Good morning, and welcome to the Sonic Automotive second quarter 2023 earnings conference call. This conference call is being recorded today, Thursday, July 27, 2023. Presentation materials which accompany management's discussion 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 very much, good morning, everyone, welcome, as she said, to the Sonic Automotive second quarter 2023 earnings call. Again, I'm David Smith, the company's Chairman and CEO. Joining me on the call today is Mr. Jeff Dyke, our President, our CFO, Mr. Heath Byrd, our EchoPark Chief Operating Officer, Mr. Tim Keane, our Chief Digital Retail Officer, Mr. Steve Whitman, and our Vice President of Investor Relations, Mr. Danny Wieland. Earlier this morning, Sonic Automotive reported second quarter financial results, including record quarterly total revenues of $3.7 billion, a 4% increase from last year. Second quarter EPS was $0.65 per share, which includes the effect of $75 million in charges related to our previously announced plan to indefinitely suspend operations at eight EchoPark retail hubs and 14 delivery and buy centers, as well as three Northwest Motorsport stores in the EchoPark segment, offset partially by a $21 million gain on the disposal of three franchise dealerships. Excluding these items, Adjusted EPS was $1.83 per share, a decrease from $2.45 in the prior year, due primarily to normalizing new vehicle margins and higher interest rates. We are proud of our team's performance in the second quarter, and we remain focused on maximizing profitability in the near term, while positioning Sonic to achieve our long-term strategic goals. We would like to thank our amazing teammates, manufacturer and lending partners, and of course, our customers for their continued support. Turning now to the second quarter results, the industry continued to see improvement in new vehicle production and inventory levels, which resulted in incremental new vehicle sales volume and lower new vehicle gross profit per unit sequentially, as expected. This decline in new vehicle GPUs should continue as we progress through the second half of 2023 and into 2024, but we continue to believe that the new normal level of new vehicle GPU will remain structurally higher than it was pre-pandemic. In the used vehicle business, wholesale auction prices for three-year-old vehicles decreased 6% in the second quarter, unwinding the surprise increase we saw in the first quarter. This is important. July month to date, three-year-old wholesale prices are down nearly 4%, consistent with our expectations for continued price normalization in the third and fourth quarters, which will ultimately benefit consumer affordability and demand for used vehicles once retail pricing follows the wholesale trend in the same direction. Lower lease turn-ins at our franchise dealerships continued to limit our used vehicle volume in the second quarter. We were able to maintain higher used GPUs to somewhat offset the lower volume. We expect used vehicle prices to decline further in the remainder of the year. Now to our franchise dealerships. Our franchise dealerships F&I gross profit per unit improved $156 sequentially from the first quarter to an all-time record $2,516 per unit. We reiterate our previously issued guidance for full year 2023, franchised F&I per unit at or above $2,400 per unit. Our parts and service, or fixed operations business, remains very strong, with another quarter of all-time record fixed ops gross profit at our franchise dealerships up 9% year-over-year, driven by 11% growth in our customer pay business. We are proud of the success our team has had in this area. We believe there are remaining opportunities to optimize our fixed ops business as we progress through 2023. Turning to the EchoPark segment. In this morning's press release, as I mentioned, we provided additional details around the previously announced suspension of operations at certain EchoPark locations and the closure of three Northwest Motorsport locations. In total, we suspended operations at eight EchoPark retail hubs and 14 related EchoPark delivery and buy centers, as well as three Northwest Motorsport stores. In the second quarter, we suspended operations, the suspended operations represented 14% of our EchoPark segment unit sales volume, approximately $74 million in revenues, and incurred a segment loss of $13.2 million. Going forward, we expect $2.5 million-$3 million in ongoing quarterly expenses associated with these non-operating locations. Suspending operations at these stores was a very difficult but necessary decision, given the current used vehicle market conditions and our near-term outlook. As we've continued to develop the EchoPark model, our team has learned how to adapt the business to the unique challenges we have faced over the past three years. While we believe the delivery and buy centers remain a key opportunity for EchoPark growth down the road, the success of the delivery center model is dependent upon broader EchoPark brand awareness to drive organic e-commerce traffic to echopark.com