PAG - Earnings call transcript Q1 2018 | Penske Automotive Group, Inc.

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Operator

Good afternoon, ladies and gentlemen. Welcome the Penske Automotive Group First Quarter 2018 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through May 02, 2018 on a Company's website under the Investor Relations tab at www.penskeautomotive.com. I will now introduce Tony Pordon, the Company’s Executive Vice President of Investor Relations and Corporate Development. Please go ahead.

Tony Pordon

good and John, you, afternoon, everyone. Thank for you joining us today. Thank

is a As was Penske and you website in press company's to Automotive performance presentation mentioned, with issued on a along Group’s morning, understanding results detailing assist financial release John designed our XXXX first this and our posted strategy. quarter

follow-up have. may always, available email by you I’m or questions As phone for any

interest, the most this Officer; such Corporate EBITDA and morning's non-GAAP directly our for On comparable Chairman; Roger J.D. and before our which today’s Shelley have Chief in and our amortization release financial on me measure presentation, we Hulgrave, Joining GAAP Investor measures. call, non-GAAP depreciation taxes, Penske, Financial press Controller. is certain and this the will as call Carlson, reconciled to discussing or available are be earnings the website measures,

in the forward-looking XXXX outlook Additionally revenue of call of our adopting on the company net some to we XXX ASC $XXX,XXX. XXX potential earnings operations, January about first on today. XXXX, income XX, Also recognition, may impact net an adopted increase the make quarter statements for the ASC and was of

may to to today's cause turn materially cause vary XXK could I'd now additional risks Our At actual filings, our to direct SEC which including that expectations. outlined the like discussion materially. the factors call results in form you Roger for of results I this uncertainties press actual and over from results because and differ may release, differ to time, to Penske. our

Roger Penske

XX.X% another XX.X% service of our us today increased I transportation think good In afternoon, pleased record and results quarter, total business the were of and each demonstrating our for to by model. record of Thank outstanding and million driven results truck increased other investment, joining strength our I'm PAG, revenues Tony. continuing an performance $XXX share area $XXX again retail XX.X% to right, Penske you came commercial Leasing from again before All joint came from came diversified from our billion $X.XX. X% our report. $X.X taxes related automotive, investments. business quarter increased across pretax of XX% the report million. everyone to increased XX.X% earnings and venture operations retail and per to from Income earnings to and Australia a Truck XX% the from

increased XXXX XX.X% EBITDA just was in to $XXX our rate XX% compared XX% and tax Our QX. under for the to million quarter

profit as and flow XX%. pleased QX report basis of percent particularly gross gross am a our I to and gross XXX profit SG&A was Additionally, improvement profit nearly point in for through

representing Looking of dividend acquisitions $XX of at million for in we $XXX sale capital completed share. consecutive for We non-core time repurchased quarter dealerships. $XX and $X.XX from generated shares estimated million. cash cash five for our We allocation, annualized revenue increased to per XXth million the the the X.X million we our approximately approximately

the quarter. let's the automotive performance of in retail to our turn first business Now

X.X% Our flat basis. and same-store units a total were automotive increased on retailed

exchange. Same foreign variable of unit $X,XXX, increase revenue However, was store an excluding same-store profit X.X% increased retail gross X.XX or per $XXX.

new Same-store Our $X,XXX. margin new gross to vehicle units, increased unit same-store $XXX at was retail however, profit declined X.X%, per units X.X%. gross same-store

