Good afternoon. Welcome to the Penske Automotive Group Third Quarter 2022 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through November 2, 2022, on the Company's website under the Investors tab at www.penskeautomotive.com. I will now introduce Anthony Pordon, the Company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Thank you, Hanna. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's record third quarter 2022 financial results was issued this morning and is posted on our website, along with 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, EVP and Chief Financial Officer; and Tony Facione, our Vice President and Corporate Controller. Our discussion today may include forward-looking statements about our operations, earnings potential, outlook, future events, growth plans, liquidity and assessment of business conditions. We may also discuss certain non-GAAP financial measures, such as earnings before interest, taxes, depreciation and amortization or EBITDA and our leverage ratio. We have prominently presented the comparable GAAP measures and have reconciled the non-GAAP measures in this morning's press release and investor presentation, which are available on our website to the most directly comparable GAAP measures. Our actual results may vary because of risks and uncertainties outlined in today's press release, which may cause the actual results to differ materially from expectations. I direct you to our SEC filings, including our Form 10-K and previously filed Form 10-Qs for additional discussion and factors that could cause results to differ materially. At this time, I would now like to turn the call over to Roger Penske.

Good afternoon, everyone. Thank you, Tony and all of you for joining us today. I'm pleased to report record revenue and earnings per share in the third quarter, which was driven by our diversified business model. Our revenue increased 7% to $6.9 billion, EBT decreased 2% to $467 million and net income declined 4% to $340 million. Earnings per share increased 3% to $4.61. Our third quarter results were negatively impacted by foreign exchange. Excluding FX, revenue increased 12% to $7.3 billion, EBT increased 1% to $481 million, net income decreased 1% to $351, and our earnings per share increased 7% to $4.75. Looking at our Retail Automotive operations on a same-store basis for Q3 '22 versus Q3 '21, new units declined 6% as we saw supply constraints continue to impact new inventory availability. We expect the current supply to remain at these general levels for the next 9 to 12 months. However, demand for new vehicles remains strong, and our pipeline of vehicles remains forward sold. For example, in the U.K., our forward order bank is over 60% higher than it was the same time last year and represents 36,000 units and $101 million worth of gross profit. Used units declined 11%, largely due to the challenges in acquiring affordable inventory to meet customer expectations. Retail automotive revenue declined 3%. However, when we exclude FX, our revenue increased 4%. Variable gross profit increased $70 per unit to $5,830. If you exclude the FX, variable gross profit increased $427 from the third quarter of last year. Our service and parts revenue increased 4% driven by increases in both customer pay and warranty. However, excluding FX service and parts revenue increased 10%. Looking at CarShop during the third quarter, CarShop unit sales were 16,400 and our revenue was $380 million. On…

Thank you, Roger. Good afternoon, everyone. As Roger indicated, we had another strong quarter, driven by our diversification and our commitment to maintain operational efficiencies achieved through cost reductions beginning in 2020. SG&A to gross profit was 66.8% in the third quarter compared to 65% in the third quarter last year and was only 70 basis points higher sequentially when compared to the 66.1% in the second quarter of 2022. As we look to the future, we expect the ratio of SG&A to gross profit to be in the low 70s, which is significantly lower than prior to the pandemic. Year-to-date, we generated $1.6 billion in EBITDA, representing an increase of 21% when compared to the same period of last year. On a trailing 12-month basis, EBITDA reached $2.1 billion through September 30. So far this year, we have completed acquisitions and new open points, representing approximately $1.3 billion in annual revenue, including $550 million of annualized revenue for 2022 from the five Mercedes-Benz dealerships and three after sales locations in the U.K. we acquired in September. During the third quarter, we repurchased 2.8 million shares of common stock for $309 million. Year-to-date through October 25, we have repurchased 6.4 million shares of stock for $675 million and acquired 148,000 shares from employees for $17.2 million. We have repurchased more than 8% of the shares that were outstanding at the beginning of the year. In October, our Board of Directors increased the authority delegated to management to repurchase our outstanding securities by an additional $250 million, bringing the total available repurchase authority to $268 million. In addition to share repurchases, our Board has increased the dividend four times in 2022, growing the quarterly dividend 24% to $0.57 per share. Through September 30, we have paid $114 million in dividends to…

