Good morning, and welcome to the Sonic Automotive Q2 2021 earnings conference call. This conference call is being recorded today, Thursday, July 29, 2021. Presentation materials, which management will be reviewing on the conference call, can be accessed at the company's website at ir.sonicautomotive.com. At this time, I would like to refer to the safe harbor statement under the Private Securities Litigation Reform Act of 1995. During this conference call, management may discuss financial projections, information or expectations about the company's products or market, or otherwise make statements about the future. Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission. In addition, management may discuss certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Please refer to the non-GAAP reconciliation tables in the company's current report on Form 8-K filed with the Securities and Exchange Commission earlier today. I would now like to introduce Mr. David Smith, Chief Executive Officer of Sonic Automotive. Mr. Smith, you may begin your conference. Thank you. Good morning, everyone, and welcome to Sonic Automotive's Q2 2021 earnings call. As she said, I'm David Smith, the company's CEO. Joining me on the call today is our President, Mr. Jeff Dyke, our CFO, Mr. Heath Byrd, our Executive Vice President of Operations, Mr. Thomas Keen, our Chief Digital Retail Officer, Mr. Steve Wittman, and our Vice President of Investor Relations, Mr. Danny Wieland. We're excited to publicly announce today record-breaking operating and financial performance for our company during the Q2 of 2021. This performance would not have been possible without the tremendous effort and execution by our valued Sonic and EchoPark teammates. Congratulations and thank you all. We'd also like to thank our customers, manufacturers, and vendor partners for helping us achieve another record quarter. During the Q2 of 2021, Sonic continued to deliver exceptional performance in our franchise dealership segment. We also posted a 4th consecutive quarter of record revenue in retail unit sales volume for our EchoPark business. On a consolidated basis, we reported all-time record quarterly revenues of $3.4 billion, up 59% year-over-year. When compared to Q2 2019 to exclude the effects of the onset of the pandemic, total revenues were up 28%. We generated all-time record quarterly income from continuing operations before taxes of $151 million, up 303% on a year-over-year basis and up 310% when compared to Q2 2019. We also reported all-time record quarterly earnings from continuing operations of $114 million or $2.63 per diluted share compared to Q2 2020 earnings from continuing operations of $31 million or $0.71 per diluted share, and adjusted earnings from continuing operations of $28 million or $0.64 per diluted share. These results reflect the strong consumer demand environment we've seen across all of our business lines since the latter part of 2020, but also showcase Sonic's continued ability to maximize operating efficiency at our franchise dealerships as well as the continued successful expansion of EchoPark's nationwide network. We are confident that our strong operating performance can be sustained throughout the balance of 2021 and well into 2022, and we are well-positioned to grow total annual revenues to $25 billion by 2025 while continuing to significantly increase our profitability. In our core franchise dealership segment, second quarter revenues were $2.8 billion, a 53% increase from last year, which reflects rebound in consumer demand since the height of the pandemic in 2020. Gross profit for the Q2 was $475 million, up 69% from the prior year. Total franchise pre-tax income was $165 million, an increase of $131 million or 375% compared to last year. Same-store franchise dealership revenues rose 55% on a year-over-year basis, while gross profit was up 74%. On a 2-year comparison, same-store franchise dealership revenues increased 25%, while gross profit grew 40% compared to the Q2 of 2019. Franchise dealership total variable gross per unit was nearly $5,100 per unit, up 43% year-over-year and up 58% from the Q2 of 2019, benefiting from strong vehicle margins and all-time record F&I per unit of $2,110. Our franchise dealership performance has been enhanced by execution against our plan, including discipline around SG&A spend, focus on our parts and service business, and our continued ability to efficiently manage our inventory. Looking forward, we remain committed to optimizing our franchise dealership business, both through organic growth initiatives and through strategic acquisitions. To that end, earlier this week, we completed acquisition of Subaru and Volkswagen franchises in Grand Junction, Colorado. These acquisitions enhance our brand portfolio and complement our overall growth strategy, and we expect to announce additional franchise dealership acquisitions in the near term as we drive toward the $25 billion in total revenues by 2025. Turning now to EchoPark, the combination of our below-market pricing, efficient