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Group 1 Automotive (GPI)

Participants
Peter C. DeLongchamps Group 1 Automotive, Inc.
Earl Julius Hesterberg Group 1 Automotive, Inc.
Daryl A. Kenningham Group 1 Automotive, Inc.
John C. Rickel Group 1 Automotive, Inc.
Yarden Amsalem Bank of America Merrill Lynch
Rick Nelson Stephens, Inc.
James J. Albertine Consumer Edge Research LLC
David Tamberrino Goldman Sachs & Co. LLC
David Whiston Morningstar, Inc. (Research)
Armintas Sinkevicius Morgan Stanley & Co. LLC
Call transcript
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Operator

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive 2018 Third Quarter Financial Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the conference over to Mr. Pete DeLongchamps, Group 1's Senior Vice President of Manufacturer Relations, Financial Services and Public Affairs. Mr. ahead, go Please DeLongchamps.

Peter C. DeLongchamps

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

information and make mentioned the made of I'd the begin, are the remarks of brief Litigation of we Except statements some for the Private pursuant provision like measures. during Reform to Act historical of call, by use Group XXXX. forward-looking forward-looking Before non-GAAP X to financial statements statements Securities Harbor about management Safe are that

and are markets. actual last from are in and XX the of the uncertainties, which Forward-looking and are with the of involve include the company's Those months. over risks statements filings available described the Copies may associated results differ conditions the these volume Those materially future and pricing, Commission risks the company's periods forecasted SEC both with filings other Securities to results. limited Exchange from to but risks and both known company. not unknown in risks cause and

defined non-GAAP certain financial SEC addition, call. In be measures, under on may this as discussed rules,

are, and comparisons measures the today by the Senior Vice President Vice applicable to Earl. Participating our U.S. most Operations; the note prepared to directly Executive of remarks over Chief financial period Hesterberg, Lance to call and that of reconciliations otherwise same the Kenningham, I'd its unless Officer; Financial comparable prior-year and our Please non-GAAP of website. Chief required As measures Rickel, our stated. now such hand Parker, Daryl SEC President rules, Officer; are provides Corporate our Controller. the in President like all any John GAAP on President company Earl and

Earl Julius Hesterberg

that earnings quarterly an our good income tough Group prior of to morning, $X.XX quarter. record to Harvey of of share, everyone. Beaumont in X earned share XXXX, I'm year. the Pete, million report adjusted adjusted new sales net per pleased Houston increase diluted $XX.X to for you, replacement and over per Thank equates from demand. a due we and comparison witnessed In vehicle Hurricane markets the XX% unparalleled September very This

vehicle Our XX% were new from quarter current and which our Beaumont unit distorts XXXX down third Houston XXXX, U.S. same-store sales result.

in same-store due quarter, to model was certification vehicle lack Our availability new brands sales quarter vehicle for X.X%. protocol. vehicle used sales new a a U.S. superior XX% UK while decline increased the vehicle new down of new in due unit key the Also year impacting XXXX sales a vehicle were to

number sell, Our Mercedes year brands. the the to third quarter in UK vehicle from as XX% models unit our unavailable prior Volkswagen, Audi, particularly were declined same-store sales new of BMW and

our release, share is our of in million. to share we the headwinds, We be sales recovered solid across company today, as course $XXX these count. cost-control significantly shares, offsetting new from and million press which Year-to-date to our to there a mitigate board able financial authorization repurchased next UK volume over in lower our have has represents pressure sales two of significant outstanding car used quarters. repurchase announced Further expect were share beginning-of-the-year reduction count. morning's the this vehicle actions. a We X.X with the significant over through X.X% these common performance the And increased

valuation. assess our priorities We by common continue investment on returns comparing to actions capital to our allocation the for growth will corporate stock

the Hurricane and address on I like our about to comments operations. Michael has further would employees make I results, Before quarterly had impact of our

majority vast was during this stores directly Panama losses employees steps hurricane. in of our these suffered and assist located some difficult employees two which taken everything. Florida, City, lost to by local We've have XX time. We The hit property the

week. and down Our vehicle one shut property our relatively inventory dealership suffered operations minor damage roughly for and were

no statements. We quarter material fourth on financial impact our expect

are been impacted of have by all those thoughts this Our who with storm.

