Ladies and gentlemen, good afternoon. Welcome to the Penske Automotive Third Quarter 2023 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through 2 November, 2023, on the company's website under the Investors tab at www.penskeautomotive.com. If you would like to ask a question during today's conference, you may press one, then zero on your telephone keypad. You will hear acknowledgment that your line has been placed in queue. You may remove yourself from the queue by repeating the same one, zero command. I'd now like to introduce Anthony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead. Thank you, Leah. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's third quarter 2023 financial results was issued this morning and is posted on our website, along with the presentation designed to assist you in understanding the company's results. As always, I'm available by email or phone for any follow-up questions you may have. Joining me for today's call is Roger Penske, our Chair and CEO, Shelley Hulgrave, EVP and Chief Financial Officer, Rich Shearing of North American Operations, Randall Seymore, International Operations, and Tony Piccione, 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 measure in this morning's press release and investor presentation, which are available on our website to the most directly comparable GAAP measures. Our future results may vary from our expectation because of risks and uncertainties outlined in today's press release under forward-looking statements. I'd 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'll now turn the call over to Roger. Yeah, thank you, Tony. Good afternoon, everyone, and thanks for joining us today. Our diversified business really produced another solid quarter, driven by strong performance from our North American automotive and commercial truck operations. The strong performance in North America was partially offset by lower earnings from our UK automotive operations, higher interest expense, and lower equity earnings from our investment in Penske Transportation Solutions. As previously announced, third quarter results include approximately $6.2 million of costs related to the loss of inventory, property damage, and business disruption from a hailstorm in Austin, Texas. It impacted our Toyota, Honda, and Hyundai dealership, 750 vehicles worth $27 million in inventory. During the third quarter, total units delivered increased 12% to 122,000, which includes 8,695 agency units. Good news is revenue increased 8% to $7.4 billion, and our same-store retail revenue automotive increased 9%, including a 9% increase in service and parts. Same-store retail automotive variable gross profit per unit declined $466 sequentially from the second quarter of 2023 to $5,180. Same-store retail commercial truck gross profit increased 6%. Our net income was $263 million, and earnings per share was $3.92. Last week, we increased the dividend by $0.07 or $0.10 -$0. 79 per share. Let me now turn to our auto operations. Demand for new vehicles remains solid, and availability, I would say, is improving. We continue to take forward orders. Our U.S. pre-sold inventory remains approximately 40%-50%. In the UK, our forward order book is 24,300 units, and gross is only down 2%, representing about $98 million. Automotive operations in the UK during the third quarter were impacted by supply challenges, stop sales, a challenging used vehicle market, of course, March is a registration month, so it's awfully key for us from the standpoint of our operation and profitability. Orders for 493 new vehicles were unable to be delivered in September. In addition, same-store used vehicle gross profit declined 30% as pricing challenges impacted the used market. Let's look at our retail automotive business on a same-store basis for Q3. Total units delivered increased 10%, service and parts revenue increased 9%, and gross profit, by the way, was up 10%. Service and parts revenue growth is being driven by an increase of 10% in customer pay, 7% in warranty, and 14% in collision repair. Our variable gross profit remains strong and are higher than historical levels, obviously. For example, variable gross per unit of $5,180 is $2,000 per unit higher than it was in Q3 2019. Let me now talk a little bit about Penske Transportation Solutions. PAG owns 28.9% of PTS, which provides us with equity income, cash distributions, and cash tax savings.... PTS currently manages a fleet of over 442,000 trucks, tractors, and trailers. In the third quarter, operating revenue increased 4% to $2.8 billion. Full service contract revenue increased 13%. Our logistics revenue increased 2%, while rental declined 9%. PTS generated $291 million of net income. Our share of PTS earnings was $84 million, which declined by $51 million compared to Q3 last year. However, the good news is our share of PTS earnings increased $11 million sequentially when compared to Q2 of 2023. The decline in PTS earnings over the prior year period was mainly impacted. Let me look at four items, particularly. Supply constraints and lease extensions increased the number of older units in operation and drove higher maintenance costs of $40 million in Q3. We also granted 18,000 lease extensions so far this year and 37,000 if you look over the last 21 months. Interest expense increased $64 million due to higher average outstanding debt, obviously, from the growth of our fleet, combined with $1.5 billion in refinancings and overall