and generate sufficient delivery center sales volume to meet our required returns. In light of the inventory constraints we are facing in the current environment, we do not feel it is prudent to invest in this level of brand marketing at this time. However, as market conditions improve, we'll begin to roll out our EchoPark national branding strategy, which will enable us to selectively invest in delivery center growth to facilitate our goal of reaching 90% of the U.S. population at maturity. We believe that the decision to suspend operations at these stores will substantially improve our near-term financial performance and allow us to reach our goal of break-even EchoPark segment Adjusted EBITDA by the first quarter of 2024, while maintaining the viability of our long-term strategic plan for EchoPark once used market conditions normalize. Turning back to our second quarter EchoPark financial results, we reported record revenues of $601 million and gross profit of $27 million, down 44%, due in part to the volatility in wholesale auction pricing I mentioned earlier. EchoPark segment retail unit sales volume for the quarter was approximately 17,100 units, up 4% year-over-year. Second quarter EchoPark segment Adjusted EBITDA was a loss of $31.8 million, compared to an Adjusted EBITDA loss of $36.9 million in the first quarter and $27.3 million in the year ago period. We expect to see continued improvement in Adjusted EBITDA losses through the second half of 2023, both due to the reduced store footprint and through improved profitability at our remaining operating stores, as we are better able to allocate inventory and management resources across the entire platform. As for our Powersports segment, the second quarter kicked off the summer Powersports selling season, and we expect peak seasonal profitability in the third quarter, highlighted by the Sturgis Motorcycle Rally next month. We are continuing to identify operational synergies with our growing Powersports network, and we remain optimistic about the future growth opportunities in this adjacent retail sector. Finally, turning now to our balance sheet. We ended the fourth quarter with $864 million in available liquidity, including $407 million in combined cash and floor plan deposits on hand. Additionally, I'm pleased to report today that our board of directors approved a quarterly cash dividend of $0.29 per share, payable on October 13, 2023, to all stockholders of record on September 15, 2023. In closing, our team remains focused on near-term execution and adapting to changes in the automotive retail environment and macroeconomic backdrop, while making strategic decisions to maximize long-term returns. Furthermore, we believe any industry-driven margin headwinds we may face in the franchise business should be a tailwind to EchoPark segment revenue growth and profitability, minimizing the earnings downside to our consolidated Sonic results over time. This concludes our opening remarks, and we look forward to answering any questions you may have. Thank you. Thank you. Ladies and gentlemen, the floor is now open for questions. If you do have a question, please press star one on your telephone keypad at this time. Again, that's star one if you do have a question or comment. Please hold as we poll for questions. We'll take our first question from Daniel Imbro from Stephens. Please go ahead, Daniel. Yep. Hey, good morning, everybody. Thanks for taking our questions. Morning. Morning. I want to start maybe on the EchoPark kind of restructuring side. I, I guess, Jeff or Heath, if we look at the portfolio today, how did you arrive at those eight locations? Are there more in maybe a second tier of challenging markets that could close if the markets stay tougher for longer? Then just to clarify on the numbers, is the right implication of your cost commentary that it's, like, $40 million of annual savings or $40 million of accretion towards EBITDA? Yeah, the $40 million's correct. Sure, we did. We looked at the stores across the board, and this is Jeff, by the way. We looked at the stores across the board, and we took the stores that, you know, we might have had more difficulty getting inventory to, buying inventory in, in the market areas around those stores and really pared it down from the 50 level down to 25, that we feel, given the market conditions today, that we can buy enough inventory to support the volume that these stores are capable of doing. We need to all remember that you go pre-COVID, these stores- ... basically, this group of stores, I think it was 12 or 13 pre-COVID, was averaging about 500 to 550 units per rooftop per month. Today, you're just not able to buy enough inventory in the one to five segment to support as many stores as we have. We pared down to the number of stores that we knew we could buy inventory for. If the market conditions change, we certainly have the ability and the leverage to pull to adjust store counts in either direction. Because we've got the stores hibernated, the market comes back faster than we think it's going to, we can open