Our vehicle operations, SG&A as a percentage of gross was 60%, excluding the burn rates of our two adjacencies. Secondly, revenue was impacted by our new vehicle mix, having tepid volumes at two of our domestic manufacturer partners. New car inventory is also rebuilding, but at a less uniform rate and varied by OEM. After experienced the lowest new vehicle SAAR since 2012, we anticipate SAAR in 2023 to be between 14.5 million and 15 million units. As perspective, the industry averaged a 17 million vehicle SAAR between 2015 to 2019 implying a future lift of 17% in addition to conquesting market share. We have pleased to have Chris back at home this call to provide additional color on the quarter in a few minutes. Our vehicle operations continue to lead the omni-channel auto retail evolution.

Our quickly growing infrastructure of omni-channel options ranging from physical store footprint, to technologies offered by our stores to Driveway and GreenCars combined to provide customers with a variety of flexible options throughout their vehicle ownership life cycle. Our core store operations massive growth and performance remains strong and continues to produce one of the highest operating margins and lowest SG&A costs in the industry. Moving to our digital channels. Our combined average monthly unique visitors reached 10 million in the quarter, an increase of 94% compared to last year with our spend only increasing 33%. Driveway and GreenCars traffic was particularly strong, growing 236% to nearly 2.5 million visitors per month during the quarter.

Traffic across all digital channels continues to gain momentum driven by a robust inventory selection and a variety of products and experiences. During the year, 22% of our vehicles were sold to customers utilizing our omni-channel technology in our stores, Driveway and GreenCars, representing just $5 -- just shy of $5 billion in revenue. Driveway, our innovative technology platform with a negotiation-free fully online vehicle shopping and selling experience generated revenues of nearly $900 million in 2022. This combination of in-store options and our Driveway experience expands the reach of our network with our stores interacting with our over 90% of customers in the country being within 100 miles now. Driveway continues to conquest new customers with over 97% of its business coming from new customers to LAD within the last decade.

Moving to our financing operations. Driveway Finance Corporation or DFC for short, ended the year at over $2 billion in receivables, solidly positioning DFC as the largest lender in our network. The penetration rate rose 200 basis points from the previous quarter to over 13% and we originated over 19,000 loans in the fourth quarter. Last week, we completed our third ABS securitization accompanied by an investment-grade rating by both Moody's and KBRA. We believe this reiterates the strength, quality and disciplined nature of our captive finance decision making and the differentiation from our other used only retailers with captive finance arms. As such, we are extremely pleased with how this adjacency has laid the foundation for expanding our profitability in the future.

I'd like to commend our entire DFC team and Chuck, who will be providing more color on the results and outlook later in the call. Now turning to acquisitions. In the fourth quarter, we made four notable acquisitions, including Glenn's Freedom CDJR in Kentucky, Ferrari of Denver, the sole dealership of its kind in the Central Rockies, Meador CJDR in the Dallas-Fort Worth area, further expanding our footprint in the Lone Star state, and finally, the Airstream portfolio we mentioned on our last earnings call. So far in 2023, we have kept pace with the momentum we built through 2022 acquiring another $50 million in annualized revenues to start the year off. We expect this to be another significant year of growth for the network. We acquired over $3.5 billion in annualized revenues during the full year of 2022 and nearly all public company M&A activity for the year, as shown on our slide 11 of our recently updated Investor Presentation.

Since launching our five-year plan in mid-2020, we have acquired a total of $13.9 billion, 63% of the total $20 billion originally targeted by 2025. Our patience, disciplined and consistent approach towards acquisitions continues to generate massive value by maintaining our multi-decade long valuation methodology of 3 times to 7 times normalized environment earnings levels. We have made a conscious decision to utilize the majority of our cash flows towards acquisitions rather than redistributing them primarily towards shareholders or paying down debt. As such, we have and we will continue to establish the foundation for massive competitive advantages in size, scale, SG&A cost leverage, interest costs, profitability levels, and most importantly, consumer optionality and attachment.

As we hit the midpoint of our 2025 plan, we remain confident that our strategy is durable and have clear sight to achieving the $50 billion revenue target. Our portfolio mix, new adjacencies and focus on profitability translates into better operating leverage with the ability for $1 billion in revenue to drive up to $1.20 in EPS by 2025, up from our historical ratio of $1 in EPS and eventually achieve the $2 in EPS future target. Let me take a few moments and outline the drivers to achieve our 2025 plan. First, we continue to drive consumer optionality, operational efficiency across all platforms. We are prioritizing our profitability goals as we optimize and integrate our omni-channel options which will result in improved margins and leverage our network and cost structure.

