Good day, and welcome to the Asbury Automotive Group Q1 2020 Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Matt Pettoni. Please go ahead, sir.

Thanks, operator, and good morning, everyone. Welcome to Asbury Automotive Group’s First Quarter 2020 Earnings Call. Today’s call is being recorded and will be available for replay later today. The press release dealing Asbury’s first quarter results was issued earlier this morning and is posted on our website at asburyauto.com. Participating with us today are David Hult, our President and Chief Executive Officer; Dan Clara, our Senior Vice President of Operations; and Matt Pettoni, our Vice President of Finance and Treasurer. At the conclusion of our remarks, we will open the call up for questions, and I will be available later for any follow-up questions you might have. Before we begin, I must 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, including those statements relating to the duration and contemplated impact of the COVID-19 pandemic on our business and financial performance as well as the financial projections and expectations about our products, markets and growth. All forward-looking statements are subject to significant uncertainties, and actual results may differ materially from those suggested by the statements, including potential impacts from the COVID-19 pandemic on us, our industry and our customers, suppliers, vendors and business partners. For information regarding certain of the risks that may cause actual results to differ please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2019, any subsequently filed quarterly reports on Form 10-Q and our earnings 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. It is my pleasure to hand the call over to our CEO, David Hult. David?

Thanks, Matt. Good morning, everyone. Welcome to our first quarter 2020 earnings call. The quarter started off very strong. For January and February, our company was pacing extremely well. Here are the results. Total revenue increased 10%. Gross profit increased 12% and adjusted EPS increased 31%. On a same-store basis, total revenue increased 6%. Gross profit increased 7%. New vehicle gross profit increased 10%. Used vehicle retail gross profit increased 9%. Finance and insurance gross profit increased 9%. Parts and service gross profit increased 3%, and SG&A as a percentage of gross profit decreased 130 basis points. Our business performed very well all the way through the first half of March. During this time, we are very successful in implementing our business and omnichannel strategy, which Dan will provide an update on the progress we have made. As we continued executing our business strategy, we completed our financing and integration work to close the Park Place acquisition in late March. We divested a Nissan store in Atlanta and exited the Mississippi market, which included two Nissan stores, one Toyota, one Chevrolet and one Ford store. We also acquired a Chrysler Jeep Dodge Ram store in Denver, where we continue to grow. These transactions are in line with our strategy of managing our assets to create the most shareholder value. Though the quarter started off great, our operations were significantly impacted by the COVID-19 pandemic in the second half of March and continued into April. As we saw business decline, we acted decisively to fortify our business to prepare for the inevitable slowdown. Unfortunately, this included canceling the Park Place acquisition, furloughing employees and reducing salaries and benefits. We also acted fast to rightsize our business by reducing expenses, deferring most of our capital expenditures and negotiate significant discounts with certain…

Thank you, David. The first quarter marked performance with adjusted earnings per share of $1.80. Overall, compared to the prior year first quarter, revenue decreased by 4%, gross profit decreased by 2%, gross margin of 16.9% was 20 basis points higher than last year. SG&A as a percent of gross profit increased by 310 basis points to 71.5%. Adjusted operating margin decreased 50 basis points to 4.3%. Adjusted income from operations decreased by 15% and adjusted EPS decreased by 18%. Net income for the first quarter of 2020 was adjusted for the following pretax items, a gain on dealership divestitures of $33.7 million or $1.30 per diluted share, a legal settlement gain of $900,000 or $0.03 per diluted share, a gain on the sale of vacant property of $300,000 or $0.01 per diluted share, a loss on debt extinguishment of $20.7 million or $0.79 per diluted share, a loss on franchise rights impairment of $23 million or $0.89 per diluted share and Park Place termination costs of $11.6 million or $0.45 per diluted share. Net income for the first quarter of 2019 was adjusted for a fixed asset write-off of $2.4 million or $0.09 per diluted share. Our effective tax rate was 19.1% for the first quarter of 2020 compared to 23.8% in the first quarter of 2019. The decrease in our effective tax rate was primarily the result of an excess tax benefit relating to divesting of share-based awards. Looking at expenses. SG&A as a percentage of gross profit for the quarter was 71.5%, an increase of 310 basis points over last year. This was a very solid performance considering the pressure we felt on total gross profit related to the COVID-19 pandemic. Floor plan interest expense decreased by $3.2 million over the prior year quarter, driven primarily by…

