Good morning, and welcome to the Sonic Automotive First Quarter 2025 Earnings Conference Call. This conference call is being recorded today, Thursday, April 24, 2025. 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, Chairman and 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 first quarter 2025 earnings call. As he said, I'm David Smith, the company's Chairman and CEO. Joining me on today's call is our President, Jeff Dyke, our CFO, Heath Byrd, and our Vice President of Investor Relations, Mr. Danny Wieland. We would like to open the call by sincerely thanking our amazing teammates for continuing to deliver a world-class guest experience for our customers. We believe our strong relationships with our teammates, our manufacturer and lending partners, and our guests are key to our future success. As always, I would like to thank them all for their support and loyalty to the Sonic Automotive team. Turning now to our first quarter results, GAAP EPS was $2.04 per share, and excluding the effect of certain items as detailed in our press release this morning, Adjusted EPS was $1.48 per share, a 9% increase year over year. First quarter consolidated total revenues were a first quarter record of 8% year over year, while consolidated gross profit grew 6% and consolidated adjusted EBITDA increased 7%. Moving to our franchised dealership segment results. In the first quarter, we generated first quarter record franchise revenues of $3.1 billion, up 9% year over year. This revenue growth was driven by an 11% increase in new retail volume and a 6% increase in fixed operations revenues. First quarter results benefited from an increase in new vehicle sales in the final days of the quarter, which we expect was the result of customers buying in advance of tariffs that went into effect on April 2. Our fixed operations gross profit and F&I gross profit also set first quarter records, up 7% and 9% year over year, respectively. Same-store new vehicle GPU was $3,089, down sequentially from the fourth quarter due to our luxury brand mix and in line with our guidance given on our last call. On the used vehicle side of the franchise business, same-store used vehicle volume decreased 2% year over year, driven by lower levels of late-model used vehicles and consumer affordability challenges. Same-store used GPU increased sequentially to $1,555 per unit. Our F&I performance continues to be a strength with same-store franchised F&I GPU of $2,442 in the first quarter, up 1% sequentially and 4% year over year. The continued stability in F&I at these levels supports our view that F&I per unit will remain structurally higher than pre-pandemic levels even in a challenging consumer affordability environment. Our parts and service or fixed operations business remained strong with a 7% increase in same-store fixed operations gross profit in the first quarter. Strong growth was driven in part by higher levels of warranty repairs, combined with the effects of the increase in technician headcount we achieved in 2024. Turning now to the EchoPark segment, first quarter segment income was an all-time quarterly record $10.3 million, and adjusted EBITDA was an all-time quarterly record of $15.8 million, up 116% year over year. For the first quarter, we reported EchoPark revenues of $560 million, flat year over year, and all-time record quarterly EchoPark gross profit of $64 million, up 21% from the prior year. EchoPark segment retail unit sales volume for the quarter was 18,800 units, up 5% year over year. On the same market basis, which excludes closed stores, EchoPark revenue was up 3%, gross profit was up 19%, and retail unit sales volume increased 7% year over year. EchoPark segment total gross profit per unit was an all-time quarterly record of $3,411 per unit, up $456 per unit year over year. Rebounding from the temporary GPU pressure we faced in the fourth quarter. We continue to believe that our data-driven centralized inventory management strategy is a key differentiator for EchoPark, which should help to minimize disruptions from market volatility in the short term while maximizing EchoPark's long-term growth potential. When combined with the strategic adjustments we've made to our EchoPark business model, we believe we are well-positioned to resume disciplined long-term growth for EchoPark as used vehicle market conditions sufficiently improve. Turning now to our Power Sports segment. We generated record first quarter revenues of $34.4 million, first quarter gross profit of $8.5 million, and a segment adjusted EBITDA loss of $700,000, which was in line with our expectations for a seasonally light first quarter. We are beginning to see the benefits of our investment in modernizing the PowerSports business, and we remain focused on identifying operational synergies within our current network before deploying capital to expand our PowerSports footprint. Finally, turning to our balance sheet, we ended the quarter with $947 million in available liquidity, including $430 million in combined cash and floor plan deposits on hand. We continue to maintain a disciplined balance sheet approach with the ability to deploy capital to grow strategically as market conditions evolve. Additionally, I'm pleased to report today that our Board of Directors approved a quarterly cash dividend of $0.35 per share payable on July 15, 2025, to all stockholders of record on June 13, 2025. As you can see on page, we have updated or withdrawn certain items in our previous financial guidance for 2025 in light of uncertainty around the effects that the tariffs are expected to have on the automotive industry. We are working closely with our manufacturer partners to understand the tariff impact and our manufacturer production pricing decisions, the resulting impact that tariffs may have on vehicle affordability and consumer demand. Despite these challenges, our team remains focused on near-term execution and adapting to ongoing changes in the automotive retail environment and macroeconomic backdrop while making strategic decisions to maximize long-term returns. Furthermore, we remain confident that we have the right strategy, the right people, and the right culture to continue to grow our business and create long-term value for our stockholders. This concludes our opening remarks, and we look forward to answering any questions you may have. Thank you.