stores back up. Certainly, if we see a jog in the inventory valuations that we saw in March, where prices went from basically what we were buying at $24,000 up to $29,000, if that happens again, then we can certainly make other adjustments, and pull other levers, to get us to our target of being EBITDA positive in the first quarter of 2024. This is Heath. I think just a couple of things to add. Your $40 million is correct from an annual basis. That is the savings that we have. But the bigger benefit is to Jeff's point, is the fact that we can sell more units out of the 25 remaining locations than the 50 units, because you can stock the shelves properly. Because of these moves and the limitations of getting inventory, we can now do a better job of inventory mix of those 25, resulting in more units at a higher gross or GPU than we had with the 50, if that makes sense. On a go-forward basis, if you guys are looking at modeling this, as we get to the first quarter and break even EBITDA, we're going to sell more cars out of the remaining 25 locations than we did out of the 50 locations in the first and second quarter. Our margin improvement should be in and around $500 better in the third quarter and the fourth quarter, versus what you saw in the second quarter. It's simply because we can buy enough cars, sell enough volume. We're seeing that happen in July. We're going to turn our inventory almost 2 x in the month of July, which is fantastic, and getting back to that big volume pre-COVID level, that is what these stores were built on and what the model is built about. We can definitely buy enough inventory right now to support the remaining stores, as long as the market stays where it's at. Now, the market, we think, is gonna continue to get better, right? Meaning prices are going to continue to drop and inventories become more available as we move from now to the end of the year. That's helpful to understand kind of your assumptions. If pricing, just to make sure I understand, if pricing were to move higher in the wholesale side, that would get more challenging, and then that would necessitate potentially further actions on the storefront? That's correct. Yeah. We don't anticipate that, though. That's just not in the cards. The manufacturer producing more cars, new car inventory across the board from everybody's announcements, is going up from a day supply perspective. No sales in the auction lanes are real high, north of 50% right now, which is a good sign, that inventory is building and prices are going to come down. There's gonna be more, more volume to buy. The rental car companies pretty much now are out of the lanes from buying cars, and that's what really caused a big issue in March for us, and for the industry. All indicators are that we're headed certainly in the right direction. Great, that's helpful. And then maybe one last one for me. Heath, if we look at the franchise F&I per unit, it was much stronger. I think you made some changes over the last year. I think you brought on some new financing partners. Can you maybe parse out what the drivers were of the sequentially stronger F&I per unit on the franchise dealer side, and maybe the sustainability of that level going forward? Yeah, I mean, look, we're not the number one in the peer group. I think AutoNation's out there at $2,800. We're a little over $2,500, and our warranty penetration is just getting better and better every month. We reiterated in David's announcement north of $2,400 a copy, and we're gonna hit those numbers. We're doing it now and had an all-time record quarter. Yeah, this is Heath. If you look at our penetration to just form, you know, our new finance penetration was up 250 basis points, warranty penetration was up 200 basis points on new, and used warranty penetration was up 50 basis points. Great. I appreciate it so much. Best of luck. Thank you. Thank you. Thank you. We'll take our next question from Rajat Gupta from JP Morgan. Please go ahead, Rajat. Great. Good morning. Thanks for taking the questions. Just wanted to like, a bit of further clarification on EchoPark. You mentioned that you're gonna get better throughput from the, the remaining stores. Is the assumption that, you know, if we adjust by the $32 million loss in the second quarter or like our $20 million loss, you know, adjusting for, adjusting for the store count reduction, you know, going from the $20 million loss to the break even, is that...? You mentioned the $500 of gross profit per unit, that would be better. Is the remaining coming from volume, growth going forward? Is the assumption that sequentially, volumes keep going up from here, or...? I'm just trying to understand, like, with a little more granularity, how do we get to that break even, or the path there? This is David. It's interesting, Jeff touched on it a second ago, and I'll let him touch on it, but it's interesting to note that our capacity to grow our volume, in the past, we, as he mentioned, we did 550 cars per store, whereas where we're sitting now is less than 300... Correct. units per store. We