Thank you, Matt. My remarks will pertain to our same-store performance compared to the first quarter of 2019. Looking at new vehicles. While SAAR for the quarter was at 15.2 million units or 10% below last year, we focus on retail SAAR, which was also down 10% for the quarter. In this lower retail SAAR environment, new unit sales decreased 9%. Overall, our new car margin was at 4.5%, flat from the prior year period. While import margins were flat from the prior year period, domestic margins were up significantly. At the end of March, our total new vehicle inventory was $861 million, and our day supply was 105, up 18 days from the prior year. In April, we were able to drop our new car inventory approximately $120 million from March 2020. While these levels may seem high, because the OEM factories have been shut down, we believe we could run into a low day supply for the summer selling season. Turning to used vehicles. Gross profit margin was 7%, which is up 70 basis points from the prior period and down 50 basis points from Q1 2019, represents a gross profit per vehicle of $1,552. While our used vehicle unit sales decreased 7% from the prior year, we were able to increase our used to new ratio by 250 basis points to 91.5%. And for the first two months of the year, we were pacing strong with good grosses. However, in March, the shelter-in-place government mandates and the COVID-19 closures at several of our stores negatively impacted our sales. Our used vehicle inventory ended March at $158 million, which represents a 42-day supply. During April, used car auction prices experienced major declines. When the market valuations dropped, we put a plan in place to maximize the value of…

Thank you. [Operator Instructions] And we’ll take our first question from Rick Nelson with Stephens.

Thanks, Good morning.

Good morning.

[Indiscernible] how you see consumer behavior changing post-COVID, maybe some of your digital efforts to address that change in consumer behavior?

Sure, Rick. This is David. I’m sure like every one of our peers and private retailers, we’re experiencing a lot of traffic online. And we’re doing a lot of transactions, pickup and delivery and at home, and roughly about 25% of our sales are being delivered at home. We’ve been dealing with each of the counties and states and mandates as far as the shelter in place. We think we’ve found a nice rhythm with our business. We’re excited that the incremental business that we’ve seen increased in April, and we’re experiencing that increase to continue into May. So it’s a little bit difficult to predict the future and whether the virus comes back around and what happens. But as we sit here today, we’re positive of – we feel very good about the pace of our business. The changes that we made to adapt to the business and how we look going forward to handle the business. It’s a very flexible model for us. And bringing back employees is certainly an opportunity for us when the business wants it.

So David, with the business now showing some signs of improvement how do you think about acquisitions and Park Place? Is there potential to reengage with them at some point?

Sure. It – we thought the Park Place deal was going to be a transformational deal for us, and it was a heck of an acquisition, but things happen. On the other side of that coin, we’re sitting on a lot of cash and probably the lowest net leverage ratio we’ve had, it may be ever. So we’re very opportunistic. I think we need to see the dust settle a little bit. There is some activity out there. We’re certainly talking to people. I don’t want to comment on the Park Place transaction. But we feel like from a cash position and where we’re sitting operationally, we have the ability to be very flexible and being acquisitive when the right opportunities come.

Got you. And those cost cuts that you made, can you put those in dollar terms and would any of that be considered permanent cost takeout with more business likely shifting to digital?

Sure. When we came into this in early April, we wanted to build the plan for 90 days and not beyond, not knowing what was going to take place. We made choices. We kept more expense in than we needed. We could have cut more and could have cut more to the bone. We believe the strength and success of our company is our people. So, we furloughed the folks that we needed to, the folks that we didn’t furlough, we basically guaranteed everyone’s pay, took them off the commission plans. And we guaranteed our A and B level technicians and didn’t furlough any technicians. Because of our cash position and how we manage our expenses and the history that we have shown how well we manage SG&A, it actually could have been better in the quarter had we managed – had we just cut the normal expense as you would in a typical recession. We believe that this was going to be temporary. And eventually, the business was going to come back. So we want to show our teammates how much we value them by taking care of them through compensation and keeping the stability with them and employed at the same time. We took out about $15 million in expense in the month of April. Most of that expense or over half of that expense was not personnel-related. That other lever is there if we need to do it. We have, like I’m sure all the other of our peers, we have strong metrics that will dictate to us when we bring people back. And when we see those metrics starting to be achieved, we’ll certainly bring people back at that time. The folks that we’ve furloughed, we communicate with them consistently, and we were hopeful one day to bring them all back.

