Good afternoon. Welcome to the Penske Automotive Group third quarter 2022 earnings conference call. Today's call is being recorded and will be available for replay approximately one hour after completion through November 2, 2022, on the company's website under the Investors tab at www.penskeautomotive.com. I will now introduce Anthony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead. Thank you, Hannah. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's record third quarter 2022 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. Joining me for today's call are Roger Penske, our Chair and CEO; Shelley Hulgrave, EVP and Chief Financial Officer; and Tony Facione, our Vice President and Corporate Controller. Our discussion today may include forward-looking statements about our operations, earnings potential, outlook, 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. We have prominently presented the comparable GAAP measures and have reconciled the non-GAAP measures in this morning's press release and investor presentation, which are available on our website to the most directly comparable GAAP measures. Our actual results may vary because of risks and uncertainties outlined in today's press release, which may cause the actual results to differ materially from expectations. I direct you to our SEC filings, including our Form 10-K and previously filed Form 10-Q, for additional discussion and factors that could cause results to differ materially. At this time, I would now like to turn the call over to Roger Penske. Good afternoon, everyone. Thank you, Tony, and all of you for joining us today. I'm pleased to report record revenue and earnings per share in the third quarter, which was driven by our diversified business model. Our revenue increased 7% to $6.9 billion, EBT decreased 2% to $467 million, and net income declined 4% to $340 million. Earnings per share increased 3% to $4.61. Our third quarter results were negatively impacted by foreign exchange, including FX. Revenue increased 12% to $7.3 billion. EBT increased 1% to $481 million. Net income decreased 1% to $351 million. Earnings per share increased 7% to $4.75. Looking at our retail automotive operations on a same-store basis for Q3 2022 versus Q3 2021, new units declined 6% as we saw supply constraints continue to impact new inventory availability. We expect the current supply to remain at these general levels for the next nine to 12 months. However, demand for new vehicles remains strong, and our pipeline of vehicles remains forward sold. For example, in the U.K., our forward order bank is over 60% higher than it was the same time last year and represents 36,000 units and $101 million worth of gross profit. Used units declined 11%, largely due to the challenges in acquiring affordable inventory to meet customer expectations. Retail automotive revenue declined 3%. However, when we exclude FX, our revenue increased 4%. Variable gross profit increased $70 per unit to $5,830. If you exclude the FX, variable gross profit increased $427 from the third quarter of last year. Our service and parts revenue increased 4%, driven by increases in both customer pay and warranty. However, excluding FX service and parts revenue increased 10%. Looking at CarShop during the third quarter, CarShop unit sales were 16,400, and our revenue was $380 million. On a same-store basis, variable gross profit per unit retailed was $2,127. Vehicle acquisition prices, reconditioning costs, and logistics continue to impact our profitability at CarShop. In response to the current market conditions, we've implemented cost improvement programs focused on improving retail sales execution and our overall cost structure. Let me now turn to our retail commercial truck dealership business. As you know, Premier Truck Group business presents a strategic advantage for PAG. It's an important part of our diversification, and the business remains strong. During the third quarter, total unit sales increased 25% to 6,031, and same-store unit sales increased 14%. Our revenue increased 42% to $1 billion, and gross profit increased 21% to $140 million. Same-store revenue increased 29%, including a 23% increase in our service and parts business. Service and parts represented 68% of the total gross profit and covered 135% of all of our fixed costs in the third quarter. EBT increased 9% to $53 million. Approximately 75%-80% of our new unit sales are Class 8 commercial trucks. In fact, our entire allocation of Class 8 product for 2023 is sold out. The new Class 8 truck market remains strong, and the backlog is 220,000 units as of September 30th, and the industry cancellation rates remain very low. During the third quarter, retail sales increased 27% to almost 80,000 units. ACT is currently forecasting North American sales of approximately 300,000 units in 2022 and 287,000 for 2023. Turning to Penske Transportation Solutions. We own 28.9% of PTS, which provides us with equity income, cash distributions, and cash savings. PTS currently operates a fleet of over 400,000 trucks and tractors and trailers, excuse me, with a goal of increasing its fleet to 500,000 by 2025. PTS has over 70,000 trucks currently on order to meet expected customer demands across its various business areas. PTS produced record quarter driven by strong performance from full-service leasing, our commercial rental business, logistics, and remarketing. Revenue increased 19% to $3.5 billion, and profit increased 15% to a record $468 million. In the third