Thank you very much, and good morning, everyone. Welcome to the Sonic Automotive fourth-quarter 2025 earnings call.

Again, I'm David Smith, the company's Chairman and CEO. Joining me on today's call is our President, Jeff Dyke; our CFO, Heath Byrd; our EchoPark Chief Operating Officer, Tim Keen; and our VP of Investor Relations, Danny Wieland.

I would like to open the call by thanking our amazing teammates for continuing to deliver a world-class guest experience for our customers. 2025 marked the third consecutive year of delivering all-time record customer satisfaction scores for our franchised dealership guests.

EchoPark once again retained the highest guest satisfaction rating among pre-owned vehicle retailers. We believe our strong relationships with our teammates, guests, and manufacturer and lending partners are key to our future success.

As always, I would like to thank them all for their continued support and loyalty to the Sonic Automotive team. Turning now to our fourth-quarter results: reported GAAP EPS was $1.36 per share.

Excluding the effect of certain items as detailed in our press release this morning, adjusted EPS for the fourth quarter was $1.52 per share, a 1% increase year-over-year. Consolidated total revenues were $3.9 billion, down 1% year-over-year.

Fourth-quarter record consolidated gross profit grew 4%, and consolidated adjusted EBITDA was flat compared to the prior-year fourth quarter. For the full year, reported GAAP EPS was $3.42 per share, and adjusted EPS was $6.60 per share, an 18% increase from 2024.

Consolidated total revenues were an all-time annual record of $15.2 billion, up 7% year-over-year, and consolidated total gross profit was an all-time annual record of $2.4 billion, up 9% year-over-year. For 2025, consolidated adjusted EBITDA grew 10% to $615 million.

Moving now to our fourth-quarter franchised dealership segment results: we generated reported revenues of $3.4 billion, flat year-over-year and down 5% on a same-store basis, driven by an 11% decrease in same-store new vehicle retail volume, offset partially by a 5% increase in the same-store used vehicle retail volume year-over-year. Fourth-quarter new vehicle volume faced headwinds from pull-forward consumer demand for electric vehicles ahead of the expiration of the federal tax credit in the third quarter, combined with strong luxury demand in the prior-year fourth quarter.

Reported franchised total gross profit was a fourth-quarter record, up 4% and declined 2% on a same-store basis. Our fixed operations gross profit was a fourth-quarter record, and F&I gross profit set an all-time quarterly record, up 8% and 6% year-over-year, respectively, on a reported basis.

These two high-margin business lines continue to increase their share of our total gross profit pool, once again contributing over 75% of total gross profit for the fourth quarter, mitigating the tariff headwinds on new vehicle volume and margin to our overall profitability, while also leveraging our SG&A expenses more efficiently than incremental vehicle-related gross profit. Same-store new, excuse me, same-store new vehicle GPU was $3,033 per unit, down 7% year-over-year, but up 6% sequentially, due to a higher luxury mix in the fourth quarter.

On a reported basis, new vehicle GPU was $3,209 per unit, down 1% year-over-year and up $208, or 7%, sequentially from the third quarter. On the used vehicle side of the franchised business, same-store used GPU decreased 2% year-over-year and decreased 10% sequentially from the third quarter to $1,379 per unit.

Our F&I performance continues to be a strength, with fourth-quarter record franchised F&I GPU of $2,624 per unit, up 8% year-over-year and up 1% sequentially. Turning now to EchoPark: adjusted segment income was a fourth-quarter record $3.6 million, up 300% year-over-year, and adjusted EBITDA was a fourth-quarter record $8.8 million, up 110% year-over-year.

For the fourth quarter, we reported EchoPark revenues of $481 million, down 5% year-over-year, and fourth-quarter record gross profit of $54 million, up 9% year-over-year. EchoPark segment retail unit sales volume for the fourth for the quarter decreased 6% year-over-year, and EchoPark segment total GPU was a fourth-quarter record $3,420 per unit, up 15% per unit year-over-year and up 2% sequentially from the third quarter.

For the full year, EchoPark segment adjusted EBITDA was an all-time record $49.2 million, up 78% year-over-year. Going forward, we remain focused on increasing our mix of non-auction sourced inventory to benefit consumer affordability and retail sales volume and GPU.

