Good afternoon. Welcome to the Penske Automotive Group First Quarter 2022 Earnings Conference Call. Today's call is being recorded, and will be available for replay approximately one hour after the completion through May 4, 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, Laurie. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's record first quarter 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 phone for any follow-up questions you may have. Joining me for today's call are Roger Penske, our Chair and CEO; Shelley Hulgrave, 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 assessment of business conditions. We may also discuss certain non-GAAP financial measures, such as earnings before interest, taxes, depreciation and amortization or EBITDA, and our leverage ratio. We have prominently presented the comparable GAAP measures, and have reconciled the non-GAAP measures in this morning's press release and investor presentation, which are available on our website to the most directly comparable GAAP measures. Our actual results may vary because of risks and uncertainties outlined in today's press release, which may cause the actual results to differ materially from expectations. I direct you to our SEC filings, including our Form 10-K for additional discussion and factors that could cause results to differ materially. At this time, I would now like to turn the call over to Roger Penske.

Thank you, Tony. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report all-time record quarterly results for the first quarter as earnings before taxes, net income and earnings per share more than doubled when compared to the first quarter of 2021. Our revenue increased 21% to $7 billion. Income before taxes increased 101% to $498 million. Our net income from continuing operations increased 102% to $368 million, and our earnings per share increased 111% to $4.76. We repurchased 1.9 million shares of common stock for $184 million year-to-date, and we added approximately $665 million in annualized revenue. Over the last 12 months, we've completed acquisitions or open new dealership points that represent approximately $1.9 billion in annualized revenue. Our strong Q1 results really came from all segments of our business. Retail automotive and commercial truck same-store revenue improved 11% and 47%, respectively, coupled with record earnings from Penske Transportation Solutions. Earnings before taxes increased 93% from retail auto, 113% from North American commercial truck retail, 75% from Penske Australia and 121% from Penske Transportation Solutions. Let's look at our retail automotive operations on a same-store basis comparing Q1 '22 with Q1 '21. Unit sales continue to be impacted by supply shortages, and declined 1% during the quarter, new declined 13%. However, use increased 8%. Our revenue increased 11%. And our gross profit increased 27%, including a 200 basis point increase in our gross margin. Our variable gross profit per unit increased 38% to $6,026 from $4,355. Demand remains strong across our retail automotive dealerships, with most allocations in new vehicles being presold before they arrive at the dealership. Put that in perspective, at the end of March, we had 2,500 new units in stock in the U.S. and 14,900 a year ago, March, in 2021.…

Thank you, Roger. Good afternoon, everyone. Our capital allocation strategy continues to leave our balance sheet in great shape. At March 31, we had $170 million in cash and over $1.3 billion in liquidity. Year-to-date through April 26, we spent $184.1 million on repurchasing 1.9 million shares. Our existing repurchase authorization has $46.3 million remaining. We also paid $36 million in dividends. And in total, we've returned $220 million to shareholders so far this year, and over $650 million since the beginning of 2021. We also spent $150 million on growth through CapEx and acquisitions. All of this was funded with cash flow from operations. When looking at our future capital allocation, we maintain a disciplined approach that focuses on opportunistic acquisitions and investments across both our retail automotive and commercial truck businesses, capital expenditures to support growth, delivering a strong dividend to our shareholders, share repurchases, especially in light of elevated valuations of current acquisition opportunities in the retail automotive market, and reducing debt where possible. At the end of March, our long-term debt was $1.46 billion, consisting of $1 billion of subordinated notes, which mature between 2025 and 2029, $327 million in mortgages, $22 million under the U.K. revolver and $57 million in other items. Debt to total capitalization was 26.2%, and leverage at 0.7x. At the end of March 2022, total inventory was $3.1 billion, which is down $158 million from March 31, 2021. We had a 16-day supply of new vehicles with premium at 18 and volume foreign at five days. We continue to sell into our future new vehicle pipeline to support our customers, maximize inventory turn and minimize our inventory costs. We expect the current supply challenges, coupled with strong demand to keep our new vehicle supply at low but manageable levels for at least the next 9 to 12 months. Used vehicle inventory is in good shape with a 41-day supply. At this time, I will turn the call back over to Roger.

