莉西亚汽车 (LAD) 2026年第三季度业绩电话会议：每股收益增长9%，DFC收入增长近70%

Lithia Motors & Driveway（纽约证券交易所代码：LAD）公布的第三季度财报显示，尽管同店收入有所下滑，但季度收益仍实现增长。二手车盈利能力、售后业务以及 Driveway Finance Corporation（DFC）表现强劲，抵消了新车业务的疲软。

核心要点

• 营业收入略低于100亿美元，调整后摊薄每股收益（EPS）同比增长9%至10.34美元。
• 同店收入下降1.4%。新车收入下降2.6%，销量同比减少2.7%，但二手车和售后业务毛利的增长抵消了部分降幅。
• 二手车毛利增长9.3%。在3至8年车龄车辆盈利能力提升的支撑下，单车二手车毛利（GPU）增长13%（即234美元），达到1,993美元。
• DFC金融业务收入增长近70%至3200万美元。管理应收账款增长22%至50亿美元，北美渗透率 reached 18.3%。
• 调整后经营现金流增长12%至3.77亿美元。净杠杆率环比从3.2倍下降至3.1倍。
• 管理层表示，Pinewood AI 和代理型 AI 应有助于支持其将销售、一般及管理费用（SG&A）降至毛利60%以下的长期目标，尽管全面发挥效益预计将滞后于系统推广过程。

关键财务数据

业务与经营表现

二手车与定价

即使可比二手车销量下降，二手车毛利仍增长了9.3%。核心的3至8年车龄类别领涨，其单车毛利（GPU）增长44%。管理层将这一结果归因于动态 AI 定价、更严格的定价纪律，以及 Lithia 门店端与更广泛的数字销售漏斗之间更好的协调。

管理层表示，目前可能只有不到四分之一的门店拥有足够高效的销售漏斗来按市场价格出售普通车辆，这表明未来仍有进一步提升的潜力。核心二手车目前定价估计为市场价的97%至98%，而整体二手车组合仍比主要“单一价格”零售商低约5%。

新车与 F&I

新车收入下降2.6%，销量下降2.7%。进口品牌销量增长0.8%，而本土品牌和豪华品牌销量分别下降8.8%和2.9%。

单车 F&I 收入下降4.7%至1,736美元。管理层提及购车负担能力压力以及 DFC 渗透率的提升，后者将部分前期 F&I 收益转变为经常性金融收入。公司表示，每笔自营金融贷款全生命周期产生的盈利能力是前期一次性交易收益的3到4倍。

售后业务

售后业务毛利增长2.4%，实现连续第八个季度增长。利润率扩大100个基点至59.5%。

在北美市场，客户自费维修收入持平，保修收入增长6.1%，零部件批发下降4.3%，碰撞修复收入下降1.5%。维修工单量略有下降。管理层估计今年至今每份平均维修工单的通胀率约为4%至5%。

英国售后业务受益于 AI 辅助的预约与预售。管理层表示，AI 交互通过引导客户在到店前考虑相关服务，额外带来了约10%至11%的预售增量。

Driveway Finance Corporation

DFC 新增贷款发放额达9.37亿美元，平均管理应收账款增长22%至50亿美元。北美渗透率上升至18.3%，正迈向管理层设定的至少20%的目标。

信贷指标保持稳定。新发放贷款的平均 FICO 分数为752，前端贷款价值比（LTV）为94.6%，贷款损失准备金占应收账款比例从3.1%降至2.8%。管理层还表示，各信贷梯度的逾期率在同比和环比方面均改善了20%。

成本结构与 Pinewood AI

调整后 SG&A 占毛利的 68.5%。在北美，同店该比例为 65.7%，环比改善了50个基点。

Lithia 正在缩减管理层级、合并岗位、实现后勤工作自动化，并整合供应商与系统。由于集成需要特定制造商的 API，Pinewood AI 正按汽车制造商分批引入。管理层预计北美地区的推广将于2028年底前完成。

资本配置

Lithia 在本季度回购了 8500 万美元的股票，以 345 美元的均价购买了 246,307 股。今年以来的股票回购和股息分配总额超过 6.27 亿美元，总股本同比减少了 11%。

公司在孟菲斯收购了四家现代和起亚门店，预计年化收入为2.5亿美元。在2026年期间，Lithia 收购了代表12亿美元年化收入的业务，并剥离了2.5亿美元表现不佳的收入业务。

管理层继续将收购价格目标定在收入的15%至30%，或正常化 EBITDA 的3至6倍。管理层表示，公司每年产生约15亿美元的自由现金流，对于在接近3倍净杠杆率的水平下运营感到舒适，同时也在致力于将其降低至3倍以下。

管理层展望

• 管理层预计，随着渗透率、应收账款和融资效率的提升，DFC 的盈利能力将继续保持同比增长。
• Pinewood AI 部署预计将于 2028 年底完成。管理层表示，将 SG&A 降至毛利 60% 以下的进程可能会落后于门店实施进度 12 至 24 个月。
• 公司认为，将 SG&A 从 70% 以下降至 60% 以下的潜在降幅中，约有一半可能来自代理型 AI，其余部分则取决于销量提升和门店执行力的改善。
• 管理层认为约 2,000 美元是 2027 年二手车单车毛利（GPU）的合理底线，并预计长期轨迹将保持在该水平之上。然而，管理层提醒称，第四季度的正常季节性因素可能会导致环比下降。
• Lithia 仍然专注于其长期目标，即每产生 10 亿美元收入带来 2 美元的每股收益（EPS）。

风险与关注要点

• 管理层称第四季度是 Lithia 季节性面临最大困难的时期，原因是公司在雪带地区（Snowbelt）的业务敞口以及英国缺乏重大的新车注册月份。11月的表现可能会尤其软弱。
• 购车负担能力继续压制可选的 F&I 产品，并可能影响客户在零部件和服务方面的决策。
• 利率企高可能会在 DFC 融资成本的变化与客户愿意接受的利率之间创造出时间滞后期。
• 北美售后业务增长依旧温和，客户自费收入持平，维修工单量略有下降。
• 随着经销商网络的扩张速度开始超过其销量增长，知名中国汽车品牌对英国业务增长的贡献可能会有所放缓。

分析师问答要点

二手车单车毛利（GPU）的可持续性：管理层表示，改善仍处于早期阶段，估计只有不到四分之一的门店在按目标效率运营。更好的库存库龄管理、定价纪律和数字线索生成可能会支持进一步的增长。

