Good morning, welcome to the Sonic Automotive second quarter 2026 earnings conference call. This conference call is being recorded today, Thursday, July 30, 2026. 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. S uch 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. Thank you very much, good morning, everyone. Welcome to Sonic Automotive's second quarter 2026 earnings call. As she said, I'm David 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, our VP of Investor Relations, Danny Wieland. I would like to begin by thanking our outstanding teammates for their continued commitment to delivering a world-class guest experience. The strength of our relationships with our teammates, our guests, our manufacturer partners, and lending partners remains central to our long-term success, and we appreciate their continued support of the Sonic Automotive team. Earlier this morning, Sonic Automotive reported second quarter financial results, including record second quarter total revenues of $3.9 billion, an increase of 8% from the prior year period, and all-time record quarterly gross profit of $616.2 million, up 2% year-over-year. Second quarter reported GAAP EPS was $1.79 per diluted share. Excluding the effect of certain adjustments detailed in our press release this morning, non-GAAP adjusted EPS for the second quarter was $1.82 per diluted share. Beginning with our franchised dealership segment, our stores performed well despite difficult year-over-year comparisons as a result of pre-tariff consumer demand pull forward during the second quarter of 2025. Reported revenues increased 6% to $3.3 billion, while same-store revenues increased 2% year-over-year. Reported franchised dealership segment gross profit increased 1%, while same-store gross profit decreased 3%. Halfway through the year, new vehicle gross profit per unit is tracking above the high end of our full-year guidance range of $2,700- $3,000 per unit. As a result, we have increased our full-year new GPU guidance to $2,850- $3,000 per unit, implying lower downside risk despite potential GPU compression in the third and fourth quarters as a result of ongoing tariff-driven affordability challenges. Second quarter reported new vehicle GPU was $3,024, down 11% year-over-year, same-store new vehicle GPU was $2,872, down 16% year-over-year, driven primarily by higher GPUs in the prior year period as a result of pre-tariff consumer demand. Same-store new vehicle unit volume was flat year-over-year, in line with industry trends. Year-to-date, used vehicle gross profit per unit is also tracking at the high end of our previously communicated full-year guidance range of $1,350- $1,450. Second quarter reported used vehicle GPU was $1,399, down 12%, same-store used vehicle GPU was $1,401, down 13%. Same-store retail used vehicle volume increased 7%, driven by improving used vehicle supply and our strategic focus on increasing used vehicle volume throughput as we progress toward our long-term objective of retailing an average of 100 used retail units per dealership per month, representing approximately 25% organic volume growth potential from current levels. We believe second half used GPU may be lower than the first half of 2026 as we focus on volume throughput and total gross profit generation. Fixed operations remains a source of stable and recurring earnings, with reported gross profit increasing 6% to an all-time quarterly record of $263.8 million. On a same-store basis, fixed operations gross profit increased 2%, driven by a 1% increase in customer pay gross profit and a 3% increase in warranty gross profit. We believe that continued affordability challenges may lead consumers to repair their current vehicles rather than replace them with newer ones. To capitalize on this potential tailwind, we are continuing to implement value pricing service offerings and service-based marketing strategies to drive share gains and support our guidance for mid-single-digit percentage growth in same-store fixed operations gross profit for the full- year. F&I continued to make a very meaningful contribution to our results, with reported franchise dealerships F&I gross profit increasing 2% to a second quarter record of $147.9 million, while same-store F&I gross profit decreased 1%, driven by a 4% decrease in same-store F&I per unit. Fixed operations and F&I continue to provide a stable foundation for our business, representing more than 75% of total gross profit during the second quarter. The strength of these higher-margin businesses helped offset declines in new vehicle GPU and supported the overall profitability of our franchise dealership segment. Turning now to EchoPark. Second quarter revenues increased 15% to $582.9 million, segment gross profit increased 4% to a second quarter record of $64.3 million. EchoPark retail used volume well outpaced the broader industry, increasing 17% to 19,601 units, reflecting continued consumer demand for our strategic value proposition, improvement in non-auction sourcing mix, and strong execution by our teammates to continue to deliver an outstanding guest experience. EchoPark total gross profit per unit was $3,292, down 12% year-over-year, driven by a 21% decrease in used vehicle front GPU to $328 and an 11% decrease in F&I gross profit per unit to $2,965. Used vehicle GPU was stable sequentially, benefiting from our increased mix of non-auction sourced inventory. The sequential reduction in F&I gross profit per unit reflected lower service contract penetration and lower gross profit per service contract, due in part to a greater mix of battery, electric, and higher mileage vehicles, which