Thank you, Shelly. Turning to sustainability. Our ESG initiatives are an important part of our strategy and values. As many of you know, we published our inaugural ESG report in the fall of last year, which lays out many of our activities to date. We focus on diversity and inclusion in our workforce. In addition to our general employee training, so we also use small groups to train employees on the importance of diversity across our business. We're proud to be above the NAD average for a diverse and inclusive workforce. In addition, we have a task force in place to drive our future efforts on sustainability and decarbonization. We are committed to electrification and are working with our OEM partners to build infrastructure to support the sale and service of electric vehicles throughout their life cycle. To date, we've installed over 1,100 charging stations across our network. However, to put electrification in perspective, in the first quarter, we sold 6,700 electrified vehicles in the U.S., including 646 pure battery units, which represent approximately 2% of new vehicle units. While in the U.K., we sold 1,400 bev units, 1,360 hybrids where electrification is supported by lower taxes and government incentives, and that was 22% of our sales in the U.K. Moving on to our digital initiatives. Our omnichannel strategy focuses on customer lifestyle, and continues to evolve with the changing landscape. Online reputation management remains critically important and focus as we strive to exceed expectations of our customers. We focus on providing flexible buying options that allow customers to proceed at their own pace and buying their next vehicle or servicing or existing ones. For sales, we continue to enhance our digital retailing strategy by embracing our OEM partner initiatives. We are currently supporting programs for BMW/MINI, Porsche, Toyota and…

[Operator Instructions] And our first question comes from the line of John Murphy of Bank of America. Your line is open.

Roger, I wanted to ask a first question on cap allocation. I mean given the buybacks and the acquisitions that you made on an LTM basis, it seems like you've got at least a 12% bump, EPS structurally going forward. You've been reasonably aggressive there, although the balance sheet is in more conservative shape, if you will, relative to some of your peers. So, some of your peers have gotten a little bit more aggressive on redeploying capital and leveraging the balance sheet simply. Do you think there's a greater opportunity to maybe get more aggressive over time? Or do you think we're in the point of the business cycle that this prudence is something that you'll maintain in the near term? Just trying to understand sort of your view of redeploying capital on how aggressive you may or may not get.

Let's talk about capital allocation, and maybe share buyback. At the present time, I think we announced today in our earnings that we've repurchased 1.9 million shares. For the entire period of 2021, we've repurchased 3.1 million. So, I think that with that kind of trajectory, it would look like we'll continue at that pace going forward. So, I would say part of the capital allocation certainly would be share buyback. And from the standpoint of acquisitions, we feel good about it. We're not going to chase these high multiples as we've seen in the marketplace. I think that at the moment, as we add up what we've done to-date, we're at $665 million, and it's a mix between auto retail and trucks. So, we would continue that. We obviously are in a position to meet the CapEx requirements by the manufacturers. We have a couple of open points which we've been awarded, which we're building new locations. And again, the annual dividend or the quarterly dividend would be a focus. So I think we're, at this point, reviewing several opportunities from a new opportunity to buy them in the marketplace as far as acquisitions. But -- and that would both be domestically and internationally, and both in the truck and in the retail auto side. So that would be pretty much -- we're going to watch valuations. At the moment, with Ukraine and with all the issues we have today, the continued supply chain disruption. I think that was a focus we had over the last 24 months. You can see that all of our acquisitions and dividends and share repurchases during the quarter were done by operating cash flow with no debt increase. And we're going to watch our balance sheet here and see what happens, I guess, what worldly impact we might have. But overall, I feel good where we are.

Got it. That's helpful. And then just a second question. I mean SG&A was very strong in the quarter. I was just curious on how we should think about that going forward, and how much of that may be able to be retained as maybe growth come under a little bit of pressure or maybe not going forward. I mean how should we think about SG&A to gross, or even just the dollar number there?