FTC费用执法：Lithia表示，在明确执法行动之前，公司已经披露了文件手续费，并且基本上做到合规。因此，管理层未发现在第三季度存在与该规定相关的重大定价调整。

DFC信贷质量：公司报告近期借款人行为未出现恶化。逾期率有所改善，管理层强调每笔贷款都是在风险调整后净现值的基础上进行评估的。

新车库存：管理层表示库存状况健康，供应量约为60天，预计车型年款更替不会对第四季度的单车毛利（GPU）造成异常压力。

中国汽车制造商在加拿大：Lithia最初可能会增加少量特许经营权，但计划采取审慎的方法。管理层提及加拿大较高的房地产成本，以及由于初期服务和零部件业务基础有限，预计需要6至8年的盈亏平衡期。

英国市场：Lithia在英国大约一半的增长归因于中国品牌。管理层表示，它们的吸引力主要来自购车负担能力以及更广泛的插电式混合动力和内燃机车型组合，而不仅仅是纯电动汽车。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

Operator

Greetings. Welcome to Lithia Motors & Driveway Third Quarter 2026 Results Conference Call. [Operator Instructions] Please note, this conference is being recorded.

We'll now turn the conference over to Jardon Jaramillo, Senior Director of Finance. Thank you. You may begin.

Jardon Jaramillo

Good morning. Thank you for joining our third quarter earnings call. With me today are Bryan DeBoer, Chairman and CEO; Tina Miller, Senior Vice President and CFO; Chuck Lietz, Senior Vice President; and Scott Cook, Driveway Finance Corporation and Southeast Region Operations President. Today's discussion may include statements about future events, financial projections and expectations about the company's products, markets and growth. Such statements are forward-looking and subject to risks and uncertainties that could cause actual results to materially differ from the statements made. We disclose those risks and uncertainties we deem to be material in our filings with the Securities and Exchange Commission. We urge you to carefully consider these disclosures and not to place undue reliance on forward-looking statements. We undertake no duty to update any forward-looking statements that are made as of the date of this release. All to discuss today include references to non-GAAP financial measures.

Please refer to the text of today's press release for a reconciliation of comparable GAAP measures. We have also posted an updated investor presentation on our website, investors.lithiadriveway.com, highlighting our third quarter results. With that, I'll turn the call over to Bryan.

Bryan DeBoer

Thank you, Jardon. Good morning, and welcome to our clear earnings call. Our third quarter again demonstrated what makes Lithia & Driveway different. We delivered revenues just shy of $10 billion and adjusted diluted EPS of $10.34, up 9% from last year, growing earnings in a mixed retail environment. Our leaders continue to capture the profitability of our diversified and durable model, delivering quality results in any environment. During the quarter, same-store revenues declined 1.4%, a resilient result as we lapped revenue growth of nearly 8% in the third quarter of 2025.

Our gross profit comparison was the best of 2026 and we exited the quarter with good momentum. Total vehicle GPU of $39.58 was down only $63 year-over-year, reflecting strong pricing discipline. Our teams responded dynamically to the market and our progress is in a position to accelerate our growth, diversification and results going forward. As a reminder, all vehicle operations results from this point forward are on a same-store basis. Used vehicle profitability was strong with GPU up 13% or $234 year-over-year. In North America, same-store SG&A as a percentage of gross profit improved 50 basis points sequentially, reflecting our ongoing focus on cost controls. Driveway Finance Corporation continues to grow delivering finance operations income of $32 million, an increase of nearly 70% over last year as average managed receivables grew 22% and provision exists also improved.

Our model is designed so each business line reinforces the others, and this quarter demonstrated that dynamic. Our growth starts with our people who are pricing smarter and running leaner across our ecosystem. Every customer relationship creates reoccurring value after the first sale and a vehicle we sell today brings that customer back to our service drive tomorrow and eventually returns as a trade-in, all accelerating our DFC and Driveway platforms. I want to personally thank our store and support team members for the results they delivered this quarter and the care that they show our customers each day. Our diversified mix continued to drive stable earnings with used vehicle gross profit, up 9.3% and after sales gross profit up 2.4%, offsetting a modest quarter of new vehicles. New vehicle revenues declined 2.6% on 2.7% fewer units against a demanding comparison to last year's third quarter when new vehicle revenue grew 5.5%.

By category, import units grew 0.8% and domestic declined 8.8% and luxury declined 2.9%. We view these conditions as cyclical. And as comparisons ease in the fourth quarter, our team carry a strong trajectory into year-end in the following year. In used vehicles, our pricing strategy continues to deliver, and it's a great example of our ecosystem technology and people all working together as one. Total used gross profit grew 9.3% year-over-year and used GPU was [ $1,993 ], led by our core 3- to 8-year old vehicle category, where GPUs rose 44%. Our work on dynamic AI pricing supports improved profitability and used vehicles remain one of our highest return businesses, providing an anti point to our ecosystem for customers at every affordability level. F&I per unit was $1,736, a 4.7% decline year-over-year.

As a reminder, DSC's gross shifts a portion of our F&I into captive platform where each loan earns reoccurring countercyclical income that is 3x more profitable over its lifetime. Variance is at a greatly reduced cost. After sales continues to anchor our resiliency with gross profit growing in each of the last 8 quarters and margins expanding 100 basis points this quarter to 59.5%. earns on every vehicle in operations, not only the ones we sell, and it is where the relationship we build at each sale keeps paying off. Lifetime Oil contracts are an example of how we are building customer retention through higher attachment with nearly 1 in every 4 North American customers now choosing to subscribe up more than 200 basis points over last year. We're building on that improved retention in our service lines, reaching customers before their next service is due and getting the most value out of each of them on each visit. Adjusted SG&A as a percentage of gross profit was 68.5%, in line with the second quarter. In North America, same-store SG&A was 65.7%, likely sector-leading performance that demonstrates how our scale, diversification and store leadership is transforming our operations. In our sales departments, we've combined roles, removed layers and given our strongest leaders responsibilities across multiple stores and departments. Behind the scenes, automation, more efficient vendor relationship and AI tools are also contributing -- with managed receivables now at $5 billion in penetration climbing towards our target of 20% or more, DFC is doing exactly what we built it to do, turning each vehicle sale into durable, stable income, a deeper, longer relationship with our customers and a clear differentiated advantage.

