Good morning, and welcome to the Sonic Automotive third quarter 2023 earnings conference call. This conference call is being recorded today, Thursday, October 26, 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 and 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. And 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, and good morning, everyone, and, welcome to the Sonic Automotive third quarter 2023 earnings call. As you said, I'm David Bruton Smith, the company's Chairman and CEO. Joining me on today's call is our President, Jeff Dyke, our CFO, Heath Byrd, our EchoPark Chief Operating Officer, Tim Keen, and our Vice President of Investor Relations, Danny Wieland. Earlier this morning, Sonic Automotive reported third quarter financial results, including record third quarter total revenues of $3.6 billion, a 6% increase from last year. Third quarter EPS was $1.92 per share, which includes the effect of certain charges related to the previously announced store closures in the second quarter. Excluding these items, adjusted EPS was $2.02 per share, a decrease from $2.23 in the prior year, due primarily to normalizing new vehicle margins and higher floor plan interest rates. We are very proud of our team's performance in the third quarter, and we remain focused on leveraging our diversified business model to adapt to changing market dynamics in the near term, while positioning Sonic to achieve our long-term strategic goals. We believe our strong relationships with our teammates, manufacturer and lending partners, and guests are key to our future success, and I would like to thank them all for their continued support. Turning now to third quarter trends. We continue to see improvement in new vehicle production and inventory levels across our brand portfolio, despite headline risk related to the UAW strike. As expected, new vehicle gross profit per unit declined sequentially to $4,678 per unit on a same-store basis, in line with our projection to exit 2023 in the low- to mid-$4,000 range. This steady decline in new vehicle GPUs should continue into 2024, but we continue to believe that the new normal level of new vehicle GPU will remain structurally higher than pre-pandemic levels in the $2,000 range. Furthermore, our luxury-weighted portfolio generally runs a lower inventory, inventory day supply, and our luxury manufacturer partners have been disciplined in inventory production to date, potentially minimizing new GPU compression relative to industry trends, which would continue to benefit the earnings power of our franchise business. In the used vehicle business, wholesale auction prices for three-year-old vehicles decreased 5% in the third quarter, following a 6% decline in the second quarter. October to date, the three-year-old Manheim Index declined another 3.6%, despite headlines indicating that blended used car prices across all age and mileage bands have begun to rise again. While used retail prices remain elevated, contributing to affordability concerns amid the high interest rate environment, the downward trends we are seeing in used vehicles and used vehicle wholesale pricing are positive for our business, and for the fourth quarter and beyond. Fewer lease turn-ins at our franchise dealerships continued to limit our used vehicle volume in the third quarter, but we were able to maintain higher than expected used GPUs at $1,668 per unit on a same-store basis to somewhat offset the effects of lower volume. Our team remains focused on driving incremental inventory acquisition and retail sales opportunities in the fourth quarter and into 2024, driving upside in this line of the, of the business alongside the expected normalization of used car pricing and volumes over time. Despite an elevated consumer interest rate environment, our F&I performance continues to be a strength. Our franchise dealerships F&I penetration rates were stable quarter to quarter, and we reiterate our previously issued guidance for full year 2023 franchised F&I GPU at or above $2,400 per unit. Our parts and service or fixed operations business remains strong, with record third quarter fixed ops gross profit at our franchise dealerships up 8% year-over-year on a same-store basis, driven by 10% growth in our customer pay business. We are very proud of the success our team has had in this area, and we believe there are remaining opportunities to optimize our fixed ops business as we progress through the fourth quarter and into 2024. Turning now to the EchoPark segment. As discussed on our second quarter earnings call, we made the difficult but necessary decision to suspend operations at 50% of our EchoPark segment locations back in June and July. We believe that the decision to suspend operations at these stores would substantially improve our near-term financial performance without sacrificing our long-term strategic plan for EchoPark. In the third quarter, our financial results reflect the expected initial benefits of these strategic adjustments to our EchoPark business model. We reported revenues at EchoPark of $627 million, up 6% from the prior year, and all-time record EchoPark gross profit of $53 million, up 22% from the prior year. EchoPark segment retail unit sales volume for the quarter was 19,050 units, up 25% year-over-year and up 12% from the second quarter. As discussed on our July earnings call, reducing our store footprint allowed us to better allocate inventory across our platform, driving higher unit sales volume, better GPU, and significantly lower operating losses. Third quarter