Good morning. My name is Breka, and I will be your conference operator for today. At this time, I would like to welcome everyone to the AutoNation Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Derek Fiebig, Vice President of Investor Relations. You may begin your conference.

Thank you, Breka, and good morning, everyone. I'd like to welcome you to AutoNation's fourth quarter ‘22 conference call and webcast. Leading our call today will be Mike Manley, our Chief Executive Officer; and Joe Lower, our Chief Financial Officer. Following their remarks, we will open up the call for questions. Before beginning, I’d like to remind you that certain statements and information on this call, including any statements regarding our anticipated financial results and objectives constitute forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks that may cause our actual results or performance to differ materially from such forward-looking statements. Additional discussion of factors that could cause our actual results to differ materially are contained in our press release issued today and in our SEC filings. Certain non-GAAP financial measures as defined under SEC rules will be discussed on this call. Reconciliations are provided in our press release and on our website located at investors.autonation.com With that, I'll turn the call over to Mike.

Yes. Thanks, Eric. Good morning, everyone. Thank you for joining us. 2022 was a great year for AutoNation and full consecutive record quarter. Tremendous results driven by the entire AutoNation team, and I know many of you are on the call. So my personal congratulations to all of you. Joe is going to take us through the result in detail, but I'm going to just touch on some of the headline numbers. Q4 new vehicle retail industry was up 2% with us posting a same-store 4% increase over prior year. New vehicle industry declined by 6%, which in my view was significantly driven by constrained used vehicle inventory, which also was a key driver of our used vehicle sales being down 11% in the quarter. Total revenue up year-over-year in the quarter to $6.7 billion bringing our full-year revenue and a $27 billion, up 4.4%. So notwithstanding the increased availability of new vehicle inventory in a somewhat choppy used vehicle market, both on the retail and wholesale side, our continued disciplined approach to used unit margin can be seen in the quarter, particularly in our used vehicle margins. This combined with another strong performance on our customer financial services team delivered a total variable per unit margin of more than $6,300, which despite being down from peak level a year ago, was essentially flat sequentially and an acceptable result in my view given the market conditions. Now coming into the year, we challenged our aftersales teams to consistently grow their business and their performance. And I'm pleased to report that they are making excellent progress as they delivered double-digit sales growth combined with margin expansion. Now with well controlled expenses, which Joe will expand on in more detail, we delivered $1.4 billion of adjusted net income for the year with…

Thank you, Mike, and good morning, everyone. Today, we reported fourth quarter total revenue of $6.7 billion, an increase of 2% year-over-year. AutoNation's new unit sales increased by 4% in the quarter, compared to a 2% increase in the retail SAAR. Strong performance in our higher margin premium luxury brands helped support our new unit PBR, which was over $5,600 for the quarter. The overall new market remained very healthy during the quarter as more than half of our vehicles were sold at or above MSRP. This has trended down, but it’s still far higher than historical levels. Total used unit sales were down 9% in the fourth quarter, PBR remains fairly constant from the third quarter and reflected discipline in our pricing strategy. We continue to focus on self-sourcing our used vehicle inventory, which represented 94% of our vehicle acquisitions in the fourth quarter. While good, this needs to increase and we have ramped up our will buy your car efforts to fuel greater used unit sales. After sales gross profit grew 12% year-over-year on both higher revenue and increased margins as we continue to drive strong performance in this area of our business. While under appreciated by some, the recurring revenue stream from after sales alone increased full-year gross profit by more than $225 million to $1.9 billion in 2022 with a strong outlook for the future. CFS performance was also very strong and we continue to lease the sector with PBRs consistently above $2,700. Moving to costs, SG&A as a percentage of gross profit on an adjusted basis was 59.2% for the quarter, significantly below pre-pandemic levels, reflecting permanent structural changes to our cost basis. Year-over-year, SG&A increased by only 1.5%. As expected in the fourth quarter SG&A as a percentage of gross profit was slightly higher…

Yes. Thank you, Joe. Derek, would you open for questions, sir?

Yes. I think we can, yes.

Operator, can you remind the audience how to queue up for questions please?

[Operator Instructions]

Hello, are you there?

We have our first question from John Murphy of Bank of America.

Great. Good morning, guys. Can you hear me?

We can. Good morning.

