Good afternoon, and welcome to the Penske Automotive Group First Quarter 2023 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through May 3rd, 2023 on the company's website under the Investors tab at www.penskeautomotive.com. I would now like to introduce Anthony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.
Thank you, Lois. Good afternoon, everyone, and thank you for joining us today. A press release detailing Penske Automotive Group's first quarter 2023 financial results was issued this morning and is posted on our website, along with a presentation designed to assist you in understanding the company's results. As always, I'm available by email 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, our 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 more commonly referred to as EBITDA, our leverage ratio, free cash flow, and cash flow yields. 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 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 events to differ materially from expectations. At this time, I will now turn the call over to Roger Penske.
Thank you, Tony . Good afternoon, everyone, thank you for joining us today. I'm pleased to report a strong first quarter as our performance continues to demonstrate the benefits of the company's diversification. During the first quarter, total units delivered increased 8% to 122,431 units. Our revenue increased 5% to $7.3 billion, our SG&A as a percentage of gross profit was 67.5% and declined 140 basis points sequentially. Looking at net income, it was at $298 million, earnings per share were $4.31. If we exclude FX, revenue increased 9% to $7.6 billion, earnings per share would have been $4.42.
During the quarter, we repurchased 900,000 shares for $110 million. Let's turn to our automotive operations. Demand for new vehicles remains strong, and vehicle availability is improving. However, we expect supply constraints to remain during 2023 for most of our brands that we represent. We continue to take forward orders. In fact, in the U.K., our forward order bank is 8% higher than it was this time last year and represents 32,000 units. Grosses on these forward orders are $130 million, compared to $83 million at the same time last year. The U.S. is approximately 40%-50% where allocation remains forward sold. Beginning in the first quarter of 2023, we transitioned certain brands to the U.K. to an agency model for new vehicle sales.
Under agency, we receive a fee from the manufacturer of the sale and delivery of each new vehicle. We do not record revenue the price of the vehicle. However, a delivery fee is included in our new vehicle gross profit. Beginning in 2023, we've broken out these agency units separately. There's no impact to our used business or our service in part. Looking at our retail automotive operations on a same store basis for the quarter versus last year, new units increased 15%. Used units declined slightly at 2%, largely due to the challenges in acquiring affordable inventories. Retail automotive revenues increased 2%. However, when excluding FX, our retail automotive revenue increased 6%. New vehicle gross profit declined $483 or 7% to $6,383.
Used vehicle gross declined $482 or 21% to $1,821. When compared to Q1 of last year, variable gross profit declined 10% or $580 to $5,483. When we exclude FX, our variable gross only declined $374. If you look on a sequential basis excluding FX, variable vehicle gross profit per unit only declined $156. Variable gross profit remains strong and higher than historical levels. If we take an example, variable gross profit per unit to $5,483 is more than $2,000 more per unit higher than 2019 Q1 or 66%. Our fixed operations business continues to perform well.
Revenue increased 10% or 14% when excluding FX as being driven by customer pay, warranty, and collision repair. Looking at CarShop. CarShop unit sales decreased 2% to just under 20,000, 19,165 units. Revenue decreased 5% to $489 million, and variable gross profit per unit declined 5%. Vehicle acquisition prices, along with reconditioning costs and logistics continue to impact customer affordability and our profitability. Excluding FX, revenue increased 3% and variable gross profit per unit would have increased 3%. We continue to focus on vehicle sourcing and cost improvement programs to improve CarShop profitability. I'm pleased to report CarShop's profitability improved sequentially. Turning to retail commercial truck dealership business.
Our premium truck dealerships business represents 39 locations in North America, and is an important part of our diversification and continues to perform well. New commercial truck demand remains solid as being driven by replacement demand associated with supply constraints over the last several years. In fact, our entire allocation of Class 8 product for 2023 is essentially sold out. The current industry Class 8 backlog is 218,000 units, representing seven months of sales. During the quarter, total unit sales increased 10% to 5,172 units, the same store sales increased 7,000 4,900 and 74 units. Our total revenue increased 13% to just under $900 million, and our gross profit increased 4% to $147 million.