When combined with the strategic adjustments we've made to our EchoPark business model, we believe we are well positioned to resume a disciplined store-opening cadence for EchoPark beginning in late 2026, assuming used vehicle market conditions continue to improve. In the long term, we intend to expand our EchoPark platform to reach 90% of US car buyers, selling over a million vehicles annually, while continuing to provide a superior guest experience.

We believe investment in brand marketing will be key to our long-term EchoPark growth plan, and we expect to begin to invest in this effort during 2026, potentially increasing advertising expense by $10 to $20 million this year. Turning now to our powersports segment: we generated fourth-quarter record revenues of $36 million, up 19% year-over-year, and fourth-quarter record gross profit of $9 million, up 25% year-over-year.

Fourth-quarter combined new and used retail volume was up 18% year-over-year, and we're beginning to see the benefits of our investment in modernizing the powersports business and the future growth opportunities it may provide. Finally, turning to our balance sheet: we ended the quarter with $702 million in available liquidity, including $306 million in combined cash and floor plan deposits on hand.

Our focus on maintaining a strong balance sheet and liquidity position allows us to strategically deploy capital in a variety of ways to deliver value to our shareholders. During the fourth quarter, we repurchased approximately 600,000 shares of our common stock for approximately $38 million, bringing the full-year share repurchase to 1.3 million shares for approximately $82 million.

In addition, I'm pleased to report today that our board of directors approved a quarterly cash dividend of 38 cents per share, payable on April 15, 2026, to all stockholders of record on March 13, 2026. We continue to work closely with our manufacturer partners to understand the potential impact of tariffs on vehicle production, pricing, and volume forecast, vehicle affordability, and consumer demand going forward.

The full-year 2026 outlook and guidance on page 13 of our investor presentation considers the considers these uncertainties and represents our current expectations for 2026 financial results. As always, our team remains focused on executing our strategy and adapting to ongoing changes in the automotive retail environment while making strategic decisions to maximize long-term returns.

This concludes our opening remarks, and we look forward to answering any questions you may have. Thank you very much.

Good morning, guys. Can you guys hear me?

Yes, sir.

We can. ):

Oh, great. Congrats on a standout quarter.

That was pretty impressive results relative to the others in Q4. I was wondering if we could talk a little bit about EchoPark.

I was just curious. If you think about the options the used car options that are out there right now, and there's obviously big players like Carvana, CarMax, DriveTime, I'm just wondering as you're starting to understand the EchoPark business better, where do you guys see how you fit into the used car ecosystem in terms of when someone's looking to buy a new car a used car, where do you guys view as where you really kind of over-index and solve a problem for a customer?

Where do you fit in the used car ecosystem?

This is Jeff. We've always kind of looked at EchoPark as the Costco of the pre-owned world.

There's 35 to 40 million pre-owned cars sold every year in this country. If you look at what Carvana's doing, 500,000, 600,000, you look at CarMax in the 800,000, 900,000 range, there's a lot of room for us.

Prior to COVID, we said we'd be at 90% coverage of the country and sell over a million vehicles. We feel very comfortable.

Over the last 3 or 4 years, we've worked very hard on the model. We can slowly and accurately build stores, we said, we're going to open 1 or 2 in the fourth quarter of this year.

We'll open more in '27. We will methodically grow the EchoPark business.

We're the low-cost provider in this arena. When you look at how we price our vehicles, and you compare to those two competitors, we're anywhere from $3,000 to $6,000 cheaper than those guys.

It gives us the ability to sell a lot of vehicles on a per-rooftop basis versus our competitive set. We're seeing that.

We see it in the 17 stores that we have open now. We believe that being that low-cost provider and really taking care of our guests like we do with our great guest satisfaction scores, which are industry leading, that combination is just going to be really hard to beat as we slowly begin to grow this brand.

Jeff, this is Heath. I'll add one point is exactly what Jeff was alluding to is that objectively, we are the lowest cost provider.

You can look at the data and the facts are there. Objectively, we have the best customer experience.