higher interest costs. A lower gain on sale of $61 million when compared to the record performance in 2022, as used truck values declined from historically high levels in the past. Commercial revenue utilization was 80% compared to 84% in the third quarter. Our full service long-term contract business remains very strong, increasing 13% in Q3. We believe the supply of new trucks is stabilizing and will provide PTS with an opportunity to replace the older vehicles in the fleet in the near future, and this obviously will drive lower maintenance expense. Also, we believe freight rates will begin improving in the near future, which has historically helped our remarketing profitability. Let me now turn the call over to Rich Shearing to discuss our commercial retail operation trucks. Thank you, Roger. Our Premier Truck Group dealership business represents 44 locations in North America, and is an important part of our diversification. Earlier this year, we expanded into Greater Winnipeg, Manitoba market area, acquiring five new locations and $180 million in estimated annualized revenue. Including the acquisition, our operations in Canada are approaching $1 billion in annualized revenue. These new dealerships have been fully integrated into our existing operations in Canada and are performing to expectations, adding an important new market and significantly expanding our operations in Canada. We remain one of the largest commercial truck retailers for Daimler Trucks North America. New commercial truck demand remains solid and continues to be driven by replacement demand. Our Class 8 allocation for 2023 remains sold out. Through September 30, North American Class 8 retail truck sales were up 13% to 248,000 units. The current industry Class 8 backlog is 161,000 units, representing approximately six months of sales. During the third quarter, same-store retail unit sales decreased 11% when compared to prior year due to production timing and delivery delays in calendar year 2022, resulting in higher than normal retail sales later in the year. However, same-store gross profit increased 6% as gross margin increased on both new and used truck sales. Service and parts represented 65% of total gross profit and covered 132% of fixed costs in the third quarter. Q3 EBT increased 16% to a record $61 million and was the highest EBT quarter in the company history. As we look forward to 2024, our order book recently opened, and we are securing orders and expect another strong year of Class 8 sales. There's also good news on the freight front. After nearly two years of declining freight rates, a recovery is also forecasted in calendar year 2024. Lastly, I'd like to congratulate the team at Premier Truck Group for being recognized as the Truck Dealer of the Year for 2023 for its, in its areas of customer responsiveness, workforce improvement, and civic engagement. I would now like to turn the call over to Shelley Hulgrave. Thank you, Rich. Good afternoon, everyone. I would now like to walk you through several key financial highlights and discuss the strength of our balance sheet. We continue to focus on operational efficiencies through cost reductions, automation, and other improvements gained over the last several years to help us maintain lower levels of SG&A to gross profit than historical averages. SG&A to gross profit was 69.9% in the third quarter and is 800 basis points below the 77.9% in 2019. SG&A includes costs related to hail damage sustained during the quarter, which represented approximately 50 basis points of SG&A to gross profit. As a result of our efforts to gain efficiencies and control expenses in our U.S. automotive operations, compensation to gross profit ratio has improved by 30 basis points, while service and parts absorption has improved 240 basis points when compared to last year. Looking at our cash flow, we generated over $1 billion in cash flow from operations in the nine months ended 30 September, 2023. During this period, we repurchased 2.7 million shares for $365 million and returned $136 million in dividends to our shareholders.... Last week, we increased the dividend by almost 10% to $0.79 per share. So far this year, we've increased the cash dividend by 39% from $0.57 - $0.79. We continue to maintain a disciplined and balanced approach to capital allocation. Year to date, we have acquired $320 million in estimated annualized revenue, and we have a pipeline of more than $2.5 billion under consideration. For the first nine months of 2023, 36% of our cash flow from operations funded share repurchases, 27% went to CapEx for growth and expansion, 21% to acquisitions, and 13% to dividends. The remaining 3% of our cash flow from operations was used to repay non-trade floor plans. Our trailing 12 month EBITDA is nearly $1.8 billion. At the end of the quarter, our long-term debt was $1.7 billion. Approximately $1 billion of the long-term debt represents our subordinated notes, with $550 million maturing in 2025 and the other $500 million maturing in 2029. The average interest rate on these notes is 3.6%. We also have $504 million in mortgages and $160 million in other borrowings at subsidiaries. Debt to total capitalization improved to 27.3% from 28.3% at the end of the second quarter. Leverage sits at one times at the end of September. We also have the ability to flex our leverage up to four times on a lease-adjusted basis, leaving significant opportunity for acquisitions and returning capital