Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's 2019 Second Quarter Financial Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the call over to Mr. Pete DeLongchamps, Group 1's Senior Vice President of Manufacturer Relations, Financial Services and Public Services.

Please go ahead, Mr. DeLongchamps..

Thank you, Debbie, and good morning, everyone, and welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results we will refer to on this call for comparison purposes have been posed to Group 1's website.

Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures.

Except for historical information mentioned during the call, statements made by management of Group 1 are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve both known and unknown risks and uncertainties which may cause the company's actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to risks associated with pricing volume and the condition of markets.

Those and other risks are described in the Company's filings with the SEC over the last 12 months. Copies of these filings are available from both the Securities Exchange Commission and the Company. In addition certain non-GAAP financial measures as defined under SEC rules may be discussed on this call.

As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website.

Participating today are Earl Hesterberg, our President and Chief Executive Officer; John Rickel, our Senior Vice President and Chief Financial Officer; and Daryl Kenningham, our President of U.S. Operations. Please note that all the comparisons in the prepared remarks are of the same-prior year period unless otherwise stated.

I'd now like to hand the call over to Earl..

used vehicles and after sales. The initiatives we have undertaken in these areas continue to drive strong same-store sales growth, independent of the new vehicle sales market conditions. Our 10% U.S. same-store after sales revenue growth is an all-time quarterly record and our 10% U.S.

same-store used vehicle gross profit growth continues our strong used vehicle performance. Although it may not sound quite as impressive, our new vehicle sales outperformed the market. With same-store volume equal to the second quarter last year. Given our continued strong F&I performance, maintaining our new vehicle volume is very important.

Turning to our business segment. During the quarter we retailed nearly 42,000 new vehicles. Total consolidated new vehicle revenues increased 2% on a constant currency basis, driven by increases in U.S.

average selling prices and Brazil unit sales, partially offset by a decline in UK unit sales due to weak market conditions that I'll cover further in a moment. Our new unit sales geographic mix was 72% U.S., 22% UK and 6% Brazil.

Our new vehicle brand mix was led by Toyota and Lexus' sales which accounted for 25% of our new units; Volkswagen/Audi represented 13%; BMW and MINI represented 4% and Ford and Honda Acura both represented 11% of our new unit sales. During the quarter, we also retailed nearly 40,000 used units driven by continued strong performance in the U.S.

At 7% same-store volume increase while expanding our per unit retail margins by almost 5% is another impressive performance by our U.S. operating team. Total consolidated used vehicle revenues grew 4% and gross profit increased 5% on a constant currency basis.

Total consolidated after sales revenue increased 7% on a constant currency basis, driven by increases in customer pay of 10%, warranty of 9% and wholesale parts of 3%. Our U.S. and Brazilian after sales businesses both increased by over 10% on a same-store local currency basis for the quarter.

Finance and insurance gross profit increased 12% on a consolidated constant currency basis. This growth was driven by strong increases in U.S. and UK profit per retail unit as total retail unit sales are roughly flat from the prior year. Regarding our geographic segment results, I'd like to turn the call over to Daryl Kenningham, President of U.S.

Operations to discuss our U.S. quarterly results before I cover the UK and Brazil..

Thank you, Earl. We are very pleased with our performance in the U.S. in the second quarter. Due to strong growth in used vehicles, F&I and after sales, we were able to generate a 9% increase in total same-store gross profit. same-store used retail unit sales grew 7% and used vehicles once again outsold new vehicles in the quarter.

The value line retail unit sales grew 19% and represented 11% of our quarterly used unit volume. We also saw an increase in total used gross profit per unit of $63. Our continued focus on pricing, inventory discipline and sourcing have been critical to driving used vehicle gross profit growth of 10% on a same-store basis.

Our quarterly after sales revenue grew by an all-time record of 10.1% on a same-store basis in the U.S. Customer pay revenues increased 11.9%, warranty increased 14.7%, wholesale parts increased 6.8% and collision increased 4%. Hiring technicians continues to be an industry-challenge and on that front, we are winning.

We've implemented our four-day work week in 65 stores. It is driving better-employee retention and has enabled us to increase our same-store headcount by 344 technicians in the last year, a 16% increase. Our adviser headcount is up 13% as well. These capacity improvements led to our double-digit growth in both CP and warranty in the quarter.

