OneWater Marine Inc (ONEW) 2024 Q1 法說會逐字稿

Good morning and welcome to the OneWater Marine fiscal first quarter 2024 conference call. All participants will be in listen-only mode. (Operator instructions) Please note this event is being recorded. I would now like to turn the conference over to Jack Ezzell is our Chief Financial Officer. Please go ahead.

Good morning, and welcome to OneWater Marine fiscal first quarter 2024 earnings conference call. I'm joined on the call today by Austin Singleton, Chief Executive Officer; and Anthony Aisquith, President and Chief Operating Officer.

Before we begin, I'd like to remind you that certain statements made by management in this morning's conference call regarding OneWater Marine and its operations may be considered forward-looking statements under securities law and involve a number of risks and uncertainties.

As a result, the company cautions you that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in the forward-looking statements. Factors that might affect future results are discussed in the company's earnings release, which can be found on the Investor Relations section of the company's website and in its SEC filings.

The company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date of the forward-looking statements are made, except as required by law.

And with that, I'd like to turn the call over to Austin Singleton, who will begin with a few opening remarks. Austin?

Thanks, Jack. And thank you, everyone, for joining today's call. We delivered a solid quarter despite the industry-wide return to seasonal selling patterns and moderated price. In an increasingly competitive environment our team remain active closing deals and driving same-store sales growth of 2%. We continue to outperform the industry, which market data indicated was down about 4% for the quarter. With the anticipated return to historical seasonal mix, demand softened as expected and customer preferences turn towards our larger boat offerings.

Unit sales were flat in the first quarter, reflecting the effectiveness of our sales team and our strategic approach to inventory management. As expected, we continue to operate in a more competitive environment boat margins across the industry continue to reset during the quarter, and we expect this to continue through the first half of the year.

Additionally, quarterly margins will continue to fluctuate with seasonality and model mix similar to traditional pre-COVID year. As a reminder, we typically benefit from stronger margins during the summer selling months with a mix shift to the lower ASPs with higher margins and increased unit volumes compared to the slower winter months with the mix shifting to higher ASPs with lower margins.

Before I turn this over to Anthony, I would like to emphasize our strategy and our path to get to where we are today.

When we went public in February of 2020, we had a solid growth strategy consisting of steady organic growth, coupled with battle-tested M&A. COVID created a lot of disruptions, both good and bad. The transition back to historical trends has been challenging, but we believe we are approaching the new normal. As we move forward. OneWater is a fundamentally stronger company, having grown significantly with a more robust and diversified product offering. Compared to where we were pre-COVID. Our baseline has been reset higher and we are off to a great start in 2024.

Adding to that, we are encouraged by what we seen at the boat shows so far giving us confidence in the coming year. Even as we navigate the challenging macro environment and inventory overhang in the industry, we are still very confident in our ability to deliver on our growth strategy. We are excited about the future as we continue to grow market share, optimize cost, enhance profit ability through our higher margin businesses and pursue M&A opportunities to amplify shareholder return for years to come.

With that, I will turn it over to Anthony, to discuss business operations.

Thanks, Austin. Our team delivered first quarter same-store sales growth of 2% supported by higher average unit prices as customers shifted their preferences through our larger boat offerings. We are excited about the boat shows we have participated in so far this year and are seeing strong demand for our manufacturers' newer models, which is a positive sign, given our inventory strategy. We are pleased to report growth in customer orders at the boat shows that were not impacted by inclement weather. We are looking forward to the Miami International Boat Show in a few weeks, which is an important bet for us and the industry.

Our aggressive inventory management approach has positioned us well in an industry flooded with non-current models. We opened the year with a healthy model mix and will continue to work down non-current inventory where we can favor newer models.

Inventory levels are up sequentially as in standard in the winter build months in preparation for the selling season. That said, our 24 weeks on-hand inventory continues to outperform the industry at approximately 38 weeks on hand. While boat sales are up year-over-year, total finance and insurance revenue was down moderately as we faced the challenges of higher rates.

However, finance penetration during the quarter tracked consistent with our target of 60% of Nuvo customers financing a portion of their purchases directly with us, credit availability and the use has remained strong, and we feel good about where we stand today.

And with that, I'll turn the call over to Jack. To go over the financials in more detail.