to shareholders. Our U.S. credit agreement provides for up to $1.2 billion in revolving loans for working capital, acquisitions, capital expenditures, investments, and other corporate purposes, and was fully available at the end of September. At September thirtieth, we had $104 million in cash, $415 million in vehicle equity, and $1.4 billion in availability under our credit agreements. Total inventory was $3.7 billion, representing an increase of $200 million from December 31. Floor plan debt was $3 billion. We had a 34-day supply of new vehicles, including 30 days in the U.S. and 34 days in the UK Day supply of new vehicles for premium was 37, and volume foreign was 19. Our current day supply of new battery electric vehicles is 52 days in the U.S. and 38 days in the UK Used vehicle inventory had a 38 day supply. At this time, I will turn the call back to Roger for some final remarks. Yeah, thank you, Shelley. She mentioned our balance sheet is strong, safe, and secure, obviously, with a capitalization ratio of 27% and a leverage ratio of 1.0 times. We have the ability to flex our balance sheet to maximize capital allocation. As we said earlier, since 2018, we've returned over $2.5 billion to our shareholders. For nine months ended 30 September, 2023, we generated $1.2 billion in earnings before taxes, and that's approximately, if you can believe it, double the earnings before taxes we generated for the full year in 2019. I think our results continue to demonstrate the benefit of our diversification across retail automotive, commercial truck industries, cost control, and a disciplined capital allocation strategy. We continue to challenge our costs while focusing on simplification and optimization and digitization to drive efficiency. I remain confident in our model and the performance of the business. Thanks for joining us today. I look forward to your questions. Ladies and gentlemen, as a reminder, if you'd like to ask a question, you may press one, then zero. Our first question is from John Murphy. Please go ahead. Uh-. Hi, John ... Good afternoon, Roger and team. Hi, John. Roger, just a first, you know, question, and you guys talked about this a bit, and Shelley gave us some numbers. But, you know, as far as inventory levels, as we think about the light vehicle business, in the U.S. and the UK, yeah, how much were you hampered by shortages? I mean, some of the numbers don't sound too bad, and I think people are thinking the chip shortage is done, but the reality is, I think there's some... There are hiccups still there. And then on the commercial side, as well, I mean, it sounds like you got real shortages there. You know, when do you think those get resolved, and will take some time, and what kind of impacts are these having on the business? Okay, let's, I think, put it in perspective, John. You know, our total inventory at the end of nine months only went up $200 million. So obviously, we're still, you know, in a tight inventory situation. And then the impact in the third quarter, because it's a registration month, you know, in the UK, the almost 500 units that hit us there, obviously, that had some impact. And I think that at this point, you know, we look at U.S. inventory today is at 2 million units, and pre-pandemic is at 3.6. And our inventory, obviously, is only up, I don't know what it is on a cost for sale, but obviously, it's not up much when you look at nine months. But, I think right now, remember, we're premium, so we don't get the big swings in the domestics that they might have in other, the other companies. And our volume foreign, obviously, Toyota is one of our lowest day supply, along with Honda, and it continues to be there. So anyhow, let Rich talk about... Rich, what do you think about the truck inventory, the way you see it as we go forward on heavy trucks? ... Yeah, John, just a clarification on the comp. So we've seen a steadier supply this year of the commercial trucks. The comparison to third quarter of last year was related to the peak in supply chain challenges at the beginning of 2022, mostly related to semiconductors in the commercial vehicles from a production standpoint. And so that—those delays early last year pushed more retail sales into the third and fourth quarter of last year than what would've, say, normally occurred. And so now that we're back to a more normal and even distribution of delivery from the OEMs, the comps look in comparison, we're down compared to Q3 of last year. So from an inventory standpoint, you know, we're still, as I said, sold out on every truck that's being given to us. We've had minor cancellations that have been sucked up by other customers who haven't got enough trucks over the last couple of years. And we're seeing the delays come down in body builders. You know, this is a cab chassis manufacturing that goes to some sort of body company after the fact. Their supply chain is improving somewhat as well. And then if you look at overall commercial truck inventory, just from a numbers perspective, we ended last year at $506 million in inventory, and we're at $494 million today, so fairly flat across the board. Okay. And just a second one real quick. Your parts and service was particularly, you know, strong in the quarter. Roger, I don't know if you can talk about sort of the different channels, customer pay, warranty. I may have missed some of those numbers, but you know, how should we think about that going forward? Because