Looking at same store revenue, it increased 10%, including 11% increase in service and parts. Service and parts represented 67% of the total gross profit, covered 136% of our fixed cost. EBT was $57 million compared to $58 million in the first quarter of last year. Turning to Penske Transportation Solutions. PAG owns 28.9% of PTS, which provides us with equity income, cash distributions, and cash tax savings. PTS currently manages a fleet of over 419,000 trucks, tractors, and trailers, with a goal of increasing its fleet to 500,000 units by 2025. During the first quarter, PTS had another strong performance, generating $3.3 billion in revenue and $280 million in income. Full service contract revenue increased 30% to a first quarter record, while logistics increased 10%.
We believe demand remains strong for PTS that has 50,000 trucks on order. Over the last two years, PTS has extended the contracts on 41,000 units simply due to supply challenges. As a result, our maintenance costs increased $73 million in the first quarter. The rise in maintenance costs, coupled with higher interest costs associated with rising interest rates and high debt levels, lower utilization of our rental fleet from 81% to 77%, and a lower gain on sale compared to the record level gain on sale of $22 million. Compared to the record performance of last year, the income we record at PTS declined $38 million. I'd like to now turn it over to Shelley Hulgrave, our Chief Financial Officer. Shelley?
Thank you, Roger. Good afternoon, everyone. As Roger indicated, we had another strong quarter driven by our diversification. Our commitment to maintain and achieve operational efficiencies through cost reductions, automation, and other improvements gained through the implementation of AI continues to help us maintain lower levels of SG&A to growth than historical averages. SG&A to growth profit was 67.5% in the first quarter and is 1,040 basis points below the 77.9% in 2019 prior to the pandemic. Most important, SG&A as a percentage of gross profit declined by 140 basis points sequentially when compared to Q4 2022. As we look to the future, we continue to expect the ratio of SG&A to gross profit to be in the low seventies.
During Q1, on a combined basis, share repurchases and dividends represented $152 million in return to shareholders. We repurchased $110 million in shares and most recently increased the cash dividend by 7% to $0.61 per share and returned $42 million in dividends to our shareholders. We continue to maintain a disciplined approach to capital allocation. For example, in 2022, 52% of our cash flow from operations funded share repurchases, 23% to acquisitions, 9% to dividends, and 16% to CapEx for growth and future expansion. Our EBITDA is nearly $2 billion over the last 12 months, and we continue to focus on being safe and secure in the current rate environment in terms of debt. Debt to total capitalization was 28% and leverage sits at 0.9x at the end of March.
On March 31st on compared to December last year, largely related to an increase in mortgages on property. Approximately $1 billion of our long-term debt represents subordinated notes with 50% that matures in 2025, while the remaining 50% matures in 2029. The average interest rate on these notes is 3.6%. We also have $591 million in mortgages and $69 million in borrowing under lines of credit at our other automotive and Australia businesses. Last week, we amended our U.S. credit agreement to increase the facility borrowing capacity by $400 million. The amended agreement provides for up to $1.2 billion in revolving loans for working capital, acquisitions, capital expenditures, investments, and other corporate purposes.
We have the ability to flex our leverage up to 4x, leaving us plenty of opportunity to grow our business through acquisitions and to continue returning capital to shareholders. At March 31st, we had $100 million in cash, $481 million in vehicle equity, and over $1 billion in availability under our credit agreements. Total inventory was $3.6 billion, representing an increase of $121 million from December 31st. Floor plan debt was $2.9 billion. We had a 26-day supply of new vehicles, including 22 days in the U.S. and 26 days in the U.K. However, U.S. inventory was 19 days at the beginning of this week. As a data point, our day supply of new battery electric vehicles in the U.S. is 42 days. Day supply of new vehicles for premium was 27, volume foreign was 14.
Used vehicle inventory had a 39-day supply. At this time, I will turn the call back over to Roger.
