PAG

**Operator:**  
Good afternoon. Welcome to the Penske Automotive Group First Quarter 2026 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately 1 hour after completion through May 6, 2026 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.

### Q&A Section

**Anthony Pordon:**  
Thank you, Krista. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's first quarter 2026 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 phone for any follow-up questions you may have. Joining me for today's call is Roger Penske, our Chair and CEO; Shelley Hulgrave, our EVP and Chief Financial Officer; Rich Shearing from North American operations; Randall Seymore, of International Operations, and Tony Facione, our Vice President and Corporate Controller. We may make forward-looking statements on today's call about our earnings potential, outlook and other future events, and we also may discuss certain non-GAAP financial measures such as EBITDA and adjusted EBITDA. We've also prominently presented and reconciled any non-GAAP measures to the most directly comparable GAAP measures in this morning's press release and investor presentation, again, both of which are available on our website. Our future results may vary from our expectations because of risks and uncertainties outlined in today's press release under forward-looking statements. I 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 turn the call over to Roger Penske.

**Roger Penske:**  
Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. We're pleased to report a solid and productive first quarter. During the first quarter, PAG delivered over 123,000 new and used vehicles and nearly 3,600 new and used commercial trucks and that generated approximately $7.9 billion in revenue. We earned $324 million in earnings before taxes and $235 million in net income and generated earnings per share of $3.56. The first quarter results include a $60 million gain on the sale of a dealership partially offset by $13 million in certain disposals and other charges as we continue to optimize our dealership portfolio. Excluding these items, adjusted earnings before taxes, was $276 million. Net income was $201 million and earnings per share was $3.05. This was a difficult comparison for the prior year period and challenging market conditions impacted year-over-year performance. We also continue to grow our footprint. In February, we acquired 2 high-performing and strategic Lexus dealerships in Orlando metropolitan area of Central Florida, one of the fastest-growing regions in the U.S. These acquisitions complement the 2 Lexus and 2 Toyota dealerships we acquired in November 2025. Combined, these 6 dealerships are expected to generate $2 billion in estimated annualized revenue. We also repurchased 170,000 shares of common stock for $26 million. We increased the dividend to $1.40, which yields approximately 3.4%, the highest yield in our peer group. Looking at the details for the quarter. Same-store retail automotive new units declined 5% and used increased 1%. Units retail were impacted by weather-related challenges and a difficult comparison to March 2025 when tariffs caused pull-ahead sales and lower BEV sales in the U.S. associated with the elimination of the BEV tax credit. Gross profit per unit, new unit retail was $4,783, up $94 sequentially. Gross profit per used unit was $2,076, up $306 sequentially. Our service and parts revenue and gross profit was a Q1 record. Same-store revenue increased 4.6 and related gross profit increased 5.7%. Service and parts gross margin was up 60 basis points. In the Retail Commercial Truck segment, Q1 unit sales declined 953 units driven by reduced order intake during Q3 and Q4 2025, following the implementation of tariffs and weakness in the freight market. However, we are encouraged today with the trends we are seeing across the commercial truck market. In recent months, we've seen an increase in new truck orders and expect the timing of these deliveries to take place in the second half of 2026. PTS equity income increased 24%. Growth in the full-service leasing revenue, improved fleet utilization lower operating and interest expenses resulting from continued fleet reductions, including maintenance and our depreciation were partially offset by continued challenges in the rental and lower gain on sale of trucks. At this time, I'll turn the call over to Rich Shearing.

**Richard Shearing:**  
Thank you, Roger, and good afternoon, everyone. In U.S. Retail automotive same-store new and used unit sales were affected by 2 major winter storms, liberation day tariff announcement and pull forward of retail sales in March of last year and lower BEV sales from easing emissions regulations and the elimination of the BEV tax credit at the end of September 2025. During the quarter, 25% of new units sold were at MSRP compared to 29% in Q1 last year. Same-store service and parts revenue increased 3.2% and gross profit increased 3.4%. Customer pay was up 4%, warranty was up 5% and collision repair declined 4%. Our U.S. automotive technician count is up 3% when compared to the end of March of last year, and our Bay utilization is 84%. Turning to Premier Truck Group. During Q1, Premier Truck Retail 3,583 new and used trucks, generated $695 million in revenue and $128 million in gross profit. On a sequential basis compared to Q4 2025, new unit gross increased $111 and used unit gross increased $4,624. New unit sales were down 26% and were in line with the overall North American Class 8 market. The recessionary freight environment and market uncertainty associated with tariffs and the status of emissions regulations impacted new truck orders during the last half of 2025. However, as Roger mentioned, in recent months, we have seen an increase in new truck orders. In fact, Class 8 orders increased 91% and the industry backlog grew 33% to 175,000 units in the first quarter when compared to March of last year. We expect this increase in order activity to result in higher new unit sales in the second half of this year. Service and parts revenue increased 5% as average daily activity continues to grow and service backlog is beginning to increase. Service and parts gross profit represented 73% of segment gross profit during Q1. Turning to Penske Transportation Solutions. We are also encouraged by the stronger financial performance of Penske Transportation Solutions. During Q1, operating revenue declined 4% to $2.5 billion. Lease revenue increased 2%, rental revenue declined 17% and logistics revenue declined 3%. PTS sold 9,319 units in Q1, ending the quarter with a fleet size of 387,500 units compared to 435,000 at the end of December 2024. Gain on sale declined by $26 million in Q1 '26 compared to Q1 2025. As PTS continues to rightsize its fleet, higher fleet utilization, lower operating costs for maintenance, depreciation and interest expense contributed to an increase in earnings. Overall, our equity income from PTS increased 24% to $41 million. I would now like to turn the call over to Randall Seymore to discuss our international operations.