Well, I think if you look at the last two quarters, we've been around $800 million. And on a same-store basis, actually, we were down sequentially about $10 million, if I'm correct. So that's positive. We're still getting the benefit of the employee reduction we did back. At COVID time, we were down approximately 9% to 10% on a same-store basis. We continue to follow that. We've been -- we've learned through technology to a certain point. Also, from a productivity perspective, our technicians, we're giving them more tools I think we picked our better salespeople who picked up the units per salesperson maybe from 9 or 10 to now 12 to 13, which is key. And obviously, when you look at our costs, it's primarily -- it's people cost because you got the variable going up because of the grosses of the business. And I think that at the end of the day, the compensation is up for their management because of the profitability.

And then just lastly, I mean we're hearing these rumblings of some potential weakness in the consumer, particularly for companies like CarMax. I'm just curious in CarShop or in your dealerships, if you're hearing or seeing anything like that, or it's a question of price. It just seems like a weird statement given what appears to be an extreme supply/demand imbalance in favor of demand being much higher than supply. Just curious what your thoughts are there.

John, one thing I think that we have to do. We're a different business and CarMax or Carvana and some of these used car retailers. Because, number one, we've got a large parts and service business, which covers 60% to 70% of our fixed costs. We also have OEMs that were tied to would give us an area of market that we operate in. And they provide us with all the umbrella advertising to drive customers, both new and used to our stores, and then we have the relationship with the captive finance companies. And then, the lease returns that are coming in give us in the future when the cars are available additional use. So looking at that, taking that as really a base to work from, we've got a short supply of new cars, which is driving used car prices up. And certainly, our acquisitions have been very tough at the moment when you think of about just looking at CarShop in the U.S., in the UK and the U.S. are our cost of sales up $8,500 and the UK is up 44. And when you add that on to the existing number, it's really pricing us on the U.S. side, up into almost new car numbers. And then, there is some affordability issues there which are going to have some impact on margin. But from an overall standpoint, the demand is strong, we're selling into our pipeline from the standpoint of our new car business, and sequentially in our units are up from 101,000 to 114,000. If you look at Q4 to Q1, so we're not seeing it at the moment that we're having any impact negatively at this point.

Thank you. And our next question is from Stephanie Moore from Truist Securities. Your line is open.

I hope we could talk a little bit on the new vehicle industry environment and maybe what you're hearing from your OEMs in terms of, I think the key topics we're always looking for is production and incentive, and also, I think there's been a little bit of conversations around pricing and spread between OEMs in the MSRP, the dealer. So maybe if you could just give us a little bit of a pulse of how you view the relationship between the OEMs and the dealers are, as we start this year?

Well, number one. The OEMs are not raising our costs without giving us the opportunity to have a corresponding increase in MSRP. That's point number one. Now obviously, there are different discounts that we get based on performance, you have a basic discount maybe of 15%. But to earn that, you have to have your CSI. You have to have your market share. So some people might not get to full discount because of performance. And that's store-by-store, certainly OEM-by-OEM. But if you look today, where we're going to be in Q2 from a vehicle availability we're seeing, from Mercedes-Benz perspective, an increase of about 10%. And I would think that, that would be what we would have as you go through Q2 into Q3. We're flat at Honda Acura. China shutdown is impacting that allocation, obviously. And we look at Toyota and Lexus to be slightly higher in Q1 based on the information we have from the OEM. Certainly, from a Porsche perspective, we've been impacted and the market has been impacted because of the fire in that one ship. We lost 66 Porsches, and I think 33 Audis. And then there was a second ship that had rough water where we lost another 33. So that is a personal impact we have for our company, but it's a better supply than we've had in the past, but it's all pre sold. Audi will have a better allocation in Q2 than we had in Q1. JR will be flat, and BMW be flat with Q1. So I don't see anything -- if we say we're going to be stronger. I think you're going to have a slight increase with some of the manufacturers. I did my homework on this, hoping I might get a question. But you can see that the market is going to take time to recover. In fact, I talked to one of the OEMs at the end of the quarter, and they said, normally, we have 250,000 units in dealer inventory at the end of the quarter. This year, we had 25,000. So it's 10x higher than the 25%. So you can see that it's going to take time to meet their current requirements which we've sold down the pipeline and then try to build any sort of inventory. And I think the OEMs have learned the benefits of lower inventory. And I think that they'll hopefully keep that as a major mission plan that we're not going to end up with excess inventory and have to discount and add incentives. So overall, I think we're going to see some of the same here through the next quarter.

