Greetings. Welcome to Asbury Automotive Group's Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen only mode [Operator Instructions]. Please note that this conference is being recorded. At this time, I'll turn the conference over to Karen Reid, Vice President and Corporate Treasurer. Ms. Reid, you may now begin.

Thanks, Rob, and good morning, everyone. As noted, today's call is being recorded and will be available for replay later this afternoon. Welcome to Asbury Automotive Group’s fourth quarter 2022 earnings call. The press release detailing Asbury's fourth quarter results was issued earlier this morning and is posted on our Web site at investors.asburyauto.com. Participating with me today are David Hult, our President and Chief Executive Officer; Dan Clara, our Senior Vice President of Operations; and Michael Welch, our Senior Vice President and Chief Financial Officer. At the conclusion of our prepared remarks, we will open the call up for questions and will be available later for any follow-up questions. Before we begin, we must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature, which may include financial projections, forecasts and current expectations, each of which are subject to significant uncertainties. For information regarding certain of the risks that may cause actual results to differ materially from these statements, please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2021, any subsequently filed quarterly reports on Form 10-Q and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures, as defined under SEC rules, may be discussed on this call. As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our Web site. We've also posted an updated investor presentation on our Web site investors.asburyauto.com highlighting our fourth quarter and full year 2022 results. It is now my pleasure to hand the call over to our CEO, David Hult. David?

Thank you, Karen, and good morning, everyone. Welcome to our fourth quarter and full year 2022 earnings call. 2022 was a record year for Asbury. We generated $15.4 billion in revenue, up $5.6 billion from 2021. Our adjusted EBITDA for the year was $1.3 billion, an increase of over $500 million and we expanded adjusted earnings per share by 38% to $37.66. We sold over 300,000 vehicles in 2022 and hit a milestone in number of cars we serviced at over 3 million. All of this is a result of our long term trajectory to manage effectively through our growth even at a much larger size. Looking back to 2017, we were a company with $6.5 billion in revenue. We have grown responsibly to over $15 billion in 2022. We have refined and maintained our operational discipline throughout this period going from an adjusted SG&A to gross profit profile of 69.1% in 2017 to 56.8% for 2022. Through continuously enhancing our execution and optimizing our portfolio, we have been accretive and efficient while more than doubling the size and power of the company. Turning now to our results in the fourth quarter. We grew adjusted EBITDA by $71 million to $319 million, an increase of 29%; expanded adjusted EPS from $7.46 to $9.12, an increase of 22%; delivered an 8.2% adjusted operating margin; increased revenue by $1.1 billion to $3.7 billion; and grew gross profit by $196 million to $738 million. Our gross profit margin was 19.9% and our adjusted SG&A as a percentage of gross profit was 56.7%. For the full year 2022, we generated $987 million of adjusted operating cash flow, an increase of $355 million over last year, which speaks to our robust business model. At the end of December, we had $1.5 billion in liquidity. Even…

Thank you, David, and good morning, everyone. I would also like to extend my thanks to all our team members for their extraordinary results in 2022 and their commitment to consistently delivering an exceptional guest experience. My remarks will pertain to the same store performance unless stated otherwise. Starting with new vehicles. Our new vehicle inventory ended the quarter at $254 million, which represents a 20 day supply. Our day supply fluctuated by segment with domestic being at 30 days, import at 13 days and luxury at 21 days. Even if missed continued supply constraints, our new vehicle volume was flat year over year while we grew new vehicle revenue by 3%. New average gross profit per vehicle decreased $704 from the per year quarter. For the full year 2022, we increased new vehicle gross profit by 7% year over year. On a PBR basis, it increased by $1,348 or 30% to $5,815 for the full year. Turning to used vehicles. Used retail revenue was down 5% from the per year quarter as the expected choppiness to the market persisted. Used retail gross profit per vehicle was $1,842 for the quarter, a decrease of $840 from the per year quarter. Our used vehicle inventory ended the quarter at $202 million, which represents a 26 day supply. Our used to new ratio for the quarter was 101%, down from 108% from the prior year quarter. Shifting to F&I. We delivered another strong quarter with an F&I PBR of $2,233, an increase of $241 compared to the prior year quarter. In the fourth quarter, our total front end yield per vehicle decreased on a year over year basis by $474 per vehicle to $5,984. Moving to parts and service. Our parts and service revenue increased 12% in the quarter. Customer pay revenue…

