Q1 2024 Penske Automotive Group Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by. Your conference will be underway shortly. Please continue to hold. Good afternoon, and welcome to the Penske Automotive Group first quarter 2024 earnings conference call. Today's call is being recorded and will be available for replay approximately one hour after completion through May 7, 2024, on the company's website under the Investors tab at www.penskeautomotive.com. I will now introduce Tony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Ladies and gentlemen, thank you for standing by your conference will be underway. Shortly please continue to hold.

Okay.

[music].

Speaker Change: Good afternoon, and welcome to the Penske Automotive group first quarter 2024 earnings Conference call.

Today's call is being recorded and will be available for replay approximately one hour. After completion through may 7th 2024 on the company's website under the investors tab at Www Dot Penske automotive Dot Com I will now introduce Tony important the company's executives.

Anthony R. Pordon: Thank you, Leah. Good afternoon, everyone, and thank you for joining us today. As you know, a press release detailing Penske Automotive Group's first quarter 2024 financial results was issued this morning and is posted on our website, along with a presentation designed to assist you in understanding the company's results. As always, I'm available by email or phone for any follow-up questions you may have.

Tony: Weis President of Investor Relations and corporate development. Sir Please go ahead.

Tony: Thank you Lee and good afternoon, everyone and thank you for joining us today.

Anthony R. Pordon: As you know a press release detailing Penske automotive group's first quarter 2024 financial results was issued this morning and is posted on our website along with the presentation designed to assist you in understanding the company's results.

As always I'm available by email or phone for any follow up questions. You may have.

Anthony R. Pordon: Joining me for today's call are Roger Penske, our Chairman and CEO, Shelley Hulgrave, our EVP and Chief Financial Officer, Rich Shearing, North American Operations, Randall Seymour, International Operations, and Tony Facione, our Vice President and Corporate Controller. Our discussion today may include forward-looking statements about our operations, earnings potential, outlook, acquisitions, future events, growth plans, liquidity, and assessment of business conditions We may also discuss certain non-GAAP financial measures, such as earnings before interest, taxes, depreciation, and amortization, or EBITDA, and our leverage ratio.

Anthony R. Pordon: Joining me for today's call are Roger Penske, our chairman and CEO, Shelly, how great our EVP and Chief Financial Officer, Rich sharing North American operations Randall C more international operations, and Tony Petrone, Our Vice President and corporate controller our.

Anthony R. Pordon: Our discussion today may include forward looking statements about our operations earnings potential outlook acquisitions future events growth plans liquidity and assessment of business condition.

We may also discuss certain non-GAAP financial measures such as earnings before interest taxes, depreciation and amortization or EBITDA and our leverage ratio. We have prominently presented the comparable GAAP measures and have reconciled the non-GAAP measures to the most directly comparable GAAP measures in this morning's press release.

Anthony R. Pordon: We have prominently presented the comparable GAAP measures and have reconciled the non-GAAP measures to the most directly comparable GAAP measures in this morning's press release and investor presentation, which are available on our website. However, our future results may vary from our expectations because of risks and uncertainties outlined in today's press release under forward-looking statements. I also direct you to our SEC filings, including our Form 10-K and previously filed Form 10-Qs, for additional discussion and factors that could cause future events to differ materially from expectations. At this time, I'll turn the call over to Roger Penske. Thank you.

An investor presentation, which are available on our website.

Tony: Our future results may vary from our expectations because of risks and uncertainties outlined in today's press release.

Tony: Forward looking statements.

Tony: I also direct you to our SEC filings, including our Form 10-K, and previously filed form 10, Qs for additional discussion and factors that could cause future events to differ materially from expectations.

Speaker Change: At this time I'll turn the call over to Roger Penske. Thank you Tony.

Roger S. Penske: Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. During the first quarter of 2024, PAG delivered 126,800 new and used vehicles and over 4,500 new and used commercial trucks. We increased revenue by nearly 2% to $7.4 billion. Our growth margin was 16.7%, which increased 40 basis points when compared to Q4 last year. We generated $295 million in income before taxes.

Roger S. Penske: Everyone and thank you for joining us today.

Roger S. Penske: During the first quarter of 2020 for Pag delivered 126800, new and used vehicles and over 4500, new and used commercial trucks.

Roger S. Penske: We increased revenue by nearly 2%.

Roger S. Penske: So $7 $4 billion or gross margin was 16, 7%.

Roger S. Penske: Which increased 40 basis points when compared to Q4 last year.

Roger S. Penske: We generated 295 million and income before taxes.

Roger S. Penske: $215 million in net income and earnings per share for $3.21. During the first quarter, our US and UK retail operation faced headwinds from Port Holmes, product recalls, supply, and production issues on premium vehicles that impacted Product Availability. Additionally, a strike at a plant in Mexico that builds the Audi Q5 SUV impacted availability as well. Income and earnings per share were also negatively impacted by higher interest costs for the quarter of $17.4 million, driven primarily by an increase in interest rates and higher inventory levels and lower equity earnings from the company's investment.

Roger S. Penske: $215 million and net income and earnings per share.

Roger S. Penske: A $3 in 'twenty one.

Roger S. Penske: During the first quarter, our U S and UK retail operation faced headwinds.

Roger S. Penske: From Port holds.

Roger S. Penske: Product recalls supply and production issues on premium vehicles that impacted.

Roger S. Penske: Product availability.

Roger S. Penske: Additionally, a strike at our plant in Mexico that builds the Audi Q five SUV impacted availability as well.

Roger S. Penske: Income and earnings per share were also negatively impacted by higher interest cost for the quarter was $17 4 million driven primarily by an increase in interest rates and higher inventory levels and lower equity earnings.

From the company's investment in Penske transportation solutions.

Roger S. Penske: Penske Transportation Solutions. Lower equity earnings from PTS were driven by lower commercial rental utilization, lower consumer rental revenue, that's one way, higher interest rates on average debt balances, and a lower gain from sale of used revenue-earning equipment vehicles, partially offset by approved results in our full-service leasing business and our Distribution Center logistics management business. Looking at corporate development during Q1, we added 24 automotive franchises, including 19 in our international markets and five in the U.S.

Roger S. Penske: Laura the equity earnings from Pts were driven by lower commercial rental utilization.

Roger S. Penske: Lower consumer rental revenue, that's one way higher interest rates on average debt balances and a lower gain from sale of used revenue, earning equipment vehicles.

Roger S. Penske: Partially offset by improved results in our full service leasing business and our district distribution Center logistics management business.

Roger S. Penske: Looking at corporate development. During Q1, we added 24 automotive franchises, including 19 in our international markets and five in the U S.

Roger S. Penske: Estimated annual acquired revenue is $1.1 billion. We also closed one car shop location in the US. In 2024, we entered into an agreement to acquire two Porsche dealerships and one Ducati motorcycle dealership in Melbourne, Australia, which is expected to close in the second quarter of 2024, obviously subject to customary conditions.

Roger S. Penske: Estimated annual acquired revenue is $1 1 billion.

Roger S. Penske: We also closed one car shop location in the U S.

In 2024 in April we entered into an agreement to acquire two Porsche dealerships.

Roger S. Penske: One Ducati motorcycle dealership in Melbourne, Australia, which is expected to close in the second quarter of 2024, obviously subject to customary conditions.

Roger S. Penske: Let me now turn attention to automotive operations. During the quarter, total automotive units delivered increased 4% to 126,864 units, which includes 8,932 agency units in the UK. New units increased 6%, and Used Units increased 2%. We continue to take forward orders with pre-sold activity averaging between 10 and 20% in the U.S., depending on brand or region. 36% of the new vehicles sold in the US in the quarter were at MSRP. Additionally, 87% of the VEVs sold in the quarter required significant discounting. We estimate 90% of the VEVs sold were leased. In the UK, the Ford order book is healthy.

Roger S. Penske: Let me now turn the attention to automotive operations during the quarter total automotive units delivered increased 4%.

Roger S. Penske: The 126864 units, which includes 80 932 agency units in the U K.

Roger S. Penske: New units increased 6%.

Roger S. Penske: And used units increased 2%.

Roger S. Penske: We continue to take forward orders with pretty solid activity, averaging between 10 and 20% in the U S. Depending on brand our region and 36% of the new vehicles sold in the quarter in the U S. We're at MSRP.

Well, 87% of the baskets, the Bev sold in the quarter required significant significant discounting we estimate 90% of their beds sold or leased.

Roger S. Penske: In the U K the forward order book is healthy.

Roger S. Penske: 19,000 units versus 18,000 at the end of December and 22,000 at the same time last year. Same store retail rev automotive revenue increased 1%. However, our service and parts increased 5%. Customer pay was up five. Warranty was up six, our collision repair business was up 6%, and all continued to grow during the first quarter. Gross profit for new unit retail declined only $302 sequentially, while gross profit for used unit retail increased during the quarter sequentially when compared to Q4 last year. Let me now turn to Penske Transportation Solutions on March 31st.