carry lower warranty penetration rates and profit per contract. As we have improved our mix of non-auction sourced inventory and shifted our inventory mix to provide more affordable, higher mileage vehicles to consumers, it has put some pressure on our F&I GPU while benefiting volume, consumer reach, and overall gross profit levels. Going forward, we remain focused on optimizing vehicle sourcing and inventory mix, vehicle pricing, and F&I product offerings to drive targeted levels of total GPU in the $3,100-$3,300 per unit range for full- year 2026, along with 12%-15% used retail unit volume growth. EchoPark's segment income was $7.2 million and adjusted EBITDA was $13.9 million, tracking within our full- year guidance of $35 million-$40 million in adjusted EBITDA. Included in this guidance is $8 million-$12 million in incremental brand marketing expense in the fourth quarter, which we believe will support new market expansion and organic volume growth in our existing EchoPark markets. We expect to open one new EchoPark location in the Orlando market in the fourth quarter and two to four new EchoPark locations in 2027. Turning now to our Powersports segment. Revenues increased 53% to a second quarter record $73.5 million, and gross profit increased 57% to a second quarter record $19.7 million. On a same-store basis, Powersports revenues and gross profit each increased 13% year-over-year. Reported new retail unit volume increased 27%, while reported used retail unit volume increased 61%. On a same-store basis, Powersports new retail unit volume increased 3% and used retail unit volume increased 19%. Powersports reported F&I revenue increased 75% year-over-year to $3.5 million, with total F&I per unit up 27% to $1,125. Same-store F&I revenue increased 20%, while same-store F&I per unit increased 12%. Powersports segment income increased to $2.3 million from break even in the prior year period and adjusted EBITDA increased 145% to $4.9 million. Our recently acquired Harley-Davidson dealerships in California, Florida, Georgia, and North Carolina contributed to the segment's growth and expanded our presence in several important riding markets. These locations also improve the geographic and seasonal diversification of our Powersports portfolio As evidenced by the increase in second quarter adjusted EBITDA year-over-year. Despite limited Sonic playbook integration to date, these stores are already seeing returns above our expectations. This gives credence to our commitment to growing and sustaining our Powersports growth strategy. We are also gearing up for the 86th Annual Sturgis Motorcycle Rally starting August 7th, where we expect another strong opportunity to showcase the benefits of our expanded footprint and capitalize on one of the industry's largest retail events. Finally, turning to our balance sheet. We ended the quarter with approximately $676 million of total available liquidity resources, including approximately $294 million of cash and floor plan deposits. Our liquidity position and balance sheet capacity provide us with the flexibility to support our existing businesses, make targeted organic investments, pursue strategic acquisition opportunities, and return capital to stockholders. As we continue to execute our balanced capital allocation strategy, I'm pleased to announce that our board of directors approved a cash dividend of $0.41 per share, payable on October 15th, 2026 for current shareholders as of September 15th, 2026. We will continue to evaluate potential uses of capital based on available acquisition opportunities, relative financial returns, strategic fit, and prevailing market conditions. Our team remains focused on delivering an exceptional guest experience while executing our long-term strategy across all three operating segments and making disciplined decisions designed to enhance long-term shareholder value. This concludes our opening remarks, and we look forward to answering any questions you have. Thank you. 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 while we pull for questions. Thank you. Our first question is from Jeff Lick with Stephens. Please proceed with your question. Good morning. Thanks for taking my question. Morning. I wanted to ask about your new business. You did outperform, now that we've seen everyone report, you're really the only one that kind of matched the market. I'm curious just to get your thoughts on why you think that is, and then maybe if you could build on it. Not only did you match the market and outperform your peers in new, but you did so in used and that your used comp was actually better than your new comp, and used units was better than new units. If you could maybe speak to why you're able to do that and what you're seeing and what might be different for you. I don't know, based on brand mix, what the differences might be. I think we're a little more aggressive on our margins. We've been saying that there's going to be a margin stretch coming into the second half of the year. We pay real close attention to our days supply and making sure that we're turning inventory. I think we're pretty darned aggressive from a margin perspective, and that helped grow the volume and really support our big F&I numbers. We strategically have higher F&I PVRs, I think, than most of the rest of the group. When you combine that with the front end, it's a little lower in our higher F&I margins. The total gross dollars were in line with our expectations, and we really drove a great quarter, both from a new and a pre-owned perspective with that strategy. Just a follow-up or a shift gears to EchoPark. You made