Thanks, Shelley. As Shelley mentioned, we're committed to implementing operational efficiencies, what we believe will lead to a lower cost structure. We're also piloting artificial intelligence in both service and sales sides of our businesses. The AI allows for automated interactions with our customers to answer basic customer inquiries and set service and sales appointments using natural conversational language. That allows our employees to be more efficient and particularly useful providing quality support after hours. We continue to integrate digital solutions at dealerships to automate and streamline processing, while ensuring consistency, compliance and quality control. We also continue to pursue digital sales by focusing on our preferred purchase program, our OEM digital programs and our proprietary site in the U.K. In Q3, digital sales represented approximately 5% of our total unit sales. Looking at sustainability. Our initiatives are important as part of our new strategy. As mentioned previously, we've built a dedicated team to drive our future efforts on this important responsibility. Our efforts are focused on measurement and monitoring to establish a solid baseline for future reporting. We are also focused on sustainable facilities lead certified to be specific and decarbonization efforts across our businesses. In fact, we are working with our OEM partners to build an infrastructure to supply the sale and service of electric vehicles throughout their life cycle. We've installed over 1,500 charging stations across our network. We're also focused on improving energy management, increasing the use of renewable energy, recycling programs at our location to reduce greenhouse gas emissions. Our results reflect, I think, the dedication of the people that make our business one of the best to work for. I want to thank all of them for the record results that continue to produce for our shareholders of our company. And I personally continue to remain confident in our business model and about the opportunities I see continuing to drive our businesses forward. Thanks for joining the call today. At this time, I'll turn it back to the operator for questions.

[Operator Instructions] The first question is from the line of John Murphy with Bank of America. Please proceed.

Thanks for all the info here. First question that we get a lot from investors, it seems to be one of the biggest fears, but there's also a massive positive here in the short run is new vehicle grosses. And I'm just curious, Roger, what your view is on how long they're going to stay as high? Are we in a somewhat of a new paradigm, I mean, I think you indicated that you expect inventory to be relatively tight for the next 9 to 12 months. So I mean that would indicate that gross is probably would stay relatively high for that period of time. But what's your view on grosses? When do they normalize and what do they normalize at?

Well, let's position, John, where we are now. If you go back to the third quarter of '21, we were at about $5,948. And sequentially, on new -- sequentially, we're now, if we exclude FX, we're at $7,000 -- or $7,100. So, we've not really seen any deterioration. In fact, Q2 '22 was $6,800 and Q3, obviously, at $7,000. When I look at the back order or the backlog, I would call it, we talked about the U.K. with 36,000 units. All of these are bespoke orders, especially from our customers. We see that strong for the next three quarters. And certainly, with the day supply that Shelley talked about, we see that really being consistent throughout the new cycle here as we go into the first quarter and the first half of 2023. Microchip shortages still continue, result in supply chain issues and also inventories today and really in short supply across all our brands. And when you think about it, our day supply on our premium luxury gives us only 4,500 units in the U.S. today. And when you go back probably into '19, '20, what did we have back in '19, probably.

We have about 14,000 .

10,000. And I think we had 2,200 or 2,300 so last year at this time. So inventory really, really is critical. And I think at the end of the day, the premium luxury, the good news for us from a gross perspective, they're building the cars they make the most money on. And basically, with our mix being 70% premium, we're getting the benefit of those higher-priced cars with a big margin for us, and I think that will help us as we go through the next 6 to 12 months to maintain a higher gross margin as we have shown here in the last couple of quarters.