Roger S. Penske: 19000 units versus 18000 at the end of December.

Roger S. Penske: And 22000 at the same time last year.

Roger S. Penske: Same store retail automotive revenue increased 1% however.

However, our service and parts increased 5% custom.

Roger S. Penske: Customer pay was up five.

Roger S. Penske: Already was up six our collision repair business was up 6%.

Roger S. Penske: All continued to grow during the first quarter.

Gross profit per new unit retail declined only $302 sequentially, while gross profit per used unit retailed increased during the quarter sequentially when compared to Q4 last year.

Speaker Change: Let me now turn to Penske transportation solutions at March 31.

Roger S. Penske: PTS managed a fleet of over 442,000 trucks, tractors, and trailers compared to 418,000 at March 31st last year. Although the overall fleet size increased, we reduced our commercial rental fleet by 4,800 units during Q1 of 2024. Due to lower utilization and a continued weak freight market, Q1, PTS operating revenue increased 3% to $2.7 billion, full service contract revenue increased 12%, and logistics revenue increased 4%. But our rental revenue declined 13%. PTS generated net earnings of $112 million.

Speaker Change: Bts managed a fleet of over 442000 trucks tractors and trailers compared.

Roger S. Penske: 418000 at March 31 last year.

Roger S. Penske: Although the over all fleet size increased.

Roger S. Penske: We reduced our commercial rental fleet by 4800 units during Q1 of 2024.

Due to lower utilization.

Roger S. Penske: In a continued weak freight market in.

Roger S. Penske: In Q1, Pts operating revenue increased 3%.

Roger S. Penske: The $2 7 billion full service contract revenue increased 12%.

Roger S. Penske: Logistics revenue increased 4%.

Speaker Change: Our rental revenue declined 13%.

Speaker Change: Pts generated net earnings of $112 million, our share of the PGS earnings was $32 million.

Roger S. Penske: Our share of the PTS earnings was $32 million, and the fine was declined by 48 million compared to Q1 last year. The decline in PTS earnings over the prior year was due to number one, a $49 million increase, and Interest Expense, from higher rates related to bond refinancing, and Higher Outstanding Debt.

Speaker Change: Five which declined by $48 million compared to Q1 last year.

Speaker Change: The climate and Pts earnings over the prior year was due to number one a $49 million increase in interest expense from.

Speaker Change: From higher rates related to bond refinancing and higher outstanding debt.

Roger S. Penske: $66 million decline in the gain on sales of used trucks; sold 11,667 used trucks in Q1 of 24 compared to 36,000 for all of 23 to expedite the disposal of older units. Our rental revenue fell 13%, and the Utilization Rate fell 310 basis points when compared to Q1 of 2023 as weak freight rates and lower one-way consumer rental demand, higher maintenance costs of $12 million compared to Q1 last year, but importantly, the sequential increase was only $3 million as we continue to replace the older fleet at lease extension. Our new units on order, which we have placed with various OEMs, are down 50%. That's really from 60,000 to 30,000.

Speaker Change: Ah $66 million decline in the gain on sales of used trucks.

Speaker Change: We saw 11667 used trucks in Q1 24 compared to 36000 for all of 'twenty three to expedite the disposal of older units.

Speaker Change: Our rental revenue fell 13% and utilization rate fell 310 basis points when compared to Q1 of 2023 as weak freight rates and lower one way consumer rental demand.

Speaker Change: Higher maintenance costs of 12 million compared to Q1 last year.

Speaker Change: Shortly the sequential increase was only $3 million as we continue to replace the older fleet and lease extensions.

Speaker Change: Our new units on order.

Speaker Change: We have placed with various Oems are down 50%.

Speaker Change: Really from 60000 to 30000 we've.

Roger S. Penske: We have nearly 12,000 units currently for sale compared to 8,400 at the end of March last year. As we look at Q2, we expect a sequential increase in earnings from PTS from the reduction in the rental fleet to 4,800, which improves utilization, coupled with new replacement vehicles and reducing maintenance expense. Now, I turn it over to Richard Shearing. Thank you.

Speaker Change: We have nearly 12000 units currently for sale compared to 8400 at the end of March last year as we look at Q2, we expect a sequential increase in earnings from Pts from a reduction in their rental fleet of 4800, which improves utilization coupled with new replacement vehicles.

Speaker Change: And reducing maintenance expense, let me turn it over to rich sharing now thank you.

Richard P. Shearing: Our premier truck group dealership business represents 43 locations in North America and is an important part of our diversification. We are one of the largest commercial truck retailers in North America for Diamond Trucks. During quarter one, Class 8 net orders increased 18% while retail sales declined 6% from the strong pace of 2023. At the end of March, the current backlog was 162,600 and represents approximately five to six months of sales. Premier Truck Group sold 4,500 units in Q1, down 12% overall, driven by new retail sales down 23%, but used up 60% for the quarter.

Rich: Thank you Roger our Premier truck group dealership business represents 43 locations in North America and is an important part of our diversification.

Rich: One of the largest commercial truck retailers for Daimler trucks North America.

Rich: During quarter, one class eight net orders increased 18%, while retail sales declined 6% from the strong pace of 2023.

Rich: At the end of March the current backlog was 162600 and represents approximately five to six months' worth of sales.

Rich: Work truck group sold 4500 units in Q1 down 12% overall, driven by new retail sales down, 23%, but used up 60% for the quarter. However, a strong mix of new units and our fixed operations business drove an increase in gross margin of 190 basis points.

Richard P. Shearing: However, a strong mix of new units and our fixed operations business drove an increase in gross margin of 190 basis points. Same store SG&A to gross profit remained well controlled at 59.2%, and fixed absorption was 130%. Premier Truck Group produced a solid Q1 EBT of $51 million and a return on sales of 6.4%. We believe commercial truck demand will continue to be driven primarily by replacement needs, and we also see strength across private fleets, vocational segments, and Class 6-7 medium duty. As we look towards 25 and 26, anticipated emissions changes should drive a strong order book and retail sales. I would now like to turn the call over to Randall Seymour.

Rich: Same store SG&A to gross profit remained well controlled at 59, 2% and fixed absorption was 130%.

Speaker Change: <unk> truck group produced a solid Q1 EBT of $51 million and a return on sales of six 4%. We believe commercial truck demand will continue to be driven primarily by replacement needs and we also see strength across applied private fleets vocational segments in class six seven medium duty as we look.

Speaker Change: Towards 25, and 26 anticipated emissions changes should drive a strong order book and retail sales I would now like to turn the call over to Randall seen thank.

Randall Seymour: Thank you, Rich. I will now cover our business in Australia. Penske Australia offers products across the on and off highway market, including in the trucking, mining, power generation, defense, marine, rail, and construction sectors, and supports full parts and after-sales service across the region. Service in Parts represents approximately 75% of our gross profit, so our focus on increasing units in operation is a key driver of the business. In fact, the month of March was the single best month in the history of our business in Australia with a return on sales of 7.6%. During the three months ended March 31st, 24, the Australian and New Zealand heavy truck market increased 4.8% and 2.7% respectively from the same period last year.

Randall: Thank you rich I'll now cover our business in Australia.

Randall: Penske, Australia offers products across the on and off highway markets, including in the trucking mining power generation defense Marine rail and construction sectors and supports full parts and after sales service across the region.

Randall: Service and parts represents approximately 75% of our gross profit so our focus on increasing units in operation is a key driver of the business.

Randall: In fact in the month of March It was the single best month in the history of our business in Australia with the return of sales of seven 6%.

Randall: During the three months ended March 31, 20 for the Australian and New Zealand heavy truck market increased four 8% in 282, 7% respectively from the same period last year.

Michelle Hulgrave: In off-highway, our power system operations continue to grow with turnkey solutions for hyperscale data centers, battery storage, mining, and military applications. We continue to be a leader in critical standby power, especially for data centers, and continue to make significant deliveries of generators into prime power and hybrid applications. In addition, we have started to deliver large-scale battery energy storage solutions, with recent government contracts adding more than $50 million to the existing pipeline. Our current order bank for hyperscale data centers and battery storage systems combined is over $550 million for 2024 and beyond. I would now like to turn the call over to Shelly Hulgrave.

Speaker Change: In off highway are power system operations continued to grow with turnkey solutions for Hyperscale data centers battery storage mining and military applications. We continued to be a leader in critical standby power, especially for data centers and continue to make significant deliveries of generators into prime power.

Speaker Change: And hybrid applications.

Speaker Change: In addition, we have started to deliver large scale battery energy storage solutions with recent government contracts, adding to more than $50 million to the existing pipeline.