business quarter, X% vehicles. comps XX,XXX constant Hurricane legislation Turning XX% as segments, decrease we driven in to during unit related basis, earlier. sales currency Harvey our over vehicle new mentioned emissions UK the and revenues consolidated retailed a Total decreased to new on by

XX% UK unit new was Our geographic mix Brazil. and sales U.S., XX% X%

and our mix of new of by led Toyota/Lexus, brand VW/Audi sales. for BMW/MINI accounted unit was our Ford XX% which vehicle new new XX% XX% vehicle Our represented XX%, represented sales, represented

decreased driven of in pay wholesale the X% X%, parts collision basis. in and and partially performances we initiative X% quarter, used grew on decrease decline sold increases units, X%, gross insurance XX,XXX especially of F&I retail and a business new our we increased basis U.S. U.S. Val-U-Line on Total units retail of the increased currency used a constant X%. increased gross in service as on consolidated customer constant the was X%, in unit increase X% per profit the X%. currency unit and retailed Used selling UK. increased combined in a increase X% vehicle the our this During by on used in basis constant more up decline with X% currency margin vehicle by per and used units The warranty. revenue This constant focus partially profit a profit price by offset vehicle our average Finance of gross of revenues strong X%. as of over both consolidated driven and basis, by consolidated X% parts a volume area and per total a unit driven result were corporate-wide retail of increase by used currency Total offset vehicle X% unit

Brazil. the Regarding I'd the Kenningham, Operations, I geographic and U.S. to segment before to turn of UK our our U.S. to over results, results President Daryl call like discuss quarterly cover

Daryl A. Kenningham

the a year with versus comps very Earl. were quarter, generally ago. you, U.S. in despite We the Thank difficult our third performance pleased in

year-over-year profit mentioned, particularly Earl Harvey X%. to by used saw distorted operating unit total growth. basis, proud as unit XX% metrics. significantly and that X.X% retail increased Val-U-Line same-store of by the profit we quarter On our On sequential in year-over-year our a used fact we the to sales basis, growth Hurricane I'm same-store retail gross during was units primary of generate X.X% continue we sales a our increased vehicle in improvement. revenues gross driver As strong and the

our used our as wholesale wholesale In volume on sales addition, we lowered XX%. vehicle reliance the declined markets, unit

this inventory internal reconditioning improved process, auction aggressive transfer practices management policies, trend. internal drove inventory new more Our more and disciplined

increase, to sales total used X.X% vehicle the we by increased same-store unit our profit gross addition per In $XX.

Takata profit. after anticipated lower by The decline Our were sales explained in recalls. results in results gross customer profit profit, X%, gross wholesale and warranty increased of increased than increase were our by a years. airbag pay over same-store while pay two a X.X% quarter collision a lapping which impacted over primarily negatively parts Both quarterly X% X% on same-store slightly in best is That's the gross customer at basis.

efforts team implemented. continue after costs. our the XX very roll where and been the the I'd are Week fully like also growth and sales in recognize initiative We X-Day Work controlling of stores to out at outperformance pleased it's with to our

gross XX.X% control. has Although to continued near the at SG&A focus SG&A delevered percent a historical expense of a place versus tough on the a for as profit lows slightly very year-over-year team U.S. is strong comp,

is XX strategy and Lastly, to time that encouraged have significantly to, a great enable now this tell Consistent are Results process our savings. love business how our higher the we their progress. our but stores showing digital online want purchase point. when in the pilots efforts are with online. our early, customer to and customers purchase process Closing a customers to do we're customers they start when are rates and us outstanding vehicle

to making In our easier addition, are customers we business us. do for it with service

appointments the and increased quarter third represent our versus Our of all online service appointments. quarter of nearly XX% one of service XXXX now

made up much profitable engine to traffic Lastly, and sources. traffic more content search traffic optimization, our year-over-year. organically Organic is website in and from changes we've than third-party receive due XX% productive is the our we coming us to

of convenience our for All to lead for Group X initiatives customers. costs these lower will and more

initiatives now the back updates the turn call over Earl. more have these will in will We future. I to on

