Good morning. And welcome to the Lithia Motors Fourth Quarter 2018 Conference Call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the call over to Megan Kurz, Director of Corporate Finance. Please begin..

Thank you. And welcome everyone to the Lithia Motors fourth quarter and full year 2018 earnings call. Presenting today are Bryan DeBoer, President and CEO; Chris Holzshu, Executive Vice President; and John North, Senior Vice President and Chief Financial Officer.

Today's discussions may include statements about futures events, including financial projections and expectations about the company's products, markets and growth. Such statements are forward-looking and subject to risks and uncertainties that could cause actual results to differ materially from statements made.

We disclose those risks and uncertainties we deem to be material in our filings with the Securities and Exchange Commission. We urge you to carefully consider these disclosures and not place undue reliance on forward-looking statements We undertake no duty to update any forward-looking statements, which are made as of the date of this release.

Our results discussed today include different references to non-GAAP financial measures. Please refer to the text of the earnings release for a reconciliation to comparable GAAP measures, which can be found at Lithia investorrelations.com. With that, I would like to turn the call over to Bryan DeBoer, President and CEO..

Thank you, Megan. Good morning and thank you for joining us today. Earlier today we reported the highest adjusted fourth quarter earnings in company history, $2.57 per share, a 20% increase over the fourth quarter of 2017. Full year adjusted EPS was 9.98 and 19% increased over last year.

Our earnings improvement was driven by strong top-line gross profit growth, both up 17%. Full year revenues were $11.8 billion and we deliver double-digit revenue increases in all business lines.

We remain focused on our core strategy of purchasing strong assets that have yet to realize their full potential to achieve operational excellence throughout our network. These efforts will drive the realization of the $250 million in incremental EBITDA potential within our existing store base.

This creates a clear line of sight to $15 in EPS and provides the additional capital necessary to accelerate consolidation within our highly fragmented industry. In just a few minutes, Chris will be providing more details on 2018 and how our teams are delivering operational excellence through their 2019 annual operating plan.

As mentioned in our press release, John is resigning on March 1st. I would like to thank John for a fun and productive 17 years together at Lithia. We will miss him and wish him great success in his future endeavors. In addition, I want to congratulate our 36 Circle of Champion winners, as our highest performing stores in 2018. Thank you.

We also invited two additional General Managers to our Lithia Partners Group. Recognition as an LPG member is a highly coveted position at Lithia and represents the pinnacle of our mission growth powered by people. Our people have positioned us to drive both traditional M&A and innovation in the years to come.

In the past five years, we have achieved both revenue and earnings compound annual growth rates of over 20%. Our history of running a hyper growth company that is accelerating earnings is a unique differentiator for Lithia. In addition to this growth, we continued to maintain sector leading operational metrics.

The automotive retail business remains unconsolidated. In 2018, nationally, we achieved over 1% of the new car market share and approximately 1.5% of used car market share, despite being one of the largest vehicle retailers in the country.

Looking forward, we see that technology and innovation combined with a nationwide network can provide the advantages necessary to gain meaningful market share in the future. In 2018, we acquired 1.4 billion annualized revenue and made investments in innovation to access consumers through new and alternative channels.

We continued to monitor over 2600 acquisition targets and other strategic opportunities that meet our strict return on equity hurdles. Our value based investment strategy has an 80% success rate in achieving 15% to 20% after tax returns on seasoned stores, meaning within five years of acquisition.

This is an exciting time for both retail and transportation, and we are well positioned to lead the way as both continue to modernize. Our history of successful growth and operational excellence generates over $300 million in free cash flow annually that enables us to expand and diversify.

We pursue innovation and diversification strategy in the following order; first, we drive improvement in our existing business; next, we consider vertical and horizontal adjacencies to our core business to capture additional earnings opportunities; finally, we see bold collaboration or strategic investments to partner with new emerging disruptors.

This discipline will broaden our omnichannel capabilities and accelerate our ability to serve our customers. For example, in September of 2018, we partnered with Shift Technologies, a San Francisco based digital retailer where we invested $54 million to become their largest shareholder.

This partnership benefits our organization through the following key areas of collaboration and focus; a 100% consumer driven shopping experiences; in-home vehicle purchasing, selling and servicing; combining technology and data to improve retail decision; and further activation of our nationwide network that currently reaches 80% of the consumers in our country.

Our investor presentation includes details on additional collaboration and synergies on Slide 8. We anticipate ongoing innovation and diversification in the future, while also leveraging our online owned inventory which is the second largest in the country, which creates a destination vehicle marketplace.