that remains a significant bright spot for the business, and seems like there's even more opportunity going forward. Well, I think the same store - let's talk same store, that's really meaningful. You know, revenue is up 9.5, and our gross profit is up 10.3. And I think the key thing here is that we're implementing AI that's driving higher after-hour appointments, which we didn't have before. We're tech video. In fact, 74% of our ROs in the West are using Tech Video now. So we're not only getting better clarification of the service, but also ability to upsell. And then our ELR, our rate of we charge the customer effective labor rate is up 5%. And we don't see BEV also not being a detriment to our fixed. In fact, it's really better right now because the parts costs are higher, and many of these cars have to be in the shop for a longer period of time. So I think the other good news is that our tech count is up 4% in the U.S. and 3% up overall. And just one follow-up on that. The ELR for warranty work, is that up in a similar rate, or is that, you know, different between customer pay and warranty work? Well, no, the warranty rate is, we have to go to the manufacturer on at least 12-18 months, and we have to show established door rate, then they give us a rate. So we probably could move the door rate to the customer higher, faster than we'd get it from the OEM, but it somewhat follows that, you know, continuously. Okay. That's very helpful. Thank you very much. All right. Thanks, John. Next, we will go to the line of Michael Ward. Please go ahead. Hey, Mike. Thanks. Hey, Roger. Thanks very much for, for doing the call. So it looks like basically some of the supply constraints on the heavy-duty truck side are hitting you both on PTS and also retail truck. And I'm just curious on PTS, if I did my math right, the fleet, the managed fleet has grown about 8% annually over the last decade. Is there any reason we won't continue to see that type of growth? And then you've also had exponential growth in the profitability, despite it being down year-over-year for some quirky things. But, is that what we can expect from PTS going forward? Well, I can say this, I think I've said it on the call: We want to be at 500,000 units by 2025. Now, that'll move up and down a little bit on rental utilization, because right now we're at 18,000, say, tractors in the rental fleet, probably moving it down to, say, 14,000 here while we go through a little slower period to maintain our 80%-85% utilization. But I see no reason not to continue, you know, the continued growth. And now, that's a mix, remember now, of straight trucks, light-duty trucks, tractors, and trailers, and I think our tractor fleet is the biggest in the world right now, and we continue to grow. The problem is from our main vendors, is getting the equipment. You know, they're—we, we get one gives us trucks, and the next one has a stop sale, et cetera. So I think when you look at our contract business, remember, if we're up 13% in contract, that's for one year, and typically, these contracts now would go forward for three to four to five years, so we really have a trailing opportunity here. So I see this revenue continuing to grow, and obviously, it's easy for us to grow the fleet. We're not limited by franchise laws or any other things you might have on the automotive side. Now, have you seen any easing in some of the constraints in the industry? Let me, Rich, you wanna answer that? Yeah, so, so Mike, you look at, you know, the parts side of the business, which really is an indicator of the challenges on the supply chain side of the business. And at its peak, there was 250,000 nationwide back orders from the dealers. And we, at any given time, as an entity, Premier Truck Group, had about 10% of those nationwide back orders. To put that number in perspective- ... it was, less than 10,000 would have been pre-pandemic level, less than 10,000 national back orders for all of the Daimler Trucks North America dealerships. So right now, as we sit here today, it's just below 100,000. So it's, it's come down significantly and the supply chain is improving on componentry, but still, you know, 10 times where it was, say, pre-COVID levels. And then when you look at equipment, I just want to go back to our new, new unit sales. So we're, we're up 8% on a, through nine months on a year-to-date basis. It's down 13% for the quarter, and that's the dynamics of related to the supply chain of 2022, where a lot of retail sales got pushed later in the year. So we're still up on a year-to-date basis, 8% in retail sales on the truck side. Yeah. The pricing is still strong, and so that's, that's another good indication. That's correct. Yeah. Yep. Okay. Thank you very much. All right, Mike. Thanks. Next, we go to a question from Daniel Imbro. Please go ahead. Daniel, hi. Yep. Hey, good afternoon, everybody. Roger, maybe starting one on, on the new vehicle side, just thinking about, you know, GPUs have been strong. They did step down a bit more. I wanted to maybe double click on that. EV demand has been pretty tepid, maybe at best. Can you talk about the GPU degradation or parse out what ICE GPUs are doing, maybe from the first half into 3Q, and then what EV GPUs did? And maybe, is that part of the reason for this deeper step down in profitability here we saw a little bit in the quarter? Well, we see gross as rationalizing. I think we've talked about it together before. We're not going