EchoPark segment adjusted EBITDA was a loss of $5.2 million, compared to an adjusted EBITDA loss of $31.8 million in the second quarter and $23.3 million in the third quarter of 2022. Based on recent market trends, we remain confident in our path to break even adjusted EBITDA in the first quarter of 2024 and look forward to resuming our disciplined long-term growth plans for EchoPark as used vehicle market conditions continue to improve. Turning now to our Powersports segment. The third quarter is the peak seasonal sales period for our Powersports portfolio, highlighted by the Sturgis Motorcycle Rally in August. Our team welcomed over 150,000 rally attendees to our Black Hills Harley-Davidson locations, selling 550 new and used motorcycles during the rally, making it one of the highest volume events in the dealership's history. Combined with our Texas Powersports stores, this drove $7.9 million in adjusted EBITDA from our Powersports segment in the third quarter. We are continuing to identify operational synergies within our growing Powersports network and remain optimistic about the future growth opportunities in this adjacent retail sector. Finally, turning to our balance sheet. We ended the third quarter with $797 million in available liquidity, including $335 million in combined cash and floor plan deposits on hand. The strength of our balance sheet allowed us to repurchase 1.7 million shares of our Class A common stock in the third quarter for nearly $87 million, bringing our year-to-date share repurchase total to 3.3 million shares, or 9% of shares outstanding at the beginning of the year. At the end of the third quarter, our remaining share repurchase authorization was $287 million, representing over 15% of today's equity market cap. Share repurchases are an important part of our capital allocation strategy, and we remain focused on opportunistic share repurchases as our liquidity allows. Additionally, I'm pleased to report today that our board of directors has approved a 3.4% increase to our quarterly cash dividend to $0.30 per share, payable on January 12, 2024, to all stockholders of record on December 15, 2023. In closing, our team remains focused on our 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 continue to believe our diversified business model provides earnings growth opportunities in our EchoPark and Powersports segments that may offset any industry-driven margin headwinds we may face in our franchise business, minimizing the earnings downside to consolidated Sonic results over time. We remain confident that we have the right strategy, the right people, and culture to grow our business and create long-term value for our key stakeholders. This concludes our opening remarks, and we look forward to answering any questions you may have. Thank you very much. Thank you. And 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. You may press star two if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Daniel Imbro with Stephens Inc. Please proceed with your question. Hey, guys, this is Joe Enderlin on for Daniel. Thanks for taking the question. Hey, Joe. Hey. So at EchoPark, you're calling for 1Q EBITDA profitability. But seasonally, 1Q is the biggest quarter for used dealers. Is that comment just about the seasonality, or is the message that we're flipping to positive EBITDA, and that should continue for the rest of 2024? Yeah, the message is that we're flipping to positive EBITDA, and that should continue from here on out. If you look at the second quarter and the decisions that we made, that certainly helped bolster the bottom line, increase volume, because our great buying team, they will buy, you know, the right mix for the smaller number of stores. You're gonna see improvement from the third quarter to the fourth quarter. Volume may be about the same, but EBITDA should continue to improve as more of the SG&A moves that we made sink in. We should be EBITDA positive in the first quarter and then from here on out, as we move into the rest of 2024 onto 2025. You know, the used car market's gonna continue to get better. Prices are gonna drop. New car inventories, as we can all see, are building. That's gonna make a difference in used car valuations. Right now, we're buying cars between $24,500 and $25,000. We think that that needs to sink below $23,000 before the real big volume that we're used to at EchoPark returns. And we think that's 18-24 months of kind of choppy water. And those left standing at the end of all that, I think, will enjoy, you know, and reap the rewards of the hard work and the dedication, and we certainly plan on intending to being one of those, as we move forward. So, you know, bluer skies ahead, from an EchoPark perspective. We're very excited about that. Got it. That's helpful. Thank you for the clarification there. Looking more at EchoPark, just as a follow-up, with the increase in unit sales, but despite the footprint moderation, does this kind of change your long-term view of EchoPark and the build-out opportunity? Do you think you might want larger selling hubs just in the biggest metros? Are you sticking to the original plan? How are you thinking about the footprint after you've made these changes and it's been such positive results? Yeah, we've learned a lot there. It's Jeff again. And more than likely, we'll have the larger hubs as we move forward in markets, but we're gonna be very disciplined about opening the next stores. I think that's an incredibly important point here. We're gonna open stores when the inventory is back, when