quarter, equity earnings increased 15% to $136 million, and year to date, we've received $173 million in cash distributions from PTS. Let me now turn the call over to Shelley Hulgrave, our Chief Financial Officer. Shelley. Thank you, Roger. Good afternoon, everyone. As Roger indicated, we had another strong quarter driven by our diversification and our commitment to maintain operational efficiencies achieved through cost reductions beginning in 2020. SG&A to gross profit was 66.8% in the third quarter compared to 65% in the third quarter last year and was only 70 basis points higher sequentially when compared to the 66.1% in the second quarter of 2022. As we look to the future, we expect the ratio of SG&A to gross profit to be in the low 70s, which is significantly lower than prior to the pandemic. Year to date, we generated $1.6 billion in EBITDA, representing an increase of 21% when compared to the same period of last year. On a trailing 12-month basis, EBITDA reached $2.1 billion through September 30. So far this year, we have completed acquisitions and new open points representing approximately $1.3 billion in annual revenue, including $550 million of annualized revenue for 2022 from the five Mercedes-Benz dealerships and three after-sales locations in the U.K. we acquired in September. During the third quarter, we repurchased 2.8 million shares of common stock for $309 million. Year to date through October 25th, we have repurchased 6.4 million shares of stock for $675 million and acquired 148,000 shares from employees for $17.2 million. We have repurchased more than 8% of the shares that were outstanding at the beginning of the year. In October, our board of directors increased the authority delegated to management to repurchase our outstanding securities by an additional $260 million, bringing the total available repurchase authority to $268 million. In addition to share repurchases, our board has increased the dividend 4x in 2022, growing the quarterly dividend 24% to $0.57 per share. Through September 30th, we have paid $114 million in dividends to our shareholders. In total, we have returned $789 million to shareholders so far this year, representing 73% of our net income. We have also spent $166 million on CapEx and an additional $29 million on land acquisitions for future growth. As you can see, our capital allocation strategy includes disciplined acquisitions in each of our business lines, investments for future growth, and shareholder returns. At the end of September, our long-term debt was $1.6 billion, representing an increase of approximately $164 million when compared to December 31st of last year. The increase in long-term debt is related to an increase in mortgages on properties of $170 million. Our debt is 35% fixed. The average interest rate on our total fixed rate debt is 3.8%, which we have secured for an average remaining term of 5.7 years. Debt to total capitalization was 29%, and leverage sits at 0.8x at the end of September. This is consistent with the end of 2021. At the end of September, total inventory is $3.1 billion, which is consistent with December 31st of last year. New vehicle supply is 15 days in the U.S. and 30 days in the U.K. We had a 23-day supply of new vehicles with premium at 25, volume foreign at 10, and domestic at 30. Used vehicle inventory had a 44-day supply. In conclusion, our balance sheet is in great shape. At September 30th, we had $92 million in cash and over $1.1 billion in liquidity. We remain confident in our ability to manage through the macro challenges that may lie ahead. At this time, I will turn the call back over to Roger. Thanks, Shelley. As Shelley mentioned, we're committed to implementing operational efficiencies that we believe will lead to a lower cost structure. We're also piloting artificial intelligence in both service and sales sides of our businesses. The AI allows for automated interactions with our customers to answer basic customer inquiries and set service and sales appointments using natural conversational language. That allows our employees to be more efficient and particularly useful providing quality support after hours. We continue to integrate digital solutions at dealerships to automate and streamline processing while ensuring consistency, compliance, and quality control. We also continue to pursue digital sales by focusing on our Preferred Purchase Program, our OEM digital programs, and our proprietary site in the U.K. In Q3, digital sales represented approximately 5% of our total unit sales. Looking at sustainability, our initiatives are important as part of our new strategy. As mentioned previously, we've built a dedicated team to drive our future efforts on this important responsibility. Our efforts are focused on measurement and monitoring to establish a solid baseline for future reporting. We're also focused on sustainable facilities, LEED certified to be specific, and decarbonization efforts across our businesses. In fact, we are working with our OEM partners to build an infrastructure to supply the sale and service of electric vehicles throughout their life cycle. We've installed over 1,500 charging stations across our network. We're also focused on improving energy management, increasing the use of renewable energy, recycling programs at our location to reduce greenhouse gas emissions. Our results reflect, I think, the dedication of the people that make our business one of the best to work for. I want to thank all of them for the record results they continue to produce for our shareholders, for our company. I personally continue to remain confident in our business model and about the opportunities I see continuing to drive our businesses forward. Thanks for joining the call today. At this time, I'll turn it back to the operator for questions. Certainly. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question is from the line of John Murphy with Bank of America. Please proceed. All right. Good afternoon, Roger, Shelley, and Tony. Thanks for all the info here. It's a first question that we get a lot from investors and seems to be one of the biggest, you know, fears, but you know is also a massive positive here in the short run, is new vehicle grosses. I'm just curious, Roger, you know, what your view is on how long they're going to stay this high. Are we in somewhat of a new paradigm? I mean, I think you indicated that you expect inventory to be relatively tight for the next nine to 12 months. I mean, that would indicate that, you know, grosses probably would stay relatively high for that period of time. What's your view on grosses? When do they normalize and what do they normalize at? Well, let's position, John, where we are now. If you go back to the third quarter of 2021, we were at about $5,948. Sequentially on new, we're now, to exclude FX, at $7,000 or $7,100. We've not really seen any deterioration. In fact, Q2 2022 was $6,800, and Q2, Q3 obviously at $7,000. When you look at the back order, the backlog I would call it, we talked about the U.K. with 36,000 units. You know, all of these are bespoke orders, especially from our, you know, customers. We see that strong for the next three quarters. Certainly, with the day supply that Shelley talked about, you know, we see that really being consistent throughout the new cycle here as we go into the first quarter and the first half of 2023. You know, microchip shortages still continue, you know, result in supply chain issues and also inventories today and really in short supply across all our brands. When you think about it, our day supply on our premium luxury gives us only 4,500 units in the U.S. today. We go back probably into 2019. What did we have back in 2019? Probably... We were at 14,000 or so. 14,000, and I think we had 2,200 or 2,300, so last year at this time. Inventory really, really is critical. I think at the, at the end of the day, premium luxury, the good news for us from a gross perspective, they're building the cars they make the most money on. You know, basically, with our mix being 70% premium, we're getting the benefit of those higher-priced cars with a big margin for us, and I think that'll help us as we go through the next, you know, six to 12 months to maintain a higher gross margin as we have shown here in the last couple of quarters. That's helpful. Just a second question around used vehicles. Obviously, there's a bit of a shortage there, and that shortage may get worse as new vehicle sales have been depressed for a number of years. Now, how do you think about one, how volumes and grosses there will trend, but also two, how you reinvest and run that business right now? I mean, a sort of skeptic would say, "Hey, back away, you know, things are tough, you know, don't invest there right now." An optimist might say, "Hey, listen, this is a huge opportunity because at some point, you know, three to four years out, the market's going to recover pretty significantly. There's a lot of depressed players, and there might be an opportunity to take share either through, you know, organic openings or maybe even, you know, acquisitions. I mean, how do you think about sort of near-term volume and grosses and then the structural opportunity over time? Well, let's look at it in two buckets. Let's look at the OEM business first, the used car business. You know, we're being impacted in a number of ways. You know, number one, on the premium side, you know, we have a number of leases, we run anywhere from 50%-55%. That has really dropped over the last 12 months. People are buying out their cars. We're not getting the trade, so that's had a significant impact. I did a little bit of homework before the call, and just in the West, if we go back and look at 2019, the first six months in 2019, we turned 2,000 loaner cars into used cars, low mileage used cars we did not have in the first six months or the last six months of this year. You know, that has a significant impact on availability. Going on from there, we've gone from maybe, you know, zero to four years for vehicles down to five and six. What we're finding out that the reconditioning cost is significant. What we have to pay for those vehicles and the ones we get at the auctions are really not good vehicles. I think it hurts our brand because we have more buybacks and more policy. Your second bucket would be CarShop, both in the U.S. and the U.K. We've really been moved out of our sweet spot because the cost of sale has moved up anywhere from $4,000 to $5,000. What's happening, we just don't have the customer base, and we're not getting the leads on those cars, so we moved again down to lower MSRP or cost. We find that those cars, we just have to rebuild them to sell them. We're somewhat at a juncture and saying, we can't get enough vehicles. We have to recondition them in order to make them salable, and yet they're not durable for our customer base, and we have to buy them back. What we've done is we've turned to really technology, to handle the customer appointments, to handle the service. The