Reflecting back on 2018, we delivered record revenues and earnings, strengthened our organizational capacity with new executive talent, added to our national network and invested in a virtually limitless new growth opportunity with Shift.

Together, these efforts are advancing our ability to create transportation solutions wherever, whenever and however consumers desire. With that, I'd like to turn the call over to Chris..

Thank you, Bryan. Our path to $15 in EPS requires our stores to achieve their full profit potential. To challenge our stores to maximize performance in 2019, we rely on individual annual operating plan or AOP. The AOP combined with our dynamic reporting tools allows each store leader to diagnose trend, identify opportunities and to quickly take action.

Through these grounded and store driven performance management techniques, the $250 million in incremental EBITDA is attainable in our existing store base. With that, I'd like to discuss our same-store quarterly results. In the quarter, total sales increased 1%, reflecting strong performance in used, service and F&I.

New vehicle revenue was down slightly as our average selling price increased 2% and unit sales decreased 6%. Gross profit per unit was $2,061 compared to $2,248 last year, a decrease of $187. As inventory availability and volume incentives change, stores quickly adjust their growth versus volume strategy.

We continue to capture market share and maintain OEM sales responsibility in each of our markets. Retail use vehicle revenues increased 10%, of which half was due to increased unit sales and half due to higher average selling prices. Our used to new ratio was 0.81:1, an increase of 13% over the prior quarter.

Gross profit per unit was $2,158 compared to $2,025 last year, an increase of $133. We continue to target 85 used vehicles per location each month and encourage our stores to capture the top of funnel position they hold in the used car inventory.

In 2018, we sold 69 used units per store per month, an increase of two vehicles, or 3% from the prior year. F&I per vehicle was $1,400 compared to $1,337 last year, an increase of $63. Of the vehicles we sold in the quarter, we arranged financing on 76%, total service contract at 47% and total lifetime oil product on 22%.

Opportunity remains especially in our unseasoned stores where F&I PVRs are $400 to $500 below our seasoned store averages. Our total gross profit for retail unit was $3,517, an increase of $20 per unit over 2017, which continues to demonstrate the resiliency and flexibility our stores have and balancing volume and grows in the current environment.

Our service, body and parts revenue increased 6% over the prior year; customer pay work, which represents over half of the revenue stream, increased 8%; warrantee increased 4%; wholesale parts increase 3%; and our body shops decreased 4%.

Service body and parts is the largest contributor to gross profit at over 35%, and we anticipate continued growth in this area as more and more technology is incorporated into new vehicles. As shown in our investor deck, the predominant share of gross profit 78% comes from our used vehicles, F&I and service body and parts business line.

These business lines are virtually limitless in their potential for growth in the future, and allow us to confidently operate without an outsized dependence on new vehicle starts. Same-store gross margin was 15%, an increase of 30 basis points from the same period last year.

Our full pro forma SG&A to gross profit was 70.9%, 220 basis points higher than the fourth quarter of last year, primarily due to the dilutive effect of unseasoned acquisitions.

In the past five years, we have acquired over $7 billion in revenues, largely at store that maintain a ratio of SG&A to gross profit well above 85% and at least 35% higher than our seasoned stores, which operate in the low to mid-60%.

While these acquisitions have impacted our consolidated results, we anticipate continued improvement as we achieve operational excellence and leveraging the model. As Bryan mentioned earlier, we continue to invest in both internal and external innovation and currently estimate incurring a minimum of $10 million in operating costs in 2019 as a result.

As always, we will evaluate the merits of successes of any investment innovation and we'll adjust the rate of expenditures up or down as a result.

We delivered significant revenue and gross profit growth in the quarter, while maintaining SG&A well within the industry benchmarks as we integrate acquisitions, work to improve growth and leverage our cost.

We will continue to look for leadership in our 181 locations to drive innovation, efficiency and profitability, while earning our customers for life. And now, a few comments from John..

Thanks Chris. As Bryan mentioned earlier, our store operations generate significant free cash flows that continually refuel our capital engine. We strive to intelligently allocate this capital with the highest returning opportunity.

At December 31, 2018, we did approximately $211 million in cash and available credit, as well unfinanced real estate that could provide an another $248 million in 60 to 90 days for an estimated total liquidity of $460 million. At the end of the fourth quarter, we were in compliance with all of our debt covenants.