Yeah. Thank you, Shelley. As Shelley mentioned, we're committed to implementing operational improvements, which we believe will lead to a lower cost structure. We're committed to operating sustainability. We continuously seek ways to reduce our carbon footprint by applying modern building practices, embracing energy efficiency, and eliminating waste and recycling materials throughout our organization. We're committed to offering our customers options to meet their shopping needs. This ranges from 100% online to our superior customer experience traditionally offered in-store. These digital options includes hybrid shopping solutions, virtual test drives, remote signing on the sales side, as well as online scheduling, photo and video collision estimation, and digital approvals on the service side. Additionally, one of our key efficiency initiatives is leveraging artificial intelligence on both service and sales sides of our business.
The AI allows us for automated interactions with our customers to answer basic customer inquiries, set service and sales appointments using natural conversational language. In Q1, we saw a 14% increase in service online appointments booked year-over-year. Total online BDC and AI service appointments represent over 80% of our total appointments. In addition, service RO payments made online increased 8%. In closing, our results continue to demonstrate the benefit from our diversification across the retail automotive and commercial truck industries, our cost control and a disciplined capital allocation strategy. I personally remain confident in our business model and about the opportunity I see continuing to drive our businesses forward. Thanks for joining us today. We appreciate your continued confidence in PAG. At this time, I'll turn it back to the operator for questions. Thanks.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press one then zero on your touch-tone phone. You will hear an acknowledgment tone that you've been placed in the queue, you may remove yourself from queue at any time by repeating the one to zero command. If you're on a speakerphone, please pick up your handset before pressing the number. Once again, if you have a question, please press one then zero at this time. Our first question is from John Murphy from Bank of America. Please go ahead.
Hey, John.
Hey, Roger. Hey, Shelley. Hey, Tony.
Hi, John.
A first question here, Roger, on agency in the U.K., 'cause there's a lot of folks that have some fears around this. But I'm just curious if you could expand on what is actually changing and what is staying the same and maybe if you have a comment on what the motivations are, particularly for the automakers like Mercedes-Benz that are going after this at this point, 'cause in some ways it seems like they're trying to favor some of their stronger partners, you know, and funnel more business in your direction, but there are some changes in the economics. If you could kind of highlight what's actually changing, what's staying the same, and what you think the motivations are.
Well, first, let's talk about income. For us as a dealer, we got fixed national pricing. There are no volume targets. It's a fixed commission, and today we get 5% from Mercedes-Benz. It's the elimination of brokers, so there's no discounting on new vehicles. The commissions we get paid on our financing is exactly the same. We can still have add-ons from the standpoint of things that would come under the F&I banner. All the fleet sales are handled by the OEM. We have no marketing costs. There's no demonstration. They're all supplied free. The stock we have on site is free, and again, from an inventory perspective, we're dealing out of a 5,000 unit inventory that's online for the brand, and there's no floor plan cost, obviously. No new car training costs.
The allocation, obviously is based on zip codes from the standpoint of allocating leads that come in through the internet. Really the transaction really is what I look at is basically handling the customer, transitioning from a sales process really to a person who really has a capability of understanding of the vehicle and the brand probably better than the current sales force we have. So it's probably a product expert. I think we would call them a delivery specialist, I guess, in this point. When I look at it from the standpoint of what's the impact, our average gross profit on the vehicles in the month of March was $3,900 US dollars. It includes F&I. If I go back to 2019, it's actually higher than it was then. That was pre-pandemic.
From a gross perspective on new, we feel quite good about it. Now, again, the OEM could change that number of 5% at some point. I think we have a three-year commitment at this particular time, but I'm sure we'll both look at that as we go forward. I think it's been slow to get started. The delivery time to take the car out of the pool, get it to the dealer so we can deliver it and PDI it, has gone from maybe 10 days to seven, and now it's looking at probably we're trying to get to three days, which obviously is key.
When you look at the number of units that we sold from a retail perspective in the month of March, we have 21 stores with 20% of the market, retail market for MB in the UK. From the motivation of the OEMs, I think that they had consultants that looked at the, probably the ability for them from a cost perspective, from incentives and residual supports, by having a direct line with the consumer and setting those prices, it would be a clearer channel. Obviously, the ability, the transparency and confidence that the customer would get would be a benefit to the brand. I guess the only thing negative you'd say that the customer still wants to negotiate.