to return to pre-pandemic, for sure, in the near future, I don't believe. And when you look at, in our business today, 52% of our business is at MSRP. So, and again, being a premium luxury player like we are, you know, we're not in the volume game, so we don't have, as I said earlier, we might have 300 BMW stores, and one of the big three has 6,000 dealers, so a lot more competition in the market. So I think that, at the present time, you know, our decline was about 450 sequentially. Again, when you looked at the first quarter of 2023 versus 2019, we're only... Or excuse me, first quarter this year, we're down 140. The key thing is here that the, the average transaction price has gone from $40,000 in the third quarter in 2019 to $56,600. So a certain amount of benefit we're getting is because of higher, higher cost base, and I think this gives us a higher base margin. Well, obviously, it's got to be inventory driven, there's no question about it. You know, but overall, I think the, the margin will stay pretty much the same, or will start to decline slightly based on more availability. Let me let Randall talk a little bit about what you see internationally. Yeah, I think on the new car side, remember that the market in the UK is nearly 17%, 16.8% BEV, which is up slightly versus last year. We're, because of our mix, we're higher than that. We're going to be, depending on the brand, we range between 20%, 20% and 25% on an average. So, interestingly as well, the, we're seeing the BEV margins erode a bit. You know, we wrote some business last year with deliveries this year towards the beginning of the year with better grosses, but on the BEV side, for some of the brands, it's a little bit weaker. Interesting on Mercedes as agency, you know, we have a fixed commission, obviously, margin on that. Typically, BEVs are more expensive, so our margin on those with Mercedes is bucking the trend in a little bit better. I think also when you look at BEV sales, you know, here in the U.S., we're selling at 80%, 80% or under MSRP. Am I right? Talk a little bit, probably about inventory on BEVs here, Rich. Yeah. So we've seen sequentially an improvement actually on inventory from the second quarter. At the end of the second quarter, we were about 15% of our overall inventory was BEV. That's down to just over 11%, you know, through the end of the third quarter. Shelley alluded to the day supply, earlier being about 14 days more than a comparable ICE inventory. And then you look at the percentage of our sales, it represents on a year-to-date basis, that sale is about 6.7%. That's up slightly, 112 basis points from our percentage of sales through the second quarter. And, you know, to Roger's point earlier, we're seeing kind of on average with the brands that we represent, about a $2,400 lower gross profit per unit on the BEV sales. We've got to discount them to move them, and as the OEMs are putting a ton of money on there to try and drive customer demand. Yeah, I think, talk about where, where we're selling them, too. I think it's interesting. It's interesting. Yeah. So if you just look at an industry year to date, 37% of year-to-date BEV sales are in California, but of our sales, the PAG sales, 51% are going to California. 70% of our sales are actually through our west region, which is Texas, Arizona, and California. So you know, you've got only three states right now in the United States that are above the national average sales rate, which is 8%, and that's Texas, California, and New Jersey. And then if you look at California sales in Q3, it was 23% overall of sales were in California. At some point, those markets are going to get saturated, and it's going to be a little more challenging in the other markets that currently have a lower adoption rate of BEVs compared to the national average. Yeah. Randall, talk a little bit about, BEV sales in the UK and the rest of Europe.... Yeah, so look, it's, like I said, a little bit challenging. And what I think an interesting statistic is, if specific in the UK, you know, the market's up, like we said, but retail is only up 2%. Fleet's really driving this, and the BEVs are really coming through those fleet purchases as you get the tax incentive through the scheme they have in the UK. And then you look at countries like Italy and Spain, where there's very, very little government incentives, and you've got, you know, BEV percentages between 3.5% and 6% penetration. So, you know, it's really follow the incentives. You know, the challenge that we've seen from an infrastructure standpoint and range anxiety, all the usual items. Randall, it's important to note, too, that the UK, just within the last couple of months, decided to push back the mandatory adoption of BEVs from 2030 - 2035. So I think that comes into play, and we should watch that carefully, too. So ICE will continue to be a more prominent player in that market, we think, for a longer period of time. Well, similarly, Tony, too, California pushed back the ban on ICE vehicles as well. They did. That's right. So I, I think, today we've got a lot of people in buy-- in premium side, have bought their EV. There's still discussion about range, correct? Yep. You know, obviously, and that is critical. And then infrastructure, about half of it's working. Right. I think that you're reading it in the papers today. I mean, we're pushing back. I would have to say that every day we talk to our field, and we're talking about BEV