some tweaks, took the units up, total GPU down, combination of the vehicle and the finance F&I. Any details there? On advertising, you took that down by $8 million, which I guess effectively means you took your EchoPark guidance down by $8 million. My question there is, if you were a private company, would you still take the advertising down? That's interesting. Yes. This is David. We don't make decisions like that. We're doing what's best for our business long term. Yeah. I think that's the easy answer but Yeah, it would have to do private or public, it has to do more with scheduling, getting it right before we take it out. It's a scheduling issue as well from a timing perspective. The margin mix was driven basically by inventory mix. Tim can comment more, we sold more EVs and C-segment cars. We're working on back-end products for that. Drove great volume, up 17% for the quarter. If you take a look at July, we're running north of 20% growth, north of 25% growth for July, which is fantastic. All of this is kind of what we said we'd do as we began the year and work towards beginning to open stores again. The volume's coming back. We've got really strong back-end numbers, even at the numbers that we're doing now with the mix change. We'll have some new F&I products for BEV and for C-segment cars that will help that. We'll stabilize in that $3,100-$3,300 range, we're going to sell more cars, and we're proving that now. All speed ahead from an EchoPark perspective. We're super excited about the business. With affordability issues that we see on new, we've crested $60,000, $61,000 close to, from a new car price perspective. The industry is at $50,000. Our used car pricing is less than half of what a new car price is from an EchoPark perspective. That really bodes well for EchoPark over the next 12- 18 months. It's going to be a lot of fun to watch this brand grow. I guess to sum it up then, if you look at the advertising guidance or the budget coming down, it maybe looks like what you're saying is, look, volume really isn't our issue given what you're observing. Maybe we don't need to spend $20 million in advertising, maybe we just need to spend a little more time kind of fine-tuning the GPU. Two separate things. We would expect the advertising that we're going to, it's a timing issue. That's it. We expect that advertising, when we get to the fourth quarter, to even add more to what we're doing now. That opportunity was there all along. We were being very conservative, making sure that our EBITDA was where it needed to be and just being conservative with EchoPark. The volume, if you remember pre-COVID, we were selling 500+ cars of rooftop a month. Now we're doing in the 350 range. We've got a lot of upside opportunity in the current stores that we have. It's just turn a little lever here and there, or pull a lever here and there, and we can push our volume up drastically. That's going to happen. You see some of our competitors doing that, and we look forward to a great second half of the year with EchoPark. We're going to see nice growth, and we're seeing it in July. As we launch our new advertising campaign, which is really going to be special, the world's going to have a lot of fun with that. We expect to see even higher growth, and build on margin from that point forward. Jeff, this is Heath. Just to be clear, we still have our initial branding budget is $20 million. To Jeff's point, it's just timing. Did you put Danny in some of those EchoPark ads? You just never know. You never know what we're going to do. He would be fantastic. This is David. I would just add that it is part of our plan. We'll have more to announce, hopefully, in the near future about our marketing branding plan for EchoPark. We can tell you anecdotally, like our naming rights deal at EchoPark Speedway, when the customers, the awareness that that has generated, once customers hear about EchoPark and they see our online reviews, again, we've got the number one guest experience in the industry. When they see that, you should see the volume in our store. In our Atlanta store, for example- It's doubled Yeah. It's been a huge impact. We know that, again, we'll have further things to announce soon, but we're excited about it. Maybe one final point. Okay. This is Danny. One final point on that is with the timing, we had our marketing teams very much taking a data-driven approach to how we deploy this incremental brand spend. With the shift in the way consumers are shopping, we had some back-end work to do related to our websites in terms of being answer engine optimized for the portion of buyers that are searching via AI tools. We don't want to go out with that significant amount of brand spend, at least to our segment results, without being prepared to capitalize on it in the way that the consumers are currently shopping. There was some front-end work, and that's what shifted the timing further back in the year from what we told you, $10 million-$20 million back in February. Well, thanks for taking my questions, and congrats. It's definitely standout results. Thanks a lot. Thank you. Thank you. Thank you. Thank you. Our next question is from Alex Perry with Bank of America. Please proceed with your question. Hi. Thanks for taking my questions here. I guess just to follow up on EchoPark. You spoke a bit about the share gains, and it's been great to see. I guess, how are you gaining market share there versus some of your used-only peers that something changed around the pricing strategy? You mentioned some shifts in the advertising strategy. Should we expect those share gains to continue? Thanks. Yeah, this