Greetings, and welcome to the Sonic Automotive fourth quarter 2023 earnings conference call. This conference call is being recorded today, Wednesday, February 14th, 2024. Presentation materials with the company 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, Chairman and Chief Executive Officer of Sonic Automotive. Mr. Smith, you may begin your conference. Thank you, and good morning, everyone, and welcome to the Sonic Automotive fourth quarter 2023 earnings call. Joining me today are our President, Jeff Dyke, our CFO, Heath Byrd, our EchoPark Chief Operating Officer, Tim Keen, and our VP of Investor Relations, Danny Wieland. Earlier this morning, Sonic Automotive reported fourth quarter and full-year financial results, including fourth quarter total revenues of $3.6 billion and all-time record annual revenues of $14.4 billion, up 3% from the previous year. Fourth quarter GAAP EPS was $1.11 per share, which includes the effect of non-cash impairment charges and tax items. Excluding these items, adjusted EPS was $1.63 per share, a decrease from $2.61 in the prior year, due primarily to continued normalization of new vehicle GPU and higher interest rates. We are very proud of our team's performance in the fourth 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'd like to thank them all for their continued support. Turning now to fourth quarter franchise dealership trends. We continue to see expansion of new vehicle inventory levels across our brand portfolio, ending the year with a 37-day supply of inventory, up from 33 days at the end of the third quarter and 24 days at the end of 2022. As a result, new vehicle gross profit per unit continued its sequential decline to $4,289 per unit in the fourth quarter, in line with our previous guidance to exit 2023 in the low- to mid-$4,000 range. This steady decline in new vehicle GPUs should continue throughout 2024, but we continue to believe that the new normal level of new vehicle GPU will remain structurally higher than it was pre-pandemic, historically, in the $2,000 per unit range. Furthermore, our luxury-weighted portfolio generally runs a lower inventory day supply, and our luxury manufacturer partners have more effectively balanced supply to date, potentially minimizing new GPU compression relative to overall industry trends, which would continue to benefit the earnings power of our franchise business. In the used vehicle market, wholesale auction prices for three-year-old vehicles decreased nearly 9% in the fourth quarter, while average retail used pricing declined just 2%. Elevated used retail prices remain a challenge for consumers, contributing to affordability concerns amid the current interest rate environment. However, the downward trends we are seeing in used vehicle wholesale pricing are positive for our business outlook and should benefit affordability and used vehicle sales volume in 2024. Fewer lease turn-ins at our franchise dealerships continued to limit our used vehicle volume in the fourth quarter, and used market seasonality drove a decline in used retail GPU to $1,443 per unit on a same-store basis. Our team remains focused on driving incremental used inventory acquisition and retail sales opportunities in 2024, driving upside in this line of 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, with same store franchised F&I per unit of $2,334 in the fourth quarter. Our franchise dealership F&I penetration rates were stable quarter-over-quarter, and we achieved our previously issued guidance for full year 2023 franchised F&I GPU at or above $2,400 per unit, with same store franchised F&I GPU of $2,411 for the full year. For comparison, for full year 2019, our franchised F&I GPU was $1,620, which was nearly $800 lower than the current run rate, and we expect to see continued stability in F&I GPU in 2024. Our parts and service or fixed operations business remained strong, with record fourth quarter fixed operations gross profit at our franchise dealerships up 7% year-over-year on a same-store basis, driven by 9% growth in our customer pay business. We are 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 2024. Turning now to the EchoPark segment. For the fourth quarter, we reported EchoPark revenues of $557 million, down 6% from the prior year, and record fourth quarter EchoPark gross profit of $43 million, up 5% from the prior year, despite a significant reduction in our store count year-over-year. EchoPark segment retail unit sales volume for the quarter was nearly 17,600 units, up 1% year-over-year. However, on a same-store basis, EchoPark retail unit sales volume was up 42% in the fourth quarter. As discussed on our previous earnings calls, reducing our store footprint in the second quarter of 2023 allowed us to better allocate inventory across the platform, driving higher unit sales volume, better GPU, and significantly lower operating losses in the second half of 2023. Fourth