Roger Penske: And, I think we’re utilizing tools to be more efficient. We’ve also been able to fill a lot of the mechanics’ requirements that we couldn’t get during the COVID time. We’re now seeing them come in, and our turnover really has been down. So I would say we’ve put more service trucks on the road going out to the customers, too, which has certainly also been a benefit. So I think through our acquisitions that we’ll see that we’ll start to get some more traction there to putting in some of the same conditions and action plans we have in the core business.
Daniel Imbro: Makes sense. I appreciate all the color. Best of luck, guys.
Roger Penske: All right. Thanks, Daniel.
Richard Shearing: Thanks, Daniel.
Operator: [Operator Instructions] We’ll go next to Rajat Gupta with J.P. Morgan.
Roger Penske: Hey, Rajat.
Rajat Gupta: Hey, great. Thanks for taking the question. Just had one question on new GPUs and then one on F&I. Based on how things have trended over the last few months and quarters, including what you may have seen in January, is the recent quarterly guidance like roughly $250, $300 of sequential decline in new GPUs a good rule of thumb? Or as you progress through 2024, you’re able to give us any color or guidance around that would be helpful? I have a quick follow-up on F&I. Thanks.
Tony Facione: So, Rajat, this is Tony. I’ll handle that one. When you take a look at the year-over-year decline from Q4 2022 to Q4 2023, new growth was down about $956 a car. That’s on a same-store basis across the portfolio. And I think, as I previously mentioned, when we looked at it sequentially, it was down $2.57 from $57.75 down to $55.18. So, I think, we’re able to manage the gross very well. Some of it will be dependent upon how the mix might change from one period to the next and the level of BEV sales. I think, Rich made the comment that we were down over $5,000 versus MSRP on the BEV side of things. So, I think, we’re very happy with how the new vehicle gross has performed so far in the past 12 months.
Roger Penske: I’d make one comment, Rajat, that we’re seeing internationally, Ferrari and Porsche, Lamborghini, some of those big cars that are now in the $200,000, $300,000 range. People could drive them for a year and come back and trade them to be able to get into the next car. So we’re seeing some people are saying, look, I’ll keep my car for another year. So that’s having some impact on canceled orders where we have to resell those at a lower margin. But I wouldn’t say it’s dramatic, but I think it’s something we should know…
Tony Facione: Because of the used vehicle decline that happened in the fourth quarter.
Roger Penske: Yeah, in the fourth quarter. Yeah.
Rajat Gupta: Got it. That’s helpful. And then on F&I, a very strong performance here in the fourth quarter, despite what we’re hearing, when leasing is coming back, we can see that in the data. What drove the strength there? And how should we think about sustaining these kind of F&I and gross levels into 2024? Thanks.
Tony Facione: Well, Rajat, this is Tony. If you look at the fourth quarter on a same-store basis, we did $1,897 a unit. That was up from $1,866. And then sequentially, it was up about $76 a unit from $1,821 to $1,897. I think it’s important to point out that when you look at the U.S., our overall product sales are about 68% of the total. Therefore, reserves are about 32%. And then, you look at some of the different penetration rates, we’ve increased our captive penetration, again, leasing is up a little bit. And then, when you look at some of the different programs that we’re selling like prepaid maintenance and protection products, tire and wheel, that stuff has stayed real strong for us. So I think, overall, our team’s doing a really strong job on the F&I side of things.
Roger Penske: And those are products that we can sell to the premium lease customer, too, which is helpful.
Rajat Gupta: Got it. Do you feel okay about sustaining these kind of like levels on a same-store basis? Obviously, like, pricing might play a role there, but like the penetration level, would you think are sustainable at these levels into 2024?
Tony Facione: Some of it will depend upon the absolute least level that we have particularly in the U.S. And then we also have to look at any potential affordability concerns that customers may have with respect to extended service contracts. But I think if you look at the second half of the year and you see any rate reduction that might happen in interest rates, that could actually help the F&I side of the business as well, making vehicles more affordable.
Roger Penske: But it’s only 32% of our revenues coming from the actual reserves. And flat, we would get on leasing.
Tony Facione: Correct.
Rajat Gupta: Got it. That’s helpful color. Thank you, and good luck.
Roger Penske: Yeah, thanks.
Operator: And next we’ll go to David Whiston with Morningstar. Please go ahead.
Roger Penske: Hi, David.
David Whiston: Thanks. Good morning or good afternoon. Two questions kind of like capital allocation for some M &A. Can you say what your preference would be this year on M&A in terms of would it be light vehicle, car shop, or trucks, and on top of that, what geographic areas would be your first choice?
Roger Penske: Well, I guess, let’s look at the different businesses. We are actively looking in the premier truck side. There’s no question in Europe. We had the opportunity with Rybrook, 16 locations. We have a number of opportunities here in the U.S. And, I would say we look primarily where we already have scale, so we can consolidate our back offices, our management team with Rybrook. We looked at the business at Pendragon, and when we looked at that business in conjunction with Hedin, we had central offices, we’d have to deal with Rybrook. We just bought the stores and plugged them right in. So we want to look where we have the least amount of additional SG&A, and that would be a key factor. And I think, right now, we’re seeing the prices coming down to a more realistic timeframe. And, obviously, with $1.7 billion of capital available, we’ve got plenty of firepower [ph] to make a big move or small moves. But, again, they’re going to be strategic.
David Whiston: But you don’t have a strong preference then on truck versus light vehicle that doesn’t really matter.
Roger Penske: I think we look at them one at a time. I mean, we’re – it’s not – we don’t have a goal to grow the truck at some speed or else. I want to see a minimum of $1 billion worth of new business that we would generate for 2024 on an annualized basis. That would be across the entire portfolio.
David Whiston: Okay. And on buybacks, can you talk about how you guys are feeling about buybacks this year relative to the 2023 spending level?
Roger Penske: Well, look, I think as we’ve done before, we look at CapEx, we look at dividend, we look at acquisition, we look at buybacks and I think that we certainly will look at that to continue, the board has to approve those buybacks and make recommendations to us. But at this point, we would continue with our buybacks.
David Whiston: Okay. And just one last thing on used vehicles, in the press release you guys specifically called out how pleased you were on that sequential GPU performance, Q4 versus Q3, is it kind of – for lack of a better word, is that like a green shoot that maybe the worst of this is over?
Richard Shearing: Are you talking on used vehicles, David?
David Whiston: Yes.
Richard Shearing: So, I – Randall will tell you. Randall, you might want to comment about what we’re seeing in the UK, because that was one of the big headwinds, if you will. So…