**Randall Seymore:**  
Thanks, Rich. Good afternoon, everyone. During Q1, international revenue was $3.3 billion, which is up 6%. International new units were up 2% and used increased 3%. Same-store service and parts revenue increased 7% as our strategies to increase customer pay drove a 10% increase, which was more than offset the 3% decline in warranty. In the U.K. market, Q1 automotive registrations increased 6% to 615,000 driven by private and retail demand and an increase in Chinese OEM sales. While we were encouraged by Q1, the U.K. automotive environment remains challenging as inflation, higher taxes, consumer affordability and the government mandate towards electrification impacts the overall market. During Q1, our U.K. same-store new units delivered were flat from lower sales of several German luxury brands and the elimination of the [indiscernible] programs for these luxury brands. Same-store used units increased 3% and gross profit per unit increased $500 sequentially when compared to Q4 2025. Turning to Australia. Our EBT increased 15% compared to Q1 last year. In automotive, our 3 Porsche dealerships in Melbourne continue to gain market traction through implementing our Porsche 1 ecosystem process. This process has driven higher customer satisfaction with all 3 dealerships in the top 5, including the top position nationally. Although we had a decline in new unit sales associated with the transition of the McCann to an all-electric vehicle, we had a strong mix of higher-end vehicles and our focus on pre-owned and after sales continues to drive the business. In the Australian Commercial Vehicle and Power Systems business, we are diversified with revenue and gross profit split approximately 2/3 off-highway and 1/3 on-highway. The off-highway business continues to grow. The current order book has exceeded our full year business plan with strength in in Energy Solutions, mining and defense sectors. We have over AUD 600 million in secured orders so far for 2026. The engines and support we provide will be critical as this segment evolves. We continue to see the potential for our Energy Solutions business to generate at least AUD 1 billion in revenue by 2030. Over the last several years, our focus has been to increase units in operation to grow the recurring service, parts and remanufacturing aspects of our business, and this focus is starting to pay off. One of the major mining customers operates 125-megawatt power station with 20 Bergen engines that we installed 4 years ago. As part of the major maintenance interval, we have begun to remanufacture 300 cylinder heads which will generate approximately 15,000 hours of work for our business. I would now like to turn the call over to Shelley Hulgrave to review our cash flow, balance sheet and capital allocation.

**Michelle Hulgrave:**  
Thank you, Randall. Good afternoon, everyone. We remain committed to a strong balance sheet and a flexible and disciplined approach to capital allocation while driving our diversification strategy, implementing efficiencies and striving to lower costs. SG&A expenses increased by 1.5%, which is lower than the rate of inflation, while gross profit declined 1.7%. SG&A as a percentage of gross profit for Q1 2026 was 74.3%. Adjusted SG&A to gross profit was 73.3%. Q1 SG&A to growth was impacted by employee benefit costs up $4 million, payroll taxes and other U.K. social programs of $3.5 million, rent and real estate taxes up $7 million and lower automotive units and the impact from lower sales of new and used commercial vehicles at Premier Truck Group. During Q1, we generated $215 million in cash flow from operations and EBITDA of $397 million. During Q1 2026, we invested $63 million in capital expenditures. This is down from $85 million in Q1 2025. We completed acquisitions of 2 Lexus dealerships representing $450 million in estimated annualized revenue. We increased the cash dividend to $1.40 per share, representing the 21st consecutive quarterly increase. On a forward basis, our current dividend yield is approximately 3.4% with a payout ratio of 39% over the last 12 months and we repurchased 170,000 shares of common stock for $26 million. As of March 31, 2026, [ $221 million ] remained available for repurchases under our securities repurchase program. Since the beginning of 2023, we have returned approximately $1.6 billion to shareholders through dividends and share repurchases. At the end of March, non-vehicle long-term debt was $2.6 billion and leverage was only 1.8x, despite completing several large acquisitions over the last 6 months. Floor plan was $4.1 billion, and we have $425 million in vehicle equity. For the quarter, total interest expense increased $2 million. Floor plan interest decreased $4 million due to our cash management and lower interest rates, while other interest expense increased $6 million, primarily from higher borrowings for acquisitions. We estimate a 25 basis point change in interest rates would impact interest expense by approximately $15 million. Our effective tax rate was 27.4% in Q1 2026. The prior year results have been recast for the acquisition of Penske Motor Group using common control as disclosed last quarter. As a reminder, PMG was a partnership prior to our acquisition and was not subject to income tax. Q1 2025 does not reflect federal or state income taxes had PMG been included in our taxable group. Therefore, period-over-period comparisons of net income and earnings per share may not be directly comparable due to the change in tax status of PMG. The impact to the effective tax rate would have been approximately 100 basis points and the impact to earnings per share would have been $0.05. Total inventory was $4.9 billion, up $77 million from December 2025. New vehicle inventory is at a 44-day supply, including 46 days for premium and 29 days for volume foreign. Used vehicle inventories at a 39-day supply with the U.S. at 33 days and the U.K. at 42 days. At the end of March, we had $84 million in cash and liquidity of $1.2 billion. At this time, I will turn the call back to Roger for some final remarks.

