Q2 2024 Penske Automotive Group Inc Earnings Call

Good afternoon. Welcome to the Penske Automotive Group second quarter 2024 earnings conference call.

Unknown Executive: 2024 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through August 7th, 2024, on the company's website under the Investors tab at www.penskyautomotive.com.

Operator: 2024 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through August 7, 2024, on the company's website under the Investors tab at www.penskeautomotive.com.

Today's call is being recorded and will be available for replay approximately one hour after completion through August 7, 2024, on the company's website under the Investors tab at www.penskeautomotive.com.

Unknown Executive: If you would like to ask a question, you may press 1, then 0 on your telephone keypad. You will hear acknowledgment that your line has been placed in Q. To remove yourself from Q, please repeat the same 1 0 command.

Operator: If you would like to ask a question, you may press 1 then 0 on your telephone keypad. You will hear acknowledgment that your line has been placed in queue. To remove yourself from queue, please repeat the same 1-0 command. I will now introduce Tony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

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. To remove yourself from queue, please repeat the same 1-0 command.

Anthony Pordon: I will now introduce Tony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development.

Anthony R. Pordon: I will now introduce Tony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Unknown Executive: Sir, please go ahead.

Unknown Executive: Thank you, Leah.

Anthony R. Pordon: Thank you, Leah. Good afternoon, everyone. And thank you for joining us today. A press release detailing Penske Automotive Group's second 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.

Roger Penske: Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's second 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.

Anthony R. Pordon: Thank you, Leah. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's second 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.

Anthony Pordon: As always, I'm available by email or phone for any follow-up questions you may have.

Anthony R. Pordon: As always, I'm available by email or phone for any follow-up questions you may have.

Anthony Pordon: Joining me for today's call is Roger Penske, our Chair and CEO; Shelley Hulgrave, our EVP and Chief Financial Officer; Rich Shearing from North American Operations; Randall Seymore from International Operations; and Anthony Facione, 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 EBITDAF, and our leverage ratio. We have prominently presented the comparable gap measures and have reconciled the non-gap measures to their most directly comparable gap measure in this morning's press release and investor presentation, both of which are available on our website.

Anthony R. Pordon: Joining me for today's call are Roger Penske, our Chairman and CEO, Shelly Hulgrave, our EVP and Chief Financial Officer, Rich Shearing from North American Operations, Randall Seymour from International Operations, and Tony Facione, 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.

Speaker Change: Joining me for today's call are Roger Penske, our Chair and CEO , Shelly Hulgrave, our EVP and Chief Financial Officer, Rich Shearing from North American Operations, Randall Seymour from International Operations, and Tony Facione, Vice President and Corporate Controller.

Speaker Change: 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.

Speaker Change: 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: We have prominently presented the comparable GAAP measures and have reconciled the non-GAAP measures to their most directly comparable GAAP measure in this morning's press release and investor presentation, both of 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 results to differ materially from expectations. At this time, I now turn the call over to Roger Penske.

Speaker Change: We have prominently presented the comparable GAAP measures and have reconciled the non- GAAP measures to their most directly comparable gap measure in this morning's press release and investor presentation, both of which are available on our website.

Anthony Pordon: Our future results may vary from our expectations because of risks and uncertainties outlined in today's press release under forward-looking statements.

Speaker Change: Our future results may vary from our expectations because of risks and uncertainties outlined in today's press release under forward-looking statements.

Anthony Pordon: I also direct you to our FCC filings, including our Form 10-K and previously filed Form 10-Qs for additional discussion and factors that could cause future results to differ materially from expectations.

Speaker Change: I also direct you to our FCC filings, including our Form 10-K and previously filed Form 10-Q s for additional discussion and factors that could cause future results to differ materially from expectations.

Roger Penske: At this time, I have now turned the call over to Roger Penske.

Roger S. Penske: Roger Penske. Thank you, Tony. Good afternoon, everyone. And thank you for joining us today.

Roger S. Penske: In the second quarter of 2024, PEG generated $326 million in income before taxes and $241 million in net income. $3.61 of earnings per share, our revenues grew 3% to $7.7 billion, and we had the highest quarterly revenues in the company's history. The company's financial performance for the three months ended June 30, 2024, again was driven by its diversification, which included continued strong performance of our retail automotive and our commercial truck business. Highlights during the second quarter included record total quarterly revenue of $7.7 billion and a 10% increase in service and parts revenue to a record $753 million.

Roger Penske: Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. In the second quarter of 2024, PDG generated $326 million in income before taxes and $241 million in net income, and $3.61 of income per share. Our revenues grew 3% to $7.7 billion, and we're the highest quarterly revenues in the company's history. The company's financial performance for the three months ended June 30th, 2024, again, was driven by a diversification, which included continued strong performance of our retail automotive and our commercial truck business. Highlights during the second quarter include record total quarterly revenue of $7.7 billion, and a 10% increase in service and parts revenue to a record $753 million.

Roger S. Penske: At this time, I now turn the call over to Roger Penske. Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. In the second quarter of 2024, PAG generated $326 million in income before taxes.

Roger S. Penske: and $241 million in net income and $3.61 of income per share. Our revenues grew 3% to $7.7 billion and were the highest quarterly revenues in the company's history.

Speaker Change: The company's financial performance for the three months ended June 30, 2024, again was driven by its diversification, which included continued strong performance of our retail automotive and our commercial truck business.

Speaker Change: Highlights during the second quarter include record total quarterly revenue of $7.7 billion.

Speaker Change: and a 10% increase in service and parts revenue to a record $753 million.

Roger Penske: When compared to the first quarter, retail automotive gross profit for a new vehicle retail improved $73, while our focus on efficiency and controlling costs drove us a bunch of decline in selling and general administrative expenses as a percentage of gross profit by 50 basis points to 70.2%. Also, our equity earnings from Penske Transportation Solutions increased 63% sequentially. As a result, earnings before taxes increased 10%, and earnings per share increased 12% when compared to the first quarter of 2024.

Roger S. Penske: When compared to the first quarter, retail automotive gross profit for a new vehicle retailed improved $73, while our focus on efficiency and controlling costs drove a sequential decline in selling and general and administrative expenses as a percentage of gross profit by 50 basis points to 70.2%. Also, our equity earnings from Penske Transportation Solutions increased 63% sequentially. As a result, earnings before taxes increased 10% and earnings per share increased 12% when compared to the first quarter of 2024. Now, let me now turn our attention to the automotive operations during the second quarter.

Speaker Change: When compared to the first quarter, retail automotive gross profit

Speaker Change: for New Vehicle Retail.

Speaker Change: approved $73.

Speaker Change: All our focus on efficiency.

Speaker Change: and Controlling Costs.

Speaker Change: drove a sequential decline in selling and general and administrative expenses as a percentage of gross profit by 50 basis points.

Speaker Change: to 70.2%. Also, our equity earnings from Penske Transportation Solutions increased 63% sequentially.

Speaker Change: As a result, earnings before taxes increased 10%

Speaker Change: and Earnings Per Share increased 12% when compared

Roger Penske: Let me now turn our attention to the automotive operations during the second quarter. Total automotive units delivered increased 2% to 126,653 units, which includes 10,221 agency units. New units increased 3%, and used units were flat. Every new vehicle transaction prices increased 3%, the $58,400, while used transaction prices declined 3% to $34,700. We continue to take forward orders with pre-sold activity averaging between 10 and 20% in the US, depending on brand and region. 35% of the new vehicles sold in the US were an MSRP, while approximately 90% of the best were sold in the US during the quarter required significant discounting.

Speaker Change: to the first quarter of 2024. Let me now turn our attention to the automotive operations during the second quarter.

Roger S. Penske: Total automotive units delivered increased 2% to 126,653 units, which includes 10,221 agency units. New units increased 3%, and used units were flat. Average new vehicle transaction prices increased 3% to $58,400, while used transaction prices declined 3% to $34,700. We continue to take forward orders with pre-sold activity averaging between 10, and 20% in the U.S., depending on brand and region.

Speaker Change: Total automotive units delivered increased 2% to 126,653 units, which includes 10,221 agency units. New units increased 3%.

Speaker Change: and used units were flat.

Speaker Change: Average new vehicle transaction prices increased 3% to $58,400 while used transaction prices declined 3% to $34,700.

Speaker Change: We continue to take forward orders with pre-sold activity averaging between 10...

Speaker Change: and 20% in the U.S. depending on brand and region.

Roger S. Penske: 35% of the new vehicles sold in the U.S. were at MSRP. However, approximately 90% of the best results in the US during the quarter required significant discounting. Same store retail automotive revenue increased 1%. However, service and parts increased 5%. Our customer pay was up 3%, warranty increased 12%, and collision repair is up 5%. As previously mentioned, gross profit for new unit retail increased $73 sequentially, demonstrating the strength of our premium mix. The gross profit per used unit retail only declined $54 sequentially, representing the stability that we see in the used vehicle market right now. Let me turn to transportation solutions at this point.

Speaker Change: 35% of the new vehicles sold in the U.S. were at MSRP.

Speaker Change: Well, approximately 90% of the best were sold in the U.S. during the quarter, required significant discounting.

Roger Penske: Same-star retail automotive revenue increased 1%; however, service in parts increased 5%. Our customer pay was up 3%, warranty increased 12%, and collision repair is up 5. As previously mentioned, gross profit for your new unit retail increased $73 sequentially, demonstrating the strength of our premium mix of gross profit per user in retail only to climb $54 sequentially, representing the stability that we see in the US vehicle market right now.

Speaker Change: Same star retail automotive revenue increased 1%, however service and parts increased 5%.

Speaker Change: Our customer pay was up 3%, warranty increased 12%, and collision repair is up 5%.

Speaker Change: As previously mentioned, gross profit per new unit retailed increased $73 sequentially.

Speaker Change: Demonstrating the strength of our premium mix, while gross profit per use unit retail only declined $54 sequentially, representing the stability that we see in the used vehicle market right now.

Roger Penske: Let me turn to transportation solutions at this point. I'm pleased to report another sequential increase in earnings for PTS. During the second quarter, revenue increased 3% to 2.8 billion. Full service, contract revenue increased 11%, logistics revenue increased 2%, but rental declined 13%. However, utilization of other rental fleet increased 50 basis points, to 79.2% versus 78.7% in Q2 last year, and utilization increased 480 basis points sequentially when compared to the first quarter of 2024. PTS earnings of 183 million in Q2 increased sequentially by 71 million, over down 28% when you still compare it to the second quarter of last year.

Speaker Change: Let me turn to transportation solutions at this point. I'm pleased to report...

Roger S. Penske: I'm pleased to report another sequential increase in earnings for PTS. During the second quarter, revenue increased 3%. $2.8 billion full service.

Speaker Change: Another sequential increase in earnings for PTS.

Speaker Change: During the second quarter, revenue increased 3%.

Roger S. Penske: Contract revenue increased 11% and logistics revenue increased 2%, but rental revenue declined 13%. However, utilization of other rental fleet increased by 50 basis points.

Speaker Change: to $2.8 billion, full service, contract revenue increased 11%.

Speaker Change: Logistics revenue increased 2%.

Speaker Change: But rental declined 13%. However, utilization of the rental fleet increased 50 basis points.

Roger S. Penske: 79.2%, versus 78.7 in Q2 last year, and utilization increased 480 basis points sequentially when compared to the first quarter of 2024. PTS earnings of $183 million in Q2 increased sequentially by $71 million, down 28% when you still compare it to the second quarter of last year. Our share of PTS earnings was 52.9 million, up from 32.5 million in the first quarter, representing a 20.4 million sequential increase, or, as noted, a 63%, decline in PTS earnings over the period, due mainly to a $43 million increase in interest expense from higher rates related to bonds refinancing and higher outstanding debt.

Speaker Change: 79.2% versus 78.7% in Q2 last year, and utilization increased 480 basis points sequentially when compared to the first quarter of 2024.

Speaker Change: PTS earnings of $183 million in Q2 increased sequentially by $71 million, over down 28% when you still compare it to the second quarter of last year.

Roger Penske: Our share of PTS earnings was 52.9 million, up from 32.5 million in the first quarter, representing a 20.4 million sequential increase, or as noted, 63%. The client PTS earnings over the period was due mainly to a $43 million increase in interest expense from higher rates related to bonds refinancing and higher outstanding debt. But also a $40 million decline in gain on sale of used trucks. We showed 10,330 used trucks in Q2 2024, which is 28% more than we did last year in the second quarter. However, a weaker freight market has reduced demand for tractors and medium-duty trucks, resolving in lower values, which obviously contributed to the reduction in gain.

Speaker Change: Our share of PTS earnings was $52.9 million, up from $32.5 million in the first quarter, representing a $20.4 million sequential increase.

Speaker Change: or as noted, 63%.

Speaker Change: The client's PGS earnings over the period due mainly to a $43 million increase in interest expense.

Speaker Change: from higher rates related to bonds refinancing and higher outstanding debt. Also, a $40 million decline in gain-on-sale of used trucks.

Roger S. Penske: Also, a $40 million decline in gain on the sale of used trucks. We sold 10,330 used trucks in Q2 2024, which is 28% more than we did last year in the second quarter. However, a weaker freight market has reduced demand for tractors and medium-duty trucks, resulting in lower values, which obviously contributed to the reduction in gain. New orders, new units on order with various OEMs, are down 50%. 21,700 compared to 41,500 in June of 2023 and 60,000 in March of 2023. We currently have 12,000 units for sale compared to 10,500 in June last year. We now turn the call over to Richard Shearing.

Speaker Change: We sold 10,330 used trucks in Q2 2024, which is 28% more than we did last year in the second quarter.

Speaker Change: However, a weaker freight market has reduced demand for tractors and medium duty trucks resulting in lower values.