The markets that have opened up, I know you spoke to last weeks as unit sales being down 25%, service and parts being down 30%. Is there a difference in the markets that have opened up, how are those performing?

Yes. There’s no question, there’s a difference in the market. They’re certainly performing well. And again, we stated in the remarks that we see March being a 20% incremental increase over April, we’re only a few days into May, but we’re very optimistic what we’ve seen so far. So we hope the virus can be contained, and that it doesn’t come back in resurgence. But we’re hopeful in what we’re seeing. Our OEM partners have been very supportive with the incentives in communications and conversations and seeing what they can do to assist us. And it just shows how valued of a partner they are to us, and we’re appreciative of that. So we’re opportunistic looking at May.

Okay. Thanks and good luck.

Thank you.

And we’ll take our next question from John Murphy with Bank of America.

Good morning, guys. I just wanted to follow-up on one of the comments you made around new vehicle inventory about the potential of running into some shortages potentially in the summer months, depending on how production gets up and running, I’m just curious how you’re thinking about your view and even used vehicle inventory at the moment, particularly around the – in the context of – for pricing and protecting or supporting GPUs? Because it seems like there may actually be an odd situation developing here whether everybody expect demand to be down, but there might actually be an inventory shortage that supports GPU. So just trying to get your thoughts around that, what do you meant by that commentary?

John, this is Dan. And from a new car vehicle standpoint and day supply back to what I referenced earlier, we’re seeing with the close in our shutdown in the plants by the different OEMs as business continues to increase, then in some of our luxury and some of our domestic specifically, we could run into a lower day supply of some of the models. Specifically talking as how we are managing through new and used car pricing and also day supply, we look at it as a model-by-model basis. And we make decisions based on that. The pricing, we continue to implement our market-based pricing. And to your point, the bottom has not fallen out as much on the market-based pricing. So we will continue adjusting and continue executing our strategy once again based on market day supply and market-based pricing.

And what I would add to that, specifically around used, it took a dramatic drop in valuations at the auctions in late March and early April. And we made a decision at that point in time, not to get nervous in fire sale inventory because I didn’t think that, that was a real – I think that was a knee-jerk reaction to the market and wasn’t sustainable. And I didn’t really want to suffer large losses or blow out inventory that wasn’t needed. Each week since, and this week is extremely strong at the auctions, they’re coming back significantly every week. So our day supply is looking a little bit high, but we just didn’t feel the need to turn it and take the loss because we didn’t see the values dropping that much, and we thought it’d come back, we got lucky and they’ve come back well. We also moved a lot of inventory from state to state depending upon the shelter in place to move inventory to a market where it had the potential to turn faster.

Okay. That’s incredibly helpful. And then also you sort of – in same vein, how are automakers helping out with this inventory carry here. It sounds like the inventory will be carried for a little bit longer. But like you kind of just said it wouldn’t be necessarily fire sales. What kind of help you get on floor plan assistance and ultimately, in any other fashion from the automakers at the moment?

John, this is Dan again. We have seen support from our OEMs in floor plan assistance. And back to David’s point and comments earlier, we really appreciate their support. And what they have done for the industry as we go through the pandemic.

Okay. But is there anything specific going on floor plan, are they – I mean is assistance being extended 10 days, 20 days, 30 days? Is there any kind of specific example you can give on the floor plan assistance side?

They’ve all given additional time and days of floor plan assistance. They’ve been extremely helpful as it relates to that. They’ve also increased their incentives coming up with 0% financing. It’s been a great partnership, and they see what we’re going through and they’ve been supportive.

Okay. And then just lastly on...

The other thing – John, the other big thing, I didn’t mention it. A lot of the monies are always tied to hitting certain targets. They’ve essentially eliminated those targets and just paid out the money, which is very extremely helpful as well.

Okay. That’s great detail. And then just lastly on parts and service. One of the constraints pre-COVID was using capital or techs. Given everything that’s going on right now, I’m just curious if you think on the other side, hopefully, in a few weeks or a few months, with the rebound in parking service, you may have more techs available to you to hire and/or over time with some of the folks that get furloughed, could you send them to trade schools and potentially get them trained up to be B and C techs or eventually A techs and provide another career path for them, it would be pretty profitable to them as well?