Good morning. Just maybe a first question on the inventory front. Things are slowly returning to normal, maybe in aggregate, but are still a bit tight. But there's some pretty big dispersions between the D3 getting closer to normal and the J3 maybe being very tight. I'm just curious if you can kind of comment where that stands, did the inventory levels stand for you and what you think the implications may be for GPUs we go forward and maybe sort of the dispersion in GPUs and the different brands?

Yes. Good morning, John. I'll take this and then Joe can jump in as well. I mean, you're exactly right, if you look at our overall inventory levels and our days of supply, it's still very, very low. Obviously, what we are doing is we track it by all of the OEMs and across all of our brands that we represent, our inventory levels as a percentage of national are still below, sales as a percentage of national sales. So from a -- if you like from a balance perspective, I think even those that have been able to replenish inventory faster than other OEMs, we're still in a good shape. And Joe and I were talking over the last few days obviously as we prepared for this and really looking in detail at our inventory. I think the key for us is not absolute numbers of inventory, but how that translates into day’s supply as we go through the year. And that obviously brings you on to one of the key questions and that's what we think is going to happen with new vehicle volume. So as I sit and look at this year, I think there's strong potential for new vehicle volume under the right circumstances to be above $15 million, and I think we'll end the year with continued low -- relatively low -- very relatively low, frankly, when you look back at some of the previous year’s inventory levels on a day's supply basis. And as a result of that, I think there will be some continued mitigation on new vehicle margin. But frankly, if you look at what happened over the period of 2022, really, I just see a continuation of that, but somewhat compensated by volume increases across the brand. So sorry for a wondering answer that obviously these things are all tied together. Joe, do you want to add anything?

Yes, I just -- kind of further elaborate on the same theme. John, if you look, the days I hope of 75 to 90 days of inventory are long in the past. I also think periods of nine days are unsustainable, we're at 19. And I think with cooperation from our partners, a 30 to 45-day type normal is a pretty healthy place for everyone to operate. And so whether we get to that by the end of this year, I don't know, but to me that would be a nice level that would serve everyone's interest, I think exceptionally well and that's kind of how we're thinking about the business right now.

Okay. That's helpful. And then just a second question, slightly multipronged on cap allocation and human capital allocation. The finance business is going to grow. Just kind of want to understand where that goes and exactly what you really are intending to do there? RepairSmith is another sort of leg of the stool, that is new and might augment or should augment the aftersales business. And Mike, your -- think something very interesting about reactivating customers, which I'd love to hear what that means and if RepairSmith helps there? And then obviously there's the share buybacks. So if you think about an AutoNation USA, if you think about sort of the flow of your cap and free cash flow to the finance business, to the after sales and the extension there, AutoNation USA and then buybacks. I mean, how should we think about this going forward? Because there are new businesses that are kind of adjacent businesses that are popping up that might be drawn on capital or may not even be that big a drawn capital may be incremental on their own. Just how do you think about that?

John, the very first thing that we think about is what is the best use of capital for our shareholders perspective. And clearly, you have seen over the last two years given the market conditions and the overvaluation of assets out there the best return -- was to return it to our shareholders and we're very clear on that and that will continue. Our discipline will continue to be with that in mind. Now I'm going to expand on some of the things that you talked about. There are a lot of really our approach is to firstly maximize the assets that we have in place and inappropriate circumstances to add to that, that will broaden our geographical coverage, but very deliberate. We have an embedded asset in the organization, a very significant customer base over a long period of years has now built significantly. But the reality is that not all of those customers are active and our share of their wallet is relatively narrow. Maybe it sells, used it sales and service. But their total spend on transportation and mobility, whichever buzzwords you want to use is very, very broad. So our approach really is to expand our business, our geographical reach, so that we can continue to add more customers to our base, understand why customers over time become inactive and that's typically, because the ages of the vehicle that they have is beyond seven or eight years and they therefore believe it's the right thing to do for them to move out of a franchise environment or they moved outside of a 25 mile radius of our stores and therefore our penetration in the aftersales part drops off. RepairSmith is an ideal solution for that, because not only are they incredibly convenient and overcome that geography…

Any intention on that financing?

If I could just add.

Yes.

