Rajat Gupta: Got it, got it. And just to follow-up on capital allocation, you mentioned earlier on using the floor plan offset as a lever to manage those floor plan expenses. But you did buy back some stock here in the first quarter. Like, how should we think about that decision between buyback versus M&A in the current backdrop and what you’re seeing in your pipeline for deals today?
David Hult: I would, this is Dave Rajat. I would say, our opinion, we’re proud of our business and our operating margins. And we think that our multiple is low. And generally when you look at that, it seems like it’s a better return to potentially look at stock buybacks. In the current market that we’re in, there’s certainly a lot of stores on the market from an M&A standpoint. But I think we really want to be extremely selective. It’s never been about the growth for us and how large we get. It’s really about returns for our shareholders and how well we run our business. So every month, we’re constantly evaluating what’s the best use of capital. But I would say, from an acquisition standpoint, it would have to be something that was accretive for us and really interesting for us at this stage.
And on the floor plan expense side, the increase in inventory over the rest of the year, and then some of the cash will be able to put to the offset account. We think that floor plan expense can use through the rest of the year. Again, increased inventory, and then a little bit of cash going into the offset account.
Operator: And our next question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Please proceed.
Ryan Sigdahl: Hey, good morning, guys. I want to stay on the use side. So you have challenges on the used vehicle supply. That’s fairly obvious across the industry. Your GPU is down sequentially, despite favorable industry seasonality, your peers being up, et cetera. So I guess, curious to dig a little bit deeper on your takeaways, kind of in early metrics, positive and negative from leaning more into volume relative to your internal expectations when you made that strategy pivot?
David Hult: Yes, and I mentioned it earlier. I would say, percentage-wise, we doubled the number of cars we purchased. We make significantly less gross profit on a vehicle that we have to purchase because we’re competing to buy it within the market. When we trade in a vehicle, we’re still north of $2,000 a vehicle, and we think that’s very healthy. Some of the benefits, I’m sure our peers have discussed it in the past, is your parts and service increased business from reconditioning costs, and the F&I income that you pick up as well. But there still has to be a healthy balance, and you really have to make sure you maintain what we would consider a healthy front-end margin on pre-owned. Dan, I don’t know if there’s anything you want to add.
Michael Welch: I’ll just add a little bit more color. And yes, we saw sequentially dropping, I think, from 1666 to 1647, from a PBR standpoint, back to your point. But then from a used car standpoint, I believe we increased it 9% sequentially, quarter over quarter. And that just goes to validate the strategy adjustment that we made, that we announced at the end of Q4 in 2023, that we were going to get more aggressive, go after the volume, because we know back to what David stated, the benefits that it brings to our internal gross profit in parts and service, F&I, and then obviously putting another unit in operation out there that we can service down the road.
Ryan Sigdahl: Helpful. Anything else from a regional standpoint? I know you called out some weather impact, but anything southeast, southwest Texas to call on?
Michael Welch: No, I would say, I mean, for us, it was fairly stable. We saw a little bit of hit for us in full-size trucks from a year over year perspective. But the imports performed extremely well. We have a very low day supply of them, probably could have done better there as well. We had the tough headwind for Stellantis, but the other two domestic brands held up pretty well in the quarter. And luxury is very stable for us. So all in all, based upon the market and what went on in the first quarter, we’re pleased with what the team did from a performance standpoint.
Operator: [Operator instructions] And our next question comes from a line of Brett Jordan with Jeffries. Please proceed.
Brett Jordan: Hey, good morning guys. Morning. New GPUs, I think you talked about 300 a quarter for the next few quarters. Is it reasonable to think then that 3000-ish is what you expect to be the new base level for new GPUs?
David Hult: Yes, Brett, this is David. It’s really tough to navigate. Will it be rate drops throughout the year? How aggressive do the incentives get? It’s the old adage of supply and demand. Right now the demand is high on imports. The day supply is low. So the margins are holding up really well. In the near term, we don’t see that dramatically changing. So we think that holds up pretty well. Even back in 19 and before, our domestic gross profits were always pretty healthy. Because now the amount of domestic stores we’ve added out in the mountain states, we anticipate that will do well and certainly above what 19 did. And luxury is going to be mixed as well, but that’s a pretty resilient market. Our margins are still really high. There may be some fall off there, but we think wherever the fall off is, it’s significantly above where it was in the past, which gives us a good edge into keeping our SG&A down.
Brett Jordan: Okay, and then on ClickLane, you’ve talked in the past about those transactions usually being physically close to the selling dealership. Is that still the case? And I guess, what are you seeing in F&I attachment in those online transactions?