We took advantage of the volatility in our stock price in the quarter to repurchase more shares. For the year ended December 31, 2018, we retired over 2.1 million shares or over 8.5% of our outstanding flows at a weighted average price of $84.72. Under our existing $250 million authorization, approximately $234 million remains available.

Our leverage at EBITDA defined as adjusted EBITDA less used for finance risk and capital expenditures was $69 million for the fourth quarter of 2018. Our net debt to EBITDA is 2.3 times within our targeted range of 2 to 2.5 times. Our adjusted tax rate was 24% in the quarter and just under 26% for the full year.

We anticipate a modest increase in tax rates to approximately 27% in 2019, primarily as a result of higher state taxes in New Jersey. Finally, in January of 2019, we called a special meeting of shareholders, which resulted in the ratification of an amendment to the transition agreement we entered into with Lithia's founder, but we as founder.

This amendment created benefits to our shareholders through a cap on the duration of the agreement and established a timeline for the mandatory conversion of our Class B shares. The amendment was ratified by 99.95% of those submitted and importantly excluded the Class B shares, which abstained from voting. This concludes our prepared remarks.

We'd now like to open the call to questions..

Thank you. At this time, we will be conducting a question-and-answer session [Operator Instructions]. Our first question comes from Rick Nelson with Stephens. Please state your question..

I have two follow-ups on capital allocation, your appetite these days for acquisitions, sounds like there's quite a bit for sale versus buybacks and with the $250 million EBITDA opportunity.

I guess why wouldn't the focus be exclusively there?.

I would start by saying that the market continues to be a buyer's market. It's very active. Despite this though the approach, we approach opportunities always from a sellers' market type of perspective, so we can attract buyers.

Additionally, our process for capital discipline and a lot of that came from John's influence over the last number of years is pretty darn good. We have metrics in terms of how to balance share buyback dividends, as well as excellent growth. And those disciplines will remain intact very soundly..

I'd also like to ask about new vehicle sales, same-store units down 6%.

How you think that compare from a market share standpoint and what caused that type of decline?.

We definitely maintained the market share in each one of our locations in the fourth quarter, the 6% decrease that we saw in new vehicle units was heavily impacted by an opportunity that we had in the northwest related to rail head distribution in our domestic stores, which impacted us about 1,200 or 1,250 units.

And so I think excluding that impact, we would have seen about 3% decline in new vehicle sales, which is in-line with what retail was for the quarter..

And SG&A widened a little more than we were thinking, up 210 basis points, and EBT actually fell in the quarter year-to-date with despite adding on $1.3 billion, I believe in revenue via acquisitions.

If you could discuss what happened there and what can be done from an SG&A standpoint? It seems like it's the acquisitions that are weighing on the SG&A but like some clarity there?.

You're exactly right. I mean, the $7 billion in revenues that we've acquired over the last five years have not been fully integrated. We bought $1.4 billion in acquisition revenue last year, which was acquired from a lot of really distressed assets that we have lots of opportunities to improve upon.

And so we're going to continue to identify ways to generate additional growth and take out the cost primarily in personnel and marketing expense that to find us that balance to get us back into that best in class 65% or under SG&A's growth.

And as far as your question related to EBT, that’s a big focus on that was related to our floor plan interest, which for the year I think was up over $50 million, for the quarter it was up over $15 million. And so partly a big chunk of that I think two-thirds is related to rate and a third is related to volume.

So we're controlling what we can control right now, which is really to focus on maximizing our churns, reducing inventory where appropriate and working with our stores to make sure that they're making good investments in the inventory that they're carrying at every moment they can..

And also like to offer my best to John North, it's been awesome working with him over the years..

Thank you. Our next question comes from Bret Jordan with Jeffries. Please state your question..

If we get a bit more of an update on the Shift business.

I mean are there any lead throughs, are you picking up any customer based service business from people who are buying through Shift or maybe some of the exchange there?.

We are getting a little bit of uplift, but it's only primarily in one store at the current time in the East Bay. If I had to guess, it's probably around 50 to 100 ROs, which is minimal. I would think that it doesn't impact our overall customer pay.

I believe in the future that it can, because there is a big opportunity on digital sales that we think we can grow through our existing network. We're actually -- we're very pleased with the first 100 days of our partnership.

We've been able to collaborate on a few milestones initially that seems to be creating better results, as well as a strength in partnership with a larger equity holding by us, which we think is very beneficial.