Roger Penske: New units on order with various OEMs is down 50%, the 21,700 compared to 41,500, the June of 2023, and 60,000 in March of 2023. We currently have 12,000 units for sale compared to 10,500 to June last year.

Speaker Change: which obviously contributed to the reduction in gain.

Speaker Change: New orders, new units on order with various OEMs is down 50 percent.

Speaker Change: to 21,700 compared to 41,500 in June of 2023 and 60,000 in March of 2023.

Speaker Change: We currently have 12,000 units for sale compared to 10,500 in June last year. I now turn the call over to Richard Shearing.

Unknown Executive: We've been outturned to call over to Richard Shearing.

Richard P. Shearing: Thank you, Roger. Good afternoon, everyone.

Richard Shearing: Thank you, Roger.

Richard Shearing: Good afternoon, everyone. We are one of the largest commercial truck retailers for dimer trucks in North America. And the retail truck business is one of the core pillars of our diversified model.

Richard P. Shearing: Thank you, Roger. Good afternoon, everyone. We are one of the largest commercial truck retailers for Daimler Trucks in North America, and the retail truck business is one of the core pillars of our diversified model.

Richard P. Shearing: We are one of the largest commercial truck retailers for Daimler Trucks in North America, and the retail truck business is one of the core pillars of our diversified model. During the second quarter, we acquired three Freightliner and Western Star dealerships and two independent repair facilities from River States Truck and Trailer, operating in Wisconsin and Minnesota, representing $200 million in estimated annualized revenue, bringing PTG's operating locations to 48 in North America. Since acquiring the retail truck business in 2014, we have grown revenue and EBT more than six times from approximately $600 million in revenue and $35 million in EBT to an estimated $4 billion in revenue and $225 million of EBT in calendar year 2023. During the second quarter, North American Class 8 net orders increased 21% while retail sales declined 12% from the strong pace.

Richard Shearing: During the second quarter, we acquired three Freightliner and Western-Star dealerships and two independent repair facilities from River States, Truck and Trailer operating in Wisconsin and Minnesota, representing 200 million in estimated annualized revenue, bringing PTG's operating locations to 48 in North America. Since acquiring the retail truck business in 2014, we have grown revenue and EBT more than six times from approximately 600 million in revenue and 35 million in EBT to an estimated 4 billion in revenue and 225 million of EBT in calendar year 2023. During the second quarter, North American Class 8 net orders increase 21% while retail sales declined 12% from the strong case, 12% from the strong case of 2023.

Richard P. Shearing: During the second quarter, we acquired three Freightliner and Western Star dealerships and two independent repair facilities from River States Truck and Trailer, operating in Wisconsin and Minnesota, representing $200 million in estimated annualized revenue.

Richard P. Shearing: bringing PTG's operating locations to 48 in North America.

Richard P. Shearing: Since acquiring the retail truck business in 2014, we have grown revenue and EBT more than six times from approximately $600 million in revenue and $35 million in EBT, to an estimated $4 billion in revenue and $225 million of EBT in calendar year 2023.

Richard P. Shearing: During the second quarter, North American Class 8 net orders increased 21%, while retail sales declined 12% from the strong case.

Richard P. Shearing: 12% from the strong pace of 2023. At the end of June, the current industry backlog was 127,900 units, representing approximately five months of sales. This compares to a backlog of 175,200 at the end of June 2023.

Richard Shearing: At the end of June, the current industry backlog was 127,900 units, representing approximately five months of sales. This compares to a backlog of 175,200 at the end of June 2023. We believe sales of Freightliner and Western Star trucks were impacted by availability challenges during Q2 as a fire at a mirror factory disrupted production. But the good news is that this disruption was temporarily temporary and has been resolved. For Mere Trucks sold 5,248 new and used units in Q2, which was flat with Q2 last year, and same store units declined 4%. Same store SGNA to gross profit remained well controlled at 57.8%, and fixed absorption with 127%.

Richard P. Shearing: 12% from the strong pace of 2023.

Richard P. Shearing: At the end of June , the current industry backlog was 127,900 units, representing approximately five months of sales. This compares to a backlog of 175,200 at the end of June 2023.

Richard P. Shearing: We believe sales of Freightliner and Western Star trucks were impacted by availability challenges during Q2 as a fire at a mirror factory disrupted production, but the good news is that this disruption was temporary and has been resolved. Premier Trucks sold 5,248 new and used units in Q2, which was flat with Q2 last year, and same store units declined 4%. Same store SG&A to gross profit remained well controlled at 57.8% and fixed absorption at 127%. Premier Truck Group produced a solid Q2 with EBT of $52 million and a return on sales. 5.7%

Speaker Change: We believe sales of Freightliner and Western Star Trucks were impacted by availability challenges during Q2 as a fire at a mirror factory disrupted production, but the good news is that this disruption was temporary and has been resolved.

Speaker Change: Premier Trucks sold 5,248 new and used units in Q2 which was flat with Q2 last year and same store units declined 4%.

Speaker Change: The same-store SG&A to gross profit remained well-controlled at 57.8% and fixed absorption was 127%. Premier Truck Group produced a solid Q2 with EBT of $52 million and a return on sales of

Richard Shearing: For Mere Truck Route produced a solid Q2 with EBT of 52 million in return on sales. of 5.7%. We believe commercial truck demand will continue to be driven primarily by replacement demands throughout the remainder of the year. As we look towards 25 and 26, the anticipated emissions change for 2027 should drive a strong pre-buy and retail sales.

Richard P. Shearing: We believe commercial truck demand will continue to be driven primarily by replacement demand throughout the remainder of the year. As we look towards 25 and 26, the anticipated emissions change for 2027 should drive strong pre-buy and retail sales. Lastly, our premier truck business was temporarily impacted by the CDK cyber security incident in June of 2024. However, our teams quickly implemented our incident response plan and alternative processes to keep operations open. Systems were restored in early July, and we resumed processing transactions through the CDK system. We do not believe the financial impact to be material in the quarter.

Speaker Change: of 5.7 percent.

Speaker Change: We believe commercial truck demand will continue to be driven primarily by replacement demand throughout the remainder of the year. As we look towards 25 and 26, the anticipated emissions change for 2027 should drive a strong pre-buy and retail sales.

Richard Shearing: Lastly, our premier truck business was temporarily impacted by the CDK cybersecurity incident in June of 2024. Our teams quickly implemented our incident response plan and alternative processes to keep operations open. Systems were restored in early July, and we resume processing transactions through the CDK system. We do not believe the financial impact to be material in the quarter.

Speaker Change: Lastly, our premier truck business was temporarily impacted by the CDK cyber security incident in June of 2024. Our teams quickly implemented our incident response plan and alternative processes to keep operations open.

Speaker Change: Systems were restored in early July , and we resumed processing transactions through the CDK system. We do not believe the financial impact to be material in the quarter.

Randall Seymour: I would like to thank our incredible team and their collective efforts for working through this disruption. I'd now like to turn the call over to Randall Seymour. Thanks, Rich. Good afternoon, everyone.

Richard Shearing: I would like to thank our incredible team and their collective efforts for working through this disruption.

Unknown Executive: I'd now like to turn the call over to Randall Seymore.

Randall Seymore: Thanks, Rich.

Randall Seymore: Good afternoon, everyone. I'll now discuss several activities taking place in our international operations. As most of you know, earlier this year in the UK, we added 16 dealerships with 1 billion in estimated annualized revenues. The integration of those dealerships continues, and we are very pleased with the initial returns. Also in the UK, we rebranded and transitioned the operations of Car Shop to Sit and Select to more closely align the used car operation with franchise dealership and to reduce our cost base. We successfully transitioned nine locations and sold the remaining three locations to a third party.

Randall Seymour: I'll now discuss several activities taking place in our international operation. As most of you know, earlier this year in the UK, we added 16 dealerships with $1 billion in estimated annualized revenue. The integration of those dealerships continues, and we are very pleased with the initial return. Also, in the UK, we rebranded and transitioned the operations of CarShop to Sittner Select to more closely align the used car operation with the franchise dealerships and to reduce our cost. We successfully transitioned nine locations and sold the remaining three locations to a third party. Going forward, we will operate nine Sittner Select locations in the UK market. Turning to Australia,

We successfully transitioned nine locations and sold the remaining three locations to a third party.

Randall Seymore: Going forward, we will operate nine sit and select locations in the UK market.

Speaker Change: Going forward, we will operate nine sitting there select locations in the U K market.

Randall Seymore: Turning to Australia. For over 10 years, we have strategically built a diverse commercial vehicle and power systems business. During the second quarter, we expanded our retail automotive operations with the acquisition of two Porsche dealerships in Melbourne, Australia, one of the largest cities. With this acquisition, we expand our worldwide Porsche footprint to 24 locations. With our scale, we will leverage our existing infrastructure to drive growth and further efficiencies. These two dealerships are expected to generate about 130 million in estimated annual revenues. Turning to the on- and off-highway markets, we continue to sell products in the trucking, mining, power generation, defense, marine, rail, and construction sectors and support full parts and after-sales service across the region.

Speaker Change: Turning to Australia.

Randall Seymour: For over 10 years, we have strategically built a diverse commercial vehicle power systems business. During the second quarter, we expanded our retail automotive operation with the acquisition of two Porsche dealerships in Melbourne, Australia, one of the largest cities. With this acquisition, we expand our worldwide Porsche footprint to 24 locations. Using our scale, we will leverage our existing infrastructure to drive growth and further efficiency. These two dealerships are expected to generate about $130 million in estimated annual revenue.

Speaker Change: For over 10 years, we have strategically built a diverse commercial vehicle and power systems business.

Speaker Change: During the second quarter, we expanded our retail automotive operations with the acquisition of two Porsche dealerships in Melbourne, Australia, one of the largest cities.

With this acquisition, we expand our worldwide portion of footprint to 24 locations.

Speaker Change: With our scale, we will leverage our existing infrastructure to drive growth.

Speaker Change: Further efficiencies.

Speaker Change: Two dealerships are expected to generate about $130 million in estimated annual revenues.

Randall Seymour: Turning to the on- and off-highway markets, we continue to sell products in the trucking, mining, power generation, defense, marine, rail, and construction sectors and support full parts and after-sales service across the region. Service, in part, represents about 70% of our growth profit. So our focus on increasing units and operations is a key driver of the business in the on-highway market. The brand new Western Star X-Series truck we sell was named the Truck of the Year in Australasia, and MAN truck sales are expected to be a record number of units sold in 2024.

Speaker Change: Turning to the on and off highway markets, we continue to sell products in the trucking mining power generation defense Marine rail and construction sectors.

Speaker Change: For full parts and after sales service across the region.

Randall Seymore: Service and parts represents about 70% of our growth profit. So our focus on increasing units and operation is a key driver to the business. In the on-highway market, the brand new Western Star X Series truck we sell was named the Truck of the Year in Australasia. In M&N truck sales are expected to be a record number for units sold in 2024. In off highway, our power system operations continues to grow with turnkey solutions for hyperscale data centers, battery storage solutions, mining, and military applications. We continue to be a market leader in critical stand by power, especially for data centers and continue to make deliveries of generators into prime power and hybrid application.

Speaker Change: Service and parts represented 70% of our gross profit so our focus on increasing units in operation is a key driver to the business.

Speaker Change: In the on highway market.

Speaker Change: The brand New Western Star X series truck, we sell was named the truck of the year in Australasia.

Speaker Change: And MAA and truck sales are expected to be a record number for units sold in 2024.

Randall Seymour: In off-highway, our power system operations continue to grow with turnkey solutions for hyperscale data centers, battery storage solutions, mining, and military operations. We continue to be a market leader in critical standby power, especially for data centers, and continue to make deliveries of generators into prime power and hybrid applications. We are the market leader with 55% market share of the high-horsepower power generation segment. Our current order for hyperscale data centers and battery storage systems is over $550 million for 2024 and beyond. I'd now like to turn the call over to Shelly Hulgrave.

Speaker Change: In off highway are power system operations continues to grow with turnkey solutions for Hyperscale data centers.

Speaker Change: Hattery storage solutions mining and military applications.

Speaker Change: We continue to be a market leader in critical standby power, especially for data centers and continue to make deliveries of generators into prime power and hybrid applications.

Randall Seymore: We are the market leader with 55% market share of the high horsepower power generation segment. Our current order bait for a hyperscale data centers and battery storage systems is over 550 million for 2024 and beyond.

Speaker Change: We are the market leader with 55% market share in the high <unk>.

Speaker Change: Hi horsepower power generation segment.

Speaker Change: Our current order big Hyperscale data centers and battery storage systems is over 500 $550 million for 2024 and beyond.

Unknown Executive: I'd now like to turn the call to Shelley Hulgrave.

Speaker Change: I'd now like to turn the call to show the whole group.

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

Michelle Hulgrave: Thank you, Randall. Good afternoon, everyone. I will review our cash flow and balance sheet and discuss our capital allocation strategy. Our balance sheet and cash flow remain strong while we continue to grow our business through acquisitions and return capital to shareholders through dividends and securities repurchases. As of June 30th, we had 115 million of cash, and our liquidity was 1.7 billion. During the first six months, we generated 691 million in cash flow from operations, and our trailing 12 months EBIDA was 1.5 billion. Just last week, we announced an 11% increase in the cash dividend to $1.70 per share.

Speaker Change: Thank you Randall and good afternoon, everyone I will review, our cash flow and balance sheet and discuss our capital allocation strategy, our balance sheet and cash flow remained strong while we continue to grow our business through acquisitions and return capital to shareholders through dividends and securities repurchases.