Thank you, Dan. To our investors, analysts, team members and other participants on the call, good morning. I would like to provide some financial highlights for our company. For additional details on our financial performance for the quarter, please see our financial supplement and our press release today and our investor presentation on our Web site. Overall compared to the fourth quarter of last year, adjusted net income increased 24% to $202 million and adjusted EPS increased 22% to $9.12. Adjusted net income for the fourth quarter 2022 excludes expenses of $2.7 million related to a significant acquisition that did not materialize and gains on dealership divestitures net of $202.7 million, primarily related to the North Carolina stores, all of which netted to $6.83 per diluted share. For reference, we received $322 million in cash proceeds for the sale of these divested stores. Adjusted net income for the fourth quarter 2021 excludes acquisition expenses and acquisition financing expenses of $28.9 million or $1.02 per diluted share. Our effective tax rate for the full year was 24.4% versus 23.7% in 2021. We anticipate our 2023 tax expense to be approximately 24.5%. For 2022, we generate adjusted operating cash flow of $987 million. Excluding real estate purchases, we spend approximately $95 million on capital expenditures for the full year. We expect this to be approximately $200 million for the full year 2023 as we continued to plan CapEx related to our 2021 acquisitions. Of this $200 million, about $20 million is related to replacement of lease properties. For the quarter, TCA made $28 million of pre-taxed income, which included $4 million of net investment income. TCA generated $80 million of pre-tax income for the year. We anticipate a full rollout of TCA products to our remaining stores by the end of 2023.…

Thank you, Michael. As we look to 2023, we believe we are well positioned in a market where the average age of the car is over 12 years old and day supply begins to build. Also, our fixed operations continues to be strong we anticipate this will continue for 2023. We are planning our business for a SAR in the mid $14 million range. We believe with our disciplined cost management and agile expense structure heading into 2023, we can adapt to changing conditions, including one with a recovering if uneven day supply for the industry. Finally, our robust cash flow and balance sheet enables us to have both the flexibility and strength for us to be opportunistic when it comes to well our well diversified revenue streams and when it comes to acquisitions and buybacks. This concludes our prepared remarks. We'll now turn the call over to the operator and take your question. Operator?

[Operator Instructions] And our first question is from the line of Daniel Imbro with Stephens.

David, I want to start on the new vehicle side of the industry. Obviously, earlier this week, large OEMs started reporting, talking about carrying 20, 30 days lower inventory than historical levels. Your inventory is slowly building up to the mid 20s. I guess could you update us on how your conversations are going with the OEM partners? And how do you think about the trajectory of inventory? Maybe shed light on how you think that evolves through ‘23 and maybe into next year, that'd be great.

I'll start with the fourth quarter. Our volume numbers are a little deceiving, because while the day supply was where it was in the quarter, our largest volume luxury and import stores had single digit day supply, so that really governed our ability to grow what was there. As we walk into 2023, we're still -- have over 35% of our inventory coming in pre-sold, so it's still a robust pipeline. I think it's going to be a different year for all manufacturers. I think some are going to come back a lot sooner with day supply, and some it'll take them most of the year to catch up to it. So I think it depends upon which brand you're talking about. And amongst our peers and ourselves, it's going to really come down to the mix of brands that we have. So we anticipate a quick recovery in the first half of the year with Stellantis, and then another domestic. But it's going to be a slower uptick as it relates to say Toyota and Honda.

And as we think about the GPU implications of that, obviously, I think new GPU is better than most expected this quarter, barely declining sequentially. I mean, what have you learned about the ability to price as inventory improves and how do you think that relationship, that inverse relationship with inventory shake out through the year?

What I'll say the last few years have been difficult to navigate it from a prediction standpoint between COVID and supply chain issues and so on. But I'll tell you, all the conversations the last few quarters have been when does it get back to 19 levels, I just don't see that. ‘19 have a $17 million SAR, we're forecasting less than a $15 million SAR. You can look back over history, when SARs are below $16 million, margins hold up pretty well. We think a lot of the OEMs have learned from their day supply, but that doesn't mean you won't have spikes at certain moments in time. I think they've been real comfortable with not bringing large incentives to the market. If inventory does back up on a day supply, I assume they'll come forward with incentives. And again, because the average age of the car is over 12 years, while we think it's not going to be a gangbuster year, we anticipate margins to hold pretty well. It will certainly vary by OEM depending upon day supply. But as we look at Asbury as a whole, we think it'll be a pretty good year for new car margins for us.