the pricing's back, and we can, in a disciplined way, and in a profitable way, open locations and markets that'll get us to the 90% coverage of the country. We still reiterate that, too. We're still focused on that, but it's got to be done in a disciplined way. The used car market and the inventory is too topsy-turvy. We've learned that over the last couple of years, and who knows what happens next? But we're prepared for it. Right now, we're very comfortable with those 17 stores that are open from an EchoPark perspective. We know we can get those EBITDA positive, and we'll grow in a disciplined way and approach as the market allows us to do so. And this is David. Something to highlight, just to make sure that I make the point that our team, when we decided to do the restructuring for EchoPark, you know, we knew that the market would allow us to buy only a certain number of cars at the right prices that fit the EchoPark model. So it was no surprise to us that once we did the restructuring, that we could stock the remaining stores properly and that sales would go up. But the results really, for our team, were not surprising. So I think that's important to note that we know the model, and well, as we said, we'll roll it out in a disciplined way, as the market allows us to do that. This is Heath. I I want to add one more point. You know, I think we all believe that it's gonna be an 18-24 month to get back to what we used to see pre-COVID. But we all believe, and I think everyone understands, that used market will come back, and we see that. And as Jeff mentioned, our growth plan will be disciplined, and we'll open when the market dictates the time to open new stores. Got it. That is all for us. Thank you guys for the color. Thank you. Thank you. Our next question comes from the line of Rajat Gupta with JP Morgan. Please proceed with your question. You may be on mute. Oh, hey, sorry. Can you hear me now? Yeah, we can hear you now. Gotcha. Great, sorry about that. Yeah, just had a follow-up on EchoPark. Can you give us a sense of, you know, how you plan to navigate, you know, some of the shortages around the later model used vehicles? You did talk about, you know, trying to increase your mix in some of the older vehicles, but, how do you navigate that challenge, you know, when it comes to, you know, just training, your salespeople, you know, changing the reconditioning practices, et cetera? Because it feels like you would need to meaningfully, take share in that cohort, of the older vehicle, like greater than five, greater than six-year-old vehicle, to meet, some of these targets, you know, including, you know, getting to profitability. And I have a follow-up. Thanks. Yeah, this is Tim Keen. You know, we made that move to a higher mileage and longer year, probably starting at the beginning of the year. That's one of the reasons we've been able to grow the volume with the shortage in, you know, one to five and one to three-year-old cars. And we've perfected, you know, selling those different models, so, you know, we'll continue to take share where we can. This is Jeff. It's 15%-20% of our overall volume right now. I think that it's going to stay in that range. It might get to 25%, but I don't think it's going to be any more than that, because as the prices begin to drop, our EchoPark model is one- to five-year-old cars under 50,000 miles, and selling those cars at a great price in the marketplace, where you can buy the car and buy a warranty for basically the same price or less than you can buy it at our competitors, which drives the real high volume and our ability to market that lower price. We certainly have—it adds complexity. It's a good question because it does add complexity. But I think Tim and the team have done an amazing job teaching the team. We've got the experience on the franchise side, because it's 30% of our business on the franchise side. So we've been able to leverage our experience on the franchise side into EchoPark and take advantage of that, and Tim Keen and team are the best in the country at it. That's something that we'll continue to leverage as we move forward. But I want to make sure that everybody understands, not more than 25% of the total mix. I think we'll be lucky if we get there. Got it. Got it. That's helpful. A follow-up was just on parts and services. You have a lot of California exposure, you know, which obviously has greater electric vehicle adoption. You know, you had some really good growth in your service business overall. I'm curious, you know, if you could share any insights on how the service activity has been on some of, you know, you know, the earlier electric vehicles that you're servicing. You know, like one of the rental car companies, Hertz, this morning, made a comment that, you know, they're having to spend twice as much, you know, to service to repair damaged electric vehicles versus an equivalent ICE vehicle. So curious if you are seeing something like that as well. You know, any more insight you could share would be helpful. Thanks. Yeah, thanks. It's Jeff again. We're exactly seeing that. Our average RO dollars or gross dollars are up 30% on an electric vehicle than an ICE vehicle. That's a nice surprise for us. Yeah, we're all smiling- We are. -other, other. Keep bringing that on. The fixed operations business, you know, for us across the country is just fantastic. We expect to see it continue to grow. You see that in our numbers. We've had an amazing year, and that's, that's going to continue on into 2024. 