is Tim Keen. Really the only shift was carrying more inventory and being conscious of us being in a value position with cheaper inventory, which is what drove our mix change and allowed us to drive the volume. This is Jeff. As we set up against the new car pricing that's out there right now, this affordability issue continues, you're going to see used car growth really, really go. We're getting back now to used car pricing being one half that of the new car price that's out there. That's when the used car business really fires. That's what's happening. It's happening naturally. We're forcing it even more from an EchoPark perspective. When you combine all that, it's just amazing the energy you get from a volume perspective. We're seeing that. I think you saw it at a couple other competitors. Some others had made some comments about going for gross. I don't understand that a little bit right now from a PR perspective, because inventory's coming back. Off-lease cars are coming. You got a lot of off-lease BEV cars in the market where the manufacturers kind of absorb some of the depreciation. We're taking advantage of that. Just missed out a little bit on back-end products with that. I think BEV was 15% or almost 15% of our overall volume in the second quarter at EchoPark. That's way up from what it normally was running. We took advantage of that, had a bigger reach for our customer base, expanded our customer base. Now we said we need to add some products for BEV. We'll do that. Very focused on our pricing and the level of inventory we're carrying. When you combine all that, it's amazing what's happening. It's going to continue to happen through the rest of the year. Like I said, if you look at July, we're having a blast and we're plus 25% to last year or something like that right now. One more point on that auction sourcing mix. In the first quarter, we were 32% non-auction sourced. We were up 10 full points to 42% of our sales were non-auction sourced during the second quarter. Significant gains there. To Jeff's point, the way that we're attacking that with the non-auction mix is going to what consumers are looking for from higher mileage, more affordable vehicles, EVs, off lease, and used EVs are very hot right now. Both of those were growing 40%-60% quarter-over-quarter in terms of their share of EchoPark's mix. We've got to fine tune a little bit the F&I component and the relative GPUs, but it's supporting the volume and it's supporting growth of the awareness of EchoPark's brand and the reach that we have. That's all really helpful. Thank you for that. I guess just to follow up on parts and service. The same-store comps, I guess, moderated a bit against fairly difficult compares. Pretty consistent what we've seen across the peer group. Is there anything structural driving that moderation? What supports a return to mid-single digit growth? Do you think there's an affordability challenge out there in parts and service where pricing sort of needs to come down at all? Or do you think it was more of a one-off thing? Thanks. No, I think that they're 100% is a pricing issue. When you think about it, customers who buy new cars as an industry average, only half of them are coming back to new car dealers to service their cars. The opportunity in fixed operations is huge. That's why we're focused on value pricing. We've got five op codes right now per store that we're really focused on from a value pricing perspective. That's going to grow. We need to get our pricing in line as an industry from a fixed operations perspective, and we're working really hard on that. There is an affordability issue there, and there's an affordability issue on the price of a new car. When you add all that together, that's why I think you see some wobbliness in fixed operations growth, and growing only 2%. There's way more there, way more meat on the bone. That's a huge focus for us as we move forward. If customers are going to stay in cars longer, the average customer is financing their car. 70% of our customers are financing their car for 72 months or longer. If that's going to be the case and customers are going to drive new cars longer, there's going to be huge upside from a fixed operations perspective. We've got to get our costs and our pricing in line for our customers to bring more customers into the service drive. We are absolutely focused on doing that. We've increased the number of bays that we have. We've increased the number of technicians we have. Quite honestly, the numbers that we're seeing out there is not good enough. There's a wobble in the second quarter. I'm not sure if it's the war or what's causing it. Just across the board, low single digit numbers in fixed operations is not acceptable. We need to be mid to upper single digit and maybe even double digit growth as we go forward, and it's something we're very focused on. It's a great question. Thank you. All incredibly helpful. Best of luck going forward. Thank you so much. Thanks. Thank you. Our next question is from Chris Pierce with Needham & Company. Please proceed with your question. Hey, guys. Good morning. Good morning. At EchoPark, can you carry this much inventory? I guess, days to sale is up, I think, 15% year-over-year. Is the pricing environment, did that help you carry this inventory, or is it more your updated sourcing? Is this sort of a new normal, or does the environment play a role in kind of what we saw in Q2 from inventory and unit growth? It's really both and it's sustainable going forward for sure. Your days supply is a little higher than normal right now, but we saw an opportunity to buy more cars