We've won for the last 16 quarters with reputation.com comparing to Carvana, CarMax, and others. Now that we are starting the expansion again in a disciplined way where we still have profitability going forward, you combine that with our brand initiatives, which we mentioned earlier in the press release and in the statements, now people know.

I think the biggest thing is that we get our name out there and you got the two main things that people are looking for, and that's just going to give additional tailwinds to EchoPark, especially as the inventory's returning. It's going to be a really nice situation for growth for EchoPark.

):

Just a quick follow-up. You talked about non-auction sourcing.

I'm just curious, obviously you had a little bit of a hiccup with the commercial rental car fleet returns and that numbing up sourcing a little bit. Just any updates on where you're sourcing non-auction related and how you see the sourcing, unit availability for your business model in 2026?

We are incentivizing our team to buy vehicles all over the country, and we're finally beginning to leverage our new car franchise dealerships for inventory. We've always kind of kept that separate, and we have found a way, we believe, to leverage the heck out of that as lease returns begin to come back, as we can trade for more cars out of those 111 franchise stores.

We'll begin to see the beginnings of all this in the inventory sort of feeding into EchoPark will start in March and April timeframe of this year. We're very excited about that in reducing our dependence on the auction lanes.

That's happening, but it's methodically happening with a very strategic plan around that. Buying more cars off the street certainly is happening, and engaging our experience guides in that kind of model is going to make a big difference for EchoPark as we go forward.

It's a very important part of our growth plan. ):

Thanks for taking my questions, and best of luck in 2026.

Yes, sir. Thank you.

Thank you.

Thank you.

Hey, good morning. I guess just first question while we're on EchoPark.

When do you plan to do the advertising spend? Then also, is that going to be more focused on building the brand or driving trade-ins?

How are you thinking about that? Then also if you could just talk regionally about whether you're going to target certain regions or if this is going to be more of a broad-based, nationwide type advertising?

That $10 to $20 million is brand-based and focused on that strategically focused on that. We'll start spending that money, call it now, beginning of second quarter, somewhere in that timeframe.

We got to build commercials and do different things. We got a lot of fun ideas that we'll present to the public.

I wouldn't expect any of that to be put into action for the public and you guys to see until the fourth quarter as we begin to launch stores again. That'll all kind of come together.

Unfortunately, you got to start spending some money now, the return doesn't come until fourth quarter or '27. Then that'll be focused on our markets, but then as we move into '27, we'll even start marketing our brand in markets we don't exist in.

We've seen sort of our competitors do that and they've done a great job with that. What the Echo, as Heath was saying earlier, we're going to bring the EchoPark brand to life, and we're going to start sharing with the world what our pricing model is and how great our guest experience is.

That's a one-two punch that's going to be very difficult to deal with, on top of an amazing selection of inventory. Put all that together, and we think we're sitting in the catbird seat and we've got a lot of runway in front of us.

There's a lot of pre-owned cars being sold in this country, we're very excited about it.

This is David, and and something to note is that remember that the first EchoPark store opened in 2014, so that that this is a, something that factually we know that when people know us, like in markets like Denver, that, we get a far higher market share, we get more for our cars, we, they they know about us, they they refer their friends and family to us. We have a lot of people who bought from us over and over again.

This's not something that we're wondering, well, what if we advertise, will it work? It it absolutely works.

They just need to know about us.

All right. That's very helpful.

Thank you. Then my last question, just on GPUs, fared pretty well in the fourth quarter.

Just kind of curious how you're thinking about the cadence of that in '26?

From This is Jeff. From a new car perspective, we've put it out there in our franchise segment of $2,700 to $3,000 a copy.

Prob- could, be a little stronger than that in the in the first quarter of the year, maybe April, tax return season, all the good things. We're going to see what happens with tariffs.

Thank God for our manufacturer partners last year in '25. They made up you saw their balance sheets and what they all lost and what they've done for our industry.

They they they are going to pass those expenses on. Our average retail selling price just got to $60,000 in the third quarter, over $62,000 in the fourth quarter.

These are all-time record-high prices. The affordability issue, while maybe not being felt in '25, we believe as you get into May, June, July, August, you're going to start feeling it as as new car prices have nowhere to go but up.