inventory, and it's not about how much more do you want, it's what do you have? And we're very careful on used pricing also. What's your inventory in the U.S.? Our inventory of used BEVs is at 134 units, so yeah. What would it be in... You don't know what it is in the UK? But again, we're really watching it, and I think the interesting, we can actually take a BEV in on trade and sell it and get more for a used one gross profit than we can on a new one. I mean, so- Yeah. There are so many moving parts, we could spend an hour here and talk about it. No, that was all extremely helpful. I may I'll follow up with one on the commercial truck side. You know, obviously, overall solid profit quarter, but we did see service and parts growth maybe moderate a bit. I'm trying to or, you know, understand that in the context of what we said about PTS. You know, fewer deliveries to PTS means that fleet spending $40 million more year-over-year on maintenance costs. So I would think if fleets are spending more on maintenance, that would drive maybe more service and parts growth. Can you maybe talk about why service and parts growth may be moderated and kind of what the buckets were within that piece on the commercial, commercial truck side? Yeah, so if you look at fixed operations in the Premier Truck Group business, year to date, we're up 8%. For the quarter, we were up 4% versus prior year. So definitely a slowdown slightly compared to prior year. If you look into that, then a little bit deeper in the constituents of that are service and parts, the majority of that is going to be related to the retail and wholesale parts side of the business. So you've got on the wholesale side, we've got a big business there where we're selling to independent repair centers. Then on the retail side, a lot of transport businesses, you know, carriers transition or transport goods down the federal highway system. So you've seen as the freight rates have declined year-over-year, that the activity and utilization of some of the assets has declined as well. And so that's where you're seeing a slight softening in the fixed operations side of the business. I think we had a benefit out of big price increases. Yeah, we had some parts appreciation in calendar year 2022 as well, that would not be in those comparables this year. Daniel, we're still covering 132% fixed absorption, so not a bad story by any means. No, that's really helpful. I appreciate all the color, and best of luck going forward, guys. Thanks, Daniel. Thanks. Next, we go to Rajat Gupta. Please go ahead. Rajat, hi. Oh, great. Hi, Roger. Thanks for taking the question, everyone. Now, could you unpack the SG&A to growth in the quarter a little bit? How much of the sequential move was driven by, you know, just the GPU weakness versus, you know, some of the delivery delays in UK, you know, for BMW or Volkswagen? We heard from one of your peers that that was an issue. And just like any other items that you might want to call out that might have influenced the SG&A to growth. And I have a follow-up. Thanks. Hey, Rajat, I can take that. As I mentioned, you know, SG&A to growth was 69.9%. Those 300 basis points, we've really whittled it down to three main areas. So as we mentioned, $5.5 million or 50 basis points related to the hail damage within the quarter. So, we've got that. The other-- you know, there's another 100 basis points that relate to service loaners in vehicle maintenance. So up $11 million, but as we've talked about, service loaners represents an opportunity for us. It's a way to cater to our service customers and improve our service gross profit, as we saw as a result. But then it's also an excellent source of used cars. And as all of the peers have talked about, we're certainly struggling sourcing used cars. So the fact that we've got almost 7,400 of service loaners available, really will be future gross profit for us, but it also helps with servicing our customers right now. So as they have affordability concerns, if somebody comes in wanting to buy a new X5 and can't quite stomach the higher payment, we can turn to our service loaner fleet, and that not only helps the customer, he's walking away with a almost brand-new X5, but his payment is more in line with what he's used to. So sometimes those costs aren't always a bad thing. And then, the, you know, the other 160 basis points or so is increased costs related to our personnel. But as we've talked time and again, we're still very comfortable that everything will eventually normalize. It's out in that 70%-ish range. You know, there's some seasonality in there, here and there, but overall, we think, you know, we'll ultimately get to that low 70% range. Some of that personnel costs was related to some of the vehicles that couldn't be delivered, that Randall spoke to earlier. Yep. Our gross was down. Correct. Probably, say $4 million-$5 million of gross that we didn't get. You know, we're up $3 million in gross for the quarter, year-over-year, but we lost $4 million-$5 million in that one point. And then, of course, we had a higher cost. The only thing we've really talked about was the hail stuff. Right. There's other little things in there where we just don't talk about at this point. Got it. That's, that's clear. And then just in the UK, you know, any updated learnings from the Mercedes agency model? Looks like the GPU actually went up sequentially there from 2Q - 3Q. What drove that? Any other learnings you