Michelle Hulgrave: I will review our cash flow and balance sheet and discuss our capital allocation strategy. Our balance sheet and cash flow remain strong while we continue to grow our business through acquisitions and return capital to shareholders through dividends and securities repurchases. As of June 30, we had $115 million in cash, and our liquidity was $1.7 billion. During the first six months, we generated $691 million in cash flow from operations, and our trailing 12-month EBITDA was $1.5 billion.

As of June 30, we had $115 million of cash and our liquidity was $1 7 billion.

Speaker Change: During the first six months, we generated $691 million in cash flow from operations and our trailing 12 months EBITDA was one 5 billion.

Michelle Hulgrave: Just last week, we announced an 11% increase in the cash dividend to $1.07 per share. So far in 2024, we have increased the dividend three times while increasing the cash payout from 79 cents per share at the end of last year to $1.07, a 35% increase. So far in 2024, we have repurchased 511,000 shares for $76 million. Including this dividend distribution and the company's security repurchases, we will have returned approximately $271 million to shareholders so far this year. In addition to the return to shareholders, we have completed acquisitions representing $2 billion in estimated annualized revenues. Our strong cash flow has allowed PAG to keep its non-vehicle debt and leverage low.

Speaker Change: Just last week, we announced an 11% increase in the cash dividend to $1 seven per share. So far in 2024, we have increased the dividend three times, while increasing the cash payout from <unk> 79 per share at the end of last year to $1, 7% to 35% increase.

Michelle Hulgrave: So far in 2024, we have increased the dividend three times while increasing the cash payout from 79 cents per share at the end of last year to $1.7, a 35% increase. So far in 2024, we have repurchased 511,000 shares for $76 million. Including this dividend distribution and the company's security repurchases, we will have returned approximately 271 million to shareholders so far this year.

Speaker Change: Yes.

So far in 2024, we have repurchased 511000 shares for $76 million.

Speaker Change: <unk> this dividend distribution and the company's security repurchases.

Speaker Change: We'll have returned approximately $271 million to shareholders. So far this year.

Michelle Hulgrave: In addition to the return to shareholders, we have completed acquisitions representing $2 billion in estimated annualized revenues. Our strong cash flow has allowed P.A.G. to keep its non-vehicle debt and leverage low. At the end of June, our long-term debt was 1.77 billion, up 137 million from the end of December 2023. That total capitalization was 26.2%, and leverage sits at 1.2 times. 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 251 million from the end of December. Total inventory was 4.7 billion, up approximately 400 million from the end of December last year.

In addition to the return to shareholders, we have completed acquisitions, representing $2 billion in Escondida in annualized revenues.

Speaker Change: Our strong cash flow has allowed EOG to keep it non vehicle debt and leverage low.

Michelle Hulgrave: At the end of June, our long-term debt was $1.77 billion, up $137 million from the end of December 2023. That's a total capitalization of 26.2%, and leverage sits at 1.2 times. It's important to reiterate that we have the ability to flex our leverage up to four times on a lease adjusted basis.

Speaker Change: At the end of June our long term debt was 177 billion up $137 million from the end of December 2023.

Speaker Change: Debt to total capitalization was 26, 2% and leverage set at one two times.

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

Michelle Hulgrave: New vehicle inventory increased $251 million from the end of December. Total inventory was $4.7 billion, up approximately $400 million from the end of December last year. The floor plan debt was $4.1 billion. Importantly, we had a 52-day supply of new vehicles and a 40-day supply of used vehicles. Day's supply of new vehicles for premium was 55, and volume foreign was 33. The day's supply of new battery electric vehicles in the U.S. was 89 days.

Speaker Change: New vehicle inventory increased $251 million from the end of December.

Speaker Change: Total inventory was $4 7 billion up approximately $400 million from the end of December last year.

Michelle Hulgrave: Floor plan debt was 4.1 billion. Importantly, we had a 52-day supply of new vehicles and a 40-day supply of used. Day supply of new vehicles for premium was 55, and volume 4 was 33. The day supply of new battery electric vehicles in the U.S. was 89 days.

Speaker Change: Floorplan debt was $4 1 billion.

Accordingly, we had 52 days supply of new vehicles, and a 40 day supply of used Dave.

Speaker Change: Days supply of new vehicles for premium was 55 and volume foreign was 33.

Speaker Change: The days supply of new battery electric vehicles in the U S was 89 days.

Roger S. Penske: At this time, I will turn it over to Roger for some final remarks. Thanks, Shelly.

Unknown Executive: At this time, I will turn to the director for some final remarks.

Roger: At this time I will turn the call back to Roger for some final remarks. Thanks Shelley our results continue to demonstrate the benefit of our diversification across the retail automotive and commercial truck businesses, our cost control and a disciplined capital allocation strategy I remain confident in our <unk>.

Roger Penske: Thanks, Shelley. Our results continue to demonstrate the benefit of our diversification across the retail automotive and commercial truck businesses, our cost control, and the disciplined capital allocation strategy. I remain confident in our model and the performance of the business.

Roger S. Penske: Thanks, Shelly. Our results continue to demonstrate the benefit of our diversification across the retail automotive and commercial truck businesses, our cost control, and a disciplined capital allocation strategy. I remain confident in our model and the performance of the business. Finally, I'd like to announce that 80 of our US dealerships have received notification from Automotive News that they have been named the best 150 dealerships to work for in 2024. I'm incredibly proud of this achievement.

Speaker Change: Model and the performance of the business.

Roger Penske: Finally, I'd like to announce that 80 of our US dealerships have received notification from Automotive News that they have been named to the Best 150 Dealerships to Work For in 2024. I'm incredibly proud of this achievement. We are committed to creating a culture that fosters teamwork and opportunity while carrying ourselves for the highest level of integrity. Congratulations to our team for their commitment, drive, and efforts in working together to be the very best.

Finally, I'd like to announce had 80%.

Speaker Change: Of our U S dealerships have received notification.

Speaker Change: From automotive news that they have been named to the best 150 dealerships to work for in 2024.

Speaker Change: I'm incredibly proud of this achievement, we are committed to creating a culture that fosters teamwork and opportunity while carrying ourselves to the highest level.

Roger S. Penske: We are committed to creating a culture that fosters teamwork and opportunity while carrying ourselves to the highest level of integrity. Congratulations to our team for their commitment, drive, and efforts in working together to be the very best. Thank you all for joining us.

Speaker Change: The integrity.

Speaker Change: Congratulations to our team for their commitment drive efforts in working together to be the very best.

Unknown Executive: Thanks always for joining the call that they'll turn it back to the operator.

Speaker Change: Thanks to all for joining the call today I'll turn it back to the operator. Thank you.

Unknown Executive: Thank you.

Operator: Thank you. Ladies and gentlemen, once again, if you would like to ask a question, please press 1-0 on your telephone keypad. One moment, please, for the first question. And we go to John Murphy with Bank of America.

Unknown Executive: Thank you, ladies and gentlemen. Once again, if you would like to ask a question, please press 1-0 on your telephone. One moment, please, for the first question.

Speaker Change: Thank you, ladies and gentlemen, once again, if you would like to ask a question. Please press one zero on your telephone keypad.

Speaker Change: Okay.

Speaker Change: One moment please for the first question.

John Murphy: And we go to John Murphy with Bank of America.

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

John Joseph Murphy: Please go ahead. Hi. Hey, John. Good afternoon. Hey, Roger. Good afternoon, everybody.

John Murphy: Please go ahead. Hey, Roger. Good afternoon, everybody.

John: Hey, John.

Roger: Roger Good afternoon, everybody.

John: Okay.

Roger Penske: Roger, just a first question on this very large acquisition of Bill Brown. It's a little bit different because it's a four dealership, and it's the largest four dealership in the country. I'm just curious what you see in this. Obviously, it's opportunity. And if this could be potentially sort of a change of direction or a new opportunity, particularly as far as focus much more on commercial vehicles and through its pro-division. Well, you mentioned the word opportunistic. I'd have to say that we were contacted by the family that owned that business. And initially, I didn't think we'd be interested, but we signed an NDA.

Roger S. Penske: Roger, just a first question on this very large acquisition by Bill Brown. It's a little bit different because it's a Ford dealership, and it's the largest Ford dealership in the country. I'm just curious, you know, what you see in this, obviously, this is an opportunity, and if this could potentially be sort of a change of direction or, you know, a new opportunity, particularly as Ford is focused much more on commercial vehicles and through its Pro division.

John: Roger just a first question on this very large acquisition.

Bill Brown: Bill Brown.

Speaker Change: It's a little bit different because it's a ford dealership into the largest Ford dealership.

Bill Brown: In the country I'm just curious what you see in this obviously each opportunity.

Speaker Change: And if this could be potentially sort of a change in direction or a new opportunity, particularly as far as focus much more on commercial vehicles and through its pro division.

Roger S. Penske: Well, you mentioned the word opportunistic. I'd have to say that we were contacted by the family that owned that business and initially I didn't think we'd be interested, but we signed an NDA, we went through the numbers, we saw the volume, and the fact that they were a Ford Pro dealer, which is a commercial, really a commercial truck dealer also, was really important able to leverage our business knowledge and capabilities within the truck leasing and rental business, obviously now in the sales business.

Speaker Change: Well you mentioned the word opportunistic I'd have to say that we were contracted.

Speaker Change: By the family that own that business.

Speaker Change: Initially I didn't think we'd be interested but I site, which we signed an NDA.

Roger Penske: We went through the numbers. We saw the volume. And the fact that they were a poor pro dealer, which is a commercial, really a commercial truck dealer also, was really important because that gave us able to leverage our business knowledge and capabilities within the truck, leasing and rental business, obviously now in the sales business. The business is located near a majority of the Ford support plants and also the World Headquarters. So almost 80% of the business goes through that is employee business and family. So, we felt that the use car business had a real upside when we were probably six new to one use because that's part of our sweet spot in the business.

Speaker Change: We went through the numbers.

Speaker Change: We saw the volume and the fact that they were a port pro dealer, which is a commercial really a commercial truck gear also was really important because that gave us <unk>.

Well to leverage our business knowledge and capabilities within the truck leasing and rental business, which is now in the sales business.

Roger S. Penske: The business is located near a majority of the Ford support plants and also the world headquarters, so almost 80% of the business that goes through that is employee business and family, so obviously that's a great sustained opportunity for continued business. We felt that the used car business had a real upside when we were probably six new to one used because that's part of our sweet spot in the business, and we basically had a great management team.

Speaker Change: The business is located.

Near a majority of the Ford support plants and also the world headquarters, So almost 80% of the business that goes through that is employee business and family. So obviously, that's a great <unk>.

Speaker Change: Pain opportunity for continue doing business, we felt that the used car business had a real upside when were probably six new to one use because that's part of our sweet spot in the business.

Roger Penske: And basically, had a great management team. I think the opportunity there, obviously, will be for us to grow the facilities. I think we need to make an investment there. But the bottom line is, people ask us, so what are the multiples? What are you paying for for the businesses and premium luxury either internationally domestically? And I would say this transaction was, and the goodwill was 50% of what we normally would pay for premium. So again, I think it's an opportunity for us. It's in our hometown. And I think that as part of our two billion of acquisitions that we've done so far for the year, again 75% of that.

Speaker Change: Basically you had a great management team I think the opportunity there obviously.

Roger S. Penske: I think the opportunity there obviously will be for us to grow the facilities. I think we need to make an investment there, but the bottom line is, people ask us, so what are the multiples? What are you paying for in the businesses of premium luxury, either internationally or domestically? And I would say this transaction was, and the goodwill is 50% of what we normally would pay for premium. So again, I think it's an opportunity for us.

Speaker Change: We will be for us to grow the facilities I think we need to make an investment there, but the bottom line is people ask us what are the multiples what are you paying for for their businesses and premium luxury either internationally or domestically and I would say this transaction was the goodwill is 50% of what we normally would pay for premium so again.

Speaker Change: I think it's.

Speaker Change: An opportunity for us it's in our hometown and I think that is part of our $2 billion of acquisitions that we've done so far for the year again.

Roger S. Penske: It's in our hometown, and I think that as part of our $2 billion of acquisitions that we've done so far for the year, again, 75% of that new volume is going to be premium, so we're still on track there. Obviously, you saw where we purchased the two Porsche stores in Australia.

Speaker Change: 75% of that.

Roger Penske: That new volume is going to be premium, so we're still on track there.

Speaker Change: New volume is going to be premium. So we're still on track. There. Obviously you saw where we are.

Roger Penske: Obviously, you saw where we purchased the two Porsche stores in Australia. That's very helpful.

Speaker Change: Purchased Porsche stores.

Speaker Change: Australia.

Roger S. Penske: Okay, that's very helpful. And then just a second question, pricing remains very strong, GPUs were up, or new GPUs were up sequentially, you know, everybody kind of seems to keep doubting this, but maybe forgetting that, you know, all this strength is happening in a much higher interest rate environment, up over 400 basis points over the last two years. So what is your take and the potential, maybe for you to sustain these higher GPUs, and we might be stabilizing it at these levels, just given your business mix, how you operate the business, and just sustainability is really the big question.

Speaker Change: Okay.

Roger Penske: And then just a second question. Pricing remains very strong. GPUs were up, or new GPUs were up sequentially. Everybody seems to keep doubting this, but maybe forgetting that all this strength is happening in a much higher interest rate environment, up on 400 basis points over the last two years. So what is your take in the potential, maybe for you to sustain these higher GPUs, and we might be stabilizing it at these levels, just given your business mix, how you operate the business, and sustainability is really the big question here. Well, I think number one, you look at our comp to grow some on sales. What we've been able to do is reduce the number of sales people that we have, which has given most of our better sales people an opportunity to have more business and make more money, so they're focused.