That's that's a difficult situation. It's a great situation for us with EchoPark because it's going to put, put us in the catbird seat with affordability from an EchoPark perspective and our used car business on the franchise side.

That's exciting for us, but I I I think that everybody needs to keep a real close eye out on the inflationary effects and what's going to happen with new car pricing as we move into the early parts of the summer, late spring here, and these our manufacturer partners start moving that cost on to the consumer in a more in a in a in a way that we did not see in 2025.

Actually, as a quick follow-on to that, are you starting to see indications that the OEMs are planning to push on more costs? I don't know if you have any additional commentary there.

Absolutely. They're lowering margin, rebates that we get, they're push- prices are going up.

There There's no question that you're going to see that. They're not going to sit back and lose billions and billions of dollars.

They can't. It's just not going to happen.

It's going to be really interesting to see the elasticity in new car pricing as we move forward over the next six months. Look, January was a hell of a month.

Without the snowstorms, it would have been a magnificent month. We'll we'll see.

I don't know if it's the tax stuff that's that's helping that, but definitely prices are higher, and so maybe there's some some great elasticity, but it does bring in the affordability discussion, and it really rings the bell from a used car perspective. We're going to have that gap that we've been missing between new car and pre-owned cars again, and that that's just going to be fantastic for for for the industry and really, really good for EchoPark.

All right. Thanks for the detail.

You bet.

Thank you.

Great. Thanks for taking the questions.

Just wanted to quickly follow up on the EchoPark commentary. You've given the store openings later this year, the increase in advertising.

It looks like the year-over-year growth should accelerate in the back half. Is are you setting up for 2027 to be an even stronger year from a growth rate perspective than the high single digits this year?

Is that the right takeaway,

Yes.

from these investments? Okay.

100%.

Got it. Okay.

That's helpful. Maybe I want to pivot to parts and services.

Understandably, warranty comps were tough here in the fourth quarter. Could you give us an update on where you ended up with respect to same-store technician growth and any targets for 2026 that you're going after there?

Would be curious. Thanks.

I think since March of '24, where we started our technician focus, we're now plus 400 technicians from that original date that we started talking about this, and that's been a big part of our success since then from a fixed operations perspective. We're all in Houston right now at our annual meeting, and our whole annual meeting today is focused on fixed operations and our ability to grow this business significantly.

We think we've got $100 million a month in fixed operations gross that we can do. That's $1.2 billion.

We did a little over a billion in '25. We're really excited about the opportunity here.

There's just too many customers that went in for the industry that don't come back to a new car store to have their vehicle serviced, and it's like 50/50. We think we can attract a lot of customers.

We've got the time to sell, we've got the bays, we've got the technicians, and we're going to take advantage of that as we move here forward here over the next year or two.

Understood. Then just on your balance sheet leverage, just a question on capital allocation.

Looks like, the way you defined it, it's 2.1 in terms of net debt to EBITDA based on, the add-backs you're allowed from rating agencies. I'm curious, how much could you stretch and would you plan to stretch that in '26 or in the medium term to maybe deploy more capital into either more M&A or buybacks?

Thanks.

If you look at that with that rate, I think we are the first or number one or number two in leverage ratio, and we're comfortable with that. We want to have a very strong balance sheet.

We would be comfortable going to a 3.5, but there's we can actually execute our plans for next year and still maintain that low leverage ratio. If a nice acquisition shows up that requires some debt funding, then we could do that as well.

We have plenty of room. We've got enough dry powder to implement our plan for '26.

You can see we had the big acquisition in 2025, that was the majority of our capital spend. You can see that from a returning capital to shareholders, dividend, that's been increased by 200-plus over the last several years, and so that's always something.

We want to stay within 20% to 25% payout on the dividend, that's our target. Share repurchase, that's one of the things that when we see opportunity, when we have a price that pencils out, and it's the best return, we're going to continue that as well.

Then the last piece is returning, basically investing back in the business, and as we start growing EchoPark, you'll see that bucket fill up a little bit more as we build new EchoPark stores. Very comfortable with our balance sheet, all of our covenants, and got the dry powder we need to execute for '26 and on forward into '27.