Thank you. We will now be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. Participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions.

Our first question

comes from the line of John Murphy with Bank of America. Please proceed with your question.

Good morning, guys. I just wanted to ask a first question around sort of the obvious on tariffs and just maybe from three specific angles if you could you know, comment as best you know right now. You know, first, you know, what kind of commentary are you getting from your factory partners? Second, as you think about the pull forward in March and early April, you know, what you're seeing outside of your stores, maybe inside of your stores on pricing and GPUs, because it doesn't seem like you've necessarily taken advantage of stuff there yet. But there's certainly stories of other folks. And then third, what kind of an impact do you think the uncertainty has around M&A activity and pricing?

It's Jeff, John. From a manufacturer's perspective, this is a this is the all balls in the air right now. No one really knows. Parts are coming in from out of the country on American-made cars. And so it's for us, it's steady as she goes. We you know, we had a great first quarter. We think we're gonna have a great second quarter. And, you know, we believe based on conversation with the manufacturers over the next ninety days, that things will settle down. You know, is there gonna be a price increase? Maybe, but we don't see it as being a twenty-five percent price increase, and we've had price increases before. And we faced a lot tougher situations than this, and you know, the industry is Teflon from my perspective. We can we'll battle our way through this. And so you know, we just are not watching the news. We're putting our head down. We're going to work. We're very focused on executing our playbooks, our processes, and we think those results showed up in the first quarter. And, you know, we'll see what happens in the coming months ahead. But I'm not and our team is not too concerned that we won't have, you know, solid resolution over the next ninety days or so. And I think the manufacturers will end up participating if the tariffs come along. In some sort of cost-cutting measure to help with MSRP pricing. Maybe the dealers and the consumers have to participate a little bit, not not sure yet. And, hopefully, the government will will come along and get a hold of this. But at the end of the day, it's not some it's not some massive concerns. In terms of M&A, it hasn't really made a huge difference at this point. We've got a lot of discussions going on. Certainly, it's come up. If anything, maybe it's it's we we're buying a little bit of time just to kinda see what happens over the next ninety days before we finalize some transactions, but no big no big changes there from from our perspective. And and John, this is David. I think one thing to mention about pricing, because I I think you alluded to it, is that you know, some dealers out there are, I think, taking advantage of the situation and and and taking advantage of customers and and we're definitely not doing that. We're we're, you know, we have our our the the highest guest satisfaction we ever had, and and we wanna keep it that way. And so we're doing more market pricing not and not gouging our customers. I appreciate the balanced view. Maybe just one one quick second one on on fixed ops.

I know you guys were were a little slow on on headcount hiring, you know, last year. Just curious if there's any update there. And what kind of opportunity you think there is to ramp up that, you know, that hiring process? It really Yeah. I think the same store sales a lot higher.

Yeah. It's Jeff. Look. At the end of the day, since last March, we fired three hundred and forty-five incremental technicians in the organization and that's made a huge difference from us for us in terms of fixed ops. So we'll continue to hire. As we grow through the year. We've got capacity with open stalls and bays for those technicians that we're hiring. And it's been a huge focus for us, as you know, since the end of the first quarter last year when we sort of put our our stake in the ground and changed our culture and our fixed operations departments to focus on bringing in more technicians as a as a part of our culture. And and and driving our growth. And I think the results have proven that in the last four or five quarters. And we've had a number of stores where we're opportunistic we're growing our service. We're building new stalls, adding stalls. So there's definitely opportunity to grow.