Speaker Change: Very helpful. And then just a second question.

Speaker Change: Pricing remains very strong Gpus were up.

Our new Gpus were up sequentially.

Speaker Change: Everybody kind of seems to keep doubting this but maybe forgetting that all.

Speaker Change: All of this strength is happening in a much higher interest rate environment up almost 400 basis points over the last two years. So what is your take in the potential maybe for you to sustain.

Speaker Change: These higher Gpus, and we might be stabilizing it at these levels just given your business mix, how you operate the business and just sustain.

Speaker Change: Sustainability is really the big question here.

Roger S. Penske: Well, I think number one, when you look at our comp to gross on sales, what we've been able to do is reduce the number of salespeople that we have, which has given most of our better salespeople an opportunity to have more business and make more money, so they're focused. And I think one of the other things is that, because of the premium, 35% of our Q2 sales were in MSRP versus 57% last year. That will come down, we realize that. Our pre-sold business is about 20%, depending on the brand or the region. More importantly, when you think about our brand mix,

Speaker Change: Well I think number one year look.

Speaker Change: You know at our SG&A you look at our comp to gross up on sales what we've been able to do is reduce the number of salespeople that we have.

Speaker Change: Just given most of our better salespeople an opportunity to have more business and make more money. So they're focused and I think one of the other things because of the premium.

Roger Penske: And I think one of the other things, because of the premium, 35% of our businesses, we realize that our pre-show business is about 20%, depending on the brand or the region. More importantly, when you think about our brand mix, 32% of all of our business was leased. And that's back to where it was over the last couple of years, which is powerful. It gives us these leased returns, which help us to feed our used car department. And I think when you look at it in the premium luxury side, it's probably 50%. So, to me, that helps us stabilize our margins as we go forward.

Speaker Change: 35% of our Q2 sales were an MSRP versus 57% last year that will come down we realize that our pre show business is about 40% depending on the brand or the region. More importantly, when you think about our brand mix, 32% of all of our.

Roger S. Penske: 32% of all of our business is leased, and that's back to where it was over the last couple of years, which is powerful. It gives us these lease returns, which help us to feed our used car department.

Speaker Change: Business was leased.

Speaker Change: And that's back to where it was over the last couple of years, which is powerful and it gives us these lease returns, which helped us to feed our used car department and I think when you look at it in the premium luxury side, there's probably 50%. So to me that helps us stabilize our margins as we as we go forward so to me.

Roger S. Penske: And I think when you look at it on the premium luxury side, it's probably 50%. So to me, that helps us stabilize our margins as we go forward. So to me, the only thing that would be a negative, and I don't think that there are hundreds of dollars up or down that we're gonna see over the next couple of quarters. The only thing would be that the BEV vehicles have the highest discount right now, probably about $6,000 under MSRP. And if you look at a normal ICE vehicle, it's somewhere between 2,500 and 3,000.

Roger Penske: So, to me, the only thing that would be a negative, and I don't think that there's hundreds of dollars up or down that we're going to see over the next couple of quarters, the only thing would be that the BEV vehicles has the highest discount right now, probably about $6,000 under MSRP. And if you looked at a overall, when you look at the gross profit, and you compare it, I went back, Tony, that he went back for me, and we looked at 2019. And when you look at this, the selling price, obviously, is up almost 14,000.

Speaker Change: Only thing that would be a negative and I don't think that theres hundreds of dollars up or down that we're going to see over the next couple of quarters. The only thing would be that the bev vehicles.

Speaker Change: Has the highest discount right now probably about $6000 under MSRP and if you looked at our normal ice vehicle and somewhere between 20 503000. So I think over overall when you look at the gross profit and.

Roger S. Penske: So I think overall, when you look at the gross profit and you compare it, I went back, Tony went back for me, and we looked at 2019. And when you look at this, the selling price, obviously, is up almost 14,000. When you look back to 19, to where it is today, and you look at the gross margin that we have today, it's up 2,000. So we're holding the growth. Some of that has to be the increase in the MSRP, but sequentially, we think we're in good shape. But again, it's deal by deal.

Speaker Change: When you compare it I went.

Speaker Change: Back Tony that he went back for me, we look to 2019 and when you look at this the selling price obviously is up almost 14000 when you look at <unk>.

Roger Penske: When you look at back to 19 to where it is today, and you look at the gross margin that we have today, it's up 2000. So, we're holding the gross; some of that has to be the increase in the MSRP. But sequentially, we think we're in good shape. But again, it's deal by deal. We're not in a volume race, and I think depending on the mix of our business, we don't have a lot of volume for them. We don't have very little of the big three. They could pull down, you're obviously your grosses. But because our inventory is in such good shape, and we're going to keep it there, Tony, we're sitting with 11 days, one of our bigger volume four.

Speaker Change: Back to 19 to where it is today and you look at the gross margin that we have today. It's up 2000. So we're holding the growth some of that has to be the increase in the Ams MSRP, but sequentially. We think we're in good shape, but again, it's deal by deal we're not in a vault.

Roger S. Penske: We're not in a volume race, and I think depending on the mix of our business, you know, we don't have a lot of volume four, and we don't have we have very little of the big three, they could pull down your your gross, but because our inventories are in such good shape, and we're going to keep them there, Charlie, we're sitting with 11 days, one of our bigger volume four.

Speaker Change: <unk> and <unk>.

Speaker Change: Depending on the mix.

Charlie: Of our business, we don't have a lot of volume for and we don't have we have very little of the big three they could pull down your obviously your grocers, but because of our inventory is in such good shape and we're going to keep it there Charlie we're sitting with 11 days one of our bigger volume foreign and certainly when we look at the premium side.

Roger S. Penske: And certainly when we look at the premium side, we're managing that quite well, still waiting for vehicles that are on sale around the world with Porsche and some of the other key vehicles, which are going to help drive some better results, I hope.

Roger Penske: And certainly, when we look at the premium side, we're managing that quite well, still waiting for vehicles that are on stop sale around the world with portions, some of the other key vehicles, which are going to help drive some better results, hopefully in Q3.

Charlie: We're managing that quite well still waiting for vehicles that are on stop sale around the world portion some of the other key vehicles, which are going to help drive some better results hopefully in Q3.

Roger S. Penske: Roger, sorry just to follow up, but in the rate environment that we may be heading into of rates actually starting to help a bit, I mean, obviously, we can all run the math, but what is your kind of take on, you know, if we see another 100, 200 basis points, or we see a 100 to 200 basis point decline in rates in the next one to two years, how much that could actually help maybe support pricing, and these grosses, I think it'll help the used car buyer for sure.

Roger Penske: Roger, sorry, just to follow up, but in the rate environment that we may be heading into of rates actually starting to help a bit. I mean, I know obviously we can all run the map. I think it will help the used car buyer for sure. I think right now that the OEMs, in order to maintain, we're up. When you look at it now, we're up about 4% year to date. If you look at six months or actually through yesterday and up about 2% unused, I think the use will continue to grow because of affordability, which has been a problem.

Speaker Change: And Roger sorry, just to follow up.

Roger: The rate environment that we may be heading into of rates actually starting to help.

Speaker Change: I mean, I know obviously being over.

What is your kind of take on if we see another 100 200 basis point, we see 100 to 200 basis point decline in rates in the next one to two years, how much that could actually help.

Speaker Change: Maybe support pricing and these grosses and demand levels in total.

Speaker Change: Whats your.

Speaker Change: I think it will help the used car buyer for sure I think right now that the Oems in order to maintain were up when you look at it now we're up about 4% year to date, if you look at six months or actually through yesterday and up about 2% on used I think the use will continue to grow because.

Roger S. Penske: I think right now that the OEMs, in order to maintain, we're up. When you look at it now, we're up about 4% year-to-date. If you look at six months, or actually through yesterday, and up about 2% on used.

Roger S. Penske: I think used car sales will continue to grow because of affordability, which has been a problem. On the new side, because of our leasing, the finance companies have been taking some of that interest rate hit by increasing residuals. So I think that'll balance out. But definitely, from a consumer perspective, I think it's gonna help us. Again, what we're seeing in Europe, some of the high-priced cars, the Ferraris and Lamborghinis, and the Porsches, where people could buy them, drive them from here, and bring them back and get most of their money back, that hasn't been the case.

Speaker Change: Affordability, which has been a problem on the news side because of our leasing.

Roger Penske: And on the news side, because of our leasing, the finance companies have been taking some of that interest rate hit by increasing residuals. So I think that will balance out. But definitely from a consumer perspective, I think it's going to help us again. What we're saying in Europe, some of the high price cars are for our ease in Lamborghinis and the Porches where people could buy them, drive them from here and bring them back and get most of their money back. That hasn't been the case, so we've lost some business, I think on a temporary basis because the cost of interest and the cost of new business.

Speaker Change: The finance companies have been taking some of that interest rate hit by increasing reschedule. So I think that'll balance out but definitely from a consumer perspective, I think it's going to help us.

Speaker Change: Again, what we're seeing in Europe, some of the high priced cars or Ferraris, and lamborghinis and the portions where people could buy them drive them familiar and bring them back and get most of their money back that hasn't been the case. So we've lost some business I think on a temporary basis, because the cost of interest and the cost to do business. So.

Roger S. Penske: So we've lost some business, I think on a temporary basis because of the cost of interest and then the cost of new business. So to me, I don't think the SAR right now is certainly as high as it was pre-COVID level, and that's over 17 million. And the answer: monthly payment. If you look at that average, it's really over $700.

Roger Penske: So to me, I don't think the saw right now certainly is not as a pre-COVID level, and that's which is over 17 million. And the Antio monthly payment, if you look at that average, is really over $700. So that has to come down to make a big difference. So we think that the benefit we're going to get for the business is the service business because the day we've gone from the five-year average car and service to a six-year, roughly. So that combined with I think some stability on the top line, as long as we keep our inventory. Gives you too much inventory, you're going to discount it and you're going to lower your grosses.

Speaker Change: To me.

Andrew: I don't think the Saar right now certainly it's not as a pre COVID-19 level, and Thats, which is over $17 million and the answer Andrew.

Andrew: Monthly payment if you look at that average is really over $700. So that has to come down to make a big difference. So we think that.

Roger S. Penske: So that has to come down to make a big difference. So we think that benefit we're going to get for the business is the service business because today we've gone from a five-year average current service to a six-year, roughly, so that combined with, I think, some stability on the top line. As long as we keep our inventory, because if you have too much inventory, you're going to have to discount it, and you're going to lower your grosses, and that would be mixed. But interest rates, I see where the Fed held today.

Andrew: Benefit we're going to get for the business.

Speaker Change: As the service business because the day, we've gone from a five year average current service choice six share roughly so that combined with I think some stability on the top line as long as we keep our inventory gives you have too much inventory youre going to discount it and youre going to lower your groceries and it would be mix, but Ah <unk>.

Roger Penske: And it would be mixed, but the interest rates I see with a fit held today, hopefully they're going to make some noise here in the next month or so. We'll see that benefit. We'll help us on our floor plan, and obviously, you know, on a finance deal that will help immensely, so it can't hurt us for sure.

Crist rates I assure the fed held today, hopefully theyre going to make some noise here in the next month or so we'll see that benefit will help us on our floor plan and obviously.

Roger S. Penske: Hopefully, they're going to make some noise here in the next month or so. We'll see that benefit. It will help us with our floor plan, and obviously, you know, on a finance deal, it will help immensely, so it can't hurt us for sure.

Speaker Change: On a finance deal that will help immensely so it can't hurt us for sure.

Unknown Executive: Great. Thank you very much. Appreciate it.

John Joseph Murphy: Great. Thank you very much. I appreciate it.

Speaker Change: Great. Thank you very much I appreciate it.

Sean: Thanks, Sean.

Mike Ward: Next, we go to Mike Ward with Freedom Capital.

Michael Patrick Ward: Next, we go to Mike Ward with Freedom Capital. Please go ahead. Thanks.

Sean: Next we go to Mike Ward with Freedom Capital. Please go ahead.

Unknown Executive: Please go ahead. Thanks. Good afternoon, everyone. When I look at the dividend increase year to date, you know, 35%, and you compare that to the increase in Sherry purchase. Should I read anything into that as a shift in how you're allocating capital, or is it what, what is your thinking there?

Michael Patrick Ward: Thanks. Good afternoon, everyone.

Michael Patrick Ward: Thanks, Good afternoon, everyone.

Unlike.

Michael Patrick Ward: When I look at the dividend increase, year to date, you have 35%, and you compare that to the increase in share repurchases, should I read anything into that as a shift in how you're allocating capital, or isn't it? What is your thinking there?

Speaker Change: When I look at the dividend increase year to date up 35% and you compare that to the increase in share repurchase.

Speaker Change: Should I read anything into that as a shift in how you're allocating capital or is it.

Speaker Change: What is your thinking there.

Michelle Hulgrave: Go ahead, Shelley. Why don't you take that one?

Michelle Hulgrave: Go ahead, Shelly; why don't you take that one? Sure.

Speaker Change: Oh go ahead, Shelly why don't you take that one sure.

Michelle Hulgrave: Sure. So, you know, Mike, our favorite word around here for capital allocation is opportunistic. And Roger talked a bit about the Bill Brown Ford acquisition. And, you know, it's one of those lifetime opportunities. We've really had a lot of those opportunities.

Michelle Hulgrave: Sure. So, you know, Mike, our favorite word around here on capital allocation is opportunistic, and Roger talked a bit about a bill for our court acquisition, and, you know, it's one of those vital lifestyle opportunities. We've really had a lot of those opportunities, and so, you know, it's be able to acquire two billion in revenue and do it internationally. Do it, you know, with the tropics and expand and get a new presence in Australia.