Thanks, Anthony. Fiscal first quarter revenue decreased 1% to $364 million in 2024 from $367 million in the prior year quarter. New boat sales grew 4% to $241 million in the first fiscal quarter of 2024, while pre-owned boat sales decreased 4% to $53 million. The increase in new boat sales was primarily driven by an increase in the average selling price as customers gravitated towards larger boats in the quarter.

The decrease in pre-owned boat sales was due to a drop in brokerage consignment sales, partially offset by an increase in pre-owned sales from trade-ins. Revenue from service parts and other sales for the quarter decreased 10% to $62 million compared to the prior year.

As a reminder, we sold Roscioli Yachting Center and Lookout Marine in our fiscal fourth quarter of 2023, which primarily drove the decline. Additionally, we saw a reduction in parts and accessory sales to original equipment manufacturers. These OEMs have reduced production of boats as a result of the elevated industry inventory levels.

Finance and insurance revenue fell 18% to $7 million for the first quarter, primarily due to decline in income earned on loans. Given the current high interest rate environment.

Overall, gross profit decreased 17% to $91 million in the first quarter compared to $110 million in the prior year. Driven by the normalization of gross margins on both sold. Gross profit margin fell sequentially with expected seasonality and a preference towards larger boats, partially offset by increases in margins on our service parts and other sales.

We anticipate gross margins to continue to stabilize through the first half of the year as the cycle returns to normal. Though we anticipate this new normal will level off higher than what we saw prior to the pandemic, given structural changes in our business in the industry. First quarter 2024, selling, general and administrative expenses increased to $80 million from $78 million.

SG&A as a percent of sales was 21.9%, up 70 basis points from the prior year period. SG&A as a percentage of sales is typically higher in the first quarter, which is historically the slowest quarter as lower revenues reduce our fixed cost leverage. We continue to monitor the sales environment and proactively manage costs to optimize the business.

Operating income decreased to $6 million from $27 million in the prior year period, and adjusted EBITDA was $7 million compared to $30 million in the prior year period. The decline in adjusted EBITDA was primarily due to lower gross profit and heightened floorplan borrowings and related interest costs.

Net loss for the fiscal first quarter totaled $8 million or $0.49 per diluted share compared to net income of $11 million or $0.61 per diluted share in the prior year. In the fiscal first quarter adjusted loss per diluted share was $0.38 compared to adjusted earnings per diluted share of $0.73 in 2023.

Turning now to the balance sheet on December 31, 2023, total liquidity was in excess of $65 million, including $45 million of cash and additional availability under our credit facilities. Total inventory on December 31, 2023 was $707 million compared to $610 million at September 30, 2023. This inventory build is reflective of our preparation for peak selling season, and we expect inventory levels throughout the remainder of the year to mirror the seasonal patterns we have historically experienced.

Total long-term debt currently stands at $440 million. Our net debt to adjusted EBITDA ratio is 2.6 times. Our liquidity and leverage position remain in a comfortable range and we are utilizing our cash to pay down our floorplan, which carries the highest interest rate.

Looking ahead, we are maintaining our fiscal 2024 guidance and expect margins to stabilize with seasonal norms, we anticipate same-store sales to be up low to mid-single digits, and we expect adjusted EBITDA to be in the range of $130 million to $155 million and adjusted earnings per diluted share to be in the range of $3.25 to $3.75.

On capital allocation, our priorities remain unchanged, and we are focused on delivering organic growth and increasing our footprint through strategic M&A of top-performing dealers in the best boating markets in the country. As always, we are prudent in our approach and will allocate cash where we believe it will provide the most value for our shareholders.

For our M&A deals, we look to utilize free cash flow as our funding source, which has historically given us the best return on our invested capital. As always, we remain disciplined in our approach when evaluating acquisition targets and the pipeline remains active and we are pleased to act when the right deal comes along.

This concludes our prepared remarks. Operator, we you please open the line for questions.

(Operator Instructions) Drew Crum, Stifel.

Okay, thanks, guys. Good morning. On same-store sales, can you address how the plus two performed versus your expectations and the level of promotional spend you deployed relative to plan in order to achieve that figure? And I guess, will you need to be more aggressive here in order to hit your same-store sales target for the year? And then I have a follow-up.

Jack, you want to take that you (Inaudible)

Yeah. I would say we're fairly close to plan where we expected it to come in during the quarter I would say from a promotional activity, you know, I would say it continues to be elevated similar to that we saw in the fourth quarter. I don't know that trends are really change a lot. I think we continue to be very aggressive in the marketplace. Customers are still coming through doors through an initial boat show activity has been good and we continue pushing on.