Rajat, this is David. I think just on M&A, just to note that these opportunities we in our industry come along and they can come along quickly and we're excited so far about our big acquisition of the JLR stores last year.

It's been a great acquisition, and that one came along pretty darn quickly and it was a great one. Hopefully, we'll see some more like that and more and some great opportunities to grow the business and grow earnings.

Great. Thanks for all the color.

Good luck.

Thank you, sir.

Thank you.

Hey, good morning, guys.

Morning, Bret. Good

morning.

Hey, slide 13, I and, I guess down in '26 roughly by the amount of your marketing advertising expense. Do you see that reflecting positively in '27 as a sort of ongoing roll-out expense as you start rebuilding the business?

Bret, you broke up right there at the beginning. Is that on EchoPark?

Slide 13.

Yeah. I was wondering, do you see that in '27 accelerating as you passing this initial marketing expense?

Yes. That's exactly how you should look at it.

We're going to have some initial spend here while we get prepared for launch. That's really not going to happen until the fourth quarter as we begin to open a few stores, and then we'll have a cadence of stores that we can open next year in a different level of spend that we'll talk about as we begin to grow the brand across the country and focus on driving our million-plus sales and our 90% coverage.

As we go through the quarters, we'll continue to update you guys on where we are and the progress that we're making. We gave you a $10 to $20 million range, kind of we'll we can narrow that gap a little bit as we get towards the fourth quarter for you, but that's exactly how you should look at it.

Just to add to that, Brett, this is Danny. We guided to high single-digit volume growth for EchoPark in '26, but as Jeff said earlier, that really doesn't reflect any benefits from this brand investment.

You could look at that as accelerating in '27 and beyond as we get the benefits of the brand investment and increase our store base. That'll help drive both the volume-based growth that we're projecting as well as some EBITDA leverage in '27 and beyond.

Great. Then a question on Q4.

Some of your peers talked about luxury consumers acting a little softer than normal for that seasonal period, and you guys didn't mention that. Are you seeing any behavioral change, whether it's people pushing back on these high AS ASPs in luxury, or in the parts and service, is there any move to decline recommended services, anything at the consumer we should read through?

That's what I was saying earlier. I'm concerned about the tariffs and from a pricing perspective what's going to happen as we get into the early summer.

If you'd have sat been with us and you were looking at October and November in the cadence, you'd have gone, holy cow, you guys better have a big December. This is going to be a rough fourth quarter.

Then December came along and it was just one of those great Sonic Decembers that we always count on and it was just amazing. We sold a lot of everything.

In particular, in our luxury segment, and surprisingly, $62-plus thousand average selling price is that mix changed to luxury, and we were prepared. We've been doing this for so long together as a team.

We had the right inventory mix. Our manufacturer partners stepped up, and so we had a great, quarter.

We think was a great quarter and an amazing December. Then we came in and had a really good January.

When we report, we can talk about it on the first quarter, but the snowstorms slowed things down a little bit, but it was still a great January even with the damn snowstorm.

Had we not had that, right?

Had we not had that, wow. We'll see.

I am cautioning you and concerned about what is going to happen, how far how much elasticity can we deal with or can the consumer deal with from a new car perspective, and something's going to have to give here. The prices are getting or just getting too high.

Now didn't show up in January, it's really not showing up in February. We'll see.

I think a lot of people are counting on big tax returns. We'll learn a lot this summer.

Great news is the service business is great and has lots of upside, the F&I business is great, and then the used car business should just be fantastic. As that gap widens, you really want your average retail selling price for a used car to be 1/2 that of a new car, and we're beginning to see that gap come back.

During COVID, it got all the way to 80%, 90%, sometimes 100%, depending on the on the brand. A lot of great opportunities as we move into the year, but a big caution on exactly what's going to happen from a from a pricing perspective on new.

Do you have visibility as to what the OEs are going to pass through in higher price, sort of on a same-SKU basis? If a BMW X Series was $50, is it now $55 with the pass-through?

You I don't, I'm from based on what I've been seeing, we're seeing 3% to 5% increases, and that can be a 1% to 2% increase on a normalized basis, right? They're definitely passing on, but they're also doing a great job of cutting spending where they don't need to spend, and cutting programs that were nice to haves.