2024. More cars on the road and more customers using our service shop. So it's been a very nice surprise, more electric vehicles coming through with higher grosses, in terms of our average RO count. Got it. Got it. Great. Thanks for the color. I'll jump back in the queue. You got it. Thank you. Our next question comes from the line of John Murphy with Bank of America. Please proceed with your question. Good morning, guys. Just a first question on sort of time and capital. Now that you're kind of, you know, investing maybe a little bit less in EchoPark on time and capital, do you see the opportunities for making dealership acquisitions on the new side as maybe a higher priority and something that might be more attractive now? Yeah, John, it's David Smith. Thanks for the question. Yeah, we're, as we mentioned, we're going to opportunistically look at what's best for the overall business. That's our, you know, and for all of our shareholders, and we're going to be open-minded about that. As I mentioned in our opening comments, we certainly believe that our shares are of great value. I think that the, you know, the opportunities in the franchise business are, you know, the franchise stores out in the market are still extremely valuable. We've seen some great opportunities in our powersports business to grow, as we've talked about. So, you know, we're going to be, you know, open-minded on where we put our capital, but, it's with having in mind, again, that it's got to be great for the overall business is the key. So we're going to look at it from a total ROI perspective. Heath, could you- Yeah, and as part of our capital allocation, you know, one of the big pieces right now is investing back into our business. You know, we talked about EV a little bit before. You'd be shocked at the requirements that, and the capital that we have to spend to prepare for EV and manufacturer requirements. So that's going to be a part of our capital allocation. And technology, you know, we've just started our path down AI and continuing our robotic process automation, and there'll be huge efficiency gains from those two investments. And as David said, returning capital to shareholders, you know, we increased our dividend, bought back 9% of the outstanding shares so far this year. So, you know, those are some of the main drivers, but I agree with David. We'll continue to look at the opportunities, both in the franchise and in powersports, for good acquisitions that make sense. Okay. All right, maybe just a second question, maybe more for you, Jeff, on EchoPark, you know, long term. The ebb and flow we're seeing in, you know, in new vehicles in the one to five-year-old category is something that is becoming more obviously a cyclical phenomenon, right? I mean, you know, you sell less vehicles for the last five years, you know, as you hit a trough, you have less vehicles to actually, you know, retail. So, you know, as you look at this, you know, that should improve in the next two years or so. So, you know, hitting the accelerator again on EchoPark at that point seems like it could make sense. At some point, you know, and this is long-term stuff, but five to 10 years down the line, you might be hitting another, you know, air pocket again in those vehicles. Could it make more sense, you know, to have this model much more flexible to operate, you know, more in the one to 10-year-old category, and flex up and down? Because, you know, you got a good operator like CarMax out there right now, struggling with similar issues that, that, that you're, that you're facing, that's, you know, that's much more established... you know, and they're just facing the same, you know, same issue with the, the air pocket in these one to five or one to six-year-old vehicles they, they focus on, and there's not, you know, even with their best efforts, anything they can really do much about it. So I mean, can you make it more flexible over time, so you're not running into these issues? It's a great question. We have that conversation here all the time. Yes, we can. Certainly, we can adjust and move our margins up. We would build stores differently going forward because our stores are built for high volume. If you remember pre-pandemic, we're averaging 550 units a store rooftop, right? Now that number's in the 300 range, and we're on our way back to the 500. But yeah, we would build-- we're not structured for that type of lower volume. We're structured for the big, heavy volume, but 100%, if we, you know, and we're-- Like I said earlier, it's gonna be topsy-turvy for the next 18-24 months. There's no question about that, but new inventory is gonna grow, and electric vehicles are gonna come into the market, which we'll start selling. And that's gonna, you know, bolster the used vehicle volume, but we're not gonna get fooled by that. And so as we move forward and build stores, we'll take into consideration the flexibility that you're talking about. We've pared down the stores now to where we know we can get that EBITDA positive moving forward and making good money. Our Denver store, for example, our Thornton store, is back up, making $800,000 a month, and it's back in the, you know, upper echelon of our profits stores across the entire company. And we see that coming back, but it's a real good thought, and it's a conversation we have around here all the time is, "Hey, do we need to expand the range, so that we don't get hit in case there is another trough that you're talking about?" And that'll happen as we contemplate building or renovating stores in the