Earl Julius Hesterberg

Daryl. Thanks,

quarter total industry team The our earlier, were same-store quarter, operations once control, disrupted but again mentioned UK brands, we legislation X. family significantly the down our strong affected. brands, for sales were disproportionately our particularly of the WLTP to that September that In delivered the XX% VW due in F&I, As was used, and effect growth. on into after areas the can came

sales currency retail gross XX% basis. total a used retail used gross constant unit profit X% and increased increased basis. unit after a X% increased both increased on X%, and per currency F&I constant on sales profit a staggering Our

remained that note We would were the our and of while depressed first the vehicle customer in Finally, in portion the to new September, fourth demand late sales steady. should good make a sales I quarter. throughout up lost expect our

as to a in strong constant control. to benefit a quarter, very driven in and a increase a vehicles, Now improvements XX% basis, had in currency new we XX% profit increase cost strong F&I gross process XX% continue turning same-store by sales. after and which from Brazil, Total increased a increase on X%

XX to Our SG&A leveraging profit gross points basis this team margin additional operating a basis as to increased job X.X%. tremendous points XXX did declined and XX.X%

some of the proud our call in team well-positioned Rickel, and now to more work market. advantage the CFO, our turn has continue we're go financial I'll John over of be local We third very to detail. results recovering take John? the quarter to done full to our of over

John C. Rickel

everyone. and Earl, you, Thank good morning,

million a $X.XX, For non-cash dealer million. record. XX.X% open exclude adjusted of explained million another $X.X These the $XX.X net real charges, adjusted consisting estate increased associated with our by million our results franchise basis, On granting in an net of of rights results of quarterly share net million per $X.X XXXX all-time offset over an adjacent point adjusted quarter quarterly to increased comparable X.X% transactions. dealership to OEM third fully gains impairment part diluted $XX.X $XX.X to earnings partially an of by in XXXX income XXXX, or group,

we the of from impact Hurricane $X.X and the billion was comps in For a the quarter, WLTP UK. X.X% year on decrease which revenues, generated vehicle Harvey new prior the legislation to in due total sales both the

increased margin X.X% Our from gross as XX.X% gross however, declined only XX.X%. to profit

$XX.X million very $XX.X due profit, as As a million Floorplan $X.X SG&A boost reflecting contributed to XX to increased a last in by XX.X% from LIBOR basis quarter prior rates versus $X.X borrowings. other interest year of X.X% mortgage Other the increased last higher X.X% to third expense million, year. to or sales or to interest million interest September and Hurricane year and increased comp. adjusted margins increased to new Harvey's vehicle gross SG&A of expense difficult points percent

for it Our consolidated rate is XX% We XX%. was rate to forecast XX.X%. between and our adjusted effective and tax tax year-to-date, third the XX.X% be XXXX quarter full-year

capital $XX funds to total to as that account, our XX, structure, September available was $XXX.X cash bringing of Turning floorplan million million on another of we our liquidity immediately $XX.X had hand and in million. and offset invested a of consolidated

third an an additional XXX,XXX an price the repurchased $XX.X million. quarter, $XX.XX total of total a XXX,XXX October, of shares of at shares $XX.XX average at price During repurchased million. we In average for of a $XX for we

As a X.X% $XXX.X at an price stated, of $XX.XX X.X have shares share we repurchased totaled year-to-date Earl our for million. repurchases These of beginning-of-the-year million through over today, of float. total average

third an X% is of increase an of quarter, XX.X pay Our the share Also per million. yield year outstanding third X.X%. the approximately we today annualized ago per over used to share quarter during dividends of a share, and $X.X of common $X.XX as million count