We are on-track to implement the four-day work week initiative at about 75 stores by the end of the third quarter, which will cover approximately 85% of our parts and service revenues. Looking forward to the rest of the year, we would expect after sales growth to maintain at least mid-single digit growth rate.

F&I income from retail units for the quarter increased $163 to $1,818 [ph] per unit, driven by strong product penetration and income per contract increases. We feel confident we keep F&I around $1,750 per unit for the full year 2019. Turning to our online digital efforts.

We feel confident that we are providing a robust omnichannel experience for our customers. Our goal is to do business when and how our customers want to do business with us online or offline. We have launched Acceleride, our online digital retailing initiative in 98 of our U.S. dealerships.

Our selling rate continue to increase in the quarter, nearly 1,000 customers who started the Acceleride process bought a car from one of our dealerships -- nearly double the number from the first quarter. We're pleased with the gross profits and the customer feedback continues to be excellent. We are on track to install Acceleride in all of our U.S.

stores before the end of Q3. In addition, our omnichannel efforts and after sales are continuing. Customers scheduling service appointments online grew 22% versus the second quarter of 2018 and now over 26% of our service appointments were made online.

This complements our best-in-class service development center that handled over 400,000 inbound customer calls during the quarter. In addition, our customers can approve and pay for service work via text or online. Our trends in digital traffic also continued on a positive track.

Lease increased 41%, organic traffic increased 29% and website visits increase 22%. Lastly, our team was able to leverage SG&A by 40 basis points on a same-store basis from 70.4%, down to 70.0%. We anticipate continuing to be able to leverage SG&A as we increase gross profit from our used and after sales efforts. I'll turn the call back over to Earl..

Thanks, Daryl. As mentioned earlier, market conditions in the UK remained very challenging, primarily caused by continuing uncertainties surrounding Brexit. The total new vehicle industry was down 5% for the quarter.

The true customer demand is likely down even more than that as some OEMs are aggressively pushing self-registrations to support our new vehicle sales numbers.

The combination of this new vehicle market pressure plus above-average used vehicles values last year caused by WLPP related new vehicle shortages resulted in downward pressure on used vehicle values in the second quarter. New vehicle gross profit declined 30% on a same-store basis as margins were also hit by new vehicle market volume pressure.

We elected to forgo certain OEM volume bonuses by not self-registering as many new vehicles this quarter. Although this had a significant short-term negative impact, it is the right business decision and should benefit future profitability.

The same market conditions also hit used vehicle margins and cost to 25% same-store decline in total used vehicle gross profit. Our focus for the remainder of the year will be on inventory management, growing our after sales business and cost control as we weather what we expect to be a temporary slowdown in the auto retail sector.

Now turning to Brazil, which continues to benefit from the ongoing economic recovery, total same-store gross profit increased 11% on a constant currency basis, driven by a 51% increase in used vehicles, a 14% increase in after sales and a 5% increase in new vehicles.

Cost however also accelerated as we have added staff in the anticipation of further market recovery. We are reviewing the balance and would anticipate better-leveraging in the market growth going forward. I'll now turn the call over to our CFO, John Rickel to go over some of our second quarter financial results in more detail.

John?.

Thank you, Earl, and good morning, everyone. For the second quarter of 2019, our adjusted net income increased $2 million or 3.9% over our comparable 2018 results to $52.8 million. These 2019 adjusted quarterly results exclude $3.5 million of net after tax charges explained primarily by $3 million of inventory damage from hailstorms in West Texas.

On a fully diluted per-share basis, adjusted earnings increased 15.5% to $2.83 in all time quarterly record. For the quarter, we generated $3 billion in total revenue which was an increase of 3.7% from the prior year on a constant currency basis. Our gross profit increased 4.8% as gross margin increased 20 basis points to 15.1%.

This percent of gross profit adjusted SG&A increased 80 basis points to 73.8% as weak UK market conditions more than offset U.S. cost leverage. Floor plan interest expense increased by $1.4 million or 10% from prior year to $15.9 million, explained by higher inventory balances and LIBOR interest rates.