Agreed. I'm saying as a quick reminder on that, John, you know, we added about a third of those headcount in the last two months of last year. And so we're still really trying to get those newly hired or newer hired technicians to full productivity. So there's still some runway there. And right now, with the additional warranty and recall activity we're seeing, there's a lot of volume running through the service lanes. As we go forward and get those technicians fully productive, we'll be better to balance better able to balance the customer pay and warranty side of the business. As long as these warranty tailwinds persist. Super helpful. Just one follow-up on that. I mean, if you think about the opportunities, a lot of it volume or because you're in the high class you have the high class problem too much demand, then you might see door rates inch up a bit.

I mean, we're looking at our door rates on a quarterly basis, John. That's something that's been ongoing for forever. Now the demand of volume is there. There's just plenty of volume from perspective, and and we're taking advantage of that.

And there are more techs to be hired. And our culture's taken over. We're not having to push so hard to hire techs the the culture's taken over, and and and our teams are out bringing in techs and it and they they see the results. It's made a big big difference. And again, that's been a year in the making of really changing our store level culture from a fixed operation perspective to get us to where we are. And there as David and Danny said, there's a lot of upside there. Yeah.

Volume and price, right, opportunity?

Yes.

Okay. Just add one point, John. And speaking of tariff impact, you know, services is one of those areas where we can pass that along to the consumer. So that's another opportunity we think if there are tariff issues people are making a buy versus a repair decision that can help that. And we can if we can pass along the tariff increase to the consumer.

Love the whole time. Yeah. The whole team tagging in there. I appreciate all the answers. Thank you, guys.

Yes, sir.

Thank you. Our next question comes from the line of Bret Jordan with Jefferies. Please proceed with your question.

Hey. Good morning, guys. This is Patrick Buckley on for Bret. Thanks for taking our questions. Good morning. Good morning. On the use side, could you talk a bit more about what the GPU trajectory looks like from here? I guess it's Q1 above the 2025 outlook. You know, when should we start modeling in contraction and and and what's driving that?

I mean, it's just sort of an unknown right now based on what's going on with the tariffs. If nothing changes and things are steady as she goes, I mean, margins that you saw in the first quarter should hold through on the franchise side throughout the end of the year. And EchoPark's margins are growing. We're buying a larger percentage of our cars the street. We've moved from twenty percent to twenty-five percent up to thirty to as high as thirty-five percent of the cars now on a weekly basis coming from street purchases. That's making a big difference in our in our front margins. And then really helped out in March of the first quarter and it's carrying over in April. And we expect that to continue.

Great. Thank you. And then I guess you know, on BEVs, have you seen any changes year to date with the current administration and, you know, just a little shake up as far as mandates and, you know, I I guess, what's the current outlook there on on inventory versus demand?

Yes. It's dropping. We have less supply. Yeah. We're I mean, everything positive there. I mean, the the the thing is is that now inventory levels are beginning to get closer to matching what consumer demand is. And that's where it should be.

The demand is is yeah, is lining up with With the inventory levels. Right. And so

we're applauding that. We're having to carry less inventory that doesn't turn as fast. We think the manufacturers are are coming around. And that's the new administration that's supporting that and that's a big big applause from this team.

And you could see in the in the front end GPUs, we had a headwind of around three hundred and fifty and the full year of 2024 is down to two hundred. In Q1. So aligning that inventory to demand is is helping reduce that headwind in EV GPU. And we think, you know, some of our manufacture

manufacturer partners are doing a great job with offering vehicles that where it's really the know, speaking of customer demand, the customer gets to select their drive train. And, you know, that strategy is a is a great strategy. So if they want an electric vehicle, they can choose an electric one or if they want an ICE, they can they can choose that. That that we we like that strategy.

Great. That's all from us. Thanks, guys.

Thank you.

Thank you. Our next question comes from the line of Jeff Licht with Stephens Inc. Proceed with your question. Good morning, gentlemen. Thanks for taking our question. First one is, I wonder if you could break down the warranty work service and parts work a little bit as it relates to warranty customer pay. I know you're getting a little bit, but just you know, what the metrics were in terms of warranty growth and as it relates the comp and customer pay. Yeah. About forty percent warranty growth in the first quarter versus the two percent to three percent customer pay growth. That's not a mix we like at all. An adjustment that we're making. We need to, a lot more focus on getting our CP customers through the lanes. And pushing the warranty work out a little bit. And those are adjustments that you'll see us make in the second quarter. That's that's just too too big of a differentiator in the mix between warranty and customer pay for our liking. And there's a lot of warranty work out there. That can't be helped. But we need to we need to adjust in terms of that mix coming through our lanes.

