Good afternoon. Welcome to the Penske Automotive Group Fourth Quarter 2022 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately 1 hour after completion through February 15, 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, Allan. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's record fourth quarter and record full year 2022 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 e-mail or by phone for any follow-up questions you may have. Joining me for today's call are Roger Penske, our Chair and Chief Executive Officer; Shelley Hulgrave, EVP and Chief Financial Officer; and Tony Facione, 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 and the assessment of business conditions.

We may also discuss certain non-GAAP financial measures, such as earnings before interest, taxes, depreciation and amortization or EBITDA, our leverage ratio and free cash flow.

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'll now turn the call over to Roger..

All right. Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. 2022 was a record year for PAG, and was driven by our diversification, certainly, our premium brand mix and our capital allocation. During 2022, we increased our revenue by 9% to almost $28 billion. We increased our earnings before taxes 16% to $1.9 billion.

We increased our income from continuing operations by 16% to $1.4 billion, and we grew our earnings per share by 25% to $18.55. We completed acquisitions representing approximately $1.3 billion in expected annualized revenue. And during the year, we repurchased 8.2 million shares or 11% of our shares outstanding at the beginning of the year.

We returned $1 billion to shareholders through dividends and stock repurchases. Now let me turn to the fourth quarter. I'm pleased to report record revenue and earnings per share, which was driven by our diversified business model. Revenue increased 11% to $7 billion. Earnings per share increased 6% to $4.21.

Excluding FX, revenue increased 17% to $7.4 billion, and earnings per share increased 8% to $4.30. Again, during the fourth quarter, we repurchased approximately 2.5 million shares of stock for $284 million. Looking at our retail automotive operations, and this is on a same-store basis, Q4 '22 versus Q4 '21, our new units increased 11%.

Demand for new vehicles remain strong and vehicle availability is improving. However, we do expect supply constraints to remain during 2023 for most of the brands in the premium side that we represent. We continue to take forward orders.

In fact, in the U.K., our forward order bank is 23% higher than it was at the same time last year, representing 31,800 units or GBP 100 million of forward gross profit. Used units declined 4%, largely due to the challenges in acquiring affordable inventory to meet our customer expectations. Retail automotive revenue increased 4%.

However, when excluding FX, revenue increased 10%. Variable gross profit remains strong and higher than historical levels. When compared to Q4 last year, verbal gross profit declined 11% to $740. However, excluding FX variable growth only declined 7%.

If you really look at that on a sequential basis, excluding FX, variable gross profit per unit only declined $33. Our service and parts revenue increased 6%. However, when excluding FX, service and parts revenue increased 11%, driven by increases in customer pay, warranty and our closing repair business. Looking at CarShop.

During 2022, CarShop unit sales increased 12% to 71,242 units. Revenue increased 16% to $1.7 billion. However, our variable gross profit per unit declined 19% to 21 0 8 as vehicle acquisition prices, reconditioning costs and logistics continue to impact customer affordability and certainly our profitability.

We continue to focus on vehicle sourcing and cost improvement programs to improve CarShop profitability. CarShop self-sourced 73% of its inventory in the U.S. and only 37% in the U.K. Let me now turn to our retail truck business.

As you know, our Premier Truck Dealership business represents 39 locations in North America, and a very important part of our diversification. In 2022, this business generated $3.5 billion in revenue and contributed $215 million in earnings before taxes and had a return on sales of 6%.

New commercial truck demand remains very solid as being driven by replacement demand associated with supply constraints over the last several years. During the fourth quarter, our unit sales increased 28% to 5,704. Same-store unit sales increased 22% to 5,287 units.

We outperformed the Class A market in the fourth quarter, growing our sales by 36% compared to the market, which increased 30%. Total revenue increased 40% to $1 billion and gross profit increased 16% to $138 million. Our same-store revenue increased 33%, including a 16% increase in our service and parts business.

Service and parts represented 65% of our total gross profit and covered 128% of our fixed cost. EBT increased 14% in the quarter to $51 million, and approximately 75% of our new unit sales are Class 8 commercial trucks. In fact, when I look at 2023, our entire allocation is sold out.