Okay. Perfect. And then on the service parts and others business, you mentioned the sales leaseback transaction contributing to the down 10%. Do you see the year-on-year declines moderating going forward?

I think with lapping the retailer destocking, the comps would get a little easier, but you also have the cuts in production by OEM's which you flagged. So curious as to how you see this business trending over the next few quarters? Thanks.

Yeah, for sure. I mean, if it's going to be a challenge for the year. I would expect the the decline rate because there's something the December quarter is such a small quarter. I would expect that percentage decline to moderate some like you suggest, but I do expect that probably to be in service parts and other for the year to be down. I don't know somewhere in that 5% to 7%, you know, just you know, but it's going to be an impact, right, because we closed on the transaction right at September 30. So you have a full year that you have the breakout.

Okay, got it. Thanks, guys.

Thank you, Drew.

Craig Kennison, Baird.

Hey, good morning. Thanks for taking my question. I think you mentioned the acquisition environment. I'm just I'm curious, I imagine there are some dealers on your target list that are ready to get out in the current environment. Is it a more active environment today? And how aggressive could you be if those who want to sell or are ready to sell?

Well, the you know, like Jack stated earlier, you know, Craig, we're going to use free cash flow. So that will put some limitations on it. If those 50 just opened wide open, but we want to be strategic about what we're looking at do and so when you kind of look at the environment right now, you know, one of the things is still trying to pinpoint what a true you know, the multiples easy because we have that set, but what we're paying a multiple on. We're expecting to see some margin decline. You know, I don't know what -- how much more a dealer can absorb right now with inflated a floor plan, interest cost. There's a lot of dealers that -- I think were something that we thought was going to happen last fall's probably fixing to start happening more now because dealers have gone through the winter not only are they paying in you know, a pretty low double digit for planned interest rate.

Cost margins are continuing to drift down a little bit, but also, you know, cash flow is tight because of curtailments and so it is kind of like the perfect storm. So I just -- I wouldn't say that it's picked up any more than it was no, even the good and bad parts of COVID, we tended to add a deal or two on to the pipeline a month. That was something that we would really consider. I mean, we get incoming calls and e-mails and stuff probably, you know, a couple -- half a dozen to a dozen a week and a lot of those just stuff we're not looking at that or even have any interest and so.

I'd say it's pretty much the same. I don't I wouldn't say it's increased. I think we might see some increase in there might be some strategic deals that we could pick up on some ideas just throwing in the towel on as they go into the early spring months and say, Hey, I just don't want to do this again because I do think people are going to have to start reaching into their pocket by leveraging up real estate or whatever to cash flow to get to the early months of April, May and June. And then if we have a bad bad weather spring that could even push it to where they really don't start to see that incoming cash flow to build back what they put out to May, June, July. So it's kind of like we're just -- we've got some things we're working on, but we're going to be very opportunistic as we move forward.

Yeah. Thanks, Austin. And then I'm trying to reconcile a weird dynamic in my mind, which is retail looks to be somewhat in line with your own expectations, but it feels like every OEM as agreed, it's actually time to cut production and help you in other dealers get right with inventory. It was it just like a realization on the OEM's part that things are different or the pain is so severe for some dealers on floorplan expense that they have to do it. So what do you think changed in the minds of [OEM] haven't spent frankly, retailers about what you thought it would be?

Yeah. So that's a really good question. When you look at retail and where we sit right now and how that works on, we're able to probably be a little bit more of not opportunistic, but I'm optimistic versus the OEM, because we have the inventory that's already on hand, they're having to replenish inventory where we have too much.

So we sell through that inventory where they need to build boats today. and so as that kind of shifts -- we have plenty of inventory. I mean, I think, Anthony, if I'm not wrong, if we just didn't order another boat from here on out. We have plenty of inventory to sell through probably a good chunk of the summer.

Correct.

So so when you look at that, that's why we're a little optimistic because we have all the inventory on hand. Now we got to do is performance sale where an OEM is like, okay, why don't have anywhere to put my inventory and so with that, they can't build it if they don't have anywhere to put it. So I think that it's just been a timing and a lag. This kind of happened and it caused the OEMs maybe not to have that [OEM] crap moment as much as it just it's a lag behind us.