With DFC, Driveway and green cars, let us serve customers, however, whenever and wherever they choose, and Pinewood AI gives us a customer-first platform to truly deliver that experience. Ridgeview Partners' acquisition of Pinewood AI completed earlier this month, delivers a meaningful valuation gain on the investment this quarter while leaving our strategic alignment unchanged and providing an even brighter future for our growth moving team members onto one AI native system, will take cost and complexity out of the business, while freeing up our teams to do what they do best: bond, build trust and create memorable experiences with each and every customer.

Now turning to capital allocation. Our approach remains the same. We put capital where it earns the best returns for our shareholders. After a very active first half, we took a more balanced approach in the third quarter, repurchasing $85 million worth of stock while funding acquisitions and maintaining balance sheet strength. Our share count is 11% lower than a year ago, and that benefit to earnings per share carries forward every quarter. Our regenerative cash flows also gives us room to strategically grow our network. A few days ago, we acquired 4 GROSEL, Hyundai, Kia stores in Memphis Tennis Sealing $250 million in expected annualized revenues and strengthening our presence in the Southeast region. So far this year, we've acquired $1.2 billion in annualized revenue of high-quality stores while divesting $0.25 billion of underperforming revenue, freeing up capital to be more efficiently used. These actions make our network more diversified across brands and regions, increases efficiency, provides growth for our people and better utilizes our capital. This growth is always underwritten with discipline and consistent execution. We target purchase prices of 15% to 30% of revenue or 3 to 6x normalized EBITDA. For more than a decade, this framework has delivered returns above 25%, which is well ahead of our 15% after-tax rate.

These returns create a compelling growth opportunity in an unconsolidated industry and the scale necessary to continue to differentiate and leverage our considerable size and scale advantages. That same discipline guides how we deploy at across the business, whether through share repurchases, acquisitions or investments in our own operations, always building on our strong balance sheet. We head into the final quarter of the year with confidence in a higher quality, diversified outcome. Our results came together nicely with North America SG&A improving sequentially and record third quarter DFC income, double-digit growth in used vehicle GPU and continued after sales growth, all adding up to high-quality earnings. These gains build on each other as we continue allocating capital prudently and we remain on track to achieving our long-term target of $2 of EPS for every $1 billion of revenue. Our teams are delivering Auto on easy every day, demonstrating what makes Lithia & Driveway difference.

With that, I'll turn the call over to Tina.

Tina Miller

Thank you, Brian. Our third quarter showed continued progress with earnings growing year-over-year and improving from the second quarter. Our cash generation remains strong letting us invest in growth, return capital to shareholders and maintain a healthy balance sheet, all in the same quarter. This optionality comes from our scale and the diversity of our earnings and positions us to act on opportunities in the quarters ahead. Behind all of it are leaders across stores who stay focused on performance and on developing their people while building durable customer loyalty with each experience. As Bryan mentioned, our cost discipline is holding and on a same-store basis, adjusted SG&A was 68.5% of gross profit. The year-over-year increase primarily reflects lower gross profit in the comparison and the structural changes underway across our stores and back office positions us to capture meaningful operating leverage as gross profit strengthens. In our stores, the sales departments are leading the way.

Our leaders are aligning compensation with profitable growth, matching staffing to each store's volume and combining rules where technology allows. Together, these changes make our teams more efficient while strengthening the experience for our customers. The same focus on efficiency is reshaping how the rest of our business runs. Our back office is getting simpler with fewer systems, fewer vendors and less manual work. The continued rollout of Pinewood AI marks the next phase of this transformation we're bringing it to our North American stores deliberately at a pace that protects the experience of our customers and team members count on to the improvements we make become part of our long-term cost structure.

Moving on to financing operations. As Bryan mentioned, DFC delivered another excellent quarter. Originations reached $937 million with net interest margin of 4.7%, up 10 basis points from a year ago, as our funding costs continue to improve with scale. North American penetration reached 18.3%, continuing its steady climb. Credit performance continues to reflect our disciplined underwriting. Origination FICO scores averaged 752 and front-end LTVs held at 94.6%. Our allowance for loan losses now stand at 2.8% of receivables, down from 3.1% as the conservative approach built into DFC from the start continues to pay off. Our ability to originate at the top of the funnel is building a high-quality portfolio and as it grows, we gain deeper access to the securitization market, more efficient funding and fixed cost spread across a larger earnings base. With penetration still growing toward our long-term target, we see significant runway ahead and expect continued year-over-year growth in profitability.

DFC is delivering on its promise, adding durable earnings that build with every loan. Next, I'll discuss the strength of our cash flow and balance sheet. We reported adjusted EBITDA of $443.5 million in the third quarter, up a modest 1.3% year-over-year. Adjusted cash flow from operations, our representation of free cash flow was $377 million for the quarter, up 12% from a year bringing our year-to-date total to $987 million after adjusting for the onetime benefit related to our used vehicle floor plan in the first quarter. Generation from every part of our business continues to provide flexibility. In the third quarter, it supported our share repurchases, our dividend and continued investment in our network while maintaining the strength of our balance sheet. We repurchased 246,307 shares at an average price of $345, which remains well below our view of intrinsic value. Year-to-date, we have returned more than $627 million to shareholders through buybacks and dividends. We ended the quarter with net leverage of 3.1x, down from 3.2x at the end of the second quarter moving back toward our long-term target of below 3 and well under our bank covenant limit of 5.75x.

This matter excludes floor plan debt, which is secured by our vehicle inventory unique to our industry and integral to how we operate. Confident with industry practice, we treat floor plan interest expense as an operating expense and EBITDA and leave the related debt out of our leverage calculation. We also exclude the ABS warehouse lines and term securitizations that fund DFC. As we finish the year and look ahead to 2027, we maintain a balanced approach to capital allocation. This means we can repurchase shares when undervalued, pursue acquisitions that meet our return hurdles and extend the reach of our ecosystem and keep the balance sheet ready for opportunity. Our opportunistic strategy lets us create value in any market while continuing to string and diversify our network. And with our shares continuing to trade at a deep discount buybacks remain attractive.

Our progress this quarter reflects the continued evolution of our business. changes in the way our stores operate are increasingly reflected in our cost structure. And as Pinewood AI comes to North America, the path to our long-term SG&A targets clearer. Our ecosystem keeps doing what we designed it to do, strengthen the relationship with our customers at every touch point. And our trial allocation stays disciplined, directing every dollar to its highest return while protecting the strength of our balance sheet. We're confident our teams keep turning this momentum into lasting value for our shareholders. This concludes our prepared remarks.