Great. No, that's helpful. And then maybe if you could touch a little bit on the Penske Transportation Solutions JV. Just what you're seeing alter the over health of that business. There's been some tones about just seeing slightly moderating freight rates in the beginning of the year, how you view the health of the business and kind of the opportunity this year on leasing, rental and some of the logistics on that side.

Well, I think the analysts are saying -- the experts are saying that freight will be up 3% during 2022. Now what that does, the spot rates -- I don't know. I think the biggest issue that most of the carriers have is drivers right now. And we're certainly not seeing any slowdown in rental units on the PTS side. So from an overall standpoint, our truck leasing rental logistics business had a terrific quarter. And from the standpoint of their revenue, they were up 22% to $3 billion and their profitability was $418 million, up over 120%. So again, very strong from the standpoint of utilization, it might be interesting to note, we grew our revenue by 22%. And if you look a year ago, our debt was down $300 million. So what we've been able to do by prudent use of our equipment and selling off our units instead of having 10,000 or 11,000 units up for sale, we're down to about 3,000, and that's taken the interest and depreciation of our costs, and giving us that cash that we can use to purchase new trucks. So balance sheet is in good shape. We're investment-grade as you probably know. And we have about 64,000 units on order right now. And to me, it's going to be -- it takes some time to catch up. We had 62,000 rental units on rent at certain days over the last 30 days in our commercial -- or our consumer business that's been driven by high profit, record pricing. This is the one way and local business. And I think overall, when you look at the business, it's never been stronger. Vehicles on rent, obviously up utilization, consumer; logistics rental was up 8%. We did have the benefit of the strong used truck market. So probably we wouldn't expect quarter-by-quarter going forward that we'd see quite -- our percentage was probably up about $20 million to $25 million this quarter on gain on sale is ahead because of the strong used market.

Perfect. And then just a housekeeping question for me, Shelly, could you remind us what the free cash flow generation was in the first quarter?

Yes, certainly. So cash from operations was just under $400 million. We paid $36 million in dividends. And then we talked about the share repurchase, $119 million within the quarter, not a huge debt pay down there, about $10 million, Stephanie, so very strong. I expect the same out of Q2. As Roger mentioned, we've received $45 million in cash distributions from PTS, and we'll get about $105 million overall within the quarter.

And CapEx was, what, about $56 million.

Yes. Thank you. CapEx was $56 million.

So I think that still gives you the pieces you need there, Stephanie.

Excellent, I can do that math. All right, well, thanks everybody. We appreciate.

Thank you. And our next question comes from the line of Mike Ward from Benchmark Company. Your line is open.

Shelly, could you remind me how the formula works for PTS, for the cash?

The formula? Sure. It's a 50% dividend. So, we received that on a quarter lag, with the first one -- Q4 coming in April. And otherwise, it's a quarter lag. So we received those May, August and November for the preceding quarter.

And it's in the -- $165 million last year.

That's right.

Okay, and hadn't hired up this year. Roger, we're kind of in this unprecedented time with the inventory and everything else. But the flip side of that is you have better visibility on orders. And I would assume if somebody's preordering a vehicle, the price portion of that transaction is resolved. Is that correct?