easily have the capacity in our team and our structure to sell far more cars with the remaining group of stores and also deliver the world-class guest experience that EchoPark, you know, has been delivering, really for the last nearly 10 years. The breakeven, I think we gave you all last quarter, was, or the quarter before, was around 9,000 cars. Given the changes that we've made, that breakeven number now for the segment is 7,200 cars. We feel that between now and the end of the year, we're gonna be in a position to make that happen. Remember, a lot more throughput means we've got to hire more people, hire more technicians. Our average Experience Guide sales associate at EchoPark this month is gonna be in the 27.5-28 range. Pre-COVID, we were doing well over 30, so that's coming back. The volume, the inventory, there's plenty of inventory to support the stores that we have left open. We think we can continue to grow that. We will continue to grow that, through the third and fourth quarter and hit our, breakeven target for Q1 of 2024. To sum it up, it's basically those three components. It's the reduction in expenses of the $10 million, a quarter, plus the increase in volume and the increase in GPU. We are seeing that occur in July. Yes. Yeah. Got it. That's helpful. Just on the inventory revaluation charge in the second quarter, the $10 million, would that just mean that, you know, the front-end gross profit in EchoPark just has a much more favorable base here into the third and fourth quarter? Does that kind of, like, drive your confidence in that $500 GPU increase sequentially as well? Just wanted to make sure, like, we're thinking about that correctly. It's certainly a part of that, but more importantly, it's the one to 35-day-old car that we're selling. We're turning our inventory so much faster, buying cars cheaper. Our margin is significantly better on our fresh inventory. The $10 million really went against our aged inventory, and a lot of the inventory that we bought in March, that depreciated a lot faster than probably we've ever seen before in history. That's where those dollars took care of some of that inventory. The bigger news is, is the margin that we're making on our fresh inventory now, that's back to normal for us, and actually better than normal for us, which is just fantastic. We're in the $550-$600 range on fresh inventory, which is well above where we've been, even pre-COVID. That's the exciting news is we know margin's improving, on our fresh inventory. We're turning our inventory really fast, probably turning our inventory faster than we've ever turned it, because we're gonna be nearly 2 x turned in, in July. The faster you turn your inventory, the higher your margins are gonna be. Right. Great, that makes sense. One last one on the franchise, SG&A to gross. The prior guidance was, I believe, like mid-sixties. Just curious if you're reiterating that and maybe, like, any updated thoughts on, you know, how you expect new and used car GPUs to trend in the second half? Thanks. Yeah, we reiterate that we believe that the franchise will be in that mid-sixties from an SG&A as a percentage of gross, that will equate to a total of, around 65 - 70 for the year. Margin should be consistent- Got it. that... Yep. Margin should be consistent from a used vehicle perspective from what you saw in the second quarter. New car margins, mid $4,000 range, somewhere in that ballpark between now and the end of the year. Understood. Great. Thanks for all the color. Once again, that's star one if you do have a question or comment. Next, we'll take a question from Brett Jordan from Jefferies. Please go ahead, Brett. Good morning, guys. This is Patrick Buckley on for Brett. Thanks for taking our questions. Hey, Patrick. Hey, good morning. Morning. Just digging a bit more into the used GPUs. How should we think about what the new normal is there moving forward? You know, given the rebound in the past couple of quarters, should we think about 1,400 as a new low or more volatility in the longer term there? I think if the market keeps dropping like it's dropping, then we're gonna be real comfortable in that 1,400 range. You know, if the market keeps moving around a lot, margins are gonna move around. That's just keeping up with the depreciation. I don't think the markets are gonna. Maybe another four or five weeks of drops, but it's got to flatten out here at some point because you know, we've gone from $29,000 a car or $27,000 a car in the first part of June, now we're buying cars below $25,000. That trend's just not gonna continue at that steep level. If that happens and things begin to flatten out, margin should sustain itself, between now and the end of the year in and around where we are today, from a franchise perspective. This is David. I think it's important to touch on that our team has been very disciplined in selling through our inventory as that market's dropped, right? It has put a little pressure on margin, but as it levels out, as Jeff was saying, its margin should improve. Got it. That's helpful. Thank