Speaker Change: Our current order bank for Hyperscale data centers and battery storage systems combine is over $550 million for 2024 and beyond.

Speaker Change: I would now like to turn the call over to Shelly whole grades.

Michelle Hulgrave: Thank you, Randall. Good afternoon, everyone.

Shelly: Thank you Randall and good afternoon, everyone I will review, our cash flow and balance sheet and discuss our capital allocation strategy.

Michelle Hulgrave: I will review our cash flow and balance sheet and discuss our capital allocation strategy. I'm pleased to report that we generated $456 million in cash flow this quarter, and our trailing 12-month EBITDA was $1.55 billion. At the end of March, our long-term debt was $1.68 billion, up approximately $50 million from the end of December. 1.05 billion of the long-term debt represents our subordinated notes, with 550 million maturing in September 2025, and the other 500 million maturing in 2029.

Shelly: I'm pleased to report that we generated $456 million in cash flow this quarter and our trailing 12 month EBITDA was 155 billion.

Shelly: At the end of March our long term debt of $1 six 8 billion up approximately $50 million from the end of December.

Shelly: 105 billion of long term debt represents our subordinated notes with $550 million maturing in September 2025, and the other $500 million maturing in 2029.

Michelle Hulgrave: The average interest rate on these notes is 3.6%. We have the intent and ability to refinance the 2025 notes. Under U.S. GAAP, we do not plan to present the 2025 notes and current liabilities through maturity. We also have $360 million in mortgages and $193 million in other borrowings at our international subsidiaries. Debt to total capitalization was 25.7%, and leverage sits at 1.1%. As you can see, our balance sheet remains strong, safe, and secure.

Shelly: The average interest rate on these notes is three 6%.

Shelly: We have the intent and ability to refinance the 2025 notes under U S. GAAP, we do not plan to present, the 2025 notes in current liabilities through maturity.

Shelly: We also have 360 million in mortgages and 193 million and other borrowings at our international subsidiaries.

Shelly: Debt to total capitalization was 25, 7% and leverage sits at $1 One X.

Shelly: As you can see our balance sheet remains strong safe and secure.

Michelle Hulgrave: Our approach to capital allocation balances investing for growth through capital expenditures, investing in diversified and opportunistic acquisitions, and returning capital to shareholders through dividends and securities repurchases. Since the end of 2022, we have raised the dividend five times from $0.57 to $0.87 per share, representing a 53% increase. During the first quarter, we paid $59 million in dividends, invested $103 million in growth through capital expenditures, and repurchased approximately 221,000 shares for $33 million.

Shelly: Our approach to capital allocation balances investing for growth through capital expenditures investing in diversified and the opportunistic acquisition and returning capital to shareholders through dividends and securities repurchases.

Shelly: Since the end of 2022, we have raised the dividend five times from 57 to.

Shelly: $2 87 per share representing a 53% increase.

Shelly: During the first quarter, we paid $59 million in dividends and invested $103 million for growth through capital expenditures and repurchased approximately 221000 shares for $33 million.

Michelle Hulgrave: It's important to reiterate that we have the ability to flex our leverage up to four times on a lease adjusted basis. New vehicle inventory increased $50 million from the end of December. Total inventory was $4.4 billion, up $100 million from the end of December. Floor plan debt was $3.9 billion.

Shelly: It's important to reiterate that we have the ability to flex our leverage up to four times on a lease adjusted basis.

Shelly: New vehicle inventory increased $50 million from the end of December total inventory was $4 4 billion up $100 million from the end of December <unk>.

Shelly: And that was $3 9 billion.

Michelle Hulgrave: Importantly, we had a 40-day supply of new vehicles and a 36-day supply of used. The day's supply of new vehicles for premium was 41, and the volume foreign was 29. The day's supply of new battery electric vehicles in the U.S. was 91 days.

Shelly: Importantly, we had a 40 day supply of new vehicles, and a 36 day supply of abuse.

Shelly: Days supply of new vehicles for premium was 41 and volume foreign was 29, the day supply of new battery electric vehicles in the U S was 91 days at.

Roger S. Penske: At this time, I will turn the call back to Roger for some final remarks. Well, thank you, Shelley.

Shelly: At this time I will turn the call back to Roger for some final remarks, yes. Thanks.

Roger S. Penske: Well, thank you, Shelly. With the acquisitions we completed during the first quarter, we continue to demonstrate the flexibility we have with our capital allocation. These acquisitions strengthen our premium brand footprint in our international markets and are expected to generate approximately $1 billion in estimated annual revenue. Most recently, our geographical diversification provided us with the opportunity to expand our partnership with Porsche. Today we have 22 Porsche stores throughout the network. We recently entered into an agreement to acquire two Porsche centers, one in Brighton and the other one in Doncaster, along with Ducati Melbourne in Australia.

Roger S. Penske: Shelley with the acquisitions, we completed during the first quarter, we continued to demonstrate the flexibility we have with our capital allocation. These acquisitions strengthen our premium brand footprint and our international markets and are expected to generate approximately 1 billion estimated annual revenue.

Roger S. Penske: Most recently, our geographical diversification provided us with the opportunity to expand our partnership with Porsche.

Roger S. Penske: Today, we have 22 porsches stores throughout the network.

Shelly: We originally entered into an agreement to acquire two Porsche centers one in Brighton.

Shelly: Enforces center of Doncaster, along with a Ducati Melbourne.

Roger S. Penske: For over 10 years, we have strategically built a diverse commercial vehicle and power system business in Australia. And with this significant acquisition, we will leverage that existing infrastructure and our significant experience in the retail automotive industry to drive growth, with the Porsche brand and Melbourne. Results continue to demonstrate the benefit of our diversification across retail automotive, commercial truck, Cost Control, and Discipline Capital Allocation Strategy. I remain confident in our model and the performance of the business. Thanks for joining us today and for your continued confidence in PAG.

Shelly: Australia for over 10 years, we've strategically built a diverse commercial vehicle and power system business, Australia and with this significant acquisition, we will leverage that existing infrastructure and our significant experience in the retail automotive industry to drive growth.

Shelly: With a Porsche brand in Melbourne.

Shelly: Our results continue to demonstrate the benefit of our diversification across retail automotive commercial truck cost control and disciplined capital allocation strategies.

Speaker Change: And confident in our model and the performance of the business. Thanks for joining us today, and your continued confidence and pag.

Operator: Ladies and gentlemen, if you would like to ask a question, you may press 1, then 0 on your telephone keypad. You will hear acknowledgement that your line has been placed in queue. You may remove yourself at any time by pressing the 1, 0 keys again. Once again, to queue up for a question, please press 1, then 0 on your telephone keypad. And first, we go to John Murphy with Bank of America. Please go ahead.

Speaker Change: Ladies and gentlemen, if you would like to ask a question you May press. One then zero on your telephone keypad, you will hear acknowledgment that your line has been placed in Q you may remove yourself at any time by pressing the one zero keys again once again to queue up for a question. Please press one then.

Speaker Change: Zero on your telephone keypad.

Speaker Change: And first we go to John Murphy with Bank of America. Please go ahead.

John Joseph Murphy: Hey, Roger. Good afternoon, everybody.

John Joseph Murphy: Hi, Good afternoon, Hey, Roger good afternoon, everybody.

Roger S. Penske: Roger, I just wanted to touch on the new GPUs, which are obviously a very hot topic for everybody for quite some time now. They're holding up better than people have been fearing. I'm just wondering if you could talk about that being brand-mix driven, luxury-mix driven, or your management on focusing on keeping these GPUs where they are. I'm just curious if you could talk about that.

John Joseph Murphy: Roger just wanted to touch on on on first on the on the New Gpus, which are obviously, a very hot topic for everybody.

John Joseph Murphy: Some time now.

John Joseph Murphy: They are holding up better than people have been fearing I. Just wondering if you could talk about that being brand mix driven luxury mix driven or your management on focusing on keeping these gpus.

John Joseph Murphy: Where they are just curious if you can talk about that.

Roger S. Penske: Why don't I have Rich Shearing talk about the U.S., and then Randall can talk about international business.

Speaker Change: So why don't I have a rich sharing talk about Oh, the U S. And then railroad can talk about international Rich, yes. Thank you John look, yes, I think you've touched on the first thing I would highlight is certainly our premium mix, we definitely think that plays a role and.

Richard P. Shearing: Yeah, thank you, John. Well, yeah, I think you touched on the first thing I would highlight is certainly our premium mix. We definitely think that plays a role in the grosses. And so then, if you look at the new side, you know, in the U.S., sequentially down $364, and used up $323 sequentially. So I think, as Shelly touched on, our day's supply as well, so that's been a very key focus for us to make sure that we're turning the inventory that we are getting.