That's helpful. And then just a second question around used vehicles. Obviously, there's a bit of a shortage there, and that shortage may get worse as new vehicle sales have been depressed for a number of years. How do you think about, one, how volumes and grosses there will trend but also, two, how you reinvest and run that business right now? I mean, sort of a skeptic would say, "hey, back away, things are tough, don't invest there right now." But an optimist might say, "Hey, listen, this is a huge opportunity because at some point, three or four years out, the market is going to recover pretty significantly. There's a lot of depressed players and there might be an opportunity to take share either through organic openings or maybe even acquisitions?" I mean, how do you think about sort of the near-term volume and grosses and the structural opportunity over time?

Well, let's look at it in two buckets. Let's look at the OEM business, first, the used car business. We're being impacted in a number of ways. Number one, on the premium side, we have a number of leases. We run anywhere from 50% to 55%. That has really dropped over the last 12 months. People are buying out their cars. We're not getting the trade. So that's had a significant impact. And I did a little bit of homework before the call. And just in the West, if we go back and look at '19, the first six months in 2019, we turned 2,000 loaner cars into used cars, low mileage used cars we did not have in the first six months or the last six months of this year. So that has a significant impact on availability. And then going on from there, we've gone from maybe zero to four years of vehicles down to five and six and what we're finding out if the reconditioning cost is significant. What we have to pay for those vehicles and the ones we get at the auctions are really not really good vehicles. I think it hurts our brand because we have more buybacks and more policy. And then your second bucket would be CarShop, both in the U.S. and the U.K., we've really been moved out of our sweet spot because the cost of sale has moved up anywhere from $4,000 to $5,000 and what's happening. We just don't have the customer base and we're not getting the leads on those cars. So we moved again down to lower MSRP or cost. And we find that those cars we just have to rebuild them to sell them. So we're somewhat at a juncture and say we can't get enough vehicles. We have to recondition them in order to make them salable and yet they're not durable for our customer base, and we have to buy them back. So what we've done is we've turned to really technology to handle the customer appointments, to handle the service, the AI is helping us in many cases. And I think that's going to be critical for us because we have certainly not given up on the used car business, and we'll do 80,000 at CarShop, we will not meet the goals that we set a year ago. But again, we think the business -- we've got great locations, certainly in the U.K., it's a key part of their business. We've got some of our very best people working in that area. So we're positive about it. But I would say, availability, affordability. And again, at this point, we want to be sure we don't damage our brand value by going downstream to zero- to eight-year vehicles.

I'm sorry, just a follow-up, do you think there might be an opportunity to make some acquisitions there to expand the store base as other folks might be under pressure and not have the financial and resources and the cash flow you're getting from the rest of the business to go after it?

Well, we have two or three locations, land that we've really purchased that we can build on. In fact, we have one or two locations in the U.K. that are almost completed that we can open up. But we've kind of tapped the brakes on those at the moment to see what happens here over the next few months. But at this point, we certainly are wide open to go forward. We're not going to back off. But they say we're going to build 10 locations or 15 locations over the next four to five months, it would not be us.

The next question is from the line of Michael Ward with Benchmark. Please proceed.

Maybe just to dive in -- just to dive in a little bit more on that chart on Slide 11, where it shows your brand mix, and it's 70% premium luxury, and it looks like over 50% of the German luxury brands. Can you talk a little bit about because there's a concern in the marketplace that the consumer is going to slip? And obviously, that's a different consumer, both in the U.S. and in the U.K. What are some of the effects? What are you seeing versus those buyers or orders continuing to be strong, pricing strong, all those other things versus maybe some of the volume imports in particular? Or are there...

Well, let's just take the U.K., 90% of our business there is premium luxury, and we got 36,000 units on preorder with very good margins. So at this point, we've not seen a deterioration, very few cancellations when we look at it. So again, I think overall, the premium luxury customer is certainly even in the U.S. side. it's affordable. This morning, I think Mercedes made a comment how good their business was going to be based on the higher line, the quality and obviously, the technology that goes there. So when we look at our days supply, really premium luxury is 25 days. And again, when you look at new, it's 15 days here in the U.S. So again, I think the customers that we have all want these vehicles. And again, we're not charging over list price for these MSRP, I think, which is important as we go forward. But I think we have the right mix. We've been a premium player right from the beginning. And when you have 21 Porsche stores, and we've got 21 or 22 Mercedes stores just in the U.K., we're definitely dealing with a premium customer. And our big market shares with BMW on a worldwide basis were almost 23% of our total business.