On the other hand, what we're seeing is that the admin work that's required online by the customer probably is a little more complicated than we would happen if you were dealing with an F&I person or a delivery specialist, you know, right at the dealership. I think its motivation is cost and to own that customer, and I think in today's world, the internet to have a clear transparency of the product. To me, I think overall, we've been quite satisfied with it at the moment.
Roger, you maintain the ability to take the used vehicle in trade or the trade-in, as the transaction is occurring, right? There's nothing that's changed with that part of the process either. Sorry.
Yeah. We own an option to take the trade or buy the trade from the customer. Correct. There's no one involved from a factory perspective or OEM demand or declaration as far as the used cars are concerned. There's really no changes both in used or in our service and parts business.
Great. Just lastly on SG&A for Roger or Shelley. You know, 67.5% in the quarter was pretty good, much better than we were expecting. Doesn't seem like you're seeing a reinflation in your costs there, like some other folks might be in the industry. I'm just curious what gives you the confidence that you can, you know, keep this in the low 70% range, you know, over time as grosses maybe normalize over the next year or two.
Hey, John, I can take that. I think it's a number of things. I think one, if you look at our service and parts, we continue to be more efficient. We've gained a lot, like we talked about with the implementation of AI. We're better, we're scheduling better, we're more efficient, and it's enabling us to use, you know, different periods of time with our scheduling to be better with our techs. Overall just our service and parts is up, which adds to that gross profit line. If you look at PTG, our fixed cost absorption was 134%. That compares to 128% in Q4 of 2022. Certainly an improvement there. The margin for supply or for service and parts, excuse me, is huge.
We've taken a really hard look at our costs, and we continue to be really strict in terms of our cost control. We're still down 8%-9% of the folks that we took out during the pandemic. That serves us in a number of ways. One, you know, we look really hard at whoever we're going to add to the business, as people are costs. We also work really hard to retain the folks that we have. We know that it's cheaper to keep an employee than it is to attract and to train up a new employee. As, you know, our folks get a better, bigger piece of the pie, they're happier, they're keeping their comp up.
Overall, our comp to growth is down about 100 basis points quarter-over-quarter, so that's a big factor of it too.
Great.
I would say, Shelley, also, John, when you look at, think about, 27,000 employees and our overall compensation in real dollars is up $4 million. Big, big number when you look at cost controls. You know, we had some increase, you know, in rent and taxes, et cetera, but our marketing was only up $700,000. You know, those are things that we're watching very carefully, not just globally, but looking at it right down at the store level.
That's very helpful. Thank you, guys.
Yeah. Thanks, John.
See ya, John.
The next question is from Daniel Imbro from Stephens. Please go ahead.
Hey, Daniel.
Hey.
Good afternoon, everybody. Thanks for taking our questions. I wanted to ask one starting on the automotive side, just on demand. Sorry if I missed it, but could you provide some color, Roger, on maybe what percent of the new vehicle inventory is pre-sold today? How different is that by OEMs? Then when you look at that data, what does that tell you about the true consumer demand out there for the new vehicle marketplace today?
Well, look, there's got to be some pent-up demand because of availability, you know, over the last, you know, several months. I think from a pre-sold inventory perspective, we talked to our guys, you know, prior to the call, and we're looking at 40%-50%. Remember, we're really primarily pre-premium, which makes a difference. I'd say 40%-50% in the U.S., which gives us probably a nice tailwind. Looking at internationally in the U.K. order book, you know, we've got 30,000-32,000 units, compared to 28 a year ago, so probably almost GBP 50 million more in gross profit, which I think is key. That should be three to six months of tailwind in the U.K. Again, our day supply, when you look at it, is very, very low when you look at the difference.
I think we're 20 days overall as we sit this morning. Toyota and Lexus would be single digit. When you think about our premium side, our biggest brand is BMW. We're sitting at 14 days. Again, availability is key for us from the standpoint of our business. As of yesterday morning, our new business vehicle was up 2% over last year. Our used vehicle was flat sales for the month. Again, indicating that, you know, we have a solid base here, at least leading off into the quarter.