Railroad: And the grosses.

Railroad: And so then if you look at the new side in the U S sequentially down 364.

Railroad: And the and used up three.

Randall Seymore: $323 sequentially, So I think as Shelly touched on our days supply as well. So that's been a very key focus for us to make sure that we're turning the inventory that we are getting.

Richard P. Shearing: And then, frankly, I think our operating team has done a fantastic job, too, of balancing the volume of achieving the OEM scorecard compliance with the best deals that are out there that are available. And you see that, obviously, in the numbers.

Rich Randall: And then frankly I think our operating team has done a fantastic job to a balancing the volume of achieving the <unk>.

Railroad: OEM scorecard compliance.

Railroad: The best deals that are out there that are available and you see that obviously in the numbers I think also John what we've been able to do as we've come out of Covid, we looked at our sales team and we've really taken the utilization and obviously the productivity has gone from 12 units per salesperson to 14 showing.

Roger S. Penske: I think also, John, what we've been able to do is we've come out of COVID. We've looked at our sales team, and we've really increased the utilization, and obviously, the productivity has gone from 12 units per salesperson to 14. So I think we have our best people on the front line now, which is making a difference.

Railroad: We have our best people on the front line now, which is making a difference and I do agree certainly with rich that the premium luxury side has given us that opportunity and yet we had headwinds with the Porsche branded weight they were down 26%.

Roger S. Penske: And I do agree, certainly with Rich, that the premium luxury side has given us that opportunity. And yet, we had headwinds with the Porsche brand; they were down 26% in the quarter. We were down 26%; they were down 23%. So we even had some impact on higher gross units. And from a VEV perspective, we're discounting them about $6,000 below MSRP, so that has an additional headwind. When you look at it overall, that would have increased our margin overall during the quarter. So Randall, why don't you just kick it?

Railroad: And in the quarter, we were down are there we were down 26. They were down 23. So we even had some impact on higher gross unit and from a Bev perspective, we're discounting knows about $6000 below MSRP show that had additional headwind when you look at it overall that would've increased short.

Railroad: Overall during the quarter. So Randall why don't you kick it yes, it's a similar story in the U K I mean, new gross all in was down $265 per unit, which isn't bad and if you look at <unk> in the U K, which represents 19% of all of our new car sales are VEB gross per unit was about.

Randall Seymour: Yeah, it's a similar story in the UK. I mean, new gross all in was down $265 per unit, which isn't bad. And if you look at BEV in the UK, which represents 19% of all of our new car sales, our BEV gross per unit was about 1400 pounds less per unit than ICE. So a little bit of that headwind.

Railroad: One <unk> thousand 1400 pounds less per unit than ice so little bit of that headwind, but I think look at the other point here is it's a common conversation with the with the team or the dealerships about gross profit and keeping the inventory where it is at a 40 day supply certainly helps that so it's a massive focus everyday.

Randall Seymour: But I think, look at the other point here. It's a common conversation with the team and dealerships about gross profit. And keeping the inventory where it is at a 40 day supply certainly helps that. So it's a massive focus every day.

Roger S. Penske: and also the mix. So, John, when you pull it all together, you take the US and you take the UK, we were down $302 on a company-wide basis on new cars but up $428 on used. So, you know, I'm really glad to report that for the quarter, but it was a byproduct, I think, of keeping our day supply down and our premium mix properly in line to be able to get maximum growth.

Railroad: Also the mix so John when you put it all together you take it.

S: S and you take the U K, we were down $302 on a company wide basis on new but up $428 gone use. So you know I'm really glad to report that for the quarter, but it was a byproduct I think of keeping our days supply down and our premium mix properly in line.

Railroad: When we get the maximum growth.

John Joseph Murphy: And then sort of another sort of similar hot topic on the SG&A front. I mean, I think we had a $30,35 million step up sequentially in the dollars, but it's 70.7% SG&A gross. It's still 6 to 700 basis points back from where we were, you know, pre-COVID.

Railroad: And then sort of another similar hot topic on the SG&A front, I mean, you've got a $30 million to $35 million step up sequentially.

Railroad: In the dollars, but at 77% SG&A to gross it's still six to 700 basis points back from where we were pre COVID-19. So things are certainly keeping remaining under control here I'm just curious Roger where do you think you want to manage that to sort of mid to long term I mean, you've been good paying people well.

Roger S. Penske: So it's, you know, things are certainly keeping, you know, remaining under control here. I'm just curious, you know, Roger, where you think you want to manage that sort of, you know, mid to long term? I mean, you've been good at paying people well and keeping turnover low. So that, you know, that's one reason to keep SG&A a little bit higher than other folks. But just curious how you're thinking about that now, you know, and particularly with the acquisitions of Rybrook and the other dealerships, if that could get a little bit more inflated over time and then get work back down.

Roger S. Penske: And keeping turnover low so that's one reason to keep SG&A, a little bit higher than other folks, but just curious how youre thinking about that now.

Roger S. Penske: And particularly with the acquisitions of Rai broken and the other the other dealerships if that if that could get a little bit more inflated over time, and then get work back down.

Michelle Hulgrave: Well, I think one point you hit was, aside from human capital, our turnover is only 18% through the end of the first quarter, which is world class. Let me let Shelly give you some color on the SG&A, okay?

Speaker Change: Well I think one point you hit was the human capital side, our turnover go into 18% through the end of the first quarter, which is as world class. Let me, let Shelly give me some color on SG&A okay.

Shelly: Sounds good.

Michelle Hulgrave: Hey, John. Yeah, it's, as Randall mentioned, it's a daily battle, and our teams are doing a great job controlling expenses. So we were very proud to report that on a sequential basis, we were down 30 basis points. You mentioned that we were up overall in SG&A, but when you look at it on a same-store basis, we were only up $5 million year over year. And so when I take a look back at that, there were about $4 million in expenses related to our acquisition and a legal settlement that we had in the quarter. And so really, you know, SG&A was relatively flat, and that's the byproduct of our teams just grinding every day.

Shelly: Yeah, It's as Randall mentioned, it's a daily battle and our teams are doing a great job controlling expenses. So we were very proud to report that on a sequential basis. We were down 30 basis points. You mentioned that we were up overall in SG&A, but when you look at it on a same store basis, we were only up $5 million.

Speaker Change: Year over year, and so when I take a look back at that there are about $4 million of expenses related to our acquisition and a legal settlement that we had in the quarter and so really you know SG&A was relatively flat and that's a byproduct of our teams just grinding every day.

Michelle Hulgrave: You know, we remain committed to keeping headcount below pre-COVID levels. Our executives are scrutinizing all our new hires. We're managing those pay plans. We want to keep those employees, but we also don't want to have any leakage when it comes to earnings.

Speaker Change: We remain committed to keeping headcount below pre COVID-19 levels. Our executives are scrutinizing all our new hires were managing those pay plans, we want to keep those employees, but we also don't want to have any leakage leakage when it comes to grocers and we've got an executive leadership team that's focused on stream.

Michelle Hulgrave: We've got an executive leadership team that's focused on, you know, streamlining and efficiencies across the board. The other expenses that we did incur, we had an increase in vehicle maintenance in the quarter of about $4 million. That's our service loaner business. We look at that as very productive. We had an additional 34 million in service and parts gross profit, and that's the result of a lot of efforts. Service Owners being one of them. You know, one of our teams was able to bring down the outstanding days outstanding in terms of when we could get an appointment for a service owner appointment from 14 to 7 days, so it's really paying dividends.

Roger S. Penske: Streamlining and efficiencies across the board so.

Roger S. Penske: The other expenses that we did incur we had an increase in vehicle maintenance in the quarter of about $4 million. So that's.

Roger S. Penske: That's our service line of our business we.

Roger S. Penske: Look at that as very productive we had an additional $34 million in service and parts gross profit not the results of a lot of efforts.

Roger S. Penske: Service partners being one of them.

Roger S. Penske: One of our teams is able to bring down the days.

Roger S. Penske: Outstanding in terms of when we could get an appointment for service on our appointment from 14 to seven days. So it's a it's really paying dividends.

John Joseph Murphy: And maybe if I could sneak one last one in, I mean, Australia seems to be a growing focus, you know, and you've been there for a while, so I mean, I wouldn't necessarily conflate it directly with sitting there in the UK, but I mean, do you kind of view this, you know, Roger, as a growth platform where we're going to be hearing more and more about acquisitions in Australia and you, you know, you don't want to, I wouldn't say control the market, but you know, you could be a big, big player in the market in many ways down there, even out of the power, outside the power business, in the dealership business as well.

Roger S. Penske: Sneak one last one in I mean, Australia seems to be a growing.

Roger S. Penske: Focus.

Roger S. Penske: And you've been there for a while so I wouldn't necessary completed directly with sitting here in the U K, but I mean do you kind of view this Roger is a a growth.