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

Earl Julius Hesterberg

approximately XX annual Thanks, XXXX year-to-date are John. to the million purchase and of that Orleans. in XXX development company revenues. stores corporate acquisitions our will quarter located was the efforts, have in activity brought of to areas generating $XXX in to our pleased generate The of revenues. announced third U.S. million $XXX previously Related franchises, acquisition stores total These Antonio San metro annual New the

remarks. California of of our in in beneficial assets revenue. the million ways question-and-answer During operator to turn franchise trailing in consistent to disposing over that the to This capital disposition I'll generated is concludes XX-month also quarter, Ford with $XX our prepared we disposed a and Operator? underperforming the shareholders. strategy now of redeploying are This call begin the session. our that

Operator

sir. you, Thank

sir. with Murphy with We first go question-and-answer will And America. now ahead, begin Please John the our Bank question session. of comes

Yarden Amsalem

morning. guys. Hey, This on for Good the Yarden on John. is Congratulations quarter. Amsalem here

Earl Julius Hesterberg

Thank you.

Yarden Amsalem

strategic initiatives. your and maybe – in question was particular your guys do technician on you you if first comment initiatives you how I can wondering see ramping. my So, on that is

Daryl A. Kenningham

interested Week, assume Work quickly. it X-Day we question, is the our I in in than With doing are we're doing well it more

When is that, stores rolled but of of we so, And out will this because stores throughout first that we've by about a that Daryl to rest the all that this have XX% small steady expect about we're XX finished, quarter. some support year are too completely continue of And the XX% there our that. And Kenningham our the basis have to are into stores. way. and on will structure, stores of

almost fully of first end out. quarter, should – between expect be it we be should and So, to rolled now the be the

Yarden Amsalem

Got it.

have you're one you seeing these those haven't? stores you quantify you which that in maybe versus initiatives can benefit the in the implemented incremental So, that

Earl Julius Hesterberg

I was pay Yeah. last growth Earl. I quarter customer quarter our believe, pay had was accidental. the the our in don't This growth that about largest We X%. think two which in is customer years

Daryl A. Kenningham

well was under U.S. in X% the It

Earl Julius Hesterberg

Yeah.

Daryl A. Kenningham

Yeah.

Yarden Amsalem

Okay. particularly the strong very in sense. And it on was Makes F&I, then, U.S.

think drivers So, push about think how guys even about we there should that talk going forward? further. do mean to maybe can you room I that there's the more and you

Peter C. DeLongchamps

Pete thank is Well, for asking. DeLongchamps. you This

rising the executing but our continue that quarter's In our really countries services job steady, I we in financial performance, think good a all keep very strategy. to levels team to three this continue financing do on product. used of business for purposes, think Val-U-Line modeling with And got continues car grow. rates $X,XXX today, are much I done we've the we we've where better interest job in range, to a our as

and think of performance we So, we're will fair we direction. a are today, model the kind if with I be that pleased it where

Yarden Amsalem

five Can the you're seeing then I old you're follow-up a that. that in in Val-U-Line? you on FI vehicle traditional to seeing years about difference have on versus vehicle So, a and new comment quick maybe PVR a zero what

Peter C. DeLongchamps

we used the little And steady. the yes, a of be on and Val-U-Line what a make would make relatively So, overall. more we on bit new money to continues is about third then,

Yarden Amsalem

And break by that Can down then there? Okay. drive us on maybe just performance then, is last Thank improvement some SG&A. the and you've initiatives you the talk question region to of you. about for taken

Earl Julius Hesterberg

U.S. simply in the every dealership Earl. this Yeah. in year, quarter-after-quarter had area. first and and We've since UK the is This single expense it's quarter by – it's dealership both the

vehicle So, of but that's some say come will there ongoing. UK, as I in to is lost it's brands the the limit volume quickly, in new few going we've sales back. a

expense in it's yeah, to some level current and back them to every somewhat But, down and in dirty volume, quickly. we store-by-store can't of the going stores, country So, come because every category. resize it's