The Class 8 truck market remains strong, with retail sales of over 309,000 units in 2022. And as we look at the forecast for North American sales, for 2023, is 294,000 and the backlog today sits 244,000 units would represent 10 months of sales. Turning to Penske Transportation Solutions, our leasing, rental and logistics business.

PAG owns 28% of PTS, which provides us with equity income, cash distributions and cash tax savings. PTS currently manages a fleet of over 414,000 units, and the goal is increasing it to 500,000 by 2025. PTS produced a record fourth quarter. Revenue increased 13% to $3.3 billion on the strength of its long-term contracts and commercial revenue.

Profit increase in percent to a record of $344 million. As a result, our fourth quarter equity earnings increased 9% to $99.4 million. And year-to-date, we've received $357 million in cash distributions. For the entire year, PTS earnings before taxes were $1.7 billion. We expect the current business environment for lease.

Our maintenance, our commercial rental and logistics will remain strong in 2023 as we expect to continue increasing the size of our PTS fleet. Now let me 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 as well as automation and other efficiencies gained through AI.

SG&A to gross profit was 68.9% in the fourth quarter compared to 67.1% in the fourth quarter last year, and remains 1,020 basis points below the fourth quarter of 2019 prior to the pandemic. As we look to the future, we expect the ratio of SG&A to gross profit to be in the low 70s.

Year-to-date, we generated $2.1 billion in EBITDA, representing an increase of 14% when compared to the same period of last year. Cash flow from operations was $1.5 billion and our free cash flow was approximately $1.3 billion, after deducting net capital expenditures.

In 2022, we completed acquisitions and new open points, representing approximately $1.3 billion in annual revenue, consisting of 9 retail automotive franchises, 2 open points and 4 commercial truck dealership.

For the full year, we repurchased 8.2 million shares of stock for $887 million, which represents 11% of the shares that were outstanding at the beginning of 2022.

In addition to share repurchases, we returned $154 million in dividends to our shareholders, and most recently increased the dividend by 7% to $0.61 per share, reflecting our strong fourth quarter performance. In total, we returned $1.04 billion to shareholders, representing 75% of our net income.

In 2022, we spent $228 million on net CapEx and an additional $42 million on land acquisitions for future growth. As you can see, our capital allocation strategy includes disciplined acquisitions, investments for future growth and shareholder return. Total inventory was $3.5 billion, which is approximately $400 million higher than December 31, 2021.

Floorplan debt increased $442 million and is at $3 billion. We had a 25-day supply of new vehicles, including 18 days in the U.S. and 37 days in the U.K. Days supply of new vehicles for premium was 28 and volume foreign was 13. Used vehicle inventory had a 53-day supply.

At the end of December, our long-term debt was $1.6 billion, representing an increase of $148 million when compared to December 31 of last year. 35% of our debt is 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 28% and leverage sits at 0.8x at the end of December. We have the ability to flex our leverage to 4x, leaving us plenty of opportunities to grow our business through acquisitions and to continue returning capital to shareholders. In conclusion, our balance sheet is in great shape.

At December 31, we had $107 million in cash and over $1.1 billion in liquidity and we remain confident in our ability to manage through any macro challenges that may lie ahead. At this time, I will turn the call back over to Roger..

Shelley, thanks. We are committed to implementing operational efficiencies that we believe will lead to lower cost structure as we go forward. One of our key efficiency initiatives is leveraging artificial intelligence. We continue to test and implement AI solutions on both the service and sales side of our business.

The AI allows us to automate tasks like answering customer inquiries and setting service and sales appointments. That allows our employees to be more efficient, provide quality support after hours. In the fourth quarter, 37,000 of our online service appointments in the U.S.

were created using AI and total online BDC appointments increased 10% to over 520,000.

We continue to integrate digital solutions to automate and streamline processes to ensure consistency, our compliance and quality control, while pursuing digital sales through our preferred purchase program, our OEM digital programs and our proprietary website in the U.K. In Q4, digital sales represented 5% of our total unit sales.

