Sonic Automotive Inc Q2 FY2023 Earnings Call

Good morning, and welcome to the Sonic Automotive Second Quarter 2023 Earnings Conference Call. This conference call is being recorded today, Thursday, July 27, 2023. Presentation materials, which accompany management's discussion on the conference call can be accessed at the company's website at ir.sonicautomotive.com. At this time, I would like to refer to the safe harbor statement under the Private Securities and Litigation Reform Act of 1995. During this conference call, management may discuss financial projections, information or expectations about the company's products or market or otherwise make statements about the future. Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission. In addition, management may discuss certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Please refer to the non-GAAP reconciliation tables in the company's current report on Form 8-K filed with the Securities and Exchange Commission earlier today. I would now like to introduce Mr. David Smith, Chief Executive Officer of Sonic Automotive. Mr. Smith, you may begin your conference.

Thank you very much, and good morning, everyone. Welcome to the Sonic Automotive second quarter 2023 earnings call. I'm David Smith, the company's Chairman and CEO. Joining me on the call today are Mr. Jeff Dyke, our President; our CFO, Mr. Heath Byrd; our EchoPark Chief Operating Officer, Mr. Tim Keen; our Chief Digital Retail Officer, Mr. Steve Wittman; and our Vice President of Investor Relations, Mr. Danny Wieland. Earlier this morning, Sonic Automotive reported second quarter financial results, including record quarterly total revenues of $3.7 billion, a 4% increase from last year. Second quarter EPS was $0.65 per share, which accounts for $75 million in charges related to the previously announced plan to indefinitely suspend operations at eight EchoPark retail hubs and 14 delivery and buy centers, along with three Northwest Motorsport stores in the EchoPark segment. This was offset partially by a $21 million gain from the disposal of three franchise dealerships. Excluding these items, adjusted EPS was $1.83 per share, down from $2.45 in the prior year, mainly due to normalizing new vehicle margins and higher interest rates. We are proud of our team's performance in the second quarter and are focused on maximizing profitability in the near term while positioning Sonic to achieve our long-term strategic goals. We appreciate our dedicated teammates, manufacturer and lending partners, and, of course, our customers for their ongoing support. Moving on to second quarter results, the industry saw improvements in new vehicle production and inventory levels, resulting in increased new vehicle sales volume and lower new vehicle gross profit per unit, as expected. We anticipate continued decline in new vehicle GPUs in the second half of 2023 and into 2024, but we believe that the new normal level will remain structurally higher than pre-pandemic levels. In the used vehicle market, wholesale auction prices for three-year-old vehicles dropped 6% in the second quarter, reversing the unexpected increase we saw in the first quarter. In July thus far, wholesale prices for three-year-old vehicles are down nearly 4%, consistent with our expectations for ongoing price normalization later this year, which will ultimately enhance consumer affordability and demand for used vehicles once retail pricing aligns with the wholesale trend. Lower lease turn-ins at our franchise dealerships have limited our used vehicle volume in the second quarter, but we managed to maintain higher used GPUs to somewhat offset the lower volume. We expect further declines in used vehicle prices for the rest of the year. Regarding our franchise dealerships, F&I gross profit per unit improved $156 sequentially from the first quarter to an all-time high of $2,516 per unit. We reaffirm our previously issued guidance for full year 2023 franchise F&I per unit at or above $2,400. Our parts and service business remains strong with another quarter of record fixed gross profit at our franchise dealerships, increasing 9% year-over-year, driven by 11% growth in our customer pay business. We are proud of our team's success in this area and see room for further optimizing our fixed ops business as we continue through 2023. Turning to the EchoPark segment, we provided more details in this morning's press release regarding the suspension of operations at certain EchoPark locations and the closure of three Northwest Motorsport locations. We suspended operations at eight EchoPark retail hubs and 14 related delivery and buy centers, along with three Northwest Motorsport stores, representing 14% of our EchoPark segment unit sales volume, about $74 million in revenues, and incurring a segment loss of $13.2 million. Going forward, we anticipate ongoing quarterly expenses of $2.5 million to $3 million associated with these non-operating locations. The decision to suspend these operations was difficult but essential given current used vehicle market conditions and our near-term outlook. As we develop the EchoPark model, our team has learned to adapt the business to the unique challenges we've faced over the past three years. While delivery and buy centers remain a key opportunity for future EchoPark growth, their success depends on increasing EchoPark brand awareness to drive organic e-commerce traffic to echopark.com and achieve sufficient delivery center sales volume for our return requirements. Given the inventory constraints we currently face, we believe it is not prudent to invest in this level of brand marketing at this time. However, as market conditions improve, we will start rolling out our EchoPark national branding strategy, allowing us to selectively invest in delivery center growth to reach 90% of the U.S. population. We believe that suspending operations at these stores will significantly enhance our near-term financial performance and help us achieve breakeven EchoPark segment adjusted EBITDA by the first quarter of 2024 while maintaining our long-term strategic plan for EchoPark as used market conditions normalize. Regarding our second quarter EchoPark financial results, we reported record revenues of $601 million and gross profit of $27 million, down 44% partly due to the volatility in wholesale auction pricing. EchoPark segment retail unit sales volume for the quarter was approximately 17,100 units, up 4% year-over-year. Second quarter EchoPark segment adjusted EBITDA was a loss of $31.8 million compared to losses of $36.9 million in the first quarter and $27.3 million in the same period last year. We expect continued improvement in adjusted EBITDA losses in the second half of 2023 both from the reduced store footprint and improved profitability at our remaining operating stores, allowing us to allocate inventory and management resources more effectively across our platform. As for our Powersports segment, we started the summer powersports selling season in the second quarter and forecast peak seasonal profitability in the third quarter, particularly during the Sturgis Motorcycle Rally next month. We are also identifying operational synergies with our growing powersports network and remain optimistic about future growth opportunities in this sector. Finally, regarding our balance sheet, we ended the fourth quarter with $864 million in available liquidity, which includes $407 million in cash and floor plan deposits. Additionally, our Board of Directors has approved a quarterly cash dividend of $0.29 per share, payable on October 13, 2023, to all stockholders of record on September 15, 2023. In closing, our team remains focused on short-term execution and adapting to changes in the automotive retail environment and macroeconomic conditions while making strategic decisions to maximize long-term returns. We believe that any industry-driven margin challenges we may encounter in the franchise business will support EchoPark segment revenue growth and profitability, minimizing potential earnings downside to our consolidated Sonic results over time. This concludes our opening remarks, and we look forward to answering your questions. Thank you.