can share on, you know, store profitability, you know, SG&A changes, et cetera? Yeah, sure. Yes, you're right, Rajat, that, you know, the gross profit has gone up. And again, with a fixed commission, that's gonna be predicated on the sell price of the car. So, you know, we were at 3,278, so GBP 3,278 per unit, which was up. If I look at 2019, it was GBP 2,595 per unit. Interestingly, in the acquisition we made about a year ago, the London stores, that's at GBP 3,564 per unit. So you know, you get that richer mix of car, obviously, we get the benefit from that. So our challenge, and what the team's done a nice job and continues to do, is we just got to reduce our cost base as we have a bit of a paradigm shift in how the customers transact. You know, you see the, the traffic, foot traffic into the stores down, but our, our digital, our internet traffic is way up, so it's really trying to convert, and we've improved our conversion ratio on those leads by eight points, year to date compared to last year. So that's the kind of stuff we're working on. We see service and parts continue to be strong there, and grow. So, you know, look at, those margins are good. We just got to continue to work on those costs underneath and drive those, drive those opportunities to the store, both digitally and walking in. I think the good news here is that we were the first guys in the barrel with agency. We're shifting to more product specialists than salespeople, which will lower our costs. We're getting a lot more inquiries by significantly higher than we had before, because 95% are coming out of our PMA, as we call it over here, which is a real positive. We've got 13,000 vehicles that are on site from the standpoint that the customer can look at. They've given us now some stock cars, which we didn't have at the beginning, and there's some incentive to sell off the floor. So it's very interesting. We had no idea interest rates were gonna go where they are. We're complaining about agency, but I can tell you one thing, we have no in cost, and they're paying for our marketing cost to a certain extent. So I think our understanding, our cost base, the fixed margin, which is good, by the way, on BEVs, we're getting an extra 100 basis points, correct on BEVs. Right. So, you know, I, I would say that, at the moment, we're learning, and I'm certainly, Mercedes is learning, too. Now, they backed up a little bit, we understand, other parts of Europe, where they were gonna introduce it, they're pushing it back because they're learning a lot about what's going on in the UK. So it might be a little bit about, like, BEVs. They're not overnight, they're gonna say, "We're going that way everywhere." So I think we got Mini coming up, you know, next year, and, we'll see in 2026, we have BMW, but, you know, we're all over it. Got it. Got it. Thanks for the color. Next, we go to a line of John Healy. Please go ahead. Hey, John. Thanks for taking my question, guys. Hey, guys. You know, Roger, just wanted to ask just kind of early thoughts in the last month or so on just the UAW impact, maybe on the industry as a whole. Obviously, I know you guys have minimal exposure to the Big Three, but part of me feels like there is a cross current that, you know, if someone's looking for an Explorer, they might be looking for a, you know, a CR-V as well, or something, something along those lines. So, you know, any sort of thought about grosses in Q4? Do you think that, you know, there's a magic number in terms of the strike lasts for so long that, maybe, you know, that it has a little bit of a sequential bump on grosses? Do you subscribe to a theory that the strike ends up maybe taking margins higher in the short run, and we start next year, maybe at a higher level than maybe where we're at today? You know, this is one time when I read the paper, it doesn't affect us, because when you look at our brand mix, we only have 1% of our total revenue comes out of, you know, out of the Big Three. And, you know, Toyota, Honda are not, at this point, affected, and most of the German brands are already dealing with their unions that they have overseas. But, look, you know, having owned Detroit Diesel and heading the UAW, look, what's happening is. You know, they see all these profits, the, the union does and the workers, and I think the unfortunate thing is that there's a cost base that has been put in place which is much higher than the competition, and that's the biggest concern I think they have. They're trying to mitigate that with good negotiations with the Big Three and with COLA, with new hires coming in and melding into the top rate instead of six years, three or four years. All these things are probably ways that you can kind of get together, but I don't think we've seen the last page of this, and unfortunately, it's gonna put higher costs, you know, for the Big Three, and I'm glad where we are with our brand mix. Got it. And you know, you brought up Toyota. I think in the last couple of days, there was an issue with one of Toyota's coil suppliers. Does that have any sort of meaningful or risk to you guys in Q4 or Q1 of next year? Have they communicated anything to be wary of on just their production outlook? Well, look, what's our day-to-day supply, 10 or 12 days on Toyota? Like, like fi- like- Less than 10. Yeah. Yeah, look, if they get an issue with a supplier, you know, obviously, and for the U.S. plants, stuff comes out of different parts of