Yarden Amsalem

it for Okay. guys. That's Thank me. you,

Operator

ahead And our Rick Nelson next with question comes from go Stephens. question. with Please your

Rick Nelson

units made in and you the third the UK many how up because follow-up size next inventory that get WLTP quarter? the Thanks. challenge, to Good to be think at how Are whether morning. fourth and it does may I like of don't is that in first into quarter up year, – on to know, quarter – up? and be really you there looking way made the we the for a of I'd lost all

Earl Julius Hesterberg

are the market's changes. October, month data than we in have October importantly, the are still you at looking single that XX%. we two it those the give But we the down UK. And XXth down and I'm solved will to as there's be were this coming XX% in back the UK, through And it can start to is I at where in because The in But Sure, is problem XXth, in. still could probably, moment. appears for a XX% bit was volume of and the most the I of seems you brands a the do the digits in problem month, big of Audi, in registration unit still down a but about quarter. sure critical in that's one more not total. Rick. Yeah. down Volkswagen That's of and math were plate are we count, September, quickly example, enough I the the see now believe but key they our of Group XX% down released, cars have coming was vehicles and more

XX and get AX, AX, Audi checked Audi some those our have which of is AX, models, and this in And next We we but those, is a late gross obviously, volume X is QX, stores year we until stores, year like get down AX, in to high-end I there very back Volkswagen are volume starting QX, AX, the early don't on potential QX models. to QX, UK. the start. profit expect and numbers models on yesterday,

that it a down Group Volkswagen it's seems issued us brand as fourth quarter. to So, later into narrowed for going the move be we to more of

Rick Nelson

you brands remind your those UK for account sales? what can us And

Earl Julius Hesterberg

What the...

Daryl A. Kenningham

Volkswagen And Audi, mean, a have maybe UK earlier is we bit third Rick. I down coming of basis. of total, question, a in. in probably on brand little were X,XXX industry units your The business, Yeah. been a our The year-over-year weaker to kind

rough I'd quarter. in us it probably units So, cost X,XXX the say, estimate,

Rick Nelson

come then maybe or...? the those quarter in fourth two-thirds of back And

Earl Julius Hesterberg

back should the since be particular, first normal, March. this hope I quarter, year be would getting quarter. in get least next will first that quarter certainly by big in to we back the And the at half then, volume we

full all So, ahead. want be the to I'm by speed sure, March, going to OEMs are

Rick Nelson

quarter. bigger a Harvey, in Hurricane that that you. probably in how think about quarter we third And fourth late started going replacement color around the Got impact that's impact demand Houston? in lap have to Any should you the to and

John C. Rickel

lot September That in there sales I Rickel. this last is a Yeah. John October and of was clearly, November. of continued into mean, Rick, year.

If new the you sales. X% up quarter look, on a take almost fourth year we in were vehicle last

the of kind chasing bogey against. be we'll that's So,

In margins pretty addition, were the that strong time. during

So, were even gross kind profit dollars than of that. the up more

got strong against. months going comps So, up couple pretty of we've we're more to be a

Rick Nelson

a lot and good Thanks right. All luck.

John C. Rickel

Thanks.

Operator

And ahead. James Edge. go question our Please next with comes from Consumer Albertine

James J. Albertine

Great. everyone. and morning, Thank good you

Earl Julius Hesterberg

morning, Good Jamie.

James J. Albertine

model United on there got the if going per working used a trajectory Val-U-Line that segment, vehicles? with unpack way or impacting going maybe into competitively its just focus States, either late the profit be gross isolate that Could may segment maybe to in could, margins can you there we try unit I to And on lot if in help on Wanted the what's and negatively. us there. you've positively

kind vehicle of used Just on give part some that as us segment. to in direction going Thanks. the of what's

Daryl A. Kenningham

Jamie, Daryl Kenningham.

clarify, Val-U-Line what's to with asking you with are used Just specifically? older happening or cars

James J. Albertine

opposite, The younger. No.