With that, I'll turn the call over to the operator for questions.

Operator

[Operator Instructions] Our first question is from Michael Ward with Citi.

分析师问答

Michael Ward

Bryan, I wonder if you could provide some of the gives and takes as you've evaluated the PAG transaction and how it relates to Lithia.

Bryan DeBoer

Great question, Mike. It's neat to see that the valuation that they were receiving prior to going private was starting to look respectable at 12 to 13x earnings. I mean I think one of the big things is I think that -- and I don't mean to speak for Roger by any means, but I imagine when you look at the marketplace and look outside the public companies and then look at yourself when you're looking at your actual goodwill multiples of somewhere around 3 to 6x earnings once you strip out all the equity in the companies that he bought that company for somewhere much less than what the marketplace is actual goodwill is relative to what typical car guys buy stores for and obviously, with a lot of nice luxury stores and diversification. It looks pretty good. I would also comment that Lithium motors is quite diversified as well. We obviously are sizably larger than what PAG was and obviously, at 7.5x multiple, there's a lot of growth for us and gives, I think, a lot of our shareholders some confidence that there's a lot of room for us to run. .

Michael Ward

Yes. That's certainly what it seems like. Switching to the business at hand. You kind of alluded to the Pinewood integration would be by the end of '28. Is that kind of a gradual process? And when I look at that chart on Page 9 in your chart deck, as you get to the 65% and even 60% SG&A levels, is that the type of thing we'll see the progress as Pinewood gets integrated? And is that the right timing that it goes gradual through the next 2 years with the full integration throughout the North American market?

Bryan DeBoer

Great question, Mike as well. The Pinewood integration is being rolled out pretty much by manufacturer because the APIs are developed by manufacturer and should happen by the end of 2028. We're pretty good at that transition, but we would also say that the lowering of SG&A that's driven by AI or by the Pinewood solutions and customers and team members being in the same environment. We'll typically follow that, okay? The United Kingdom currently is doing a nice job reducing their cost structures, especially in their service departments and gaining some really nice efficiencies and it's starting to become pretty effective. They've been on that technology for about 6 to 9 months. And we're just now starting to see some of those nice gains that I mentioned in the script. All in all, I would say that the drive to a sub-60% SG&A will tail -- will trail the rollout of the Pinewood stores probably by 12 to 24 months.

Michael Ward

Okay. But that's the direction that we'll see over the next couple of years and the pine wood is a big part of that.

Bryan DeBoer

It sure is.

Operator

Our next question is from Ryan Sigdahl with Craig Hallum Capital Group.

Ryan Sigdahl

I want to start on the new GPU side. I heard from one of your peers intra-quarter, they expected amuch more significant step down in GPU sequentially, looking at your numbers much less of a moderation. Curious how you saw regional performance stack up company-specific performance stack up and then anything else to call out? .

Bryan DeBoer

Sure, Ryan. I mean, we've had pretty resilient new car GPU, and obviously, part of the reflection of that can also be seen on the used car GPU because you're taking a trade on those new cars and it's reflective on the other side. So we're pretty pleased about our ability to price vehicles and create demand top of funnel to be able to find the right customers that can pay us the appropriate prices for the cars that we're looking at. The market feels pretty good. In terms of regional differences, it could be that, that greater exposure to the higher dock fee states that some of our peers have may influence their GPUs a little bit more. But ultimately, we're seeing pretty good results across the company, and hopefully, that will continue. .

Ryan Sigdahl

Good segue into my next question on dock fees, Bryan, but FTC enforcement actions, more discussion there, specifically dock fees. Just clear the air on what you guys are hearing. And then you mentioned it, but primarily West Coast, but a lot of Lithia's footprint are in lower dock fee states. Just talk through how that flows through GPUs and -- from a financial standpoint?

Bryan DeBoer

Yes, dock fees are are part of GPU. They're just embedded in GPU. And I think the important thing to note is the FTC's enforcement rules that were clarified in, I believe it was February and March. Lithia & Driveway was obviously in compliance way before that, years before that and have typically always disclosed those dock fees across the country. So anything that you saw with us, if there was changes in a few stores, they happened in Q2.

So I'd be surprised if there's big differences between Q2 and Q3 because the enforcement action. And if there was changes, it had to be there. The best thing that it does is with competitors that are a little less transparent on their pricing and how they get to their ultimate pricing it should make those that weren't fully transparent, and we're disclosing a hypothetical $500 to $1,000 dock fee. It should allow them to be more competitive in the long run. In fact, it should have been shown even in Q2.

Operator

Our next question is from Rajat Gupta with JPMorgan.

Rajat Gupta

Just wanted to start with parts and services. If I heard correctly, I think you mentioned U.K. was up 14%, which would imply U.S. after sales probably flat to maybe slightly up. I'm curious to get your thoughts on what's driving some of like the sluggishness there, not just for you guys, but also hearing the same from some of your peers as well. And when can we expect the U.S. after sales business to start recovering? Any outlook comments you can give would be helpful. And I have a quick follow-up. .

Bryan DeBoer

Sure, Rajat. I think that the United Kingdom, and I'll start with that at the low teens. We're seeing that RAI in the United Kingdom is generating additional business. And it's coming from -- and I was on the phone with Neal and Richard and their teams earlier this week, and they shared that the idea of a presale is something that is making a difference in their revenue base, meaning when the customer books the appointment with the AI, the AI is consistently asking for additional things, service things to be windshield wipers like yes, I probably need my fluids change. Oh, yes, I need this. We're getting around 10% to 11% additional presales on every AI.

And if I had to guess before the AI went in, albeit we had close to 0, okay? Because most of our upselling is done once we do an inspection, okay? And that's a big difference. So they are getting some pretty good lift and it's something that we're trying to figure out how to accelerate some of that AI in America even before all the stores have the pit acquisition. So we'll see how that goes. In terms of -- and I think you're probably right, Rajat, that in the U.S., we were probably up slightly in terms of gross profit in after sales. I think relatively speaking, that's probably a pretty solid number, knowing that we're compounding 2 years a pretty good same-store sales increases that were mainly driven off some pretty large recalls with a few of the Korean manufacturers and a few of the other Japanese manufacturers.