Other interest expense decreased by $1.5 million or 8% from the prior year to $18 million, reflecting lower mortgage and working capital loan borrowings. Our consolidated adjusted effective tax rates from the second quarter was 21.5%, bringing our year-to-date rate to 23.3%, which is consistent with our full year forecast of between 23% and 24%.

Turning to our consolidated liquidity and capital structure. As of June 30, we had $37.7 million of cash on hand and other $69.5 million that was invested in our floor plan offset account, bringing immediately available funds to a total of $107.2 million. As previously announced, we amended and extended our $1.8 billion U.S.

credit facility at the end of June for another five-year term. Interest savings as a result of reduced rates spreads will benefit us by approximately $2 million annually. In addition, revised covenant calculations lower our RET adjusted leverage ratio from 3.7x to 3.33x.

Also during the second quarter, we used $4.8 million to pay dividends of $0.26 per share, which is currently an annualized yield of approximately 1.2%.

For additional detail regarding our financial condition, please refer to the schedules of additional information attached to the news release as well as the investor presentation posted on our website. I will now turn the call back over to Earl..

Thanks, John. Related to our corporate development efforts, as previously announced, we acquired two BMW and two MINI franchises in New Mexico in July. That also included our first U.S. BMW Motorcycle franchises. These dealerships are expected to generate approximately $100 million in annualized revenues.

We also announced the recent acquisition of four Volkswagen franchises and one Volkswagen commercial vehicle franchise in the UK. These dealerships are within our existing geographic footprint and increase our Volkswagen franchise count to 10 in the UK.

This acquisition is expected to generate approximately $115 million in annual revenues, bringing total year-to-date acquired revenues to $255 million from 11 franchises. Since our last earnings call, we have also disposed a BMW, MINI and Volkswagen commercial vehicle franchises in the UK and a Mercedes Benz franchise in Brazil.

To date in 2019 we have disposed of 11 franchises that generated $200 million and trailing 12-month revenues. This concludes our prepared remarks. I'll now turn the call over to the Operator to begin the question-and-answer session.

Operator?.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from John Murphy with Bank of America. Please go ahead..

Good morning, guys. This is [indiscernible] on for John.

A first question on the UK market, as it remains relatively weak or at least volatile, in your view, how much of that weakness reflects your go-to dynamics like [ph] WLTP and now RDE? And how much of it is driven by a more structural economic weakness? I guess relatively, how does that impact your expense and strategy in the region if at all?.

This is Earl. I believe the majority of the weakness is this politically-driven consumer confidence issue. WLTP has impacted some brands more than others. Volkswagen Group, Volkswagen/Audi more so than others at least in terms of our brand mix and to a lesser degree, some others. But the underlying problem is this political problem.

And until there's a clear path forward on Brexit, it's probably going to remain a bit choppy..

And then on WLTP, I know in previous quarters you've mentioned supply constraints with VW in particular.

Have you seen that easing in any way in Q2?.

Well, it have eased in the first half of this year but we're about to go into another pressure point because there are certain cars that must be registered by September 1 because of a new emissions-regime starting then [ph], so we're already seeing problems being pushed to register certain cars and we know that there will be some supply issues with the new model vehicles beginning in September.

So yes, it's not behind us yet..

Okay, thank you. That's helpful.

And then lastly, can you maybe talk about how you think about SG&A over the long-term? Is the lowest 70% level an appropriate bench to use or is a mid-70% level is more likely just given industry volumes are slowing? And relatively, where do you see the greatest opportunity to take out the cost and how can your digital efforts potentially help drive that number down?.

Okay. This is Earl. I'm going to speak to the corporate SG&A metric and then I'll let Daryl or John come in on the U.S. which drives our numbers primarily. But we have cost issues and opportunity in both the UK and Brazil right now and we need to do a better job in both markets.

Clearly, this week, market condition on new and used vehicles in the UK means we have to -- the business is much more dramatically than what we have. And in Brazil, the market is recovering a bit, but we haven't experienced the kind of cost leverage we can experience.

We may have added a few, too many people expecting the market to recover a little quicker than it has. So on a corporate basis, we have significant cost opportunity in the UK and Brazil..

This is John Rickel. Just to add to what Earl was saying, I think on a corporate basis, longer term, we can get into that mid to lower 70%s is the right overall consolidated number.