you. Then just moving over to the parts and service side. Could you talk a little bit more about where your capacity levels are at? I imagine labor continues to be a constraint there, but curious to hear how that compares to your overall physical capacity and how much room left there is to grow. We're full. Every stall, we need more technicians. We're actively building stalls in many of our locations today, we'd have further upside in terms of our year-over-year growth. This is a long runway. We've been really working on our market share, as we said last quarter, from an OpCo perspective, in growing our share across all our brands. We've got BMW done now, we've got Honda done now. That'll continue throughout the rest of the brands and growing share, by specific OpCo, and that's given us a great return. We've had just an amazing performance from a fixed ops perspective, another record-breaking quarter, and we expect that to continue to grow. We need more stalls, and we need more techs. There's no question about that. Great. That's all from us. Thanks, guys. Thank you. As a reminder, that's star one if you do have a question or comment. We'll take our next question from John Murphy from Bank of America. Please go ahead, John. Good morning, guys. I just wanted to follow up on the EchoPark restructuring from an operating standpoint and maybe from an accounting standpoint. If we think about the 25 locations, or maybe the 22, you know, and except the motorsport stuff, should we really think about these as the lights kind of being turned off, and then if market conditions in, you know, 12+ months, you know, improve, that you might be able to turn these lights back on pretty quickly? Yeah. Yeah. That's the exact idea. Yeah, I'd just add one other thing. Go ahead. I'd like to, you know, brag on our team here a little bit, that our team does an amazing job of hiring and training and getting these stores open. I think that it's actually gonna be an easier job as the market improves and, you know, because of the experience of our existing leaders at EchoPark to ramp up these stores and get them going again, you know, again, as the market improves. Yeah, the lights are definitely out in the stores that we closed, but doesn't mean they can't be turned right back on. That would be the intention if the market improves, you know, like we think it's going to do. It's just not going to happen in this calendar year, right? We've got a long way to go to get back down to the $21,000-$22,000 price level, if we do. Certainly rapidly improving prices and rapidly improving availability is occurring right now, and we're seeing that in this month. We're selling a lot more cars per rooftop because we can buy and fill the shelves at the remaining stores that we have. If that more inventory becomes available, at the right prices, then absolutely, we have the ability to pull those triggers and levers and open more stores and open them quickly, obviously, because they already exist. A key takeaway is that the stores that were closed only represented 14% of the volume. Yeah, no, that's pretty resounding, right? Given it's the, you know, the same number of stores that you're going to keep open, right? I mean, it clearly shows, you chose the right stores, or at least appears you chose the right stores. Just a follow-up on the accounting side on this. Why would you keep an ongoing expense for something that's put in disc ops? Wouldn't that have been put into the charge? Sort of, you know, the follow on the accounting side, when you talk about the inventory write down, is that write down for vehicles that are then dispersed to the other locations and then sold at a higher gross, so they help you out in the short run? I'm not trying to be a wise guy. I'm just trying to understand the, the, the accounting and how this is all flowing. John, this is Danny. Two pieces to that. The ongoing expenses are the pieces that we couldn't accrue in recognizing that one-time charge. You've got ongoing maintenance, you know, security, utilities at those leased and owned properties going forward. Other things like the rent and depreciation were contemplated in the $75 million of charges in the second quarter. When you think about the $10 million inventory adjustment, as we noted in the release, about $7.7 million of that's related to the operating stores. Again, as Jeff noted, just cleaning up some aging with the rate of depreciation that we saw in the second quarter. The remaining 2.3, you're exactly right, with the aged inventory, as well as then just valuing that to what the retail market value is as we reassign that, either to other EchoPark locations or wholesale. Given that inventory write down in operating stores another $2.3 million in the disc ops stores, like, that will help. I mean, that will flatter the margins in the short run as you're, you know, as you're going through the next quarter. Is that correct? I just want to make sure I understand that. Yeah, this is Jeff. It's certainly gonna help the aged inventory. Let's call aged inventory anything north of 45 