Asbury Automotive Group Inc

Greetings and welcome to Asbury Automotive Group third quarter 2023 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this call over to your host, George Velsata. Senior Vice President and Chief Legal Officer. Thank you. You may begin.

Thank you, Operator, and good morning. As noted, today's call is being recorded and will be available for replay later this afternoon. Welcome to Asbury Automotive Group's third quarter 2023 earnings call. The press release detailing Asbury's third quarter results was issued earlier this morning and is posted on our website at investors.asburyauto.com. Participating with me today are David Hult, our President and Chief Executive Officer, Dan Clara, our Senior Vice President of Operations, and Michael Welch, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open the call up for questions, and we will be available for any follow-up questions later. Before we begin, we remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature, which may include financial projections, forecasts, and current expectations, each of which are subject to significant uncertainties. For information regarding certain of the risks that may cause actual results to differ materially from these statements, please see our filings with the SEC, including our Form 10-K for the year ended December 2022, and any subsequently filed quarterly reports on Form 10-Q and our earnings press release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures, as defined under SEC rules, may be discussed on this call. As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website. We also have posted an updated investor presentation on our website at investors.asburyauto.com, highlighting our third quarter results. Now, it is my pleasure to hand the call over to our CEO, David Hult.

Thank you, George. Good morning, everyone. Welcome to our third quarter earnings call. First, I'd like to commend the resiliency and strong efforts of our team members as they work diligently to deliver the most guest-centric experience in automotive retail. They have executed efficiently to maintain cost control as our business has scaled. I remind everyone, in the span of two years, we doubled the size of our company. The team has worked very hard to set up infrastructure to integrate processes, increase productivity, and drive performance. Now onto our consolidated results for the third quarter. We delivered $3.7 billion in revenue, had an adjusted SCNA as a percentage of gross profit of 58.4%, had a gross profit margin of 18.4%. We generated an adjusted operating margin of 7.2%. Our adjusted EBITDA was $280 million. and our adjusted EPS was $8.12. I'll touch on some areas where we did well, and other areas where we know we have work to do. As expected, this quarter we saw some headwinds, beginning with brand and model mix in new vehicles. While day supply remains at a healthy level, we are seeing some cases where high demand models are selling well, though difficult to replenish, while others remain at elevated day supply. On the use side, we continue to see a challenging market for sourcing those vehicles. We are seeing a continuation of PVRs as a whole trending to a more sustainable level. Our parts and service business showed year-over-year growth, yet this is an area that was disproportionately impacted by the integration activities we mentioned last quarter. Demand remains strong, and we are confident in the longer-term trend of our parts and service business. Turning to F&I. I'll highlight two areas in the quarter. We are seeing slightly lower penetration rates in our F&I products as customers look for ways to manage lower monthly payments in a rising rate environment. Second, the way in which we account for TCA will result in a negative drag on results over the next two years as the products roll out across the legacy Ashbury stores. The impact is driven by the way in which sales from the products are recorded over time, rather than upfront like a third party provider. Michael will cover in more detail in his section. Finally, our SG&A levels in the quarter demonstrated our commitment to manage our cost structure to the performance of the business. I'm encouraged by the progress and direction of our operations and strategic initiatives. We are enthusiastic about the pending acquisition of the Jim Coons Automotive Group, a well-respected group with a phenomenal set of team members and leaders. The group generates over $3 billion in annual revenue and averages over $140 million in revenue per rooftop. Amidst the evolving backdrop of our space, I am optimistic about automotive retail and our diversified business model. We have strategically purchased quality assets, making us a stronger company. Part of our long-term plan to deploy capital to its best and highest use. We have entered into growing strategic markets that we haven't operated in before, and we continue to integrate and grow the business. We operate in an environment where the average age of the car is 12 and a half years. And while SAR levels have been trending higher, It is important to note we are still below historical levels. Our parts and service business will remain a critical element of our success well into the future, repairing older vehicles, addressing the complexity of newer cars, and supporting numerous EV models rolling out over the next few years. Overall, we are focused on achieving our long-term strategic goals. We plan to fund the pending Coons acquisition with existing liquidity and capacity. Our strong balance sheet and reliable cash flow has enabled us to undertake this deal without the need to raise additional debt or issue equity. We are well aware that interest rates have moved up and we have adjusted our return assumptions accordingly. We will remain strategic with our capital allocation decisioning with a focus on paying down debt in 2024. As we are winding down on year three of our five-year plan, I am proud of the progress we have made in transforming the size and scale of our business. In just a few short years, we have grown revenue from $7 billion to $15 billion, or $18 billion pending the Coons acquisition. Increased adjusted EPS from nearly $13 to over $34 per share. Generated over $400 million in adjusted operating cash flow to now just over $700 million before the pending Coons acquisition. increased adjusted EBITDA from $400 million to an annualized run rate of $1.2 billion. We acquired an insurance company, Total Care Auto, and introduced ClickLane, tools which fundamentally changed the buying experience. Our 2025 growth objectives will be updated after our year-end results and the planned closing of the Coons acquisition to provide a clearer roadmap for our long-term growth trajectory. I'll now hand the call over to Dan to discuss our operating performance. Dan?