If you look at the individual country pieces, certainly 70% is sustainable and if we can continue to grow gross profit in the U.S., we should be able to leverage that and over time, I think something in the mid to upper 70%s in the UK and similar maybe high 70%s for Brazil are good to longer term structural targets to think about..

Thank you so much..

The thing I'd add about U.S.-specific comment is we made people investments in the U.S. to add to our capacity in after sales. Nearly 500 advisers and technicians. As we continue to grow after sales double-digits, we'll be able to scale that expense as well..

Thank you. That's very helpful. That's it for me..

The next question comes from Michael Ward with Seaport Global. Please go ahead..

Thanks very much. Good morning, everyone. First off for me, your UK strategy where you're selling some stores and then buying some other ones, what is the driver of that strategy? You mentioned footprint..

The acquisition, Michael in the recent quarter was just circumstantial. In fact we weren't even going to bid on it. We're trying to consolidate in the UK until the market improves and we made some pretty big acquisitions in recent years. But the OEM very much wanted us to acquire those Volkswagen franchises as they're contiguous to our existing stores.

So we did that in concert with the OEM and the Volkswagen brand has been recovering nicely in the UK after the diesel issue about a few years ago. We really didn't plan on that. That was circumstantial, but it will work out well for us in the OEM long term..

You still have the profitability we compare on those versus the ones you disposed?.

This is John. The ones that we disposed, obviously as we look at the portfolio had some challenges. Whether it's real estate or fixed cost issues and certainly the ones we picked up are more profitable.

I'd say it's very fair to assume the ones we did that were under-performing and the ones we picked up we certainly expect to be consistent with the overall portfolio..

Okay. There is a chart on Page 16 and it has new technology business impact on the service business. I just want to make sure I understand that.

If you're looking at the retention levels and then the electrified vehicles versus internal combustion engine, is that correct?.

Correct. Michael, this is John Rickel. It's basically trying to say there is an assumption out there amongst certain investors that battery, electrics, whether they're hybrids or pure battery electrics have lower service dollars associated. The data that we'd have and what we shared with you here doesn't really support that hypothesis.

What we see is the battery electrics basically have about the same dollars per unit is what a nice engine would have. You maybe have a little less repair, but you have better retention because there's no other place to take those units..

Okay. And then the retention levels -- I'm looking at the 2017 data for the U.S., it's 69%. you have a 79% retention.

Is that what you're talking about with the electrified?.

Yes..

Wow..

Correct..

Okay..

Because there are fewer alternatives to take the units to..

Yes, that's right. And John, just one housekeeping item.

On the one-time items, I assume all those hits are in the U.S., is it all about the asset impairment in SG&A?.

No. The hail [ph] stuff is obviously the U.S. The asset impairment is in Brazil and it's associated with basically the divestiture of a franchisee on there..

Okay. So if we're looking at it from an income statement standpoint, the $3.9 million [ph] and the other two items in the legal, those would be in -- and in the real estate -- are those items included in SG&A in the U.S.

operations?.

The $3 million is the other items are in SG&A in Brazil..

All [indiscernible] real estate and the other ones are okay [ph]..

Correct..

All right. So that's how you get to a lower SG&A percentage of gross from the U.S.

if you kind of back that out and do it apples-to-apples?.

Correct..

Awesome. Thank you, guys..

Yes..

The next question comes from Rajat Gupta with JPMorgan. Please go ahead..

Hey. Thanks for taking my question. I just wanted to follow up on the UK cost saving actions. Could you give us a sense of the magnitude and timing of the benefits rates of that and what kind of actions are you taking there? And then I have a follow-up..

Simplistically, the major cost items that need to be addressed in the UK quickly are personnel-related staffing. When you're selling less vehicles, you don't need as many people.

And a lot of expense comes from used vehicle depreciation on these short term vehicle sales actions such as changing demo fleet, employed lease vehicles and self-registered cars is the used car values have dropped substantially this year, the depreciation expense has jumped up dramatically.

But the way you address that is you have to control your inventories better. You have to create less of those vehicles, you have to sell those vehicles more quickly and so forth. We have a staffing and personnel expense related adjustment to make to size our business better and we need to control our inventories better..

Got it.

Would you be able to quantify that at this stage? Or is it still in the planning process there?.