I've spent a lot of time on a bunch of different dealer boards and that's a great topic of conversation with the manufacturer partners. They are do making some really good decisions on spend so that they don't have to impact pricing and they don't have to impact margin.

The tariffs are too high on some of these brands, and you're going to they're going to pass pricing on. It's already happening.

They're going to cut margin. It's already happening.

They paid for it all in '25, and that's a big point here. They really paid for it and you can see it in their reported numbers and the amount of money that some of these manufacturers were losing in the billions of dollars.

That's just not going to That's unaffordable. That's not going to continue to happen, and something's going to change as we move into this year.

We'll see that it's if we've got to really pay close attention. I was calling this out, if y'all remember, in the third and fourth quarter: watch these numbers.

I'm telling you, watch these numbers. Watch new car pricing as we move forward, in particular on luxury.

The Luxury buyer will push back at some point.

Great. Thank you.

Thank you.

Hey, good morning, everyone. Morning.

Good morning.

Just kind of look more looking at fixed ops, I was just wondering if maybe you could speak to possibly like a subscription nature of this business, or I know I guess you're trying to bring people back into the funnel, but when people buy cars, I know there's a pre-buy option for three years of service, that type of thing. Is that something you're seeing and that gives you confidence in growing this business, or is that so small right now that it's not really a factor?

No, I think that we have a opportunity to sell more products like that for sure to bring the customer back. The industry as a whole is doing something wrong if 10 customers come in, buy cars, and five of them don't come back to a dealership to have their vehicle serviced.

In some manufacturers, as high as 70%. This is something as an industry we must address.

Why would you not come back to a dealership where you have ASE-certified technicians, you've got the best equipment, the best parts, the best service you can get, and they're going to mom-and-pop store, half of them are going to a mom-and-pop store down the street? That would indicate that there's a pricing opportunity from my perspective.

There's an opportunity, we filled the bucket up with technicians and the amount of hours that are available. Now we need to put that to work for us, and that's where we are at this point in time of our journey is really sharpening our pencils, making sure that we've got the right pricing out there, and that we're bringing customers and the marketing, and we're bringing customers into our service drive.

There's more out there to get, a lot more out there to get, a lot of upside, and we're just scratching the surface from my perspective.

We've got to get the perception versus reality, where the customer knows that our prices are actually competitive or better than the independent down the street. That plus, I was going to say, literally the marketing is a new concept from the Sonic perspective.

We have a focused sales force, we have a focused campaign now, which we used to never have that on the service side. That, coupled with having products, warranty products that drive the consumer back to the franchise dealer, those two things are going to help our market share.

One other point there, we guided to mid-single-digit percent growth in fixed ops on a same-store basis. Fourth quarter, our warranty was only up 2% year-over-year.

That had been growing 20%, 30%, 40% year-over-year for the last several quarters. We're finally seeing kind of a normalized level there.

We think that these opportunities on the customer-pay side are what's going to drive sustained, mid-single-digit growth above that long-term, 2%, 3% average, but continued opportunity with the additional technicians, the marketing efforts, the efficiency of selling the hours and loading the bays. There's some real upside there in that piece of the business that just crested $1 billion in gross for the first time this year.

It's, the larger numbers with a, mid-single-digit percentage is significant opportunity from a gross profit growth perspective.

Just on that, is this something I know you guys have to take the ball and run with it, but it's something the OEMs can help with as well? I know that cars are getting smarter.

You don't just see a check engine light, you can actually push a message, what needs to happen and maybe the price. Do the OEMs help on this front as well with the cars getting smarter, or is it 100% you guys have to kind of take this and execute here?

100 Well, yeah, 100%. You sit down and talk with many of our OEM partners, they see the exact same issue.

It's at the top of discussion with all of them is, how do we drive more customers in that we're selling cars to now back into our service drive, and what products do we need to use in order to make that happen? I've had this exact conversation with the leadership at Toyota and Lexus not too long ago.

It is a big, big focus point. We need to drive more customers that we're selling cars to back into our service drive.

We can do it. The industry needs to do it, but we're certainly going to make that happen at Sonic Automotive.