AI is helping us in many cases, and I think that's gonna be critical for us because we have certainly not given up on the used car business. We'll do 80,000 at CarShop. We will not meet the goals that we set a year ago. Again, we think the business, we got great locations, certainly in the U.K., it's a key part of their business. We've got some of our very best people, you know, working in that area. You know, we're positive about it. I would say availability, affordability, and again, at this point, we want to be sure we don't damage our brand value by going downstream to zero to eight-year vehicles. I'm sorry, Roger, just to follow up, do you think there might be an opportunity to make some acquisitions there to expand the store base as other folks might be under pressure and not have the financial and resources and the cash flow you're getting from the rest of the business to go after it? Well, we have two or three locations, land that we've really purchased that we can build on. In fact, we have one or two locations in the U.K. that are almost completed that we can open up, but we've kind of tapped the brakes on those at the moment to see what happens here, you know, over the next few months. At this point, we certainly are wide open to go forward. We're not gonna back off. To say we're gonna build 10 locations or 15 locations over the next four to five months, it would not be us. Okay. All right. Thank you very much. Thanks, John. Thank you, Mr. Murphy. The next question is from the line of Michael Ward with Benchmark. Please proceed. Mr. Ward, your line is open. Oh, I'm sorry. Thank you very much. Good afternoon, everyone. Good morning. Hey, guys. Just to dive in a little bit more on that chart on slide 11 where it shows your brand mix, and it's 70% premium luxury, and it looks like over 50% are the German luxury brands. Can you talk a little bit about, you know, because there's concern in the marketplace that the consumer is going to slip, and obviously, that's a different consumer, both in the U.S. and in the U.K. What are some of the effects? What are you seeing versus those buyers? Are orders continuing to be strong, pricing strong, all those other things, versus maybe some of the volume imports in particular or other. Well, let's just take the U.K. 90% of our business there is premium luxury, and we got 36,000 units on pre-order with very good margins. So at this point, we've not seen a deterioration and very few, you know, very few cancellations when we look at it. So again, I think overall, the premium luxury customer is certainly even in the U.S. side, it's affordable. This morning, I think Mercedes-Benz made a comment how good their business was gonna be based on the higher line, the quality and obviously the technology that goes there. So when we look at our day supply, you know, really, you know, premium luxury, you know, is it's 25 days. Again, when you look at new, it's 15 days here in the U.S. I think the customers that we have all want these vehicles. We're not charging over list price for these, over MSRP, I think, which is important as we go forward. I think we have the right mix. We've been a premium player right from the beginning. When you have 21 Porsche stores, and we've got 21 or 22 Mercedes-Benz stores just in the U.K., we're definitely dealing with a premium customer. Our big market shares with BMW on a worldwide basis were almost 23% of our total business. Mike, this is Tony. Usually, with those brands too, those premium luxury brands, that consumer tends to be a little more resilient for longer in the purchasing cycle too. We think our brand mix is in a really good spot. Well, also, Tony, we talked a little bit about leasing. That lease customer is going to buy because of the cash in his pocket. We got the benefit of coming back, and they'll offset some of our residual at the finance company, the BMW Financial and Mercedes. I think we've got a great offense there as we go back into the market, as leasing becomes more of a mainstream play for our premium customer. Thank you. Can you talk a little bit about the acquisition you made in the U.K. with the Mercedes-Benz? Yeah. It's a great opportunity. As you know, Niederlassung is a name that they call the factory stores in Europe. Mercedes has made the decision on a worldwide basis to divest of those. We were able to negotiate a purchase of five locations in Northwest London and three service centers. It fits like a glove because we've got the big, large Audi dealer there in North London, and we have also our Jaguar Land Rover store. What we're doing, we're actually being able to put those in one big group, and I think it's important that it will generate $550 million in revenue, and it's the largest acquisition that we've made since we've really had Sytner. Right, Shelley, from the very beginning? Yes, in the U.K. Yeah, in the U.K. We're pretty excited about that. To me, the sites are amazing. The one on the M4 coming in from the airport is world-class. It gives us a real opportunity to grow that brand. Are the multiples paid apples to apples with the U.S. acquisition or? Well, they're a lot less than they are in the U.S. A lot less. Okay. Okay. Thank you very much. Thanks, Mike. Thank you, Mr. Ward. The next question is from Daniel Imbro with Stephens Inc. Please proceed. Daniel, hi. Hey, Daniel. I wonder if I could on the PTS the business, obviously, there's a lot of moving parts there, but surprisingly strong, kind of driving nice upside versus consensus. Can