inventory procurement, logistics, and reconditioning processes, and digital-enabled sales channel has allowed us to offer tremendous value to consumers, and our top-line growth reflects this growing brand recognition. We generated all-time record quarterly EchoPark revenues of $596 million, up 89% on a year-over-year basis, and a 104% increase compared to the Q2 of 2019. During the Q2, EchoPark achieved all-time record quarterly retail sales volume of nearly 21,300 units, up 61% year-over-year. On a two-year comparison, EchoPark retail unit volume increased 69% compared to the Q2 of 2019. We are already halfway to our EchoPark network expansion goal of opening 25 new locations in 2021. Based on our success to date and plans for future markets, we expect EchoPark to achieve 25% population coverage by the end of 2021, and 90% population coverage by 2025. Further driving our expansion opportunity, we have made excellent progress with our proprietary digital retail platform and are on track for a Q4 2021 launch at EchoPark. In the meantime, we continue to drive market share gains in our existing EchoPark markets, and we anticipate our market penetration and brand recognition will continue to grow rapidly over the next decade as we expand our nationwide distribution network. Looking now at market share in more detail, EchoPark has shown a consistent trajectory from launch, indicating that our expansion is performing to plan. Within EchoPark's 1 to 4-year-old vehicle category, markets with EchoPark locations open for less than 2 years average a 5% share, while markets with EchoPark locations open for 2 to 3 years average an 8% share, and markets with EchoPark locations open for more than 5 years average a 14% share. In addition, our below-market pricing drives sales opportunities on both ends of the 1 to 4-year-old spectrum, where we compare favorably on price to both new vehicles and 5 to 6-year-old vehicles, allowing us to expand our addressable market. In the longer term, we expect to continue to drive market share growth within EchoPark to an achievable target of 10% of that core market of 1 to 4-year-old vehicles network-wide. Which, combined with the adjacent vehicle age segments, positions the business for a potential volume of 2 million units annually at maturity. With our progress to date and the continuing development of our omnichannel retailing platform, we remain confident we can reach our interim goal of 575,000 units and $14 billion in EchoPark revenues by 2025. In addition to our top-line results and continued expansion of EchoPark, our team remains committed to improving operating margins and managing expenses throughout the organization. In the Q2 of 2021, total SG&A expenses as a percentage of gross profit were 62.8%, an all-time quarterly record, and a 1,210 basis point decrease from 74.9% in the Q2 of 2020. Franchise segment SG&A expenses as a percentage of gross profit were just 58.1% in the Q2, a 1,660 basis point decrease from 74.7% in the Q2 of 2020. On a two-year comparison, this represents a 1,900 basis point improvement from 77.1% in the Q2 of 2019. With this expense leverage, we realized second quarter adjusted EBITDA margin of 5.7%, up 220 basis points year-over-year, and a 280 basis point improvement compared to the Q2 of 2019. These results reflect the permanent expense reductions we had previously communicated. While current operating results reflect a higher gross margin environment due to constraints on new vehicle inventory, we do not expect new vehicle GPUs to fully regress to pre-COVID levels once inventories begin to build. Assuming normalized new vehicle GPU of $2,500 and used vehicle GPU of $1,300, without assuming additional unit sales volume or further parts and service growth, our pro forma franchise dealerships SG&A is expected to be in the 62%-63% range. Representing a 1,000 basis point improvement from pre-COVID levels as a result of the permanent changes in our expense structure. In addition to operating expense leverage, we continue to focus on strengthening our balance sheet. We ended the Q2 with over $600 million in available liquidity, including approximately $315 million in cash and deposit balances on hand. During the early part of the quarter, as we mentioned on our last earnings call, the company closed a new 4-year, $1.8 billion credit facility, which allowed us to extend our debt maturities, improved our borrowing costs, and raised our total available liquidity and footprint capacity at attractive terms. With our available liquidity resources, we believe Sonic is well positioned to continue executing on our EchoPark growth plans, while also strategically investing in the future of our franchise dealership business, and continuing to return capital to shareholders through our dividend and share repurchase programs. I'm pleased to report that our board of directors approved a quarterly cash dividend of $0.12 per share, payable on 15 October 2021, to all stockholders of record on 15 September 2021. In closing, our all-time record quarterly