Let me -- yes, Joe. Let just add a, kind of, boring finance answer to some of this. Because strategically, Michael, I think very clear in particular as to what we're trying to do. When you match that with the financial or capital strategy, we have a first-class problem. We have robust cash flow on a very strong balance sheet. So then the question is how do we utilize that and maximize the benefit of it? And it's not surprising to most it's an IRR-driven approach and we look at what the return is on each opportunity. We have obviously, as Mike mentioned in the recent past viewed share repurchase as an extremely attractive opportunity. As we look forward, we have found some opportunities that offered very, very compelling returns. And as we think about capital going forward, we will deploy it in a similar fashion in identifying where there really is truly incremental value. And I think you were going to ask about the finance business and I think we've been very clear that one, we're going to be delivering this growth and we will utilize facilities that we are not funding all of that directly from our balance sheet. As is typical in some ways similar to the way you think about floor plan. So we're not going to be putting dollar for dollar behind the capital business at the expense of other opportunities.

And let me just follow-up on that. So I think, Joe, in the past, John, last year, when we think about CID, was clear that we are going to grow that business. That business has been around 35-years and has been successful during that period. And our intention is to grow that business at a speed that we believe is very manageable on pace with the growth of our AN USA businesses predominantly. We have good relationships in our franchise businesses with our OEM captives and that will continue. So we really wanted to focus on the work of AN USA, so it's going to grow slowly. And it will grow deliberately and it will grow in a way that we think is manageable. RepairSmith is a phenomenal start up business. It's a much younger business and full of dynamic people really trying to forge a new way of trying to provide convenience and great service to their customers. But they are there, they're a start-up business. They've grown well, I think they've been very deliberate in terms of their growth. But there's a lot of things that need to continue to happen to make that business grow to scale. So again, don't expect RepairSmith in the course of the next two, three, four quarters to start to become a dominant force is about a deliberate, progressive approach to growing our business in ways that we think will deliver over time a really good balance result.

Mike, just real quick to follow-up. It's fair to say that these are good incremental opportunities that are not going to be very material calls on capital that would crowd out share buybacks that have been a big part of the story and there's probably room for everything. Is that a fair way to think about this?

Actually, I think that's more eloquent way than I could have put it. So thank you for your answer.

Okay, then thank you very much guys.

Thank you, John.

Thank you. Your next question comes from the line of Daniel Imbro with Stephens. Your line is open.

Yes. Hey, good morning, guys. Thanks for taking the questions. Joe, I wanted to follow-up on one of the answers to the last questions. I think you talked about confidence in OEM partners, maybe just the high 30s to 40 days. I'm just curious what gives you guys the confidence that the OEM partners are going to be disciplined this cycle? Historically, if I think do it, maybe they've been a little less disciplined as supply comes back online. So curious maybe what's changing in the conversations? What gives you confidence in that? And then to a dovetail onto it, if that is what you expect, kind of where would you expect new GPUs to shake out maybe for the year? Or what's the exit rate you're planning on for 2023? Just based on that day supply outlook you provided?

I mean, you may think it, but we actually don't have daily, weekly, monthly conversations with the OEMs of that this complexity of inventory levels we talk to them periodically. So we can understand what their hopes and aspirations are both on a volume market share, but also then the production to support that basis. But I tell you what I -- when I look back, what I think has been really interesting is number of the new what would happen. It's all of a sudden there was an industry-wide correction of inventory. Nobody had any clue. Everybody was too scared to do it. Because if you do it as an individual OEM, you get crushed. So circumstances create a situation where everybody got affected at the same rate and there was a reset across the industry. Prior to that in my life anyway and I'm not the best example frankly of this, but prior to that in my life, your whole concept of profitability was keep your plants churn in as hard and fast and as efficient. And as you can, churn, churn, churn, churn, churn, [Indiscernible] sales guys, let you sales guys buying the marketplace for share and that was if you like, that was a predominant. And again, I have to speak myself, I can't speak for the OEMs you guys talked to those, but that was a predominant. You know, the future, so you get this opportunity to reset it, right? And the opportunity comes and people suddenly realize that, yes, this whole concept of supply and demand actually maybe coming in there. I think it worked for everybody. And I obviously think that people learn, and so I wouldn't say, as your confidence level 100%, Mike, do you want to go on to FanDuel and take it back? No, I actually don't want to do that. But I do believe that within the different pressures that are on an OEM, remember, they had very large union relationships, very large investments that they recognize, that is a balance that's what I believe. I think they're all intelligent people, they wouldn't be able to run those complex businesses if they won't. But I'm hoping that, that prevails.