Yes, Roger. This is John Rickel. I don't know that we want to put a number to it just yet because it's also dependent on the gross profit part of that equation. The one thing that makes the quarter SG&A for the UK look worse is that there was quite a bit of contraction in the gross profit line as well. Some of that is a little bit transitory.

It's the used vehicle issue that Earl mentioned. Used vehicle values were really kind of inflated in the first half of the year when some of the acquisition of the inventory happened because the WLTP shortages. That I think will pass and allow us to recover the used gross.

And we also took a decision about passing on a volume bonus from one of our OEM partners, the depress the new vehicle growth. We have to work both sides of the equation, but suffice to say, we're looking to bring that SG&A as percent of gross back into more normalized ranges..

Got it. That's helpful. I just wanted to also ask on the new online initiative, the launch.

Is it possible to quantify the impact that you've already started to see on sales and what you would expect in the second half from that launch?.

Yes, this Daryl Kenningham. The impact we've seen is nearly a thousand -- we sold 30,000 vehicles in the first and second quarter, 30,000 new. The impact we see at a thousand customers who started their process online bought a car from us.

And that's almost double what we saw in the first quarter and we continue to monitor it but we expect that to grow over time and we learn something with every one of these transactions as customers do more of their business online. So we expect it to be a bigger piece of this going forward..

Got it. All right. Thanks. I'll pass on..

Thank you..

The next question comes from David Tamberrino with Goldman Sachs. Please go ahead..

Great. Good morning. I got a question on your parts and service guidance. Obviously not the double-digits you spoke about, but having said that, the technician gross is great. I think it's Slide 15 of your deck. You've got easy comps year-over-year and you've been growing 7% to 9% for the first two quarters.

Just wondering if there's something in the back half you're seeing that's going to drive a little bit of a slowdown in that growth? Or you're just being conservative?.

This is Daryl. One thing, we're pleased with our CP growth, but also goes in the after sales obviously is wholesale parts collision and warranty. But we're seeing double-digit warranty growth that we really haven't seen. We saw decline in warranty last year. So you never know when that might reverse that.

In total, that's why we're comfortable with the mid-single digit growth forecast..

Understood. Let me ask this another way though. The text service -- the U.S. tech headcount growth has been pretty stellar so far since you've gone to your change.

Is that something that you think you can continue through 2019, into 2020 and continue to add capacity? I think you might be growing out to 85% of the stores by year-end?.

Yes, this is Daryl again. We expect to be in the stores to cover 85% of our after sales revenue by then. We do expect to add more text between now and the end of the year and we're looking at ways for how we want to leverage the capacity we have as much as possible. So we expect to continue to do it.

I don't know if we'll do it at this rate, but we're certainly pleased at where we are..

Okay. And then the last one. How much is the favorable use backdrop in the U.S.

helping drive the current business? Do you still think that off lease wasn't growing? Or OEM incentives ticked up and that pressured residual values? Do you still have a strong used market? Just trying to understand how fluid that market is to some potential changes going forward to supply and new vehicle incentives..

This is Earl. I think there's a fundamental shift towards the used vehicle market in the U.S. and I think it will be difficult to reverse that shift if again with a lot of additional supply the last few years in off leased vehicles.

But there is a value equation for the consumer that really will be difficult to shift even with more new vehicle incentives. You've seen the pricing data on new vehicles. And I think the financial support, there's a lot of money that they land by retail lenders.

So I don't really see a massive shift back toward the new vehicle market at the expense of the used vehicle market..

Got it. Helpful. Thank you very much..

The next question comes from Armintas Sinkevicius with Morgan Stanley. Please go ahead..

Good morning. Thank you for taking the question. When I look at the UK -- I just wanted to make sure I heard this right. You were talking about WLTP from last year, RDE from this year.

How do you anticipate RDE to impact the business in the back half of this year starting September?.

I think it will continue to be bumpy for some brands. I think we're going to be short on new model, new vehicles in certain brands. Audi is our biggest concern because it's the biggest piece of our business..

Okay. And then with regards to Acceleride, it looks like you essentially used a software there from a third party and it looks like a pretty nice product. There is some interaction there with the dealer representative on the site.

Just curious, at what point could we see the need to interact with the dealer representative sort of fade and where the entire transaction could actually happen online from start to finish?.