quarter EchoPark segment adjusted EBITDA was a loss of $9.1 million, compared to an adjusted EBITDA loss of $25.4 million in the fourth quarter last year. In January 2024, we made the difficult decision to close the seven remaining Northwest Motorsport pre-owned stores in the EchoPark segment due to unique ongoing challenges to the Northwest Motorsport business model. This decision, while not taken lightly, was made in order to benefit EchoPark's near-term profitability path and better align with our overall used vehicle strategy. Fourth quarter adjusted EBITDA loss associated with the Northwest Motorsport Group totaled $1.3 million. That's $1.3 million, while full-year adjusted EBITDA losses associated with the group totaled $5.1 million. Moving forward, we remain confident in our path to achieve breakeven EchoPark segment adjusted EBITDA in the first quarter of 2024, and positive EchoPark segment adjusted EBITDA for the full year. Sonic's diversified cash flows and strong balance sheet allowed us to withstand the challenges in the used vehicle market over the last three years and maintain our long-term EchoPark plans. Our unwavering confidence in EchoPark's future potential has positioned us as one of the few remaining nationwide used vehicle retailers, creating a tremendous opportunity for this brand down the road. We look forward to resuming disciplined, long-term growth for EchoPark as used vehicle market conditions improve. Turning now to our Powersports segment. For the fourth quarter, we generated revenues of $27 million, gross profit of $7 million, and an adjusted EBITDA loss of $2.4 million. Given the seasonal variability, variability in the powersports industry and our geographic presence with the Black Hills platform, our fourth quarter results were in line with our projections. Looking into 2024, we continue to focus on identifying operational synergies within our current powersports network and remain optimistic about the future growth opportunities in this adjacent retail sector when the time is right. Finally, turning to our balance sheet. We ended the third quarter with $846 million in available liquidity, including $374 million in combined cash and floorplan deposits on hand. The strength of our balance sheet allowed us to repurchase 3.3 million shares of our common stock in 2023, or 9% of shares outstanding at the beginning of the year. At the end of the fourth quarter, our remaining share repurchase authorization was $287 million, which represents approximately 15% of today's equity market cap. Share repurchases are an important part of our capital allocation strategy, and we remain focused on returning capital to shareholders via share repurchases as our liquidity and other capital needs allow. Additionally, I'm pleased to report that our board of directors approved a quarterly cash dividend of $0.30 per share, payable on April 15th, 2024, to all stockholders of record on March 15th, 2024. As we move ahead to 2024, I'd like to call your attention to pages 12 and 13 in the investor presentation we released this morning, where we discuss our outlook for the industry in 2024 and provide limited financial guidance for certain metrics. From a consolidated company earnings perspective, we expect lower franchise dealership segment earnings to be partially offset by significant improvement in EchoPark segment results, returning to positive adjusted EBITDA for the year, as well as a moderate increase in Powersports segment income year over year. While the financial outlook in the investor presentation is subject to inherent forecast risks and uncertainties, some of which are beyond our control, we believe the metrics provided may be useful in developing a financial model for Sonic's 2024 results. In closing, our team remains focused on near-term execution and adapting to ongoing changes in the automotive retail environment and macroeconomic backdrop, while making strategic decisions to maximize long-term returns. Furthermore, we continue to believe that our diversified business model provides significant earnings growth opportunities in our EchoPark and Powersports segments that may help to offset any industry-driven margin headwinds we may face in the 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 the right culture to continue to grow our business and create long-term value for our stakeholders. This concludes our opening remarks, and we look forward to answering any questions you may have. Thank you very much. Thank you. We will now 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 question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Daniel Imbro with Stephens. Please proceed with your questions. Hey, guys, this is Joe Enderlin in for Daniel. Thanks for taking the questions. Hi. Morning. On the franchise side, your SG&A assumption of low 70s margin was a little higher than we expected. Could you maybe bucket out what drives these