off the street. We're selling more cars. As you can see, we're having a big old July. We expect that to carry on for the rest of the year. Day supply is going to drop as we move into September and October. That's just normal seasonality. We told you earlier, we pushed inventory up because we know there's some opportunities from a volume perspective, and we've done that, and just great opportunity for us to grow. This is David. I think it's important to note that our existing footprint of EchoPark stores, we have a lot more capacity that we can sell out of those existing stores. It's close to double what we're selling now. The room that we have and how we're built, and we have some salespeople are selling 50 cars a month individually. Thank you for that. There's more BEV coming off lease for the next multiple years. Should we think about, and I think Danny said the stat that only 16% of EchoPark was EV. Should this sort of be a new sort of normal for F&I? I know you kind of guided where you guided, the figure we saw in 2Q, is it possible it could move lower as more EV comes online? What's the right way to think about that? From a margin perspective? Yes, from F&I retail dollars per vehicle at EchoPark. Yeah, no. We're kind of in the ballpark, where we'll be. I don't think it goes any lower. It could go higher because we're working on products to add that we can sell on that particular type of vehicle. I don't expect it to go any lower. No, no. Okay. Yeah. David, I have a question. Really, you're going to have a lot of offerings. Go ahead. I would say you're not as familiar with selling so many EVs, attached might be artificially low in this beginning period. Is that sort of a realistic expectation? I think the industry is that way. We've got a lot of off-lease BEVs coming back now. Manufacturers have done a great job absorbing some of that depreciation. We're going to see that until, I think, the end of next year, when it kind of maybe levels off or the middle of the following, when we don't have as many BEVs being sold now, obviously. There's going to be an up and then a down. We have more off-lease cars coming back from a combustion perspective and a hybrid perspective. That'll be a big help and a big boost. It's going to be good for the used car business over the next couple of years, I think, from a lease return perspective. We'll work out the margin with products on the back end. We sold more this quarter, we'll sell more in the coming quarters, we'll add some F&I products to support that. Some of it on the F&I, on the warranties attached with BEVs is a little bit of a disconnect in our sales approach historically, with more hybrid and ICE-based unit volume at EchoPark, as well as consumer perception that EVs have less repair risk or less repair cost. In fact, we're actually seeing that EVs are the highest dollars per repair on average in the industry. Some of that is because it's new technology, some of it's because you got more wholesale replacement of parts as opposed to individual components. There's a bit of an opportunity just to educate the consumer, too, when you look at some of the data on EV maintenance and repair costs relative to hybrid and ICE, that it's not quite as low cost as it seems, at least for the interim. Okay. Just lastly, judging on your reaction to Jeff's question, you're going to kind of scoff at this one, too. I'm just kind of curious, you're growing 17, 25 in July with no advertising. You've got easy comps in the second half. Why push that button now? Why not push the store opening button, or why not just kind of let it run through until you need to hit the gas on that? We're going to do both because we can grow even more, and we can grow margin. The more our guests know who we are, EchoPark's relatively unknown in the markets that we do business in. We think there's a margin play there for us, a front-end margin play. We've got a lot more volume to get. It's there for us to go get. We can back off if we need to, if we see we've made the investment and it's not coming. We've worked really hard to get this brand ready to roll. As David said earlier, our guest experience is unmatched, and we're very excited about that opportunity. We're going to start growing and grow the brand. We've made that commitment. We've been telling you all that this is coming for a better part of a year now. We're ready. We're healthy. We're ready to go. We're in shape, and we'll see. I'm not scoffing at it, I'm very excited about it. To David's earlier point, I just want to reiterate, because I think it's really important. We objectively have the best experience. We objectively have the lowest cost for the same or better quality of vehicle. The only thing we're missing is you don't know about us. If you know about us, those are the three things that customers are looking for, and the brand is going to create that awareness. Okay. Thanks a lot. It's not a quarterly play for us. That's just not how we look at this business. We're not trying to bump numbers one quarter after another. It's a long-term, educated, seasoned executive team, and we're going to take that and put that to work for us over time. We've been building and investing in EchoPark for a long time. It's now time to grow. Thank you very much. Thank you. Thank you. Our next question is from Bret Jordan with Jefferies. Please proceed with your question. Hey, good morning, guys. This is Patrick Buckley for Brett. Thanks for taking our questions. Hey, Patrick. Sure. As you look across your segments today, where are you seeing the best valuations and opportunity for investment? Powersports seem to