Thank you, David, and good morning, everyone. I'll start off by once again thanking our team members who delivered the most guest-centric automotive retailer experience. Now, moving to same-store performance, which includes dealerships and TCA, unless stated otherwise. Starting with new vehicles. Our new vehicle inventory ended the quarter at $807 million, which represents a 36-day supply. As in previous quarters, there was significant variation among brands and models. Our new vehicle revenue grew 8% year over year to $1.9 billion, and unit volume grew 5% year over year to over 36,000 vehicles. New average gross profit per vehicle was $4,567. New vehicle gross margin was 9% this quarter. Turning to used vehicles. Used retail revenue was $1 billion, as unit volume was over 32,000 vehicles in the quarter. Average used retail gross profit per vehicle was $1,862 for the quarter. a function of stronger new vehicle availability and macro conditions. Our used vehicle inventory ended the quarter at $304 million, which represents a 29-day supply. As conveyed in our opening remarks, we are still seeing challenges in sourcing inventory. We typically source about 90% of vehicles internally to maintain a strong profitability profile. We remain focused on delivering strong profitability over chasing volume in this environment. Shifting to F&I. We delivered an F&I PVR of $2,207 compared to $2,521 last year, a reflection of higher interest rates pressuring consumer payments, which impacts our F&I results. In the third quarter, our total front-end yield per vehicle was $5,514. Moving to parts and service. Our parts and service business revenue increased 3% in the quarter to $526 million, growing over a tough comparison from last year's strong same-store growth of 12%. We have also been investing across the business towards a transition of software to support a more unified process and platform for fixed ops. some of which relates to the integration activities that David mentioned in his opening remarks. We observed a mixed result among the stores in performance. Now, turning to Clicklane. Please note that for Clicklane, we are reporting on an all-store basis. We achieved another all-time record with over 11,600 vehicles sold through Clicklane in the third quarter, a 71% increase year-over-year. 17% of our third quarter new and used retail sales were powered by ClickLane. We generated $460 million in ClickLane revenue for the quarter. We are tracking to approximately $2 billion of revenue in 2023, mostly governed by constraints within pre-owned sourcing and relatively low day supply in our high-velocity brands that make up a good portion of new vehicle sales. Moving on to some ClickLink KPIs for the third quarter. 46% of ClickLink sales in Q3 were new vehicles, and 54% were used. Total front end PVR of $3,018 and F&I PVR of $2,151, which equates to $5,168 of total front end yield. The average ClickLink customer credit score was 723, which is higher than the average credit score at our stores and sequentially higher than last quarter. 92% of those that applied were approved for financing, of which 86% of those customers received instant approval, while the remaining customers required some offline assistance. 74% were lender finance sales and 26% were cash sales. The average down payment of the finance sales continues to be over $9,000. The average distance of a Clicklane delivery from our dealerships was 40 miles, consistent with last quarter as the western states utilized the convenience that Clicklane has to offer. We are pleased with the way Clicklane is growing and driving adoption rates. We are seeing great feedback from the customer experience. You will hear us talk about Clicklane within the context of our overall business as it becomes an integral part for the dealership model and our results. I will now hand the call over to Michael to discuss our financial performance. Michael?