And then last one for me, maybe Michael, jumping over to the balance sheet. You paid down a lot of debt. I think the buyback update was encouraging last week. I wanted to ask just for some color. I mean, you guys were active divesting stores in 4Q. How should we think about capital allocation but also just the portfolio going forward? Are we done with divestitures, are you back to being a net acquirer in the market? Any update there on use of capital as we move forward.

I'll start with it and then Michael can jump in. Michael referenced in the script that we had $2.7 million in cost from an acquisition that didn't materialize. I've said it for many quarters. We're very focused on our assets and our portfolio of stores that we have. And we're always trying to maximize our opportunities in acquiring things that are accretive to our platform and divesting of stores that might not necessarily be performing at the highest level. The divestiture of the North Carolina stores was partly due to the anticipation of the new acquisition coming on and making sure we maintained our balance of cash flow and kept our leverage proper. When that didn't materialize, we had already been under contract to sell the North Carolina stores.

It leaves us with a lot of capacity, so $1.5 billion liquidity and a very low leverage ratio. So we have plenty of capacity if acquisitions materialize this year to deploy that capital or if per share buyback. So leaves us in a good place for 2023 for capital deployment.

Our next question comes from the line of John Murphy with Bank of America.

Maybe just to follow-up on the GPU question, David. And I know this is a little bit unfair but also kind of fair because it's important. How do you see new vehicle GPUs progressing as we go through the course of this year and where might they ultimately land? And sort of as a corollary to that, how much of the variable compensation you pay to your sales folks is linked to that dollar gross, meaning there's kind of a natural reduction in SG&A as that gross comes down over time?

So John, it's complicated, right? I mean, every year no one's predicted the year coming. Well, there's been a lot of unique things going on. But what I'll tell you, in the fourth quarter, one of our domestic brands, the day supply, I would say, got back to close to normal levels. And the gross margins with that brand were significantly higher than what they were in 2019. So we have confidence that our margins will be significantly higher in ‘23 than they were in ‘19. But certainly, you can tell it's fallen off from prior year results. So we think it'll be healthy. We think it'll be well above ‘19. But it's really going to be a story of how each particular brand comes back and when they come back. But because of a SAR below $15 million and all the things I've stated, we think it's going to be a pretty good year for new car margins.

And John, on the SG&A side. You're right, a lot of the commission, a lot of the pay in the stores is tied to the gross profit is generated, and so there's a natural kind of fall off in the SG&A to match up with that fall off in any gross profit decline.

The other thing I'll add, John and you're talking about new but I'll bring up used as well. It cost us X number of dollars to do a transaction. So to chase volume with lower growth really deteriorates or hurts your SG&A. So we're very thoughtful about not necessarily chasing volume but really looking at each one of these cars as an asset and trying to get a fair return for it while not letting aging catch up to us.

And then on Clicklane, I think you said two things that were kind of sort of opposite. You said, I think that 92% of the customers of transactions were new to Asbury, but then you said vehicles were delivered within 18 miles, which could indicate they're already in your market. So I'm just curious where the Clicklane customers are coming from. Was that statement, correct, maybe I misheard something there, the 92% were incremental. And if they're within 18 miles, it sounds like they're just coming from another brand as opposed to another dealer maybe. I'm just trying to understand where these folks are coming from, because it sounds like you're going to have a good bump up here in potentially incremental revenue from Clicklane?

So John, I'll do my best to answer that. If you need a follow up, please take it. That 92% incremental means these are local customers that were doing business with other dealer groups that chose to leave the brand or the dealer that they were doing business with to come over to us. We believe they made that decision, because of the ease and transparency of being able to transact online instead of sitting in a showroom. At some point over the years that number will fall off a little bit as the market catches up with transactional tools. But that 90 -- we love the fact that it's local. We don't want to sell a car 500 miles away, we will on certain occasions. But the parts and service business, the retention, the relationship is really what we're into. So we focus on really a 50 mile radius around our rooftops and we try and do our Clicklane transactions within that space. So 92% new customers to us, meaning they were doing business with other local competitors that we compete against in that market.

So just a follow up then. I mean, you're saying $1.1 billion to $2.5 billion on Clicklane year-over-year for ‘22 to ‘23, right? So $1.4 billion in incremental, just shy of 10% and that's about 9% incremental coming from Clicklane alone. Do you expect that to remain that incremental in ‘23? Because I mean that's almost like that's a 9% increase in your base revenue for 2022. It's a kind of a big statement.