be the primary M&A focus this quarter, but how does that pipeline compare to franchise vehicles? This is David. It's really fantastic because of our team and what a great job we've been doing with the market share and guest experience, and we're green with our manufacturers. We're seeing more opportunities than ever to grow, both in franchise and in the Powersports. Certainly, the valuations in Powersports are very interesting, very compelling. We're super excited about the performance of our Powersports team. I think we'll be hopefully announcing some things here in the coming quarters. There's no shortage of really fantastic high-quality opportunities, both in Powersports and franchise. Jeff, any comments? This is Jeff. The most I've seen in my career. Yeah. It's amazing from a franchise and Powersports perspective, the opportunities that are out there, and great quality deals, great brands, and brands that we excel in. We're working on a lot of them right now, and as David said, stay tuned because there are more opportunities coming. This is Heath. A couple of interesting things. If you look at Powersports, they traded at different multiple, a smaller multiple than the franchise, and there's so much opportunity. We said at the beginning how we could change the used business in Powersports and fixed ops, and it's great seeing that it's working just like we thought. In the F&I piece, we have a ton of opportunity. There are competitors that are double our F&I GPU. You get it for lower multiples, and there's a lot more opportunity for improvement. That's fantastic. The beautiful thing about Sonic is the diversification. To your point, we've got opportunities in the franchise. We've got unlimited growth opportunities with EchoPark, and now that we've sort of formalized our playbooks in Powersports, that is a very attractive segment to grow in as well. I think our diversification is something that's very attractive. Got it. Very helpful. Then on the franchise vehicle side, were there any notable regional call-outs this quarter? No. There's nothing. It's a smooth operation. Everything was fine. The big thing is affordability. Like I said earlier, one in five customer payments now are above $1,000 a monthly payment. Approaching $800 a month, a monthly payment on a new car as an industry, this is just too high. Something's got to give here. In the meantime, we'll take it. We'll sell a lot of used cars and enjoy the 16 SAR that's out there. The big surprise continues to be what the tariffs have done to affordability, kind of across the board. I think at some point, the industry's going to have to address it, the manufacturers are going to have to address it. The cars are getting too expensive. Great. That's all for us. Thanks, guys. Thank you. Thank you. Our next question is from Rajat Gupta from JPMorgan. Please proceed with your question. Great. Thanks for taking the question. I wanted to follow up on parts and service. We've seen some slowing in the growth rates, even some negative gross profit growth from some of your peers. I understand warranty comps got tougher this quarter, but I'm curious if anything's just shifted more recently in the market backdrop in general, either be it affordability or just the car park shifting. It just seems a little sudden in terms of the shift in growth there. To your point, you're still guiding to mid-single-digit growth for the year. Just curious, what's going to drive the acceleration in the second half? Well, I mean- For your fixed ops as well? Yeah, thanks. Thanks, Rajat. We're staying aggressive on our pricing, hopefully, that's going to drive more and more RO count and customers through our service drive. I agree with you. If you look just across the board at the industry and everybody's reported, there's a wobble in fixed in Q2, and it really makes no sense. It shouldn't be that way. I think there's tons of opportunity in the car park that's out there. We are focused on mid-single digit to upper single-digit growth. Anything less than that, like I said earlier, is just not acceptable. There's just too much opportunity. Something happened. I can't tell you that it was the news and the war or gas prices really fluctuating all over the place. That could be a player. The overall opportunity has not changed. It's big. Warranty comes and goes. It actually can be detrimental to a service department if you have too much warranty because the service writers pay attention to that. It's easy money, and they don't sell and do the job they need to do from a customer pay perspective. That's something that we're very focused on in our service drives, very focused on putting the right offers out there, and keeping our costs down so that there's plenty of margin there so we can bring our customers in, and they're not going to the mom-and-pop service centers all over towns. It's a big focus for us. To put my finger on one individual thing, I think you've heard it from everybody, it's just not there. Yeah, I think it's important to note, Rajat, this is David, that our marketing team, we're also taking steps to reach out to both our existing customers and potential new customers to change the perception that the franchise dealer has higher pricing. As we're adjusting our pricing, I think it's key to make sure that the people know it. We're taking those steps to drive our business. One more point. This is Danny. We're getting to the point where our average vehicle coming through our service lanes is about five years old. Mid 2026 is with a five-year lapping of the sudden decline in new vehicle SAR that we saw starting in May, June of 2021. You ran