results demonstrate the company's continued focus on execution with strong franchise dealership performance, the continued expansion of EchoPark's nationwide footprint, and our success in maximizing operating efficiency throughout our organization, driving long-term earnings growth potential. Our strategic growth plan is based on demonstrating unique value to current and future customers through our pricing, guest experience, and growing nationwide reach at both EchoPark and our franchise dealerships. We believe that this consumer-focused approach will continue to deliver strong results for our shareholders and maintain Sonic and EchoPark's position as leaders in an evolving automotive retail environment. Now, before we turn the call over for your questions, I'd like to comment on today's announcement that the company has initiated a review process to evaluate potential strategic alternatives for our EchoPark business. As detailed in our press release, working together with our advisors and our board, we will explore a range of value-creating alternatives for the business. No timetable has been established for the completion of the review. Allow me to remind you that there can be no assurance of a specific action or outcome. As the review progresses, we will remain committed to executing our accelerated expansion plan for EchoPark, bringing this unique and competitive offering to new markets to deliver value for our guests, while also supporting the teammates that are central to cultivating the EchoPark experience. We are focused on continuing to build upon the positive momentum in the business and remain confident in the long-term growth opportunity ahead. As the review is ongoing, we will not speculate on any particular outcome or make any further comments related to the process. This concludes our opening remarks. We look forward to answering any questions you may have. Thank you very much. Our first question comes from the line of Rick Nelson with Stephens. Please go ahead. Thanks. Good morning. Great quarter. I'd like to follow up on this strategic alternative. I'm curious what is prompting that review at this time? Rick, this is Steve. We're not going to comment any further than the statement that both is in the press release as well as in the opening statements from David. Once the evaluation is complete, there may be additional comments. At this point, I just wanted to make everyone aware that that process was underway. Got you. Thanks for that. On the franchise side, we saw pretty meaningful expansion. On the EchoPark side, we saw declines in that GPU. Can you help reconcile those differences? Yeah, Rick. This is kind of a long-winded answer, but why don't we start, and let me refer you to slide 22 of the investor presentation that we released this morning. I think that'll really help us answer this question. I'll give you a minute or a second to get there. As you can see on the slide, when you look at weeks 1 through 9, we had really normal market conditions and normal EchoPark margins. Beginning in week 10, wholesale prices rose above average market retail prices. In my career, which is 25 years doing this, the market's never seen a wholesale pricing version of this length or magnitude at all. In early April, we then decided to make a strategic decision to drive volume and market share, but also mitigate losses by adjusting our pricing strategy up. As we move into the Q3, market conditions are now beginning to return to normal, and we've returned to our normal pricing strategy that we were running in the Q1. However, we do have a 40+ current day supply of inventory that's driven by new store openings. Traditionally, we run 30-day supply, 20 on the front line and 10 in the pipeline. We expect margin pressure to continue through August. As we approach the end of the third quarter, we expect EchoPark margins to begin to normalize. Q4 margins are going to look a lot like the Q1, and as a result of the actions that we've taken, we do remain on track to sell 100,000 to 105,000 cars that we told the Street that we would sell at the beginning of the year. When you look on the franchise side, trade-ins make up a big percentage of our volume, about 60%. We're obviously trading for cars a lot cheaper than we're buying cars at the wholesale line. About 88% of our cars come from the auctions, at the EchoPark level, where a much smaller percentage of our cars come at the franchise dealerships. That speaks for the industry as well. Everybody's got higher margins. The exposure for EchoPark is that we buy a lot of wholesale cars at auctions, and we keep a short day supply. We're going to run into margin events when you have an event like this. The good news is these events have happened one time in my 25 years and probably have happened one time in anybody that's on this call, as well. It's not a concern for us, as we move forward. We believe things will return back to normal, and getting closer to normal as we go into the month of September, certainly into the Q4 and as we move on into 2022. Gotcha. Thanks