**Roger Penske:**  
Thank you, Shelley. As mentioned, we added 2 Lexus dealerships to PAG during the first quarter. And today, I'd like to welcome our new teams at Lexus Orlando and Lexus Winter Park to our organization. As I said earlier, we had a solid first quarter, and I continue to remain optimistic about our business. New and used retail on motive process remained strong and service and parts continue to grow. Our diversification remains our key strength of our business model, the recovery commercial truck market is underway. We expect to increase new truck orders to benefit the second half of the year and our retail truck dealerships and PTS investment should benefit. Again, today, thanks for joining our call. We'll take questions.

**Operator:**  
[Operator Instructions] Your first question comes from Michael Ward with Citigroup.

**Michael Ward:**  
I hope you all are doing well. Weather had a -- had a significant impact on the industry in January and February in the U.S. Can you quantify at all how much you were affected? And were you able to get any of that back?

**Richard Shearing:**  
Mike, this is Rich here. Good question. I mean as I mentioned in my prepared remarks, 2 significant storms, both -- one in January, one in February, impacted -- the first storm in January, I think, was almost 2,400 miles in its length. So it impacted our businesses from Texas all the way to the Northeast. And so we had either delayed openings, multiple day closures as we had to deal with the cleanup. So February wasn't as bad, but did impact pretty significantly the Northeast. Now the good news is, obviously, the competitors around us in those markets also suffered the same same challenges. So we don't think consumers were running to their dealerships to buy cars while were struggling. But certainly, from a fixed growth standpoint, there was lost business there because that's time you just can't get back. So we had the added expense of the snow removal and then we attribute the fixed gross loss to about $4 million to $5 million. And then in total, overall, about a $6 million impact to our earnings in Q1 related to the weather.

**Michael Ward:**  
Okay. So you called out -- I don't know if you were calling out or just the cost on the SG&A side of about $15 million. It sounds like some of those will be recurring, I guess, the rent and the health in the U.K. Are those onetime in nature? Are they not recurring? What were you kind of alluding to with that?

**Michelle Hulgrave:**  
Mike. Yes, a little bit of both. Certainly, rent increases we see year-over-year health benefit plans. We certainly hope those costs go down, but that doesn't seem to be the trend. I wanted to highlight the fact that the U.K. social programs, this is the last quarter before we anniversary those. So it's a bit uncomparable compared to Q1 of 2025. But like I said, we'll see that anniversary here in Q2.

**Michael Ward:**  
Okay. And that's about 30 to 40 bps, sorry?

**Michelle Hulgrave:**  
Yes. We estimate without those that our SG&A to growth would be in that 71% to 72% range that we had talked about. So still comfortable in that low 70s range.

**Michael Ward:**  
Okay. And just lastly, it looks like you've been doing some portfolio rebalancing. Usually, you don't see much movement in the retail automotive revenue mix, but you see a couple of good changes year-over-year. And I'm just wondering if that's a trend we can look to more. Are those going to our focused brands continue to focus on the luxury, the volume form, that's the strategy, correct?

**Roger Penske:**  
Well, let me say this, that we actually sat with our Board probably 18 months ago to determine what was going to be our strategy on brands, locations not only domestically but internationally. And we felt that we would look at our low performers, and then we looked at what were the expectations of the manufacturers from a CapEx perspective. And then what could we grow that business? And we determined there were probably a number of locations that we would need to sell in order to get a return that we would want on top of that, because of our commitment to go forward with Penske Motor Group, and we had to commit to sell 2 Lexus stores, one in Norwich and one in Madison, Wisconsin, which we completed. Obviously, that gave us the opportunity to buy the Orlando stores and the PMG stores. Along with that, we took out a number of other smaller locations, some larger, some in the U.K. and that generate about 300 -- I'd say, [ $25 million to $350 million ] worth of free cash flow back on these stores, which we sold, which obviously, we used some of that money to pay to buy these other key stores that we're going forward with. So we'll continue to prune the portfolio. We're still in the acquisition business. I think we made the decision in the U.K. to reduce our number of [indiscernible] select stores from 14 to 6, which is paying off. We are taking those locations and adding the Chinese brands in the same showroom. So overall, I think the strategy has worked and we've kept our leverage, as Shelley said, from around 1.5 to 1.8, am I right?