I think as we move forward, our collaboration on data sharing, as well as leveraging the rest of our network, we still have a lot more opportunities there and we'll be sharing information with you soon on that. Pay attention to slide eight as well, it'll line out again the six areas of collaboration..

And then one question on the market share question I just want to ask. I guess when you think about it regionally, if you were 3% down ex the non-recurring northwest event.

If you think about your market share versus SAAR, it was the East Coast obviously where you've done more acquisitions, still in line with SAAR or are there markets that are outperforming and underperforming?.

We definitely have pockets of stores that are outperforming. We have pockets of stores that need significant improvement. And then we have pockets of stores that are maintaining the share that they've had.

If I had to generally speak to the northeast, I would say that upstate New York has an opportunity that's higher than what we have in the metro markets, which obviously is a smaller percentage of the portfolio that we have in the northeast..

Our next question comes from Armintas Sinkevicius with Morgan Stanley. Please state your question..

Good morning, thank you for taking the question and congratulations to John and it's been a pleasure working with you in the short stint covering the company here. With the omnichannel experience and Shift just to piggyback off the last question.

How are you thinking about putting your inventory on the platform? You highlight in the slides that you have the second largest inventory in the country, and just it would seem like that would be the easiest way to collaborate with Shift and then maybe would generate some substantial return there for the effort put in..

I think if we look long term, it makes a lot of sense to be able to co-share inventory across both platforms. Initially, we're really looking at building both channels more independently and support each other.

I think as we think about our second largest inventory that's online, we really look at how do we activate it within our own network at the current time. We're working on an individual regional platform that started a few months ago and we'll be able to share some results and details on that in the coming quarters.

We're also able to share data, which is a really important part, because that allows us to procure inventory in multiple ways, as well as price inventory and value inventory. Those are the real key things initially.

We are starting to explore some neat ideas specifically around procurement, which also can grow our inventory in ways that we really haven't in the past. And again, we'll share more of that in coming calls with you..

And then I can appreciate that you're not providing guidance for 2019. But any puts and takes you can give us from a modeling perspective whether it's SG&A or tax rate and anything that you could share would be helpful..

Couple of thoughts, I guess, number one. I think Brian said as well in the prepared remarks. The goal for us is the $15 in EPS. And I think that looking at the share count and the relative volatility on such a small share base, you need to think about that relative to the inflection for the model in 2019.

We did give some color in Chris's section that we expect about $10 million investment in technology. And we did give some color in my section are out about 27% tax rate in 2019 so slightly higher than in 2018, because we've exhausted a lot of the planning strategy around the tax law change. So I think that's directionally where we see things.

But again, longer term, what we're really trying to focus everyone on is the path of significantly higher EPS, which is $15 plus and I think that's definitely going to be how we're trying to run the company in the future. And I'd leave it at that..

Our next question comes from John Murphy with Bank of America. Please state your question..

Just a first question on the footprint and the focus on acquisitions. You made a comment that you were reaching about 80% of the market. I'm just curious what you mean by that in the total U.S. market with your current existing physical footprint and if that's the case, how much larger or wider you need to spread your footprint with acquisitions.

Just trying to understand how far you think you might need to get to 100% or if it makes sense that you can get to 100% coverage?.

Ideally, we would like to have close to 100% coverage, because you can activate then the digital strategies. But overall right now, we don't touch the southeast that's about it. We look at our ability to be able to deliver cars or service cars in a short period of time of eight hours to be able to touch that network.

We also believe that you don't have to be in the center of metropolitan areas that you can be in lower brick and mortar examples to be able to enter markets from a lower cost point, which can be very effective in the future. So I don't believe that we need a 100%.

Obviously, at 80% that the population base, it still covers almost 300 million people, which is a big opportunity and can increase our 1% new car market share today and a half a percent in used cars..

So it seems like southwest might be a focus in the near-term.

Is that a fair statement?.

That is right on target. I think when we think about the growth implication, we typically when we go into a new region we look for a seasoned management team that we can build off that has similar growth powered by people type of value base. And I think we have some pretty good candidates that hopefully at some point will be able to join us.

We obviously also are continuing to backfill, because obviously when you have strength within a market, it makes sense to be able to have both the luxury, a domestic and an import franchise to be able to have full coverage..

And then second question and doing some simple reasonably obvious math. I mean as we look at the average selling price of your vehicles, it's gone off and the gross on new vehicles has gone down. So you're shipping back to your automaker supplier an extra 1,659 bucks per unit. Obviously, there's some mix in there and all that stuff.