And we'll take our first question from Daniel Imbro from Stephens.

I want to start maybe on the EchoPark kind of restructuring side. I guess, Jeff or Heath, if we look at the portfolio today, how did you arrive at those eight locations? Are there more in maybe a second tier of challenging markets that could close? If the market stayed tougher for longer, and then just a clarifier on the numbers is the implication of your cost commentary that it's like $40-ish million of annual savings or $40 million of accretion towards EBITDA?

Yes, the $40 million figure is accurate. We evaluated all of our stores and identified those that would face challenges in acquiring inventory due to market conditions. We narrowed down from 50 stores to 25, as we believe we can secure enough inventory to meet the sales capabilities of these locations. Historically, before COVID, this group of stores averaged around 500 to 550 units sold per month. Currently, we are struggling to acquire sufficient inventory for the one to five segment to support all our existing stores. Therefore, we chose to focus on those stores for which we can reliably obtain inventory. If market conditions improve, we have the flexibility to increase or decrease the number of stores because we can temporarily close some. If we experience a surge in inventory prices similar to the increase we saw in March, we are prepared to make further adjustments to achieve our goal of being EBITDA positive in the first quarter of 2024.

And this is Heath. I just want to add a couple of points. Your figure of $40 million is accurate on an annual basis. That represents the savings we have. However, the larger advantage, as Jeff mentioned, is that we can sell more units from the 25 remaining locations than from the 50 locations, as we can stock the shelves more effectively. Because of these changes and the challenges in obtaining inventory, we can now manage the inventory mix better at those 25 locations, leading to more units sold at a higher gross of GPUs than we achieved with the 50 locations, if that makes sense.