**Michelle Hulgrave:**  
That's right.

**Roger Penske:**  
So I think it's been a good movement and will continue. And I think I see our peers doing the same thing because today, the cost of doing business is so high and some of the smaller locations with all the controls you need and the high cost of the best people we just can't see the numbers, give us the returns we want. So all of us are obviously looking for locations, at least where we can add on in key markets.

**Anthony Pordon:**  
So Mike, this is Tony. Just Page 9 of our earnings presentation is a key chart in the deck that lays out what total revenue is, right? And you can see there, in particular premium, 72% volume, volume non-U.S. is 22%. And then when you look at the Toyota Lexus number, it has jumped up to 18% of our overall business from an automotive standpoint. So very, very key with the acquisitions and the OEM presence that we have.

**Michael Ward:**  
Proactive plan looks like you're just pulling it off.

**Operator:**  
Your next question comes from the line of Rajat Gupta with JPMorgan.

**Rajat Gupta:**  
I just wanted to follow up on PTL. Pretty nice earnings growth in the quarter, obviously despite the lower gain on sale. Obviously, a lot of those improvements are coming from just lower maintenance, debt, fleet costs, et cetera. I'm curious how we should think about the trajectory of PTL earnings for the remainder of the year? Any kind of guardrails you can give us for the full year?

**Roger Penske:**  
I think number one, we've come from roughly 430,000 units defleeted to 387,000 at the end of the quarter. So that's obviously reduced a significant interest cost in our depreciation has been impacted positively with that. But the good news is that our fleet utilization on the rental side which were before we were down to 71%. It's now moved up to 76%. And I think we've seen that the operating side of our business has been excellent during the quarter and really in Q4 also because our gain on sale obviously has been down $26 million in the quarter. So we were able to pick that back up through utilization through lease revenue and some of our logistics businesses, which provided an overall pickup in our profit -- their profit from $120 million to $142 million. We've got lower operating expenses, obviously, as I mentioned, maintenance, depreciation, et cetera. So it's operations. I think you think about interest, depreciation and gain on sale is down but still higher than it was a year ago, but we're seeing rental utilization up about 500 basis points.

**Rajat Gupta:**  
Got it. Got it. So I mean, just like a lot of these trends are sustainable like from -- or at least from like a cost and earnings perspective through the remainder of the year on a year-over-year basis?

**Anthony Pordon:**  
Rajat, could you repeat that, please?

**Rajat Gupta:**  
I was trying to say that a lot of these trends seem sustainable for the remainder of the year directly from the cost side when you look at the year-over-year trend?

**Roger Penske:**  
You're talking about PTS?

**Rajat Gupta:**  
Yes.

**Roger Penske:**  
Okay. Look, certainly, we are continuing. We probably have another 3,000 or 4,000 units that we'll take out easily during this year from a fleet perspective, we will continue to grow. And also, we're seeing the revenue coming back on rental, we can take some of our off-lease equipment and replace at that point. So I think the older trucks are out now, which we're providing much higher maintenance. So we're seeing that maintenance and entire maintenance much, much better. And I think that the customer acceptance -- this is a key one for you. We're starting to see people signing up for long-term leases. We say there was a pause over the last 90 to 120 days with emissions, with costs, et cetera. and we weren't getting the traction in the month or the quarter, Q1, we saw our lease signings going up, which bodes well for us for the future because these leases are 3, 4, 5 years of economic escalators.

**Rajat Gupta:**  
Got it. Got it. And just a follow-up on the parts and service business, more on the international side, pretty strong numbers overall. But it looks like if you look at it excluding the FX benefit, growth was probably flat to slightly up. I'm curious if sort of -- if that's correct? And what kind of initiatives are in place to maybe accelerate that growth going forward?

**Randall Seymore:**  
Rajat, it's Randall. We could take the FX out, that's correct. In the U.K., we were slightly up. But as an example, Italy, we were up 11%; Germany, up 20%, and it's really on the back of customer pay focus because warranty is actually down. And remember, internationally, we don't get the markup on parts like we do here in the U.S. So you only get 10% margin, we're on warranty on the parts, whereas customer pay it's the same. So it's the mix and the focus on customer pay that's driving it with the higher margin business.

**Rajat Gupta:**  
Got it. What portion of international in the U.K. versus non-U.K. in your numbers there?

**Roger Penske:**  
Italy was up 11%. Germany was up 20%.

**Rajat Gupta:**  
I mean like just mix of services, just mix of your business in terms of contribution in U.K. and non-U.K?

**Anthony Pordon:**  
Rajat, I'll get that back to you off-line after the call.

**Operator:**  
Your next question comes from the line of Jeff Lick with Stephens.

**Jeffrey Lick:**  
Question for Rich. Rich, we get into this part of the year kind of April through the rest of the year, lapping against last year. Last year at this time, luxury started to lag the broader auto sector with the exception of April and -- I mean, of August and September with the EVs. Just kind of curious how you're seeing things now as the year plays out because you guys are a bit unique and that you have easier compares. Just kind of curious how you're thinking about the rest of the year on the new luxury and then maybe also talk about as we lap the EV compare with anything to think about there?