XX.X% in at and $XX to to and retailed was March vehicles days new retail in used $X,XXX Same-store improved time increased X.XX% XX supply same to units at and the QX. Our to our unit improved gross unused XX used Used X.X% our used of same-store end ratio was year days compared X.X%. new the margin gross profit and per last units X%. increased

an body XX.X% of days increase to at of QX. same the time unit, on days, in used was March supply down PDI XXX. vehicles service was compared increased we last it same-store and representing basis. up customer total year have job XX X.X%. Same-store and our for X.X%, technicians XX parts up of X% Warranty the Today with openings $XXX breaking the F&I approximately up was Our and XXXX end $XXXX a to of X.X% another US per X%. shops pay in increased for a

initiatives at estimate focus also As fixed this, on month, I area. We're look in our between and profits if continue XX,XXX making produce progress [indiscernible] can on and recruiting to per growth this in and we e-commerce service. XX,XXX great we

we year collected XX,XXX over online quarter, million and payments. appointments nearly scouted we service first the last During online $XX on

So it's really working.

profit XX,XXX and XX this revenue. business generated That on location margin a annual return $XXX retail in four $XX,XXX pretax was billion supercenters a XX%. previously expect large Including When $X,XXX we the had PAG's our these annually opportunity We generate believe used invested to we used used U.K., first than standalone and retail scale million vehicle on $X People under announced over vehicles our to sales and units supercenter vehicle business, fragmented just to quarter, acquired locations in The supercenter diversify this acquisition, highly at Car XX.X% XXXX, the in marketplace. at was Moving an quarter, and more vehicle XX,XXX in over price averaging revenue. look England. January provide the capitalize the capital, variable used was these operates per retailed as average further business operations and will which transaction business vehicle Northern return the you XX%. in first gross unit. on X% In

of by up We also have these expect Greenfield the to and six locations and running identified new locations end XXXX. all have

Turning experience Ag the metrics increasing. rates. market remained rates tractor heavy retail heavy VIII, of year-over-year. duty freight truck a duty Build improved continues and this $XXX,XXX and industry, strong North this would to truck strong sales that's American commercial to backlog industry that XX% increase in including utilization data is business, forecast Class condition but represent our retail XXXX

to VII, Class midrange forecasted grow and VI American over North approximately are which sales retail the $XXX,XXX. is Additionally, X% to

our retail revenue. retail same-store quarter, new its and truck of by revenue For $XXX represented X% were and covered was business and basis, and cost sales XXX% in and gross commercial this the and we and to business quarter. a Service our our We sales XX.X% profitability. will units increased X,XXX our On during parts will over sales group million up XX% total the expenses. XX%. XXX% these over generated improve almost used market on operating profit in of continue growing help fixed Return drive of conditions with the believe strong

turn to Penske now me Let Leasing. Truck

made in July PTL tax PAG This As of you XX.X% back initial provides investment with cash benefits. and earnings our XXXX. know investment in We we PTL. annual of equity distribution own and

in consumer investment income. approximately XX% We in is and rental, Penske really $XXX million is revenue. main Leasing operates business our received and total full-service in Truck our approximately date Our about of to our benefits rental $XXX segments, truck which XX% $XXX was million cash and another three XX%. million. leasing, is commercial equity over logistics

months XX, operating and $X.X leasing million. three billion net generated March the income truck revenue in Penske For ended $XX of

equity Our ownership earnings interest of generated $XX during the quarter. first million

which Australia experience business, we to commercial and improved our performance. contributing Zealand improved across conditions to is Australian to vehicle New our markets, continue Turning

was return quarter for revenue our on $XXX X%. the over and was million sales quarter, first the up During XX% our

marine and to combat into have defense. strong place offshore one product profits to power which markets vessels use. armored sales Recently will and provide continue field wheeled bids especially generation and be lifecycle our Our system products our and of sales we power patrol strong, and vehicles in for

of March. at Let's $XX had the end look of million at the cash balance sheet. We

is our end at and and the million floor $X.X was $X.X at of Debt XX% capitalization million We non-vehicle was plan XX% had March. leverage rates floor the fixed over $XXX to billion. March. while ratio our of Our non-vehicle debt at of end the in X.XX% remaining liquidity was at debt is at XX.X% our was in variable. plan

billion $X.X New year. March and used compared when to million last vehicle up $XXX inventory was