Some of it's timing. We added LHM and Stevenson in the fourth quarter. We didn't have them in the Clicklane numbers most of the year. We've been on Clicklane software for a couple years. Anytime a store or a market goes on Clicklane, it takes them a full year to get the conversion rate up right. So you're catching up to the conversion for the stores you added. We're assuming SARs going to increase a little bit. We're going to have a higher day supply of new at some points during the year, which is going to increase the sales as well. And as we're experiencing with the tool and then our sales incrementally going up, it's just logic based. If you could spend 15 minutes purchasing the car very transparently from your living room, would you rather do that than spending two and a half hours in a showroom. So the additional $1.4 billion, if you will, is the full company being on it for a full year. The legacy store is improving slightly on conversion and the other new acquisition stores increasing their conversion rates throughout the year.

I appreciate you being humble, but it is $1.4 billion incremental, and it is a question of timing. But I mean, it is incremental, so it's pretty impressive performance. Just lastly, on the net leverage, I think you guys you said you were at 1.7 times at the end of ‘22. You've been at 2.7 times at the end of ‘21. How should we think about where you want to target that and where that could go to if there was another large deal that came available to you?

So we're comfortable, at three times if, if we had the right deal out there, but something that kind of 2.5 times is probably our ideal place in this margin environment.

And I would say, John, we we're not aggressively trying to acquire things. 80% of the things that are put in front of us we don't even look at. We are really very disciplined upon looking at acquisitions that are accretive for us. So we're not going to feel the force of having to acquire things to hit a certain target, it's more important that we add value assets to the portfolio that certainly benefit our shareholders.

Our next questions come from the line of Ryan Sigdahl with Graig-Hallum Capital.

I want to focus in on used vehicles, so pricing seems to be somewhat stabilizing here in January. One, do you think that's sustainable and then two, what do you think kind of trends are as you look out over the next several months this year?

We are seeing the use car valuation and pricing stabilizing. We also go to keep in mind we are approaching our selling season for a lack of a better term, and also what comes with the tax credit. So we feel that the big valuations that we saw Q3 into Q4 will definitely stabilize. And now there's still going to be pressure from an availability standpoint. But we believe that the market has stabilized in some capacity, but still some depreciation still coming along.

And then for my follow-up, just curious on interest rates, if that's having any impact either favorable or not on attach rates in for the financing?

We have not seen a major impact. Obviously, there is always concern when you look at the average payment to own a car across the nation. And when you try to add whether it is whatever you want to protect the asset with from an F&I product, it does put pressure on a monthly payment. But we have not seen any negative impact that is of concern at the store level. One of the things that I mentioned on the call was we have our loan marketplace. We not only deal with our captive lenders but we also deal with local lenders, institutions and credit unions. So that gives us flexibility to be able to provide the best rate out there for our consumer.

Our next question is from the line of Adam Jonas with Morgan Stanley.

This is Daniela Haigian on for Adam Jonas. So Tesla came out with a 20% or so price cut, and while that doesn't necessarily compete with all the name plates you're selling, in some of the stores you might have some comparable products. So we're curious to see whether you saw any real time impact on prices, demand or showroom traffic whatsoever after those cuts?

The first thing when we saw that announcement was take a real quick assessment of what kind of inventory do we have from a Tesla standpoint across the stores. The good news it was below 60. And in most cases they were fresh rates, we were able to adjust. We did adjust the pricing of the cars to make sure that it was brought down to the current market condition, and paying a close emphasis on retailing those cars. As far as impact on EVs that we sell, respectfully, I believe that that just speaks to the strength of the franchise system and the integrity that we have within the system selling EVs, and being a good distributor for the end consumer.

We haven't seen any material impact on EVs sales with any of our brands, because of the repricing of Tesla. Not to say it won't come at some point in time, but we also anticipate incentives to come out throughout the year as well.

The next question is from the line of Rajat Gupta with JPMorgan.

So just want to follow up on the SG&A comments. I understand there was some seasonality from 3Q to 4Q typically, but looks like expenses were down $20 million quarter-over-quarter on a $30 million gross profit decline quarter-over-quarter. Is this kind of a general rule of thumb to think about when looking into 2023 and as GPUs moderate, particularly on the new vehicle side? Just trying to understand like how should we think about that drop through and based on whatever assumptions we make on GPU? And I have a follow up.

I would say, we have a history of being very disciplined and cost efficient. We've been working for years at our legacy stores at productivity per employee and really getting our transactional cost down for sale. All of our new acquisitions naturally aren't at the same level that we are from an efficiency standpoint. So we look to work in ‘23 to really get all those efficiencies that we have in the legacy stores, which we believe is a potential slight tailwind for us.