So I think all in all, with what was Delta. That's a pretty good number, relatively speaking. But again, Rajat, I'll sit here and say that when I look at our business and I look at the opportunities that are afforded us, it's the single biggest area in our business that we have lots of opportunity to delight customers, okay? And we need to do that through creating personalized experience, the way each customer individually wants to be treated, okay? And we've got good transparency. We've got great people out there. We just need to open up our ears in our eyes and figure out what they're really asking for and give it to them quicker and less costly than what others can. And I think that's when we look forward and look at the my Driveway portal or look at the network that we've built, that's still our big opportunity, and we'll continue to push on that.

Rajat Gupta

Understood. Helpful color. And then maybe one on just capital allocation. Given where you are from a leverage standpoint, a little above 3x and potentially entering a rate hike cycle here. Is it seems to assume that the focus would be on delevering in the near term to get to below 3x and staying there? Just curious how we should think about buybacks or M&A in the near term?

Bryan DeBoer

Sure, Rajat. I think I mean we do produce almost $1.5 billion in free cash flow a year, and we did delever from 3.2 to 3.1 in the quarter. We do like the number of less than 3x because obviously, that helps us pathway towards IG and gives us the flexibility to scale if we need to. So we'll continue to balance capital with a focus still probably on buybacks, knowing that acquisitions are quite costly, especially in North America, and that's really the balancing act that we're always doing is looking at the crazy trading or PE that we trade at relative to what other transactions are at. So, we'll stay focused. We'll stay disciplined, and we'll continue to deploy capital in the right manner and feel comfortable in that 3x leverage range.

Operator

Our next question is from Jeff Lick with Stephens Inc.

Jeffrey Lick

Bryan, I was just curious, you used the term demanding compares for 3Q it kind of flips in 4Q where it compares -- it has the appearance of being a little easier. I was wondering if you could address how we should think about 4Q maybe caution us about kind of overreacting. And then maybe building into that, GPUs obviously were -- new GPUs were a little weaker sequentially than we've seen in the past. One of the things we've heard is that potentially the change over inventory maybe get put out a little bit, meaning that there's going to be more 2026 is a lot this far into the quarter. Any thoughts on where GPU trends on the new side could go because of that dynamic?

Bryan DeBoer

Jeff, was that first part of the question related to aftersales that Q4 looks a little like...

Jeffrey Lick

No -- I mean well, it's interesting, your new comp was down 8.3% in Q4 last year, which you completely bucked the trend because your used comp was up 5 or 4.7. So there's an interesting dynamic there as well. .

Bryan DeBoer

I understand the question then. I think when we think about Q4, we basically adjusted our company with diversification of Driveway of Driveway finance of green cars as well as a global footprint that changes how we look at our business, okay? We used to have a Q1 and a Q4 that were our softest quarter is by a large amount, like 20%, 25% lower than Q2, Q3, okay? We're fortunate that in the United Kingdom, is typically a pretty strong quarter for us just because there's such a disproportionate earnings that occurs in March in the United Kingdom that it helped balance out Q1. Unfortunately, Q4, and I mentioned this last quarter as well, Q4 is our toughest quarter, okay?

We not only have Snowbelt, but we have the United Kingdom that doesn't have a big registration month in it. And we're still looking for ways to be able to strengthen Q4. Now the good news is that Q4 does have December okay? And a lot of times on year-end product or model changeovers, October can be a decent month, okay? It's really November that can be a little bit tougher than normal. The exciting thing for us is when we look at this Q4 versus last Q4, we're starting the quarter with a nicer day supply, okay? And if you remember, some of our even they were up 5-plus percent in used cars last year. We also had pretty good degradation in GPUs. And I think that focus on GPUs going into Q4 can help us knowing that our days supply is looking a little better than last year. So with that, I'd urge everyone to just look at our relativity of Q4 to Q3. And then you can apply that looking back last year and then looking forward to this year and maybe get some indication of what Q4 could turn out to be.

Jeffrey Lick

And then any thoughts on the GPU dynamics with 2026 and 2027, is that going to have any impact on Q4 GPU?

Bryan DeBoer

I would not expect so because our inventory looks pretty clean. I think we're sitting at close to 60 days, okay? And it's sitting in the right places. So I don't expect any abnormalities there.

Jeffrey Lick

And then a quick follow-up on the used -- your used unit comp down 3, but you used GPU dollars up 9. So you guys have been -- you've been talking in the last few calls, about trying to find that balance of units versus profitability, appears like you're doing a pretty good job on profitability. Any more thoughts on just kind of the fine-tuning and where this is going to settle out?

Bryan DeBoer

Sure, Jeff. I think it's important to remember, we're at the infancy of this, and they're getting traction. We're getting a couple of hundred bucks in GPU. Many of our stores are still not adapting to that because I think we think about it as a micro funnel as a store and then the macro funnel is a driveway and Lithia. A lot of our micro funnels still haven't figured out that they need to sell the car to the first person that walks in because their funnel is small, and they flinch and sell it to the first curse. So if we can help the macro funnel feed into the micro funnel better, they get more customers sooner and hopefully can hold on price to be able to drive that. We're really grow in our core products.

So we try to teach our stores about scarcity and scarcity starts in that core product. We were up $500 in GPU year-over-year on core product, which is 3- to 8-year-old vehicles. Now on the opposite side of that, we were down 300, 400 on certified. So they're balancing some of those things out. But ultimately, the 2 together get you a lot more trade-ins and ultimately, that GPU is what helps us lever our cost structure, okay? And that's how we're able to maintain our SG&A about the same as last quarter and it should be sector-leading, I would imagine, okay, which is where we should be as the largest auto reseller in the world and maybe more importantly, that a great team of people that is powered by them, and they know what they're doing, and I trust that they'll continue to do that and find the GPU and bring it to the bottom line.

Jeffrey Lick

One relationship just real quick that you brought up in the past was that -- and I think it only pertains to the Driveway business was they priced at point-0% below Carvana and CarMax, and you've been closing that gap and you kind of highlighted that as kind of like a almost like a GP reserve that as you get closer and closer to parity, you get back. Can you maybe elaborate on that and explain kind of where you're at in that process?

Bryan DeBoer

Sure. We're still 5% below them. the double-digit number was relative to what we call value auto product, which is our lowest priced cars. Those where we were selling them for about 12% under market. It's improved slightly, okay, where we've really improved is on the core product, and I don't have the exact relativity to market, but I'm going to guess we're 97%, 98% now on core product. But you are correct that 5% as an aggregate on a $30,000 car is $1,500. I mean that is the prize of why Lithia built a bigger funnel, okay? And why green cars and Driveway exist is to bring more people in. So our stores have greater options to be able to stabilize pricing at something closer to what market conditions are.