Got it. 40%-50% pre-sold. I guess, are you surprised by how strong that demand is coming into this year, given the consumer backdrop and some of the headlines around just affordability issues, Roger? Is that premium luxury consumer behaving as you would expect?
I think that the interest rates are not affecting the premium luxury person as much as it would maybe, you know, the middle market customer. I think the pent-up demand is still there. To me, on the luxury side, many of our customers are in three, two and three-year leases rather than, you know, five six year, you know, contracts that they have from a financing perspective. We see those people coming back into the market. Now, some of those we've had to extend because we didn't have vehicles, so that's gonna be an opportunity for us to convert those again into a current 2023 vehicle. I think that, I expect leasing to increase. When you think about it, we were 50%-55% our mix in our company on leasing, and that's dropped down into the mid to low 30s.
We think that's gonna grow back as the OEM start to support residuals to get these payments in line as we go forward when they want these sales numbers as they go forward.
Got it. If I could squeeze one more in, just following up on John's question on the agency model. You mentioned you have the ability to sell, I think, full F&I products. Do you see a similar financing attachment? I guess, when the consumer buys a car directly from Mercedes-Benz in the UK, are they getting offered captive finance upfront on the website, and then you guys sell non-captive finance to the dealership? How does that F&I relationship work, under the agency model?
I think this is all the things that we're working with the OEM on. The deals are now on the website, so they're competitive. There's a deal out there at Mercedes-Benz, or excuse me, at BMW or Audi. They have the ability, we're seeing that on their website now. We have the ability to sell product and insurance at any level during the transaction as the dealer.
Great. No noticeable difference on financing attachment over there?
Not at the moment that we know of. It's look, it's early. I think I'll answer that question better, we will as a team here probably, you know, after another three to six months, once we get mature. I would say overall, the ability for us to partner for the overall business agency plan has been excellent, we're learning every day. The fact that we've got instead of having 300 or 400 cars online, we've got 5,000. You know, think about it when you go online, you really, as a customer, can really fish in a big pond. We get the benefit of where you are from a postcode. That inquiry comes directly to us, and it's clear re ally, the customer really.
If you're gonna walk down the road now to try to get 200 GBP or 200 GBP off, you can't do that. It becomes down to us being sophisticated enough to handle the trade-in. I think the big change will be in taking cost out, will be that we have product specialists that understand the trading, and we'll have people that can price the used vehicle, but everyone doesn't have to have that complete capability. We're kind of changing the mix, which will take some of our costs out for the sales process and hopefully have a better informed product specialist with a customer, which would be a better customer experience as we go forward.
I can tell you in our business, fleet business, meaning where we call in big customers, we cut that unit down in half on people already. I think we've got some real opportunity. We're also consolidating one of our service locations that we have in the UK into our big location in West London. These are things that we're already doing in order to take advantage of our scale and our technology.
Great. I really appreciate all the color and best of luck moving forward.
Thanks.
The next question is from Mike Ward from Benchmark. Please go ahead.
Hey, Mike.
Thanks very much. Good afternoon, everyone.
Hey, Mike.
Two things. Shelley, if it works, it seems like the initial agency model in the UK is set up pretty well, if it's effective and it expands to other brands, does the business itself become less capital intensive?
As Roger Penske mentioned, there's no change to used and to service. Service will continue to be a big portion of our business over there. I think, you know, we're still expected to maintain a beautiful delivery site. From a capital allocation standpoint, I don't see it becoming less. You know, in the U.K., there's not a lot of space over there anyway for new cars as property prices are at a premium. If things were to change over here, certainly, I think, you know, we'd look at smaller sites. You know, as we've mentioned several times, we are way away from that in terms of all franchise laws and such there. I think you're a long way off from seeing any significant changes.
Yeah. The only thing I would say, Shelley, is we don't have a floor plan requirement. When you look at our total debt, you follow me, including floor plan, that would be eliminated from our, you know, from our overall debt. You know, it does make a difference because, you know, it's several million dollars.
Yeah. Then Roger, on the acquisition front, I think over the last couple of calls, you've talked about, there being more opportunities on the truck distribution side. Is that still the case?