Got it. And then Joe any follow-up question on kind of where you expect GPUs to end this year given that inventory, kind of, expectation?

So obviously, we're not going to predict an absolute level. And obviously there was some talk about the expectation of some level of pressure as inventory builds, but consistent with a view that the business can be run at 30 to 45 days that's consistent with an expectation that PVRs, while moderating are going to be above pre-pandemic levels. And that should be a sustainable model provided everyone cooperates in much of the way that Mike, kind of, alluded to. The work process is pessimistic, but also very pragmatic about the whole thing.

Got it. And then want to…

I think that's brilliant we are cautiously optimistic. We're cautiously optimistic, but we ain't going to do it by the final moment.

Got it. Makes a lot of sense. Maybe just a follow-up on something more in your control on the used side of the business. It does feel like you guys have improved your sourcing, kind of, customer sourcing last few years, maintaining higher GPUs, but unit sales were a bit light there kind of relative to the group. So kind of curious is it becoming more difficult to buy from consumers as vehicle equity normalizes? Or what are your expectations there around your ability to continue self-sourcing enough units to drive outside used growth in the future?

I have 100% confidence in our ability to self-source there, because I think in Q4, Joe, we have something like 94% sales or about an 90% anyway.

I have absolutely confidence in that. But that's not the real answer to the question, I don't think. First, I do think you're going to see an increase in new vehicle industry as we talked about. Obviously, as a large player in the franchise new vehicle, retail business that's going to help us in terms of our sourcing and that's a competitive advantage against those standalone used car players, which I think has been pointed out most times. But the reality is that roughly 90% of all of the vehicles that are sold, used vehicles that are sold either to franchise dealers or publicly traded used car dealers are under 10-years old, roughly 90%. Of that, 40% of those vehicles are sold between two and three-year old vehicles. And those vehicles have to be put in the market two and three-years old -- two and three-years ago to be available. So it's absolutely clear that unless the sales profile has been in the used car market in the United States for years is going to dramatically change. We are entering a period of tight supply on two and three and four-year old vehicles, which make up the majority of these car sales. And that's going to impact wholesale prices and ultimately retail prices, margins I think are going to be fine. They're going to bounce in and out through the bandwidth that they always bounce in and out, because as wholesale prices move, retail prices move you all know the dynamic. But the reality is that those vehicles are going to be in short supply for a period of time, which will impact those prices. So for us, what we're going to do is we're going to obviously continue on our strength that we buy your car, continue to maximize…

Really helpful color. Appreciate it and best of luck.

Thanks.

Your next question comes from Rajat Gupta of JPMorgan. My apologies. Our next question comes from Bret Jordan of Jefferies.

Hey, good morning, guys. Could you talk a little bit more about RepairSmith, and maybe what the scope of services that you can offer on a remote basis are? And are there any regional restrictions there, you know, as far as, you know, outdoor work or driveway repair, how you sort of envision that?

Yes, it's great question, Bret. I mean, obviously, there's a limited range of services and repairs that can be carried out on someone's drive or in a car park or those elements and those, but it's still incredibly broad if you think about servicing oil changes, filter change, cabin change, all of those things they can do repairs, a whole host of different repairs, which includes vehicle diagnostics. They can also provide free. There's a lot of business, I'll give you one of the things that to me is always a great area. There's a lot of business of private, one guy selling a car to another guy or one girl selling the car to another guy, those are private sales. Some of those people actually wouldn't mind their technician turning up for a relatively competitive fee and doing a quick diagnostic on the car they're buying, gives them a lot of protection in that used -- in that C2C market. So there's a whole host of things that RepairSmith are exploring and working on. They also have great relationships with lead companies, because it's incredibly convenient for these large fleet operators to have their van, their transport vehicle serviced at night when they're not using them. So I mean, the breadth of services that they can provide is phenomenal. They add back to all of the physical infrastructure that we have. All of the physical infrastructure that we have. So if you turn that up at your house, for example, and you've asked us to come into do a diagnosis and actually you need new transmission, we're going to do that on the side of the road, that's clear. But RepairSmith now have access to tens of thousands of ramps around the country where they can go and do that for you. So you did the benefit is if they're able to repair at your door, they can repair at your door, they could certainly diagnose it for you so you know what you're in, and by the way, if necessary, we can get you to a ramp. So I don't actually see much limitations based upon what you've said with the exception of obviously the further north you go in winter, and the less, I would say, the less likely you are to do what I would call prolonged jobs. But again, if you look at the person's current footprint, our current footprint, how we're going to grow together, that's obviously been part of the thought process.