for that, Jeff. Curious also if you're expecting losses in Q3 and Q4. Do we shift to profitability? Any sort of forecasts are helpful. Yeah. Here's how you would look at it. I think that the losses that you see and saw in the Q2, they're going to kind of be relative in the month of July. We'll get a little better, but probably still show a loss in August. September should then turn positive, and then the Q4, we'll be back to the run rates that you saw in the Q1. That overhang that we had, and we wouldn't obviously have an overhang if we weren't opening so many stores, but we're buying a lot of inventory right now, and we're just not going to adjust our strategy because of an event that happens once in a lifetime. It's not something we're going to do. It slows the entire business down. We're going to continue to grow our shares, David said in his opening comment. We have a 5-year-old store. Our most mature store in our most mature market's got 18% share in the Denver market, and we're averaging really 14% share, in anything over 5 years. We're not going to slow that down for a one-time event. We think we've made the right decisions there. A little bumpy road for July, August. Things get a lot better as September gets here, and then back to normal in the Q4. Thanks for that. Also noticed, you have an acquisition announcement, today. That's true. You could speak to that and your appetite now to acquire on the franchise side? Look, we're bullish on the franchise side of the business and the EchoPark side of the business. There are a lot of deals out there right now. We're strategically buying deals that fit our footprint or markets that we're going into. New markets, like we announced with Grand Junction, although we're in the state of Colorado. There are a lot of opportunities out there right now, and as David said his opening statement, you're going to see more purchases from us on the franchise side as we move through the rest of this calendar year. Great. Thanks. Good luck as we push forward. Thank you. Thanks so much. Thank you. Your next question comes from the line of Rajiv Gupta with JPMorgan. Great. Thanks for taking the question. I know you don't want to give too much color on the strategic review, but, in the event that there is a separation of the EchoPark business that might happen as one of the possibilities, is there any way you can frame for us or quantify the dissynergies that would be there in that event? Any brief color on that would be helpful. I'll follow up. We appreciate the question, but we really can't comment further. Okay. Anything qualitative to keep in mind, in terms of shared resources or auctions or anything like that? Rajiv, this is Heath. Again, we're not going to comment on any of the details. I can just assure you that just like every decision that we make in this company, our focus is on increasing shareholder value and releasing as much value in this company as we can. That's the driver of every decision we make. Other than that, we just won't get into details of that analysis. No worries. I had to try. On the 2 million units at maturity, what kind of EBITDA margin profile can the business run at? The 2025 targets imply like somewhere in the low single digits, but you're still ramping up stores at that point. Any color on what kind of EBITDA margins, or profitability of that business can be at maturity? Yeah, you're going to continue to see expansion of that in particular based on what we projected in 2025. That's based on an immature store set. As we run those out towards maturity and you get a more mature store base, you'll see continued expansion beyond what that is there. We have not quantified what that opportunity or upside is, I think. The basis for EchoPark is that we are able to scale and leverage those expenses dramatically better and more efficiently than we are on the franchise side. We should see meaningful upside to EBITDA margin as you get north of the 575,000 units and continue to mature the store base. To Danny's point, we always talked about how the expenses at EchoPark are more fixed, and so obviously that's going to drive a higher EBITDA margin as we scale. Got it. Any color on what the matured stores, what kind of EBITDA margin they're at? Obviously, keep taking into account the one-time hit this quarter on GPU, but any reference to that? I guess the best way to look at it is SG&A is going to be in the mid-50% to 60% range, somewhere in that ballpark for a mature store. Got it. Okay. If you go back to what our 2 most mature markets, Denver and Dallas, did in 2019 pre-COVID, each of those markets did $12 million in pre-tax. If you think about them running at a, I think that year was 1,300, 1,400 units a month on average. If you look at it from that perspective, EBITDA is going to be somewhere north of that $12 million into that revenue base. During that timeframe, the share in those markets was lower. Denver's running last month, the month of June, we ran 18% market share there, so it's a much more mature market now. We don't know where