a 13.7 million SAR kind of for that period, then it jumped up into the mid-14s, then jumped back up into the 15s. Not attributing that necessarily to what we've seen in this slowdown, but as we look ahead, that car park that's in its return to dealer service life is going to continue to grow over the next two to three years. Some of the things strategically with pricing and marketing that we're doing should help us get back to that mid-single-digit growth rate as we go forward, notwithstanding whatever happens with the warranty tailwinds. Understood. No, that's great color. Then just following up on EchoPark. Yes, the mixed headwinds is understood very well with respect to the impact. There was no price actions that you had to take, right? No. To drive the growth. It was just pure mix, I just want to clarify that. No, we're past. We're already cheap enough, Rajat. We didn't need to take any price action. None whatsoever. There's a little mix change there, but no. Got that. The FTC guidelines, which has led to a lot of independent dealers just raise their prices, add the full fee. Has that had any kind of impact to your traffic, to your conversion? I'm just curious if there was any benefit or not to the business from that. Thanks. This is Heath. From my perspective, I do believe that the only thing that changed, because we're compliant and we'll maintain that. The only thing that's unique, certain markets, some dealers may not be compliant. It impacts our ability to compete on a price perspective. We're hoping that the FTC will stand behind this and ensure that everyone's compliant, and will follow up on the whistleblowers that are identifying these that are not. That's the biggest change is if everyone was on and compliant, it's business as usual. It's certain markets where you've got competitors that are not fully compliant, and at least for now, it doesn't appear that the FTC has followed up on those individuals. Understood. You didn't have any pricing benefit because some of the independents they raised prices, like did it give you an ability to maybe capture some price? Because you're still as competitive either way. Yeah, the opposite happened. We're in compliance, but like Heath was saying, there's a lot of dealers out there that are not, and they're still advertising one thing, and then when you get to the store, it's a different price. That's not in line with the FTC rules, and that's causing some wobbling. Now the third-party lead providers are making adjustments. That's a big deal. If they're not going to allow you to advertise and they're going to hold you accountable, then everybody's got to play by the same rules. That's going to all work itself out over what I would think would be the remainder of this year. You might have a little bit of noise, but overall, it didn't affect our business at Sonic. Understood. Thanks for all the color and good luck. Thank you. Thank you. Our next question is from John Babcock with Barclays. Please proceed with your question. Hey, thanks for taking my questions. I guess just quickly following up on the parts and service side of things. As you're trying to chase some of that next opportunity, do you think there's going to have any impact on margins? If not, or if it does, I guess actually, are there opportunities, I guess, for you to kind of take out costs, kind of keep these parts and service margins as strong as they are? This is Jeff. No, I don't think it's going to have any impact on margin. I think we're going to continue. There's just so much opportunity out there because so much of the car park doesn't come back to a new car dealer. Because as David was saying earlier, they really don't understand our pricing. The great technology, the great technicians, we're getting that word out. That's going to drive more customers to our service drives, and I'm not expecting any margin erosion. I'm expecting a lot of gross growth. I think as long as customers are going to stay in cars longer, which is where all the indications are, if that's beginning to happen, then our fixed operations business should skyrocket. There should be a lot of opportunity there for us to continue to grow and not have what we saw happening across the industry in the second quarter. I think we'll all adjust to that and continue our normalized growth. This is Heath, just one add there is, I do believe there's an opportunity to take out expense in fixed ops. With some of the AI development that we're doing, that's one of our main areas that we think can create efficiency and faster throughput, which will give us the ability to service more, make more gross, and take costs out of it. I guess next question I had. One of your peers is trialing out virtual F&I. I was just curious, is that something you guys have looked at? Is it something that is interesting? Is it difficult to execute? Any comment on that would be helpful. We're not looking at it or haven't. I get the idea. We're watching them. When you look at our GPU for F&I, it's amongst the one or two in terms of our performance. We're very happy with that performance. If there's some major cost savings there, Group One's working on that, and we'll let them lead the charge there. There was a group out of Brazil once that does this, that we visited with, that does all their F&I really out of one office. Maybe there's some opportunity there. It's an idea. It's been around for a little bit. A lot of other things we're focused on, and areas where we can take expense out of this business. We do such a good job in F&I. We don't need a wobble there right now. That's one of our stalwarts. That and our fixed