Mike, this is Tony. Usually, with those brands too, those premium luxury brands, that consumer tends to be a little more resilient for longer in the purchasing cycle, too. So, we think our brand mix is in a really good spot.

Well, also, Tony, we talked a little bit about leasing. That lease customer has gone to buy because of the cash in his pocket. We got the benefit of coming back, and they'll offset some of that residual at the finance company with BMW Finance and Mercedes. I think we've got a great offense there as we go back into the market as leasing becomes more of a mainstream play for our premium customer.

Can you talk a little bit about the acquisition you made in the U.K. with the Mercedes?

Yes. It's a great opportunity. As you know, [Neater Lawson] is the name if they call the factory stores in Europe. And Mercedes has made the decision on a worldwide basis to divest of those. So we were able to negotiate a purchase of five locations in Northwest London and three service centers, and it fits right, fits into our glove because we've got the big large Audi dealer there. We have -- in North London, and we have also our Jag Land Rover store. So what we're doing, we're actually being able to put those in one big group. And I think it's important that it will generate $550 million of revenue. And it's the largest acquisition that we've made since we've really had Sytner right, Shelley, from the very beginning.

That's right.

Yes, in the U.K. So we're pretty excited about that. And to me, the sites are amazing. The one on the M4 coming in from the airport is world-class. So it gives us a real opportunity to grow in that brand.

Are the multiples paid apples-to-apples with the U.S. acquisition or...?

Well, there are a lot of veterans in the U.S. a lot of veterans.

Your next question is from Daniel Imbro with Stephens, Inc. Please proceed.

I want to start on the PTS side of the business. Obviously, there's a lot of moving parts there, but surprisingly strong, kind of driving nice upside versus consensus. Can you just talk about within that, I would guess, one way was slower because moving has slowed, but kind of how you move that capacity and how you utilize it and then what your outlook is for the fourth quarter and into 2023 for the PTS business?

Well, I think we talked to revenue was up 21% to $3.5 billion and an all-time record of $476 million EBT, that's up 14%. And you go into the individual product lines, full service leasing was $1 billion, up 10%. And that's the three-, four-, five-year contract we make with customers on their equipment, and it's the biggest portion of our business and about economic escalators on an annual basis. Our commercial rental was $653 million, and that was up 24% and that commercial revenue, when you think about it, half of that revenue comes from our lease customer because they need extras as their businesses go up and down, example would be Coca-Cola needs more trucks in the summer. The battery guys need more batteries in the winter, that's going to change, I guess. But anyhow, as we look at utilization on the rental side, we were at 82%. We've got 77,000 units at our rental fleet. Think about it. So every day, almost 65,000 units are on rent. And with the size of our fleet and you compare it to our biggest competitor in the marketplace, we're almost 2x this rental business. So we have the equipment and we have the reputation of the best equipment. And I think that's given us a terrific jump because pricing is there for us, which is key. But consumer rent, you mentioned it earlier. This is the one-way business. Rent it in Detroit to leave it in Chicago, well, that's really slowed down with people that's not moving as much right now because some of the capital cities now are obviously with the problems. They had people have moved out. So we've seen that go down. On the other hand, those units that we normally would have on one way have…

Sure. So as Roger mentioned, we've received $173 million so far in cash distributions this year. We also get a considerable amount of cash tax savings as a result of all of those trucks and trailers that are in operation. So, over 400,000 -- over 400,000 this year, they have over 70,000 trucks on order. And as they spend that capital, those -- that depreciation flows through our tax returns here as a partnership. So we're able to defer a lot of cash tax savings and take advantage of that on our side as well.

Okay. Great. Appreciate all the color. And then for a follow-up, Roger, I wanted to ask one on the F&I side of the business. Obviously, during the quarter, some SEC headlines just around potentially cracking down on that side of the industry. Can you just talk about a bit what you think the risks are, that could be for your business or the broader industry from what you've seen so far from the proposed legislation?