**Richard Shearing:**  
Yes. So I'll touch on the last comment you made relative to EVs. So if you look Q1 this year versus Q1 of 2025, our EV sales were down 61% this year compared to last year. And certainly, in our West Coast in California, there's still a certain level of demand for the BEV. And so the consumer out there. We haven't completely replaced that with hybrids or ICE. So that was a tough compare year-over-year. We thought that the Iran conflict would drive some near-term or short-term demand in BEVs that we just haven't seen materialize. So that escalation in fuel prices hasn't overcome the consumers' concerns about battery electric vehicles, either from a range or infrastructure charging perspective. And so I don't see really a material change occurring in the balance of this year. I think it's kind of stabilized post the tax credit going away in that 4% to 5% of the overall retail sales market. So then coming back to the luxury, you mentioned or someone did earlier that the tough compare, certainly in March, we were at $17.6 million [indiscernible]. April, is it at $17 million. And so we've got some tough comps year-over-year. You look at the premium luxury market, certainly, the sales are a little bit down in those brands. If I look at Audi in Q1 was down about 30% overall as they're launching some new models that need to come into the marketplace. BMW about 15%. And Porsche with the Macan going away, we knew that this year, next year until they relaunch that model will be a little more challenging. So we're down about 18% with them and Mercedes, about the same as BMW down about 15% overall. The good news, I would say, is that the OEMs have now adjusted to the -- what the tariff impact is going to be on their business. Certainly, I think they were holding back money on incentives and programs certainly in the latter half of last year. I'd say they're back in the market. I wouldn't say the incentives are great, but they're good. And the products they're producing are still very desirable. We tend these annual dealer meetings and every single one of them has a bevy of new products that are going to be launching in the market this year that I think are going to be highly desirable. So I think from a model mix and brand mix with our 72% premium luxury, we're still in a good position there.

**Jeffrey Lick:**  
And anything to call out with service and parts with respect to warranty that you're lapping stop sales, especially on the luxury side?

**Randall Seymore:**  
So our fixed gross overall was up about 3.5%. We talked about the impact from the storms. An encouraging nugget in there is our customer pay ROs. We talked about that in the last couple of calls, we've been really focused on that segment, too. The recalls, they continue to happen. So if you look at Toyota, they increased the Tundra recall on engines to the 23 and 24 model year units. BMW has got a starter recall that was recently announced, and then Audi on their 3-liter engine has piston replacements, which is about a 30-hour job, and then we're doing a proactive software campaign, too, on the Q5 product. So look, I know the OEMs would prefer not to have these recalls, but they continue to have quality leakage into the marketplace.

**Operator:**  
Your next question comes from the line of John Babcock with Barclays.

**John Babcock:**  
Just a quick one on the truck market. I know you're expecting an increase in truck orders, particularly in the second half. Just curious on the sustainability [indiscernible]. I mean I'm sure there's probably a portion of the truck demand is probably driven by expectations for higher prices with some of the regulatory changes. So I'm just kind of curious if you think this is something that you think is long-term sustainable truck demand? Or is this something that you temporarily driven by some of the short-term factors like regulations.

**Randall Seymore:**  
I certainly think there is some short-term influence on the truck orders similar to what we saw with lack of truck orders in Q3, Q4 last year, John. I think once there was some finality on what the EPA 27 guidelines were going to look like and customers could understand what the rule set was going to be that's what drove the order intake here in the first part of this year, as Roger quoted, up 91% on Class 8. I also think we had a near-term bump in particular for Premier Truck Group with tariff announcements in February. And so there was a grace period that was granted to customers that if they placed orders by the end of -- or sorry, by the beginning of March, they could avoid that tariff price increase, which was between $1,000 and $1,500 depending on heavy-duty or medium-duty and then there's some things structurally that I think have been going on that we've talked about for the last 18 months with the administration, right? The Department of Transportation and FMCSA have really been cracking down on illegal carriers and non-domiciled CDL holders, and that has had an effect of tightening capacity. You see that in the spot rates up 30% to 40%. And year-over-year, and that's driving higher utilization of, say, the legal operators on the road, and we're seeing that manifest itself in our parts and service revenue up just over 4% in that business. And that's the first first time in 6 quarters that we've seen a growth in our fixed gross profit there. And then when you look at the freight rates increasing, we're seeing that drive near-term used truck demand as well. So our volume sales are trending upward there, and our gross profit, as you saw in the quarter, was up almost $4,000. So -- and I think if you look -- if you follow any of the public, J.B. Hunt, Covenant Transport, that they've reported, they would reiterate that they feel that the changes are structural and not temporary in nature.

**John Babcock:**  
Thanks for all that color. Now just on the M&A side of things, you've increased exposure to Texas -- Toyota and Lexus recently. But on a go-forward basis, should we think about expanding brands? Are there certain geographies you want to tack on to? Also, how are you balancing that with leverage? And what's your comfort level of leverage right now?