Shelly: Our favorite word around here on capital allocation as opportunistic and Roger talked a bit about adult our Florida acquisition.

Shelly: One of those in a lifetime opportunities, we've really had a lot of those opportunities and so.

Michelle Hulgrave: And so, you know, to be able to acquire $2 billion in revenue and do it internationally, do it, you know, with a truck and expand and get a new presence in Australia, that was our key focus in terms of dividends versus share prices. You know, we had said all along that when the multiples on the stock were less than the multiples on the street for an acquisition, that was where we were going to focus.

Roger: Being able to acquire 2 billion in revenue and do it internationally.

Speaker Change: With a truck and then expand and get a new presence in Australia that was our key focus.

Michelle Hulgrave: Hey, that was our key focus in terms of dividends versus share purposes. So, we had said all along when the multiples on the stock were less than the multiples on the street for an acquisition. That was where we were going to focus. I've seen those level out a bit, but dividends have always been a high priority for us. We've looked at what is it slide six on our presentation, and we've hovered around a 60 40 split in terms of growth versus acquisition. It's a little bit higher than that this year, year to date, but the dividends remain a key part of our strategy.

Speaker Change: Dividends versus.

Speaker Change: Sure.

Speaker Change: We have said all along when the multiples on the stock were less than the multiples on the street for an acquisition that was where we are going to see now.

Michelle Hulgrave: I've seen those level out a bit, but dividends have always been a high priority for us. We've looked at, you know, what is it, slide six in our presentation, and we've hovered around a 60-40 split in terms of growth versus acquisition. It's a little bit higher than that this year, year to date, but dividends remain a key part of our strategy.

Speaker Change: Level out a bit.

Speaker Change: Dividends have always been a high priority for us we've looked at.

Speaker Change: What is it slide six on our presentation and we covered around a 60 40 split in terms of growth versus acquisition.

Speaker Change: A little bit higher than that.

Our year to date, but said dividends remain a key part of our strategy.

Michael Patrick Ward: Okay, so it's just more of the same. So it's just the timing, and maybe there's a little catch-up on the dividend, just the return rate, but don't read too much into it.

Michelle Hulgrave: Okay, so it's just more of the same, so it's just the timing and maybe there's a little catchup on the dividend, just the return rate, but don't read too much into it. Yeah, no, I think if you look at our payout ratio, you look at our dividend yields in particular, that's remained fairly steady. We like being the highest gear space, so that's also something that we look at from a metric point. And, you know, we'll continue to focus on returning to the capital to share holdings, turn out to the exhibition.

Speaker Change: Okay. So it was so it was just more of the same age. So it's just the timing and maybe there's a little catch up on the dividend just the return rate, but don't read too much into it.

Michelle Hulgrave: Yeah, no, I think if you look at, you know, our payout ratio, and you look at our dividend yield, in particular, that's remained fairly steady. We like being the highest in the share space, so that's also something that we look at from a metric point of view. And, you know, we'll continue to focus on returning capital to shareholders.

Speaker Change: Yeah, No I think if you look at in our payout ratio you look at our dividend yield in particular, that's remains fairly steady we might be.

Speaker Change: Being the highest aerospace so that that's also something that we'd like to add from a metrics right.

Speaker Change: And or.

Speaker Change: We will continue to focus on returning capital to shareholders.

Speaker Change: That acquisition.

Michael Patrick Ward: Okay. Randall, has the rebranding been completed with the car shop stores? And what was the thinking behind keeping the nine and getting rid of three? What was kind of the dividing line with that?

Randall Seymore: Okay, Randall, has the rebranding been completed with the car shop stores, and what was the thinking behind keeping the nine and getting rid of three? What was kind of the dividing line with that? Yeah, so we did the first one in April of the last one. We just finished last week; six of the nine were done in Q2, but we are 100% finished now. We had an opportunity; somebody actually came to us and said, "Hey, would you be willing to look at three loose locations to sell?" And, geographically, two of the three really made sense, and the other one, so we ended up making a deal.

Randall: Thank you Randall.

Speaker Change: How has the rebranding been completed.

Speaker Change: With the with the car shop stores, and what was the thinking behind keeping the mine and getting rid of three what was kind of the dividing line with it.

Randall Seymour: Yeah, so we did the first one in April, and the last one we just finished last week. Six of the nine were done in Q2, but we are, we're 100% finished now.

Speaker Change: Yes. So we did the first one in April the last one we just finished last week six of the nine were done in Q2, but we are we're 100% finished now we had an opportunity somebody actually came to us and said.

Randall Seymour: We had an opportunity; somebody actually came to us and said, hey, would you be willing to look at three of those locations to sell? And geographically, two of the three really made sense, so we ended up making a deal. And the other benefit of that, going from, and we closed one, so the other benefit of having fewer is, you know, the sourcing of these vehicles. Instead of buying them at auction, we're able to take trades from our contiguous franchise dealerships.

Speaker Change: Hey would you be willing to look at three lose locations to sell and it geographically two of the three really made sense and another one so we ended up making a deal and the other benefit of that going from and we closed one so the other benefit of having less is the sourcing of these.

Randall Seymore: And the other benefit of that, going from, and we closed one, so the other benefit of having less is, you know, the sourcing of these vehicles. Instead of buying them at auction, we're able to take the trades from our contiguous, branchized dealerships. So, we went from car shop to Sitner Select number one, you know, Sitner has a cachet and has a very high quality reputation within the UK market. So we thought we'd get some benefit from that. Number two was the sourcing, which is huge. So we get the trades from the franchise dealerships. We're already seeing a pretty significant increase in our growth profit per unit because of the sourcing of those vehicles.

Speaker Change: Vehicles, instead of buying them at auction, we're able to take the trades from our contiguous franchise dealerships. So we went from car shop to sit in a select number one.

Randall Seymour: So we went from car shop to Sittner Select, number one, you know, Sittner has a cache, has a very high quality reputation within the UK market, so we thought we'd get some benefit from that. Number two was the sourcing, which is huge, so we get the trades from the franchise dealerships, and we're already seeing a pretty significant increase in our growth profit per unit because of the sourcing of those vehicles. And when I say getting the trades, if it's a non-certifiable car, so if you've taken a trade at Audi, it's a little bit higher on mileage or has a reason you can't certify it, historically, we were wholesaling those through our electronic auction, you make a couple hundred pounds, but now we're able to take them at Sittner Select and retail them, increase our gross profit, we can sell more F&I products with it, and so that's the benefit.

Speaker Change: Sitting there has a cache has a very high quality.

Speaker Change: <unk> within the UK market. So we thought we'd get some benefit from that number two was the sourcing which is huge so we get the trades from the franchise dealerships and we're already seeing a pretty significant increase in our gross profit per unit because of the sourcing of those vehicles when I say getting the trades if it's a non.

Randall Seymore: When I say getting the trades, if it's a non-certifiable car, so if you take in a trade at Audi, it's a little bit higher on mileage or has a reason you can't certify it. Historically, we were wholesaling those through our electronic auction. You make a couple hundred pounds, but now we're able to take them at Sitner Select and retail them, increase our growth profit. We can sell more FNI products with it. And so that's the benefit. And then the third point of this was we had a head office or a centralized infrastructure for car shop, which we were able to eliminate and leverage the infrastructure current infrastructure within our branchized business.

Speaker Change: Certifiable cars have you taken a trade at Audi, it's a little bit higher mileage or has the reason you can't certify. It historically, we were wholesaling those through our electronic auction you make a couple of hundred pounds, but now we're able to take them at sitting or select and retail them increase our gross profit we can sell more F&I.

Speaker Change: Products with it and so that's the benefit and then the third point of this was we had a head office or a centralized infrastructure for our shop, which we were able to eliminate and leverage the infrastructure current infrastructure within our franchise business. So we were able to really make our business.

Randall Seymour: And then the third point of this was we had a head office or a centralized infrastructure for the car shop, which we were able to eliminate and leverage the infrastructure, current infrastructure within our franchise business, so we were able to really make our business model or our expense model much more efficient.

Randall Seymore: So we were able to really make our business model or our expense model much more efficient too. I think Mike is really looking at the business. We got to continue to trim and look at areas where we're not making the returns we want. And we had great expectations on car shop in the US and in the UK, but we saw the sourcing. Obviously, timing during the last 36 months was tough to source the right vehicles. But we were trying to source the 9, 10, 11,000-pound car. And with the issues you have with that customer following and policy and buybacks, we just couldn't get the tracks when we wanted as a quality company.

Michael Patrick Ward: Ms model or our expense model much more efficient too I think Mike is really look at the business. We got to continue to trim and looking at areas, where we're not making the returns we want and we had great expectations on car shop in the U S and in the UK, but we saw the sourcing obviously.

Roger S. Penske: I think, Mike, as we look at the business, we've got to continue to trim and look at areas where we're not making the returns we want. And we had great expectations for the car shop in the U.S. and in the U.K., but we saw the sourcing. Obviously, timing during the last 36 months was tough to source the right vehicles, but we were trying to source the 9-, 10-, 11,000-pound car.

Michael Patrick Ward: <unk> during the last 36 months was tough to source the right vehicles, but we are trying to source to 910, 11000 pound car and where the issues you have with that customer following and policy and buybacks. We just couldnt get the traction we wanted as a quality company. So appealing that we could tie them into R. R.

Roger S. Penske: And with the issues you have with that customer following and policy and buybacks, we just couldn't get the tracks that we wanted as a quality company. So, feeling that we could tie them into our OEM side, because think about it. Now when you go to BMW, sitting there, you'll see a BMW that is certified, and you'll go all the way down and see maybe a $30,000 BMW that's not at the OEM store; it's at Sittner Select. So they feel like they're doing business with the same organization.

Randall Seymore: So feeling that we could hire them into our OEM side because think about it. Now, when you go to BMW sitner, you'll see a BMW that are certified. And you go all the way down and see maybe a 30,000 dollar BMW that's not and that's not at the OEM store as it's sitting there select. So they feel like they're doing business with the same organization. So there's lots of benefits there. Then we also have the ability to do use car reconditioning for the OEM locations that are contiguous because we got small locations. They don't have a lot of body shops.

Michael Patrick Ward: OEM side, because think about it now when you go to BMW.

Michael Patrick Ward: Sitting here, you'll see a BMW that are certified and you go all the way down and seem maybe a 30000 dollar BMW that's not that's not at the OEM store is just sitting there select so they feel like they are doing business with the same organization. So there's lots of benefits. There then we also have the <unk>.

Roger S. Penske: So there are lots of benefits there. Then we also have the ability to do used car reconditioning for the OEM locations that are contiguous because we have small locations and don't have a lot of body shops. So we'll start to use those big operations that we're doing, this other reconditioning, and we'll utilize those for the reconditioning of our used cars, plus maybe do some work for some of the leasing companies that we do business with.

Michael Patrick Ward: Bill I need to do used car reconditioning.

The OEM locations that are contiguous because we got small locations don't have a lot of body shops. So we will start to use those big operations that we're doing this other reconditioning and will utilize those for reconditioning of our used cars plus even do some maybe work where some of the leasing companies that we do business.

Randall Seymore: And so we'll start to use those big operations that we're doing this other reconditioning. And we'll utilize those for reconditioning of our used cars. Plus, even do some maybe work for some of the leasing companies that we do business with. So I see it as a real opportunity to expand our parts and service. Plus, I think we'll have a very good return. I spent a couple days with Randall there a week or so ago. You walk in as professional. Ironically, we've had very few people leave. In fact, they're more excited to work for Sitner than they were, I think, for Karsha.

Roger S. Penske: So I see it as a real opportunity to expand our parts and service, plus I think we'll have a very good return. I spent a couple of days with Randall there a week or so ago. You walk in, and it's professional.

Michael Patrick Ward: So I see it as a real opportunity to expand our parts and service plus I think we will have a very good return I spent a couple of days with Randall there a week or so ago, you'll walk in his professional ironically, we've had very little few people leave in fact, there are more.

Richard P. Shearing: Ironically, we've had very few, few people leave. In fact, they're more excited to work for Shittner than they were, I think, for Car Shop. Let me let Rich talk a little bit about the Car Shop change in the U.S. Yeah, thanks, Roger. Mike, if you look at the U.S., similar actions, if you recall last year in January, we closed the Scottsdale location. January of this year, we made the decision to close the South Brunswick location, and I think if we're honest, we probably overbuilt those, and certainly the market didn't help us with the timing that those opened, but by taking those actions, we've been able to mitigate our operating expenses, along with all the other actions that the team has taken.

Rich: Excited to work for sitting here than they were I think for car shop, Let me, let rich talk a little bit about the car shop changed in the U S. Yeah. Thanks, Roger Mike.

Richard Shearing: Let me let Rich talk a little bit about the Karsha change in the U.S. Yeah, thanks, Roger. Mike, if you look at the U.S., similar actions, if you recall last year in January, we closed the Scottsdale location. January of this year, we made the decision to close the South Brunswick location. And I think if we're honest, we probably overbuilt those, and certainly the market didn't help us at the timing that those open. But by taking those actions, we've been able to mitigate our operating expenses, along with all the other actions that the team have taken.

Rich: If you look at the U S. Similar.

Rich: You know actions if you recall last year in January we closed the Scottsdale location January of this year, we made the decision to close the South Brunswick location and I think if we're honest, we probably overbuilt those and certainly the market didn't help us at the timing that those open.

Rich: By doing so ive taken those actions, we've been able to mitigate our operating expenses along with all the other actions that the team.