I would say that ones that we feel are rational from the standpoint of pricing and ones that would fit into us because of a geographical location, I would say yes. I think as we look into the rest into this quarter, we would look at between truck and automotive, somewhere between $300 million and $500 million that we would close on potential opportunities. Again, I think that the multiples are probably more realistic, certainly on the truck side versus automotive at the moment. Whether that changes, there's still lots of activity we're looking at. We're being really safe and secure on what we're gonna go forward on.
Thank you very much.
Thanks, Mike.
Bye, Mike.
Thank you. Once again, if you do have a question, please press 1 then 0 at this time. Our next question is from Rajat. One second, he disconnected. We'll go to Rajat Gupta from JP Morgan. Please go ahead.
Thanks for taking the question. We just had a question on PTL. Would you be able to unpack the drivers a bit more on the trends that you saw year-over-year, you know, related to interest expense or utilization and even gain on sale, if you could quantify some of that for us? Any updated thoughts on, you know, what you expect gain on sale to be for the year? I believe it was close to, you know, $500 million for the full entity last year. I think last time you had mentioned, you know, maybe down 20%. I'm just curious if that's still the case. Maybe any updated thoughts on like how we should think about PPL, you know, through the remainder of the year?
I have a follow-up.
I think it's key when you look at the interest cost, you know, I think we had two bonds we secured in the marketplace over the last several weeks, and those interest rates were up probably 300-400 basis points. Our interest cost in the quarter, our piece of it, of the $38 million decrease in profit that we took into the PAG's balance sheet was $38 million. $12 million of that was interest. To annualize that us, which would be roughly $50 million. It's $150 of interest cost you would look at baked into your model if you looked at the balance of the year.
I think from a rental rental utilization standpoint, look, 77%, we're down from 81 is tremendous because we had days that we were 80,000 units on rent, but we're able to flex that fleet very easily. I think our rental utilization was down for the quarter. It was down probably somewhere about $30 million-$35 million. You take a look at that and you can annualize it and say we straight lined it. Then gain on sale, I think you're gonna see probably somewhere around $100 million off in gain on sale. We'll sell more units, but I think the market, just the values in the market, spot prices for trucks, utilization by drivers is down, and there's more availability on vehicles.
I think that probably, you know, would be, if we look at it, probably gain on about $100 million. Again, our maintenance costs offset some of this. When you look at maintenance costs, I think I mentioned it before in conversation I had lately, was that because of the late delivery and no delivery from the OEMs, we've had to extend over 40,000 of our customer leases, meaning units. These are units that were probably four or five years old. We had to extend these to another six months or a year. What we didn't get when we extended, we didn't get the initial more revenue to offset some of these maintenance costs. We see that maintenance returning back down to normal levels when you look at that once this equipment has been delivered, and we'll really rationalize that through the fleet.
I see some ability to pull that back. Again, looking at the growth, we did $600 million of sales, of leasing, that would be new business, add-on business and renewals in the first quarter. That was an all-time record when you look at it. At the end of the day, you know, that's at a rate of $2.4 billion, that's 1 year of revenue. I think overall, the business is strong. Interest rates, delivery by OEMs, obviously, and utilization is based on the market. You know, taking those into consideration, I think the guys are running a great business for us.
Got it. Excuse me. That's helpful. Maybe just on new GPUs, you know, very strong results here in the first quarter, you know, like in the non-agency stuff. How are you seeing the supply side develop here in the second quarter so far? You know, any updated thoughts on, you know, how we should think about that GPU trajectory for the remainder of the year? You know, how are we expecting, yeah.
I think if you, if you look, you know, sequentially, you know, we've been on new vehicles, but somewhere in the 11.5 to 11.8%. I think I don't see that changing because on the premium side, you know, we've been able to hold the gross. I think overall, if you look at the gross profit from a year ago, you know, we're down right about $500 when you look at the variable gross per unit on new vehicle, including F&I. I don't see a big deterioration on that. Used, on the other hand, has been running in the low to mid-fives, and I'd look at that as probably a number as we look out over the next quarter.