Sure. I’ll tell you, I haven’t been in the industry a long time, I have been through many downturns. You never let a good downturn go to waste. It’s a great opportunity to focus on your employees and training and career development and really build stronger processes within the organization and get better at what you do. Guaranteeing the technicians pay and not prolong the A and B level techs. That word has gotten out in a lot of markets, and we’ve actually been hiring some techs in the last 30 days that heard about what we’re doing for our techs, so they were looking to come on board. Downturns serve a good opportunity for you to really get your house in order and add techs. And we’re hopeful that we know the business will come back. We know there’s going to be some pent-up demand. People have been putting off service and part of it with the shelter in place, they’re not driving the cars. The cars aren’t banging into each other in the highways, the collision is slowing down a little bit. But eventually, as that comes back and driving here and around Atlanta, I can tell you they’re already starting to bang into each other again. That business will come back for us. So we’re excited about that. We’re happy to bring these technicians on now and pay them, even though we might not necessarily have the work for them. And that value has been well received by our techs.

And then just one quick last question on that. I mean, is there any sort of level of capacity government you think that you might sort of point to is what you can handle or not handle on the recovery, meaning, let’s say there’s massive pent-up parts and service work in the third and fourth quarter? I mean, could you handle up 10%, 15%, 20%? I mean what do you think is reasonable to think about sort of on a year-over-year basis where you might start running into some limitations on manned capacity in terms of being...

Sure, John. It always depends upon the month and the circumstance. And do you get hit at all brands at once or how does it come? But I would say a fair number would be 20% could easily be absorbed. And that’s 20% over normal terms. Over times right now, again, parts and services, I made the comment, it was down 30% by the end of April. It’s starting off May better than it ended in April. But if we’re backwards, say, 20% in parts and service right now, there’s an additional 40% on top of that we could handle without worrying about staffing issues. And as far as bringing back support staff in the parts and service area that would be efficient and quick, again, store-by-store decision depending upon how the business and the market react.

That’s very good year. Thank you very much.

Thank you.

Then we’ll take our next question from Bret Jordan with Jefferies.

Good morning guys.

Good morning.

In the, I guess, sort of the magnitude and the abruptness of the shock, do you think there will be any store closings, either franchised or independent used dealers or even independent garage operators that would allow for real market share gains here? Or is the hit is the recovery quick enough that most stores will stay open?

This is David. Bret, that’s tough to predict. A lot of the independent used car dealers rely on floor plan lines and I know a lot of the floor plan lenders for those independents really govern their ability to buy cars starting in March. They’re really only advancing 80% of the values. So that kind of brought down the market as well. Like anyone else, depending upon how someone was positioned regarding capital going into this, we’ll determine how well they’ll be able to weather it. And obviously, we’ve never in our lifetimes come across a virus like this and had to deal with something like this. So it’s very difficult to talk to someone and predict what next week or 30 days or 45 days from now it’s going to look like. It’s hard to imagine that some independents wouldn’t go out. It’s hard to imagine that some folks wouldn’t run into some capital issues, but I couldn’t really comment on a number.

Okay. And then I guess a follow-up. Your comment about $15 million in expense reductions in April, and you said a bit over half of that was not personnel. Is that a number something a bit – something half or so of that would be a sustained expense reduction, I guess, just taking out permanent overhead? Or is it not as much as that?

Yes. I’ll talk about both halves of it. The non-personnel expense side, a lot of it was negotiated discounts with our large vendor partners for a period of time. So a lot of that expense will come back. Some of it, like anything else, because of the scale of business right now, some of the expense will stay out. But like anything else, that incrementally comes back, some of it will come back. The personnel side, we could have gone a lot deeper than we did. We chose not to because we wanted to preserve the stability of our teammates and show them how much we value them and give them a steady paid check and income through this. There was an incremental expense in doing that because from a percentage standpoint, we’re paying out more than we’re bringing in because we realize for a period of time, this was the right thing to do for our teammates and eventually would come back. So far, that’s worked out well for us. We’re in a great cash position to be able to do that. But certainly, for some reason, if this ended up being a very prolonged thing and a much slower recovery. We could certainly make those adjustments on the compensation side as well.

Great. Thank you.

And we’ll take our next question from Ryan Sigdahl with Craig-Hallum. Please one moment. And Mr. Sigdahl please go ahead with your question.