**Roger Penske:**  
Well, I think our leverage gives us all sorts of opportunity, point number one. Point number two, we're sitting with 70-plus percent premium luxury and 21% or 22% volume foreign. And we're focusing obviously on the mix of our business in those particular areas probably more critically and looking for opportunities. I think our goal obviously is to maintain, as Shelley said, our dividend, our buyback and our CapEx. We think by eliminating some of the stores that we have, have allowed us to reduce our CapEx whole fleet by $100 million this year, and that's going to give us the opportunity to continue to focus. I would say, internationally, we've also done some pruning of our businesses there. I think at the end of the day, we're focusing on investments in Australia, in the defense area and the power system and power generation. So a good thing is we have such a diversification. And then obviously, the returns that we're getting from Premier Truck Group, their Freightliner business, they are market share leaders and we'd be looking for other locations in the U.S. and Canada to represent them because those have been turned out to be quite good. And I think what's key is we'll look right now, like the stores we did in Orlando, the right brand, certainly the right location and profitability. So I think we have the luxury of not being in a hurry when you put $2 billion of revenue on, now we've got to continue to integrate those into our company, which I think we're doing well. And we'll again look for ones with a brand, look at Titan and Lexus right now. the lowest day of supply of the industry. We're talking 120 days when you think about it, some of the Lexus stores under 10, and they could continue to keep the product tight and that, to me, is going to be critical, and they're saying, that's where they're going to operate in the future. And we're getting some of that already also. When you look at Land Rover, you look at Porsche and our business is down, not because we're down it's because of supply of the vehicles we want, and that's being impacted by tariffs, et cetera. So we're going to be cautious and there will be people that are confused down because on these businesses, some of the smaller operators if they're contiguous to our circles, we're going to pounce all over those if we can. That's a long answer, I'm sorry.

**John Babcock:**  
Yes. no thanks. That's perfect. Appreciate it.

**Operator:**  
Your next question comes from the line of Mike Albanese with StoneX.

**Unknown Analyst:**  
Could you guys just comment on what you saw in Q1 regarding Chinese models and taking share in international markets? And then a house view on how you think about the implications to premium luxury? And I mean, do you think about leaning into building exposure with these models or just kind of continue to take it slow and monitor.

**Roger Penske:**  
Let's let -- Randall is the expert on -- in fact just came back from the auto show in China. So he's most current that we have on the phone. But that's again what we're doing, what we're seeing in the U.K. and Europe.

**Randall Seymore:**  
Yes, Mike. So obviously, the Chinese brands are gaining share in Europe. In fact, the markets that were in the U.K., Italy and Germany, they've more than double. In fact, if you look at Australia last year, the Chinese brands were 15% and year-to-date this year, through the first quarter, they're up to 23%. So we are -- we've put our toe in the water in the U.K. and in Germany starting really effectively at the beginning of the year, we started late last year, but this is our first full quarter. We've got 11 locations between the U.K. and Germany right now, 4 different brands. And I would say, first of all, our strategy has been to put these brands into existing facilities. So in the U.K., we have our Sytner Select, which is our big box used car retail. So we're able to put the brand there with a, call it, a minimal CI spend and we're in business. So we don't have additional fixed expense, we can sweat the asset a little bit more. But frankly, first blush so far has been positive. We're going to take a walk before run approach in the big box used car retail, we get about 400 guests per week. So these Chinese OEMs are eager to partner with us more. So that's one of the reasons I went to the auto show is really to understand the difference between these brands. You can't just throw an umbrella, say, Chinese brands, just like any Western brands that each of them have their pros and cons. So look, we're going to expand where it makes sense, but we're going to be, let's say, eyes wide open, cautious as we do it.

**Unknown Analyst:**  
Great. And then probably just follow up to that, it probably matters brand by brand as you alluded to. But could you just comment on what you're seeing in terms of unit profitability on these vehicles?

**Randall Seymore:**  
Yes. It's -- look, it differs slightly, I would say, in the U.K., Geely and Cherry have both been good to deal with. One concern like with any brand, got to make sure they don't have over inventory that they're not going to over dealer the market because then it's just a race to the bottom. And the other channels as you think about you open a brand-new store stand-alone, you don't have any fixed operations. So instead of running at 75% fixed absorption at 0, right, at the beginning. Now over time, that will increase. But that's to get a return on that investment. So -- and then in Germany, we have BYD and MG, and we just started those. So I would say it's too early to tell.

**Roger Penske:**  
I'd say when you look at the margins in the big boxes, we're probably getting a couple of thousand pounds more on the Chinese brands that are with our used vehicles we're selling in the same store. So right now, it could be Christmas. We don't know what's going to happen as we go forward.

**Richard Shearing:**  
But look at the product's good -- we're not seeing any consumer pushback. The mix has been about 50% retail, 50% fleet. Obviously, they're going to put some in fleet to seed the market and get some volume up and awareness in the marketplace. But I think their approach has been sensible overall. Again, as a dealer, you just caution not to -- that they don't saturate the market.

**Unknown Analyst:**  
Okay. And then just my last question on this front. Is there anything we should be thinking about in terms of implications on after sales with these brands? I mean, is it the same process, getting them in the service lines and the same general RO that you would get on premium luxury. Yes, go ahead.