And so you know, we feel we're in a good spot when you talk about individual dealers and the promotional activity. I don't think that we've been in the position that we're in right now. Today in [I mean] almost two decades where you have floor plan interest cost in double digits for the majority of the dealers. Not only is that a big expense margins have contracted the floor plan curtailments pre on the great you know, [O-8, O-9] weren't really enforced so that when an outflow of cash flow.

And so as we've gone through this winter every month, dealers are out there having to cut checks for curtailments. Now that's marking the inventory to market, which is a good thing. It's a discipline thing. The industry needs that, but they're not used to that. They've never seen that, and they're not really sure how to navigate that. And so when you look at that and say, okay, where do they sit today is probably a pretty scary point. You know, for a large majority of the industry, they're looking at something that they're not used to having to deal with and they've got to shift what they're doing to navigate this.

And so, you know, that's kind of, you know, it's just a tough spot for some dealers. I imagine out there, you know, that are coming through going, okay. Where's all the money and that's going to go back to what we've kind of been waiting on. I think a little bit is for the dealers that we've navigated O-8 O-9. I'm sure they can navigate this. I'm not being you know saying that they're doing it's going to be hard. Now is the right time. Maybe it is the right time to throw in the towel or to look for that exit strategy.

Great. Hey, thank you.

Jeo Altobello, Raymond James.

Thanks. Hey, guys. Good morning. Just a follow up on that comment. You made on that about non-current inventory in the industry. How long do you think it'll take for your competitors to kind of work through that non-current?

Well, I mean, it really just depends on how strong the screen early selling season. As you know, I think we're doing -- we're seeing good things at the boat shows. Things are going really good at the boat shows for us. And I imagine you've got several other dealers out there that are performing very well at the boat shows, you know, people are coming through the door and they're buying boats. And so as that inventory kind of pushes through on a good early spring selling season will accelerate that, you have weather pockets that aren't as good you know that could change things. And so, you know, I [think] that's a crystal ball. I just don't have you know if you just wanted.

Anthony, probably has a better good at that than me. I take a swag at it and say, you know that once we get to model year change going into 2025, you know that lagged pointed June, July, I think we should be in pretty good shape unless there's something out there that we're not seeing from a macro standpoint.

Anthony, you got any feeling on that?

No, I think that we're heading that way. And we have a plan in place to ensure that our inventory is right.

Yeah, I think the only thing I would throw in there, Joe, as you know, we had gotten some indication that dealer inventories around 38 weeks. And so if manufacturers cut, you know, 20%, 30% for, let's say, 25%, right? if I just say, okay, well, then that reduces fuel and retail's flat, you know, does that reduce it back down 25% and I guess some closer to that 26 weeks on hand, that two turns that historically the industry has seen that sounds like some math you can get around that would make sense, assuming the season is a flat year.

Okay. That's very helpful. And maybe just to follow up on that. You talked about normal seasonality several times this morning. Maybe help us understand what you mean by normal seasonality because your business has changed a little bit. Since COVID. So as we think about the next three quarters, for example, how do we think about the cadence for the year from maybe a sales and EBITDA perspective?

Jack. Let me jump in and you can back stop at a little bit. I think, Joe, one of the things that, you know, the exercises that we kind of went through is we wanted to go back and look at 17, 18, 19 an individual years, seasonality by month and quarters and then also took an average of those three and kind of apply that to where we are today for the first quarter.

And it was a really good exercise and it gave us a lot of confidence on where we sit today. There's a lot of things out there in front of us that we can't control when the macro that could change some things. But when you look at just what -- how it used to be and then what we're seeing as far as like the transition to bigger boats in the winter months because those are a longer build time, just the way the customer buying patterns and E&O, not the urgency in the September, October, November to order smaller boats or waiting to the boat shows. It's just it feels just like it was 17, 18, and 19. And I mean, we had great years those at those tops.

Now I do agree that we've shifted the EBITDA contribution to some of these higher margin businesses. So that changes a little bit. But if you just kind of really look at the seasonality of new boat sales, which is still the predominant driver of our EBITDA. And you go back and you look at it pre-COVID, take all the COVID noise out of that. It's a pretty compelling story. We were where we sit today, and I think that's something that's got us, optimistic, feeling pretty good boat shows have helped a little bit. But then, we got to really be be careful and watch really tight inventory and all this stuff as we move forward because there's some things out there that could stop us that we can't control.