And we think it's a great a great sign of our that our our team, you may wanna mention that that that already highlighted and noticed that. You know, it wasn't like that was just noticed. This Yeah. The the team towards the end of the first quarter saying, look, this is just not

the mix of revenue coming through the service drive is not the mix we like. We need to start making some adjustments and those adjustments are being made. And we've got the technician headcount now to to handle that and that's growing. So put all that together, and we think we can pivot pretty quickly. In how that mix is coming through the service drive in the second quarter. Is there evidence or do you have ways to track you know, kind of the occurrence of crowding out customer pay because of the warranty? I mean, you do you see yourselves, you know, even inadvertently turning away customer pay jobs in lieu of in favor of warranty. Not intentionally, but it's common sense. I mean, if you got that much warranty coming through, it's easier work, it's higher margin, it's everybody's taking taking the licks at that. And it's just it's not the right way to run the shop. You need to load the shop differently. We know that that there's a lot of warranty hit us all at the same time. And, you know, service provider can take a a warrant to job in. Technician can flip it and and get another one real quick because there's another one standing in line. And so we're not doing the additional service request and the things I think from a playbook perspective that we should do. We gotta slow down and execute at a higher level. It's great to have the warranty work. It certainly played a big role in our in our quarter. From a fixed perspective, but we can do a better job in making sure that we're balancing customer pay and fix the right customer pay and warranty the right way and loading the shop appropriately, and and we're making those changes.

Yeah. And I I would say it's more of, you know, rather than saying turning customers away, it's more scheduling properly.

And just a quick one on EchoPark.

If you and and this is kinda just the you know, hypothetical. If you think about a tariff scenario where let's just say the SAAR does go down you know, pick your number a million, yet it's a million and a half because prices rise. And, obviously, that's gonna come at the franchise dealers. There'll be less trade-ins where franchise dealers tend to get more you know, of their supply through trade-ins. You know, I'm just curious I could see either way how this could affect EchoPark, how Obviously, EchoPark is the whole premise is it's a value proposition. When you think about the puts and takes of all the different dynamics in terms of, you know, less stuff going through the auction lane and and and that and whatnot. Do you do you guys view a tariff scenario as beneficial to EchoPark or would it be a headwind?

Well, we've seen this video before. Right? I mean, we played this out in twenty and twenty-one and twenty-two with COVID, and we're prepared for it. That's why you're seeing us buy a lot more cars off the street. We think we can push that up even higher. Maybe the forty to forty-five percent level. That's just turning knobs. We are really in shape for something like this where I would say that we were not when COVID hit. And so it could have been a headwind if this was 2020. But we don't look at it like that now. We're very prepared and just had an amazing first quarter with EchoPark. We look to have another one in the in the second quarter. April's showing up that way. So you know, in prices at the auctions are already up over a thousand dollars a car from what we're seeing in buying. But margins are continuing to grow. Volume's solid. So I don't see it being a big problem. Also, we're we're you know, if you think about it, we've noticed that in our especially in our mature markets, you know, as you may have heard on our previous call, you know, our EchoPark stores have the number one reputation dot com score in in the industry. So we're seeing where a lot of repeat customers their friends and family coming to EchoPark. And those those people as you've seen, our growth is going up. People are identifying EchoPark and saying, we wanna go there and buy a car and just choosing to go there first, and and we're seeing that in our numbers. So I think the know, our team will adapt, so prices go up. I still think that customers will pay for that amazing guest experience. Not just the sourcing. Obviously, sourcing could go up, but if your demand goes up, and your value proposition goes up even your prices could go up, but your value proposition relative to the alternative could could actually widen. That's what I was trying to get at is is this A hundred percent. We we saw Yeah. We saw that at the end of March, and we're seeing it in April. And And we're still gonna be in marketplace. Even if our price is a thousand dollars higher, everybody else is gonna be a lot higher. Including our own franchise stores. So it's just the difference in the model. And we really have that dialed in in particular, around inventory management, the day supply, how fast we're moving inventory through the system, twenty to twenty-two, twenty-three days supply online. We're turning those cars in twelve days just as fast as they can go. And we don't the inventory is not sitting. And so it it just if you can turn the inventory as fast as it that that that and we have that. We've had great education.