the off-lease, would CPO, the so segment, to points. the So, be four price higher the zero

Daryl A. Kenningham

was quarter, significant luxury through motor new. our us are was marginally up of model, mix, CPO late down that seeing and while as the a competition we're which manage bit. fleets, sources new, sources The vehicle we – for percentage of volume In that nearly our in mix, has

quite I guess there, would I tell you. So, a there's of competition bit

James J. Albertine

in quantify auction channels so your and how about sort as sourcing of trade-ins the from a side from questions from be advantageous franchise I'd much on on imagine been pretty Yeah. the focus depend an would off-lease primary perspective? a sourcing you help If just us And bring you great. could you forth. think spot you're as to versus perspective? how among how much I much don't there's dealer

Daryl A. Kenningham

best that trading by get can place on a lot a put that. it. we pre-owned focus of And car we The is for

put that's those try on rely in more feel can like on wholesale some meaning to more auctions. service place and cars we through are our do And that and our of last have customers' cars the we selling wholesale Our trade that. to less want quarter purpose. and we we of down for to and initiatives better control were to and We try keep exactly transaction. feel know markets, purposely just history XX% to of like the more tried those buying We We volumes units.

James J. Albertine

from it? I that trade-ins put Are percentage be you or vehicles? XX% to fair? mean, you would a off-lease around over say able Would source

Daryl A. Kenningham

I'd say trade-ins, about XX% Jamie. from

James J. Albertine

you Okay. so Thank Perfect. much.

Daryl A. Kenningham

quite I'm to it like one-third. not sure two-thirds it's We be one-third.

is an trade-in. of OEM all I other think consider cars to question police like those very your much make, acquiring auction. Most point is which vehicles is part that of we from a the the wouldn't

auction buying online it from acquire the you're an the it's most really way not off-lease price-efficient OEMs, some to vehicles. be may the If of or

off-lease We pressure there some OEM. get So, you pricing is a in of from margin vehicles, influence quantities dealing with that don't the lot. which

James J. Albertine

you do pass have have a pressured But on vehicles more refusal, a of Understood. condition. right? first right or could that more So might you margin difficult

Daryl A. Kenningham

returned are to which those your dealerships. For

James J. Albertine

Understood. Understood.

Thanks helpful. very the best luck much so in That's and of quarter. Great. Okay. next

Daryl A. Kenningham

Thanks.

Operator

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

David Tamberrino

Hey. Yeah.

to a dig then couple and in Just stuff, regional U.S. of wanted in Brazil the

if First more I should on that was it's can potentially environment been any And as that I position pretty leverage SG&A the down think adjusted mid-XXs not, so, at often trend higher money mean and there are where get and you this good somewhat you to continue? Brazil, incremental quarter rebounds? is bit little losing. a a

Earl Julius Hesterberg

market The most is or million up there from expect X If from Presidential pace would thing moment overall is everyone for X.X election whatever kind million important of for, on to recover administration, the units is of which business-friendly continue move Sunday. the we kind it's and at then at. to low the a a hoping the Brazil currently

we biggest in for us. had vehicle quarter, So, a margins. big that the is In new the our factor increase

of with out vehicles Some was a relationship luxury recovery we're and better have business And JLR. demand our at the we moment. and Toyota there, much and BMW is which then we in because of Honda also, have some brand ago volume that year blowing some supply a

and the economic our continue if business can So, environment improve. overall I think to continues Brazilian grow to political

David Tamberrino

weigh become about Got overall end do from rebound as against expecting a you the no-deal starts understand and I market to up more can having do if available, it. but Brexit a contrast we that you're you how minds? the vehicles it And think U.K. next on year headwinds consumers' – the in

Earl Julius Hesterberg

environment that is the it's and of like Yeah. supply to And in going matter, underway correction that's Brazil, political market The probably determining next the kind it the the is overall happen. of size factor the to in year. well critical