Hello. Can you hear me?

Yes.

Okay. Sorry about that, guys. Just one for me. Can you talk about your omnichannel business, either quantitatively or qualitatively amid the shelter-in-place restrictions? And do you think that has helped you guys take market share amongst some of your less technology-savvy dealer competitors?

Good morning. This is Dan. Yes, like I mentioned on our omnichannel technology and strategy, for the first two months of the year, we were up 25% increase in both – in January and 23% in February. And I do believe that it is – continue to give us a competitive advantage. As we moved into the entire Q1 of 2020, we increased that 9%, and once the pandemic hit, the online activity continue to increase. And even in the month of – we’ve continued to see that trend translating to the month of March, April and May is starting very healthy as well.

And I would just follow-up. 15% of our used car sales in a month is a record for us. We’ve been hovering in the 8% to 10% range. So we’re excited about that. Something we did – we’ve been working on this for four years. And about four years ago, we also decided to go to really 30-day outs with all our software partners. Because we want the ability to be flexible and transition if there was a better product that came along. And we don’t think, from our perspective, it’s a good capital investment to invest in software from a hardware cost. So we work with partners. We utilize their cash in our ideas, and we partner together and share our ideas with anyone that’s interested. We’re solely focused on creating an entire sales transaction online, 100% completed. We – like anyone else, we shop our competitors. We think we have a pretty good tool out there. We’ve created a new relationship with another partner. And we think we can actually go further than where we’ve been. So we’re excited about the future. We’re working hard on developing that product more. And we think we’ve been pretty good in the space at execution so far.

Just one quick follow-up. Are you able to elaborate on who that new partner is?

I really don’t want to because it’s such a competitive space. I’ll say the one that we’ve used for four years has done extremely well and partnered with other large peers of ours and OEMs, which has been great. They’ve plateaued a little bit in a very solid company, but there’s another aggressive company out there that we can see a pathway to take us further down that transaction line. We compare ourselves to Carvana from a standpoint of online transaction. And I would say the trade-in piece is one that they – is better than what we offer today. We feel like our online marketplace for financing is superior to anyone’s in the marketplace right now. So we’re looking forward to working with this partner and enhancing those areas and getting more of the documents online to complete the entire transaction. We’re not there yet. No one’s really there yet, but it’s our sole focus to get there.

All right. Thanks guys. I’ll turn it over from there. Good luck

Thank you.

And we’ll take our next question from Armintas Sinkevicius with Morgan Stanley.

Just as we think about the sequential improvement here week-over-week and into May, what you’ve seen so far, can you give us some color on who you’ve seen buying cars whether it’s geographic or demographic? And what are the drivers of the sales that we’ve had during this shelter-in-place period?

This is Dan. We’re seeing the customer base coming in, driven by the incentives that the OEMs are putting out there. As you can see, there’s quite a few offering to 0% and that is driving quite a bit of a traffic if it provides an opportunity for consumers to upgrade into a new vehicle.

I think we’re seeing it across the board. Lending is available. There’s no tightening on lending, which is great. The 0% and other incentives that are out there. I think people are looking to be opportunistic. So it’s not just the luxury deal. It’s not just an import deal. It’s not just a domestic deal. Clearly, the trucks are very strong right now. But with all brands, there’s some interesting pent-up demand and I think it’s really mainly driven by the incentives.

Got it. And then on the parts and services side, that’s been more resilient than sales. What are the drivers there? What type of work are people getting done? If you don’t really need to leave your home, why are you coming in to get your car service? Or what are you seeing?

Sure. We’re – it obviously varies by brand. But I would say there is the pent-up demand, there’s a lot of people that are sheltering at home saying I’m not really driving the car, I can push off the service. We’re doing warranty work right now. We are doing a lot of customer pay work. A lot of that is communicating, kind of, if you will, the typical gorilla marketing direct with the consumer locally grassroots. And that’s the pickup in delivery. And on average, we’re doing 25% of that, but we have some stores that are over 50% pickup in delivery. So I’m sure that will wane – as the shelters open up, so to speak, and the markets open up. But we’re just trying to be opportunistic to be here for our guests and communicate with them and offer them a level of service. But it really is everything across the board from traditional maintenance to warranty work and additional items as well.

Okay. Got it. Thank you for taking the questions.

And we’ll take our next question from Rajat Gupta with JP Morgan.