Roger S. Penske: Platform, where we're going to be hearing more and more about acquisitions in Australia and you. You know you don't want to I Wouldnt say control the market, but you can be a big big player in the market.

Roger S. Penske: In many ways down there even out of the power outside the power business and the dealership business as well.

Randall Seymour: Yeah, John, it's Randall. I'll take that one.

Roger S. Penske: Yeah, John It's Randall I'll take that one look we've you know for the past 10 years, we've had other opportunities to get into automotive retail and made a strategic decision to focus on the core of the commercial vehicle and power system and really grow that but with this opportunity with Porsche. It was a significant one we've been working on for several months and were able to get it.

Randall Seymour: Look, we've, you know, for the past 10 years, we've had other opportunities to get into automotive retail and made a strategic decision to focus on the core of the commercial vehicle and power system and really grow that. But this opportunity with Porsche was a significant one we'd been working on for several months, and we were able to get it over the line and certainly view that as a springboard for more opportunities.

Speaker Change: Over the line and certainly view that as a springboard for more opportunities in fact, we've already had some knocks on the door, but having 1300 people over in that part of 1300 people. There we can leverage the infrastructure that we have from a from.

Randall Seymour: In fact, we've already had some knocks on the door, but having 1,300 people over in that part, 1,300 people there, we can leverage the infrastructure that we have from a finance standpoint, legal, HR, IT. So it's just, it's a tuck in the hole that we can continue to grow. And the Australian market, just as a population and Melbourne being one of the best places in the world, we thought it was a great first step. Thank you.

Speaker Change: From a finance standpoint legal HR. It. So it's just it's a tuck in than that we can continue to grow in the Australia market just as a population in Melbourne being one of the best places in the World. We thought it was a great first step.

Speaker Change: Great. Thank you very much everybody.

John Joseph Murphy: Great. Thank you very much, everybody.

Speaker Change: Thanks, Sean.

Operator: Next, we move on to Michael Ward with Freedom Capital. Please go ahead.

Speaker Change: Next we move on to Michael Ward with Freedom Capital. Please go ahead.

Michael Patrick Ward: Thanks very much. Good afternoon, everybody. Hello, everybody.

Michael Patrick Ward: Thanks, very much good afternoon, everybody Hello, everybody.

Michael Patrick Ward: Hum Randall Theres been a couple of significant transactions in the UK market over the last six months with yourselves.

Michael Patrick Ward: Randall, there have been a couple significant transactions in the UK market over the last six months with yourselves and Lithia and Group One. Is there something going on in the market that we're not seeing? And are the franchise restrictions similar in the UK as they are in the US? Do you have more room to grow there, more opportunities, or are you about done as far as expansion is concerned?

Michael Patrick Ward: With you in group one is there something going on in the market that we're not seeing in our U R. The franchise restriction similar in the U K or the U S. Do you have more room to grow there more opportunities where are you about.

Michael Patrick Ward: As far as expansion.

Randall Seymour: Yeah, I look at it. I think we're going to continue to be opportunistic there. Yeah, the franchise laws aren't, you know, nearly as strong as they are here.

Michael Patrick Ward: Yes look at I think we're going to continue to be opportunistic there yeah. The franchise laws aren't nearly as strong as they are here, but if you look at the premium brands and how we've positioned ourselves being 20% plus of the Mercedes business, 16% of the Porsche business were 20% plus.

Randall Seymour: But if you look at the premium brands and how we've positioned ourselves, you know, being 20% plus the Mercedes business, 16% of the Porsche business, we're 20% plus the BMW business, you know, we've got that core in the culture there. And we want to continue to grow and look at some of these other acquisitions that have happened from the public. It's, it's a good market, but some of that brand mix just didn't fit right into our wheelhouse. So we just want to continue, you know, we're 98% premium in that market, and we just want to continue to be that way moving forward.

Michael Patrick Ward: The BMW business.

Michael Patrick Ward: We've got that core and the culture, there and we want to continue to grow and look at some of these other acquisitions that's happened from the publics.

Michael Patrick Ward: Got.

Michael Patrick Ward: It's a good market, but some of that brand mix just didn't fit right into our wheelhouse. So we just we want to continue where 98% premium in that market and we just want to continue to be that way moving forward.

Speaker Change: One of the other things Mike as we looked at obviously, we're on the Pendragon deal, but it got to pricing that was hiring lauded.

Speaker Change: And obviously I think lithia.

Speaker Change: The benefit there no question Nobody group one.

Roger S. Penske: I think one of the other things, Mike, is we looked, and obviously we're on the Pendragon deal, but it got to a price that was higher than we wanted. And obviously, I think Lithium saw the benefit there, no question about Group 1 with the Inchgate. Look, they have good brands, they have premium brands, but for us, taking our mix from, say, 90 down to 75 in premium, we think it was a mistake, and that's one of the benefits we have, because we have a major market share, as Randall mentioned, when you think about each one of the key premium brands there. So obviously, the multiples, at least when these took place, were lower than the multiples are in the U.S. right now, so you'd certainly think that you'd see where they'd look.

Michael Patrick Ward: The inchcape.

Michael Patrick Ward: Have good brands, they have premium brands, but for us taking our mix from say $90.

Michael Patrick Ward: Down to 75 in premium we think it was a mistake and thats one of the benefits we have because we got major market shares as Randall mentioned when you think about each one of the key premium brands or so.

Michael Patrick Ward: Obviously, the multiples at least when these took place were lower than the multiples are in the U S. Right now so that would certainly think that you'd see where they looked at it we have 9 billion of annualized revenue in the U K now it's a great car market. We've got a terrific management team I think we have almost <unk>.

Michael Patrick Ward: 10000 people operating in the UK now so look.

Michael Patrick Ward: As as Lithia and.

Roger S. Penske: We have $9 billion of annualized revenue in the U.K. now. It's a great car market. We've got a terrific management team. I think we have almost 10,000 people operating in the U.K. now. So look, as Lithium and Group 1 come in, look, there's plenty of room there. It's like they're our heroes. I think it shows that people realize the market might be validating our being there as long as we have to be honest with you.

Michael Patrick Ward: Group, one come in and look there's plenty of room. There in fact of our hero I think shows that people realize the market it might be validates our being there as long as we have to be honest with you.

Michael Patrick Ward: And I think the upside might be near term upside is probably better in the U S as far as industry sales.

Speaker Change: Surely there are two things just for clarification the <unk>.

Michael Patrick Ward: First one you kind of mentioned.

Michelle Hulgrave: And I think the upside might be near-term upside is probably better than the U.S. as far as industry sales are concerned. Shelley, there are two things, just for clarification. The first one, you kind of mentioned that SG&A included a legal settlement. Can you quantify that? I'm coming up with like 30 or $40 million. Is that the right number? That was a one-time, type penalty. Is that right?

Michael Patrick Ward: SG&A included a legal settlement can you quantify that.

Michael Patrick Ward: I'm coming up with like 30 or $40 million that the right number that was a one time type penalty is that right.

Speaker Change: No no no so the $30 million was I'm.

Speaker Change: Total overall.

Michael Patrick Ward: We.

Michael Patrick Ward: We had our.

Michael Patrick Ward: Shareholder lawsuits that we disclosed publicly in the first quarter and it was about $1 million Mike.

Michelle Hulgrave: I don't know. So the $30 million was total overall. We had our shareholder lawsuit that we disclosed publicly in the first quarter. And it was about $1.5 million, Mike. Okay.

Michael Patrick Ward: And then the second thing.

Michael Patrick Ward: Okay.

Michael Patrick Ward: It was $1 5 million and that would you did not call out was the one time item, but it's included in the SG&A.

Michael Patrick Ward: Yeah, that's correct, Mike we had some acquisition costs, which we just don't call those out as well.

Michael Patrick Ward: And then the second thing is... Okay. Okay, it was 1.5 million, and that would you call out as a one-time item, but it's included in the

Michael Patrick Ward: On an adjusted earnings we just take that but I think Shelly I wanted to make that comment because if you look at that on a same store basis were really flat essentially flat.

Michelle Hulgrave: Right. Okay. And the second thing, Shelley, you mentioned about the 25 notes, and you said you're not, you're going to allow them to come current, or are you in the middle of refinancing? I didn't quite catch that.

Shelly: Right. Okay, and then secondly, you mentioned about the 25% notes and you said youre not.

Shelly: You're going to allow them to concurrent or you're in the middle of refinancing.

Shelly: Quite catch that.

Michelle Hulgrave: Oh, so we wanted to stress that even though we have the 2025 notes due in September of 2025, under standard US GAAP rules, come September, we'd be required to classify those as current liabilities. But when you have the intent and ability to refinance them, as we do with the 1.7 of availability that we currently have in dry powder, you don't have to classify them as current, so we'll continue to keep them in long-term debt. And with the rate being where it is versus the rates right now, that really is more of a true story. Right, that makes sense.