future. And John, this is David Smith. Something to keep in mind is we have evolved the EchoPark brand and model over the years. It's been, you know, 10 years and of a lot of R&D. And one of the things as you look down the road, you know, Jeff mentioned the Colorado market, the brand awareness in the Colorado market, because we've been there longer than anywhere else is far greater than anywhere else in the country. And we've got our Chief Marketing Officer, Dino Bernacchi, here, and he may want to chime in, but I believe if you look down the road, our brand awareness for EchoPark is gonna be far greater. That's gonna help us get into a lot of, you know, more areas and drive our revenue, if we do hit one of those air pockets you talked about. We started branding in Houston in March of this year, and our brand awareness there is growing like wildfire, so that's great. But we haven't been unwilling, given the current economic circumstances, to push that beyond the Houston market. But as we get better and stronger from a P&L perspective, you're certainly gonna find us expand that throughout all of Texas and then the rest of the country. So there's a lot of levers, John, that we can still pull. But we are, you know, very focused on that one to five-year-old category. We will build stores in the future that'll give us the flexibility to do it in different ways if we need to. I'm sorry, just one—Can I sneak in one, one, one last one on the, on the inventory side? I mean, some of your brands are still pretty inventory constrained, you know, and, you know, operating in, you know, I guess, maybe mid to, you know, mid-single to maybe mid-teen, you know, day supply. I'm, I'm just curious, you know, how much of an impact do you think that's having on, on your new vehicle sales here, you know, in the short run, and do you see any relief on the horizon? We do. The fourth quarter, you're gonna see it. We got... We haven't been over 10,000 units in stock since 2019, and we hit that in this timeframe. Where we're really constrained is Honda and Toyota, the imports. The luxury manufacturers are doing a fantastic job. BMW, we're at about an 18 day supply. Electric vehicles were at 26 for BMW. So we've got inventory to sell, and I think you see that in our sales. Hopefully, the strike, you know, starting to be solved last night with Ford's announcement, and they're like lemmings, they'll follow each other and hopefully get this handled by the end of the year. I, I'm not too concerned. Inventory is gonna continue to build. That's why we're so excited about EchoPark, because it's gonna bring used car valuations down. We're seeing no sales at the auctions now in the mid-40% range, which is a big deal. That means people are holding on to it, holding on. They're gonna have to start selling those cars. That's gonna bring pricing down. So we're excited about the new vehicle inventory coming back, but I don't think it's gonna come back too far. I mean, I think it—when we get to the highs, not including electric, we're just looking at ICE, you know, maybe in the 30-35 day range versus pre-pandemic in the 65 day range. So I think it'll stop there. There's not a manufacturer out there saying that they're gonna bring inventory day supply, you know, up to some crazy number, which I think is healthy, and it's good for the used car business. That's enough for us to get our job done from a pre-owned perspective, both at EchoPark and on the Sonic side. Leasing is coming back, which is great. We're starting to see incentives there. Again, we're leasing a higher percentage of the portfolio now. Of course, that's gonna take 18-24 months, and that'll make a big difference. But inventory is getting better. If we had more Hondas and Toyotas on the ground, we'd sell more Hondas and Toyotas. There's no question about that. Those day supplies are still, you know, Honda sub-10 for us, but improving every month. I expect that to improve greatly in this quarter that we're in right now for those brands and others. We're seeing, including BMW, which is a big part of our portfolio, we're gonna get more ICE vehicles, more SAVs. That's gonna make a difference in terms of our new car volume for the rest of this quarter and going into 2024. Encouraging. Thank you very much, guys. Yes, sir. Our next question comes from the line of Michael Ward with The Benchmark Company. Please proceed with your question. ... Thank you very much, and good morning, everyone. Two things. On the inventory front, can you provide any details on the used vehicle inventory at both Franchised and EchoPark? In terms of day supply? Yeah, where it sits. Yeah, they're both in the 30-day range. We try to keep 20-day supply on the lot and 10 days in the pipeline. We're probably a little bit below that on the franchise side, maybe 27, 28 days, and we're right at 30 in the EchoPark stores only, not including Northwest Motorsports or eCarOne. And so we're in fantastic shape. Our inventory is young, margins are good. We're in as good a shape as you know, as probably anybody out there in terms of our used day supply and our inventory mix. Okay. And on the franchise side, with the inventory, you're not forced to chase out in the outside. You're either taking on trade-ins or, you know, the priority auctions. Is that what you're looking at? Yeah, I mean, we're buying more and more cars off the street. That, that percentage is growing with us every month. We're very, very focused on that. Like I said, at EchoPark, I think that those cars are gonna be 25% of the mix. It's a much larger percentage of the mix. Right. On the franchise side, we buy very few cars at auction, if any, at all. Right. 