Thank you, Dan. To our investors, analysts, team members, and other participants on the call, good morning. I would like to provide some financial highlights for our company. For additional details on our financial performance, we would like to provide our 2023 CapEx to be $155 million as we continue to roll out planned CapEx related to our 2021 acquisitions. Of this $155 million, about $15 million is expected to be related to the replacement of leased properties. Year-to-date, TCA made $71 million of pre-tax income. We are deploying TCA in our states with larger dealer presence, and we will have all of our current stores enabled with TCA by the end of first quarter 2024. The deferrals associated with TCA rollout have begun to show up in our F&I results. which led to some headwinds in our PVR number. These trends will be more meaningful in 2024 as TCA expands within new and existing markets. We now expect pre-tax income for TCA for 2023 to be $85 million. Year-to-date, we generated $514 million of adjusted operating cash flow, a product of our robust and resilient business model. Our balance sheet continues to be strong, as we ended the quarter with approximately $1.7 billion in liquidity comprised of cash, excluding cash and total care auto, floor plan offset accounts, and availability on both our use line and revolving credit facility. Last week, we reached an agreement to renew and upsize our credit facility, up from $2.55 billion to $2.8 billion, at the same pricing as our previous agreement. The agreement extends the current credit facility to October of 2028, This gives us the financial flexibilities to support our long-term strategic objectives. We'd like to thank our OEM and bank partners for their continued support. Our pro forma adjusted net leverage was 1.7 times at the end of September, reflecting the use of cash to repurchase shares earlier in the year. As David mentioned, we anticipate using current balance sheet liquidity, mainly comprised of cash, floor plan offset accounts, and used vehicle floor plan capacity towards the purchase of the pending Jim Coons acquisition. Also, pending the Coons acquisition, we anticipate our net leverage to be in the mid twos. Our robust cash flow as a larger company will allow us to reduce leverage back to two times or lower by the end of 2024. Finally, I am grateful for the hard work of our Asbury team members, who help us operate at a high level and continue to focus on the customer experience each and every day. Thank you. I will now pass the call back to David for closing remarks.

David. Thank you, Michael. I want to close our prepared remarks with a big thank you to our team members and leaders within our organization. Your efforts are noticed and greatly appreciated. Thank you. Your commitment and dedication to making a great workplace environment has also been recognized nationally. We were recently named as one of America's greatest workplaces 2023 by Newsweek, receiving a five out of five star rating. And we were awarded 2024 Best Companies to Work for Retailers Industry by U.S. News and World Report. I commend all of you for fostering an enriching and welcoming work environment. This clearly speaks to the quality of our store leaders and our team members committed to our vision. This concludes our prepared remarks. We will now turn the call over to our operator and take your questions. Rob?

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Daniel Embro with Stevens. Please proceed with your question.

Yep. Hey, good morning, everybody. Thanks for taking our questions. Of course. I want to start on maybe the used business. David, obviously things have slowed there, but curious if you could provide some color on the cadence. Was there any notable changes noticeable changes month to month. And Dan, I think in your prepared remarks, you noted a focus on profitability over more volume, but GPU did still step back sequentially despite wholesale prices falling. So can you maybe talk about how you're thinking about used GPUs in this environment as well?

Yeah, Daniel, this is David. I'll start and then Dan can jump in. You know, with the used car gross profits, it's all about what you acquire the vehicle for. It's a competitive space. There's less vehicles out there. There's more shopping going on. So your cost of sale, as far as what we own the vehicle for, is creeping up a little bit, which has put pressure on the margin. We have chosen not to chase volume, so we're purchasing less cars at the auction than we normally would. Our thoughts are if we're purchasing at a higher rate through the auction, you would see lower PVRs. We think we're getting close. to a sustainable level. But in this dynamic environment, it's really difficult to predict what the future is going to be.

Good morning, Daniel. Dan here. To answer your question, we did see some pressure in the valuation of the vehicles, specifically at the beginning of the quarter. And so that put additional pressure on our margin, a little bit more than than we were expecting, and that's why we fell a little bit short. But I will tell you the good news is we were able to adjust quickly. That is one of the benefits of keeping a 29 to 30-day supply. As market conditions change, we're able to adapt. And if you look from a wholesale perspective, because of the quick turnaround that we were able to adjust, our wholesale perspective, we did not suffer on vehicles that we were wholesaling, because we cannot retail at the store level.

That's helpful. Maybe if I could follow up just on the new side of the business. Obviously, new GPUs are probably a bright spot. Thinking through it, I mean, domestic GPUs here are still over $4,200. David, versus pre-COVID, I would call it $1,700, $1,800. Can you just walk through the buckets of how, despite inventory building, domestic GPUs are still that much higher? Is it more premium? Is it OEMs being disciplined? And then what does that tell you about the future of new vehicle GPUs, given what you've seen so far in that segment?