You are right. Able to accept an option that actually

has to change on the hillside. Surrounding, wholesale and retail used car prices in market. Options. Improved anticipate as part of the peak performance we saw in the first quarter of the we were a lot smarter and more nimble than we were even twenty-four, thirty-six months ago. Four hundred and fifteen cars are rooftop in in March. Every store profitable, and and the big EchoPark store is among the most profitable. That we had in the company. And so we we got it dialed in, and now the question is, can we get him in toward to stabilize a little bit? Because once we do that, we can start opening some stores, and we're hopeful that towards the end of the year or the beginning of next year, we can start announcing, hey, we're gonna we're gonna bring a strategy that shows you how we're gonna grow the footprint of EchoPark. And and and this

worth mentioning that, you know, our our new EchoPark store in Houston as we open that store, and I think November. I mean, it it went off the like, you know, we're very efficiently. We have we've got a mature team in there. They did four hundred plus cars, like, in their second month. Yeah. And have and have been profitable since day one. So which is just a great sign. Awesome. Well, thank you very much. You've been best of luck in Q2. Thanks so much. Alright. Thank you. Take care. Bye bye.

Thank you.

Our next question comes from the line of Rajat Gupta with JPMorgan. Please proceed with your question.

Great. Sorry. I have just one more follow-up on EchoPark here. The first quarter results obviously pretty strong here. You know, it looks like you did take up your full year guidance, but maybe you know, it seems a bit conservative in context of how strong the first quarter was. You know, it looks like you you feel good about the EchoPark retail GPU, you know, the and I, you know, maintained your unit guidance. I'm curious, like, why isn't the guidance higher than the range you provided based on the first quarter start?

You know, it looks like you you feel good about the EchoPark retail GPU, you know, the and I, you know, maintained your unit guidance. I'm curious, like, why isn't the guidance higher than the range you provided based on the first quarter start?

Noise. We've taken the guidance up further. Sorry. Yeah. I think, like, there might be some issues with my line, but I'll try again. We we we heard we heard we heard your question. Oh, you did? Okay. Great. Can you hear us? You hear us?

It broke up, like, in the response, but I can I can check the transcript? May maybe it's on my line, but I'm not sure it look like. Others have got it. But if you wanna repeat the answer, that's fine. That's fine. And and and run on SG and A.

That's no problem. We we said you sound like our board of directors yesterday in our board meeting asking the exact same questions. And and, look, the tariffs are are playing a role in our forecast there. We'll get a lot more we can get more aggressive if things play out the way we think they're going to from a tariff perspective. And they turn positive. But we need to be conservative there, Rajat. So we don't get out ahead of ourselves if things do get tighter from a used car pricing perspective. And and so further adjustments as we get into announcing the second quarter if things play out the way we think from a tariff perspective.

Understood. Understood. That's helpful. And then just on the SG and A, you know, one of the things you've noticed, you know, you know, in your print and, you know, some of the peers that have reported we did see a little more deleveraging in the first quarter than maybe at least what you know, I had been expecting and maybe some other investors might have been expecting. You know, some of the peers talked about, like, some weather headwinds in January, February, you know, couple lower selling days. That might have caused that. I I was curious if there's anything you would wanna call out on the SG and A if, you know, that the leverage was in line with your expectations or was it worse or better? And also, like, just have there been any pay plan or commission type adjustments within the workforce that's maybe know, driving the SG and A higher and which could be more sticky. So just just wanting to unpack all of this a little bit, if possible. Yep. That's all I had.

Thanks. I could I could just mention that that in our this is David that from the our kickoff to the year, we had a big focus on SG and A and and expenses and and throughout the company in our annual meeting and and we think that that's, you know, taking effect as you see it in the numbers. But Yeah. I I was just gonna mention there are a few things that our first quarter one times We had some compensation that was just for the first quarter that will be driving that up. But there's nothing that's material. There hasn't been any change to pay plans, it would have caused that. It's really just your first quarter things that we clean up in the first quarter such as payroll taxes or higher, etcetera, but nothing systematic that is gonna be going through the next three quarters into the year.