This is Daryl. I think that that's up to the customers, honestly. The only thing they really need to do is come in and pick up the car if they like to or if they choose to have it delivered. We use a couple of different providers and we learn from each one of them.

The world is moving through online purchases and we want to be able to accommodate that if customers want to do it..

And then last one here with the UK used market. We've seen warnings from some of your competitors on the used side -- Pendragon and Lookers.

What are you seeing on your end on the used car side?.

Well, it's tough, but the tough part of the used car side are these merely new used cars. That's what is the most difficult to manage, these very low-mileage -- whether they're self-registrations, demo change-outs, those types of vehicles.

When the values drop, those tend to be fairly expensive vehicles and you get hit pretty hard, hence for depreciation expense issues I mentioned earlier. So the true used car market in the UK if you're looking at two, and three, and four-year-old cars is not nearly as bad as a new vehicle dealer performance numbers would indicate.

Most of our problems as franchise new vehicle dealers relate to this very young low mileage used cars..

Okay. Much appreciated..

Thanks..

The next question comes from Rick Nelson with Stephens. Please go ahead..

Thanks. Good morning. I think the U.S. market same-store sales were flat and the U.S. industry was down.

If you could speak regionally or what you think the driver was there?.

It wasn't any one market, Rick. We were generally across -- we're mostly Texas. We were generally class of Texas and up one on Oklahoma, but it wasn't any one specific market that seem to drive that..

Well, a question for Pete [ph].

Once again, F&I per unit, $1,821 [ph] this quarter even with some shift toward used cars and valued cars which I would think have lower F&I attachments, the drivers there and the outlook?.

Daryl said the outlook in his opening that $1,750 so we're comfortable in that $1,700 range. But we've just been focusing on product and product sales. That's the main driver of the F&I performances quarter, Rick..

And what would drive that number lower?.

What would drive the number lower is selling few of products, but we still think the $1,700 range is a good number for us moving forward..

Fair enough. Also I'd like to ask about the acquisition environment, how you view acquisitions versus buy backs, versus debt paid down at this point..

Rick, this is Earl. We' continue to be interested in acquisitions, but our decisions are financially driven on those opportunities. Because it's very easy to destroy capital when you're in a soft new vehicle market and sellers expect to be paid on profits generated in past years when a new vehicle market was stronger.

So again, that's very opportunistic and circumstantial in terms of acquisitions. And our board discusses every quarter the relative uses of our cash. We have until this year been very aggressive in buy backs and we'll just continue to revisit that quarter-by-quarter. It's a very dynamic market and the same relative to debt repayment..

got you. Thanks and good luck..

the next question comes from David Whiston with Morningstar. Please go ahead..

Thanks, good morning. Going back to the UK on the cost cutting and restructuring.

I guess just a question on how you both reduce and then rehire efficiently because if you cut a bunch of people now and Brexit at some point -- although who knows when will not be an issue, how do you balance having to spend too many resources, money and time rehiring people at the stores?.

That's one of the challenges in our business is how we go about that. In the UK market, it's a different dynamic than in the U.S. It takes longer to reduce your headcount, it takes longer to step headcount back. That's just the way employment law is working in that country.

So we do tend to be a little slow in both directions, little slow in cutting cost, a little slow on hiring back and we keep that in mind when we take these actions. But when you saw the drop in gross profit of 25% or 30% on new and used vehicles, we have to take some actions now. Even if it does make it a little slower when the uptick comes..

Okay. Going back to the U.S., I guess a couple of questions there.

Are you seeing any weakness even at marginally in light trucks whether it's crossover, SUV or pickup amongst consumers right now?.

This is Daryl. 67% of the market in the second quarter was truck and SUV which is fairly consistent with where it's been. Not seeing any material change over the first quarter..

Okay. And you guys are in ground zero for pickup trucks there in Texas in Oklahoma. The auto makers in Tucson [indiscernible] are all talking about doing BEV pickups.

Do you think your customers want those type of vehicles?.

This is Daryl. Our customers love big trucks with gas engines, honestly..

Okay, thanks..

Thank you..

This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Earl Hesterberg for any closing remarks..

Thanks, everyone, for joining us today. We look forward to updating you on our third quarter earnings call in October..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..