Daniel Clara: Good morning, Brett. This is Dan. Yes, we’re still seeing the average delivery distance in Q1 of 2024 was 49 miles. So pretty consistent to what we have seen in Q4 of 23, that was 51. And then just as a reference point, Q3 of 23 was 40 miles. So pretty consistent with what we’re seeing there. From a F&I PBR, we are looking at for the Q1 of 24, we finished around 2190 a car, which is slightly below about 1.3% below sequentially and about 3.7% behind last year. So, we are happy with the numbers. Like I stated in my script earlier today, we’re committed to this omni-channel and we strongly believe that it is going to continue to enhance the guest experience.
Brett Jordan: Right, and I could slip one more in. I guess, what are you seeing on OE lease promotions? Are they ramping up lease focus in the lines where inventory is building or is that pretty stable?
Daniel Clara: We are starting to see, yes, increasing slightly. And obviously it depends by OEM as well. But to answer your question directly, yes, we’re starting to see a slight increase.
Operator: And our next question comes from line at David Whiston with Morningstar. Please proceed.
David Whiston: Thanks, good morning. First, a two-part question on consumers’ willingness to spend unit volume for luxury was down just a little bit. Whereas, as you noted, import is doing quite well still on the volume side. And so, is there any hesitation with luxury customers on spending money in any way? And then also across all of your segments of volume or luxury, is there any hesitation on consumers in terms of not getting a vehicle option they would have a few years ago or not doing TCA or not getting an F&I product attachment they would have earlier?
David Hult: David, it’s a great, this is David, it’s a great question. I would tell you with any new hot luxury vehicle that comes out, regardless of the price point, they sell right away, they’re pre-sold. So I think it’s more of a timing issue. From our perspective, we viewed the first quarter as being stable and we actually thought it was pretty good. There’s still some transitioning within the luxury brands with model mix and timing and you never have enough of the SUVs and you might have a few extra EVs and that’s balancing out as well. But I think it’s pretty healthy there and that luxury customer is pretty resilient. When you get to the import side, and even domestic, and Dan could add more color to this than I can, but you’re reaching a price point with those interest rates where they are.
It’s affecting the F&I numbers a little bit, it’s affecting the cost of sale. You’ve seen it come down. I think our cost of sale on used, it was back in ’22 at a high of like 32.5. So it’s down dramatically and continuing to come down, but on the new side it’s only coming down slightly because the build probably hasn’t caught up yet. So there is a little bit of pressure, but still again on the import side, if there’s a new product coming out, like anything else, the demand is higher than supply and the margins are holding up well. So the market we feel has been pretty resilient. We don’t think that we can sustain another rate increase or two. I think that’d be a little painful for us. But so far I would say generally speaking, the customer base has been fairly resilient.
Dan, does anyone have?
Daniel Clara: I agree, I have nothing to add.
David Whiston: Okay, thank you. With on the balance sheet and capital allocation, there’s buybacks and M&A, but there’s also possibly debt reduction with earnings normalizing. Do you feel the need to accelerate debt reduction at some point this year?
David Hult: No, I mean, our stated range is kind of two and a half to three. If we don’t find anything good returns and we, debt buyout would be good, but there’s a share buybacks acquisitions are good allocations, but we don’t need to get it down kind of into the below two, five, but we’d like to be in this mid to range with the EBITDA coming down or the gross profit coming down the new vehicle side. And I would say with the stacks we have out there with the bonds, you can only chip away at so much of it. And the big stack that’s in ’26 is really mortgages that considering the rates in the market, significantly lower than what the market rates are. So it’s really tough to justify taking that capital and paying off 3% debt.
David Whiston: Okay, and you mentioned you probably can’t handle rates going up much, but if we were to actually get even one rate cut, is that going to matter in your opinion this year? Do we need multiple rate cuts for the consumer to feel better?
David Hult: Yes, this is just an opinion, obviously no way of knowing, but I don’t think one rate cut is going to, you know, it’s a nice spark and it’ll probably do well for the market for the day or so. But from our standpoint, it probably needs two or three rate cuts for us to really what I would call a tailwind for us.
Operator: Thank you. Ladies and gentlemen, this concludes the question and answer session. I’d like to turn the call back to David Hult for closing remarks.
David Hult: Thank you, operator. This concludes our call today. We appreciate everyone’s participation and we’re looking forward to speaking with all of you at the end of the second quarter. Have a great day.
Operator: This concludes today’s conference. You may now disconnect your lines at this time. Enjoy the rest of your day.