Understood. That that's helpful clarification. Thanks thanks a lot, and good luck.

And and maybe one final point on that, you know, we we reaffirmed our full year consolidated company SG and A target in the low seventy range. And so there's gonna be some some puts and takes as to what comes from the franchise and what comes from EchoPark as we go through the year. And obviously depending on how the tariff situation plays out on demand and volume, volume is the big driver of sales compensation, the variable compensation piece. But overall, you know, we're still in line with what we anticipated for the year through the first three months. Yeah. And I think this is I think it's interesting to point out that, you know, this quarter, EchoPark's SG and A has percent of growth was lower than the franchise. And that just shows you as the volume and the gross increases you have more money that flows to the bottom line quicker because of the the fixed expense structure that we have at EchoPark.

Got it. Got it. That that makes sense. Thanks for flagging that. Yep. Alright. Great. Again. Good luck.

Thank you. Our next question comes from the line of Daniela Agin with Morgan Stanley. Please proceed with your question.

Hi. Thanks. One more on on EchoPark, and apologies if you you answered earlier. I also had some connection issues, but you mentioned anticipating an increase in used pricing, uplift to demand as a result of tariffs. With new newer used vehicle supply still tight even with the mitigating factors like diversifying your sourcing and off lease incrementally improving the next year or so? Do you see opportunity moving into older use vehicles to meet some affordability concerns as well?

I mean, we did that during COVID, Daniela. This is Jeff. We did it during COVID. It's a small percentage. It's ten to fifteen percent of the overall volume, maybe even less at times. And, sure, we we would flex that way, if we need to. We haven't seen a need to do that yet. And remember, we've reduced the number of stores that we had, so we're down to seventeen EchoPark stores. We can buy enough inventory to support those stores both off the street and trades and through the auction lines. So I'm not too concerned about getting inventory. We'll watch pricing. And adjust the mix accordingly. But if we need to, no question, we can we can increase the percentage of five, six, seven, eight, nine, ten-year-old vehicles It it just adds complexity to the business when you do that. Recon times take longer. There's just a lot of complexities, and we try to stay away from that because complexity is now part of the EchoPark model. But it's certainly something that we have the capability of doing and we did during the COVID years.

Thank you. Our next question comes from the line of Michael Ward with Citi Research. Please proceed with your question.

Michael? And and, Michael, are you there? Your line is Oh, sorry about that.

You am I good? You're good. Yep. Yeah. Sorry about that. One thing we haven't touched on is that if we get these price increases for tariffs, you get a corresponding increase in the residual values of vehicles coming off lease.

Particularly at the at the luxury end, the import luxury end. How fast do those residual values adjust?

I mean, they they will adjust quickly, Michael, but we're still dealing with the lack of lease returns from lack of lease sales in the in the That was my next question. Yeah. Yeah. Pretty much. Line of sight on it? When does that start to turn the other way?

In next year. You'll start to see yeah, an adjustment. But but not not in this calendar year. No way.

So if anything, some of those vehicles coming off lease this year, the lower supply, you'll get a pretty big increase in the residual that should help on the CPO side and offset or trade-ins. But It it can. Yes. It can. Okay. To help Medicaid. Okay. Alright. And then one last thing on EchoPark. You kind of alluded to that the timing of considering reopening some of the the locations. Could be at the end of the year. If you do, it sounds like you're gonna show them traffic is picked up. Certainly, your crossroad line and some of the other things.

If necessary, can that be accelerated, or are you still just gonna wait and see before you turn the keys back on? Yeah. I I can tell you that we are our team we is you know, as Jeff mentioned earlier, you know, we've learned a lot from the pandemic and and how to open stores and when to open stores. And I think you're gonna see that in in the future quarters that if these if our performance continues the way it did in this this quarter, you're going to see us opening some stores and and we found it that we can very efficiently open them, like the one in Stafford, for example, which by the way was that particular location that was Jeff Dyke was a general manager at that location back in the day. First GM, Jeff. And it was great. And Yep. But we got once we acquired that location from the time we did to opening was a very short period of time, and it was off to the races as I mentioned earlier in the call. Within a couple months, we're selling over four hundred cars out of that location. So once we get ramped up and get going, again, you're gonna see we're we're able to do that quickly. And this is Jeff. We've got you know, obviously, properties, facilities that we own that are ready to go, things that we can go pull the trigger on. There needs to be some stability here.