operations business and what we've been able to show now in terms of our ability to grow the volume. I'll let somebody else be first there, and if there's an opportunity, we can certainly jump on the bandwagon. Okay. Then just one more for you on the EchoPark side of things, just to fill up the whole cup here. It does sound like you adjusted the cadence of store openings a little bit. How much of that is related to just generally getting the construction work done and getting the site ready versus, maybe demand or also your view on inventory build. Any thoughts there to share? Sure. This is Tim Keen. It is 100% driven by timing of construction. Okay. Thank you. Nothing else is holding us back. Are we losing you? Thank you. As a reminder. Go ahead, sorry. Okay. As a reminder, 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. Our next question is from Rob Saltzman with UBS. Please proceed with your question. Hey, team. Thanks for the questions today. Your peers have been highlighting difficulties in sourcing used vehicles over the course of Q2. Have you been experiencing similar difficulties, like competitiveness within the auction channel? If so, how are you working around it? Nice to see the increase in customer source vehicles, any details around that competitive environment on the sourcing side would be super helpful. This is Jeff. I don't think it's been any more competitive than it has been the last four or five quarters. It's super competitive in the auction lanes. You're paying up when you buy cars there. That's why you need to trade for more, buy more cars out of your service drives. We're doing that. Do a better job of sharing inventory between the companies, buying cars out of our buy centers that we're working on, across the country. You're seeing that effort as our percentage of cars off the street are growing, and buy cars are growing versus auction cars. I don't see it being any more competitive. What I do see is a lot more off-lease cars from a BEV perspective are coming back, which is great, more off-lease cars are going to start coming back as we move out of this year and into next year. Inventory abundance, or that's probably too strong of a word. More inventory is going to be available for us as we move forward. I think that's why you're seeing some that really understand the pre-owned business start to really grow. You're seeing those double-digit growths or high single-digit growths, because there is more inventory available out there, we can go get it. That's making a big difference there. Guys, just one follow-up from me. How can you address the parts and service price competitiveness perception? Is there an opportunity, in your view, for the OEMs to offer lower price placement parts, make your guys' job easier? I know Ford's been out there saying that that's an opportunity for them. Is that something you're working on? How do you change that price competitiveness perception in the service space? Thanks. Yeah, this is Jeff. A 100% we are. It's not just the manufacturer, I want to make that straight. They need to do a better job of keeping their costs in line from a parts perspective. We as retailers, and in particular, our stores, need to do a great job of understanding the pricing that's going on within the marketplace. AI is allowing us to do that, we're spending a lot of time and energy driving more information into our dealerships' hands so that we make great pricing decisions on a daily basis, with fixed operations items that we're selling in our stores. That's an important function and something that we're paying a lot of attention to. As David said earlier, we've got to market that. We have to educate the consumer that, wow, we do have these amazing facilities. They're not rat traps. We've got great technicians. We've got great pricing. We've got manufacturer-certified trained technicians. Why would you not service your car in a dealership? Why do 50% of the customers, as an industry, why do they not come back and service their car at a dealership? It's pricing. That's the answer. We're fixing that, and then now perception. You got to combine those two things. We're doing a much better job of that, we'll do an even better job as we go forward. We educate our stores. We educate ourselves on how we market that information and do exactly as you just said. That's changing the perception that we're overpriced. It isn't a perception, it's a fact. We are overpriced, we're working on fixing that and driving a lot more market share into our service drive. We do a great job. Our general managers across the industry do a great job giving cars away. For some reason, the hours that we sell in the service department are like gold bars, we need to do a much better job of understanding that pricing and then driving more customers into our service drive, maintaining great margin and great growth, and growing the heck out of the customers. Half of the car park out there doesn't use an auto dealership, we need to bring them back into our stores. Should be 70%, 80%. If you start calculating that math, you look at the upside, it's just infinite. As you can tell, I'm very passionate about this topic. It's something that I'm talking to our team about ad nauseam, something that we're going to take advantage of as we move forward. Thanks so much, team. Appreciate it. You bet. Thank you. This now concludes our question and answer session. I would like to turn the floor back over to David Smith for closing comments. Well, thank you all for your time and your questions. We will talk to you next quarter. Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.