automotive the again to brand heavy and duty used supercenter the certainly car do optimistic turn joining Truck benefits operator. projected remain U.S. market Leasing stand-alone in growing results team If class in and at quarter had look again million for In the and our all our and of services of first we of Thanks for our basis, Thank the VIII by beyond. a transportation At continue the you growth operations of strength million, America, strong mix, to the investment. demonstrate truck our diversified $XXX market, we the we on luxury you million in our strength end $XX sheet. PAG's model, in automotive with $XXX opportunity and March balance closing, outlook you. were I'll the provided premium approximately in the our over record Penske our up North with it and and equity $XXX vehicle used. I retail call million from XXXX about new receive confident same-store

Operator

with James ahead. first Thank Instructions] [Operator you. Albertine ConsumerEdge. of we'll Please the And go go line

James Albertine

Great. you Good afternoon for and taking the thank question.

Roger Penske

Jamie. Hey

James Albertine

If sense sort a the throughout standalone applies to well, quarter beginning think today? outperform from of then based what in growth end do seeing fourth of Hi. sales but how may give kind your new us terms I also think into can and used you XXXX quarter, of on in as of sales the this the business, franchise of on could I XQ well, and stores you used performed XQ used the as you're of

Roger Penske

have guess the consolidate heard I've to answer supercenters to our I business. along I Let we the traditional me just X.XX last with guess piece, X.

We year will during do. we sell will more the than used

point. would So be one that

then our the to many premium As on going after the on into customers those. big strong the miles pull OEMs go of we along far X,XXX -- know leasing by you X,XXX lot the cars cars luxury strong very traditionally our with used luxury opportunity side, QX those be all business supply out side we -- to to as we continues with have the become because try used of and service to or in initiatives premium finance they and and and QX, to

So we really forward. in businesses the see go that we an offense as as

James Albertine

far, and here margins have across industry do can sort are quick go part relates where a the into on from you're provide your if I some Understood, willing into as we so vehicle if follow-up is got to of mean quarter that view the April latter to you it used ahead? sense as of insight margins looking and and margins, and a as you can, the stabilizing

Roger Penske

X%, that look would of growth we by but take Well, it's per QX, that say $XXX the on looked look, on think the XX you on margin on it's and impacted be franchise, dealerships XX,XXX to middle price our looking our when are in about and growth when I frontend vehicle at the price frontend supercenters selling a break our margin average the about used in out, selling to look is standalone, to at in at U.S. we we're hard down unit X% this month franchised where I was have X% April, X.X%. our for look you our when the go and standalone you the and

gross all fact that margin. bit little So a see the this mix the coming when of is really don’t these you next of that lower used over It's go lower, together, business drives sale deteriorating, MSRP and forward the drive pull it's not the we'll probably a months. we that the a it vehicles lower as just

So our business coming cars the Jamie of got advantage lease. off overall taking we I think use we're of because

supply these Our vehicles certainly as for at look profit We in us. the get margin on on day shape. our guys in it's we another very and good our center reconditioning is understand

on So car. the that overall high environment new I is incentive think

would So higher see only that of incentives the concern the where to I be premium, have. start higher-priced high, are we there lose to could used crossover we That some cars. some tend might so

James Albertine

Understood, well best of luck. and again thanks

Roger Penske

Thanks.

Operator

go is question Next Stephens. Please Nelson from ahead. with Rick

Rick Nelson

Thanks. Good afternoon.

Roger Penske

Hi Rick.