Well, I guess this is the only race I've been in that I didn't want to be first when you think about F&I gross profit per deal. Really, these are proposed rules. I fully support the elimination of unfair deceptive practices. What this is not the kind of business we want to be in that. I think any of our -- my peers also would feel the same. But we're running at about 40% of our reserve comes from finance and 60% comes from product. So again, I think it's going to be disclosure if it goes through. To me, with us being a big player in leasing, we don't have a lot to sell to a lease customer because typically those are two- or three leases. So I think it's -- at this point, you have to see what the government says on this particular subject, but I think we've got to clean up the practices for sure. It only makes our industry better.

But for you guys, where you think you are maybe not doing as much as that the practices. Is there a big financial risk for you guys? Or is it still too early to know?

Too early to know, what do you think, Tony?

I actually, I think it's too early to know. They're just proposed rules. So it's too hard to speculate in terms of what the final adoption of the rules will be and any impact that would have on us, Daniel.

But I think having a true price of a vehicle and disclosure, so there's complete transparency, there's a lot of merit to that. And I think we have to understand how does that affect us from the standpoint of the business. In the old days, you had a payment book. They just gave you a payment, you know what you paid for the car. So we certainly come a long way. And I think we need to continue to make our business better and more transparent to our customer.

And I think the other part of that, too, Roger, is with the docuPAD process that we have in all the stores across the U.S., which is a digital transaction. And everything is presented as a customer upfront and they have to sign everything that we have today. So I think that we have an advantage there -- potentially have an advantage there as as these new rules may be adopted.

When you look at our Google scores, our Google stores are world-class. So again, I think from a from a turnover standpoint, too, we have very, very low turnover with our salespeople. And one of those reasons is because they've got the right people, and they're delivering the right message to the customer.

The next question is from the line of Rajat Gupta with JPMorgan. Please proceed.

Do you hear me okay?

Yes, I hear you fine.

Great. Just on SG&A, could you share any updated metrics around just productivity levels, sales force productivity or just like store level productivity. And how should we think about the Company sustaining some of these as supply starts to come back or inventory starts to build at the store? Also, you mentioned earlier some of the initiatives behind the scenes around AI and automation. And whatever you're doing, do you speed up the transaction time for the consumer? Anything you could share on that and how that's improving productivity a little bit further? And if you could tie that back all into -- maybe just draw a line, if GPUs on new and used do go back to pre-pandemic levels, what would SG&A to gross look like for the Company?

Well, let me -- that's a complicated question. I'll try to do my best. Okay. From a GP perspective, I think we've talked about that before, looking at pre-pandemic and where we are today, we've made quite a consistent increase year-over-year, and we look quarter-to-quarter and sequentially. As I said earlier, I think the John Murphy, we're over $7,100. So I see -- it's all going to be driven by supply -- and again, there has been, I think, some learning that's taken place at the dealer level and all the manufacturers. I don't think you're going to see manufacturers like Toyota having 250,000 vehicles in dealer inventory. And with a shorter supply, it's going to help us maintain inventories for sure. And from an SG&A perspective, we took 10% out of our -- out of our same-store businesses we operate today. And I think it's important to note that with that, our turnover is certainly much lower. And when we look at SG&A as we get to a normalization, it should be somewhere between 70% and 72%. And previously, it was 78% in the past, pre-pandemic. So I think that's -- that's really what we're seeing. If you look at the increase just sequentially that we've had here over the last three months, we really have really seen it in personnel. We're up probably about $20 million, and that's basically people coming out of COVID coming back to work, and we're -- it's very competitive out there you see it every day. It's not -- we can't get cars, we can't get people. So it's very important that we're competitive from the standpoint of what we're paying all of our individuals and inflation, obviously, is paying a part of that. If you look at the other costs, we've got…

Yes. And from an automation standpoint, we are just scratching the surface, but we have a lot of opportunities working both in the U.S. and the U.K. to improve efficiencies through automation, in the front part of our business and certainly in the back. So it certainly helps to improve our efficiency and our costs, as you mentioned, but it also helps us from a consistency standpoint and a compliance standpoint as well. So we look to continue to make further investments in that area.