that share can go. We're calling out 10%, which is driving the $2 million. Our stores are, at 5 years, at 14%, so there's certainly upside to that number, and I think that's a critical thing to think about as we move forward. Got it. Just this one last one. On the SG&A side you gave us some color on the franchise business in the context of what GPUs would look like. Just looking at the Q2 number, the 58% for franchise that's chained into gross. It looks like the leverage or the drop-through to the bottom line from the gross profit increase just seems to be much higher for you versus what we've seen at some of the peers. Almost like 75%-80% drop-through of that gross profit benefit. Is there something different or are there any changes that you had made over the last year when you were laying off some staff that, has there been any change in terms of the fixed versus variable comp model or anything of that sort that would lead to this kind of a drop-through? Just curious if you can share any thoughts there. That'll be all. Thanks. Yes. This is Heath. A couple of things. I missed a little bit of it, but I just want to And David hit on it very well in the opening comments. First of all, on a high level, I think we had actually had guidance in February of around 73% for 2021. For the year, we're running at 66%, 67%. For this year, we absolutely expect that to be our SG&A percentage gross at that level, not the higher 73%. If you look forward, David articulated this, and try to normalize what we expect to see in 2022, where we still believe the GPU is going to be elevated on new. You normalize the used, we are looking at a 62%, and that includes EchoPark and the franchise business. As the EchoPark matures, we can actually improve that even better than the 62% range. A couple of things that are driving the throughput. If you look at our productivity on our sales associates, for example, we used to sell 12 units per month per associate before these cuts would be put in place and these efficiencies. Now we're running 18, 19. That's a fundamental change that you can see even at these new levels we're maintaining. That's a big part of it, that is structural changes that have been made in the organization. The other one is the centralization of advertising, a huge component to our SG&A that is a structural change that's allowing that throughput to happen. We're spending a lot less on advertising, and it's even more effective. Those are two of the biggest structural changes that are driving that throughput. It's not just a gross driven event. It's a gross and expense driven event, and we made a big deal out of that during COVID, saying we really did take a lot of expense out of this business. I think we quoted $84 million annually that's come out. It's running higher than that. It's permanent, as David said in his opening statement. When you're looking at your models and forecasting for next year, you really got to take that into consideration in terms of how you look at the business. The great news there is, and I don't know if you mentioned this or not, Heath, but our California market is really underperforming in a big way compared to the rest of the markets. The market has just not come back as fast due to COVID. If you look at our new car volume in California, it underperformed the rest of our stores by 1,000 basis points. Used car volume down by 1,400 basis points, fixed ops 600 basis points. Total revenue is down by 1,300 basis points and gross profit down by 1,000. As California opens back up, it's going to be fantastic for us. We've got a big chunk of our stores and our business out there, that's going to further enhance the gross portfolio, but it's also going to continue to lever the SG&A percentage gain. It really is coming from both sides. The great news is we can have the new car margins return. I don't think they're going to return to pre-COVID levels again. I think the manufacturers are doing a smart job by keeping inventories tight, and they'll continue to do that even as we move forward. If you do model a $2,500 PVR, which is still well ahead of where we were pre-COVID, you get to have the gross growth and you get the big expense reductions that are permanent, again, in place. That's just going to keep the SG&A coming down. You add on top of that the performance of EchoPark getting back out of this crazy inversion time that we went through, and the picture just looks really, really good for us. That's why, this is David, and that's why I noted that assuming no additional unit sales volume in that or further parts and service growth, we're being conservative in these projections. I think that when I look at some of the models I've seen from some of the analysts on buy and sell side, from our perspective, I think what is being missed is the power of that SG&A reduction staying in place. I also think that some people are assuming that we go back to pre-COVID GPUs, which from our perspective, as Jeff mentioned, we think that new will be elevated continuing. At least from our company