90% of our cars are coming from purchase off the street or trade-ins. Okay. And you kind of alluded to it about the captive subs, finance subs, getting back into the game a little bit, subsidizing leases, and it sounds like they're subsidizing loans as well. Just wonder if you can comment what that does for your business, both plus and minuses? Yeah. I mean, they've really had to do it on the electric vehicle side, right? So 90% of the electric vehicles we're selling are all leases, just because the MSRPs were too high, and customers want. You know, just don't see the value in paying a difference between electric and, and an ICE vehicle. But certainly, it's, it's making a difference in the business. You can see it in our new car volume, had a great new car volume quarter. We intend to have another one in the fourth quarter moving forward. And they are 100% back in the game. They're doing a great job. Really, really good job for us, and so we expect that to continue. Okay, they've stepped up leasing, correct? Yes. The incentives on the leasing front. 100% across. Yeah. And what... You have a higher luxury mix than most, so what is the percentage of leasing on the new vehicle side? Well, the thing that's funny now is, and we should all, as an industry, start talking about this, the difference between ICE and leasing and, you know, combustion engine and leasing an electric vehicle. The percentage for electric vehicles, 85%-90%. Um, wow! You look at Mercedes, it's above that. At short term, I think that's gonna continue on. It's in the 30% to high 50% range, depending on the brand, on the luxury side as well. Perfect. Thank you. Thank you very much. Yes, sir. As a reminder, if anyone has any questions, you may press star one on your telephone keypad to join the question and answer queue. Our next question comes from the line of Brett Jordan with Jefferies. Please proceed with your question. Hey, guys, this is Patrick Buckley on for Brett. Thanks for taking our questions. You bet. Taking a look at used GPUs and the strength there, was there anything specific driving that? It sounded like sourcing has improved a bit as far as getting cars off the street, but anything else to call out there? Yeah, 100%. It's disciplined day supply. You know, we've, we have always had that, and in, and in this kind of environment, that's gonna show up for us. We have a very, very disciplined way that we manage inventory. As I said earlier, 20-day supply frontline, 10 days in the pipeline. We don't go over that. That might cost us some sales in some points in time, but, but in this kind of, day and time, it really does help, and so that's, that's, keeping the margin strong for us on, on the franchise side. And, and on the EchoPark side, that discipline really does help, and it's made a difference in our, in our margins. Got it. That's helpful. And then we've also heard some talks of a bit of a mismatch between EV production and inventory levels and retail demand there. Are you guys seeing the same thing, and do you guys expect to see some heavier discounting as we enter 2024? Yeah. Actually, it's very interesting that, this is David. You know, depending on what part of the country you're in, I got the chance to drive one of the new Mercedes electric vehicles recently, and it was fantastic vehicle. But, the demand for that particular vehicle is certainly higher at, you know, as I'm sure you've seen out west, you know, and but in some areas of the country, as Jeff said, you know, you've got to discount that car heavily to actually get it sold. So- 100%, this is Jeff. 100%, you know, there's a lot of discounts going on. And depending on the manufacturer, remember, we're in its infancy right now, so everybody's learning, including the manufacturers. We've got a 26-day supply of BMW EVs on the ground. We got a 58-day supply of Mercedes EVs on the ground. Our margins are better on BMWs right now than they are on Mercedes. They're, you know, BMW is still in the same range as a nice vehicle margin, so I think they've done a really good job in managing that. Mercedes got out a little bit ahead of themselves in terms of inventory. The product's great, and we're selling a lot of it on the East Coast. I think among the largest sellers in the country, maybe the world of EVs for both of those brands. But there's still challenges ahead. The prices are too high, the product's fantastic. Customers need to get used to the product. There's a lot of work to be done, to get us there, and we'll get there over time. The manufacturer is gonna be discounting. There's no question about that in the coming quarters. That's great for us. We'll sell more cars, drive more F&I, and drive more profitability in the company. This is Heath. You've seen probably a lot of manufacturers talk about the market for hybrid vehicles and especially Toyota, and you know, that being the transition really from the combustion engine to EV, and so hybrids are great for us. We love the product, and it's really good for service, so we think that's gonna be more of a demand right now than EV. Great. Very helpful. That's all for us. Thanks, guys. We have reached the end of the question and answer session. I'll now turn the call back over to the CEO, David Smith, for closing remarks. Great. Thank you very much. Thank you, everyone, for joining us, and have a great day. Talk next quarter. This concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.