Yes. Moving forward, if you're modeling this, we expect that in the first quarter, as we reach breakeven EBITDA, we will sell more cars from the 25 remaining locations than we did from the 50 locations in the first and second quarters. Our margin improvement should be around $500 better in the third quarter compared to the second quarter. This is simply because we can acquire enough cars to support higher sales volumes. We're already seeing this in July, where we're nearly doubling our inventory turnover, which is great. We're getting back to the high volume levels we experienced before COVID, which is the foundation of our business model. We can indeed buy enough inventory right now to support the remaining stores, provided the market remains stable. We believe the market will continue to improve, with prices likely to drop and more inventory becoming available as we progress through the year.

That's helpful to understand kind of your assumption. So pricing, just to make sure I understand, if pricing were to move higher in the wholesale side, that would get more challenging, and that would necessitate potentially further actions on the storefront.

That's correct. Yes. We don't anticipate that, though. That's just not in the cards, the manufacturer producing more cars, new car inventory across the board from everybody's announcements is going up from a day supply perspective. No sales in the auction lanes are real high, north of 50% right now, which is a good sign that inventory is building and prices are going to come down. So there's going to be more volume to buy the rental car companies pretty much now are out of the lanes from buying cars, and that's what really caused a big issue in March for us and for the industry. So all indicators are that we're headed certainly in the right direction.

Great. That's helpful. And then maybe last one for me. Heath, if we look at the franchise F&I per unit, it was much stronger. I think you made some changes over the last year; I think you brought on some new financing partners. Can you parse out what the drivers were of the sequentially stronger F&I per unit on the franchise dealer side and maybe the sustainability of that level going forward?

Yes. I mean, look, we're not the number one in the peer group. I think AutoNation's out there, $2,800. We're a little over $2,500. And our warranty penetration is just getting better and better every month. And so we reiterated in David's announcement north of $2,400 a copy, and we're going to hit those numbers. We're doing it now and had an all-time record quarter.

And this is Heath. If you look at our penetration to Jeff's point, our new finance penetration was up 250 basis points. Warranty penetration was up 200 basis points on new and used; warranty penetration was up 50 basis points.

And we'll take our next question from Rajat Gupta from JPMorgan.

I would like some further clarity on EchoPark. You mentioned improving throughput at the remaining stores. If we consider the $32 million loss in the second quarter, or the $20 million loss when adjusting for the reduction in store count, is the expectation that it will move from the $20 million loss to breaking even? You stated that the gross profit per unit would improve by $500. Is the rest of the improvement anticipated to come from volume growth moving forward? Is the assumption that volumes will continue to increase sequentially from this point? I'm trying to understand more precisely how we reach that breakeven point.

Yes, this is David. It's interesting to highlight that our capacity to grow our volume has changed. Previously, we had an average of 550 cars sold per store, and now we are less than 300 units per store. We have the capability within our team and structure to sell significantly more cars with our current group of stores while also providing the world-class guest experience that EchoPark has been known for over the past nearly 10 years.

Yes. The breakeven point we mentioned last quarter was approximately 9,000 cars. Due to the adjustments we’ve implemented, the current breakeven figure for the segment is now 7,200 cars. We believe we can achieve this by the end of the year. An increase in throughput requires us to hire more staff and technicians. This month, our average experienced sales associate at EchoPark is expected to have a performance range of 27.5% to 28%. Before COVID, we consistently exceeded 30%, and it's starting to recover. There's sufficient inventory to support our remaining stores, and we are confident in our ability to continue growing. We plan to sustain that growth through the third and fourth quarters and reach our breakeven goal for the first quarter of 2024.

Yes. And to sum it up, it's basically those three components. It's the reduction in expenses of the $10 million a quarter plus the increase in volume and the increase in GPU.

And we are seeing that occur in July. Yes.

Got it. Got it. That's helpful. And just on the inventory revaluation charge in the second quarter and the $10 million. Would that just mean that the front-end gross profit in EchoPark, this has a much more favorable base here into the third and fourth quarter? And does that kind of drive our confidence in that $500 GPU increase sequentially as well? Just wanted to make sure like we're thinking about that correctly.