Okay, great. And then one quick question, you've commented that 50% of transactions were at or above MSRP. Could you give us the percent above MSRP and maybe what's the cadence in that mix?

It’s above MSRP has really not changed, really through the entire business…

That we need to clarify this, there's not 50% -- never ever added in 50% transactions done above MSRR.

No, add MSRP.

MSRP.

No your comment was 50% at or above and I was trying to get the above.

Yes. So good clarification. My mistake, very clear above MSRP, really the pandemic has never been much above 3% and today is slightly below 2% and that is really a company policy and approach, which we've maintained. So think of 50% of their bucks at MSRP and less than 2% a buck. So thanks for clarifying that.

Perfect. Thank you.

Thank you, Bret. Your next question comes from Colin Langan of Wells Fargo. Your line is open.

Great. Thanks for taking my questions. Can you just go into what drove the new GPU decline, I think it was down about $300 quarter-over-quarter. Is that customer mix? What is causing that decline? And how should we think about that as we go forward, is that rate going to continue?

I think the reality is that new GPUs are never going to be sustained at the level. And we've been talking about it for a long period of time that as new inventory levels begin to restore in the franchise network that you're going to see a better balance. And I say better because it brings some volume back here in GPU's drop, but ultimately what you're trying to do is maintain the overall level of profitability. So it was really driven by the fact that inventory levels, of course, certain manufacturers began to recover. And I would say, well expected moderation of new GPUs. That's how I would describe it. And I think you will see that in this year as well, and I don't think it should come as a surprise to anybody.

Got it. And how should we think about F&I, there were some article dealers getting concerned about with rising interest rates, people may scrutinize that line item -- that payment. Are you [Indiscernible] much pressure in the quarter. I mean, how should we think about that as the year kind of progresses?

So I think what you'll see when you get rise in interest rates and it gets passed on, sort of, F&I rates with then staff and these penetration levels begin to drop a little bit, because other providers become more attractive and I think that's what happens. Often it gets mitigated by an extension of the term, or and/or an increase in terms of deposit. The good news for us is our big focus really has been our focus on additional products within our CFS performance, so that we have a very balanced performance that as you've seen in our results consistently, consistently has been at what I think is great levels. So as interest rates continue to go, you see movement up the FICO range away from being subprime up to mid and into prime, you see, obviously, the lights passed on. I think it's for locomotive, the industry, I think about 2% of rate is now embedded in all of the finance that's written in the United States. And you see a mitigation on penetration levels from captive or pseudo captive finance companies. But that's how you should think about it. And that just says reinforces our focus on the additional products that add value to our customers that are not linked to an interest rate.

Yes, the only thing I would add just to further clarify, more than 70% of our CFS is actually coming from product rather than financing. And as Mike indicated, is a real focus on increasing penetration, increasing profit per product is clearly our focus and I think underlies the confidence we have in being able to maintain that going forward.

But just to be clear, those products in addition to the financing, those are still embedded into what the person pays. So when someone's shopping the payment to keep those products, the payment would still be higher, right?

In most cases, yes.

Yes, I think they buy on standalone.

Okay.

But most cases, people like to pay on a monthly basis as well.

Okay. Thanks for taking my questions.

Thank you.

Thank you. Your next question comes from the line of [Danielle Haggen] (ph) of Morgan Stanley. Your line is now open, Danielle.

Hello. This is Danielle on for Adam Jonas. So we heard you talk about the dynamics that play in the used car market. We've heard similar things with our conversations and industry contacts and recent manheim prints, including the print from this morning. You mentioned tighter supply, is that the sole driver of this kind of 180 degree turn in the used market? Are there other dynamics at play? Are you seeing anything on changes in consumer demand heading into kind of a macro uncertainty this year? Thank you.