you just talk about, you know, within that, I would guess, you know, one way was slower because moving has slowed. Kinda how you moved that, you know, capacity and how you utilized it, and then what your outlook is for the fourth quarter and into 2023 for the PTS business? I think we talked our revenue was up 21% to $3.5 billion, and all-time record at $476 million EBT, that's up 14%. Now you go into the individual product lines, you know, full-service leasing was $1 billion, up 10%. You know, that's the three, four, five-year contract we make with customers on their equipment. It's the biggest portion of our business, and they've got economic escalators on an annual basis. Our commercial rental was $653 million, and that was up 24%. That commercial revenue, when you think about it, 1/2 of that revenue comes from our lease customer because they need extras as their businesses go up and down. Example would be Coca-Cola needs more trucks in the summer. The battery guys need more, you know, batteries in the winter. That's gonna change, I guess. Anyhow, as we look at utilization on the rental side, we're at 82%. We got 77,000 units in our rentals. If you think about it, every day, almost 65,000 units are on rent. With the size of our fleet, and you compare it to our biggest competitor in the marketplace, you know, we're almost 2x the rental business. We have the equipment, and we have the reputation of the best equipment. I think that's given us a terrific jump because pricing is there for us, which is key. Consumer rental, you mentioned it earlier, this is the one-way business. You know, rent it in Detroit to leave it in Chicago. Well, that's really slowed down with people just not moving as much right now because some of the capital cities now, obviously, with the problems they had, people have moved out. We've seen that go down. On the other hand, those units that we normally would have on one way have been a great bucket for us to fish in because we'll use those as daily rentals, you know, in our markets, which is proving to help our commercial rental, and we take that rental up into that line. Logistics was up 13%. We've made some very good progress in our logistics business. I think that housing also, by the way, on the consumer side, has flowed really some of our one-way business. Logistics is up, utilization is up on rental, and of course, full service is good. Think about the real thing we have here going for us is we built this fleet from 300,000 to 400,000 over the last several months. We also have more trucks that we're going to be able to sell over the next three or four years. I think that's driving this remarketing gain. Our gain on sale was up from $74 million to $120 million, and our increase in PHGR, our piece of that, was about $21 million. Now, look, obviously, it's a hot truck market. Will we get that same gross per unit? I don't know. Again, we'll have more units to sell because we've grown to a bigger company, and I think that's key. We got 40,000 people. You know, we've got 950 locations that we control 100%. We have about 2,000 agents that handle, you know, some of our rental businesses. To me, the brand is strong. We've got a great management team there, and I think that as we go forward, we'll benefit. You might want to say something, Shelley, about the benefit we get on the tax basis from PTS. Sure. As Roger mentioned, we've received $173 million so far in cash distributions this year. We also get a considerable amount of cash tax savings as a result of all of those trucks and trailers that are in operation. Over $400,000 this year, they have over 70,000 trucks on order. As they spend that capital, that depreciation flows through our tax returns here as a partnership. We're able to defer a lot of cash tax savings and take advantage of that on our side as well. Okay. Great. Appreciate all the color. For a follow-up, Roger, I wanted to ask one on the F&I side of the business. You know, obviously, during the quarter, some FTC headlines just around potentially cracking down on that side of the industry. Can you talk about a bit what you think the risks are that could be for your business or the broader industry from what you've seen so far from that proposed legislation? Well, I guess this is the only race I've been in that I didn't want to be first when you think about F&I gross profit per deal. You know, really, these are proposed rules. I fully support the elimination of unfair deceptive practices. Look, this is not the kind of business we want to be in. I think any of our, my peers also would feel the same. You know, we're running at about 40% of our reserve comes from finance and 60% comes from product. Again, I think it's going to be disclosure if it goes through. To me, you know, with us being a big player in leasing, we don't have a lot to sell to a lease customer because typically, those are two or three-year leases. I think it's at this point we'll have to see what you know what the government says on this particular subject. I think we got to clean up the practices for sure. It only makes our industry better. For you guys, where you think you are maybe not doing as much deceptive practices, is there a big financial risk for you guys, or is it still too early to know? Too early to know. What do you think, Tony? I actually think it's too early to know. They're just proposed rules, so it's too hard to speculate in terms of what the final adoption of the rules will be and any impact it would have on us, Daniel. I think