Yes, it's certainly a part of that. But more importantly, it's the 1 to 35-day old car that we're selling, we're turning our inventory so much faster buying cars cheaper. So our margin is significantly better on our fresh inventory. The $10 million really went against our aged inventory and a lot of the inventory that we bought in March that depreciated a lot faster than probably we've ever seen before in history. And so that's where those dollars took care of some of that inventory. But the bigger news is the margin that we're making on our fresh inventory now, that's back to normal for us and actually better than normal for us, which is just fantastic. We're in the $550 to $600 range on fresh inventory, which is well above where we've been even pre-COVID. So that's the exciting news is we know margins improving on our fresh inventory. We're turning our inventory really fast, probably turning our inventory faster than we've ever turned it because we're going to be nearly 2x turned in July. And the faster you turn your inventory, the higher your margins are going to be.

Right, right. That makes sense. One last one on the franchise SG&A to gross. The prior guidance was, I believe, like mid-60s. I'm just curious if you're reiterating that and maybe like any updated thoughts on how you expect new and used car GPUs to trend in the second half?

Yes. We reiterate that we believe that the franchise will be in that mid-60s from an SG&A as a percent of gross and that will equate to a tune of around 65 to 70 for the year.

And margins should be consistent from a used vehicle perspective from what you saw in the second quarter. In new car margins, mid-4,000 range, somewhere in that ballpark between now and the end of the year.

And next, we'll take a question from Bret Jordan from Jefferies.

This is Patrick Buckley on for Bret. Just digging a bit more into the used GPUs. How should we think about what the new normal is there moving forward? Given the rebound in the past couple of quarters, should we think about 1,400 as a new low or more volatility in the longer term there?

I believe that if the market continues to decline, we will be quite comfortable in the 1,400 range. If the market experiences a lot of fluctuations, margins will also vary, which is simply a reaction to depreciation. However, I don't expect the markets to keep dropping. Perhaps we'll see another four or five weeks of declines, but it has to stabilize at some point because we have seen prices drop from $29,000 or $27,000 per car in early June to now below $25,000. That rate of decline cannot sustain itself. If the situation stabilizes, margins should maintain their levels between now and the end of the year, staying around where we are today from a franchise perspective.

And this is David. I think it's important to touch on that our team has been very disciplined in selling through our inventory as that market dropped, right? And so it has put a little pressure on margin. But as it levels out, as Jeff was saying, that margin should improve.

Got it. That's helpful. And then just moving over to the parts and service side. Could you talk a little bit more about where your capacity levels are at? I imagine labor continues to be a constraint there, but curious to hear that compares to your overall physical capacity and how much room left there is to grow?

Yes. Well, every stall, we need more technicians. We're actively building stalls in many of our locations today or we'd have further upside in terms of our year-over-year growth. This is a long runway. We've been really working on our market share as we last quarter from an OpCo perspective in growing our share across all our brands. We've got BMW done now. We've got Honda done now. That will continue throughout the rest of the brands and growing share by specific opcode. And that's given us a great return. We've had just an amazing performance from a fixed ops perspective, another record-breaking quarter, and we expect that to continue to grow. But we need more stalls and we need more techs. There's no question about that.

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

I just wanted to follow up on the EchoPark restructuring from an operating standpoint and maybe from an accounting standpoint. So if we think about these 25 locations or maybe the 22 ex-auto motorsports stuff, should we really think about these as the lights kind of being turned off? And then if market conditions in 12-plus months improve that you might be able to turn these lights back on pretty quickly?

Yes, that's the exact idea.

I'd like to brag on our team here a little bit that our team does an amazing job of hiring and training and getting these stores open. I think that it's actually going to be an easier job as the market improves and because of the experience of our existing leaders at EchoPark to ramp up these stores and get them going again, again, as the market improves.

Yes. The lights are definitely out in the stores that we closed, but it doesn't mean they can't be turned right back on. And that would be the intention if the market improves like we think it's going to do. It's just not going to happen in this calendar year, right? We've got a long way to go to get back down to the $21,000, $22,000 price level if we do, but certainly rapidly improving prices and rapidly improving availability is occurring right now. And we're seeing that in this month or so a lot more cars per rooftop because we can buy and fill the shelves at the remaining stores that we have. But if that more inventory becomes available at the right prices, then absolutely, we have the ability to pull those triggers and levers and open more stores and open them quickly, obviously, because they already exist.

And the key takeaway is that the stores that were closed only represented 14% of the volume.