So going back to what we kind of say all the time we're controlling the things we can control. And we're watching it really tough. And if the shifts, we're going to make big adjustments. But right now, if you look at what the seasonality was pre-COVID and take all that COVID noise out of it. It kind of feels like we're back to this new normal this something very similar to what we saw pre-COVID.

Jack, I am probably ramble too much, but you can (multiple speakers)

You're pretty much stole my thunder. I think the only thing I would add when you work through the math of it. I think as I look out at consensus guidance, right? I think the -- I think we got the front half of the year just a little too heavy in the back half of the year, a little light. And when you think about that, right? you go kind of over the last several years with COVID, right and scarcity of inventory.

The first half of the year, we accelerated so much. We shifted so many sales into that beginning part of the year. And we were selling a pontoon boats and ski boats in the December quarter when that customer wasn't even really using the boat. Normally, that was a spring and early summer boat buyer. And so now I think we're seeing the shift sales to transition back, and that's our expectation. But like Austin, said, we're cautiously optimistic that if those sales don't come in the back half. As we're going through the boat show season lining up orders, we'll adjust. But, as of right now, we're cautiously optimistic.

Okay. Great. Thank you, guys.

Michael Swartz, Truist Securities.

Mr. Swartz. You're line is open.

Hey, sorry, about that. I forgot there was a mute button. Just trying to understand, with regard to the guidance, I would assume there's some sensitivity to the path of interest rates both on your consumer demand, your flooring expense. Yeah. F&I revenue. So maybe just help us understand what exactly are you embedding in your guidance as it pertains to the path of interest rates over the next, call it, 6 to 12 months?

Jack, I don't think we embedded a whole lot of I mean (multiple speakers) interest rates.

I wouldn't say we embedded any material changes, I would say in our models right, we get some yield curves from a couple of different banks, including tourist. And we kind of sensitize those together, and we drop them in the model. So we're not baking in some additional shift or curve or a significant reduction if that's what you're getting at.

I think as far as retail goes, we are baking in that the pressure we've seen on the F&I line where -- we're just not able to make the spreads we've made in the past. So that's probably the biggest -- I'll say it's more [than] it's a negative impact versus a positive should rates ease a little bit. Maybe that gets better. But again, it's as you know, it's a highly profitable business and it has certainly can impact the model, but it's just a small piece.

Got you. That's helpful. And maybe just expanding, I think, Anthony, you had some commentary around the boat shows and I think we kind of look at the boat shows and compare them to a year ago. And maybe if we can go back to pre-COVID, maybe back to the 2019 level, not so much concerned about what you're seeing demand-wise there, but just the level of promotional intensity, maybe versus back then. And I'm sure the answer is a little different pertaining to model your 2023, year model year 2024. But is there any way you can just frame what discounting looks like this year versus maybe a normal year?

I think it's back to the way that our business was in 2018, and 2019 [everybody's] being pretty competitive and the manufacturers are being great partners and they help us move boats.

As far as the volumes are concerned with pretty impressive. What we've had some shows that we've had some unfortunately pretty bad weather in the northern markets that were affected. The both shows that we had in the southern markets that were up over the prior year and continue to do very well. And it is with the help of great manufacturing partners, though, which we had that help in 2018, and 2019 during COVID, we didn't have any help with the needed help, but as things get more competitive as the inventory rises, they are staying with us, if you will, helping us and making ensuring that we have great shows and they have been.

Great. Thank you.

Fred Wightman, Wolfe Research.

Hey, guys. Good morning. You've talked for a few quarters now about working down your inventory to position OneWater for what you were seeing on the horizon in terms of slowing retail and some dealers getting a little bit heavy.

Do you just feel like your mix of current versus noncurrent compared to what you're seeing in the industry today really positions you to do that. And can you maybe just talk about your ability to capture maybe where that would show up? Is it more on the comp side, as more on the margin side? Like where do you think that proactive approach that you've taken is going to be most visible?

Well, I mean, I think it will show up everywhere. I mean, you know, I think one of the things that we are what's happening now comparing us you know, the weeks on hand when you look that we don't really know the makeup of that 38 weeks on hand from an industry perspective. You know that's information we get out of the weeks on hand out of Wells Fargo, but it's not diced up between [22s, 23s, 24s].