But I got to imagine they love you for doing that, right, because they're getting -- I mean, you're giving up a little bit of gross, they're getting higher revenue and they're just doing better.

As you look at that how long can you continue to do that? And how important is that to ingratiate yourself with these guys as partners to really build up the basis stores and make this acquisition strategy that much smoother, easier to execute on?.

John, this is Chris. I'll try and the answer the first part of that question. I mean, obviously, each one of our stores is constantly trying to manage between do I go for volume or do I go for growth. And in any given month that change is based on, one, the availability of inventory and how strong the market is from a retail perspective.

And so the goal then is if we can't push as hard on the new car side, obviously, we have a big opportunity on used cars, and which we generates strong profits there. And then we work on F&I which has been something that has been a focus of ours, obviously, for the last couple years.

And we continue to march up to that peer level, which is still significantly lower in those acquisition stores that we came through. So I think that it's a balance that we fight every single day. But we are partners with the OEMs and we're going to continue to stand by them and continue to sell their products.

So Bryan, maybe to second part is for you..

I think Chris touched a little bit on manufacturer support. It's what's allowed our growth strategy to be so effective, because our performance is typically buying underperforming stores and then improving them, which is a key part of our execution model.

I think what we also know for sure is that over 78% of our gross profit comes from used vehicles, F&I and service body and parts. So the component of new vehicles is a smaller point. So it does obviously impact our ability to get downstream business.

But remember, we're also top of food chain when it comes to used cars and so many other things that our manufacturers are able to provide us, whether it's certified or whether its warranty work. And those things continue to be very collaborative efforts with our partners now and in the future..

And then just lastly on parts and service, I mean customer pay was up 8% that was very strong in the quarter, margins were very high.

I'm just curious how long do you think you can keep that customer pay number in the mid to high-single-digit range and how much of it is a function of UIOs increasing and how much of it is a function of you may be getting a little bit lower into the spectrum of potential customers meaning going past five or six years, or the traditional shift away from the new vehicle dealer to the independent shop.

I'm just curious the split there and how you think about that business going forward?.

John, this is Chris again. I mean, you nailed the first part of that as UIO continues to climb back up, especially in that 10-year and newer bucket as we drop off some of those years of 2008, 2009, 2010, I think we see a lot of opportunity for customers returning into our stores and supporting our fixed cost business.

The second big thing that we believe is that the technology and features that are in the new products, including the electric vehicles, you got level 1, 2, 3 automation that's in vehicles today, is creating a lot more opportunity for the 2000 OEM certified technicians that we have, to be the repair center of choice for more and more consumers.

And we don't anticipate that that's going to go anywhere but up in the right direction..

And then inventory get that you're cap on a man basis in your stalls is very high.

But I mean is there a cap ute number that you could give it to the rent house on your on stalls?.

John, it hovers around 50% utilization across our network..

Our next question comes from Derek Glynn with Consumer Edge Research. Please state your question..

As you think about the incremental opportunity from seasoning your restore base and then looking across your various operating segments.

Is there any low hanging fruit or what significant opportunity do you see in 2019 to help you march further towards achieving that goal?.

I think our number one opportunity is inventory. I mean, we are and about two-thirds of our stores are in rural markets, where inventories have to be somewhat of size to be able to provide up choices for our consumers.

But despite that, we believe that there's inventory sharing that can go across by like brands and we're working on some real need to have digital to be able to share that to help drive our dollars down on inventory. I would say this also, opportunities in cost savings come through improving sales volumes.

So most of our stores are acutely focused on how to capture market share, and I think digital experiences and our ability to do things for customers, wherever, whenever and however they choose, is a really crucial part to our continued growth in that realm, which allows us the flexibility to be able to massage expenses and keep profits growing to capture that $250 million in potential..

And then as it relates to some of the larger acquisitions you completed recently just Prestige, Day, Downtown LA, and how are trends tracking relative to your internal expectations.

And can you share any details around progress made on SG&A growth, is there any other key metrics for those acquisitions?.

Derek, this is Chris. They're all unique and each store is actually unique in each one of those platforms. But I think generally speaking, the more seasoned of those acquisitions are doing better than the less seasoned acquisitions.

We talk about the season stores that are running SG&A to gross in that 65% range versus our unseasoned stores, which as a group are running somewhere north of 75%. I mean that 10 percentage points of difference in SG&A would be $44 million in the quarter alone if they were equal.