In addition to continually driving high performance, this will help drive SG&A as a percentage of gross profit below 60% in a normalized GPU environment, enhanced liquidity and continued cash flow generation. Second, the investment in our financing operations DFC will grow our earnings power and diversify our portfolio. As demonstrated by DFC's capital structure are moving to sustainable self-funding, DFC is maturing and effectively managing its growth. We are targeting a 15% to 20% penetration rate at DFC, primarily driven by used vehicles and we are well on our way to profitability later this year. Third, we continue our cadence of growing our network, the backbone of our plan through acquisitions. Growth of our physical network to reach 95% of our consumers within 100 miles creates the foundation of our business.

It gives us the ability to physically reach customers throughout their ownership life cycle within a two-hour proximity. Acquisitions continue to be the core competency of LAD to consistently generate strong returns, while optimizing the network with timely, profitable and strategic divestitures of smaller poor performing stores that lack strategic value to the network. Lastly, we remain financially disciplined with a strong balance sheet and committed to capital allocation strategy focused on the best risk reward for our shareholders. We have reduced our leverage over the past several quarters while still growing through acquisitions. We invested in network growth, our omni-channel tools, growing our captive finance business and generated meaningful shareholder returns through dividends and share repurchase.

As crafted a half a decade ago, we continue to believe in a longer term strategy, while finding the balance between smaller shorter term gains and long-term strategic positioning. Lithia & Driveway is well underway towards building a differentiated diversified mobility and transportation platform across multiple geographies. We have focusing on making the experience of owning a vehicle easy and hassle free with strategically designed and position options for all types of owners across our network and e-commerce platforms including our captive finance arm. Core to our business is delivering highly profitable growth, as we continue to execute on our 2025 plan to reach $50 billion in revenue and our longer term ambition of $2 of EPS for every $1 billion in revenue.

With that, I will turn the call over to Chris.

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Chris Holzshu: Thank you, Bryan. It's good to join everyone on the call today to provide a brief overview of our operating results and discuss our focus areas for 2023. However, before jumping in, I'd like to congratulate our 2022 class of Lithia Partners Group winners better known internally as LPG. These 56 leaders and their teams generated the highest performance levels among their peers last year, independent of store size, franchise representation or geographic location. These stores led their market share with exceptional consumer satisfaction and solid profitability. There were also key supporters of Driveway, DFC and GreenCars, executed the majority of our mobile service and at home pickup and delivery all our growing future team leaders.

We now have over 40% of our eligible store leaders attaining this coveted status and we look forward to all of our teams attaining LPG status in future years. Now to the quarter. Overall, same-store gross profit declined 12% as the recovery in new vehicle volume trends did not offset the expected declines in vehicle gross profit per unit or GPU as we transitioned out of the coded fueled retail environment. New vehicle GPUs, including F&I, was $7,719 per unit, compared to $8,593 the prior year. Used vehicle GPUs, including F&I, were down to $4,028 from $5,341 in the prior quarter. F&I results were strong at just over $2,117 per unit, down from $2,162 the previous year. As a reminder, new vehicle GPU levels are still significantly above our historical levels from 2019 of around $3,600 per unit, while used vehicle GPUs have returned to pre-COVID levels.

During the quarter, combined import and luxury vehicle sales were relatively strong, growing in the low-single digits, offset by domestic sales, which fell over 10% on a same-store basis. While domestic OEMs make up about 27% of our new vehicle sales, we are starting to see a shift towards additional incentives from these OEMs on certain product lines, which we expect to continue into 2023 as normalization in the market continues. Used vehicle prices averaged $29,545, up nearly 2% from last year. As a top-of-funnel franchise dealer, we remain aggressive on retaining trades we are offered, as well as the continued procurement of inventory from all external channels even as pricing pressure on use continues with the rising interest rate environment and recovering new vehicle inventory supply.

Transitory issues and pricing pressure on used vehicles should have a minimal impact on 2023, as we carry less than a 60-day supply and the shortage of late-model used vehicles from the abnormally depressed new vehicle SAAR environment takes years to normalize. At the end of December, new and used vehicle day supply were 47 days and 55 days, compared to 39 days and 65 days at the end of the third quarter. Customers appreciate our vast range of products at all price levels, including the option to purchase and service vehicles up to 20 years and older as represented in our value auto segment, which is 17% of our used vehicle sales volume. Our nationwide network aligned with the execution by local market leadership, cast a wide net across all geographies and allows us to service a diverse set of demographics and purchasing preferences with one team.