Well, when we're preordering, obviously, they take our orders in the factory, and we don't have a price change. We do get a price change on trucks. If we order a new truck and it's just not built, they typically can change the price on us. On the heavy-duty side, that's been the current business practice by the OEM. But from a new car customer, selling down the pipeline, they're able to preorder and we get a fixed margin, a full margin on that typically, and he gets the components or I guess the option would be a better word of what he wants. Today, when he goes in, a lot looks at a new vehicle, sometimes he buys more than he needs, and it's less. And one thing that's happening and some of the OEMs have done this, the vehicles that we're getting shipped, might have a lower MSRP for only one reason. That's because they've left out certain options, which they can't provide because of the chip shortage.

Okay. So -- but on the transaction with a customer that comes into the retail auto, the price is determined when they order that vehicle, there might be some trade-ins or whatever else to add on.

But you have to always look at the value of the trade, which could move up or down. Then there are -- in the -- as you look at our finance income, we've got two components. We got the finance piece, and we got the product. Now, we would sell GAP, we can sell tire and wheel. There's a number of things that we sell. So, ultimately, the customer would possibly pay more for that. And I think that the after-sale opportunity where we would sell the prepaid maintenance is typically something that's a great product we sell to the customer. So basically, they have one payment, and they're on their way.

So, am I thinking about it the right way, there's at least over the next six to nine months as some of these orders turn into deliveries. There's less risk on the growth side of new vehicle retail on just the gross margin part of it than there has been historically.

That's a great point because obviously, we are selling into the pipeline at full margin, there's no question. So that's going to help us sustain this margin as we go forward. And I think that's obviously something both in the U.S. and the U.K. that we're seeing now.

Right. And then just my own personal experiences, I think it enhances the relationship with your customer at the dealer level. So, the business is pretty [indiscernible]

The customer orders of carry wants, it's sticky, interesting on the lease side because on our premium side, 55% of our customers are leasing. What we're doing now is we're extending leases. And when we extend offer the customer, an opportunity to extend because basically, we could have that car back now, we then order the new car form. So, we will probably end up with less people moving from us to maybe the lease of another competitive vehicle, but that's been very positive with the customers. And again, from a customer experience standpoint, it makes a big difference because they know that they'll have a car, what they want. And the lease price obviously is set at the time that we do that order that new car.

Thank you. And our next question is from Daniel Imbro of Stephens Inc. Your line is open.

Roger, I want to follow up on Stephanie's question on the OEMs. How do they feel about consolidation going on across the industry? I mean, do they realize the benefit of having maybe fewer larger dealer groups? And have there been any discussions -- or have you heard any discussions around changing or increasing the framework agreements to allow for larger scale M&A as all of you guys grow?

Well, we've had -- we signed up for framework agreements probably, what, 10 years ago, there were some with some like Honda, Lexus had it, and we've lived with those over time. Now they are getting more active now when you look at BMW and other of these manufacturers are coming in now with probably not as much to try to curtail the growth but more to be sure that the dealerships that you already have are meeting the CSI requirements, and the CI and the market performance. And that's what they're looking at before they would allow you to grow. That probably is the biggest issue today. I don't think they're saying no. In fact, if you're a good dealer, and you've got a good track record, and you're in a market that -- they limit you to the number in a particular market. So you don't -- you're not the only dealer in the marketplace. I think other than that, they're very appreciate when we come to them with an opportunity because they know we've got the capital, we've got a track record. We've got a management team that many of them know. And I've seen you've seen the growth just in the public, and that's -- and they've been approved with big acquisitions. Now in some cases, you might have a market where you have to sell something off. But I think that is easy. I mean we made a move from Lexus in -- over in New Jersey to buying the two Lexus stores in Austin, and we had to divest the two to get two more. But obviously, I looked at the Jersey market versus the Austin market, and feel, on a longer-term basis, it would be a better opportunity for the Company. So those would be my comments.

Got it. That's helpful. And then one on the open points you guys are opening, Roger. I think historically, that helps you get more allocations at first to maybe get the stores up and running. One, I guess, is that true? And then, two, for how long do you get better inventory allocations at those new open points?