specifically, the models are not giving EchoPark any credit. As we've mentioned many times, 2022 is the tipping point of EchoPark. That's when we are going to be opening less stores than we have opened. I think when we look at some models that really don't jive with ours, those are the things I think they're missing. David Smith. Hello? Yeah, we can hear you. Go ahead. Yeah, I think I missed the last few seconds. I maybe got off, but I can read the transcripts. Thanks for the color. Yeah. You bet. Say that again about the store openings versus- Yeah, I was just saying that as we look at some of the models from some of our buy and sell side analysts, when it doesn't really jive with our perspective, the things that I think are missing are the understanding of the permanent reductions that will continue regardless of any increase in volume, number one. Number two, the assumption that new GPU goes back, that the manufacturers go back to the 60-day supply, 65-day supply, and the new GPU goes back to 2019. From our conversations, as Jeff mentioned, that's not going to happen. Those will be elevated continuing. The impact of California, at least specifically for us, and what is going to happen to the H2 of 2021 and into 2022. Again, EchoPark. EchoPark is that 2022 is our inflection point or tipping point where we are opening less stores than we have mature. As we've stated before, we believe that is when the profitability, even though we have it today, it starts growing exponentially because you've got so many mature stores in place. Got it. Great. Thanks for all the color and good luck. You bet. Thank you. Your next question comes from the line of John Murphy with Bank of America. Good morning, guys. You answered a lot of my questions, but I'll ask just one or two more. You mentioned on 2 million units is sort of the target for EchoPark at maturity, and I think, Jeff, you were saying there's some markets and that's based on 10% market share on your target vehicles. There are some markets you're 14%-15%. Could this be the kind of thing where this is not 2 million, it's 3 million, and then if you decide to expand in the iceberg of maybe slightly older vehicles or expanding the offering, that you might be something significantly larger than that? How are you pegging this 2 million other than just 10%? What's the opportunity beyond maybe that? If we take the 5-year-old store average right now, it's 14%. The number's bigger than $2 million. It could be $3 million, $4 million. At the end of the day, we're always looking to take the inventory process that we have at EchoPark and the pricing model and to expand that. I would think of it differently. I don't think we expand into 5, 6, 7, 8-year-old cars because it brings a lot of complexity to the model that really doesn't fit our model. Adds cost and things of that nature that just doesn't fit the model. What you might think about is instead of the traditional EchoPark, less this crazy time, traditional EchoPark average retail price being $20,000 to $21,000, you might look at something with, okay, can they expand that to a $35,000 to $40,000 car? Because that's not an average retail selling price we come anywhere near. We're always looking at how can we take this great model that we have, the efficiency that we have with the model, which is really exceptional, and one of a kind, I think, in our industry, and expand that to grow EchoPark to further levels. Yeah, the 2 million is a good, safe number for us because we know we're going to be above 10% in terms of market share, and we understand what our defined market is. It's a smaller swim lane. It's not the traditional 40 million to 43 million cars being sold every year. It's a smaller lane. We can own a much larger percentage of that lane than what some of our competitors are talking about of the overall market. I think you're thinking right, and it's absolutely the way that we're thinking. The other thing to think about, because of our pricing strategy, part of that 2 million, which could be a lot higher numbers, we're pulling that 5 and 6-year-old buyer into the 1 to 4-year-old because we are priced so low that now they can afford a 1 to 4 rather than a 5 to 6. Yeah. That Park TAM. You're also pulling from new car buyers, because I've got a 1-to-4-year-old car with a condition of 4 to 4.5, it's just as good as a new car. I'm pulling from that 13 million as well. We feel like we're going to have some migration from those other populations into the 1 to 4 because of the low price. We do today. That's part of our volume today, and we expect that to continue to expand with our pricing model as we move forward. We see that happening, and that's part of the big share, like I quoted for Denver, that we've got an 18% market share there in the 1 to 4 category, but it includes some 5 and 6-year-old vehicle buyers because the price is so low, and it includes some new car buyers because we're 40% price below the new car traditional numbers. All in, a great opportunity for us. Again, I think you're thinking right. Just a