Daniel, I'll give you my best attempt. It's a great question. You know, we're heavy with our domestic brand mix of Stellantis. So that, you know, impacts us a little bit compared to our peers. As we've said when we've done these acquisitions, especially the Miller acquisition, there was a lot of domestic stores in there in the mountain states. And as I said, when we acquired them, you know, their gross profit margins or PVRs were higher than Asbury was. So while, you know, we are seeing some deterioration from all-time highs, we're still at very healthy profit margins. And even with the day supply creeping in some areas on domestic, we're still able to get good gross profit. So we're excited about that. We think it has a lot to do with the average age of the car park and the large town payments that our customers are still putting down.

Great. I'll hop back in the queue. Thanks so much, guys.

Thank you. Our next question is from John Murphy with Bank of America. Please proceed with your question.

Good morning, guys. Just a couple of quick ones. David, first on parts and service, you indicated that integration had stunted, you know, same-store sales a little bit. You know, I'm just curious, you know, when you think that will resolve and how we should think about the opportunity of parts and service, you know, growth is sort of mid and long term.

Sure. I'll do my best, John, and others can jump in here. You know, there was a lot of accounting consolidation that took place. And, you know, when that takes place, it's never convenient. It's never easy. And there's unfortunately hiccups with software integration, which makes it difficult for the results. At the same time, we were integrating some of our service software to make our stores out west a little bit more efficient in how they operate and sell their product. As I said last quarter, I thought it would be a quarter or two. We're hoping by the end of the fourth quarter, we should have normalized and had everything integrated and start off fresh in Q1 of next year.

That's super helpful. On the use sourcing side, Is this really just a function of a dearth of late model vehicles, and is there maybe a need to go older in the age spectrum until we regrow that population of units? Or do you think there's something sort of more structurally going on in the dynamics of who is getting vehicles in the competitive set in the used vehicle markets?

John, good morning. This is Dan. As you can see, our cost of sale dropped $900 a car or around there. We're definitely bringing that cost of sale down with trying to really keep the older car for lack of a better term. Those cars are harder to get. When we get them, we do everything within our power to put a safe, reliable car in the front line that we can sell to one of our guests. But we still, even at that point, you're talking about $31,000 in our cost of sale for a new car that is pretty high, and that has just been a product of what we've seen in the last few years, where the acquisition cost of new cars has continued to grow.

Okay. And then just lastly, obviously, you're making big acquisitions, and that seems like it makes sense. You've got the cash flow balance sheet to do it. But at some point, David, that story will run out maybe to some degree. It might be many, many years. So I'm not saying it's happening anytime soon. But as you build out the network even further and go wider, ultimately, what kind of opportunity is there to go deeper and in each market, whether it be sort of what we're just talking about, sort of age of vehicle on sort of the turn or the second, third, fourth turn of the vehicle or the service work that might go instead of five years, 10, 15 years. How do you think about that and eventuality of needing to and wanting to go after that?

It's a great question, John. You know, a few years ago, we were the smallest by far of the public. So we've been trying to grow in markets where we think it'll stabilize and strengthen our company. And we think we've effectively done that. And even though we've had a lot of acquisitions, I'll just remind everyone, when we close on the pending deal, it'll be almost two years since we've acquired something. And in 2022, we divested of 16 stores. So there's a lot of activity going on there. We've been building for the last few years. to be an efficient organization, to be ready to scale, to be ready to support the OEMs, and any consolidation that might take place over time. As you know, leasing has disappeared from the marketplace the last few years for obvious reasons. So we think there's a lot of tailwinds down the road with leasing coming back with the OEMs, with the adoption of electric vehicles at some point in time, and with further consolidation. we always have opportunity to deepen our relationship with our client base within our markets that we're in from a service retention standpoint. And as these vehicles become more complicated, we just think that we're the obvious choice to service your vehicle compared to independent shops. So while the next couple of years might get a little bit bumpy with what goes on economically, what goes on in the world, we think as things start to settle down and get back to normal in the future, will be well positioned in the markets we're in with the brands that we're in to really deepen our relationship within the communities to expand our service retention and hopefully grow our new car numbers, grow through leasing and additional lift through SAR.

Okay. Thank you very much, guys. Thank you.

Our next question comes from Rajat Gupta with JP Morgan. Please proceed with your question.