I mean, Rajat, this is Tony. As you look at the overall new vehicle gross and you compare fourth quarter to first quarter on a sequential basis, I think we mentioned in the prepared comments it was only down about $150. I think that remains strong. When you talk about demand, we still see forward orders. We still see forward supply being sold in advance of our allocation at that 40%-50%. When you think about our days supply of the units that are out there, we're 21 days in the U.S. right now. I think demand remains strong. We're seeing inventory come in. It's higher than it was, but we're turning it very quickly.
We're doing a good job of maintaining the growth across the industry. I think that the setup is pretty good as we look towards the future.
I think our premium brand mix at 71% will drive, you know, probably, our ability to maintain these grosses versus maybe the, you know, the US Big Three, which is, looks like they have more availability right now, which is driving probably some of these dealers starting to discount.
Got it. That's helpful. Thanks so much. I'll get back in queue.
Thanks.
The next question is from the line of David Whiston from Morningstar. Please go ahead.
David, hi.
Hi, everyone. I guess first on agency. On agency, once you guys get your commission or payout or whatever you wanna call it from Mercedes-Benz, does the portion of that money go to the Penske associate who helped the customer in store?
Well, we have a compensation. Quite honestly, we would think of a delivery commission for a salesperson plus some, if he's involved in the F&I piece, he would get that. We might go to more salaried people, depending on how the model works as we go forward, but I think it's too new to rate that at the moment.
And you're getting-
The comp plan, David, probably is more fixed in the U.K. anyhow. It always has been.
The F&I business for these people, though, that goes to you guys?
Oh, yeah. Yeah. Remember, I think Tony said or I said it earlier that we get a delivery fee for the sale of the new car. Everything else stays the same. You know, we have the F&I income. We get the benefit of that. All our parts and service, all that gross profit drops to the bottom line as normal.
David, if you go back and you look at the agency units in the first quarter, you compare that to what we did for on a normal basis or before agency, the F&I was about the same in the UK. I think that that's very positive and shows that the people at the stores are selling the product or the insurance products effectively.
Well, also we looked at, if you go back and look pre-COVID at 2018 and 2019, the 5% margin we're getting today, quite honestly, in most cases, somewhat has to do to mix at certain stores, is actually higher than it was back then.
We were chasing volume targets and bonus plans, yeah.
Yeah, we had, brokers in the middle of our business.
David, I think it's important to remember, when you look at agency and MB in particular historically, their new gross profit was only 1% of our total gross profit last year, in 2022 in the height of all of it. There is still so much opportunity with these businesses in used and particularly in service and parts where we make higher margins for their impact to our total bottom line. It's just important to keep that in perspective.
Okay, thank you. On the M&A environment, is there, either in the US or UK, are you seeing any surge in the number of sellers coming to market, perhaps fearful of a recession coming soon?
We've got a number of these brokers coming to us with deals, but I would say I don't know that it's any more or any less. I think some of the bigger deals we're not seeing. You know, we're focusing on ones that we can glue on, where we have capability and have lower SG&A when we take over someone or it's a brand which we think fits our premium basket. I don't see it being higher at this point. You'd have to ask, you know, the brokers themselves that are moving these things around the country. I'm just not up to speed on that. I know Our phone is ringing, but I would say, you know, we're being very selective.
Okay. Just one more on the credit line increase. I was just curious, is that just to grow the facility as the company has grown over time, or are you looking to be more aggressive in M&A and/or buybacks?
I would say what it does because of our, I guess, our results, you know, we want to put in place this evergreen line of credit because, you know, as we look at the business over the next, i t's, I think it expires in 25, and it's evergreen, and it gives us flexibility now from the standpoint of, you know, the use of our capital. To me, you know, that's important. We're aggressive. We're willing to take risks. I think in today's business environment, I think that, you know, we wanna be cautious as we go forward here for the next 6 to 12 months. When we can load our gun, I certainly wanted to do that.
Okay, thank you, everyone.
Agreed.
Thank you. At this time, there are no further questions in queue.
All right. Thank you, everybody, and we'll see you next quarter. All the best.
Thank you. Ladies and gentlemen, that does conclude our conference today. Thank you for your participation. If you're using AT&T teleconference service, you may now disconnect.