Richard Shearing: And the headcount is tight; advertising is under control. Inventory has been managed very well. And so now that we see some of the traditional sourcing channels opening up, we're up 10 percentage points in vehicles sourced through dealers and fleet. And flat on auction, which has traditionally been the lowest gross profit per unit source we have. We've seen four consecutive months now of GPU above $3,000 unit. Our sales are trending 20 to 25 percent above prior year on a monthly basis. And as we look to the second half of the year, we feel good about sustaining the current performance that we have there, so in good shape.

Richard P. Shearing: The headcount is tight, and advertising's under control. Inventory's been managed very well. Now that we see some of the traditional sourcing channels opening up, we're up 10 percentage points in vehicle sources through dealers and fleet and flat on auction, which has traditionally been the lowest gross profit per unit source we have. We've seen four consecutive months now of GPUs above $3,000 a unit. Sales are trending 20 to 25% above the prior year on a monthly basis, and as we look to the second half of the year, we feel good about sustaining the current performance that we have there, so I'm in good shape.

Rich: We have taken the head count is tight.

Rich: Advertising is under control inventories and manage.

Speaker Change: Very well and so now that we see some of the traditional sourcing channels opening up we're up 10 percentage points in vehicles sourced through dealers and fleet.

Speaker Change: Flat on auction, which has traditionally been the lowest.

Speaker Change: Gross profit per unit source, we have we've seen four consecutive months now of GPU above above $3000. A unit sales are trending 20% to 25% above prior year on a monthly basis and as we look to the second half of the year, we feel good about sustaining the current performance that we have.

Speaker Change: They're still in good shape.

Michael Patrick Ward: Okay, is it something, assuming you have success with Center, do you look at transitioning to like a more of a direct branding example using the Penske name in the U.S., or do you stick with Car Shop? And what are the benefits?

Unknown Executive: Okay, is it something, assuming you have success with Center, do you look at transitioning to like a more of a direct branding example using the Penske name in the U.S.?

Speaker Change: Okay is it something.

Assuming and assuming you have success with center do you look at transitioning to.

Speaker Change: More of a direct branded U example, using the <unk> name in the U S or do you stick with car shop.

Unknown Executive: Or do you stick with car shop and are the benefits the same in the U.S. that you would get in the U.K. If you start pulling them together closer to the new vehicle locations?

Speaker Change: Or are the benefits the same in the U S that you would get in the U K. If you started pulling them together.

Speaker Change: Closer to the new vehicle locations.

Roger S. Penske: Mike, I don't think they're quite the same. We'll continue with the car branding here. We have it as a successful business. Remember, that car shop was in place for a number of years, and I think at this point, we would look at areas, maybe, to open up, under the right cost structure. I think we just overbuilt, and I think that we can sell all brands in the U.S. stores too. So I think that there's a really good opportunity here that we have, and I think the acquisition, the management team has done a terrific job with their costs.

Unknown Executive: My kind of don't think they're quite the same. We'll continue with a car branding here. We have it as successful. Remember that car shop was in place for a number of years.

Speaker Change: Mike I don't think they are quite the same will continue okay.

Speaker Change: Yeah.

Speaker Change: <unk> here, we have it is successful.

Speaker Change: Car shop was in place.

Speaker Change: For a number of years and I think at this point about we would look at areas maybe to open up <unk>.

Unknown Executive: And I think at this point that we would look at areas maybe to open up under the right cost structure. I think we just overbuilt, and I think that we can all brand in the U.S. stores too. So I think that there's really good opportunity here we have, and I think the acquisition, the management team has done a terrific job in their costs. I think our comp plans. I think the recondition we have over here is almost site by site. We're in the U.K. It was more one big major site in Lake Buzzard. We're going to use for fleet preparation.

Speaker Change: They're the right cost structure I think we just overbuilt and I think we can.

Speaker Change: All brands in the U S stores too. So I think that there is real good opportunity here, we have and I think the acquisition.

Speaker Change: The management team has done a terrific job.

Speaker Change: Cause I think our comp plans I think the reconditioning, we have over here is almost site by site where in the U K. It was more one big major site at buzzard.

Roger S. Penske: I think our comp plans, I think the reconditioning we have over here is almost site by site, where in the U.K., it was more one big major site at Leighton Buzzard we're going to use for fleet preparation.

Speaker Change: We're going to use for their fleet.

Speaker Change: Separation.

Michael Patrick Ward: I see. Can I just clarify one thing? Roger, you said, did you say 80? 80 of your locations were in the Automotive News Top 50, so 80 of the 150 Auto News Top 150 dealers were Penske?

Unknown Executive: Can I just clarify one thing. Roger, you said, did you say 80 of your locations were in the Automotive News Top 50? So, 80 of the 150 Automotive News Top 150 dealers for Bensky? I was concerned because last year we were, I think, we had 60 out of the 100, and they had a lot of regulations on that. That's impressive.

Speaker Change: Okay.

Speaker Change: Can I just clarify one thing.

Speaker Change: Roger You said did you say 80.

Penske: Any of your locations were in the automotive news top 50, So 80 of the 150 automotive news top 150 dealers where penske.

Roger S. Penske: I was concerned because last year we were, I think we had 60 out of 100, and they raised the bar on us. Yeah, 80 out of 150, correct. Wow, congratulations on that.

Speaker Change: I was concerned because last year, we were I think we had 60.

Speaker Change: 100, and they raised the bar.

Speaker Change: Now 80 out of 150 correct.

Speaker Change: Well congratulations on that that's impressive.

Rajat Gupta: And next we will move to Rajat Gupta with J.P.

Rajat Gupta: And next, we will move to Rajat Gupta with J.P. Morgan. Please go ahead.

Rajat Gupta: And next we will move to Rajeev Gupta with J P. Morgan. Please go ahead.

Rajat Gupta: Morgan. Please go ahead. Great. I had one on the apartment services. A pretty good resilient trend there. I was curious if you could dissect the U.S. forces in the U.K. in that business. And also in the U.K. you know whether more electric wake up failed and more working done on those vehicles. I'm curious if it could give us some metrics around, you know, just without all the size, frequency, security, anything else that you're seeing would be helpful. Thanks. I have a follow-up. Well, when I look at the same store performance in parts and service, our customer pay was up approximately three and a half percent.

Rajat Gupta: Great question. Thanks for taking the question. I had one on parts and services.

Great.

Rajat Gupta: With your question.

Rajat Gupta: Hey, everyone. Thanks for taking the questions.

Rajat Gupta: I had one on the parts and services.

Rajat Gupta: A pretty good resilient trend there. I was curious if you could dissect the U.S. versus the U.K. in that business, and also in the UK, you know, where there are more electric vehicle sales and more work being done on those vehicles. I'm curious if you could give us some metrics on that.

Rajat Gupta: A pretty good resilient trends there I was curious if.

Speaker Change: You could dissect the U S versus the U K in that business.

Also when you care, you know where theyre more electric vehicle sales.

Speaker Change: And more work being done on the Waco, I'm curious if you could give us some metrics around.

Speaker Change: Just regarding order size frequency severity or anything else are you seeing what would be helpful. Thanks.

Speaker Change: Follow up.

Roger S. Penske: When I look at the same store performance in parts and service, our customer pay was up approximately 3.5%. I think in the U.S., it was up just over 2% internationally, which gave us a 3.1% increase. Our warranty, obviously, was up.

Speaker Change: When I when I look at it.

Speaker Change: The same store performance in parts and service.

Speaker Change: Our customer pay was up approximately 3.5% I think in the U S. It was up just over two internationally, which gave us a three 1% increase our warranty obviously it was up we've talked about are significantly up almost nine and up 18% internationally and then our collision repair.

Roger Penske: I think in the U.S. It was up just over two internationally, which gave us a 3.1 percent increase. Our warranty obviously was up. We talked about it significantly, up almost nine and up 18 percent internationally. And then our collision repair was up 2.2 percent in the U.S. and 9 percent internationally. I think the good news is when we look at our effective labor rate in our dealerships, we were up $8.43. So the discipline of not discounting is made a big difference. and we talk about numbers and mechanics, we're up 8% year-over-year on mechanics, which I think is terrific, and certainly we look at our over six months, our repair order counts up 2%.

Roger S. Penske: We talked about it significantly, up almost 9% and up 18% internationally. And then our collision repair was up 2.2% in the U.S. and 9% internationally. I think the good news is when we look at our effective labor rate. In our dealerships, we were up $8.43, so the discipline of not discounting has made a big difference. And when we talk about the number of mechanics, we're up 8% year over year on mechanics, which I think is terrific. And certainly, when we look at our repair order count, which has been up 2% over six months.

Speaker Change: It was up two 2% in the U S and 9%.

Speaker Change: Internationally I think the good news is when we look at our effective labor rates.

Speaker Change: In our dealerships, we were up $8 43.

Speaker Change: Discipline of not discounting has made a big difference.

Speaker Change: And we talk about numbers that mechanics were up 8% year over year on mechanics, which I think is is terrific and certainly we look at our over six months, our repair order counts up 2%.

Roger S. Penske: Got it, got it. That's helpful. And just like, you know, on the severity side of things, on electric vehicles versus ICE, any color of the dollar there, like how different it is, and maybe how that's changed, you know, over the last couple years.

Speaker Change: Got it got it.

Speaker Change: That's helpful.

Speaker Change: And just like.

Speaker Change: On the severity side of thing electric vehicles merchandise.

Unknown Executive: Any color of the dollars there, how different it is, and maybe how that's changed over the last couple of years.

Speaker Change: Any any color on the dollars there like how different it is and maybe how that's changed over the last couple of years.

Roger S. Penske: Well, let's be honest with each other. I think all the OEMs, if we were sitting here two years ago, would have been pounding their chests on what they had invested in electric vehicles. They were going to be pulling out EVs by 2030, and Mercedes and GM and some of the other domestics had, you know, had big opportunities, they felt, to grow market share with us. Obviously, when you look at it, the EV market, certainly the expectation hasn't grown. We don't have customers coming in, and I think, at the end of the day, we don't have the infrastructure. We've talked about that.

Roger Penske: Well, let's be honest with each other. I think all the OEMs, if we were sitting here two years ago, were ponding their chest on what they had invested in electric handles. They were going to be fully V by 2030 at Mercedes and GM, and some of the other domestics had big opportunities they felt to grow market share with us. Obviously, when you look at it, the EV market, certainly the expectation hasn't grown, but we don't have the customers coming in. And I think at the end of the day, we don't have the infrastructure. We've talked about that consumer acceptance, obviously, range anxiety, and the selling price today for us is $6,400 less than an MSRP, and I'm sure that the margin that the domestics we're hoping to get has been here because Tesla certainly has taken downward pricing offense to its effects.

Speaker Change: Well, let's be honest with each other I think all of the Oems. If we were sitting here two years ago, where we're putting their chests and what day and invested in electric vehicles, and we're going to be.

Speaker Change: Hopefully the by 2030, Mercedes and GM and some of the other domestics head.

Speaker Change: Big opportunities they felt to grow market share with us obviously when you look at it.

Speaker Change: The EV market.

Certainly the expectation hasnt grown.

Speaker Change: Don't have the customers coming in and I think at the end at the end of the day, we don't have the infrastructure, we've talked about that consumer acceptance, obviously range anxiety and the selling price today for us is $6400 less.

Roger S. Penske: Consumer acceptance obviously brings anxiety, and the selling price today for us is $6,400 less than the MSRP, and I'm sure that the margin that the domestics were hoping to get has been here because Tesla certainly has taken a downward pricing offense, which affects us. And I think the long-term aspects, when you look at it, we really have to look at what the bridging strategy for it is, and I think the bridging strategy will be plug-in hybrids. We can see it.

Speaker Change: Then an MSRP and I am sure that the margin that the domestics were hoping to get has been here because Tesla certainly has taken downward pricing.

Speaker Change: Offense, which affects us and I think long term aspects. When you look at it we really have to look at what's the bridging strategy for it and I think the bridging strategy will be plug in hybrids, we see it.

Roger Penske: And I think long-term aspects, when you look at it, we really have to look at what's the bridging strategy for it. And I think the bridging strategy will be plugging in hybrids. We see it. Toyota's talked about it, and I think that what we have a long time before we get to anybody fully electric. Look, I've driven them; they're nice to drive. But again, if it's a hub and spoke for trucks, it works heavy-duty trucks right now. We think it's a long toll because basically you put five or six thousand battery weight into a tractor trailer that reduces your economic payload, which is obviously not good.

Roger S. Penske: Toyota's talked about it, and I think that we have a long time before we get to anybody fully electric. Look, I've driven them. They're nice to drive, but again, if it's a hub-and-spoke for trucks, it works. Heavy-duty trucks right now, we think it's a long pull because basically, you put 5,000 or 6,000 battery weight into a tractor-trailer, it reduces your economic payload, which is obviously not good. But again, when we look at our BEV inventory, we've got about 2,200 in the U.S. We've got 91 days' supply in the U.S., and in the U.K., we've got a couple thousand also, 99 days versus 33 days roughly unused. In fact, we can buy used ones and make more money than we can on new ones.

Speaker Change: Toyota has talked about it and I think that will.

Speaker Change: We have a long time before we get to anybody fully electric look I've driven them there are nice to drive but again.

Speaker Change: It's a hub and spoke for trucks. It's works heavy duty trucks right. Now we think it's a long long time, because basically you put five or 6000 or battery weight.

Speaker Change: Wait into attractive trailer it reduces your economic payload, which is obviously not good but again when we look at our Bev inventory.

Roger Penske: But again, when we look at our Bev inventory, we've got about 2,200 in the U.S.; we've got 91 days supply in the U.S., and in the U.K., we've got a couple thousand, also 99 days versus 33 days roughly on youth. In fact, we can buy users to make more money than we can on the news.

We've got about 2200 in the U S. We got 91 day supply in the U S and in the U K. We've got a couple of thousand also 99 days.