days, because you bought cars 45 days ago, they're down $2,000 a car already. Yeah, it'll shorten there. The more important thing is, what's the margin on the cars that are one - 35 days old now, that we're seeing in July? Yeah. Of course, those dollars aren't going to that inventory. What's happening in that inventory is our margins are significantly higher than the pre-COVID run rates that we had in margins, where the stores were making all the money that they were making. That's the great news. The great news is the margins on the fresh inventory is back and back better than it was pre-COVID. That's what we hope to see continue to happen between now and the end of the year, and why we're so confident in in positive EBITDA in the first quarter of 2024. I'm sorry, just one last one on this. Does this mean that you will not open any new stores until these stores come back on? Could these stay in disc ops and you say: Hey, listen, we just found a new market or newer markets that are just really attractive, and we can add a couple stores here and there, so we could see EchoPark grow store counts, even with these kind of stores in, you know, in disc ops for now? Yeah, I mean, some of those stores and discounts could be there forever, right? We might, you know, end up selling, but, and find new markets that are bigger, better. We've got inventory resources there, you name it. It'll be a combination of what you said. Okay. All right, great. Thank you very much, guys. You bet. Thank you. Our next question comes from David Whiston from Morningstar. Please go ahead, David. Hi, good morning. I had a question on your franchise business. Just looking at the reported versus same store on the used side, your used GPUs were actually up 14%, but on a same store basis, they were down 3%. You seem to be bucking a pretty strong industry headwind here, which is great to see, but it looks like maybe you're favoring profit over volume on the used side, on the franchise side. Also, do you have some newly acquired stores, not yet in the same store base, that were just outperforming the industry on used to cause that difference? There is some of that going on, but we are bucking the trend. We're being very conservative. I mean, we sold 75-80 units per rooftop, and we typically run over 100. You just can't buy the inventory. There's no off-lease cars coming, so we're really trading for cars and buying cars off the street. We did take a much more conservative approach than we normally have in terms of holding onto our GPU and selling a little less volume. We could sell more cars, there's no question, but the margins would really drop if we had to go buy more cars in the auction, and we see that at EchoPark with our lower margins. Yeah, that was strategic. We'll continue to balance that through the rest of this year before we start opening any of our buyers to go back into the auction lanes to buy cars for the franchise stores. We're gonna live off of vehicles that we buy off the street and our trade-ins, keep our trade ratios really high, which is running in the 55%-60% range right now. We'll live off that until we really get a handle on what's gonna happen in this used car market. One of the big differences is really just the brand mix of what we acquired last year and what we disposed this year. That's also some noise in those new numbers. This is David, I mean, it was from all accounts, a historic drop in valuations of used cars in the market. You know, we think that strategically it's really smart to, you know, keep that inventory tight, and as Jeff said, maybe miss a few retail deals until that market starts to flatten out more consistently, and then we can crank up the volume. We're seeing prices drop in the wholesale market for the mix that we buy. Two weeks ago, we were buying cars over $26,000. Last week, we bought cars under $25,000. You know, you have to adjust your retail pricing on your lot to account for that. We're just being very, very careful, turning our inventory a lot faster, getting our cars through reconditioning quicker, and executing our playbooks at a really high level. It's given us more gross, there's no question, and we're seeing that both at EchoPark and at, on the franchise side. Thanks for that. Out of curiosity, do you have any store GMs complaining to you guys, though, they'd like to get more volume on the used side? No, not at all. No, we buy our inventory. The inventory- We buy our inventory and trade for our inventory centrally. Our teams are executing their playbooks, and we don't have any of that. Okay. Just curious on the Tesla Model Y aggressive discounting, how badly is that hurting not only your premium brands, if at all, but also your volume brand stores? You know, it, it certainly played a role if you had a bunch of Teslas in stock, you know, in any of the franchise stores or in pre-owns, right? That hurt. Overall, I mean, it, it's certainly playing a role against electric vehicles from a new car perspective because they're having to get more aggressive in terms of their pricing. The quality, the