And maybe on parts and services, strong growth again here in the fourth quarter. Curious how we should think about the puts for 2023? What is likely to be the key limit to growth, is it still technician hiring? And also pricing has been a key contributor to growth last couple years. And with product supply improving and maybe some cooling and inflation, how should we think about or how are you planning in terms of growth for that particular business segment this year?

I assume, most like us, we never have enough techs and we can always use more. I think what you're seeing with the dollars increasing has more to do with the aging of the car. As the cars age, they need more work and certainly parts costs go up every year. So as we look at ‘23 from a growth standpoint, at least at this point, we don’t think it's going to look very similar to what our results were in ‘22 as far as growth. We don't see it slowing down or leveling off. People are holding onto their cars longer. And if the jobless rate increases over time that will certainly have an impact on parts and service, but we believe that'll be a positive impact.

Maybe just one last one. You reiterated the $55 EPS plan, we're still in a somewhat weak used car demand backdrop. You mentioned $14.5 million SAR, it seems like getting to 55 from $38, still 50% EPS growth, it would need a pretty sharp recovery in the industry, both new and used. So outside of Clicklane, what else gives you confidence in this current backdrop where prices are still high, rates are high due to supply for used cars like to get tighter in the medium term. What gives you confidence in those targets? And is it reasonable to assume that you see an earning decline this year before moving higher again, or you don't see that happening to that path to $55?

If I miss a piece, please come back. We think that 90% of the market are stores that are opportunities for acquisition, that it's really only 10% of the market that's owned by large groups like ourselves. So there's plenty of potential for acquisitions. We also think naturally over time in the next few years, the SAR will continue to grow. So between the combination of the SAR growth over the next few years, the opportunity with acquisitions, the efficiencies with Clicklane and our ability to lower SG&A over time, I wouldn't say so much in ‘23, but over time with the use of software and tools to become even more efficient, we think all those things still give us the potential and the opportunity to get there. Fast forward out, if acquisitions aren't great the next few years and SAR doesn't recover, your point is valid. We just don't -- we think it's too early to make that call and we still see the next three years growing SAR, and our opportunity to acquire more stores and get better with our software.

But maybe just on 2023, your comments on parts and services, consistent growth, $14.5 million SAR and still relatively strong GPUs. Is it safe to assume that earnings might not decline this year with that kind of backdop?

You know, it's a fair question. You have the interest rates, you have your floor plan costs, you have different things that'll come up on you naturally. Your healthcare costs go up every single year, so your cost per employees go up as well. And as I sit here today, I don't have a guaranteed timeline for ‘23 how each manufacturer is going to recover with day's supply. As we sit here today, we truly believe that the new car margins will hold up well throughout the year, but that could be altered. I mean, it's been an odd last three years. On the used car side, you've seen margin fall pretty good, but we don't think it's going back to ‘19 levels, because you still have a supply issue in the marketplace where it's been depleted the last few years. So while we think it may not potentially be quite as strong as it was prior year, as we sit here today, we don't think it'll be far off of 2022.

Our next question is from the line of Bret Jordan with Jefferies.

On the parts and service, could you talk about traffic versus ticket in the quarter, sort of what was price versus volumes?

Part of it was price, but we also saw an increase in our customer pay, RO count throughout the quarter. When you look at, just break it down by the different segments, every segment saw an increase, and domestic was relatively flat, maybe down 2% from an RO count. So we're seeing the traffic coming into the stores and we keep our schedulers, online appointment schedulers, wide open for a lack of a better term so that we can service the customers when it benefits them and not when it benefits us. And we're seeing the results out of that.

And Bret, one thing I would point out, because we're a relatively small company a year and a half ago, we simply -- we almost doubled the number of rooftops we have in a year. And we spent years working on the legacy stores to really get up to production and efficiency within our shops. We now have that same opportunity with all those acquisitions. So we think we got a nice tailwind over the next couple years working with our great teams up those markets at becoming more efficient and growing that business.

And then on SAR your forecast of mid 14s. Is that more production constrained or demand constrained? I guess, when you think about the puts and takes, is it -- what is the normal -- with natural SAR be higher if vehicles were available, or do you just sort of see a smaller group of buyers able to afford in this environment?