costs higher? And maybe is this where you expect long-term margin to shake out, or do you expect leverage after 2024, and we return to a more normal GPU cadence? Thanks. Yes, h ey, this is Heath Byrd. A couple of things. Obviously, the SG&A's percent of gross is heavily dependent on gross, right? And in our guidance of a low 70% range, we also have about a $1,200 degradation in the front-end GPU. If you just take that degradation on a flat unit basis, that's a $130 million of gross, that's leaving the numerator in that calculation. We do have about a 1% increase in units in there that does offset some of that, loss in gross. And so the biggest component is that $130 million, give or take, decrease in gross. If you look at the expenses, you know, the variable expenses are leveraging as they should, as the gross is going down. Fixed expenses, there are some that are higher than normal. Insurance coverage, trying to get coverage with property and casualty is going up across the country. Also, loaner expense is higher because our fixed ops business is growing at such a good pace. And we have manufacturer requirements to use EVs as loaners, and the depreciation of those are higher than ICE vehicles, and so that impacts our loaner expense. And some IT expenses and investments for future optimization. There's definitely upside potential in that SG&A percentage of gross. The GPU degradation may be slower than we expected, but I think it's pretty standard across the peer group that in that range of about $1,200 loss for the year. Our portfolio could outperform the SAR, the expectations out there from 1%-4%. We have a low single-digit expectation in the units that we sell, and obviously, we've got potential in the F&I and fixed gross to offset that loss in new gross. We also have plans to have some structural changes in our expense structure, which could also impact that number. So we definitely see opportunity to beat that number, but looking at the math and the things that we see out there, we think a low 70% range is appropriate. Got it. That's helpful. As a follow-up, just given the weakness in the used market as a whole, do you have any updated thoughts on what gives you confidence in the long-term operating model of EchoPark? Do you maybe increasingly think that consolidation of assets is gonna play a considerable role in returning to that peak profitability? Yeah, this is Jeff. Certainly, the reduction in store count has helped us and our buying team buy cars for fewer stores, and that's proving out in the numbers, as we called out in the second and the third quarter. We're seeing excellent growth across the remaining 18 stores that we have. And with the manufacturers providing more and more inventory out on the street, it's gonna just naturally, common sense, it's gonna drop pricing. We're seeing that. Average wholesale prices are dropping. We're buying cars now in the mid-$23,000 range. I expect that to continue to drop, in particular, after we get out of the March, kind of April selling timeframe, and that'll continue to improve as we move throughout the year. With that, we're gonna sell more cars. We're gaining confidence with where we were with EchoPark back in 2019, and then we can start looking at strategic growth for EchoPark, being very conservative, but getting back on the bicycle and growing the brand again. And so we've just been waiting. Certainly, as we called out in the third quarter, turbulent waters for the used car business. We think there's another 16-18 months of that, but progressively getting better as we move throughout the year. Got it. Thank you, guys. That's all for us. Thank you. Thank you. Thank you. Our next question has come from the line of John Murphy with Bank of America. Please proceed with your questions. Good morning, guys. I just wanted to follow up on that used question. I I mean, Jeff, I mean, it seems like what we're seeing is demand for vehicles is continuing to, you know, slowly improve. And just curious, you know, as you think of what's going on, on the used side, right, versus the new, is there this substitution where folks are just tripping into buying new vehicles as opposed to used vehicles. But we also have this dynamic of sort of a still shrinkage of the 1- to 6-year-old used fleet. So there's a lot of moving parts that are going on here, and we're kind of hearing, you know, cross currents, you know, in different ways about used being weak, but it doesn't seem like it jives necessarily with the idea that the vehicle demand is improving. I just—I don't know if you could expand on that, or tell us kind of what you're seeing, you know, generally maybe in the new stores, but then also in EchoPark. Yeah, sure. I mean, I don't agree with the statement that the used vehicle is getting weak. I mean, if anything, it's flattening out and starting to get better. And so, you know, in the coming months, with the amount of new cars