Michael Patrick Ward: So we want to stress that even though we have the 2025 notes due September of 2025.

Michael Patrick Ward: Hi.

Michael Patrick Ward: Under standard U S GAAP rules.

Michael Patrick Ward: September we'd be required to classify those as current liabilities, but when you have Ryan.

Michael Patrick Ward: The refinance time as we do with but one seven of availability that we have currently and dry powder you don't have to classify them as current so we'll continue to keep them in long term debt and with the rate being where it is.

Michael Patrick Ward: Right now.

Michael Patrick Ward: It's more of a true story so.

Speaker Change: Right makes sense. Thank you. Thank you very much.

Michael Patrick Ward: Right. It makes sense. Thank you.

Speaker Change: Okay.

Russia Chocolate: Next we go to Russia chocolate with Jpmorgan. Please go ahead.

Operator: Next, we go to Rajat Gupta with J.P. Morgan. Please go ahead.

Rajat Gupta: Great. Thanks for taking the time to answer the question. You know, I just had a question on BTL first. You mentioned you expect earnings to be up sequentially, quarter over quarter. Okay, would it be possible to give us a little more granularity on, you know, a range around the dollars or, you know, or year-over-year number on how we should think about that and then just the cadence beyond that into the second half? Any kind of like four-year guidance related to that would be helpful, you know, just with our models and have a follow-up.

Russia Chocolate: Oh, great. Thanks for taking the question.

Russia Chocolate: I just had a question on PPL first.

Russia Chocolate: You mentioned, you expect earnings to be up sequentially.

Jpmorgan: Quarter over quarter.

Russia Chocolate: Okay.

Russia Chocolate: Possible to give us a little more granularity on you know.

Russia Chocolate: A range around the dollars or on a year over year number.

Russia Chocolate: Or we should think about that and then just the cadence beyond that into the second half.

Speaker Change: Any kind of like for your guidance related to that would be helpful.

Russia Chocolate: With our models.

Speaker Change: Follow up thanks.

Roger S. Penske: I think I understood the question being asked is, as we look into Q2 and beyond, what are the generators going to give us a sequential increase in profitability, is that correct?

Speaker Change: I think I understood. The question asking as we look into Q2 and beyond what are the generators are going to give us a sequential increase in profitability is that correct.

Roger S. Penske: Yeah, in the truck leasing business, the PTL.

Russia Chocolate: Yes.

Russia Chocolate: Trucking using business the PD L business.

Roger S. Penske: Yeah, well, number one, we'll have a reduced rental fleet. At this point, we had 4,800 come out during Q1. We'll continue to de-fleet as we can as the market will allow us to sell used trucks into the market with profit, and that'll help our utilization. ACT put out a statement last week that said that they expect freight rates or freight to pick up in the second quarter. Am I correct, Rich?

Russia Chocolate: Yeah.

Russia Chocolate: Number one we will have a reduced rental fleet.

Russia Chocolate: At this point, we had 4800 come out.

Russia Chocolate: During Q1, we will continue to de fleet as we can as the market will allow us to sell used trucks enter the market.

Russia Chocolate: With profit and that'll help our utilization.

Russia Chocolate: <unk> put out a statement.

Russia Chocolate: Last week that said that they expect the freight rates are afraid to pick up my correct rich and.

Roger S. Penske: So that certainly will help us. I think also from the standpoint of, maybe you got to go back and tell the story of when we had 60,000 units on back order, you know, back in March of 2023. Today, we have 30,000.

Russia Chocolate: Correct.

Russia Chocolate: In the second quarter, so that certainly will help us I think also from the standpoint, maybe you got to go back and tell the story. When we had 60000 units on back order back in March of 2023 today, We got 30000, so we pushed a lot of those units through the system the new units coming.

Roger S. Penske: So we pushed a lot of those units through the system, the new units coming in, which have to replace the roughly 25,000 or more extensions we had. So we won't have the higher maintenance on those older units. And in fact, we only had 2,500 units that we extended in Q1 of this year. So that'll be key.

Russia Chocolate: In which have to replace.

Russia Chocolate: Roughly 25000 or more extension, we had so we won't have the higher maintenance on those older units and in fact, we already had 2500 units here, we extended in Q4 and Q1 of this year, so that will be key and obviously as we look at the one way business and if we get some benefit in interest rates.

Roger S. Penske: And obviously, as we look at the one-way business, and if we get some benefit in interest rates, that'll certainly help us. We also have 12,000 units available for sale versus 8,000 roughly last year, and we'll continue to work through those. So I see the continued increase in market share we're getting on full-service leasing. I think we're right-sizing our rental fleet to go forward, which will be positive. Remember, 50% of our rental revenue comes from our leased customers.

Russia Chocolate: That will certainly help us. We also have 12000 units available for sale versus 8000, roughly last year and we will continue to work through those so I see the continued increase in market share. We're getting on full service leasing I think we're right sizing our rental fleet to go forward.

Russia Chocolate: Which will be which will be positive remember, 50% of our rental revenue comes from our lease customers and with all of these businesses somewhat lower in revenue or using less extra trucks. So that's been obviously.

Roger S. Penske: And with all of these businesses somewhat lower in revenue, they're using fewer extra trucks. So that's obviously hit us from the standpoint of revenue. We think that'll pick up as we go into the second and third quarter. You know, overall, I think the reduction in people, I think we're looking at our T&E, we're looking at our CapEx from a standpoint of facilities. All of those things will have a benefit.

Russia Chocolate: Hit us from the standpoint of revenue, we think that'll pick up as we go into the.

Russia Chocolate: And the second and third quarter, you know overall I think the reduction in people I think we're looking at our TNA. We're looking at our Capex from a standpoint of facilities all of those things will have a benefit and again, reducing the growing balance sheet, we had $350 million of increase.

Roger S. Penske: And again, reducing the growing balance sheet. We had $350 million of an increase in the balance sheet in Q1. We expect that to stay down, and we'll be well below what it was last year, even with a big buy of new trucks coming in. And we're buying no more rental trucks for the rest of the year other than what we got in the first quarter. So when you put all that together, I can say that our expectations, talking to the team, we would expect a sequential increase in the bottom line for PTS and Q2.

Russia Chocolate: <unk> balance sheet in Q1, we expect that to stay down and will be well below what it was last year basis, even with a big buyer of new trucks coming in in Russia.

Russia Chocolate: Or is that we are buying no more rental trucks in the rest of the year other than what we got into the first quarter. So when you put all that together I can say that our expectation is talking to the team. We would expect a sequential increase in our bottom line for Pts in Q2.

Rajat Gupta: Got any granularity on like the degree, like double digits, single digits, you know, because it's pretty there are a lot of these nowadays. Is it a way for us to baseline that assumption?

Speaker Change: Got it.

Russia Chocolate: Any kind of an already on like the degree like in the double digits single digits, you know because it's a pretty there's always seasonality in that.

Russia Chocolate: Whereas to baseline that assumption.

Roger S. Penske: I don't want to give you a number on the phone, but I can assure you that we're

Russia Chocolate: I don't want to give you a number here on the phone, but I can assure you I'm pushing for as much as we can and we would hope to continue that momentum as we look at our comps and three and four for the rest of the year.

Rajat Gupta: Got it, got it. That's helpful. And then just to follow up on the used car GPUs. Very nice improvement here from the fourth quarter, you know, both the US and UK. But you know, what should we think about?

Speaker Change: Got it got it that's helpful. And then just to follow up on the used car Gpus.

Speaker Change: Very nice improvement from the fourth quarter.

Speaker Change: Both in the U S and U K.

Speaker Change: How should we think about the sustainability of those levels you're into the second and third quarters, obviously fourth quarter has a seasonal headwind, but just curious like how should we think about the progression there.

Richard P. Shearing: Hi, Rich. What is the feeling here as we go forward, Rich, on the unused GPUs? Sure.

Speaker Change: Also on the units for the used car business.

Richard P. Shearing: Yeah, Rajat, I think there are a couple things to keep in mind. So, you know, the affordability. We're seeing some improvement there. If you look at our average sales from an average sales transaction price, it peaked in 2022 at over $30,000. That's come down to under $27,000 now. So, we anticipate that that's going to continue to trend down as the market normalizes. Then you look at the sourcing side. We're seeing what was difficult in the past relative to trade-ins from a negative equity standpoint.

Unknown Executive: Rich Adams.

Speaker Change: Trailing his here as we go forward rich on the.

Speaker Change: Our new Gpus sure, yes, it was that I think.

Unknown Executive: Things to keep in mind, so the affordability, we're seeing some improvement there if you look at.