Great. Thanks for taking the question. Just had a couple here. On the parking services impact, you know, from the integration and the software change, is there any way to quantify that impact at all in terms of how many points of same-store impact it might have had? And I have a couple follow-up.

Thanks. You know, Rajat, You know, you integrate from an accounting standpoint a consolidated look in your accounting through 50 stores. It doesn't go equally across all some stores. Some have issues, some don't. Some have more complicated issues that take a week or two to figure out and get the numbers correct, and then you have the service software. I would tell you the stores that were impacted from a customer pay standpoint, because that's kind of the number that we focus on, it was anywhere from 10% to 15% disruption within those stores during the quarter. Some brands were more than others, depending on parts availability they had on top of that. But generally speaking, it was between 10% and 15% of those stores out west.

Got it. Got it. That's helpful. And just related to the important services, you know, we have had the Detroit Street parts plant strike now, you know, almost five weeks into that. Could you give us a sense of, you know, when should we start to get concerned about any kind of part shortages? Any way to quantify what the per day or impact could be with every day or shortage that you might see eventually? And also, relatedly, do you expect to recover any of that once the strike ends, if we do end up having an impact? And I have one last follow-up.

Morning, Rajat. This is Dan. I'll start it and then turn over to David to add any additional comments. I will tell you that the time of we're seeing the biggest impact is starting now. We had enough day supply within our parts inventory when this all started where we were still able to service our cars and take care of the guests in a timely fashion. but as the delivery centers, the parts warehouses have no employees and now the OEM is doing everything within their power to continue to ship parts to us, in some cases we are not delivering, we're not receiving shipments and it's been days if not weeks since we received them. The good news about our size and our scale is we're able to transfer parts amongst our stores where some of them have the part that we need for to satisfy another guest across, you know, whether it's the East Coast or the West Coast. So we're working that to the best of our ability. But as this continues to prolong, the impact is going to be greater. And unfortunately, the one that gets affected is the end consumer.

Rajat, I'll add to that. You know, we have a large wholesale parts operation that is starting to impact as well because we're not able to deliver those parts to our customers. So that's concerning. So every week that goes by, it's affecting our business. We saw this coming. Our parts managers were strategic and built up the inventories as best they could to prepare for this. And we came into it with a decent day supply of vehicles with all the brands. But as you can imagine, as these weeks go on and they shut down certain plants, it's going to impact us in the fourth quarter. To what degree at this point, it's hard to determine. But we're certainly starting to feel it. And as far as it coming back, just real quickly, as far as it coming back, you know, that's a hopeful thing. You know, either the consumer gets frustrated and trades the vehicle for another brand or they wait it out. You really just don't know what that's going to look like until you get to the other side.

Got it. Got it. That's a hopeful color. Just last one, I believe, Mike, I think in your prepared remarks you mentioned that you expect the leverage for the company to go to the mid-twos with the Jim Coons deal, and then you mentioned you expect to get it back down to less than two times by the end of 2024. Is that implicitly suggesting some sort of earnings cadence for next year? I mean, if you were able to get to less than two times by the end of next year, it would suggest that you're expecting EBITDA for the company, including Jim Coons, to grow next year. Is that like an unreasonable assumption? Are we missing something there in your statement there? Any thoughts? We'll be curious.

Thanks. That's more of a cash flow issue. We're going to, you know, prioritize cash to paying down debt. And so that's just taking the cash flow that we'll have next year and using that to pay down the debt level that we'll take, you know, the net debt level that we'll take on as far as the Coons acquisitions.

Got it, got it. But is that, there's an implicit EBITDA assumption there, like in the two times?

There's an EBITDA assumption in there. I mean, it's, you know, it takes the same store EBITDA assumption with, you know, with lower margins next year, but then adds to that the Coons, you know, cash flows kind of come with it. And so, you know, why same store will be backwards a little bit because of the decline in new vehicle margins is you know, we'll get a lift because of adding the Coons EBITDA.

Got it. Got it. Great. Thanks for all the color.

Thank you. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Ryan Signal with Craig Hallam Capital Group. Please proceed with your question.

Morning, guys. Want to start with TCA. Can you talk a little bit more about the accounting nuance? Looking at ex-profit, you expected 25 million started this year, then it went to 75, now 85. I guess, is that primarily a timing of when Asbury stores are rolling on to TCA or is there some other underlying assumption in their business impact? And then can you also talk maybe magnitude of negative impact next year?