having a true price of the vehicle and disclosure so that there's complete transparency, you know, there's a lot of merit to that. I think we have to understand how does that affect us, you know, from the standpoint of the business. You know, in the old days, you had a payment book, they just gave you a payment, you didn't know what you paid for the car. you know, we certainly come a long way, and I think we need to continue to make our business better and more transparent to our customer. I think the other part of that too, Roger, is with the docuPAD process that we have in all the stores, Good point. Across the U.S., which is a digital transaction, and everything is presented to the customer upfront, and they have to sign everything that we have today. I think that we have an advantage there, potentially have an advantage there as these new rules may be adopted. You look at our Google scores, our Google scores are world-class. Again, I think from a turnover standpoint, too, we have very, very low turnover with our salespeople. Correct. One of those reasons is because they've got the right people and they're delivering the right message to the customer. Great. Thank you guys so much for the color and best of luck going forward. Great. Thanks, Daniel. Thank you, Mr. Imbro. The next question is on the line of Rajat Gupta with JPMorgan. Please proceed. Oh, great. Thanks. Hi, how are you doing, Roger and Tony, and Shelley Thank you for the question. Can you hear me okay? Yeah, I hear you fine. Yeah. Great. Just on SG&A, can you share any updated metrics around just productivity level, you know, sales force productivity or just like store level productivity? How should we think about the company sustaining some of these as supply starts to come back or inventory starts to build at the store? Also, I mean, you mentioned earlier, you know, some of the initiatives behind the scenes around AI and automation, and whatever you're doing to speed up the transaction time for the consumer. You know, anything you could share on that and how that's improving productivity even further. If you could tie that back all into, maybe just draw a line on if GPUs on new and used do go back to pre-pandemic levels, what would SG&A to gross look like for the company? Thanks. Well, it's a complicated question. I'll try to do my best. Okay, thanks. From a GP perspective, I think we've talked about that before, looking at pre-pandemic and where we are today. You know, we've made quite a consistent increase year-over-year, and we look quarter to quarter and sequentially, as I said earlier, I think to John Murphy, that you know, we're over $7,100. I see, you know, it's all gonna be driven by supply. Again, there has been, I think, some learning that's taken place at the dealer level and all the manufacturers. I don't think you're gonna see manufacturers like Toyota having 250,000 vehicles in dealer inventory. With a shorter supply, it's gonna help us maintain inventories for sure. From an SG&A perspective, you know, we took 10% out of our same- store business as we operate today. I think it's important to note that, with that, our turnover is certainly much lower. When we look at SG&A, as we get to a normalization, it should be somewhere between 70%-72%. Previously, it was 78%, you know, in the past pre-pandemic. I think that's really what we're seeing. If you look at the increase just sequentially that we've had here over the last three months, we really have seen it in personnel, you know, where we're up probably about $20 million. That's basically people coming out of COVID, coming back to work, and we're. You know, it's very competitive out there. You see it every day. It's not that we can't get cars, we can't get people. It's very important that we're competitive from the standpoint, you know, of what we're paying all of our individuals. Inflation obviously is playing a part of that. You look at the other costs, we've got people traveling now. Utilities are up. You know, our policy is up some. We took that really. That's clearly some. We get that in some of our buyback cars and, of course, our rent and real estate. Again, SG&A, 70%-72%. I think GP will really be driven by availability and pushing by the OEMs. When you talk about AI, that's a really good subject to talk about. It's basically what we've done now, and we're posting this today and really looking at it in about 30 stores. It's virtual scheduling for service appointments. Inbound calls are available 24/7, 365 days a year. It can answer these calls within a minute. Whether it's 12:00 A.M. night or 4:00 A.M., I think this virtual tool can schedule service appointments, we don't have people. We've seen an increase in appointments written at the stores where it's implemented. Again, we can always then use the live team for outbound calls, which is on the sales process, which is key, and we're gonna roll it out to all the stores across the country over the next several months. I think that it really is working. Also, the AI gives us a tool in place to respond to our internet leads. You submit a lead, we'll engage in a two-way customer communication, either via text if you want it or email, and then we'll try to book the customer for an appointment with a store. These are things that we're trying to do. We can be VIN specific. We'll have it live, as I said, at 30 stores. I think that it certainly gives us a benefit for response time. As we've gone with our sales forces through this period of the last, shall I say, 