shoppers. And Bryan, I don't know if you have anything to add to that, but, you know, I think affordability is something we've always commented on, that's important, that drives our business. John, I think when we think it from an impact and magnitude to the organization, and I’m sitting here next to Adam, who spent a lot of his career with manufacturers. His focus and the operational team’s focus of our presidents and regional vice presidents, we have tons of opportunity in terms of inventory and being able to control inventory. And now that the ecosystem is fairly well built and our people are out there swinging, and they get this, we’re talking about almost a billion-dollar cut in total inventory between new and used by year-end, while still maintaining our same growth rates, okay? And if nothing else, improving velocity of our turns to be able to improve that. But, you know, we're talking that that's almost $100 million in interest rate savings at today's rate, compounded with the things that Tina just spoke to. Okay. Thank you very much, guys. Thanks, John. Our next question is from Douglas Dutton with Evercore. Hey, team. Thanks for taking my question here. Just had a question on the buyback. Obviously, a very strong quarter there, about $200 million in repo. You know, is that—what would you handicap as the new normal there going forward, Q3, Q4, and 2025? You know, do you think high eight-figure, low nine-figure buyback could be the norm, or are we going to go back to that, you know, 10%-12% level of free cash? Yeah, I mean, I mean, for us, this is Tina. When we think about capital allocation, it really is balancing valuations that we're seeing out there from an M&A perspective, as well as the stock price and how we can be opportunistic in it. And so, you know, from our perspective, it's always running that math as we look at what the opportunities are. M&A, as you know, is core to our business and our strategy, and we see, you know, really strong value and continuing to grow the footprint. Our focus is here in North America, especially in the United States, where there's lots of opportunity in the fragmented market. So you know, we don't really set sort of a set dollar amount on our approach. It's really looking at what is that opportunistic purchase that we can make, you know, compared to our stock versus the M&A activity out there, you know, from that perspective. Bryan, do you- Tina, you want me to embellish a little bit on that too? Keep this in mind as well, Doug. The marketplace is pricing acquisitions close to three years average earnings on inflated earnings. So when we look at that and the opportunity, that's, that's not that appealing because we typically look at pretty high returns on what we expect to be able to buy things through. We think that will subside, okay? And I think our standard line is: you already got that earnings, why do you expect us to pay for it? But we are, we are competitive buyers, and we'll continue to grow and find opportunistic acquisitions, expecting somewhere between $2 billion and $4 billion in the years to come. More importantly than that, the value that our stock trades at, now one of the, one of the lowest in the sector, so we would say we're at trough earnings potential, okay? We're also at trough multiples. So when we look at the fact that I, I can, I can look around this room with the six of us in here and confidently say that the $2 of EPS for every $1 billion of revenue is a very high probability of success in the, in the mid- to long-term range, okay? And you can see the reconciliation on page 14. We updated the slide because our forecasting is quite clear on it. We've now disseminated through the organization. It's clear that we're about $0.80 right now in that ratio, so about 0.8- 1 rather than a 2- 1. We've got somewhere around $0.60-$0.70 that we think can be realized in the potential within our stores, as well as the acquisitions that come from the capital that we've allocated and that I just walked through with you. Our financing operations of what Chuck talked about at maturity gets us to $0.22-$0.25 additional. We talk about capital efficiencies that Tina just spoke to, and the idea of using some of the capital for share repurchases, especially if we're going to be penalized this much, okay? That's another $0.25-$0.35, okay? Massive amounts as well. We haven't even got into the new adjacency that Chris is going to be working on with Wheels and Pinewood, and the things that we don't even really share with the world, that's the advantages of what Lithia & Driveway built in an ecosystem that is totally different than what anyone else in the space has. And now you're starting to see that realization come true. And as long as operations can keep going, which I know it will under Adam's leadership, that we'll be able to take that potential and realize the true potential of what we've built over the last 8-10 years. Awesome. I appreciate the detailed answer there, and you actually answered my follow-up as part of that. So I will turn it over. Thanks, team. Great, Doug. Thanks. Our next question is from Colin Langan with Wells Fargo. Oh, great. Thanks for taking my questions. Hi, Colin. Can I just follow up on your comments on sort of new GPU coming down only? I think you said $200-$500. That did include when you quoted at F&I. I think in the past, you've talked pretty clearly how you think new GPU, at least alone, would normalize at pre-COVID levels. So has that part of it changed? Is it just F&I is offsetting some of that? And if so- Sure, Colin. If it's changed, why, why, why has it changed? Thanks. In my comment, when I said we're at 4,700, and we're going to go to 40. We think we're going to be at 42-45, that was total GPU, okay, between new and used. We do believe that the way that you