Generally speaking, most new car dealers sell their used cars for way less than what the one price used only retailers are selling cars for, okay? And that's because they focus on new cars, and they're not quite as savvy and don't have as big a top of funnel to be able to find the right customers that are willing to pay or be able to finance that car at a higher price.

Operator

Our next question is from Alex Perry with Bank of America.

Alexander Perry

I guess maybe as a follow-up to that question and more as it pertains with some of the FTC enforcement actions. How much did you have to raise sort of the advertised price to the consumer in order to comply. And how is it impacting the used vehicle comps and maybe sort of the price competitiveness with like the CarMaxes and Carvanas out there?

Bryan DeBoer

Yes, good question, Alex. Lithia & Driveway, we were in compliance with virtually every store. So there wasn't any price adjustments, and we were fully disclosing any additional fees that were charged to customers online and then when they come into the store. They actually match, okay? And I think a lot of the game is -- had been in Florida as a lot of dealers had tendencies to price low and then have a big dock fee when you came into the store. That's not how our dealers ever did, okay? We've always been full disclosure in in every state across the country. So a little bit different. You mask some of the others.

And I think the biggest offenders are typically the private guys and the guys that aren't groups that don't have legal departments and don't play by the same rules, okay? But outside of that, I'm going to guess that most of the publics were in compliance back in March when this got announced, and I imagine most of the private larger groups were in plan.

Alexander Perry

Really helpful. And then I just wanted to follow up on the aftersales business. Could you just maybe talk to us about pricing there? Are you seeing increased work deferrals with where sort of pricing has gone and given the sort of affordability issues out there? And then do you think some of the softness is related to share lost some of the cheaper independents do you think pricing needs to come in at all and aftersales?

Bryan DeBoer

Great question, Alex. It's easy to get over our skis and raise prices when inflation was going up so much, and everyone was doing it we really encourage our stores to stay affordable as they can. But the simplest way that we do it is we do it with aftermarket parts and non-OEM parts post period. Now if a customer doesn't seem to show resistance we'll continue to replace their parts with OEM parts. But if they show pricing resistance, we're pretty good at being able to detect that and move them to an aftersales part and be able to compete in terms of what our pricing is on both labor and parts, okay? I will say, though, Alex, not all of our stores behave the same. It's really easy to get into the mode that they were warranty shops and were not customer-focused shops, okay?

And again, when I talk about auto done easy or optionality with our customers, I'd encourage many of our team members to think a little better that we've got to keep our prices in line. We've got to be able to offer the great service and the great optionality for home pickup or in-store work at affordable prices, and we're very acutely aware of how to do that. Alex, the last thing I'd remind everyone, we now have 156,000 users on the My Driveway portal, and that's an area that creates transparency, simplicity and empowers our customers to be able to choose those things and communicate with their service advisers or their salespeople immediately the way that they want, okay?

And I know that we're still in our infancy knowing that we have almost 10 million customers. It's -- we've got a long ways to go to get full adoption on that, and that's an area that customers will be able to opt for affordability a little bit more if they choose to. And hopefully, we'll be able to detect a little quicker as to if they're defecting or they're thinking about defecting and come back to them with some offers that fit their budgets. Great quit, Alex. It's a real opportunity for us as well.

Operator

Our next question is from John Saager with Evercore ISI.

John Saager

I just wanted to follow up about the sustainability of used GPUs I think this is obviously strong progress. You've talked about this for a while now, second quarter in a row, around [indiscernible]. Is this kind of a new floor of what investors can expect? Because I think even with sort of changing macro the initiatives that you've taken on should be applicable. You're buying and selling in sort of the same market. So as we look out into 2027, are you thinking about $2,000 as roughly a new floor?

Bryan DeBoer

I would say, looking into '27, that is absolutely accurate. I would remind everyone that the used car market typically does soften in Q4. So we could see a little bit of sequential decline, but overall, we should see a trajectory that GPUs continue to climb above the $2,000 GPU level, okay? And again, the prize and why we designed the entire ecosystem, including DFC and wheels and all the other componentry that Lithia is a party to was designed to be able to capture that $1,500 a unit, and you extrapolate that over 350,000 vehicles, and it's -- it's a pretty big number of about -- what it's about $500 million, I think, is the possibility if we can capture that just to get to what the average is for the marketplace of the one price retailers. .

John Saager

Makes sense. Okay. And then how should we think about the sort of the percentage of stores that are already at target relative to the whole group? Like -- is that a way that we can think about the amount of progress that you've made so far towards your end goal here?

Bryan DeBoer

John, let me get back to you on that because this is going to be a total swag. I'm going to guess, it's less than 1/4 of our stores. that have a micro funnel that is efficient enough to be able to sell their average car at market, okay? It's a small amount. And a lot of those are are the traditional Lithia stores that have been with us for years and understands how to build the right top of funnel and how to finance every type of customer that walks in the door and to be able to do it in that 15 to 45 days of age rather than in the 0 to 15 days of age, which is what most -- many of our stores, they overprice -- they underpriced vehicles too soon, okay?

And they don't let this car season in the marketplace, okay, to be able to find the right customer for seat and they just turn it. I don't mind doing that if it's a certified car, okay, that I can replace really easy. But I think all of us would say that if it's a scarce car or it's a core product, if you can't replace it, let it sit through 3 or 4 customers and generate additional business before you actually spin it and sell it to someone. So there's a lot of opportunity here, and I think we'll be able to see it in the coming quarters.

Operator

Our next question is from John Bowcock with Barclays.

John Babcock

All right. Just first one on you've been working with the Chinese OEMs in the U.K., and they're going to be expanding into Canada over the next year or so. Just kind of curious to the extent that you're doing work with them in Canada and any sort of discussions you have ongoing?

Bryan DeBoer

Sure, John. I think in Canada, I think we're pleased to see that they're choosing to partner with dealers when they move into the marketplace. That's a real positive thing. They are looking for exclusivity in Canada, which is much different than how it is in the United Kingdom, where we're spending $50 million to [ $100 ] million by buying a small inch program and assign and having the cars on our lot in 60 days. In Canada, they're looking for exclusive franchises and exclusive locations. I would also note that the real estate costs in Canada are about 30% higher than the United States as a whole, which makes it even more cost effective to be able to do that. Our numbers are showing somewhere between a 6 and an 8-year break because of the lack of service and parts business going into that market, okay?