**Randall Seymore:**  
Look, it's a good question, more from the standpoint of, hey, are they prepared and hence, are we prepared that we've got all the right safety stock from a parts standpoint that when the customer does come in, that we can handle them officially. So that's 1 big message I had with these OEMs as I met with them, and they seem to understand that we haven't had any challenges yet. But it's been so minimal, Mike, relative to the number of customers we've had come in. I can't say dollar period. But one thing is these cars have a 7-year warranty on it. So we think the customer is going to be stickier rather than having a 3- or 4-year warranty, they'll keep coming back.

**Roger Penske:**  
We don't know what the used car bias going to be. That's -- and then also is the captive finance companies, which lead the brands around the world that has the best captive finance the ones that we see are best for us. So right now, they're using banks and other things in order to support it, then they will buy down the rate to be competitive in the market. So those are all things. And we don't have units in operation. That's why Randall decide if we're going to do it, we're going to put it in places where we already have revenue and we have a parts and service just in different cargoes on the left on the more ...

**Randall Seymore:**  
Those select locations where we have full fixed operations in each of them. So it's -- again, we're just -- we're utilizing our assets better.

**Roger Penske:**  
We're trying in a different market to what's going on in Germany versus what's happened in the U.K., you might talk a little bit about Australia.

**Richard Shearing:**  
Yes, from a Chinese standpoint?

**Roger Penske:**  
Yes.

**Richard Shearing:**  
Yes. Well, look, we don't have any Chinese brands there now. But like I said, it's up to 23% and that's 1 market where the Australia is pinched a little bit more with lack of fuel. They've only got 2 refineries there, so they're dependent on imports. So their fuel price went up more than most countries. And they've seen significant increase in BEV sales along with the Chinese sales. So think about it, they went from 15% to 23% in just 1 quarter. And those customers now are getting the taste of the quality of those brands. So it's it's a disruptor for sure.

**Operator:**  
Your next question comes from the line of Daniela Haigian with Morgan Stanley.

**Daniela Haigian:**  
So switching gears a little bit to a more thematic question. The trend of energy and auto is converging on a global scale is getting a lot of interest from investors. Could you speak a little bit about your Australian, New Zealand segment? And any opportunity there?

**Randall Seymore:**  
Well, thanks, Danielle. It's Randall again. So first of all, let's say, the energy business is vital across the world, but particularly in Australia, the data center business is exploding. And we have a 75% market share in data center backup power for the power range of 1,250 kilowatt and higher, which the majority of them are. So that's just our business pipeline there is extremely strong. We're very tight with numerous customers and that's good news. The bad news with that is you sell the engine and it sits there, right? You go, you do maintenance on it once a month, but it doesn't run. So you don't have that after sales annuity. So where we're focused is to continue to grow our prime power strategy and units in operation. So as an example, 4 years ago, we built a power station with our Bergen engines in the Northwest of Australia, which for our biggest mining customer, 175-megawatt stations, 15 engines, 20 cylinders per engine. These are massive engines, 18 liters per cylinder. These are and these run 7,000 to 8,000 hours a year. And so we're in the cycle right now after they got this commissioned, where the 16,000-hour maintenance interval, you have to take the heads off and remanufacture them. We have all that capability and expertise to remanufacture these heads in country as part of Penske Australia. So after those 15 engines or 300 cylinder heads, that's about 15,000 hours worth of work. So our strategy is to do more -- get more units in operation than our prime power, and we've got that whole vertical strategy and approach and solution for those customers in the market. So it's a key strategy without a doubt for us.

**Operator:**  
Your next question comes from the line of Alex Perry with Bank of America.

**Alexander Perry:**  
Congrats on the strong quarter. I wanted to ask about the outlook in the U.K. sort of ex the Chinese brand sort of the core outlook in the U.K. And then just 1 piece on the Chinese brands. Are you expecting -- I know you said earlier you're going to take a measured approach there, but will you continue to add doors there. So just wanted to get your thoughts on the U.K. sort of outside of what's going on with the Chinese brands.

**Roger Penske:**  
Yes. I think we're going to be measured is the right word, but it was interesting, again, meeting with all these OEMs and understanding the strengths and what some of their strategies are, how that aligns with our strategies. I think we'll continue to evaluate 2 things. Number one, which brands make sense, most sense to continue to partner with. And number two, where we have available facility infrastructure, again, with the strategy of saying we already have it, let's put it there. And because, again, with the lack of units in operation, you don't have that after sales. So the cost to get in is minimal. And then look, we're going to, as usual, be good partners with these brands and want to grow and help them understand the market better. But they're going to limit us based on [indiscernible].

**Randall Seymore:**  
Yes.

**Roger Penske:**  
Now we start to see what the discounting is because we don't want to handle [indiscernible].

**Randall Seymore:**  
Correct. Correct.

**Alexander Perry:**  
Yes, that makes a lot of sense. And then just on inventory levels across the network more broadly. Can you just talk about how you feel about inventory levels? It sounds like there are certain brands [indiscernible] Lexus where you're light any where you think you're over in inventory? And then -- and the brands that you're like, how much do you think that, that sort of restricting the sales velocity and any line of sight into those improving?