Unknown Executive: Our average sales from an average sales transaction prices peaked in 2022, but over $30000 that's come down to under $27000. Now. So we anticipate that that's going to continue.

Speaker Change: Trend down as the market normalizes.

Unknown Executive: When you look at the sourcing side, we're seeing that.

Unknown Executive: What was difficult in the past relative to.

Unknown Executive: Trade ins from our negative equity standpoint.

Unknown Executive: Closed auctions.

Unknown Executive: Those are starting those channels are starting to open up again and traditionally those have been some of our highest profitability sourcing.

Richard P. Shearing: that we know are going to turn into profitable units. And so we've seen good stabilization in that aspect. And, you know, price corrections, I think, will continue as we go into Q3, Q4.

Unknown Executive: Channel, So we anticipate that continuing.

Unknown Executive: As well of course.

Unknown Executive: The team needs to continue to be disciplined on what we're purchasing so we're looking at that and with some of our technology.

Unknown Executive: Technology and some of the vendors, we use using algorithms to make sure we're putting values on these cars that that we know we're going to turn to.

Roger S. Penske: Yeah, I would say to add on to the U.S. day's supply, when you're looking at 37 days, you know, we really, when you look at it with, you know, in the U.S., 37 days on new cars, and they're really 29 days on use, so keeping that inventory current, so, you know, as used cars start to age, I think we're in good shape. One other benefit, we've seen car shopping really make a big step forward in margin in the U.S. as we've been able to access more cars. We've seen a several hundred million, hundred dollar benefit from that here in the U.S., so, Randall, what about you from the U.K.?

Unknown Executive: The profitable units and so we've seen good stabilization in that in that aspect and.

Unknown Executive: Price price corrections I think will continue as we go into Q3 Q4, I would say to add on to the U S. Days' supply is when Youre looking at 37 days.

Unknown Executive: We really when you look at it.

Unknown Executive: In the U S 37 days, a new one and it really 29 days on us so keeping that inventory current so you.

Unknown Executive: Used cars start to age I think we're in good shape, one other benefit we've seen car shop.

Unknown Executive: Really make a big step forward in margin in the U S. As we've been able to access more cars, obviously, we've seen a several $100 million.

Unknown Executive: Dollar benefit.

Unknown Executive: Out here in the U S. So Randall what about you from the around the U K, Yes, similar story I mean, we were up $725 per unit unused gross in Q1 versus Q4 sequentially and remember we were fighting those headwinds in Q4, the you know the.

Randall Seymour: Yeah, similar story. I mean, you know, we were up $725 per unit on used gross in Q1 versus Q4 sequentially. And remember, we were fighting those headwinds in Q4, and the pricing in the market was down 10% over Q4. So that's certainly stabilized. And it's really managing day supply and age. I mean, you know, I'd love you to sit in one of our meetings as we go through the used inventory. And, you know, our goal is to have zero over, you know, 90 days and hardly any from 60 to 90. And the team's just all over that. So as we turn it, keep it fresh, price it right, and get it through reconditioning quickly, we're going to get more gross profit in a stable market. And that's

Unknown Executive: Pricing in the market was down 10%.

Randall: Over over Q4, so that's certainly stabilized and it's really managing day supply and aged I mean.

Randall: We love you to sit in one of our meetings as we go through used inventory and our goal is to have zero over nine.

Randall Seymore: 90 days and hardly any from 60 to 90 and the team's just all over there. So as we turn it keep it fresh price it right get it through reconditioning quickly, we're going to get more gross profit and a stable market and that's exactly what we're doing.

Roger S. Penske: Rajat, one other thing, Matt, Richard. Sorry Rajat, one other thing to add that I failed to mention is the changes in the loaner fleet. So if you look at our loaners, you know, going back 12 plus months ago, used vehicles were the predominant makeup of the fleet. As we've been able to take those out, we put new cars into that fleet now, we're able to turn those much faster, they turn into great used cars, and we're able to put new car programs, depending on the OEM, on a lot of those that will help us, you know, from a gross profit per unit perspective.

Speaker Change: Was that one other sorry Richard.

Richard: Sorry, It was out one other thing to add that I failed to mention is the.

Speaker Change: The changes in the Loaner fleet. So if you look at our loners going back 12 plus months ago.

Speaker Change: Used vehicles, where the predominant.

Speaker Change: The makeup of the fleet as we've been able to take those out.

Speaker Change: New cars into that fleet now, we're able to turn those much faster they turned into great.

Speaker Change: Used cars, and we're able to put new car programs, depending on the OEM on a lot of those that will help us from a gross profit per unit perspective, I think just.

Roger S. Penske: I think just, Rich, in BMW alone, we have 2000 loaners that we can turn those two or three times. It's four to 6000 more used cars that we can put into the market, zero to four years old, which is great and gets that all the new car program, that'll be a huge benefit for us. So we're starting to get some, some supply of ice vehicles. Leasing is also up. You know, from the standpoint of, Shelly, what is it we're up from year to year? We're up 8% year over year, up to 32% of our new sales. So it's... And we're...

Speaker Change: Rich and BMW alone, we have 2000 loaders and if we can turn those two or three times. Its 46000 more used cars that we can put into the market zero to four years old which is rich I'd get that all of the new car program that'll be a huge benefit for us now that we're starting to get some supply of <unk>.

Speaker Change: Ice vehicles leasing is also up.

Speaker Change: From the standpoint, Shelly what is it we're up from what.

Speaker Change: <unk> were up 8% year over year up to 32% of our new sales. So it's.

Roger S. Penske: And we're getting some lease returns now, which are also good opportunities for us, and I think we're starting to see that the VEV units are able to sell in the market. We're making more money on those than we are on the ones that we sell new. So, interesting. Our guys are being very selective as we trade those, or we buy them in the open market.

Shelly: And we're getting some lease returns now which also are also good good opportunities for us and I think we're starting to see that.

Shelly: Sure.

Shelly: Bev units are able to buy in the market, we're making more money on those than we are on the ones that we sell news. So interesting our guys are being very selective as we trade those or we buy them in the open market.

Rajat Gupta: Got it, got it. That's really helpful. And I'll definitely take up your offer of sitting in on one of the meetings. Thank you.

Shelly: Hum.

Speaker Change: Got it got it that's really helpful. Oh definitely take up your offer I'm feeling is one of those meetings.

Operator: Thanks Rajat. Thank you.

Speaker Change: Sure.

Speaker Change: Thanks for that thank you.

David Whiston: Next, we go to David Whiston with Morningstar. Please go ahead.

Speaker Change: Next we'll go to David Whiston with Morningstar. Please go ahead.

David Whiston: Hey, everyone. Just two questions. First, on capital allocation for the rest of the year. You do seem pretty interested in doing acquisitions so far. So just curious about how to balance thinking about spending between buybacks and more M&A.

David Whiston: Hey, David.

David Whiston: Hey, everyone. Just two questions first on capital allocation for the rest of the year you do see them.

David Whiston: Pretty interested doing acquisition so far.

David Whiston: So just curious about how to balance thinking about spending between buybacks and more M&A.

Michelle Hulgrave: Hey, David, it's Shelly. I can take that. You know, we have enjoyed a lot of shareholder returns the last couple of years when it comes to our cash from operations. You know, typically, we'd like to stay in that 50-50 range between growth and shareholder returns. It has been weighted more heavily. You know, I think last year was 65-35.

David Whiston: Sure.

David Whiston: Hey, David It's Sallie I can take that.

Sallie: We havent enjoyed a lot of shareholder returns the last couple of years when it comes to our cash from operations. Yeah. Typically we like to stay in that 50 50 range between growth and shareholder returns. It has been weighted more heavily you know I think last year was $65 30.

Michelle Hulgrave: But to keep a 50-50 balance between, you know, growing through acquisitions and then shareholder returns is how we like to do it. We want to grow revenue 10%. We're going to do, you know, 5% at least through acquisitions. And we're going to do, you know, we're going to really push the teams to grow 5% on an organic basis. And so that's how we think of it here.

Sallie: But to keep a 50 50 between growing through acquisitions and shareholder returns is how we like to do it.

Sallie: We want to grow revenue, 10%, we're gonna do you know, 5% at least through acquisition and we're gonna do you know where.

Sallie: Really pushed the team to grow 5% on an organic basis and so that's how we think of it here now it's all going to depend on the opportunities that come our way, we're gonna be selective, but we certainly.

Michelle Hulgrave: Now, it's all going to depend on the opportunities that come our way. We're going to be selective, but we certainly are entertaining a lot of things as we're able to look across many markets. We've talked a lot about our diversification. And so we bought internationally, we've talked about going into Australia, which could be, you know, a great new market for us on the retail side, as well as the business opportunities that Randall mentioned that we have there already. You know, we've been very active in truck acquisitions. There are just a lot of opportunities, but it gives us the opportunity to be selective as well.