Speaker Change: Versus 33 days roughly unused fact weakened by users can make more money than we can on the new.

Rajat Gupta: Yeah, Rajat, I'll just add something from the fixed op side relative to Bev. You know, I think early on there were concerns that all the fixed operations business would go away with respect to battery electric vehicles. Obviously, it's still early in their deployment, and there's still a low percentage overall in the total market. But what we see presently is the opposite of that.

Richard Shearing: Rich, you've got to get a shout-out. I'll just add something from the fixed-op side relative to Bev. I think early on, there were concerns that all the fixed operations business would go away with respect to battery electric vehicles. Obviously, it's still early in their deployment, and there's still a low percentage overall, the total market. But what we see presently is the opposite of that. If you look at our hours per RO, we're at 3.1 hours per RO on the battery electric vehicles compared to 2.7 hours as an average across all 1.8 million repair orders we've done to date.

Rich: Rich you got it yes, John I'll, just add something from the fixed op side relative.

Speaker Change #100: It's about.

Early on there was concerns that all of the fixed operations business would.

Speaker Change #101: Go away with respect to battery electric vehicles, obviously, it's still it's still early and there.

Speaker Change #102: <unk> deployment and there is still a low percentage overall of the total market, but what we see presently is the opposite of that if you look at our hours per arrow were three one hours per oh on the battery electric vehicles compared to $2 seven hours as an average across all $1 8 million repair orders, we've done to date and.

Roger S. Penske: If you look at our hours per RO, we're at 3.1 hours per RO on the battery electric vehicles compared to 2.7 hours as an average across all 1.8 million repair orders we've done to date. And then you look at the dollars per RO, we're at $1,160 for a battery electric vehicle versus about $715 for a comparable ICE repair. So right now, Bev's are taking longer to repair and costing more money. So we'll see if that normalizes over time, but at present, it's certainly... You know, different than the ICE vehicle. Also, it's costing the factories more money than I thought, too. Then, I can tell you the majority of the work we're doing in the shops is warranty. Correct. It's not the customer's pay.

Richard Shearing: And then you look at the dollars per RO, we're at 111,160 for battery electric vehicle versus about $715 for comparative ICE repair. So right now, Bev's are taking longer to repair and are costing more money. So we'll see if that normalizes over time, but at present it's certainly... You know, different than the ICO. It's also it's cost in the cost of the factors, more money than it's ought to. Then I can tell you the majority of the work we're doing in the shops is already correct; that customer pay. Got it, that's helpful.

Speaker Change #102: When you look at the dollars per <unk> were at 11 1160 for a battery electric vehicle versus about $715 for comparative ice repair so right now beds or more taken longer to repair.

And our costing more money so.

Speaker Change #102: We will see if that normalizes over time, but at present.

Speaker Change #102: Certainly.

Speaker Change #102: No different than the Ico, Charles Phillips caution there.

Speaker Change #103: The factories more money than I thought to but I can tell you. The majority of the work we're doing with shops as we're already correct shot customer pay.

Speaker Change #104: Got it got it that's helpful and just one follow up on the CDK <unk>.

Roger S. Penske: Got it, got it, that's helpful. And just one follow up on the CDK outage. I was curious if you saw any benefits to your business during the end of June and early July from some of the outages occurring at the CDK stores. I'm curious if there was any benefit to the business, in the automotive business in the U.S.

Roger Penske: I just want to follow up on the CDK outage. I was curious, you know, if you send any benefit to your business during the end of June or New July from some of the outages occurring at the CDK stores. I'm curious if that was any benefit to the business in the automotive business in the US. Well, I think there was definitely a benefit of not being on CDK on the automotive side. Obviously, we were impacted on the commercial truck side of our business. But I think I go back to the comments I made in the opening remarks. The reaction by our team, whether it was our operational staff or IT folks, was really benchmarking my opinion of what they accomplished in a short period of time to get us back to an operating level within 48 hours to where we could open repair orders, generate parts tickets, and book truck deals.

Speaker Change #105: I was curious.

Speaker Change #106: If you stand to benefit.

Speaker Change #107: Due to your business during the end of June early July from from some of the outages occurring.

Speaker Change #107: <unk> stores.

Speaker Change #108: Curious if that was there any benefit to the business.

Speaker Change #109: And the automotive business in the U S.

Roger S. Penske: Well, I think there was definitely a benefit of not being on CDK on the automotive side; obviously, we were impacted on the commercial truck side of our business. But I think I go back to the comments I made in the opening remarks; the reaction by our team, whether it was our operational staff or IT folks, was really a benchmark, in my opinion, of what they accomplished in a short period of time to get us back to an operating level within 48 hours so that we could open repair orders, generate parts tickets, and book truck deals. So overall, for the outage period we had from the middle of June to the end of the quarter, we didn't see it as a material impact.

Speaker Change #110: Well I think there was definitely a benefit of not being on CDK on the automotive side, obviously, we were impacted on the commercial truck.

Speaker Change #110: Truck side of our business.

Speaker Change #110: But I think I'd go back to the comments I made in the opening remarks.

Speaker Change #111: Reaction by our team whether it was our operational staff or our it folks.

It was really benchmark in my opinion of what they accomplished in a short period of time to get us back to an operating level within 48 hours to where we could open repair orders generate parts tickets and book.

Speaker Change #111: Truck deal. So overall for the outage period, we had from the middle of June to the end of the quarter, we didn't see it as a material impact.

Unknown Executive: So overall, for the outage period we had from the middle of June to the end of the quarter, we didn't see it as a material impact. But you did not send any increased traffic at your automotive dealerships for consumers; you might have otherwise gone to the CDK store. No, no, nothing that we can measure. Thank you. Great. Thanks for all the color and good luck. Thanks, Raja.

Roger S. Penske: But you've not sent any increased traffic to your automotive dealerships for consumers who might have otherwise gone to a CDK store.

Speaker Change #112: Got you, but not sent an increased traffic at your automotive dealerships.

Speaker Change #113: For consumers, we might have otherwise gone to a CDK in store.

Roger S. Penske: No, no, nothing that we could measure.

Speaker Change #114: No no nothing that we could measure.

Rajat Gupta: understood. Great. Thanks for all the cover songs and good luck.

Speaker Change #115: Great. Thanks for all the color and good luck.

Roger: Thanks Roger.

David Whiston: Next, we move to David Wiston with Morningstar. Please go ahead. David? Hi, everyone. Hey, Tony. I'm just curious on unused vehicles first. Your customers are generally more affluent. So are they in just on the use side, though? Or they would you say they're still struggling much with use of portability like a lot of Americans are in the market and they handle the higher rates and higher prices better in the use market than the typical use consumer.

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

Roger: Next we'll move to David Whiston with Morningstar. Please go ahead.

David Whiston: Hi David. Hi everyone. Hey Tony.

David Whiston: Hey, David Hi, everyone.

David Whiston:

David Whiston: Turning.

Speaker Change #118: Tony just curious on used vehicles first.

Speaker Change #119: Youre customers are generally more affluent and so are they in just on the used side, though are they.

David Whiston: I'm just curious about used vehicles first. Your customers are generally more affluent. So are they, just on the use side, though? Would you say they're still struggling much with use affordability like a lot of Americans are, or can they handle the higher rates and higher prices better in the used market than the typical used consumer?

Speaker Change #120: Would you say theres still struggling much with us affordability like a lot of Americans are or can they handle the higher rates and higher prices better.

Speaker Change #121: The used market than the typical use consumer.

Tony Pordon: So David, this is Tony. So I think affordability is definitely a concern when you look at the used vehicle prices that are out there. I think we see a more stable market today than we did six months ago. So that's a good thing. And you know, when you take a look at our overall sourcing of vehicles today on our franchise stores, we're self-sourcing about 85% of those vehicles. We get most of our sourcing comes from trades and lease returns. But we're also doing a little bit in terms of buy your car directly from the street.

Anthony R. Pordon: So, David, this is Tony. So, I think affordability is definitely a concern when you look at the used vehicle prices that are out there. But I think we see a more stable market today than we did six months ago. So, that's a good thing.

Speaker Change #121: So David this is Tony So I think affordability is definitely a concern when you look at the used vehicle prices that are out there I think we see a more stable market today than we did six months ago. So that's a good thing and when you take a look at our overall sourcing of vehicles.

Anthony R. Pordon: And, you know, when you take a look at our overall sourcing of vehicles today at our franchise stores, we're self-sourcing about 85% of those vehicles. We get most of our sourcing from trades and lease returns, but we're also doing a little bit in terms of buying your car directly from the street, and then loaners are a pretty big part of our strategy in terms of taking those loaners and turning them into great used cars that become available for sale in our dealerships.

Speaker Change #122: Today on our franchise stores were self sourcing about 85% of those vehicles, we get most of our sourcing comes from trades and lease returns, but we're also doing a little bit in terms of buy your car directly from the Street and then loners as a pretty big part of our strategy in terms of taking those law.

Tony Pordon: And then loners is a pretty big part of our strategy in terms of taking those loners and turning them into great use cars that become available for sale in our dealerships. Think in the US, we've got about 7,000 loners. You know, if you're turning these things every three months to six months, or 5,000 miles or so, they become a great used car, and they help with that affordability concern. So I think we have to look at all those available sources and what we're doing with that business to try to make it more affordable for consumers.

Owners and turning them into great used cars that become available for sale in our dealerships in the U S. We've got about 7000 Loners. If you turn these things every three months to six months or 5000 miles or so they've become.

Anthony R. Pordon: I think in the U.S., we've got about 7,000 loaners. You know, if you're turning these things every three months to six months or 5,000 miles or so, they become a great used car, and they help with that affordability concern. So, I think we have to look at all those available sources and what we're doing with that business to try to make it more affordable for consumers.

David Whiston: A great used car and they help with that affordability concerns. So I think we have to look at all of those available sources and what we're doing with that business to try to make it more affordable for consumers I think David when you look at the success that the guys in CAD and car shop by not having to use the auction we've seen better.

Roger Penske: I think, Dave, when you look at the success that the guys have had in car shop by not having to use the auction, we've seen better cars, more availability, and we're getting higher margin. Now, that's in a, say, 15, 18 to 20,000 MSRP car. I think Tony mentioned the loner cars. It's really hurt us, really, the last couple of years because we've been putting used cars in loners where we take a new car, which is spec properly, and we depreciated two to two and a half percent. Over three months, you've got a four, five, six, or seven percent depreciation from cost.

Roger S. Penske: I think, David, when you look at the success the guys have had in the car shop by not having to use the auction. We've seen better cars, more availability, and we're getting higher margins. Now, that's in a, say, $15,000, $18,000 to $20,000 MSRP car. I think Tony mentioned the loaner cars. It's really hurt us, really, the last couple of years because we've been putting used cars in loaners where we take a new car, which is spec'd properly, and we depreciate it 2% to 2.5%.

David Whiston: Cars more availability and we're getting higher margin that tend to say 15 to 18 to 20000 MSRP car I think Tony you mentioned, a loaner cars, it's really hurt us really over the last couple of years, because we've been putting used cars and loners, where we take a new car, which is spec prop.

Tony: Early and we depreciated two to two 5% over three months, you got a 456 or 7%.

Roger S. Penske: Over three months, you've got a 4%, 5%, 6%, or 7% depreciation from cost. Plus, the OEM allows us to use all of the in-market incentives, i.e., leasing or buying on those cars. And to think about 7,000 of those that we can turn, it's a tremendous benefit for us.

Tony: Depreciation from cost plus the OEM allows us to use all of the end market incentives I E leasing or buying on those cars and think about 7000 of those that we can turn it's a tremendous benefit for us.

Tony Pordon: Plus, the OEM allows us to use all of the in-market incentives, i.e. leasing or buying on those cars. And to think about 7,000 of those that we can turn, it's a tremendous benefit for us. One other point, David, is that when you take a look in the U.S. At the number of certified pre-owned units that we sell as a result of some of these programs, it's 38-39% of our overall used vehicle sales in the U.S. market that are certified pre-owned. So that helps drive our service in parts, too.

Anthony R. Pordon: One other point, David, is that when you take a look in the U.S. at the number of certified pre-owned units that we sell as a result of some of these programs, 38, 39 percent of our overall used vehicle sales in the U.S. market are certified pre-owned. So that helps drive our service and parts, too.

Tony: One other point David is that when you take a look in the U S. At the number of certified pre owned units that we sell as a result of some of these programs. It's 38, 39% of our overall used vehicle sales in the U S market that are certified pre owned so that helps drive our service and parts too.

Unknown Executive: Okay, thanks. On equity income, I know Q1 is generally seasonally weak. For this year, at least, it's still fair to think of second half equity income probably being higher than first half or something different this year. Well, major, the major part of the income is Penske Truck Leasing investment. And I think we talked about it in some of my notes. You know, we had both a revenue of about 3%. Obviously, full service leasing and maintenance contract, maintenance and also logistics all grew as we can stabilize the rental revenue and we keep our cost structure and we see some lightening into the title on used trucks.

David Whiston: Okay, thanks. On equity income, I know Q1 is generally seasonally weak. For this year, at least, is it still fair to think of second half equity income probably being higher than first half, or is something different this year?

Speaker Change #124: Okay. Thanks.

Speaker Change #125: Equity income I know Q1 is generally seasonally weak.

Is there for this year at least is it still fair to think of second half equity income probably being higher than first amphora is something different this year.

Roger S. Penske: Well, the major part of the equity income is Penske truck leasing and investment, and I think we talked about that in some of my notes. You know, we have growth in our revenue of about 3 percent. Obviously, full service leasing and maintenance, contract maintenance, and also logistics all grew as we can stabilize the rental revenue, and we keep our cost structure, and we see some lightning under the tunnel. Obviously, we have June, which is always a big quarter because kids are going and coming out of school, etc., with our one-way business, but overall, I think that we're in We've grown our lease fleet. 4,200 units, or two and a half percent.

