Roger Penske: I think just, Rich, in BMW alone, we have 2,000 loaners. If we can turn those 2 times or 3 times, it’s 4,000 to 6,000 more used cars that we can put into the market zero to four years old, which Rich get that all the new car programs. That’ll be a huge benefit for us now that we’re starting to get some supply of ICE vehicles. Leasing is also up from the standpoint, Shelley, what is it, we’re up from what year?
Shelley Hulgrave: We’re up 8% year-over-year, up to 32% of our new sales. So it’s…
Roger Penske: And we’re getting some lease returns now, which are also good opportunities for us. And I think we’re starting to see that the BEV units are able to buy in the market. We’re making more money on those than we are on the ones that we sell new. So interesting. Our guys are being very selective as we trade those or we buy them in the open market.
Rajat Gupta: Got it. Got it. That’s really helpful. And I’ll definitely take up your offer on sitting in one of the meetings. Thank you.
Roger Penske: Thanks for that.
Randall Seymore: Thank you.
Operator: Next we go to David Whiston with Morningstar. Please go ahead.
Roger Penske: Hey, David.
David Whiston: Hey, everyone. Just two questions. First, on capital allocation for the rest of the year, you do seem pretty interested in doing acquisitions so far. So just curious about how to balance thinking about spending between buybacks and more M&A for the rest of the year.
Shelley Hulgrave: Hey, David. It’s Shelley. I can take that. We have enjoyed a lot of shareholder returns the last couple of years when it comes to our cash from operations. Typically, we’d like to stay in that 50-50 range between growth and shareholder returns. It has been weighted more heavily. I think last year was 65-35. But to keep a 50-50 between growing through acquisitions and then shareholder returns is how we like to do it. We want to grow revenue 10%. We’re going to do 5%, at least, through acquisitions. And we’re going to do — we are going to really push the team to grow 5% on an organic basis and so that’s how we think of it here. Now, it’s all going to depend on the opportunities that come our way.
We’re going to be selective. But we certainly are entertaining a lot of things as we’re able to look across many markets. We’ve talked a lot about our diversification. And so we bought internationally. We’ve talked about going into Australia, which could be a great new market for us on the retail side, as well as the business opportunities that Randall mentioned that we have there already. We’ve been very active in truck acquisitions. There’s just a lot of opportunities. But it gives us the opportunity to be selective as well. So it’s all going to depend on what opportunities come our way.
Roger Penske: I think, David, also we’ve got to realize that the purchase prices in multiples were the highest they’ve ever been over the last 24 months. We’re seeing those come down now, which makes some opportunities more attractive to us and we’re going to look at those. I think that we have a pipeline of deals we’re working on, which would be acquisitions. We want to grow at least 5% through acquisitions. Hopefully 5% through organic growth would be kind of our mission plan. But I think there’s opportunity there for us as we go forward on the acquisition side. We’ve raised our dividend, Shelley, I think, what, 57% since 2022?
Shelley Hulgrave: That’s right.
Roger Penske: A big number, so we continue to see the dividend increase. And certainly, when you look at our capital allocation just in 2024 and our dividends were about $60 million, and you look at our CapEx, which some of this, about $25 million is land, is over $100 million. And then, of course, our share repurchases at $33 million. So somewhere around a $0.25 billion that we’ve done and that’s kept our, when you look at our leverage, it’s still 1.1 to 1. So I think we’re safe and secure from an overall company standpoint. And I want to stay there, too. I don’t want to go way off too much of a standpoint of share buyback or I think we want to be leveling ourselves in a standpoint of acquisition. But there’s opportunity out there, for sure.
David Whiston: Thanks. And speaking of opportunity, you talked about the Ford and Stellantis acquisitions in your press release. It’s unusual, though, you do still do it once in a while, in terms of buying Detroit 3 brand. So I was just curious, were those a compelling, were those stores just a very compelling price or is there a geographic reason you wanted to buy them?
Roger Penske: I think it was, up in Massachusetts, I think, it was more opportunistic, I think, and it would tuck right into Rhode Island. But I think we look at, right now, we’re sitting with 1% from the standpoint of our big three volume. I think there’s opportunity there. We’re seeing some of those prices coming in line where we would expect them. So in the right place, in the right market, we’re going to take a look even on the domestic side.
David Whiston: Okay. Thank you.
Operator: And we have a follow-up from Michael Ward with Freedom Capital. Please go ahead.
Roger Penske: Michael, hi.
Michael Ward: Thanks, again. Just, we’re about one year into the agency model in the U.K. and I’m just wondering what your thoughts are on it and how is it working out?
Randall Seymore: Yeah. Hey, Mike. It’s Randall. I’ll take that. So, yeah, so if we rewind the clock to the beginning of 2023, the first quarter was a big challenge from a system standpoint, available inventory standpoint. And I think, Mercedes-Benz U.K. has done a nice job collaborating with ourselves and the entire dealer body. And those systems, and let’s just call it the ease of doing business for both the dealer, and more importantly, the customer, is enlarged in place now. So we were able to increase our volume significantly in Q1, and obviously, the gross being a fixed gross and we get one more percentage point on EV, so that actually helps. And over the past year, as we’ve matured that agency model as well internally, we’ve been able to reduce our cost base.
So we measure closely a retained profit per unit on new, so the gross profit less controllable direct expenses. And that number is the best it’s been since we’ve owned Sytner, with exception to 2022, which I think we would all call an anomaly or relative to the car market. So in representing over 20% of all Mercedes sold in the U.K. and then the acquisition of those London stores in late 2022 with the populace there has been significant, because 90% plus of all cars sold are sold within each dealer’s primary market area. So they’re not going geographically other to a neighboring dealer, they’re going right there, because there’s no negotiation on the price. So, and look at the end of the day, there’s less competition, so our conversion rate has actually improved 6 percentage points over the last year as well.
So I think our team in the U.K. with Mercedes has done a really nice job in conjunction with Mercedes-Benz U.K. and we’re just going to get more efficient. So I would say right now it’s been — it’s looking like a win for us this year.
Michael Ward: Great color. Thank you very much.
Roger Penske: Thanks Mike.
Operator: And for closing remarks, I’ll now turn the conference back to Mr. Penske.
Roger Penske: Thank you everyone for joining us. Good quarter, we’re looking forward to Q2 and your support. Thank you.
Operator: Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.