Yeah, so two things in there. When we originally had the $25 million forecast, we expected higher used vehicle and new vehicle volumes for this year. And so as those came in less, we're in effect rolling off LHM stores for 2018 and 19. That's the income that's kind of rolling off as part of the deferral. And we're replacing it with less of a hit for this year because of the volumes being lower. That's a big chunk of it. Then the other piece is we did our large groups in Georgia and Florida where we have a lot of our volume for Asbury. The Georgia ones are fully rolled out. The Florida ones, we're going to go out in the fourth quarter. We delayed that until the first quarter just with the Coons acquisition and some other things, just decided to push that off to the first quarter versus trying to stick it in during the holidays in the fourth quarter. A little bit of a delay of the Asbury stores in Florida rolling out, which is a big group for us. And then just the lower volumes from both LHM and Asbury from our original projections.

And then for next year... Yeah, thank you.

Yeah, for next year, you know, we're still working through the forecast of the units for next year in terms of what SAR is going to be in used vehicle volumes. But I would expect something, you know, close to that, you know, you know, call it breaking even the $25 million range. So, you know, pretty big fall off for next year just because we'll have the full year of deferral of all the stuff that we rolled out this year, plus we'll have Florida rolling in next year.

Great. Last question for me. You mentioned F&I's slightly lower attach rates, but then I look at ClickLane and it's 74% finance, 26% cash transactions, which is identical to what it was In Q2, I guess, can you talk through the dynamics of F&I attach rates between Click Lane and then the retail stores? And then anything you've seen in October would also be helpful there.

Sure, Ryan. This is David. I apologize. I might have got it wrong in the script. Normally, of our F&I number per vehicle, 70% of it is product sales and 30% of it is reserve. In this past quarter, it was just about 67%. products and the rest reserved. So the leakage was a little bit lower penetrations on our product sales. We don't think it's a material number, but it was certainly down, so we thought we would call it out a little bit. You know, we think we're a healthy business when we're 70% product sales and 30% reserve.

Gotcha. I may be just misunderstood as well. Anything you can comment on October? Any change in trends there? And then that's it for me. Thanks, guys.

Ryan, this is Dan. No, I mean, what we've discussed is what we're experiencing for October.

Thanks, that's it for me.

Thank you. Our next question is from Brett Jordan with Jefferies. Please proceed with your question.

Hey, good morning, guys.

Morning.

Any color on the UAW impact to GPUs in the third quarter and I guess into the fourth? Is the broader market discounting less with concerns around supply shortage or is it not impacting?

Good morning, Brett. This is Dan. Yes, we're starting to see a shift, less of a discount before the strike was taking place, even though you could see it coming you know, there were a lot, dealers were a lot more aggressive on the domestic side. And we have seen that scale back considerably now that we know where we are and that this is going for a long time, I guess. Looks like it's up to them.

Okay. And then a question, I guess, that sort of got asked earlier, but now that you've got another quarter under your belt, do you have any feelings for what the new normal, you know, market average GPU is on new? I mean, are we going back to 2000 or is it, you know, just given the changes in the market going to stay, you know, higher than the historic levels?

Yeah, Brad, you know, I think across the peer space, it'll differ by brand mix and, you know, whether it's luxury, domestic or import. The one thing that we've stated all along and we still believe, you know, whatever it settles into, we believe that we'll be higher than we were in 2019 because of the mix of our company now and the brand mix. You know, there's nothing to prove that model out, and there's a lot going on in the world right now to predict what the future is going to look like. But we still believe that we should end up higher than 2019 levels, and we'll continue to manage our expenses as best we can to the size and scale of our business as far as what we're generating.

Okay. And then one quick question on parts and service. When you think about supply chain problems on parts, I guess, is there anything that prevents you from using aftermarket parts for post-warranty work? I mean, you could get in and stock up on O'Reilly if you had to, or do OE agreements prohibit you from doing that?

So, this is David. We do do some aftermarket parts. We generally try to stay away from it. We represent the manufacturers. We want to sell their parts. We believe that they're the best quality parts in the market, and they're what should be put on our guest vehicles. But in certain circumstances, to keep cars up and running and keep them on the road, we certainly do some business in aftermarket.

Okay, great. Thank you.

Thank you. This concludes our call today. We appreciate everyone's participation, and we look forward to discussing our fourth quarter earnings down the road. Have a great day.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.