second question. I'm not sure you're going to be willing to answer this, but you said 88% of EchoPark units are sourced from auction. Will that be the case over time? Are the other 12% flowing from your franchised stores? I'm just trying to understand that inventory. Sourcing 2 million units, you start getting into just simply big numbers, big chunks of the market. Is the sourcing strategy going to stay the same over time at EchoPark? Yeah. It's really not a strategy. At the end of the day, we buy as many cars off the street as we want. Just think about it, there's not a lot of customers trading in a 1 or 2-year-old car, and they're still upside down, have negative equity, whatever. It's just not as big a swimming pool as you might see for our franchise stores or some of our competitors where we're selling 0 to 10-year-old cars, and the average car on the road is 8, 9 years old, and we trade those cars all the time. It drives the margin that you see on the franchise side. Yeah, I think it can expand. If you look when we first started, that number was 6, 7, 8%. We've got it up to 12%. I think we have some opportunities here, but I don't think it's going to be as big a percentage overall of our sellable inventory as you might see at some of our competitor set or even our own franchise stores. We don't take cars from the franchise stores and move to EchoPark. We do the other way. Cars that don't fit the EchoPark model, we send to our franchise stores, and they benefit greatly from that. It's certainly every day a topic of conversation for us is how do we increase to 12%, because the margins are significantly better on a street purchase than they are buying a car at the auction. One other point, I hear people all the time talking about not being able to buy inventory. We've never had a problem buying inventory. We haven't had a problem. When everybody says inventory is tight right now, we don't have a problem buying inventory. You got to pay for it, and that's going to adjust the margins. What we're not going to let that do is slow us down. The business is strong enough now that we're going to continue to power through. When you have events like we had over the summer here, it's not a big enough event to worry us. We're going to continue to power through, drive our market share, because we come out the other side of this, we're going to be a lot stronger for it. We don't have any problems getting inventory. I want to make sure that I get that point across. Yeah. Okay. This is David. Something to think about it and related to that is, as we grow our brand, our EchoPark brand in markets, you can see that our market share increases, but so do the number of quality trade-ins that we get that actually fit the EchoPark model that we then go and resell. We definitely see those numbers growing. Okay. Just lastly, there's the core part of the business, which is still very good business outside EchoPark. Do you have any designs about where that lands? You've given us an idea of 2 million units, Obviously, there's some upside there on EchoPark. Where do you think that the core business, the core franchise business goes over time? How do you think about where that could top out or where you go when you're making acquisitions? Well, there's a number of ways to answer that, and I know Jeff will have some comments on that. The franchise business is still extremely fragmented in this country. There's still tremendous opportunity for growth in that area, which we alluded to that in our opening comments. John, we've just never been in a position to grow, right? We just haven't had the liquidity. We've been shoring up our business. This team's been together since the end of 2018, we've positioned the company now from a liquidity perspective, we can kind of do what we need to do to grow in the franchise business and continue to grow EchoPark. Now you're going to see us dive in there. We said it in the opening. We've got more franchises coming. We're going to grow the business. It's a great business. Like you said, it's highly profitable. We really have our house in order when it comes to our liquidity, and Heath can comment on that here in just a second. From an operational perspective, the turnover from our general manager turnover is 5% or less. The company has really strengthened its performance. Our playbook processes have matured. It's time to grow the business. We're in a position to do that now. There's been some deals that we just want to emphasize, too, that we absolutely look at the ROI of all of our investments. So there have been some deals that we've passed on that just did not represent a great investment versus the investment in EchoPark. We think as we move forward, we're seeing more and more opportunities for great acquisitions that are accretive and will add a lot of value for our shareholders. If you look at from a balance sheet perspective, our leverage ratio is extremely low. Our credit profile is improving from the agencies on a daily basis. We've got readily available access to the capital