Hey, Danielle. Firstly, Adam is well. And that -- you're not on because he's ill, but when you talk to him, give him my regards, so just. There's obviously a range of things that impact it, one of which is the availability. And as you've seen, we saw used car prices begin to drop at the end of last year and that has now kind of mitigated and stopped. But it's also being impacted on the demand side, because depending on the age and the profile of the customers buying it, there is no doubt that what we've seen in terms of interest rate increases also affects the demand side of it. So it's a combination of things. I think when I -- my opening comments really when we look and obviously do it on a very regular basis when we look at our performance and we -- I try and identify the key driver. For us, it was around that very tight supply and not wanting to buy deeper at the expense per se of gross, so hopefully that's an answer.

Thank you.

Thank you. Your next question comes from Rajat Gupta of JPMorgan. Your line is open.

Great. Thanks for taking the question. I had a question on this SG&A going forward. Obviously, that the GPU trajectory is a bit uncertain and how to predict. But how should we think about the SG&A drop through as those gross profit dollars come down over the next 12 to 18 months. And maybe if you're willing to, can you give us a range of SG&A gross profit that you're thinking about for 2023? And I have a follow-up. Thanks.

Sure, Rajat. Good talking to you. So SG&A as you kind of saw in the release in my comments, maintain strict discipline. As we think about it, you obviously have a fluctuation primarily in comp associated with GPUs. Think of the flow through your SG&A per dollar growth is somewhere between $0.25 and $0.30 per dollar. Beyond that, what we're trying to do is obviously be very efficient in our advertising and marketing and you can see relatively flat sequentially and then really controlling the store and corporate overhead, which again was essentially flat sequentially. Results of that, as you can see, it's still below 60%, I think there is some slight pressure on that going forward, but in a strong intent on maintaining our discipline. And then I mentioned the investments, which was maybe 100 basis points as a percentage of growth this quarter. I don't see that getting much beyond 200 basis points in the course of 2023 as we make what I think are absolutely essential investments to ensure the longevity and well positioning down the road. And I can kind of give you a range, I mean, we clearly intend to stay below 65% this year with a target to be at the lower end of kind of the 60% to 65% range. And that will fluctuate somewhat with the GPUs. But the other measures including overhead and advertising in our elements that we're going to maintain strict discipline on. So that's how we think about it and that's how we manage it every day.

Got it. Got it. That's helpful color. Maybe just to follow-up on the prior question around like the manheim print and like just used car prices turning. Are you able to comment on how first quarter for January and February months to-date has been in terms of demand or like just unit comps for you, both new and used?

I'd say the interest in buying a used car is very strong. That converting into sales is, as I mentioned, still be and will continue to be impacted by availability of inventory, particularly in those age profiles that historically have been the bulk of used vehicle sales for franchise and public [Indiscernible] dealers, so we're seeing that. Joe mentioned it in his opening remarks, we have -- we like, I think, all of our competitors are recognizing this and we've redoubled our efforts. That redoubling of efforts means that prices that's for sure stabilized, you'll see some upward pressure on prices. I think ramping is going to necessarily impact margin, because it's just a relatively short time before that hits retail. But what we saw in Q4 continues in Q1 and it's an area of great focus and we've got our teams focused on that every day, but that's how it started. Hopefully that helps.

No, that's helpful. Great, thanks for taking the question and I'll get it back in queue.

Thank you. We have time for one more question. Our final question comes from David Whiston of Morningstar. Please go ahead. Your line is open.

Thanks. Good morning. I guess, first looking at the segment income, domestic was down especially hard about 25% and just wondering kind of related to that, you've got a large brand mix decline from Ford, but then at the overall segment level for domestic, was there just lack of inventory from Ford or others, or is it more due to unfavorable pricing?

Well, there's no data, you had some interesting movements in -- from all of the domestic, both up and down. I think there are three things that play. For sure inventory, there's no doubt about that inventory still was for those areas really that their mainstream brands, I'm not talking about the premium parts of their brand, Lincoln and Buick and Cadillac, but the main parts of the brand. You had pockets of inventory that are not available. You had movement in terms of net price position and it's incredibly competitive. And I also think all of the OEMs are adding towards the end of the year and what they like to do -- look to do is to plan not just the end of the year, but how they're going to start the year. And those dynamics resulted in what we saw. So we've already, I think, seen some of the OEMs talk about how they finished off the year. That will be wrapped up. And then I don't want to comment for them on how the year the New Year started. But the great thing is that invariably there is not just one silver bullet that they did it and that's why this business is beautifully complex.