Yes. No, yes, that's pretty resounding, right, given it's the same number of stores that you're going to keep open, right? I mean, it clearly you chose the right stores, or at least appears to have chosen the right stores. Just a follow-up on the accounting side on this. Why would you keep an ongoing expense for something that's put in discounts? Wouldn't that have been put into the charge? And then sort of the follow-on on the accounting side. When you talk about the inventory write-down, is that write-down for vehicles that are then dispersed to the other locations and then sold at a higher gross so they help you out in the short run? I'm not trying to be wise. I'm just trying to understand the accounting and how this is all flowing.

Yes, John, this is Danny. Two pieces to that. The ongoing expenses are the pieces that we couldn't accrue and recognizing that one-time charge, you've got ongoing maintenance, security, utilities at those leased and owned properties going forward. Other things like the rent and depreciation were contemplated in the $75 million of charges in the second quarter. When you think about the $10 million inventory adjustment, as we noted in the release, about $7.7 million of that’s related to the operating stores. Again, as Jeff noted, just cleaning up some aging with the rate of depreciation that we saw in the second quarter. The remaining $2.3 million, you're exactly right, with the aged inventory as well as then just valuing that to what the retail market value is as we reassign that either to other EchoPark locations or at wholesale.

Okay. Given the inventory write-down in operating stores and another $2.3 million in the discount operation stores, that will help flatter the margins in the short run as we go through the next quarter. Is that correct? I just want to ensure I understand that.

Yes, this is Jeff. It's certainly going to help the aged inventory, and let's call it aged inventory, anything north of 45 days because you bought cars 45 days ago they're down a couple of thousand dollars a car already. So yes, it will shorten there. But the more important thing is what's the margin on the cars that are 1 to 35 days old now that we're seeing in July. And of course, those dollars aren't going to that inventory. And what's happening in that inventory is our margins are significantly higher than the pre-COVID run rates that we had in margins where the stores were making all the money that they were making. So that's the great news. The great news is the margins on the fresh inventory are back in back better than it was pre-COVID. So that's what we hope to see continue to happen between now and the end of the year and why we're so confident in positive EBITDA in the first quarter of '24.

I'm sorry. And just one last one on this. Does this mean that you will not open any new stores until these stores come back on? Or could these stay in disc ops and you say, hey, listen, we just found a new market or newer markets that are just really attractive, and we can add a couple of stores here and there. So we could see EchoPark grow store count even with these kind of stores in disc ops for now?

Yes. I mean some of those stores in discounts could be there forever, right? And we might end up selling and find new markets that are bigger, better; we've got inventory resources there, you name it. It will be a combination of what you said.

And our next question comes from David Whiston from Morningstar.

I had a question on your franchise business. Just looking at the reported versus same-store on the used side, your used GPUs were actually up 14%, but on a same-store basis, they were down 3%. And so you seem to be bucking a pretty strong industry headwind here, which is great to see, but it looks like maybe you're favoring profit over volume on the used side on the franchise side, but also do you have some newly acquired stores not yet in the same-store base that were just outperforming the industry and use to cause that difference?

There is some of that going on, but we are bucking the trend. We're being very conservative. I mean we sold 75 to 80 units per rooftop, and we typically run over 100, but you just can't buy the inventory. There's no off-lease cars coming, so we're really trading for cars and buying cars off the street. And we did take a much more conservative approach than we normally have in terms of holding our GPU and selling a little less volume. We can sell more cars. There's no question, but the margins would really drop if we had to go buy more cars in the auction, and we see that at EchoPark with our lower margins. So yes, that was strategic. And we'll continue to balance that through the rest of this year before we start opening any of our buyers to go back into the auction lanes to buy cars for the franchise stores. We're going to live off of vehicles that we buy off the street and our trade-ins, keep our trade ratios really high, which is running in the 55% to 60% range right now. And we'll live off that until we really get a handle on what's going to happen in this used car market.

And one of the big differences is really just the brand mix of what we've heard last year and what we disclosed this year. So that's also some noise in those new numbers.

And this is David. We mentioned it earlier. I mean it was from all accounts, a historic drop in valuations of used cars in the market. So we think that strategically, it's really smart to keep that inventory tight. And as Jeff said, maybe miss a few retail deals until that market starts to flatten out more consistently and then we can crank up the volume.