markets for additional needs if necessary. Actually, just a follow on to Zane. You look at AutoNation, it's about 2% of the market. You got Lithia making acquisitions pretty aggressively, talking about getting about 5% of the market. Would you ever, I can't put you on the spot right now because I'm sure, well, you may have some ideas about this, so I'd certainly ask, of where you could be as a percentage of the new market, right? If you're sitting here saying, "Hey, I can be 10% of the addressable market I'm going after in EchoPark." Could you say 2, 3, 4, 5% in the new vehicle market? Is that something you'd be willing to put out at some point as a target? Is this going to be just more opportunistic and you're going to roll up as you see fit over time? Well, look, we just dove back in the pool, right? That's a number I'm sure that we'll come with, because there's just a ton of buying opportunities out there right now, and you see our competitors buying, and you'll see us do the same, in particular between now and the end of the year. Yeah, I think at some point in time we can define that. We're really kind of starting to hit our stride from an M&A perspective and so give us a few quarters and we'll begin talking a little bit more about that as we kind of define how many of these stores we're going to buy and where we're headed with this. Okay, great. Thank you very much, guys. You bet. Thank you. Your next question comes from the line of Mark Jordan with Jefferies. Good morning. Thank you for taking my questions. You bet. I guess following up on the M&A question, can you kind of talk about what multiples you're seeing now and how they compare to historical trends? They're different all over. It really depends on the brand and the markets that you're in. If you're going to go out and buy a Porsche store, you're going to pay north of a 10 multiple. If you're buying some of the domestic or imports, it's 5.5, 6, somewhere in that ballpark we're seeing. It really does depend on the market, the city. There's just so many different issues with narrowing it down on a kind of a nationwide basis as those numbers are different all over the place. I think you would hear that from our competitive set as well. Okay, great. I guess following up on the EchoPark GPU question from earlier. It looks like in the quarter you took some pricing up, I think above market to kind of offset some of those wholesale headwinds. When we get back to more of a normal sourcing environment, is this may be kind of an opportunity to rethink the pricing model or maybe just be a little bit above where you have been historically for EchoPark? It's an interesting conversation because what it showed in this timeframe is the strength of the brand. We got as high as 108%, 9%, 10% of the market during the timeframe trying to balance the loss and maintain our numbers in terms of share. Down the road, as the brand strengthens and the guest gets to experience more than just price, but they get to experience just the great experience that you get coming into the store. Then we introduce in the fourth quarter our digital retailing platform, and our new websites, which is going to be fantastic. There is definitely going to be opportunity for margin expansion. We have not defined that yet, but you will continue to see us stay very aggressive versus the market. That's our bread and butter. Could we go from 2,500 to 3,000 below market down to 2,000 below market and still get the same kind of market share that we're seeing today? We will definitely play with those numbers as the brand expands across the country and becomes a nationwide name brand. I might have Steve Wittman just comment quickly on our digital retailing platform. Yeah, sure. We're taking a two-pronged approach to e-commerce here at Sonic Automotive. In parallel, we are improving echopark.com and building our proprietary digital retailing tool. Our proprietary digital retailing tool is on track to launch in Q4 of this year. We have a big team of over 50 people of designers, developers, and product owners who are working on that right now. That's really set to deliver a true end-to-end experience for the consumer without having a lot of human intervention like a lot of our other tools out there have. In parallel, we're improving echopark.com. echopark.com visits are up 156% versus year ago. Leads are up 111% versus year ago, and our cars sold from our websites are up 74% versus year ago. We're improving echopark.com every single day. We've actually, for the first time in May and then June and July, we actually generated more leads from echopark.com than we did from our third parties. Just shows the strength of the website and also shows the strength of our brand. Great. Thanks, Steve. We have no further questions at this time. I will turn the conference back over to management for any closing remarks. Thank you everyone for joining us, and have a great rest of your week. Thank you. Ladies and gentlemen, that will conclude today's call. Thank you all for joining. You may now disconnect.