Well, on an open point, they have a plan that says this is the planning potential for a point, let's say, it's 1,500. And what they will do is preload you with those cars when you -- before you open and you get those for about, I think, probably about 90 to maybe 180 days, but then you're on a run rate based on your history. So it works out well. And I think -- after spending $15 million or $20 million on a facility, you certainly need the cars to start the business. But I don't think it's not -- it's fair. I think the -- it's certainly good for future allocation because you continue to meet the requirements of the planning potential and to give you the cars or trucks to be able to meet that early on. So it's up to you to drive it, and then maintain it.

Got it. And one last one for me on the parts and service on the commercial truck side. If we did go through a broader freight recession or pullback on the industrial side, could parts and service still organically grow and comp positively through that? Or what have you seen through past industrial cycles on that part of the commercial truck side?

I would say the parts and service would grow because people would not be buying new vehicles. And we see that in our own truck leasing fleet. We run past a certain point of mileage, our maintenance costs go up. So that would always be an opportunity for the Freightliner dealer for us to give us more parts and service. So I think at the end of the day, it's very positive for us if there is because we'll have more parts. And we saw that during the last recession. I Think we saw parts and service be pretty steady and solid.

Thank you. And our next question is from Rajat Gupta of JPMorgan. Your line is open.

I just had a question on parts and services on the automotive side. Could you give us a sense of how the different segments during the quarter in -- how should we think about just the outlook for the rest of the year given what -- given the trends you're seeing so far in 1Q, and also in April?

Well, when you look at -- you asked about the growth -- I didn't -- ask me the question again. I was -- unfortunately, I didn't get it. So I want to be sure I try to give you a right answer, sorry.

Just within parts and services, the different components within that customer pay, warranty, et cetera, how those did in the first quarter? And just how should we think about the progression through the rest of the year?

Well, I would say we're seeing more miles driven. There's no question because the country has opened up, which is driving more mileage, which will drive more parts and service. So I see that being -- Kia, repair orders were up 13% in the U.S. and up 11% in the U.K. And our body shop was up 22%. So customer pay was up. Warranty was down. Now one thing that had some impact on our PAG margin because we have a fixed margin on warranty and on customer labor, we haven't negotiated because you have different aged vehicles coming in, and that obviously drove a slight reduction in our total margin, but still very strong at 59%. Our effective labor rate went up, and this is a good one. Our effective labor rate went up about 8% in the U.S. during the first quarter if you compare it to a year ago.

Got it. And in terms of like the outlook for the rest of the year, any visibility we can get in terms of how the progress should be for the business?

I mean, overall, the -- in the overall PG business, you're saying or parts and service?

Yes, just part of the services, on the retail automotive.

Well, I think it's -- so I think it's going to go up. I don't see it going down for sure. And the only thing will be will be if the parts supply, which we have had some impact on parts supply because of the supply chain and that could have some impact on slowing it down. The other, which I didn't really mention I just -- it came as a thought here now is our loaner cars and the ability to offer you a loaner car because a lot of people don't want to come in for service if they don't have loaner cars. Well, all of us have reduced our loaner cars because of availability of new cars to put into that service. In fact, we've used some used cars. That might have some ability to dumb down the strength of the business, but I'm not sure it's going to be major because people will wait. It puts the customer out. If you have a critical issue, we're going to try to take carry on the day. But overall, I think we're in really pretty good shape. Miles driven is recovering, but it's still lower than pre-pandemic. There's no question about that. So I think it's positive.

Got it. Got it. Just a follow-up on PTS. Could you give us an update on where the utilization rates are? Or where they were in the first quarter? How do you expect that to trend this year, maybe into next year? And then maybe if you could give us an update on just the fleet size, and on what your plans are for the next couple of years in terms of where you would like to get in terms of just a long-term fleet for PTS?