Speaker Change #125: Well.

Speaker Change #126: Major part of it.

Speaker Change #127: ZIP is penske truck leasing and investment and I think we talked about it in some of my notes.

Speaker Change #128: We have both in our revenue of about 3% obviously.

Speaker Change #129: Full service leasing and maintenance contract maintenance and also logistics all grew as we can stabilize the rental revenue and we keep our cost structure and we see some light at the end of the title unused trucks remember we sold 10000 trucks in the quarter with just eight a year ago.

Roger Penske: First member, we sold 10,000 trucks in the quarter; this is eight a year ago. We defleated 9,000 of our rental trucks. Those would just eat us up in depreciation, interest, and maintenance. So we think that we'll continue to see a benefit in the second half. Obviously, we have in June; it's always a big quarter because kids are coming out of school, et cetera, with our one-way business. But overall, I think that we're in good shape. We've grown our leased fleet 4,200 units, or 2.5%. So, as we brought the rental fleet down, we've also brought the leased fleet up.

Speaker Change #129: <unk> 9000 of our rental trucks.

Speaker Change #129: <unk> and depreciation interest and maintenance. So we think that will continue to see a benefit in the second half. Obviously, we have in June which always a big quarter, because kids going comment coming out of school et cetera, with our one way business, but overall I think we're in good shape.

Speaker Change #129: <unk> grown our lease fleet.

Speaker Change #129: 4200 units or two 5% shows we've brought the rental fleet down. We've also brought the lease fleet up I think I mentioned it earlier that the funding is done by bonds quieter from some retail and paper.

Roger S. Penske: So as we brought the rental fleet down, we've also brought the lease fleet up. I think I mentioned earlier that the funding is done by bonds primarily and some retail paper. We've been, our commercial paper, we've been able to keep our debt stable at about 15 billion in that company to cover our 440,000 units that we have. But we had thought that would go up. And then if we, if the Fed does some moves here, that's gonna help us from an interest point of view because when you look at the quarter, we had a $40 million impact on gain on sale year over year. We had a $43 million hit on interest. So 83 million, nothing to do with operations. We were down only 70. So obviously, we had a good operating capability.

Roger Penske: I think I mentioned it earlier that the funding is done by bonds quite early in some retail paper. We've been to our commercial paper; we've been able to keep our debt stable at about 15 billion in that company to cover our 440,000 units that we have, but we had thought that would go up. And then if the Fed does some moves, or that's going to help us from an interest, because we look at the quarter, we had a $40 million impact on gain on sale year over year, and we had a $43 million hit on interest.

Speaker Change #129: We've been a good commercial paper, we've been able to keep our debt.

Speaker Change #129: Stable at about $15 billion in that company to cover our 440000 units that we have where we had thought that would go up and then if we.

Speaker Change #129: Fed does to move sure Thats going to help us from an interest because when you look at the quarter we had.

Speaker Change #129: A $40 million impact on gain on sale year over year, we had a $43 million hit on interest so $83 million nothing to do with operations. We were down only 70. So obviously we had good operating.

Roger Penske: So 83 million, nothing to do with operation until we were down only 70. So obviously, we had good operating capability.

Speaker Change #129: Capability.

David Whiston: Thank you, and then just quickly on the automotive news list, I know, as you mentioned, the bar got raised. Now it's top on 50 stores. You guys have always done really well on this list, probably why they had to change it in the first place. But I'm just curious; in addition to the overall count going up 50 stores, did you guys in the past year institute any kind of new employee benefit that might have driven an increase in the number of stores making the list? You know, David, nothing I could point to, but obviously, every year we do an employee survey to gain feedback from our employees on what we're doing as well as an organization and what can be improved upon.

David Whiston: And then just quickly on the automotive news list: I know, as you mentioned, the bar got raised. Now it's the top 150 stores. You guys have always done really well on this list. You're probably why they had to change it in the first place. But I'm just curious, in addition to the overall count going up by 50 stores, did you guys in the past year institute any kind of new employee benefit that might have driven an increase in the number of stores making the list?

Speaker Change #130: Thank you and then just quickly on the automotive news list I know as you mentioned the bar got raised now its top 50 stores.

Speaker Change #131: And you guys have always done really well on this list.

Speaker Change #132: Why they had to change it in the first place but.

Speaker Change #133: I'm just curious is that in addition to the <unk>.

Speaker Change #134: Overall count going up 50 stores did they did you guys in the past year Institute in any kind of new employee benefit that might have driven an increase in the number of stores to making the list.

Speaker Change #133: Sure.

Roger S. Penske: You know, David, nothing I could point to. But obviously, every year, we do an employee survey to gain feedback from our employees on what we're doing well as an organization and what can be improved upon. Out of that annual employee survey, we form employee involvement committees that are aimed at focusing on the areas that the business needs to improve upon. And, you know, so it's a culture of continuous improvement and learning.

David Whiston: David Nothing I could point to but obviously every year, we do an employee survey to gain feedback from our employees on what were doing while as an organization and what can be approved upon out of that annual employee survey, we form employee involvement committees that are aim.

Roger Penske: Out of that annual employee survey, we form employee involvement committees that are aimed at focusing on the areas that the business needs to improve upon. And you know, so it's a culture of continuous improvement and learning. And we see our turnover, obviously, which we would consider benchmark at just under 20% for the last couple of years. So I think we're doing a good job of keeping the employees happy and making sure that we've got an environment that people want to stay with us. I think also what you look at our facilities and you take the back end of parts and service and we actually extend extra back there for our technicians and also the people in our parts operations.

David Whiston: Aimed at focusing on the areas that the business needs to improve upon.

David Whiston: So, it's a culture of continuous improvement and and learning and we see our turnover obviously.

Roger S. Penske: And we see our turnover, obviously, which we would consider benchmarked at just under 20% for the last couple years. So I think we're doing a good job of keeping the employees happy and making sure that we've got an environment that people want to stay with us.

David Whiston: I wish we would consider benchmark at just under 20% for the last couple of years. So I think we're doing a good job of.

David Whiston: Keeping the employees happy and making sure that we have.

David Whiston: Got an environment that people want to stay with us.

Roger S. Penske: I think also, when you look at our facilities and take the back end of parts and service, and we actually spend extra back there for our technicians and also the people in our parts operations. I think giving them good parts trucks and clean equipment makes a big difference in the image of the company, so it's just not all front end loaded.

Speaker Change #135: I think also.

Speaker Change #135: You look at our facilities and you take the backend of parts and service and we we actually expand extra back there for our technicians and also the people in our parts operations, but I think in giving them. Good part struction clean equipment makes a big difference in the image of the company shows just not all front end loaded.

Roger Penske: I think in giving them good parts, trucks, and clean equipment makes a big difference in the image of the company shows just not all front and loaded.

Unknown Executive: Okay, thank you very much. Thanks, David.

Speaker Change #136: Okay. Thank you very much.

David Whiston: Thanks, David.

Rajat Gupta: And we have a follow-up from Rajat Gupta with JP Morgan, please go ahead. Great. Yeah, I just wanted to follow up on the the PPS common. You know, you mentioned, you know, excluding the game on sale and just know the business action crew.

Rajat Gupta: And we have a follow-up from Rajat Gupta with J.P. Morgan. Please go ahead.

David Whiston: And we have a follow up from Rajat Gupta with Jpmorgan. Please go ahead.

Rajat Gupta: Great. Yeah, I just wanted to follow up on the PTS comment, you know, you mentioned, excluding the gain on sale and interest, the business actually grew.

Rajat Gupta: Great I just wanted to follow up on the ETS carbon.

Rajat Gupta: You mentioned.

Speaker Change #137: The gain on sale of interest in the business.

Roger S. Penske: Here we are. I'm curious, you know, if we could share any color, you know, into the second half or next year, you know, how's that business normalized, you know, from an earnings perspective, and should we, should we continue to expect any year-over-year pressure in the second half? It's curious, you know, any forward-looking thoughts.

Roger Penske: Here we are curious; you know, if you could share any color, you know, during the second half or next year. You know, I have that business normalized, you know, from an audience perspective, and should we continue to expect in the early year pressure in the second half? It's curious, you know, a forward-looking part to get there. Thanks.

Speaker Change #137: <unk> grew year over year I'm curious if you could share any color there.

Speaker Change #139: Turning to the second half or next year.

Speaker Change #139: How is that business normalized doberman earnings perspective.

Speaker Change #141: Should we should.

Speaker Change #140: We continue to.

Speaker Change #140: Back in year over year pressure in the second half.

No.

Forward looking thoughts.

Roger S. Penske: Well, let's look at the business fundamentally. I think about 85% of the business is contractual. That's both in logistics and leasing. So we have economic escalators that drive that. And what's hurt us over the last, say, 12 to 18 months has been the fact that we couldn't replace vehicles because of supply challenges. That's gone away. It's gone away now.

Roger Penske: Well, let's look at the business fundamentally. I think about 85% of the business is contractual. That's both the logistics and leasing. So the economic escalators that drive that and what's hurt us over the last, say, 12 to 18 months, has been the fact that we couldn't replace. Vehicles because of supply challenges that's gone away. It's going away now. I said we have about 20,000 vehicles that we have. I think when you look at the our use truck business, you know, there's no question that we're hoping that market will stabilize. We've been actually probably impacting it because the number of tractors that we're selling.

Speaker Change #142: Let's look at the business fundamentally.

Speaker Change #142: I think about 85% of the business.

Speaker Change #142: It's contractual.

Speaker Change #142: Both on logistics and leasing.

Speaker Change #142: Economic escalators that drive that and what has hurt us.

Speaker Change #142: Over the last.

Speaker Change #142: 12, 18 months has been the fact that we couldnt replace vehicles because the supply challenges that has gone away. It's going away now I said, we have about 20000 vehicles that we have I think when you look at the our used truck business.

Roger S. Penske: I said we had about 20,000 vehicles that we had. I think when you look at our used truck business, there's no question that we're hoping that that market will stabilize. We've been probably impacting it because the number of tractors that we're selling. I think the fundamentals are going to continue. We get a little bit of help and remember. When you look at commercial rental, you have the pure rental where you go in and want to rent a truck for a week. So then you have it.

Speaker Change #142: There's no question.

Speaker Change #142: We're hoping that that market will stabilize we've been actually probably impact because the number of tractors that we're selling I think the fundamentals are going to continue.

Roger Penske: I think the fundamentals are going to continue. We get a little bit of help. And remember, when you look at commercial rental, you have to peer rental where you go into one or rent a truck for a week. So then you have the extra vehicles that are run by our lease customers. That business was down 150 million when you look at it year over year for the second quarter. So that means the general marketplace or transportation is flat to down. And when that turns, that's going to benefit us. And I think that we look at the next six months as our fleets and good shape.

Speaker Change #143: We get a little bit of help but remember.

Speaker Change #143: When you look at commercial rental you'll have the pure rental where you're going to want to rent a truck for a week or so then you have.

Speaker Change #143: The extra vehicles that are run by our by our lease customers that business was down $150 million. When you look at it year over year for the second quarter. So that means the general marketplace, where transportation is flat to down and when that turns that's going to benefit.

Roger S. Penske: The extra vehicles that are run by our lease customers, that business was down $150 million when you look at it year over year for the second quarter. So that means the general marketplace transportation is flat to down. When that turns, that's going to benefit us. I think that we should look at the next six months as, "Our fleet's in good shape." Our interest rates hopefully will go in our direction. We had a bond that we were going to place for probably $500 million that we were going to place in the next six months. We probably won't need to do that because of our capital allocation and the ability for us to deliver due to the sale of some of our equipment. So, I would say that we will continue to grow the business during the next six months and have a better return.

Speaker Change #143: And I think that.

Speaker Change #143: We look at that.

Speaker Change #143: Six months.

Speaker Change #143: Our fleets in good shape.

Roger Penske: Interest rates hopefully will go in our direction. We had a bond that we were going to probably 500 million. We were going to place in the second and the next six months. Probably won't need to do that because there were capital allocation and the ability for us to deliver through the sale of some of our equipment.

Speaker Change #143: Interest rates hopefully will go in our direction, we had a bond that we were going to probably $500 million that we were going to place in the second in the next six months, probably won't need to do that because of our capital allocation and the ability for us to delever due to the sale of some of our equipment. So I would say that we will continue to grow the business.

Roger Penske: So I would say that we will continue to grow the business during the next six months and have a better return. Great. Thanks for all the color. Thank you.

Speaker Change #143: During the next six months and have a better return.

Rajat Gupta: Got it. Got it. Great. Thanks for all the color and good luck.

Got it got it great. Thanks for all the color and good luck.

Speaker Change #143: Yeah.

Speaker Change #144: Thank you.

Roger Penske: We will turn the conference back to Mr. Penske for closing remarks. Thank you very much, everybody. We had a great quarter. I look forward to the next quarter, and we'll see you then. Thanks all of us.

Roger S. Penske: And we will turn the conference back to Mr. Penske for his closing remarks.

Speaker Change #144: And we will turn the conference back to Mr. Penske for closing remarks.

Roger S. Penske: Thank you very much, everybody. We had a great quarter. I look forward to the next quarter, and we'll see you then.

Roger S. Penske: Thank you very much everybody, we had a great quarter look forward to.

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

Roger S. Penske: In the next quarter and we'll see you there and thanks all of us.

Unknown Executive: Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect. We're sorry, your conference is ending now. Please hang up. Thank you very much.

Speaker Change #145: 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.