So we're continuing to work on each store, each general manager has opportunities in each business line top-line, and then we continue to focus on driving out costs. So that's what I'd say on that..

Thank you. Our next question comes from Rajat Gupta with JP Morgan. Please state your question..

I just have one question I think the $250 million opportunity. You highlighted that for a few quarters now.

I mean how much of that is already in the run rate now? Or is that $250 million still all incremental? And how much do we expect probably close to 2019? And give some of that flow through can we still expect SG&A to gross profit to be down in 2019 versus '18, given you're already investing 10 million in technology? I mean, just trying to get a sense of what the thought is there for SG&A to gross profit in the near to medium term?.

Rajat, let me definitively say that it's all incremental. The $250 million isn't in how we think about things it's all additional business to us. And it is through driving gross profit, as well as top line revenue to be able to capture that.

If we look at the breakdown of where it typically comes from, it comes from volume increases that trickle down into the used car business, into F&I to reach the $1,400 to $1,500 a unit that we currently recognize. It then takes a number of years to build your units and operations, which ultimately drives your service and parts of business.

And if you do a good job at service and parts business then they continue to buy again and that engine becomes a momentum builder to be able to capture that potential. So as we said in the prepared remarks, it's typically about a five year maturity to reach a seasoned state.

And currently about 20% of our stores achieve that, maybe 30% depending on those opportunities..

Rajat, this is John. I'll just jump in on the SG&A question really quickly. You did mention the $10 million. I mean, to put it in perspective, I think we did close to $1.3 billion in SG&A expense in 2018. So clearly $10 million is not immaterial from an earnings perspective. I mean, it's roughly about $0.30.

But when you think about it in the grand scheme of the SG&A opportunity we're talking about and if we can get anywhere near the leverage that Chris is speaking to in the mid 60s it's going to be very meaningful. But as we said from the beginning, it's all a function of driving gross up. It's not necessarily about cutting costs.

You can't cut your way to a profit, that's the one thing that we know..

Just a question on Shift, you talked about you announced expansion of the collaboration recently.

Is there any more investment we can expect in the JV? And not in terms of stake but just in terms of SG&A type expenses in order to leverage the partnership the way you want to? And is there any earnings benefit we could start seeing from 2019 onwards or is that still too early for the partnership? That'll be helpful, thanks..

This is Bryan. Any growth plans with Shift are pretty low cost venture, because you're leveraging your existing network. I think if we look at other types of investments, that's not really what we're focused on.

If you remember we focused on our internal business first then we focused on adjacencies and then lastly, we focused on Shift type of opportunities. And I think as you build out your model, if you think about that, the Shift opportunities will come every few years as will large platform acquisitions.

Other than that, our focus is to drive our existing stores to achieve potential and that's what our team has been experienced at and why growth powered by people is such an important statement for our mission as a company..

[Operator Instructions] Our next question comes from David Whiston with Morningstar. Please state your question..

Correct me if I'm wrong, but in the past I think in your slide deck, you had mentioned some interest in possibly expanding internationally to both Canada and the UK, and with the Brexit turmoil.

Are you still interested in the UK no matter how that ends up playing out?.

David, this is Bryan. I think we would enter cautiously. We are still looking internationally. But again, those are long-term strategies that I think in our acquisition model. We're very good about diagnosing and setting up standards before we jump.

So we've spent now approximately three years in Canada and probably two years looking at UK and a few other markets around the world. But ultimately, when there's opportunities domestically and the returns have been still high, it's a lot easier to be able to achieve that and build out that 100% footprint in our existing store base..

And any impact from higher rates driving the Shift to used or new or is it more things like more off lease vehicles in the market?.

We're not seeing any major impact on that, David..

And last question, Chris, you talked about being, especially on the newer stores a lot of SG&A to cuts. And I guess my question is with you guys acquiring over $1 billion a year now.

Is there ever point where you might be at a point where you're growing too fast?.

I think when you look at our entrepreneurial focus model where the general manager is really responsible for making those decisions in the stores we were managing 180 different locations with a team of senior group leaders that support each one of those general managers.

And I think based on the model that we have and the people that we have right now in the field, we have a lot of capacity to bring on additional stores and turn them around as quick as possible..

There are no further questions at this time. I'll turn the conference back to management for closing remarks. Thank you..

Thanks Diego. And thanks everyone for joining us today. I look forward to updating you on the first quarter results in April. Bye-bye..

Thank you. This concludes today's conference, all parties may disconnect. Have a great day..