Brexit So, be reasonable in inventory as and on are they being EU exported that out. will course, there. It's to hard a other, vehicles, lot out big the UK need sorted order Audi, very won't issue some for enable manner vehicles economically. of the that many the Germany. not be in in The UK twice BMW export and there. each number coming of three, and, the have imagine auto Japanese UK, will into Mercedes, It's four factories the and they the to life on go necessarily vehicles, there's as five brands JLR German, are manufacturers that Both the and market

that unlikely themselves the of to parties it's the are economically two So, damage going at end day. the

exactly whatever I never because the happen, auto has done will before, help believe does but it in clarity should market. should an is, this don't occur, will be know it I consumer uptick confidence, which get sorted So, when And been out. what we think there

David Tamberrino

model? have end vehicle subscription product I quarter, margins programs. and you how so that even – your do really far? afterwards, lastly, dealer And partnerships of working then adding what the announced the type to And you Understood. towards think the business offerings see that some you How that maybe improve does in of

Daryl A. Kenningham

material don't I anybody. to realistically think it's financially Well,

adapt were want were trying to we're experiences. learn, so, eager occurs they learn and We by it all from in to to significant learn, as market. see get participate. these to experience in to term. the change We near Audi think we this because to want asked as just but don't We're I we any trying profit the opportunity to do

David Tamberrino

maybe was understand could your or were does model be but play, will, buyer of what P&S trade-in, profit new move U.S. you percentage and Yeah. financing tell, take see become the contract play triple a I for getting from I a away And vehicle, F&I? the quadruple business a to significant or if the where generation early serious to the of a that that, to it from that type or sale you're it's towards and if too mean but the you

Daryl A. Kenningham

needs I that'll on I that long don't that as to our with the customers assumption be the think and but retailer. everyone, underlying comment serve OEM that, to the we a enough work for know is business as needs, continue their really to transportation model

we're so, our to the by customer. We're maintain maintain business being to that's distribution value to best the And to for model. have our value trying we trying continuing good OEM the good a partners. have to odds And

David Tamberrino

questions. Thanks Okay. for taking the

Operator

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

David Whiston

tactics Thanks. Good aggressive any morning. discounting your war, you're in competitors what price Can Japan, from you seeing franchise are seeing of in U.S. like the terms talk about in you actual three stores?

Daryl A. Kenningham

appears less that's a rate Because are row cash you're year support the than just are seen would the the seeing trucks structure of changing. incentives interest APR fairly truck incentives truck, to – are in a I than me, And Daryl then and it to second OEMs that for Kenningham and incentives. statement. more a they've more support. and in truck/SUV. managing cars significantly through we're to here. sales That's heavier market. say ago, quarter general balanced, Generally, we're were aggressive we that production car us the through Inventories car seeing been. are aggressive now an The increases, and in of appears we've managing

David Whiston

it hasn't hurt customers' to do are interest going dealers yet, Okay. buy ability a car their agree? most you saying up, is And rate really

Daryl A. Kenningham

of seen haven't yet. think evidence I we we We're enough yet. that enough seen watching haven't evidence it, and obviously,

David Whiston

And... Okay.

Daryl A. Kenningham

want add you that? to to John,

John C. Rickel

average rates if at our waive, sensitivity, little some basis to agree up for points premature Yeah. Rickel. little month yet. Daryl, to to payment. a XXX it'll a to And continue $XX I be point, a I go sensitive start early The – it's think, obviously, John I The say, worth customers able about with it's in but think

David Whiston

guidance guess question, missing Okay. you I that you I – John, tax I do it? apologize gave rate for but last is just And think repeating my mind so this, some missed, I

John C. Rickel

year-to-date quarter. comfortable the Yeah. were kind we're Basically, XX% to for of year. We're for you the full with XX.X% adjusted XX% for modeling we and XX.X%

David Whiston

Thank All you. right.

Operator

Sinkevicius our comes Stanley. Armintas question next from Please from Morgan And go ahead.