Hi, good morning. Thanks for taking my question. I just wanted to follow-up on a couple of the previous questions. You talked about the online opportunity you are seeing a bit up there. Could you give us a sense of what the unit economics are looking like for the online transaction, be it on the sales side or on the service side versus what you have been doing historically? And specifically, like both from a gross profit and SG&A per year perspective? How should that be trending going forward as well? And I have a follow-up.

Sure. I’ll start with sales and then finish with service. And if I miss something, this is for you by the way, please come back around and let me know. On the sales side, on an average month, pre-virus, we’re between 8% and 10% of our new car sales are transacted online. Now 90% of our business is transacted online, but most of it comes in the showroom. That 8% to 10% is handled completely online. So that took place. As we went into this, that number started incrementally growing. And used cars was in that same 8% to 10% range. In March, it grew to 15%, and it grew a little bit larger than that into April. I think it will probably level off a little bit and maybe come down a little bit as the shelters open up. But right now, it’s 15% or higher depending upon the brand. As far as PVRs and margins, this is an area of opportunity for us. Currently, we see the same margins online as we do if the transaction took place inside. We’re always surprised by the good F&I numbers that are generated online. But I’ll tell you, one of our opportunities for growth is creating a better F&I experience online. And that is a big focus of ours that we’ve been working on for a while. We’re not there yet, but we’re opportunistic about the future. From a service standpoint, pre-virus, between 35% and 40% of our business was handled online and scheduled online. And we communicate with our consumers mostly via text as far as their NPIs and also for them paying for their transactions via text as well. Some stores were north of 50%, but the whole company, we’re between 35% and 40% of the parts and service business was generated online for us. As we went into this, our overall appointment numbers naturally dropped as the business dropped in the store, and because of the way we were choosing to communicate with our customers, the progressive online employment fell off a little bit on a percent basis. But as of this week, we’re – that’s incrementally starting to grow back. So I’m not sure if I answered all your questions. If I didn’t, please come back.

That was very helpful. But just from like a cost structure perspective, from a headcount perspective, like if we were to see somewhat of a permanent shift towards the online channels and just in terms of your overall sales base. Would you be able to manage that kind of volume with your free-gated cost structure or headcount? Or just trying to understand like how would like the SG&A, the unit economics look like post the current downturn. I mean, it looks like there could – there would just be higher throughput here. So does that like permanently change your SG&A to gross profile going forward? Or is that not the case?

So, one thing we started over a year ago, we started to build the dealership and not to set a return, but we’re calling it our dealership of the future. And that’s basically – the store looks different, acts different, it’s compensated differently, and it’s focused to do most transactions online, both in sales and service. That model shows tremendous potential to have an impact on SG&A expense. In a COVID environment, it’s really difficult to say what the new normal is going to be and what the levels are going to be. I would tell you in that model that we’re seeing with the dealership of the future, you can certainly be more efficient, and you can be a flatter organization with less COGS in the wheel the more transactions and transparency that you have online. It creates a better experience for our guests. And quite honestly, it creates a better experience for our teammate as well.

Got it. That makes sense. Thanks a lot. And good luck.

Thank you.

And we’ll take our next question from Stephanie Benjamin with SunTrust.

Hi, good afternoon.

Hello.

I just wanted to follow up on specifically the used business. I know that you called out some improving trends throughout April and some improving trends in May across the business. A lot of that driven by some of the incentives you’re seeing from the OEMs and great support from them. But can you just talk about everything between used vehicle values, demand for consumers? Are you seeing more consumers kind of gratitude towards new vehicles? Just any color there would be helpful.

I’ll start it and flip it to Dan. We’re a consumer-driven market that appreciates incentives and deals. I would say the demand is a little bit higher for new than used right now, but I think that’s really driven by the incentives that are out there. The used car business is always going to be healthy and strong, in my opinion. And the certified pre-owner CPO option is a great value proposition for a consumer. So I think we feel pretty strong about it. Dan, I don’t know if you want to comment.

David, I would just echo what you just said about potentially seeing a little more demand, so gravitating towards the new side of the business because of the incentives and the special financing. But again, that certify preowned is a great option for the consumer as well.

Great. And that’s all I have. Thank you.

Thank you, Stephanie.

This concludes today’s discussion. We appreciate your participation, and we look forward to speaking with you at the end of July. Have a great day.