Sallie: Our entertaining and a lot of things that as we're able to look across many markets. We've talked a lot about our diversification. So you bought internationally, we've talked about going into Australia, which could be you know a great new market for us on the retail side as well as the the business opportunities that Randall mentioned that we have there already.

Speaker Change: Yeah, we've been very active in truck acquisitions.

Sallie: There's just a lot of opportunities, but it gives us the opportunity to be selective as well. So it's all going to depend on what opportunities come our way.

Michelle Hulgrave: So it's all going to depend on what opportunities come our way. I think, David, also, we have to realize that the purchase prices and multiples were the highest they've ever been over the last 24 months. We're seeing those come down now, which makes some opportunities, you know, more attractive to us. And we're going to look at those. I think that, you know, we have a pipeline of deals we're working on, which would be acquisitions, and we want to buy at least five, and grow at least 5% through acquisitions, hopefully 5% through organic growth would be kind of our mission plan.

Speaker Change: David also we got to realize that the purchase prices and multiples are at the highest they've ever been over the last 24 months, we're seeing those come down now, which make some opportunities more attractive to us and we're going to look at those I think that.

Speaker Change: We have a pipeline of deals we're working on which would be acquisitions, and where we want to buy at least grow at least 5% through acquisition hopefully 5% through organic growth would be kind of our emission plan, but I think there's opportunity there for us as we go forward on the acquisition side.

Roger S. Penske: But I think there's opportunity there for us as we go forward on the acquisition side. You know, we've raised our dividend, Shelly, I think, what, 57% since 2022? That's right.

Speaker Change: We've raised our dividend Shelley I think what the 57% since our.

Speaker Change: 2022, alright, a big numbers. So we continue to see the dividend increase and shortly when you look at our capital allocation just in 2024, and our dividends were about $60 million and you look at our Capex with some of this about 25.

Roger S. Penske: A big number. So we continue to see the dividend increase. And certainly, when you look at our capital allocation, just in 2024, our dividends were about 60 million. And you look at our CapEx, which some of this about 25 million is land, is over 100 million. And then, of course, our share repurchases at 33. So somewhere around a quarter of a billion dollars that we have, we've done. And that's kept our leverage at when you look at our, our leverage is still 1.1 to one.

Speaker Change: As Lan with over 100 million is that of course, our share repurchases to 33 show somewhere around a quarter of a billion dollars that we have.

Speaker Change: We've done and that's kept our when you look at our our leverage.

Speaker Change: Leverage is still one one to one so I think we're safe and secure from an overall company standpoint, and I want to stay there too I don't want to go way off too much of a standpoint of share buyback or I think we want to be leveling ourself from the standpoint of acquisition, but there's opportunity out there for sure.

Roger S. Penske: So I think we're safe and secure from an overall company standpoint. And I want to stay there too. I don't want to go way off too much in a standpoint of share buyback, or I think we want to be leveling ourselves in the standpoint of acquisition. But there's opportunity out there for sure.

David Whiston: And speaking of opportunity, you talked about the Ford and Solantis acquisitions in your press release. It's unusual, though. You do still do it once in a while in terms of buying Detroit three brands. So I was just curious, were those compelling buys? Were those stores just like a very compelling price? Or is there a geographic reason you wanted to buy them? Thank you.

Speaker Change: Thanks, and speaking of opportunity you're talking about the Ford influences acquisitions in your press release, it's unusual though.

Speaker Change: You do still do it once in a while in terms of buying Detroit three brand and so I was just curious where those are compelling for those stores just like a very compelling price or is there a geographic reason you wanted to buy them.

Roger S. Penske: I think it was up in Massachusetts. It was more opportunistic, I think, and it would tuck right into Rhode Island.

Speaker Change: I think it was up in Massachusetts, I think it was more for opportunistic I think and with truck right into Rhode Island, but I think we look at it right now we're sitting with 1%.

Roger S. Penske: But I think we look at, right now, we're sitting with 1% from the standpoint of our big three volume. I think there's opportunity there. We're seeing some of those prices coming in line with where we would expect them. So in the right place, in the right market, we're gonna take a look even on the domestic side.

Speaker Change: From the standpoint of our our big three.

Speaker Change: Volume and I think theres opportunity there, we're seeing some of those oil prices coming in line, where we would expect them. So in the right place and the right market, we're going to take a look even on the domestic side.

Speaker Change: Okay. Thank you.

Operator: And we have a follow-up from Michael Ward with Freedom Capital. Please go ahead.

Speaker Change: And we have a follow up from Michael Ward with Freedom capital. Please go ahead.

Speaker Change: Mike.

Michael Patrick Ward: Thanks again. We're about one year into the agency model in the UK, and I'm just wondering what your thoughts are on it and how it is working out.

Speaker Change: Hum.

Michael Patrick Ward: Just we're about one year into the agency model in the U K and I'm just wondering what your thoughts are on and how is that working out.

Randall Seymour: Hey Mike, it's Randall. I'll take that. So yeah, so if we rewind the clock to the beginning of 23, the first quarter was a big challenge from a system standpoint, available inventory standpoint, and I think Mercedes-Benz UK has done a nice job collaborating with ourselves and the entire dealer body, and those systems, and let's just call it the ease of doing business for both the dealer and, more importantly, the customer is, in large, in place now.

Speaker Change: Yeah, Hey, Mike, It's Randall I'll take that.

Speaker Change: So yes, so if we rewind the clock for the beginning of 'twenty three the first quarter was a big challenge from a system standpoint available inventory standpoint.

Randall Seymore: And I think Mercedes Benz U K has done a nice job collaborating with ourselves and the entire dealer body in those systems and let's just call. It the ease of doing business for both the dealer and more importantly, the customer is in large in place now so we were able to increase our volume significantly in <unk>.

Randall Seymour: So we were able to increase our volume significantly in Q1 and obviously the gross being a fixed gross and we get one more percentage point on EVs so that actually helps and over the past year as we've matured that agency model as well internally we've been able to reduce our cost base so we measure closely a retained profit per unit on new so the gross profit less controllable direct expenses and that number is the best it's been since we've owned Sittner with exception to 2022 which I think we would all call an anomaly or relative to the car market so in representing over 20% of all Mercedes sold in the UK and then the acquisition of those London stores in in late 22 with the populace there has been significant because 90% plus of all cars sold are sold within each dealer's primary market area. So, they're not going, you know, geographically other to a neighboring dealer. They're going right there because there's no negotiation on the price.

Randall Seymore: Q1, and obviously the gross being a fixed gross and we get one more percentage point on an EV so that actually helps.

Randall Seymore: And over the past year as we've matured that agency model as well internally, we've been able to reduce our cost base. So we measure closely are retained profit per unit on new so the gross profit less controllable direct expenses and that number is the best it's been since we've owned <unk>.

Randall Seymore: Sitting there with exception of 2022, which I think we would all call an anomaly year relative to the car market, so and representing over 20% of all Mercedes sold in the U K and then the acquisition of those London stores and and late 'twenty two with the populist there.

Randall Seymore: Has been significant because 90%.

Randall Seymore: Plus of all cars sold are sold within each dealers primary market areas, So theyre not going.

Randall Seymore: Geographically.

Randall Seymore: There are two of neighboring dealers, they're going right. There because there is no negotiation on the price. So in looking at the end of the day, there's less competition. So our conversion rate has actually improved six percentage points over the last year as well. So I think our team in the U K with Mercedes has done a really nice job.

Randall Seymour: So, and look at it this way, at the end of the day, there's less competition. So, our conversion rate has actually improved 6 percentage points over the last year as well. So, I think our team in the UK with Mercedes did a really nice job in conjunction with Mercedes-Benz UK, and we're just going to get more efficient. So, I would say right now it's been, you know, it's looking like a win for us this year.

Randall Seymore: In conjunction with Mercedes Benz U K, and we're just going to get more efficient. So I would say right now it's been it's been looking like a win for us this year.

Michael Patrick Ward: Great color. Thank you very much.

Speaker Change: Great color. Thank you very much.

Speaker Change: Thanks, Mike.

Roger S. Penske: And for closing remarks, I'll now turn the conference back to Mr. Penske.

Roger S. Penske: And for closing remarks, I'll now turn the conference back to Mr. Penske.

Roger S. Penske: Thank you everyone for joining us. Good quarter. We're looking forward to Q2 and your support.

Penske: Well. Thank you everyone for joining us good quarter, we're looking forward to Q2 and your support thank you.

Operator: Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.

Speaker Change: Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.

Operator: We're sorry, your conference is ending now. Please hang up.

Speaker Change: We're sorry your conferences ending now please hang up.