that the manufacturers are putting on the road, we're gonna trade for more cars, we're gonna trade for more 1- to 5-year-old cars. And that's certainly helping both the franchise used vehicle departments and EchoPark. And you can see it in EchoPark. I mean, you see the numbers. Our EchoPark volume is expanding greatly. We're selling, you know, more cars now out of 18 stores than we were selling out of 45 stores before. So, and we expect that to continue. I think the used vehicle business gets stronger as the year goes on. And that's because wholesale prices are gonna drop, and wholesale prices are gonna drop because the manufacturers can't help themselves. They're just putting more and more cars on the road. Some are doing a better job than others. But there. And And then we've got the electric vehicle piece that's coming in. We don't have any, to say, used vehicle, electric vehicles. That's gonna start becoming a part of the picture as we move into the mid-summer months, as some of the off-lease cars start coming back. So, I just see nothing but upside from a, from a used vehicle perspective, and that's why we're very confident in our first quarter, break even EBITDA call out, for EchoPark. And we ought to be in great shape for the year. The business, the used car business is strong. It's always been strong. We've just been short on the 1- to 5-year-old model for EchoPark, and that, you know, caused some turbulent times over the last couple of years. That's dissipating, and as we move throughout 2024, it's just gonna get stronger and stronger. And that bodes well for the EchoPark model. It's an offset to what goes on from a franchise perspective, for us, and so we're expecting just a tremendous year, from an EchoPark perspective. Okay, that's very helpful. Just one follow-up on the F&I PVR, 2,400, roughly, you guys are looking at. You know, it seems like we're through the worst of times, you know, knock on wood, on rates rising and sort of the negative headwinds that you might have there. You know, there might be some offset of revenue per unit, ATP is going down a bit in 2024. But, you know, is there potential that there could be some real upside there, you know, in 2024, maybe structured over time as you get good, you know, better penetration of some of the good product that you guys have developed there and the industry has developed? Yeah, absolutely. And especially as we get to the back half of the year, rates come down a little bit. Certainly, with retail pricing dropping, there's less margin on the F part of F&I. But, you know, there's nothing but upside. Look, you know, we are typically one or two in the category, or excuse me, two or three in the category, and I think AutoNation's out there with a much higher F&I PVR. We believe we can perform at that level or higher. Our EchoPark stores perform at that level or higher, and I think you'll see that, along with improving front-end margin at EchoPark as we move throughout the first quarter and into the end of the rest of the year. So that's a good call out. I think there is opportunity for F&I improvement as we move forward. Thank you very much, guys. Thank you. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate you are in the question queue. Our next question comes from the line of Rajat Gupta with JPMorgan. Please proceed with your question. Great. Thanks for taking the question. Just wanted to, you know, first, reconcile, you know, some of the comments on the used car market. I think, Jeff, I think earlier on the call, you'd mentioned that the backdrop is likely to remain tough for 16-18 months. But then to John's question earlier, I think you mentioned that you're seeing improvement. I'm just curious, like, you know, how should we reconcile those comments? And then, would you be able to put a finer point on expectations for used car volumes, both at EchoPark and the franchise business for 2024? And I have a quick follow-up on SG&A. Thanks. Yeah, I think over the next 6-8, 16-18 months, you know, it's not gonna return to 2019 levels, but it's progressively going to get better. And the way that I would look at volume for EchoPark is in and around the same amount of volume that we did last year, with a lot fewer stores, for six months of the year. And then we are projecting low single-digit growth for used car volume increases from a used car perspective on the franchise side. So, look, you know, we're not out of the troubled waters, but it's not anywhere near as choppy as it was. With the wholesale market prices dropping, it's just progressively going to get better as we move throughout 2024 and into the first quarter of 2025, and that's why we're just so confident about EchoPark and where we are. We told you guys this in the second quarter. We made our moves. We saw what happened in the third quarter. We saw what happened in the fourth quarter with our volumes. That's continuing in January. It continued