It's awareness, as David was saying earlier, it's making sure that our door rates and our pricing are in the right areas in terms of being competitive with the mom-and-pops up and down the street. That data is readily available for us all now, and I think you'll see us make a big impact as we move forward.

I think you're, sounds like you're also thinking of the technology side of it, where the customers will have apps for their BMW, Mercedes, Porsche, etc., and the app will tell them, okay, come on in and that's going to drive a lot of business for us.

Okay. That's something that's not quite happening now, but can get better.

Got it. 100%.

Then just one on EchoPark. Do you feel like you need a buy button on EchoPark given what digitally only what Carvana is seeing as far as growth in units, or is it just about convey the value to customers, convey the price, and then, versus peers, and from there that should get the customers into the store, and that has consistently got the customers into the store in your older locations?

Part of that $10 to $20 million spend is we'll see a launch of the EchoPark app, which we're incredibly excited about. We're building and investing in a digital retail solution that we think will be industry leading once complete.

We've got a great team is dedicated to that, and we're very, very excited about that exact opportunity for EchoPark. We need it.

We need in an omnichannel environment, whether the customer wants to come in and test-drive the car or, sit at home in their underwear and buy a car, we need to be in a position where we can take care of that guest all the way through that buying journey. It's great, because at EchoPark, they can come, they can test-drive a car.

Many of our competitors, you can't even test-drive a car. You've just got to buy it.

We want to put ourselves in a position where they can do all of that, and that is part of that spend. Great, great question.

Much appreciated.

Okay. Thanks, and good luck.

Thanks, Chris.

Thank you.

Thanks very much. Good morning, everyone.

What are you mentioned some variables that are giving you confidence, I don't know if they're internal or external, to step up the growth again at EchoPark. Can you talk about some of those?

Yes.

Go ahead.

This is Heath. One of them is obviously external triggering is the inventory returning.

That's going to be a big part of it, and we've said that from the beginning, that once that inventory starts returning, and I think we all believe it's going to take till '28 to '29 to get back to the 2019 number. That's the external.

The other internal is the fact that we've seen we can actually make really good EBITDA even at these lower units that have been sold. A lot of the efficiencies that we have seen and done internally gives us confidence that now we can grow.

The branding that David was mentioning, at our older locations, we can command a higher price and get a higher GPU because it's been there long enough that the word-of-mouth branding is working. That, coupled with the inventory coming back, coupled with the things we've learned with this lower-unit environment, are the things that give us confidence that it's time to grow again.

We've said

You have the number Go ahead. Oh, go

ahead. We've said for the last two years, as soon as inventory begins to return, you're going to see us

methodically

start and strategically growing. Inventory's returning, and we're going to start methodically and strategically growing.

One of the things that's most impressive, because of the environment we were in, we got a lot better of finding alternate sources to buy, better buying off the street. All of that's going to help us as we grow as well.

Also, this is David. Also the economics of what a new EchoPark location and the money we're going to spend on those is going to be far less than some of the locations we've had some of our current locations.

It's going to be a lot easier. We're going to have to sell a lot fewer cars at those locations to actually break even, you're going to see those locations are going to be highly profitable.

Did I hear the number right, your goal is to get to a million units?

That is correct.

It's 90% coverage We actually said over a million.

It's a million-plus units. That's not a new number.

If you go back and you look at our growth trajectory from '18, '19 before COVID hit, we were saying this exact same thing. We're on our way to making that happen, and we were well on our way and the whole world changed.

Now, methodically and strategically, we're on our way again, and we darn well believe that that is something that we can do. We know we've got the pricing methodology, we've got the inventory management, and we've got the guest experience.

We're adding technology, our branding. We've been doing this for a long time, and we're very excited about this day.

It's a long time a-coming.

It's a big deal. Second thing, two of the headwinds that kind of hit you in 3Q were BEVs and JLR.

You didn't mention you had a JLR acquisition. What's the inventory situation like with JLR?

How did the what's the latest trend on the BEV side?

Yeah. We sold a lot of BEVs because of the tax credit going away in the third quarter.

That significantly dropped, and, we'll see what happens in this upcoming calendar year, but maybe settle in the 5% to 7% range, who knows. JLR's inventory was impacted by a multitude of things, but coming back now.