Okay. And on service, that's -- from a growth perspective that's a positive outlier. And I'm just curious is a lot of people -- are there just a lot of people coming back to the market now who have deferred for a long time? And is the growth mostly customer pay or warranty?

Yes, growth is coming mainly to customer pay, but it isn't about significant volumes of additional customers coming into your dealership or dealership at least. I think it really is a reflection of the fact that they have been more miles driven, there's a direct correlation between miles driven and expense to keep the vehicles on the road in the safe fashion. So what you're actually seeing is you're seeing the revenue and the gross per repair order actually drift up for a largely stable number of customers that are coming in. It's obviously very dramatically dealership by dealership depending on their penetration of their after sales part, but broadly across the piece, that's what you're seeing. And internal work as well, which obviously has an impact, is continuing to improve as well. So broadly, as I said, more mouse driven, more repair and maintenance.

And Mike, just a higher-level question. Having worked at both OEMs and dealers, I'd love to hear your perspective on contrasting the direct sale model that the EB [Indiscernible] were doing to the franchise model that you guys do. In your opinion, where is the key value for in having the dealer franchise model versus a direct to sales model, direct to consumer model?

Well, when you buy me four beers and dinner, I'll give you an answer to that question. Because it's an incredibly complex question. But what I can tell you is that dealers are an invaluable part of the supply chain not only are they connected to the community, but the reality is that customers, given the amount of money that they are spending on vehicles and that price is going up and up having a relationship that they can trust on a local level where they know that their needs are going to be looked after whether there is an emergency service repair or something else at significant value. And at the end of the day, each of these OEMs are establishing their own individual brand position and those brand positions are enhanced and developed by their dealer bodies and therefore dealer bodies -- the dealers and how they work with their OEMs in my opinion is invaluable and will always be invaluable and will not be replaced with a car turning up on the back of a truck.

Well, I appreciate that and I have a bar in my living room. You're welcome anytime.

Thank you. Just email me the address. It's obviously -- and I say and I don't mean to be flipping it, it's obviously a complex question, but I think there are lots and lots of OEMs have talked about the valuable nature of their dealer body and working together our ambition as partners of our OEMs is to just make sure that the customer journey is as seamless as it can possibly be that it really does represent the brand that the OEMs have spent years and billions of dollars to develop and it's done in a transparent way. That means the customer feels that they continue to support it, not just through the purchase, but through the aftersales experience as well. And there's always moving pieces, but that's my genuine view on it. So with that, I think we are done. That was the last question. Is it right?

Yes.

Again, thank you all for joining us. And our fourth quarter results that we've just discussed were capping off a record year for us. And we've really focused this year, not just on our earnings, but also our customer experience. And I'd like to just say to our associates who are on the call thank you for the things that you have done. There's no doubt we continue to perform in this current environment, but we are also taking the steps that I touched on at the beginning, so that we can really be a big player and take part of the industry transformation that is coming. So the expansion of our footprint, the additional transportation solutions, how we thought about our cash flow and the investments that we've made, including return to shareholders, I think, are all examples of that. Now one of the things that we launched in our organization last year with all of our people was a man should go be great. And we like that because what it means is, it means go be great whether that is in your performance in the business and the way that you deal with customers and also now you get involved in the communities that we're in and that's a big strength for automation. And I've said very openly, when I joined this company now nearly last maybe year and a half, maybe a bit longer than that ago, understanding the culture in the organization and how they constantly are looking to give back to communities, whether it's through their Drive Pink initiatives or whether it's just through the engagement that they have in each of the individual markets. It's been for me a fantastic part of the organization. And frankly, last year, I think the guys and girls in Drive Pink over $35 million and these things I think are important. These things are important. And notwithstanding the fact that this is a quarterly call, I think it's important that we call those things out, because it isn't Mike Manley doing that. Nothing to do with me, it’s grassroots from our people getting involved. So thank you all. With that, I'll give you the days back. Thank you everyone. Bye-bye.

Thank you. This concludes today's conference call. You may now disconnect.