The United Kingdom, remember, most of our franchises in the United Kingdom, they're dual with with American manufacturers or French manufacturers or German manufacturers, not obviously the luxury manufacturers. But -- and that's really easy because then I have an after sales base and any business that I get on the new car sites plus business. So if we circle back now to Canada, I think probably will be an early adopter, maybe a couple of franchises in Canada. But ultimately, we're probably at a take a wait-and-see approach just so we've got our foot in the pond to be able to see what happens in the United States in the event that they eventually come to the United States.

John Babcock

Okay. That's helpful. And then separately, on F&I, there was a little bit of a pullback there in terms of the F&I PVR -- could you just talk about that a little bit? How much of that is driven by consumers pulling back on spending? And if that is the case, if you could talk about maybe what products they're designed to hold off on purchasing now is it?

Bryan DeBoer

Sure. Sure, John. I think on F&I, I think it's important to note that our F&I is also affected by our DFC penetration, which was pushing 20%, which is great, good job check, good jobs got -- it's nice to see that because that's the main pathway to achieve today were, what, $31 billion in revenue domestically, and we say that you should be able to convert that into a 0.1 in terms of profitability. So that's $310 million in profit from Driveway. That does affect our F&I average in the short term. Though in the long term, it gets us 3 to 4x more profitability on each transaction. that we do. Now back to F&I.

I would say, John, that I think affordability does create a little bit of drag the optionality of buying service contracts or lifetime oil products are those types of things, and we are seeing a little bit of that. Outside of that, we've got a lot of opportunities to continue to grow F&I and I imagine that, that downward trend should be able to be cured pretty quickly.

John Babcock

Okay. And if you don't mind, just one more question. Just back to parts and service, I know people have already asked about this to some extent, but I was wondering if you could break out the performance across warranty and customer pay in the quarter and then also, just generally, how volumes in the quarter and how were they last quarter?

Bryan DeBoer

Sure. Volumes on service as well parts and services. Okay. here, I'll just give you the quick revenue numbers. Customer pay was flat. Warranty was up -- okay, my glasses need fine-tuning here, up 6.1. Parts wholesale was down 4.3, which means do-it-yourselfers and collision was down 1.5, okay? On gross, customer pay was flat. Warranty was [indiscernible]. Parts wholesale was flat and collision center was flat, okay. The warranty is being driven, and I mentioned this last quarter, there's some franchise loss changes that are allowing us to get the full hours that we typically need to pay our mechanics, manufacturers in Florida, New Jersey and I believe, Virginia now are required to pay that. A lot of the lift in gross profit the differential is coming from that, that 4% difference is coming from just those 3 states alone. .

John Babcock

Okay. And then just from a unit perspective, like overall, are you -- I assume with the relatively flattish growth on the same-store sales basis, we should assume volumes were down during the quarter?

Bryan DeBoer

I don't have my -- it's technically called repair orders, and I think it was down slightly. It was down slightly.

Operator

Our next question is from Bret Jordan with Jefferies.

Bret Jordan

But I guess when you think about customer pay price, and it would seem like car accounts were down a little bit. What do you think price inflation year-to-date has been sort of on an average repair order?

Bryan DeBoer

Which would ultimately be the cost of our technician.

Bret Jordan

Technician parts, right.

Bryan DeBoer

I would probably say 4% to 5%, it's a total swag, Bret, but I'm going to guess it's something like that.

Bret Jordan

All right. Great. And then I guess on the U.K., you called out the Chinese success story over there. how is the legacy business? I mean what's the Chinese contribution to that north of 10% growth in the U.K.? And as you -- is there an opportunity to sort of keep that above-trend growth by adding more Chinese to the footprint?

Bryan DeBoer

So about half of that success is coming from the Chinese. Fortunately, our market share in our luxury brands have been really good. Like we've been able to continue to grow our BMW, Porsche, Mercedes and over franchises, and that makes up a lot of our business over there. The other thing is we've got a pretty good footprint in our mainstream brands as well that have done a pretty good job. The other -- if you look a little deeper into that, our used car successes in our nonluxury is exceptional. Our leader, Gary over there that runs our mainstream brands, he's exceptional about filling every single parking spot on those lots and then turning those quickly at the right prices that we think that there's still a lot of opportunity there.

Now is there more opportunities to be able to add mines, I think was the second part of the question, Bret. We're actually seeing pretty good saturation of the first 7 that came in 3, 4 years ago. They continue to add points in the United Kingdom. So there -- even though there is growth of the Chinese now pushing 14%, 15% of the entire marketplace. It's starting to taper off. And the brands that are growing, we're starting to see that the number of stores they're adding is outpacing the growth rate by units of those brands. The other thing that I would learn in, there's 5 more new Chinese that have entered the market this year, okay? They are the ones that are actually growing at the faster rate. So there is some adoption that we're looking at adding a few of those in some of the opportune areas. What we basically end up doing is we end up substituting or swapping out like a Renault or a Citroen and Stellantis or something like that, that's just not able to compete and perform at the same level where you end up just swapping those brands out, okay? And many of those stores already have 2 or 3 brands sitting in them. Hopefully, that color on that, Bret.

Bret Jordan

Is the underlying consumer in the U.K. feel better than they did. I mean, it seemed like the end of last year sort of felt like a soft backdrop. Are you seeing that the market feels a little healthier?

Bryan DeBoer

I think that if Neil was answering this question, I think they would indicate that it's neutral to positive, but not vastly different. The one thing that the Chinese were able to was to drop into an affordability budget. And that's where we've really done a nice job because if the new cars are more affordable, it basically takes away the sale of used cars, and we have been bucking that trend, which is great to be able to see. So I think a lot of the confidence is coming from the fact that there is a little bit more affordability in what's coming to marketplace. I would also caveat this since we got so deep into the United Kingdom market, it's a fallacy to think that the Chinese are taking market share because of BEV, okay?

Remember, the first manufacturers that went to Western Europe that went into the United Kingdom, came with just BEVs, they had less than 1% market share, and they were stagnant for over a year, okay? It wasn't until they started to introduce their other products, a plug-in hybrids and even ICE engines that they began to get traction in market share, meaning that the whole formula is about solving for affordability, not solving for sustainability, okay? So just a little bit of a caveat, and I think it's the same will hold true in many other parts of the world.