12-18 months, we've gone probably for salespeople selling eight, nine, 10 vehicles. Now they're 11, 12 and 13. The yield of our salespeople certainly is better. Yeah. From an automation standpoint, we are just scratching the surface. We have a lot of opportunities working both in the U.S. and the U.K. to improve efficiencies through automation in the front part of our business and certainly in the back. It certainly helps improve our efficiency and our costs, as you mentioned. It also helps us from a consistency standpoint and a compliance standpoint as well. We look to continue to make further investments in that area. It's a huge opportunity for us. It really is. Got it. That's helpful. Just, you know, just to follow up on capital allocation, you know, any updated thoughts there? You know, the pace of buyback has been pretty strong, you know, 9%-10% of float reduced. You know, is that sort of the number one priority in the near term for the company? You know, curious if you could give us your latest and greatest on that. Thanks. I'll let Shelley answer that one for me. Okay. Thanks, Roger. As I mentioned, we hit $2 billion in trailing 12-month EBITDA for the first time in September here. We have a lot of priorities for that, but it's all about being balanced. If you look at how we've spent our capital allocation over the last couple years, it's roughly 50/50 in terms of growth and return to shareholders. As Rajat mentioned, we just made our largest acquisition in the U.K. with the Mercedes-Benz dealerships, and we've grown and we continue to grow on our diversified path. We've made those acquisitions in truck. We've made significant acquisitions in our auto side, both internationally and domestically. We continue to spend capital, CapEx, approximately $200 million year to date on manufacturer CI requirements, supporting our EV development, both from a manufacturer standpoint and for our customers, IT like we talked about, and that land for future developments. From a return to shareholders standpoint, we continue to remain strong, and I would look, you know, on average over the next few years to be 50% growth, 50% return to shareholders. We so far returning almost $800 million is certainly providing excellent shareholder returns. Got it. Just to follow up on that, based on the leverage you have today, you know, adjusting for the leases, how many more turns can you add today to make sure you're still within the band of the rating agencies? Thanks. Yeah. At our current rating, we could push lease adjusted up to 4x, and we ended the quarter at 1.8x. We certainly have ample room there from our leverage standpoint and from our other debt covenants as well. We've been a lot higher in the past, and the right opportunity when the bond market is in the right spot, we could certainly take advantage of that. But right now between our EBITDA and our liquidity where it's at, it's just not an urgency for us at this time. We have 35% of our debt at fixed rates too right now, so. Right. I think, Rajat, we talked about it. I wanna be safe and secure. As we got into COVID, and we started looking at what our options were and the cost of some of these businesses to buy, we said, "Let's take leverage out of the company." If you go back 12-18 months, we've got almost $1 billion out of debt, out of our working capital. To me, we're in great shape. Really, the only debt other than the bonds we had at the end of the quarter was $400 million worth of mortgages, which we're really using the OEMs finance companies. They love that business, and they support us on that. I think we've got the right position and if something is major, we're available. Remember, we're looking at it across a wide windshield. It's just not all new or used, it's trucks, it's all the different areas that we're doing business with. Even in Australia, we just got some good news here in the last 24 hours. We got a $75 million order for data center standby power with our MTU products. These are things that are starting to come to us because the reputation of the company. The diversification, as Tony calls it, the big D, is certainly playing off. Those leverage efforts saves us $40 million in annual interest. That is... That's right. No small amount for us. Right. That's great. Thanks a lot for all the color and good luck. Great. Thanks, Rajat. Thank you, Mr. Gupta. Once again, to ask a question, press star one. The next question is from the line of David Whiston with Morningstar. Please proceed. Hey, David. Hi, everyone. Hey, David. I wanted to first start on the Mercedes-Benz deal in London. Do you have to divest anything with this, or is there a cap on the number of stores that you may be approaching? Anything like that? No, we don't have a framework agreement in the U.K. At this point, it gives us 21 Mercedes-Benz stores in the U.K. plus the additional service centers that they had from a factory perspective. It puts us in great shape. Okay. CarShop revenue comps are down 12% same store. Obviously, I know there's a big problem with used vehicle affordability both in the U.S. and U.K. Is that basically the entire reason for that decline, or is there anything else going on? No, David, it's all related to vehicle availability and us being able to acquire affordable product for our consumers. It's just very, very hard out there to get the right product that plays into that one price model. You know, we talked about it earlier. For us to dig down deeper, when I say dig down deeper, it's going to zero to