in January. We're seeing it again in February. And we expect the rest of the year to progressively get better as we move forward. Did we lose you? You might be muted. Hi, can you hear me? Sorry. Yeah, we can hear you now. We can hear you. Yeah, so just on SG&A to gross, you know, the low 70% number for the full year, I mean, if we compare that to 2019, it's obviously, you know, below. You know, you were 77% in 2019, you're guiding to 72%. But t hat 72%, 73% for this year is still on a higher than 2019 in new car GPU number, I know, on a blended basis. So, is there any change in thought process around, you know, where the normalized SG&A to gross would go to? Because presumably, 2025 is gonna see another step down in the new car GPU. So should we expect that franchise, the SG&A to gross, to settle even higher than low 70s, you know, eventually? Or, you know, how should we think about that? And hopefully, the question makes sense. Thanks. Yeah, this is Heath. Yeah, we absolutely think that in the out periods, that there's the opportunity to decrease that level of SG&A as a percent of gross. We're doing some structural changes from an expense perspective, as well as some changes in our F&I products that we're offering, and those things will help replace that degradation in the new gross and will actually help the SG&A as percent of gross. So we do not think that this is gonna be staying in the 70s going forward. We think there's opportunities to get back in the high 60s. But at this point, based on the data that we're seeing, we believe that that low 70% range is appropriate for 2024. Raj, the other thing, too, is we added 100 net gain of 108 technicians last year. Our target is to add an additional 300 net gain of technicians this year. We still have to do that, but at the end of the day, that's gonna create incremental growth to help offset what we see from a front-end gross degradation on degradation on new car. And that, too, will help push the margin SG&A percentage gross down below the 72% number that we're calling out. And look, at the end of the day, we'll see. The Street, you know, some of our competitors are calling out 150-200 basis point increase in expenses, and we're in that 400-500 range. It's still early in the year, but we're all calling out basically $300 a quarter in front-end margin degradation, and that's a lot of gross reduction. And we'll see, you know, kind of who's right when this is all said and done with. There's a long way to go in the year. We certainly believe that we can improve upon the number that we're giving you. But like Heath said, based on where we are right now, that low seventies range we feel is a good number to begin the year with, and we'll work our tails off to improve from there. But there's a long way to go, and what the manufacturers do with new cars and new car day supply is gonna play a big role in all of this, along with what percentage of your overall sales is gonna be electric vehicle. That's running around 10% right now. That had almost a $400 degradation to our front-end margin in the fourth quarter. Highline drove a lot of that. Mercedes-Benz was $235 of that degradation alone, primarily driven from California. That's. We've got to get control of that. That's a big focus point for us with our manufacturer partners as we move forward. And I know that we're not the only ones experiencing that. So there's a lot of moving pieces at play here. But safe to say, in that low 70% range for now, and hopefully, as we move through the quarters, that becomes a better number. And one technical point, too, on the degradation. It's not gonna be linear. We're gonna have, for that GPU front-end degradation, you're gonna have a larger portion going from Q4 into Q1, and then it levels out to about 300 a quarter going forward. To your point, Raj, this is Danny. To your point on the sustainability of structurally higher new GPUs, we still believe that that's a possibility as we go forward, move past 2024. We're already seeing where with some of the domestic manufacturers, they've got an 80+ day supply today, but yet we're making $1,200-$2,000 more in GPU than we did in 2019, despite day supply being roughly back at that level. A lot of that has to do with the segment mix shift towards full-size trucks, SUVs, that are higher margin business for us. And then across the other brands, you know, where we've got more measured inventory day supply expansion, we're still seeing dramatically elevated new GPUs, that while they expect to come down as we go through this year, we still see a path to where, as part of that longer term SG&A growth structure, we're not going back to a $2,000 blended new GPU, and it's somewhere elevated above that. And then you factor in the fact that we're running roughly $800 higher in F&I per unit. The variable GPU associated with those, those retail unit sales down the road, should help us leverage the expense