It's a huge opportunity for us.

It really is.

Got it. That's helpful. Just a follow-up on capital allocation. Any updated thoughts there? The pace of buyback has been pretty strong, 9% to 10% float reduced. Is that still the number one priority in the near term for the Company. Curious if you could give us your latest and greatest on that.

I'll let Shelley answer that on for me.

Thanks, Roger. So as I mentioned, we hit $2 billion in trailing 12-month EBITDA for the first time in September here. So we have a lot of priorities, Rajat. But it's all about being balanced. If you look at how we've spent our capital allocation over the last couple of years, it's roughly 50-50 in terms of growth and return to shareholders. As Roger mentioned, we just made our largest acquisition in the U.K. with the Mercedes-Benz dealerships, and we've grown and we continue to grow on our diversified path. So we've made those acquisitions in truck. We've made significant acquisitions in our auto side, both internationally and domestically. And we continue to spend CapEx approximately $200 million year-to-date on manufacturer CI requirements, supporting our EV development, both from a manufacturing standpoint and for our customers, IT like we talked about and that land for future development. From a return-to-shareholders standpoint, we continue to remain strong, and I would look on average over the next few years to be 50% growth, 50% return to shareholders. But so far, returning almost $800 million is certainly providing excellent shareholder returns.

Got it. And just maybe just follow-up on that. Based on the leverage you have today adjusting for the leases, how many more turns can you add today to make sure you're still within the bonds of rating agencies?

Yes. So with our -- at our current rating, we could push lease adjusted up to 4x, and we ended the quarter at 1.8. So we certainly have ample room there from a leverage standpoint and from our other debt covenants as well. So we've been a lot higher in the past and for the right opportunity when the bond market is in the right spot, we could certainly take advantage of that. But right now, between our EBITDA and our liquidity, where it's at, it's just not an urgency for us at this time.

And we have 35% of our debt at fixed rates, too, right now,

I think, Rajat, we've talked about it. I want to be safe and secure is as we got into COVID and we started looking at what our options were and the cost of some of these businesses to buy. We said, let's take leverage out of the Company. So if you go back 12 to 18 months, we've got almost $1 billion out of debt, out of our working capital. So to me, we're in great shape. Really the only debt out of the bonds we had at the end of the quarter was $400 million worth of mortgages, which we're really -- we're using the OEMs finance companies that they love that business, and they support us in that. So I think we've got a really -- we have the right position and something is major, we're available. But remember, we're looking at it across a wide windshield. It's just not all new or used, it's trucks, it's all the different areas that we're doing business with, even in Australia. We just got some good news here in the last 24 hours. We've got a $75 million order for data center, standby power with our MTU products. So these are things that are starting to come to us because of the reputation of the Company. So the diversification as Tony calls is the big D is certainly playing off.

And those leverage efforts saved us $40 million in annual interest. So that is not a small amount for us.

[Operator Instructions] The next question is from the line of David Whiston with Morningstar. Please proceed.

I wanted to first start on the Mercedes deal in London. Do you have to divest anything with this? Or is there a cap on the number of stores that you may be approaching, anything like that?

No, we don't have a framework agreement in the U.K. At this point, it gives us 21 Mercedes stores in the U.K. plus the additional service centers that they had a from a factory perspective. So it puts us in great shape.

Okay. And CarShop revenue comps are down 12% same-store. Obviously, I know there's a big problem with used vehicle affordability both in the U.S. and U.K. Is that basically the entire reason for that decline? Or is there anything else going on?

It's -- no, David, it's all related to vehicle availability and us being able to acquire affordable product for our consumers. It's just very, very hard out there to get the right product that plays into that one price model.