six years, zero to eight years, really buying, you know, very poor vehicles, and then we try to rebuild them, and then the policy goes up. We just said, "Hey, we're gonna stay out of that." The impact we have on used on the OEM side, obviously, just taking loaner cars out. You know, fully committed to the brand, and I think, you know, we're continuing to grow. As we talked about earlier when John asked that question, we have property, and we have stores in the U.K. that we can open, and we plan to do that. I think the whole industry on the used side, I'm not sure who has the right formula. Right now to get vehicles, it's not if you can find a vehicle, but it's where is it? What's the logistics cost? What's the reconditioning? And with interest rates going up and in that online business and the credit scoring of those people, you know, it's a tenuous situation. I think what we wanna do, take this time to clean up any, what I call, what we might say fat around, you know, around the corner here that we can take out and make ourselves more lean. That's what we're gonna do, and I think we're on that track. We make good money at the individual stores, but when we roll up the overheads, that's why this AI and some of these things become really important because the people that have to then, you know, handle the overall business creates the issue for us from the standpoint of getting the profitability where we want it. Would you say, Tony? Absolutely. That's what we're trying to do. It's not just in the U.S., but it's in the U.K. also. The guys in the U.K. are working on a big project to automate the processes at CarShop to drive more efficiencies there as well. Yeah. In the past, all the people would come in on Saturday and Sunday to buy cars. But what they're doing now, automatically, they can set up the appointment to come in Tuesday, Wednesday, Thursday, less people, a better transaction feeling. The guest has a better feeling when he drives out with a car. These are things that we can build the brand in one particular point, but also take cost out at the same time. David, one of the things on top of that we're working really hard on through the teams is to change the sourcing of the vehicles. You know, change the– Good point, yeah. Change the sourcing away from auctions into more what we call buy at the curb or buy directly from consumers. Those would be the consumers that might not necessarily buy from us, but they wanna sell their car. Instead of taking it to some other third party, they're coming to us, we're evaluating it, and then we're buying that for our business. Those are actually are some of our most profitable cars that we can buy and then resell in the store. It's a constant process to be able to do that. We also in the U.K. have the Sytner closed bid auction that we can get off-branded vehicles through that that would've normally gone through the franchise business and push those into the CarShop business in the U.K. There's a lot of things that are in process to increase sales and drive more efficiencies in that business. It's just gonna take time as affordability is still challenged. I understand. You mentioned logistics, and I know for everybody that's really gotten terrible, especially for trucking. I mean, you have a really unique angle into the trucking industry. Is there any opportunity for you guys to get some trucking savings through related party business? Well, look, our issue here is that these vehicles that haul cars are really specialized equipment. You know, to be in the trucking business, you gotta get utilization. You know, if we can't get used cars and you're picking up two or three used cars with a car hauler, you know, it's very inefficient and very costly. You know, we were in that business many years ago with Anchor Motor Freight, and we just couldn't make it work. I think, from an overall standpoint, in order to bring these cars throughout the country, a lot of people have invested in their own equipment. We have some, we probably try to do business in more of a geographical area. We start to go get cars way out of a 200-mile area, then it really becomes expensive, and we don't have a silver bullet for that. We wouldn't play in that market because we don't have enough equipment that's specialized. Correct. Okay. Just one more question. If the macro situation gets a lot worse, would you be likely to keep buying back stock, or would you wanna hoard cash under the cash is king mantra? I think we're gonna look at our options, quite honestly. Hoarding cash, I'm not sure that's, I would say that. I think what we would do is, you know, continue to look at what are the options. We will have a certain amount of CapEx that's necessary. I think the market should understand, you know, that we've increased our dividend 24%, 4x so far this year, so we are certainly trying to pay back to the shareholder. You know, obviously, being a shareholder myself, we like it, and I think that we'll continue to look at what's best for the shareholder, and that will be what will drive our decisions. Okay. Thank you very much. All right, Dave. Thank you. Thank you, David. Thank you, Mr. Whiston. There are no additional questions waiting at this time, so I will turn the call over to Mr. Penske for closing remarks. Anna, thank you, and everyone, thanks for joining the call today. We'll see you at the end of the next quarter. All the best. Thank you. That concludes today's call. Thank you for your participation. You may now disconnect your lines.