structure more efficiently than we did in 2019. Got it. That's very clear. Thanks for taking the questions. Thank you. Thank you. Our next questions come from the line of Glenn Chin with Seaport Research Partners. Please proceed with your questions. Good morning. Thanks, gentlemen. Good morning. Just circling back to your comment about GPU headwind from EVUs, is that- We lost you. Sorry, can you guys still hear me? We can now. Ask that again. Sorry about that. Just circling back to your comment, Jeff, about GPU headwind from EVs, that $400, that, that's a comment relative to year-over-year, correct? Not sequential. That's the headwind in the fourth quarter. So if you look at our blended GPU that we reported for Q4, it reflects a $400 headwind from EV GPUs at running at a lower rate than the remainder of the business. And in some brands, negative margin and significant negative margin, which added to that. Okay, very good. Thank you. And then, you know, historically, fourth quarter is seasonally strongest for earnings for Sonic. Can you just highlight the factor or factors that primarily drove that disruption to that trend this year? Well, I mean, a lot of us, this is David, we've talked a lot about it, right? There was sort of a window of uncertainty that we saw that really impacted our traffic. And I think that the overall macroeconomic, you know, landscape, that people were, you know, hesitated a little bit there to do business, and then it came back in some areas at the close of the year. But I think that was... Again, this is sort of a macro point of saying, "You know, hey, we'll just wait and buy. Let's see if this storm clears a little bit before we go and buy a car." That's some of the feedback we've gotten. So- Okay. The other thing that I would add to that is BMW plays, you know, an enormous role in our overall performance, and our growth on BMW in the quarter was about 1.1%. You compare that to some of our other highline manufacturers, Lexus were up 76% in the quarter, Audi up almost 23%, luxury was up 11.4%. But when BMW doesn't have the kind of volume in the quarter that it normally would have, that and the gross erosion associated with that certainly did not help during the quarter. And that was really driven by inventory levels. BMW has done an amazing job overall, keeping their day supply down and did that during the fourth quarter. We missed out on some opportunities there. Because we have so many BMW stores, and they're such a big part of our overall revenue mix, that certainly played a role in the overall performance in the quarter. Okay. I apologize. I hopped on late, so thank you for clarifying. No problem. Then just on your outlook, thank you for the comprehensive look. That's very helpful. I don't suppose you guys would care to venture a range for a potential adjusted EBITDA profitability for EchoPark for 2024? No, we, you know, we do have that. We forecast being positive EBITDA for the year for EchoPark, and that's as far as we go. Okay. And can I ask just what that may be predicated upon? Does it require any more store closures, or is the footprint you guys have now set? That's not something we built into it, is it, any additional store closures. Yeah, I mean, look, the used vehicle business is getting better. The inventory supply is getting better. The average wholesale price is dropping significantly. And when you combine all of those things, that's why we just have such confidence in our EchoPark model and why we stuck it out through those last three very difficult years. It makes for a pretty picture for 2024, and even better as the years go on. We're coming out of those turbulent waters, as I said earlier, and it's gonna make for a fun year. EchoPark's gonna have a great year, and we're very excited about, you know, being back on our bicycle, so to speak, and getting those stores back to selling the kind of volume that we built them for, and driving the kind of gross that we built them for, and that's upon us now. We've waited a long time, worked really, really hard. Our team has busted their butts to get through all of this, and we're getting ready to, you know, enjoy the rewards from the hard work that went into that. You know, as I, this is David, as I mentioned in our opening comments, you know, talking about our diversified business model and being able to weather the storm, you know, we view it and jokingly here in the office talk about it. It's like in the movie Forrest Gump, when they survive the storm. You know, you've seen these other stores, you know, these other competitors closing. You know, it's not as if the used vehicle market has just, you know, disintegrated forever. It's not. Okay, we think it's gonna be, you know, stronger there. It's a much larger market than the new vehicle market historically, and we just, as we said, we see a tremendous opportunity for EchoPark in the future. Yeah, and one more point to add. This