We're right on plan with our acquisition there, which is great. We were real green with those guys, really understand that brand, and the acquisitions that we made in California, JLR, Beverly Hills, it all goes together.

Newport That's a great fit for us. We're very excited about that acquisition.

Their inventory is returning. They're another one that are going to be faced with the tariff issue, right?

There's not a plant here and they're faced with this, as is Porsche, as is Audi. These are all things that they're going to pass on expense to the consumer.

Fantastic product, and our inventory is improving as every month goes on with them.

Fortunately, that, the JLR customers, it, the people love those cars. We've got, multiple customers that have more than one in their garage.

so it's a great brand. We're excited about that acquisition.

Mike, on the BEV mix, we saw north of 12% of our sales mix in the third quarter was EV with the pull-forward demand from the federal tax credit expiration, but it was only about 4% of our mix in the fourth quarter. You've seen our inventory mix of EV become more in line with that kind of 4%, 5%, it's benefiting GPUs.

Relatively speaking, BEVs are still $100 headwind in the fourth quarter to blended GPU, but that was down from $300 in the third quarter, and so as we go forward, if the OEMs can continue to produce the right BEVs for the right markets as importantly, I think that becomes less of a headwind for us going forward.

Really appreciate the color. Thank you, everyone.

You bet.

Thank you.

Good morning. Wow, thanks for squeezing me in.

Morning, Glenn.

Good morning.

Just revisiting the pricing discussion. Jeff, you mentioned a few times OEMs cutting margins.

Can you just clarify, is that a reference to dealer margins?

Both. You've got dealer margin in some manufacturers being cut, you've got price increases, 1%, 2%, 3%, you've got all kinds of different things going on, and then you've got manufacturer partners doing a great job from my perspective on their part cutting spend where the dealer and the manufacturer got together and said we really didn't need this program.

They're doing everything they can to fight this tariff battle, but again, if you go back to '25, and you look at some of the losses that some of our manufacturers took, it's a lot, and they did an amazing job fighting this battle. They're not going to fight that battle by themselves forever.

It's just not going to happen. They're going to have to pass on, and I just we'll see what happens from a pricing perspective, from a margin perspective.

We're working incredibly close with all of them, and everybody's got the right mindset, everybody wants to do the right thing, but there's only so much room before you have to start passing on price increases to the consumer.

Yep. On a related note, are you seeing any signs of them decontenting, taking out equipment?

Absolutely. That everybody's looking at it is, what can we do to pair down the price of a vehicle, whether it's wheels, you name it.

That's something that is a topic of conversation across the board.

Any items in particular, Jeff, that stand out to you?

No. I could probably go get you some detail, but none off the top of my head.

Wheels definitely are part of that. The infotainment systems are certainly changing, and really we're heading in one direction when BEV first launched because of the amazing technology in those vehicles.

I think that's being tightened up, and more to come. We're really at a crossroads, an inflection point, as manufacturers put their arms up and say enough is enough, dealers certainly can't absorb those kinds of hits, and pricing is going to have to change or something's going to have to change.

Interesting times. Okay.

Then just a question on the outlook. You're expecting a 10% increase in floor plan interest expense.

Is this a function of higher store count? I know you guys acquired those JLR stores last year.

Or is that a function of you expecting to carry higher inventory levels, or both?

It's really on store count and brand mix, as well as the inflationary cost of vehicles. Our floor plan is based on the dollar value of the invoice cost, and if the OEMs are going to pass along with the model year '26 increases we've seen, as well as what we expect in '27.

Then compound that with, we carried a higher floor plan offset balance for most of last year, depending on what we do from a capital deployment perspective going forward, you could reduce the benefit that we see against floor plan somewhat. It's a combination of factors.

Okay. That makes sense.

Just to confirm, your floor plan rates are variable, no? Any reduction in rate the rate environment should be a favorable offset to that.

Is that accounted for in your outlook?

Yes. Yes, and

that's accurate.

Okay. Very good.

That's it for me. Thank you.

Thank you.

Thank you.

Thank you.

Thank you very much, everyone. We'll speak to you next quarter.