We also focus on reputation management, and we are proud to congratulate 126 of our dealerships for being recognized as top dealers by CARFAX. I'd like to talk about some management changes that happened just recently. As of -- effective January 1 of this year, Greg Penske has been named Vice Chairman of the Board.

Greg Penske brings extensive automotive retail industry experience, has relationships with automotive partners and has familiarity with all of the company's operations. Rich Shearing, formerly the President of Premier Truck, will oversee Penske Automotive Group's North American operations, including its automotive and commercial truck dealerships.

Randall Seymore, formerly the Executive Vice President, Global Operations for Commercial Trucks and Power Systems, will oversee Penske Automotive Group's international operations in the U.K., Europe, Japan and Australia.

These new [Indiscernible] will work in tandem both with me and Rob Kurnik, our President, and our executive leadership team, while building further depth to ensure that we have the best leadership in place to remain the leading transportation service company in the world.

In closing, our results continue to demonstrate the benefit of our diversification across the retail automotive and commercial truck industries, our cost control and a disciplined capital allocation strategy. I continue to remain confident in our business model. Thanks for joining us today, and I'll turn it over to the operator..

[Operator Instructions] We'll first go to the line of Daniel Imbro with Stephens Inc..

Roger, Shelley and the team, congrats on the quarter. And congrats everybody on the promotion. I want to start on the demand side. New vehicle demand has clearly hung in there on the automotive side, despite price increases, rate increases, and I think a volatile backdrop.

So can you discuss what you're seeing from your core customer today? And how do you think consumer demand shapes up as you progress through this year on the automotive side?.

Well, let's talk about our business, which obviously is diversified. But point number one is on the vehicle side, we're premium luxury. So we see the demand on new vehicle is consistent and strong. And we're turning our inventory very quickly, as we talked about earlier here today. And our prefilled inventory, both in the U.S. is 40% to 50%.

And I mentioned earlier in my remarks that 23% forward sold orders. That's up from last year of almost over 100 billion -- 1 million pounds is certainly positive for us as we go into this first and second quarter.

I think that lease penetration is down significantly due to -- certainly, when we look at residual support and also some of the support we get from the finance companies. And when you look at it in real numbers, 55% of our premium was leasing prior to maybe the last 12 to 18 months. And our overall, from a Penske perspective, was 34%.

We're down to 11%. So we really haven't seen the premium OEMs get back into the market at this point. And I think, at this time, we're going to have to wait and see. But those customers are stickier. We want those used cars coming back. So to me, that's going to be something we'll look at as we go forward.

But I think the premium customer right now, affordability hasn't hit them, obviously, even with higher interest rates. But what's driving our margins and our success, again, certainly is supply.

And when you think about what we're getting, they're building the best cars they have with the highest margins for not only the factory, the OEM, but also for us. And I think that growth continues to be strong, and I think when you look at our inventory, it's way below our historical levels, which you can see that based on looking at our numbers.

When you even think about Toyota and the Vayant Florent is only 6 days. So again, low inventories, OEMs building the right product for us in the premium side, I think bodes well for us as we look over the next couple of quarters..

Great. And then I wanted to shift over to the SG&A side. If -- but you just said new GPU is going to stay stronger. How are you and the team thinking about maybe SG&A margin as a percent of growth for 2023? Are there still operational changes? I think at the end of your comments you talked about AI and some smarter task automation.

Can you help quantify what the potential cost savings are? So any help kind of thinking about the outlook on expenses there..

Well, let's look at SG&A. When you look at the fourth quarter, our SG&A went up probably 100 basis points from before. And really, that was indicated really due from the standpoint that we had more compensation in the U.K. from the standpoint of our people. We had a onetime benefit for cost of living, which would hurt us.

And most likely, an impact here in the U.S. was the fact that our loaner car vehicle maintenance was up significantly due to the fact that we have more loaner cars in fleet and we can't turn them today as we did in the past because we don't have the availability. So I think those are the points that were key for us on SG&A as far as the lift.

Now when I go forward, and we look at it, I think we got to look at -- really got to look at 2 components. Number one, what's the growth from the standpoint of our growth? And I think looking today, we were 3,200 in 2019. We were 6,700 in 2022. And I looked at the numbers for January, we're at 6,600.