is Danny. You know, Glenn, I think you mentioned it in your note this morning, that even just going from the $83 million adjusted EBITDA loss at EchoPark in 2023 to zero, is north of $1.50 of EPS benefit, and we called out that we expect to be positive for the full year next year. So there's a big opportunity to offset, at least somewhat offset the, the normalization, continued normalization of franchised earnings just by getting back to zero, let alone positive EBITDA, on the EchoPark segment. Yep, understood. Okay, thanks. And then just last for me, if you can just comment on the spread between wholesale and retail used pricing. Has it normalized and what you guys might see it doing for the rest of this year? No, it's not, it's not normalized. I think wholesale prices in the fourth quarter dropped, like, 9%, retail dropped 2%. And, you know, there's a 7-8-week lag there. There's still a lot of high percentage of no sales in the auction lanes. I think that's running north of 40%, but down from 50%. And so as- you know, everybody's still trying to find their way through this, you know, the back edges of this storm. But, we expect those two things to catch up with each other as we move into March and April and May, and again, you know, put some wind in the sails of EchoPark and the industry. Used vehicle business should be getting better as we move forward. So in other words, yes, so that spread should be widening, correct? Yes, that's exactly right. Yeah. Okay. Very good. Thanks for all the comments. Thank you. I appreciate the questions. Thank you. Our next questions come from the line of Michael Ward with Freedom Capital. Please proceed with your question. Thanks very much. Good morning, everyone. Good morning. Just to zero it in a little bit on EchoPark on the SG&A side. So we've seen a big improvement in SG&A costs, second half versus first of 2023. As we go into 2024, I assume the run rate's even lower as we go into Q1 with getting rid of some of the Northwest stores. Is that correct? Yes. 100%. Okay. I think we called out on the pages that David referenced, somewhere in EchoPark, more, SG&A percentage in the 80% range, with a mature store being south of 70%. We expect that, as we mature, we- that's where we expect to be. And honestly, that's where we were, if not better- Yeah. P rior to COVID hitting. So all these things are coming back into light for us, which is just fantastic. Yeah, that's a total segment level. At the store level, we've seen at our more mature stores, EchoPark in 2019, are getting back toward a sub-60%. I mean, they're among the best of our entire portfolio in terms of SG&A to gross and SG&A leverage because of the cost structure at, in that market. Okay. How many locations do you have at EchoPark at year-end? 18. 18? We had 25 at year-end, but with the 7 closures in January. Today, we sit at 18. Sorry, I've already forgotten about Northwest Motorsport. Thanks very much. Thank you. Our next question has come from the line of Bret Jordan with Jefferies. Please proceed with your questions. Hey, good morning, guys. Morning. Morning. Could you talk about the impact of lease recovery on F&I? Obviously, it's been at a pretty low rate on lease penetration, but it would seem that has less F&I packaged in that transaction. Is that factored into your flat F&I going forward? Meaning if leases improve and penetration improves? It, it's not, it's not gonna make a difference, I don't think. Our, it is factored in and, and, you know, we're gonna be in that $2,400 range or north of that, I think, as the back half of the year gets here, as we continue to improve, especially on a total company basis, because we're, we're seeing great improvement at EchoPark, even in the current margin rate, at current interest rate environment, as we zero in and focus on, on execution there. There's a lot of ops opportunity, from our perspective and from an F&I perspective, and, we should be able to hit that $2,400 number, $2,400 number, or higher as we move forward. Is there any F&I attached to leasing or is it pretty much not a thing there? No, there's F&I in it. It's just not at the level that you would with when someone's financing a car traditionally. Okay. And then in the customer pay, parts and service side, up 9%, what was the number between price and traffic in that 9%? About 1/3 of that. This is Danny. About 1/3 of that comes from higher repair order volume, and 2/3 is coming from passing along higher labor costs, higher parts costs, the effects of inflation as we've seen over the last several quarters. Okay, great. Thank you. Thank you. There are no further questions at this time. I'd now like to hand the call back over to David Smith for any closing remarks. Thank you very much, and thank you, everyone, for participating in the call, and we look forward to speaking with you our next quarter. Thank you. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.