**Richard Shearing:**  
Yes, Alex, Rich here. So I'll speak to the U.S. and then Randall can cover internationally. Just as a top side from an overall perspective, new, we ended the quarter 43 days and unused 33 days and the new compared to 52 days a year ago. So we're down from a day to supply standpoint, 9 days. You've got to look at both the day supply and the model mix within the inventory that you have by brand. And so even though we would say that Toyota Lexus is great from a days supply standpoint, we would prefer to have maybe more wrap forwards in that inventory and less [indiscernible] as an example. So you've got to look at it from both perspectives. But certainly, they are the healthiest in maintaining that supply versus demand balance. We talked last year, we saw Honda maybe overproduced a little bit and our days supply crept up there. They had a plant closure earlier this year that has got them back more in line. And then we still got to balance the BEV mix in there. We've seen that come back up after the the tax credit went away at the end of September, and we had that sell-through. We were down 12 days supply on bev. We're up to 78 days supply now. And so that's higher than certainly our overall new car averages and certainly higher than we would want it to be. And then I think from a use perspective, we would prefer to have more used right now. There is demand in the used car market. but we've been disciplined again on our sourcing of used cars. We could go out and buy more used cars, but it would have the counter effect of lowering our grosses on the other side of the ledger. So we've stayed within our wheelhouse of 0- to 4-year-old used cars, not going upmarket in the 8-plus year range for used cars. So that's -- that's a little bit of color on the U.S. So Randall?

**Randall Seymore:**  
Yes. Look, it's very similar in the U.K., our new car supply is 40 days and giving you an idea the lowest day supplies land over at 35 days and the highest is Audi at 45 days. So the band is pretty small with all the brands in between. And then our used car supply is 42 days, similar to the U.S. is difficult now, but I would say -- our team in the U.K. has done a fantastic job with acquisition of used in proper appraisal. The available growth we have in our used cars right now is as best it's been in months. So anyway, we feel we're in very good shape.

**Operator:**  
Your next question comes from the line of David Whiston with Morningstar.

**David Whiston:**  
On service [indiscernible] utilization, you talked about it being, I think, 84%. So I was just curious what prevents that from being -- not being 100%? Is it purely labor shortages or other variables?

**Richard Shearing:**  
Yes. There's -- it's a combination of tax because that is a measure of tech ratio to base. And so our tech count is up 3%. Our guys would tell you, you don't want and we're probably never going to have 100% [indiscernible] utilization because in order to achieve that, you need that, to Randall's comments earlier, have every part you need at the time you need it and invariably, that's never the case. And so you -- you're in a process of having a car torn down, waiting on a part that's tying up a bay or you -- in the case of battery electric vehicles, you've got a flat Bay and you've you need a bay next to it to reinstall the battery. So we feel pretty good at 84%. We probably can tick that up a few percentage points more. But with the flexibility we need for the type of work we do, growing north of 90% would be a challenge.

**Roger Penske:**  
Yes, I think, Rich, also these bigger jobs or we're taking engines out of [indiscernible] and things like that, you will see the second [indiscernible] year [indiscernible] in order to be able to do the work. It's flexible. But we are -- to put it in perspective, we're adding -- we're going to 100 bays at Longo Toyota, in California. We're building a full dealership with 100 bays and Hutto Texas outside of Austin, and we're adding another 30 bays to Central Florida Chadwell get us to almost 100%. So our commitment because the units in operation for this brand, make this a real opportunity, talk about where growth will be. And depending on its warranty, look, we like to warranty work, but the customer comes back because you've got a car that's not in for warranty every day. So I think that's key and as for Toyota, in many cases, leads the market. And there's no question that our biggest push when we talk about investment is some of the showroom CapEx that's required because in many cases, that means we got to tariff our billing. We just did this in San Diego at Lexus, we spent by almost a year, new furniture, et cetera, et cetera. I think it's done great, but we have to go further than that. This is some of the questions that we have today. what is the store making, what's the expectation of the OEM. And we're pushing back to them in a good way, trying to explain to them, we needed to spend more in parts of service let's make the showroom smaller, let's put more cars outside and work on more inside. I know it's opposite of what the thinking is. But we have Bill Brown Ford, #1 Ford dealer in the country, we could put 3 cars in the showroom and they sold 600 cars this month. And what are we doing, we're expanding the service. So there is no question in the back end. And that's why we like Rich's business in premium truck, what are you 120%, 130% fixed coverage?

**Richard Shearing:**  
That's Premier Truck, yes, we're 127%.

**Roger Penske:**  
127%. So how many trucks you have in the showroom?

**Richard Shearing:**  
Zero, [indiscernible].

**Roger Penske:**  
[indiscernible] based, David.

**Operator:**  
That does conclude our question-and-answer session. And I would now like to turn the conference back over to Mr. Penske for closing comments.

**Roger Penske:**  
Thanks for joining us. We'll see you next quarter. Thank you.

**Operator:**  
Ladies and gentlemen, that does conclude today's call. Thank you all for joining, and you may now disconnect.