So I think we've got a nice glide slope on our -- certainly on our growth. But to me, when I look at our SG&A, if we took 2,000 off the gross profit, say, during the year, just as a number, our SG&A would go from roughly 69% to 72% from a gross profit standpoint in our SG&A.

So I think what we're doing is looking at how we can reduce labor force in many cases, using AI. Many of these people that were taking inbound calls, can be put into other jobs within the company or they can move on.

And we're seeing the customer satisfaction go up, the ability to schedule work and the way we want to more seasonally and also based on the days availability has been much better, plus we've got the benefit of putting filling our jobs at times that we wouldn't be able to do before.

And again, I think that will help us with automation, will all help us in our absorption because we'll get more work through our shop, which maybe will offset lower margins with higher unit sales but also higher parts and service gross profit..

Our next question will go to John Murphy with Bank of America..

First question on Slide 15. There's a couple of slides around that are also very helpful. But if we focus on this one, -- you can clearly see that units in total we're up 13%. They actually trended fairly well through the course of the year.

With the short supply and sort of the lack of availability coming from automakers, can you just maybe just talk about how you were able to, on the new vehicle side, actually get these vehicles to drive that kind of an increase? Because it is far and above what we saw in the industry at large..

Well, I think that, number one, we had the benefit of the U.K. Because they were locked that probably had less availability in '21. So we had a bigger lift, certainly in the in the premium luxury side. And over there, where 91% of our mix is premium luxury. I would say that drove quite a bit of it.

And again, we are running with [Indiscernible] low day supply and to me, that was probably when you look at the mix between U.S. and international, that probably would help that number..

Okay. That's helpful. And maybe staying over in the U.K. for a second. I mean the CarShop U.K. self-sourcing, 37% is far lower than what you're doing in the U.S.

I'm just curious, is there an opportunity over time? Or is there something structurally in that market that's going to keep that much lower than what we'd see in the 70% to 80% range in the U.S.?.

Well, we made a structural change, John. You talked about efficiencies and the businesses talking to each other. In Europe, OEMs do not like you to have non-OEM vehicles on the lot is used. So if I'm a Porsche dealer, they don't want to see a Mercedes-Benz. So what we've done is taken all the non-vehicles in each dealership, which are not proprietary.

And what we're doing there, we're putting them on to [Indiscernible] and giving those vehicles, the CarShop, which has made a big difference. We're looking somewhere between 250 and 400 cars a week, which will help us build that self-purchased vehicles from us rather than having to go out into the auctions.

And I think that at the moment, most of the fleets are selling their cars themselves. So we don't have the opportunity to pick those up as we normally -- where we have these bigger buys. And basically, when you look at the OEMs who used to buy 300, 400, 500, maybe even 600 cars at a time from the OEMs and now they don't have those to buy.

So we're somewhat restructuring that, which is going to help our margin, also help our availability. We had a -- we had a very good month. We did over 5,000 new units in the month of January at good margins. So I think we're starting to see a pickup in margin and also the internal process for giving us the fleet we need to sell..

Okay. And then that's helpful. And then just lastly for you or Shelley. I mean whether you're a bull or bear on estimates for 2023, you're still going to have a high-class problem of reallocating a significant amount of free cash flow. So if we look at what happened in 2022, it was kind of spread across buybacks, acquisitions and obviously the dividend.

But as we think about what your priorities are in 2023, could you just kind of remind us or even give us a fresh view where you think the excess cash will go?.

Sure, John. I can take that. We had about $1.5 billion in cash flow from operations. We've talked before, we typically start with about a 50-50 split of return to shareholders versus growth. That was certainly planted a bit more 2/3 return to shareholders this year, 1/3 in growth. But that was not insignificant by any means.

So from a growth standpoint, we typically target 5% growth acquisitions, 5% growth organically. When you exclude FX, we certainly got there over the year. So we're happy from that standpoint. [Indiscernible] was just a bit larger.

And so given the prices of our acquisition and the multiples compared to our multiple in the market, we took a very proactive stance on share repurchases and shareholder returns. So that was about $1 billion of that $1.5 billion..