the world for them. It could impact us for sure. Thanks, guys. Our next question is from David Whiston. Please go ahead. Hi, David. Hey, everyone. A couple of questions. First, I think, Shelley, you were talking earlier about the example of a customer balking at a new X5. You could sell them one of your loaners as a used. I guess my question on that would be, how quickly can you then replenish that loaner? Well, I think that's, that's what we're seeing today. Everybody's looking at our used cars, and I said, "Look, we were hampered by not being able to turn loaners." We turn loaners typically in 90-120 days. Yeah. Now that supply is coming, we're gonna suck up some of that availability in the loaner cars, so it's all gonna be done based on availability. But in the premium luxury side, you know, it's really key because I can turn that 21,000 loaners three times a year. That's 20... Really, that's 21,000 more used cars, but I think we fill the pipeline, you know, based on the individual OEM. I mean, that's not what you want, but that's kind of what my thoughts are. I mean, our loaners-. Okay, and, Our loaner cars are up, what, 10%, at least from what they were? Yep. They're 7,300 versus- Yeah, so- Sixty-seven hundred. So that's a big change, and that's gonna help drive more of the used vehicle turn for the business. Well, but think about it, David, we. You have an MSRP, and you say we depreciate the vehicles at 2% per month. Some higher, some lower, but say 2%, so you get 6% off of invoice, and typically, the new car programs, whether it's financing or whatever it is, go along on this vehicle that's coming out of loaners, as long as it has a certain limited number of miles. So we get newer car rates, we have a depreciated vehicle, and we take a customer that didn't want to step up maybe to the X5, what have you, we can give an X3. It's a loaner car, you know, with a lower cost base. The OEMs want us to have these service loaners, so we're incentivized to have them. We're also starting to see a return of CPO business, too, because of this. CPO business, certified pre-owned used, sales are up year-over-year because of this. Right. ... because we're having more availability. We got our other impact we've had is lease returns. Right. There hadn't been a lot of leasing, so leasing went down to 21%, I think, overall, right? In the premium luxury side, we were as high as 55%- Right We were some months. We were 27% leasing this, this past quarter. Quarter. Right. I'm sorry, what was your leasing penetration this quarter? 27% leasing this past quarter. That's up from 21-. And. a year ago, David. You said it was up from 20, Tony? 21. 21. Mm-hmm. And then going back to the EV discussion from a few minutes ago, what is your team's opinion on, especially next year, once a lot of OEMs get access to the Tesla Supercharger network, and over time, we get more non-Tesla charging outlets out there in the U.S., do you think that's enough to get EV demand moving, or do we also need a lot more affordable models, or is it still just way too early for EVs? Well, I think you've hit on a couple of different things. I think the price points right now are still substantially higher with certain models than compared to ICE. And so when you combine that with the interest rate environment we're in, that's problematic. So that's one thing that hurts the demand for EVs. Roger talked about the infrastructure, you know, so you've got the charging network that's out there, you know, from a public standpoint, you got about 20% success rate of the charger being successful when you pull into it, which is pretty alarming when you think about it. So that reduces the confidence. Still got the range anxiety. And then, you know, I think as it relates to all these other OEMs signing up on, you know, Tesla's charging network, I'm interested to see how that plays out with the Tesla owners today, because obviously, that was a network that was exclusive to them at one point. Now, it's been opened up to everybody else. I don't know, off the top of my head, how many additional chargers Tesla is installing on a monthly basis as to whether or not they'll keep up with this additional brands and other OEM EVs that have access to that network now. You know, but if I'm a Tesla owner, you know, that would upset me a little bit, that I had this proprietary network to the vehicle that I purchased. It gave me some assurances that, you know, charging was gonna be more convenient. Now, I've got to compete with all these other OEMs on the same network. So I think it's gonna be a while before we get to a critical mass, where the charging infrastructure really supports mass adoption of the vehicles. David, if it helps, you heard Randall's penetration numbers on EVs in the UK, and it almost gives us, you know, a preview of what it's like in the U.S. Over in the UK, I can tell you, they still have the same range anxiety. They still have, you know, the broken chargers. So even despite a much higher EV penetration, there's still that range anxiety and those issues with the infrastructure. It may help next year, but I don't think it solves the problem. Okay, thanks for all the detail. David, thanks. Thanks. We have no other questions. I will turn the conference back over to Mr. Penske for closing remarks. All right, thanks, everybody, for joining us. We'll see you at the end of the next quarter. Have a great day. Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.