Working together, we can service local markets individually or ship vehicles regionally or across North America as represented by Driveway where the average distance delivered is over 900 miles, providing a negotiated experience in our local network and a negotiation free process through the Driveway national channel allows consumers empowerment and the option to choose their pathway. As we continue to gain further insights on the consumers and the relationship between product demand by market, our stores are making better decisions to price and merchandise our product across platforms, resulting in better economics. Over time, this will translate to significantly more leverage in our network. Our aftersales business remains strong across all business lines, up 8.4% in the quarter.

With the record units in operation and an average age of vehicle over 13 years, we anticipate continued growth throughout 2023. Shifting to SG&A. Core operations, excluding adjacencies, generated SG&A as a percentage of growth below 60% on the quarter. However, even in the core business, there remains ample opportunity to improve our operating leverage in our lower quartile segments of stores, which vary across geography and size. We estimate there's upward of 250 basis points or $125 million in additional profitability we can achieve by solely moving this bottom quartile to an average level of performance. These focused stores are expected to continue to improve topline growth, boost productivity, drive down cost and enhance utilization of our innovative technology solutions.

As illustrated, our best stores in this environment aligned with LPG attainment achieved SG&A to gross of 48% or better. Conversely, there's a cluster of stores operating at 75% SG&A to growth and our operations team is focused on improving the results at these locations. Over the past three years, we have invested nearly 40 locations with an average revenue per store of $42 million and replaced them with larger stores averaging over $100 million in revenue and performance level in our upper quartile in many cases. We remain diligent on optimizing our network where it makes sense and look forward to continuing our high cadence M&A growth trajectory. In summary, each day, our team is rising to the challenge to aggressively meet the needs of consumers in the ever-changing future of automotive retail.

We have motivated by the evolution in our core business and look forward to navigating through the transformation to become a more diversified, greater consumer optionality company. The team is looking to improve across all of our business lines leveling up our digital retail readiness, leveraging our cost structure at new levels and driving incremental profit to the bottomline that will eventually translate to $2 in EPS for every $1 billion in revenue we generate. Their efforts will continue to evolve our in-store and at-home solutions to meet consumers wherever, whenever and however they choose. We remain humble and look towards another strong year and we remain laser focused on achieving our plan. With that, I'd like to turn the call over to Chuck.

Chuck Lietz: Thanks, Chris. DFC posted a solid finish to the year and continues to be the premier lender for Lithia & Driveway. Our business strategies remain consistent as we continue to maximize the economic returns by managing risk, while leveraging the benefits of being a captive lender. We continue to move upmarket in terms of credit quality to help mitigate the overall risk in the portfolio. Our near-term objectives continue to be growing the portfolio, creating a systematic and scalable capital structure and achieving segment profitability in 2023. In Q4, the portfolio grew to just over $2 billion, driven by the measured growth in originations, which totaled $605 million. Quarterly loan originations had a weighted average APR of 8.2%, while our cost of funds rose to 4.8% in line with recent rate increases by the Federal Reserve.

We have continued to pass along rate increases to our customers at an incremental rate without degradation to our credit quality or underwriting standards. For the quarter, our financing operations achieved a net interest margin of $23 million with a loss of $8 million, including provision expenses of $19 million. In the fourth quarter, DFC penetration rate rose to over 13% and averaged just over 10% for the full year. Going into 2023, we expect penetration rates to remain stable between 12% and 13%. Our decision to adjust the pace of originations growth, particularly in the near-term, stems from our goal of achieving profitability this year and maintaining our current portfolio risk profile. The average FICO score for loans originated in Q4 was 732, up from 721 in Q3.

Total portfolio weighted average FICO scores increased from 700 to 708 during the same period. We reduced front-end LTVs for three consecutive quarters with Q4 originations at 97.2%, a reduction of nearly 200 basis points sequentially and over a 700-basis-point reduction from Q4 2021. At the end of December, our allowance for loan losses as a percentage of managed receivables rose slightly, but in line with expectations to 3.1%, bringing our total allowance to $65.1 million. Overall, we have seeing some signs of stability in delinquency rates, especially at the tail ends Q4 where 30-plus delinquency fell approximately 40 basis points to 4.1%. This is primarily driven by a combination of DFC's improved credit quality and deployment of advanced telephony system in Q4.

Net charge-offs increased slightly quarter-over-quarter, which was primarily a result of the rapid growth in our portfolio, but also a deterioration in net recovery rates as wholesale vehicle auction values declined. While the increase in net charge-offs due to the rapid growth of the portfolio was expected, we will continue to optimize vehicle recovery activities while waiting for 2022 originations with a lower average LTV to help mitigate reductions in used car values. Last week, we closed in our third ABS term offering for $480 million. This offering is DFC's first where a tranche carried a AAA rated as rated by both Moody's and KBRA. The ABS term market was particularly receptive to this offering with all tranches being materially oversubscribed, which allowed significant tightening of final credit spreads versus initial pricing guidance.