Yeah. Yeah. And Be nice when the

Yeah. God. You know, it's just that we were laughing the other day. It's just that you know, keep throwing it at us. We're Teflon, which we can handle we can handle anything. And so this is tariffs. What the hell? Who cares? We will just Yeah. That's right.

It's it's honestly an important message, I think, for the street and our team. Is to understand, you know, we've got a lot of leather on our skins. We've been through this before. We've seen, you know, a lot of curve balls thrown at us. It'd be nice to have a year to have just straight, let's go sell some cars and service some cars and have some great test experience and build the great technologies.

But we'll deal with it, and we we seem to always find the rose here in the garden. And and we'll do that again with this little with this little gig that we're we're facing. So we'll see. It's gonna be a fun be a fun year. We're gonna sell a lot of cars. EchoPark's gonna do great. But a few bumps in the road, so to speak. And our our, EchoPark chief operating officer, Tim Keane, is not here with us today because his daughter's getting married this weekend, but but we we can tell you that Tim has been on the road looking at potential locations recently that are we're really excited about. So we'll we'll have more on that in the in the future.

Sounds like you planned it out properly back when you made those decisions. So We we did it, Bill. Yeah. They'll give you the flexibility. Thank you.

Thank you.

And as a reminder, if anyone has any Our next question comes from the line of Chris Pierce with Needham and Company. Please proceed with your question.

Hey, good morning, everyone.

Morning, Lev.

Can you just walk me through I I think the question was asked earlier on used vehicle GPU. I I just wanna make sure I understand the assumptions when I look at first quarter recent history, and then the guidance. Is it that because prices might go up, and you still wanna move units, the yourselves in the industry will take a lower or or is there something I'm missing? I just wanna make sure I understand the puts and takes there.

Meaning GPU or margin percentage?

From a from a franchise Dollar GPU.

Yeah. A dollar GPU from a franchise perspective was something crazy happens with the tariffs. We ought to be in the same ballpark that we're in now. I think we're at fifteen hundred and something. That that's kinda we've been operating for years now in the fifteen to fourteen to sixteen hundred range, and I'm, you know, somewhere in that fifteen hundred range, we're gonna we're gonna be from a franchise perspective. I don't see that really changing. And then but I do see EchoPark's front end margin getting better historically. Because of the percentage of cars that we're buying off the street and we're trading for versus the percentage of cars the mix is changing that we're getting from the auction. That's now a seventy thirty mix, a sixty-five thirty-five mix. It was an eighty-twenty mix. And just by definition, if you're buying cars off the street, you're gonna have better margin.

Yeah. And this is see, one thing to add, I think, the disconnect here is one of the big issues is you have seasonality. And so as we go through the year, it's we do them quarters you're gonna have certain quarters that are historically lower. Now the demand of volume is there. There's just plenty of volume from perspective, and and we're taking advantage of that.

And so you're gonna end up, like we said, between that thirteen hundred and fifteen hundred range.

Okay. And then just lastly, one on EchoPark F and I per retail vehicle. I look at the number this quarter and then look at the guidance, I mean, was there some is there seasonality based on type of customer you see in the first quarter that takes a higher percentage of warranty or pay the higher interest rate so you can sell off the loan at a higher amount? I I just wanna understand because it it looks like the per vehicle number comes down.

the rest of the year to get to the guy who's at Echo Park.

Yeah. You know, honestly, we're probably being conservative there. Getting at a really high level from a warranty penetration perspective. We've done some cost work on what we're paying for warranties in managing that better. That's flowing in in other products. Those are flowing to the bottom line. So our F and I performance is just stronger and and I would project it gonna continue to be stronger.

Okay. And just to clarify that, you're saying that you're seeing price advantages from your third party warranty providers? That and that's flowing through? Am I We're seeing like that?

Price advantages from moves that we've made with our third party warranty providers that's flowing through the to the bottom line. Yes.

Again, it's also important to emphasize again that that our our team, our EchoPark team is delivering you know, the the number one guest experience in the industry. So it's it's there's no doubt that that's reflecting in the numbers.

Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to David Smith for closing remarks.

Thank you, everyone. We'll speak with you next quarter. Have a great day. Thank you.

Thank you. And this concludes today's conference. You may disconnect your lines and have we thank you for your participation. Have a great day.