Operator

Our next question is from Daniela Haigian with Morgan Stanley.

Daniela Haigian

Great, so my first question is on DFC, which had another excellent result. I just wanted to get a sense of -- I know it's a very high quality book. Average FICO is quite high. But have you seen any changes in consumer behavior in the past 6 weeks or so with the higher rate or oil environment?

Charles Lietz

Daniel, this is Chuck. Thanks for your question. Yes, in terms of looking at the consumer and any changes in behavior for us in our portfolio, we have not seen any change in behavior. If anything, our book continues to maintain its high credit quality, and our delinquency rates are actually 20% better up and down the credit stack on a year-over-year sequential basis. So our consumers are performing well and continue to perform well.

And that really leans into our stated strategy of really getting preferential selection on a risk-adjusted return basis, and we expect that to continue as we move forward with DFC.

Daniela Haigian

And then next one is for you, Bryan. I wanted to ask about Agentic AI. There's been a lot of discussion around the potential for this technology to change how consumers shop for vehicles. How think about the impact on the traditional dealership model. Do you see this as an opportunity for Elia to lean into scale inventory and this kind of full ecosystem that you've built out?

Bryan DeBoer

Thanks, Daniela, for the question. It's an exciting time for our business. And I'd like to speak to the investors about that just as much as I'd like to speak to our own team members because this is a fearful thing for them at times because they look at -- they could look at it as making themselves obsolete. And I would encourage all of my team members and all of our team members to think about it as you get to do what you do best, and that's create memorable trusting relationships with our customers, let the Agentic do the stuff that we either forget to do don't like to do or it's just too repetitive, okay? So lets agentic do the boring stuff. That's what we're seeing in the United Kingdom. We have some in the United States, a lot of it in service and parts, and we're seeing early success.

Now how do I quantify it, okay? We sit at a little bit of a sub-70% SG&A, and we publicly disclosed it, we believe that we can get to sub-60% SG&A believe that half of that improvement is going to come from agentic, okay? And it will come through simple things like what I just spoke about presale service, okay? It's really easy to forget to ask people, do you want your windshield wipers done? Do you want me to check your tires? Do you want me, we get busy in our business and our people get busy. We don't want to lose business and lose serviceability of our customers because we're busy. Agentics can fill that gap in a nice way so we can send a creating attachments with our customers. So if we look at where is the other 500 basis points of that 1,000 point drop, that's some improvements in volumes and underperformance in our stores. It's new stores that have not yet adapted to the idea that I'm going to sell older used vehicles, okay? They haven't adapted to the idea that post warranty period, I'm going to sell non-OEM parts, okay?

And they haven't maybe adapted to the ideas that I don't mind going to people's homes to be able to do whatever they want, okay? And I think as retailers, it's been really easy to be able to sit on our laurels and make a lot of money and I think those days are behind us, and I would challenge my entire team and challenge the industry to get better at what we do by thinking about what our customers are wanting and giving it to them the way that they want it, okay. Hopefully, that gives you some color on how we see Gentex in the future, but that's probably the tip of the iceberg as to how it can help our teams do a better job.

Operator

Our next question is from Mark Jordan with Goldman Sachs.

Mark Jordan

Chuck, this might be a question for you, but it looks like the second quarter in a row here on the slide presentation where we have a higher midterm outlook for income from financing operations. Can you talk about what changed there? Is it just really the pull forward of some of the portfolio growth and the penetration nearing your 20% target? Or is there something else?

Charles Lietz

So Mark, great question. This is Chuck again. So we're really seeing 2 main things that are driving sort of our forward-looking profitability growth. The first one is, as you mentioned, just our consistent preferential selection of the quality of the portfolio and our outperformance of the market on our charge-off and delinquency metrics and then the second is certainly the growth. We are closing in on almost doing $1 billion in originations in the quarter. Bryan certainly mentioned the higher penetration rate, that's obviously flowing through to our bottom line. So I think all of this points towards signs of achieving preferential selections from a risk-adjusted return basis, growing our portfolio, this business will continue to be consistent, predictable and repeatable in terms of its growth, otherwise, absence of seasonal adjustments for charge-offs. So we're very bullish on DFC's forward-looking outlook.

Mark Jordan

Perfect. And Bryan, 1 for you, if I could. Just thinking about new vehicle affordability, obviously, you kind of been pressured for a while now. But are you seeing any changes in terms of customer behavior here in the U.S.? Any noticeable shifts in behavior over the last few months?

Bryan DeBoer

We really haven't. The good news is there's a number of manufacturers that understand that they can gain market share if they can just get into that lower -- into that lower price point as well. We have seen -- we haven't -- I should say, incentives aren't getting much better. So I still believe that there's opportunities for our manufacturer partners to be able to provide a little bit better leases which can affect affordability in big ways, okay? And they haven't jumped back in on that fully. We were at 31% lease penetration. Hopefully, we can get back close to [indiscernible] and that really keeps those customers in funnel and in life cycle so we can get them back in 2, 3 years. Anyway, outside of that, Mark, not big changes in affordability and behaviors of our consumers.

Operator

Our final question is from Rob Saltzman with UBS.

Robert Saltzman

Just a quick one on DFC. So with rates moving higher and funding costs for DFC likely moving higher with it, how do you think about the balance between passing through higher funding cost to customers and absorbing maybe some of that in order to drive sales out the balance of that would be the question.

Charles Lietz

Yes, Rob, this is Chuck again. Obviously, there is a time lag between how quickly we can sequence through changes in our cost of funds rates as the markets move in an upward direction versus what the market will and our customers will bear. This is really part of our overall strategy where DFC were there to support our stores and help drive overall growth and meeting the needs of our customers. in conjunction with our stores. However, having said that, we actually look at each contract on an individual basis on a fully risk-adjusted NPV basis to make sure that it is still profitable for lithia driveway.

And taking that balance between supporting our stores and making sure we're meeting the needs of our customers and still being profitable on a risk-adjusted basis. That's, I believe, how we'll continue to to really balance those risks of the higher rates versus supporting our stores.

Operator

There are no further questions. I would like to turn the conference back over to Bryan for closing remarks.

Bryan DeBoer

Thanks, Sherry, and thanks, everyone, for joining us today. We look forward to talking to you again for our fourth quarter and year-end earnings call in February. Bye-bye. .

Operator

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.