We don't get -- we can't get that kind of detail out of them. But when you look at, you know, 38 compared to where we are, that's a pretty good competitive advantage that we have. I think the one thing that probably would give us a little bit of concern. The further we get into the year, the more that 2023 inventory that we have left is the harder inventory to sell.

So like if you have there's certain 23 that are like popcorn, you can sell just as many of them as you can get. But then you get into some other ones that aren't really the right boats. And I think that's a little bit of any concern that we've had in the last several weeks is as we keep moving forward, it's going to get harder and harder to sell that 23.

You know, the hope is that means we're going to be selling that many more 24 to offset whatever kind of margin we're going to have to take on margin decline on this 23. So but I think it's going to show up in same-store sales. I think it shows up in gross margin. It all depends on how quick we can work that down and then get into being able to sell to 24 against 23, then you don't have to be as competitive. Especially on the new models.

That makes sense. And is there any way that you can just give some context to the pricing or margin benefit for those 24 versus the non-current stuff? Just to sort of help us think about what that blended margin opportunity could look like?

Well, I mean, I would think, Anthony, it's probably double. Isn't it? If you take our '24s, putting it against the competitors '23, we can probably get twice the margin they're getting. They're getting a 6. We're getting 12, they're getting 10. We're getting 20. If they're getting the 20 we're getting that 24. I wouldn't say it's close -- yeah. Go ahead.

And it's very mixed by model. I mean, whether it's brand or whether the specific models, a Korean OEM, a recent renewal or it's a model that's a little bit more sales. So there's a -- it's really hard to break down that number Fred.

Right. Okay. Thanks a lot, guys.

Noah Zatzkin, KeyBanc Capital Markets.

Hi, guys. Thanks for taking my question. You kind of touched on this a little bit, but in terms of -- kind of the levers that you have available to you should retail potentially soften, I guess, first like internally, how are you thinking about those levers? And then secondly, is there an expectation that OEM incentives could step up on more units, not to be moving come spring and summer? Thanks.

Jack. I'll -- to the levers. We've covered this a lot in several of the quarters. We have a lot of levers that kind of pull themselves. When you go back and you look at comparing what we had pre O-8, O-9 as far as you know, our biggest expense on the P&L is [fully] most everything's tied to bottom line or the performance of that department.

So if things slow up a little bit, that kind of right that ship, you know, there's a lot of other levers that we have from just different cost-cutting methods that we can do. Just stuff that we kind of have in our playbook that it's been hard for us to really deploy some of those right now because the revenues have kept up. And so it's like, you know, you go out and you make a bunch of cuts and then net inflows up, you know, or does it slow up dramatically, then you start performing bad from a service perspective to the customer and that just it works.

So we're watching that really good. And we feel we have a lot of leverage, but there are several levers that just automatically pull themselves based off the performance of the business. So we're confident in our ability if things were to dramatically shift from a macro standpoint or something that's completely outside of our control, we have a pretty good game plan in place and ready to deploy that if we're needed.

As far as manufacturers incentives that you know, I can't answer that for the manufacturers. I think that if things slow up, they're going to have to I mean because again, you're looking at a dealer network that's out there. And I'm really talking about the single off one off dealerships that have interest on their floor plan that they've never seen before. It's a big number.

And if they got a lot of carried over inventory, those curtailments eat a lot of cash flow, I had heard want somebody reach out to me about our curtailment holiday and they were like what does that mean to you and I'm like why that I've never heard that, but a curtailment holiday is probably something that could be needed if it softens up because that sucks cash out of the dealers, you know, cash flow for operations. So when you look at a slowing up, I mean, I asked it today and I will the dealers probably cannot afford to take any more promotional activity on their P&L.

And you know, that is they have to, you know, are we going to lose some I think so. When you look at the increased floor plan, all the other just incremental increases, but then you look at the cash flow that curtailments are sucking out of there also and they're not making any margin if they have too many, 23s and they're not getting a blended 23s and 24s that could be very devastating to one-off dealership.

One of the blessings that we have and one of the things that have been a fundamental competitive advantage that we think we that we have, that we can move inventory between a lot of different stores. So you can have one market that's hot one, that's not we're moving. We're moving product to the hot market. And so that will help us as we go through. But I would suspect and you know, but I can't speak for him. But if things slow up dramatically, the manufacturers are going to have to step up or they're going to lose a lot of their dealers.

Very helpful. Thank you.

This concludes our question and answer session. Thank you for attending today's presentation. You may now disconnect.