Armintas Sinkevicius

and Great. Good from Maybe commentary little spurred remarks for the investment morning. in putting into initiatives. digital could the you Thank you're prepared of talk on you the increased this? today more bit A focus about that the question. amount taking what

Daryl A. Kenningham

We're is investment focus number, to of not it but lot here. a Kenningham us. Daryl prepared for share getting

do to do when to business want that customers business to they how going business do over. business they our Our and and we're customers way. want that I and demonstrate mentioned, want And over as do to

it's the advantage some will deal of savings, driving of we can And seeing customer where service So, sales, but great really that, it. we're cost and take we this. see a certainly

Armintas Sinkevicius

And are the the to homes? vehicle you delivering customers' Okay.

Daryl A. Kenningham

lot offer we offer a of aren't advantage customers that. We but that. Candidly, that, taking of

Armintas Sinkevicius

Okay.

Daryl A. Kenningham

And it's in this us. initiative for early

So, some...

Armintas Sinkevicius

Sure.

Daryl A. Kenningham

...of the learn more things go. as we we will

Armintas Sinkevicius

guess the curious many to question people that vehicles vehicle delivered how want drive? vehicles home, that to that, with like I one your to just sense people extent Yeah. on try it you two, to the some thoughts deliver the there, one experiences? Is any test you have just on or

Daryl A. Kenningham

They don't. used cars, this wanted, lot a in vehicles whole been there's but new a usually decade if misrepresentation don't. think I We've and vehicles particularly of usually they they homes, delivering to Well, customers' area. for and confusion too,

not they're to a vehicle, away You to don't it. far going because new so to far home from that buy go have deliver

us. model think now the they're I more serious online in of advantages zeroed they That's the they into much engagement educated world. much and want very are yeah, time buyers get by the on of the one with So,

I want or suppose OEMs vendors car. new may to of of a lot they this done OEM but two in an pretty many there today's We three, online And conversation, confusion there's investment purchasing, by of most different supporting on test shopper well in for it programs. too. do variety don't ways. that. think zeroed on in viewpoint they investment this a that There's this is pay There it. vendors. are from is model the this the drive is relative I Most of So, IT

can It's we is But in in dollars people is something millions Now, do. to investing which developed call some necessary. where proprietary this what the industry. handling investment many Internet we're being develop software. It's think we our perhaps not of not have I centers, people the all lead

Armintas Sinkevicius

Yeah.

I Okay. sequential the but on coming are markets, as up markets there? – what the the or on and in a Hello? with Hello? oil And some comps oil Harvey, we're basis maybe seeing them regarding know Hurricane tough curious there's of as Houston then, you far middle

Daryl A. Kenningham

muted? we Were

Earl Julius Hesterberg

for Yeah, second. a

Armintas Sinkevicius

Hello?

Daryl A. Kenningham

back. We're Yeah.

Sorry.

Earl Julius Hesterberg

I'm sorry.

Armintas Sinkevicius

worries. No

Daryl A. Kenningham

Did the of you any hear response?

Armintas Sinkevicius

response. I the missed entire

Daryl A. Kenningham

My Okay. apologies.

Armintas Sinkevicius

No worries.

Daryl A. Kenningham

the time, at Houston, to unit higher We I they're the think these comps plus lap just were oil slowly a strength lower into and weak to we the see continues production the In in side recover. forth. little and to do to prices continuing oil Oklahoma, bit finally economy markets there, cost the impact come like of gather on so comps. adjusts world as starting and

in So, I a we're think economies. continuing see energy-related to those recovery

Armintas Sinkevicius

prices, store are gas level the that? side, regards affecting with on whether or like it's or with to mix then, flip you Okay. the anything at purchases, units rising anything seeing that And

Daryl A. Kenningham

No. yet. Not

Armintas Sinkevicius

you. Thank Okay.

Operator

like our any would this management turn I question-and-answer concludes remarks. the session. for over to conference to And back closing

Earl Julius Hesterberg

on updating you. everyone today. fourth to Thanks earnings in February. you our us look We call for quarter to forward Okay. Thank joining

Operator

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

You may disconnect. now