quality of the product that the manufacturers are producing now is simply amazing. I don't care if it's Mercedes, BMW, Audi, you name it, Lexus, Toyota, they're just producing an amazing product, and it's a better product than Tesla. As the pricing gets right, the inventory levels come up, you're gonna see a higher mix of electric vehicle sales throughout the category. Do you think consumers are catching on, though, that it is a better product than Tesla? Because Penske was complaining they have too many EQSs. Yeah, I think it's a little early yet to make that comment, right? Let's see what happens as we move through the next six months, shelves begin to get filled, and we put some electric loaner vehicles in and let the customer get used to driving an electric vehicle, dealing with the range issues that kind of go with the consumer's concerns. Let's see what happens. I think we've got, you know, another six months to a year of sort of crossing some new boundaries with the electric vehicle. If the manufacturer could get the pricing right, and they keep their day supply in line, which are two big questions that they really need to focus on, then I think they can do very, very well. If they're gonna launch vehicles that are $112,000 when the counterpart combustion engine vehicle is, you know, $20,000-$30,000 cheaper, they're gonna have a problem. They're very well aware of that. Some manufacturers are doing a better job than others. Everybody's learning the electric vehicle business right now, and that includes the manufacturer, how to launch it, what product to put out there, how to compete against Tesla. We're nowhere near that limit. I think Mercedes, BMW, in the 17,000-20,000 vehicles versus Tesla at 600,000, maybe, this year from a U.S. perspective. There's a whole lot to learn and a long way to go, before we can, you know, claim any victories from a, from an electric vehicle perspective. I think it's worth noting, you mentioned the EQS, and that we've got the number one Mercedes dealership in the country out in California that's in the EQS model. It is, you know, regional, where it's like that part of the country has been faster to adopt that car. That store's actually been buying EQSs from other parts of the country and, you know, shipping them out there. Okay, I appreciate all the detail. Thank you. You bet. Thank you. Once again, star one, if you do have a question or a comment. We'll take another question from Rajat Gupta from JP Morgan. Please go ahead, Rajat. Great. Thanks for taking another question. I just wanted to get your updated thoughts on capital allocation, you know, buyback, M&A. Obviously, you know, a big focus in conserving cash at EchoPark in the near term, but, you know, as you get more comfortable with the line of sight towards, you know, profitability and, like, lower cash flow in EchoPark, how should we think about, you know, use of excess cash and, like, just relevant capital allocation? Thanks. Yeah, this is David, and I know Heath has a comment about this. You know, we think that, you know, our focus on our balance sheet and making sure we have the strongest balance sheet possible, we deliberately, it was a strategic decision to not buy back shares in the second quarter. You know, we'll see where we go opportunistically from here. As you see, we've got a fantastic balance sheet, a lot of cash, and we'll look at, you know, strategically at various opportunities for acquisitions and share buybacks. But, you know, we just thought that it is important to focus on. We've had quite a few acquisitions and a lot going on with EchoPark, is to focus on those operationally. We've got our Powersports business and the RFJ dealerships and putting into our playbooks and making sure that we execute properly. So there'll be plenty of opportunities in the future for our capital allocation. Heath, did you have anything? I'll just reiterate, you know, we believe that cash is king when you have uncertainty with economic conditions, we wanna have dry powder for that, number one. Number two, we also have a strategic initiative to bring our debt down, we've reduced our debt about $60 million for the year, that's a big important part of our capital allocation plan. We're reinvesting in our IT infrastructure and innovation as well as our facilities, that's a priority. We don't have anything that is pressing or material from an M&A perspective in the near term. We wanna be prepared and have capital available to start growing EchoPark again, as we start seeing that market normalize. Again, as always, we will return capital to shareholders, primarily through our dividends and opportunistically through share repurchase. That's it. Great. Thanks for the color. Thank you, sir. Once again, star one if you do have a question. Okay, there appear to be no further questions at this time. I'd like to turn the floor back over to management for closing remarks. Thank you all so much for attending the call, and we'll talk to you next quarter. Thank you. Thank you. Thanks. Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.