Yes, it's the question to ask and it's a tough one to answer. I made the comment, over 35% of our incoming product is pre-sold. You go back to ‘19 levels, you were nowhere near that number from a pre-sale standpoint. So still selling -- pre-selling 35% plus of your inventory before it hits the ground tells you that demand is still pretty good. I don't want to be a broken record, but again, that average age of the vehicle being over 12 years creates an opportunity, and you have a resilient job market. And with that average age of the car and them not being able to purchase cars the last couple years because of availability, we think that there's an opportunity to continue that steady growth. We don't think we get back to the $17 million SAR, because production won't be there. There's still supply constraint issues that are out there and you still have a lot of OEMs converting R&D and working on a lot of launches of EV vehicles over the next 12 to 18 months. So I think it's a combination of a lot of things. Certainly, the economy could shift and change where demand drops dramatically. We're just not seeing that at this point.

And then one quick question on leasing something that obviously has not been a hot topic in the last couple years, but as affordability from an outright purchase standpoint gets to be more challenging. Do you think there's likelihood the OEs sort of step in and facilitate more leasing to drive volumes, or is that just not a topic lately?

Yes, selfishly, I certainly hope so. That leasing business is important to us because we retain the customers in the brand. And it's important to the OEMs, because they retained them within their brand as well. There hasn't been that incentive in leasing, because the product hasn't been out there and it hasn't been available and it's been a way for the manufacturer to retain the earnings, which was great. We think over time leasing has to get feathered back into it. When is it happened by what brand, it's really going to depend upon availability. But naturally, your luxury segment would be the first to benefit from leasing returning.

Our final question is from the line of David Whiston with Morningstar.

Going back to -- David, you had talked about wanting to get the most out of every vehicle. But just looking at the new vehicle category, the three new vehicle categories, looking at imports, it looked like more of the opposite happened there in that only import had unit growth, but GPU, percentage wise, fell the most. And just given the tight Toyota, Honda inventory, I was a little surprised by that you’re not going as high in pricing there, because you want to preserve some import volume?

I wouldn't say it plays out that way. You have a lot of brands within the segment. The brands with the single day supply had extremely high margins, so we don't think that was a major issue. I get your point as far as the gross profit falling off. But we still think for import that's $3,800 or in that vicinity is a very strong number on imports. So again, it's going to be a competitive market. I don't see Toyota and Honda having a high day supply this year, so that will equate to higher margins. But there maybe some other brands within that import segment that have a higher day supply. But again, as you can see, to your point with the falling margin like that, we're still generating over 8% operating margin and we still have a very efficient and healthy SG&A percent.

And with Toyota and Honda, their inventory has been an issue for a long time now industry wide. I mean, how much communication are they giving you and is it purely chip shortage, is it chip plus still some COVID absenteeism? I mean, what do you think driving it mostly?

Look, it's frustrating to us, it's frustrating to our consumers, it's quite honestly frustrating for them. We're fortunate to represent these brands. They communicate really well with us as best they can. And it's typically in 30 day increment as to what we'll see and then there's conversation and talk about what potentially we could see in the first half of the year. Sometimes they hit those [targets], sometimes they don't, unique things come up with supply chain issues. A lot of these parts come from all over the world and depending upon what's going on, it could have a negative impact at a moment in time.

And I know you said demand still strong. But just curious how worried are you, maybe back end of the year, high interest rates become an issue at that point?

I can only answer it this way. If the Fed raises one or two more times at 25 basis points, we think we'll be just fine. I think something catastrophic would have to happen in the marketplace for us to alter our belief in what's going on. If there was another war out there or something significantly got worse, if COVID came back to extreme levels like it did when it launched, that would dramatically change things. But as we sit here today with all the things we've already discussed, age of the car park, the job market, we believe it’s -- not that retail, automotive won't be affected like other industries, we think we'll fare better than most throughout the year.

And just one more, if you don't mind on acquisitions, you referred to that deal that fell through as significant in size. And just generally speaking, I know you can't comment on a specific deal. But when you tell us something like we're pursuing a large acquisition or a significant acquisition, should we still assume that it's significantly smaller than Larry Miller's size?

I'll try and navigate this one at the best I can. Most opportunities aren't the size of LHM, they're extremely rare. So you have everything between one rooftop and 60 rooftops. This probably would've been somewhere in the middle of the two. It was a very healthy size acquisition, but not the size of Miller.

Okay, I appreciate it. Thank you.

Okay. This concludes today's discussion. We appreciate your participation and look forward to speaking with you after the first quarter. Have a great day.

This concludes today's conference. Thank you for your participation. You may now disconnect your lines at this time.