Yes. We're seeing prices drop in the wholesale market for the mix that we buy. Two weeks ago, we were buying cars over $26,000. Last week, we bought cars under $25,000. And you have to adjust your retail pricing on your low to account for that. And so we're just being very, very careful. Turning our inventory a lot faster getting our cars through reconditioning quicker in executing our playbooks at a really high level, it's given us more growth. There's no question. And we're seeing that with the EchoPark on the franchise side.

So just a curiosity, do you have any store GMs complaining to you guys, though, that they like to get more volume on the used side?

No, not at all. We buy our inventory. Yes, we buy our inventory and trade for inventory centrally. Our teams are executing their playbooks, and we don't have any of that.

Okay. And just curious on the Tesla Model Y aggressive discounting, how badly is that hurting not on your premium brands, if at all, but also your volume brand stores.

Having a significant number of Teslas in stock at other franchise or pre-owned stores certainly impacted sales, but overall, it's affecting the market for electric vehicles from a new car perspective because competitors are becoming more aggressive with their pricing. The quality of products coming from manufacturers now is exceptional. Whether it's Mercedes, BMW, Audi, Lexus, or Toyota, they are all producing remarkable vehicles. In fact, these products are superior to Tesla's offerings. As prices adjust and inventory levels rise, we can expect to see an increase in electric vehicle sales across the entire category.

Do you think consumers are catching on, though, that is a better product than Tesla because Penske was complaining they’ve some in EQSs?

Yes. I think it's a bit early to comment on that. Let's see how things progress over the next six months as shelves fill up and we introduce some electric vehicles, allowing customers to adjust to driving them and addressing their concerns about range. I believe we have another six months to a year of navigating new challenges with electric vehicles. If manufacturers can set the right pricing and manage their inventory supply, which are two significant factors they need to focus on, I think they can succeed. However, if they plan to offer vehicles priced at $112,000 when conventional vehicles are $20,000 to $30,000 less, they'll face difficulties. Some manufacturers are handling this better than others, but everyone is still learning how to operate in the electric vehicle market, including how to launch products and compete with Tesla. Right now, there's a lot to learn and a long way to go before we can claim any successes in electric vehicles.

Yes. And I think it's worth noting, you mentioned the EQS and that we've got the #1 Mercedes dealership in the country out in California that's in the EQS model. It is regional where it's like that, that part of the country has been faster to adopt that car. And so that store has actually been buying EQSs from other parts of the country and shipping them out there.

And we'll take another question from Rajat Gupta from JPMorgan.

Just wanted to get your capital allocation, buyback, M&A. Obviously, a big focus on conserving cash at EchoPark in the near term. But as you get more comfortable with the line of sight towards profitability and lowered cash in EchoPark. How should we think about the use of excess cash and just reluctant capital allocation?

Yes, this is David. I know Heath has a comment about this. We believe that it's important to focus on our balance sheet and ensure it is as strong as possible. We made a strategic decision not to buy back shares in the second quarter, and we will assess opportunities as they arise. We have a strong balance sheet and a significant amount of cash, allowing us to consider strategic opportunities for acquisitions and share buybacks. However, our current priority is on the operational aspects, particularly with the recent acquisitions and ongoing developments at EchoPark, along with our powersports business and the RFJ dealerships. We need to ensure effective execution of these initiatives. There will be ample opportunities for capital allocation in the future. But Heath, did you want to add anything?

Yes. Now I'll just reiterate, we believe that cash is king when you have uncertainty with economic conditions. So we want to have dry powder for that, number one. Number two, we also have a strategic initiative to bring our debt down. And so we've reduced our debt about $60 million for the year. So that's a big, important part of our capital allocation plan. We're reinvesting in our IT infrastructure and innovation as well as our facilities. So that's a priority. We don't have anything that is pressing or material from an M&A perspective in the near term. We want to be prepared and have capital available to start growing EchoPark again as we start seeing that market normalize. And then again, as always, we will return capital to shareholders, primarily through our dividends and opportunistically do share repurchases.

Okay. There appear to be no further questions at this time. I'd like to turn the floor back over to management for closing remarks.

Thank you all so much for attending the call, and we'll talk to you next quarter. Thank you.

Thank you.

Thanks.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.