Michelle, I guess we should assume that it remains kind of dynamic -- the target is 50-50, but if it's tilted towards your stock being a lot cheaper than those acquisitions, that will be the direction you'll lean in even in 2023.

Is that a fair statement?.

I think that's fair, yes..

John was really seen from an acquisition standpoint, the things that we're interested in are certainly high priced at the moment. So we're going to be very selective. And the one good thing about our diversification is not all retail auto, U.S., it's international plus our truck business. And we have opportunities in all those areas.

And I think what we'll do is pick the ones we think we get the best returns as we go forward..

Yes. And there's certainly an opportunity in your stock. So that gives you an avenue, too..

[Operator Instructions] We'll go next to the line of David Whiston with Morningstar..

I guess, first, just on -- continuing on the acquisition topic. I know there's opportunities you said all throughout the business, which is great. But like what variables would probably make you or perhaps there aren't really any variables. It's just how reasonable is the seller.

What variables would make you choose to do the deal on the truck side versus the light vehicle side or vice versa?.

Well, I think there's no question. As we look at the truck side, the multiples have been less than they are on the auto side, point number one. Point number two, the CapEx requirements, i.e., tile, furniture, et cetera, we don't have that on the truck side.

So to me, the CapEx requirements are significantly less when you're talking about typically buying a U.S. dealership. So -- and also, if it's contiguous, if we can go into a market where we already have scale, we have infrastructure in place that we can take out certain admin costs which help us and gives us the returns we want.

But we typically would say in the premium/luxury side here in the U.S. in volume foreign, which is primarily tilted to our Toyota and Honda business. And of course, internationally, we think that 91% market share we have today are mixed, we would stay in that lane from the standpoint of international.

And on the truck side, we're committed to Freightliner across all markets and even in Australia with Western Star. And they want us to grow. We have a framework agreement where we're nowhere near the top of that framework agreement from the standpoint of total market share. So I would say we'll continue to look at Freightliner opportunities..

And what about another major truck maker? Can you still do that? Or you do a contractual obligation with Freightliner?.

Right now, we're committed to Freightliner..

Okay. And then shifting over to light vehicle used. Just curious, when you look at, say, at the franchise stores, a used vehicle customer versus a CarShop customer.

I think affordability is probably an issue in both channels, but are you seeing perhaps the franchise customers perhaps a bit wealthier and not as hit by the affordability issue? Or is it just really bad across the board?.

Well, I guess, affordability for sure. In the CarShop model, I think we're $4,000 to $5,000 to $6,000 more than that typical customer is paying 12 to 18 months ago. So that's had some limiting factor for us to be able to source vehicles, recondition them, pay for logistics and be market share on a price for the customer.

So putting that aside, I go to the OEM business. And we've been -- had a luxury over the years, number one, because of the leasing penetration. We've had a lot of leased cars coming back that we bought from the OEMs, which filled our leasing and used car opportunities across the premium brands. And also within that mix is our loaner car.

Today, we have 6,000 loaner cars in our premium luxury fleets today. If you go back to last year or so, we would turn those probably every 60 or 90 days. And today, we're turning those 6 to 9 months. So basically, when you look at that, that's limiting us maybe the 10,000 to 12,000 units for the premium side.

So we're not going to struggle, but I would say this that we want that young used car, it's a good lease car. It's a good way to get the people into the brand. And of course, as we grow this, it grows our parts and service business. So I think those are dynamics we're looking at today..

Right. And just last question. I know basically, you don't have any Ford representation right now.

But in the future, would you be interested in one of their model EV stores with the direct-to-consumer type approach? No inventory?.

We really haven't looked at that. I think that the mix that we have today on the premium luxury side, volume foreign probably is the direction. I wouldn't say that we wouldn't take a look it. These are going to be opportunities as they have maybe truck dealerships and other things that become separate franchise.

You're starting to see that kind of noise in the marketplace. We certainly would look -- is there an opportunity for us. We do have a Ford parts distribution business as part of PAG that operates out of Tulsa, Oklahoma, which is a parts operation, which has been very successful for us with Ford..

We have a question in queue from the line of Rajat Gupta with JP Morgan..