DFC remains committed to utilizing the ABS term market as our primary near-term source of capital as this is a critical step towards becoming a materially self-funding entity. Becoming a periodic programmatic ABS term issue will lessen DFC's reliance on parent company capital, thereby allowing LAD to deploy forward looking liquidity towards other growth initiatives. The 2023 business fundamentals across DFC should result in a near-term in prominent profitability. However, the negative impact of further volatility in either DFC's cost of funds or our credit performance results could impact DFC's profitability on a forward-looking basis. In closing, we are excited by the results DFC has achieved up to this point. We are constructive on hitting penetration rates of 20% by 2025 as LAD moves towards achieving $50 billion in revenues, which as a reminder, should result in excess of $500 million of pre-tax income once DFC reaches a steady state portfolio and normalizes the vessel reserves.

DFC's end state will become a major contributor to LAD's future were $2 of earnings per share is generated for every $1 billion of revenue. We are particularly excited about achieving segment profitability in 2023 and the breakout of our financial results is a foundational milestone to provide visibility as we look to meet this goal. Our prudent approach towards managing credit risk, while balancing growth positions DFC to achieve our KPIs going forward. I will now turn the call over to our Chief Financial Officer, Tina.

Tina Miller: Thanks, Chuck. Thank you again for joining us today. We have received great feedback from our investors and appreciate your support and patience as we outlined the multiple financial levers we navigate within our 2025 plan, the growth and expansion of DFC. With that, we have restated our segments to vehicle operations and financing operations, adding greater visibility to the operational results of DFC. As a result of this, we have added a financing operations income loss line to our income statement. This line represents the interest income earned less the interest expense associated with DFC directly associated SG&A expenses and the change in provision and depreciation from our leasing portfolio. Most of these items, except depreciation were previously reported within SG&A.

To assist in understanding the impact of these re-classes, we have added a reconciliation to our Investor Presentation on slide 24. During the fourth quarter, we reported adjusted EBITDA of $421 million, down 22% from last year. The change was attributable to a decline in gross profit and higher interest costs associated with DFC as the portfolio grows. We ended the year with leverage at 1.5 times, flat with the prior quarter and providing substantial headroom for growth in 2023. During the year, we generated over $1.1 billion in free cash flow and deployed over $2 billion in capital. Of this amount, approximately half went toward acquisitions and a third toward share buybacks. This resulted in the repurchasing of approximately 8% of our float in 2022.

Our strong earnings year provided us the opportunity to concurrently return value to shareholders through share repurchases and an increased dividend, while maintaining strong growth through acquisitions. For 2023, our outlook remains constructive and optimistic. Overall, we expect new and used vehicle SAAR to grow 3% to 5%. As a reminder, we believe earnings will be impacted by declining GPUs and are assuming the following. Same-store unit growth for new in the mid-to-low single digits and used in the high-single digits, as we navigate this transitory environment with supply and demand normalizing, new vehicle GPUs will continue to moderate, assuming a decline of about $200 per unit each month throughout 2023, this would average to a GPU of $3,800 and end the year a little above pre-pandemic levels.

F&I per unit may be impacted by rising interest rates and consumer affordability and are estimated to be around 1,850 for the year. We expect service body and parts revenues to grow in the mid-to-high single digits with margins consistent with historical levels. And finally, we target SG&A as a percentage of gross profit in the range of 61% to 64%, which includes the impact of strategic investments we are making for the future. Given these assumptions, we estimate free cash flow net of capital expenditures and dividends to roughly exceed $1 billion in 2023. At our disciplined hurdle rates, deployment of all of our free cash to acquisitions would represent $4 billion in annualized revenues. Balancing growth and returns for our shareholders are pillars to us reaching $50 billion in revenue.

Our proven consistent ability to grow through acquisitions, underlies our strategy and provides us with size and scale to optimize our profitability and fully leverage our in-store and online channels. Incorporating adjacencies like DFC diversifies our business and lays the foundation for significantly expanding margins in the future. Our strong balance sheet and capital generation positions us well to continue the growth we have achieved since the launch of the 2025 plan. We see a clear line of sight to increasing profitability from our historical $1 billion in revenue, generating $1 in EPS to generating up to $1.20 in EPS by 2025 and in long -- in the long-term and ambitious $2 in EPS per $1 billion in revenue. This concludes our prepared remarks.

With that, I will turn the call over to the audience for questions. Operator?

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