get there, that $200-$500, is some recovery of used vehicles, which are still at depressed levels, below where they were pre-COVID, okay? And if we can get more into the Value Auto cars at Lithia, we're making about $200 more on every Value Auto car and turning about 3-4 times as fast, okay, than what we do on a certified car. So we think that there's a lot of opportunity there. So it's probably, I would say, $300-$500 return of used vehicles and maybe $800-$1,000 drop still in new vehicles. If we can prevent that, then that's the upside, but I think we're real close to normalization at this stage. You know, not assuming some macro factor that changes things, okay? But we feel real comfortable with where we're sitting today, that it's, it's been a softer landing rather than a pretty abrupt landing. Got it. That's a helpful clarification. And then you mentioned a $120 CDK impact. I think the question earlier is, you know, recovery. How should we think about that instead of insurance recovery? I was sort of wondering, how much of that lost sales that's in that $110 in a quarter is a good portion recoverable? Is it most kinda just sort of lost and you're not going to see any sort of benefit into Q3 as maybe things are deferred? How should we be thinking about what kind of maybe a push in the next quarter? Good question, Colin. Yeah, so it was $1.10, and I would think that a portion of it, and I would say less than the majority, is probably recoverable. It may be as little as 10-20 cents. A lot of it is really service and parts that was backlogged in terms of production levels. But you have to remember this, even though CDK had this event, 55% of the industry wasn't on CDK in the United States, okay? So understand that, that customers don't typically wait around for 12-15 days to buy another car. They may wait around a little bit on service just because it may be their only service point, especially 40% of our stores are in isolated markets, okay? So that probably helps a little bit. But ultimately, those new and used car customers probably bought. Okay, most customers buy within 72 hours of making the decision to buy, even though they may research for 2-4 weeks. They typically buy when they want to buy. So I don't believe there's a ton of that $10 that's sitting out there, unfortunately. Got it. Very helpful. Thanks for taking my question. Thanks, Colin. Our next question is from Ron Josey with Citigroup. Hi, this is James Michael on for Ron. Two-part question here, focused on your evolving omni-channel strategies. So first up, can you talk about any shifts you're seeing in the broader online competitive environment, and any update on marketing ROI or underlying conversions across your Driveway and Green Cars digital sales channels? Secondly, how are you balancing investments to tackle that 50x online customer TAM, while at the same time, cutting burn rates by 40%? Thank you. Thanks for the question, James. I think when we think about our Green Cars and our Driveway channels. We're quite pleased to see that our top of funnel is staying pretty consistent while still reducing marketing budgets by over 50%. So we're pleased with that. We think that we're ready to turn the afterburners on both of those channels again, because what we were struggling with was customer retention and satisfaction, where we were at a 3.7 Google score last year. Year Year to date so far, we're at a 4.7. I congratulate our Green Cars and our Driveway teams massively. That's a massive shift, meaning that our ability to grow and improve what we used to call a golden ratio, which is the bottom of funnel relative to the top of funnel, can be massive. Now that we've got satisfied customers, what you get is repeat and referral business that start to come back now. Okay? That's how you access the 50x or 50 x more customers than what our core businesses typically touch. Okay, we are still seeing that 98%+ of our customers in Driveway and Green Cars are new to Lithia and Green Cars and Driveway. So that's, that's really exciting to still be able to have. But we built a channel with an experience that's transparent, convenient, and simple, and it's a great way to be able to access this, especially as our procurement of used cars and our ability to really leverage the network that we built start to take hold in the overall ecosystem. Very helpful. Thank you. Thanks, James. Our next question is a follow-up from Rajat Gupta with J.P. Morgan. Great. Thanks for squeezing me in again. I just had a question on the used car GPUs in the second quarter. It looks like the same- store numbers were up sequentially, but the overall numbers took a big dip. I mean, and I'm sure, like, UK had, like, a bit of a mixed impact, but I was curious, were there any kind of, like, one-time liquidation-type events in the UK that might have driven that reduction? And how should we think about just used car GPUs going forward? Thanks. Rajat, you nailed it. That was a great summation that you had there on used car GPUs. We do think that there's opportunity for growth, but again, operationally, we have to get back to selling and keeping those Value Auto cars that yield the big profits and turn so quickly. That will lift our overall GPUs back up, and they're way less sensitive to market conditions. But no, there wasn't any one- times or anything like that. That was true market conditions. Got it. Okay, thank you. Thanks, Rajat. Ladies and gentlemen, we've reached the end of the question and answer session. I'd like to turn the call back to Bryan DeBoer for closing remarks. Thank you, everyone, for joining us today. We really look forward to updating you again and seeing the impacts of the 60-day plan really take hold. We'll talk again in October for the third quarter results. Bye-bye. This concludes today's conference.