All right. Great. Just first question on PTS. Again, a pretty strong quarter here in the fourth quarter.

Can you help us think about 2023? Maybe from a year-over-year standpoint, any parts of the business that you expect to get worse or better in 2023? And how should we think about your revenue picture there? And then maybe, on the expense side, things like wage inflation.

I know you mentioned some of the debt refinancing, and then maybe the gain on sale. How should we think about all those buckets for 2023 for PTS? And any color or guidance there would be helpful. And I have a follow-up..

Okay. Let me take a shot at these. I think number one, when you talk about gain on sale, we had $500 million in gain on sale in 2022. That was about 22,000 units. Our forecast for 2023 is 27,000. Obviously, because the mix, we'll have a lower gain on sale. The good news is that we did 3,200 units in January. We had $50 million again.

Now I wouldn't write that down in straight line, but at least shows that the market is still there for our used vehicles that are coming out. But I think we'll have a deterioration on the gain on sale probably somewhere around $100 million. If we look at it today, just looking out at pricing and mix as we go into the rest of the year.

Looking at interest costs. I think I've talked about that before. We did a bond here, $750 million here in the last 10 days. That was 400 basis points higher than we had 2 years ago for the same $750 million. So we're probably going to see $100 million more of interest costs that we'll have through our financing in our bond portfolio.

We are investment grade. But again, we're going with the market at this point. From an overall standpoint, our maintenance costs will be up for one reason, some because we're growing the business, but also because we have 71,000 units on order.

And many of these units are replacement units for customers, and many of those units are running high mileage, and we need to get them out of the fleet. So we're going to have the opportunity, hopefully, to get them out here as we go forward. But I think it's important that -- we also look at maintaining our employee and our employee base.

There's pressure on mechanics, on wages, certainly, and in hours of working. So these will drive some higher cost. But overall, we've got a very strong business going into next year, with the growth in our truck leasing or contract maintenance.

And when I look at our utilization of our truck business and rental side in PTS, if you looked at January, we were at 86% on our tractors.

Remember, we have 70,000 units on rent every day, 86% of our tractors are on rental and 82% of our midrange -- and when you think about that, because the size of our fleet, the quality of our fleet, I think that we have those customers coming to us.

And because of the size of our leasing fleet, 50% of the revenue we get in rental comes from our lease customers. So again, with a number of units on order to 70,000, we expect those to come in. So we'll have more gain on sale opportunity.

On the other hand, it will help drive some maintenance costs down, but I still think we'll see some creep on maintenance during the year..

Got it. Got it. That’s helpful. And maybe on parts and services, how are you thinking about growth in that segment for this year? Strong mid-single digit plus range in the fourth quarter. I believe U.S. was more like 9%, 10%.

Do you expect that kind of trend to continue here into 2023? Maybe if you could help us across the different buckets like warranty, customer pay or body shop. Any color there would be helpful..

I think we’re seeing a catch-up by miles driven. Remember, we’ve had people sitting with their cars and people not working, not going into work. And our GM is asking come in for 3 days. So we’re going to see more demand. But when you look at our parts and service growth, after excluding FX, we were up 11%, certainly in the fourth quarter.

And we see that continuing. It’s been very strong in U.K. also. So we expect a nice increase as we go forward in Q1 and Q2, at least as far as we can see right now. And again, it’s going to be labor rate efficiency that we get.

From the standpoint, our ELR effective labor rate, we’ve been able to increase that across the board in all of our locations, really generally not only internationally, but also domestically, about $7 last year.

And we would expect less discounts and hopefully grow that ELR that’s the effective labor rate that we charge the customer, which will drive more gross profit. Body Shop business is up. Warranty was down, but now we’re starting to see warranty creep back up again. I can’t tell you exactly why, but we’re seeing some spike in warranty..

We have no further questions in queue. And with that, I'll turn it back over to Mr. Penske..

All right. Thank you, and welcome, everybody coming to the call today. And we'll see you at the end of next quarter. All the best. Bye-bye..

Ladies and gentlemen, that will conclude your conference call for today. Thank you for your participation and for using AT&T Event Teleconferencing. You may now disconnect..