And we talked about it earlier for us to dig down deeper. When I say dig down deeper, it is going to zero to six years, zero to eight years, we're really buying very poor vehicles and then we try to rebuild them. And then we -- the policy goes up. And we've just said, "Hey, we're going to stay out of that." And then the impact we have used on the OEM side, obviously, just taking a lot loaner cars out. But we are fully committed to the brand. And I think we're continuing to grow as we talked about earlier when John asked that question, we have property, and we have stores in the U.K. that we can open, and we plan to do that. But I think the whole industry on the use side, I'm not sure who has the right formula. But right now, to get vehicles, it's not -- you can find a vehicle, but it's where is it, what's the logistics cost? What's the reconditioning and with interest rates going up and in that online business, and the credit scoring of those people, it's a tenuous situation. I think what we want to do to take this time to clean up any what I call, what we might say around the corner here that we can take out and make ourselves more lean, that's what we're going to do. And I think we're on that track. We make good money at the individual stores. But when we roll on the overheads, that's why this AI and some of these things become really important because the people that have to then handle the overall business creates the issue from us from the standpoint of getting the profitability where we want it. Would you say, Tony.

Absolutely.

That's not just In the U.S., but it's in the U.K. also.

The guys in the U.K. are working on a big project to automate the processes at CarShop to drive more efficiencies there as well.

Yes. In the past, people -- all the people would come in on Saturday and Sunday to buy cars or what they're doing now, automatically, they can set up the appointment to come in Tuesday, Wednesday, Thursday, less people, a better transaction feeling, the guest has a better feeling when it drives out with a car. So these are things that we can build the brand in one particular point, but also take cost out at the same time.

So David, one of the things on top of that, that we're working really hard on through the teams is to change the sourcing of the vehicles, change the sourcing away from auctions into more what we call buy at the curb or buy directly from consumers. And those would be the consumers that might not necessarily buy from us, but they want to sell their car. So instead of taking it to some other third party, they're coming to us, we're evaluating it and then we're buying that for our business. So those are actually -- are some of our most profitable cars that we can buy and then resell in the store. So it's a constant process to be able to do that. And then we also, in the U.K., have the Sytner closed bid auction that we can get off-branded vehicles through that that would have normally gone through the franchise business and push those into the CarShop business in the U.K. So there's a lot of things that are in process to increase sales and drive more efficiencies in that business. It's just going to take time as affordability is still challenged.

I understand. You mentioned logistics. And I know for everybody that's really gotten terrible, especially for trucking. I mean you have a really unique angle into the trucking industry. Is there any opportunity for you guys to get some trucking savings through the related party business?

Well, look, our issue here is that these vehicles or all cars are really specialized equipment. And to be in the trucking business, you got to get utilization. And if we can't get used cars and you're picking up two or three used cars with a car hauler, it's very inefficient, very costly. We were in that business many years ago with Anchor Motor Freight, and we just couldn't make it work. And I think from an overall standpoint in order to bring these cars throughout the country, a lot of people have invested in their own equipment. We have some -- we probably try to do business in more of a geographical area. We start to go get cars way out of a 200-mile area then it really becomes expensive. And we don't have a silver bullet for that when our logistics company wouldn't -- we wouldn't play in that market because we don't have enough equipment that's specialized.

Correct. Okay. And just one more question. If the macro -- if the macro situation gets a lot worse, would you be likely to keep buying back stock? Or would you want to hoard cash or the cash is king mantra?

Well, I think we're going to look at our options, quite honestly. Harding cash, I trust, I would say that. I think what we would do is continue to look at what are the options. We will have a certain amount of CapEx as necessary. I think the market should understand that we've increased our dividend 24% four times so far this year. So we are certainly trying to pay back to the shareholder. Obviously, being a shareholder myself, we like it. And I think that we'll continue to look at what's best for the shareholders, and that will be what will drive our decisions.

There are no additional questions waiting at this time. So, I will turn the call over to Mr. Penske for closing remarks.

Ana, thank you, and everyone, thanks for joining the call today. We'll see you at the end of the next quarter. All the best. Thank you. Operator That concludes today's call. Thank you for your participation. You may now disconnect your lines.