Well, well, I think that we went up 38,000. And my goal, obviously, by '25 would be to be at 500,000 if we can grow it, will certainly be based on availability and the amount of signing we're doing when you look at -- on the full service lease side, that business was up 8% during the first quarter, and contract maintenance was up 14%. So that's very positive. And we still see with the requirement in transportation across the country, our commercial rental is the strongest it's ever been, and that was up 55%. So we see that continuing to grow. We've held back a little bit because the supply of vehicles right now. So we'll add to those fleets as those rental fleets as we go forward, which will make a difference. So our logistics business grew at about 8%. And when you look at the balance of the business, the one way continues to be strong when we get good pricing. Our full service is up, our contract maintenance, and we continue to add probably 15 to 16 locations a year, new, along with the -- when we go in, we can take over the customers' locations, and that gives us a chance to add another shop with a -- captive shop we call out with a customer. So I think in Q1, we benefited by a higher gain on sale, PAG prospectively, got about $25 million, and I think it would be lower in Q2 and Q3 going forward because we've really reduced the vehicles available for sales, as I said earlier, from about 12,000 to 3,000. So I don't think we'll quite see that gain. But overall, the business should be strong.

Thank you. And our next question is from David Whiston of Morningstar. Your line is open.

First on equity income. If I remember correctly, normally, Q1 is the weakest quarter for equity income. But this year, obviously, you outstanding growth of about 116%. So just curious, if you are expecting Q1 to not be the weakest quarter this year?

Well, I think we'll have, from an equity income perspective, when you start looking at PTS, when we get into the July, August, September because of the one-way business will drive that probably higher. And we continue -- we'll have some impact, as I just mentioned to Rajat, that we had in the gain on sale. But I see it being equal here as we go forward other than the gain on sale for the rest of the year. I feel good about it.

Okay. And sorry, how much was that gain on sale?

The gain on sale for PAG was up about $25 million. Am I right, Tony?

Yes, year-over-year.

Year-over-year. So I wouldn't expect that every quarter because we had vehicles we wanted to run in rental, which was such a demand at the end of Q4. We decided to run those vehicles through Q4, took them out in Q1 and sold those. That's why we had the bigger gain.

Okay. And on CarShop, the disclosure about the self-sourcing by division was helpful. The U.K. is the lowest there at 39%. How can you think that can get over time?

Repeat that again.

So you're talking about just on CarShop, David?

That's on Slide 30.

You broke up there. You broke up. Go ahead. You're there?

Yes. Sorry, it was Slide 30.

Yes. So, you're looking at the sourcing coming out of where -- what -- we're self-sourcing on used vehicles in the different markets. And yes, we think that the U.K. is continuing to trend positive. If you look at just the traditional franchise business in the U.K., they increased in the quarter on a year-over-year basis from 18% to 25% in terms of purchases direct from the consumer. And I think they've got a team of buyers working on this, and we would expect that to continue. On the CarShop side in the U.K., they're not sourcing nearly as many vehicles from consumers as we are in the U.S. And what we would see happen there is that over time, they would use the Sytner auction as more of a direction to help gain and get more cars, and that's been somewhat limiting right now because of the cars and trades coming off of either out of fleet or trades coming in from the overall business. So, we do expect those to improve over time.

Okay. And just finally, I think it was on Slide 16, talks about your retail automotive brand mix, and BMW is a little more than double on Toyota, 25% versus 11%. And BMW is obviously a great brand. But over time, do you want to try and narrow that gap? Or are you pretty much capped on the Audi, Toyota side so you can?

No. When you take Audi, and you had Porsche to it and Bentley and the other, we'd probably get close to 20% with them. I think that we have no limits with anyone. I think the BMW is driven because we have the majority. We have double-digit market share with BMW in the U.K., which probably drives a little bit higher. We don't quite have that kind of number here in the U.S. But it is our number one brand, and we've been strong with many, right from the beginning. But there's no limit. In fact, we just made an acquisition of three stores, BMW stores in the last 30 days in the U.K. And yes, we'd expect more. And as we go through the rest of the year, we have some other possibilities in the pipeline.

Thank you. And there are no further questions at this time. I will turn the call over back to Mr. Penske for closing comments.

Thank you everyone. We had a great quarter. I appreciate the support, and our team is ready to take on Q2. We'll talk to you next quarter. Thank you.

And this concludes today's conference call. Thank you for participating. You may now disconnect.