Rick Nelson

you some first big remainder over to that lapped full performance you see how the quarter the year? year if to could March, the U.K. and are ago a you of numbers U.K. with up power shaping speak very

Roger Penske

wages are has no got one what with Well, some some down do going not remember registrations had used XX% number over and a in we is people with on. negotiation first have on question there's guess about now remember and -- uncertainty quite over cars. have X.X% we've a rise knowing of just the and that say There and I policies increased they've government inflation XXXX. U.K. Number the on that Brexit couple those there's I'd are their the in interest since X% probably is things to going rate impact U.K. in play Diesel

because XX% pull we year. ahead marketplace, was was when about of So quarter, think the by but first the it really impacted in last down attacks that the

early my last both up April over U.K. used year. April with As and team that we look discussions at show our in are the new

ahead a against bounce ago. think the that's the April month of year I pull back in just So a

we So we see pretty in probably that positive see April. that,

ends you. quarter tell the luxury mention I didn't that can't market Now thing premium down how that only was was the up, The one X.X%. I

In fact to over it grew XXX XX%. basis points

we that pond that have bode us go the that's forward. in fish as I So and well we for think

So in was how a we think service with registration at finished month. standalone? is. And the team a really done unit we profitability March, CarSense. and a again some job always margin. the and a balance the in the the meet did really give good We as year, this can that the I a is we and used superstores the but in from us a strong, at perspective, good had car when parts look really you thing grow through not it focusing only of one and go U.K. obviously we on real They’ve I'm momentum again on U.S. It

think a in focus. and I People there's it's think real CarShop and opportunities I Car

a think is about and here, think gross to us give to we real the over certainly the brand, and really have but you it's that's some number going you XX% because it, of do margin the our when about of XX% As it's this, opportunity margin. revenue only X% things

focus forward. So I as we as see a that go real

So benefit in the us that should over really U.K.

Rick Nelson

Thanks luck. lot good. good a Sounds and

Roger Penske

Thanks Rick.

Operator

of John ahead. Please America Murphy question go Next is Bank from with Merrill.

John Murphy

and Roger Good Tony. afternoon,

Roger Penske

Hey John.

Tony Pordon

Hey John.

John Murphy

on superstores, you compare I those just economics you additional you about the car stores, of opened the fast of will that right the an those and how stores Greenfield existing am have That's store ramp that XXXX. mean first basis XX they to through used as mentioned will sites and question, had the I a now? you pretty Just XX rapid, think staffing stores, they up how the relative curious

Roger Penske

I six six. my comment. Well said that open maybe we would you misunderstood at least

John Murphy

I Oh, sorry. okay. am

Roger Penske

it be a little So would aggressive.

John Murphy

mean as But mean okay. staffing compare that's your still Yeah in far existing the the I ramp, XX? and economics as I will those the to how

Roger Penske

selling XX XXX X.X a People we in think build I black them Well, Car and XXX think I they and that approximately months in they to about and that about a for It the location month. Warrington want months get ago. or units have took that's that

been property think our ready is putting up, in XXXX, almost in to it logos at So these that are trying big operations purchase, cleaning we putting opportunistically. sites can which up, matter go. to in it and get lights I which DHL Jersey. some look commitments we've and the got site, at and on U.K., able We've it's convert I a some New to we're It's of but think

around where the sites that around some Springs in U.S. Chester Phoenix area. have in some and for Pennsylvania key We the market potentially also the is CarSense Wilmington

spots. and country we where So advertising. the our of trying all what digital impact not the also We're go is our white have for we're trying do just over to grow to

that get we coverage. So

that to and hopefully looked less gross we this process process. know at I running those get XX% issues the level, of profit, our to and a this business open So trying I it's from one and and business look here but our some profitability running to driven. good point peers sale think the compensation, they we're to standpoint good and drain data a is not that we're think of It's I price on trying very when six compensation these a the infect is don't they've of business I look you business the we have think side when had because price. our with pretty as me, probably retail and months because the we're the you businesses traditional unit at the commitment do is in in on XX% way the the at U.S.

be enterprise. beneficial and whole learn think things I the So some we to can got across

John Murphy

Obviously just about strong service in just was in it quarter the but that XX-year how vehicles pretty they and going truck helpful and like the these commercial do five about given strength growing come seems you're know the think based How this back in when question, a you the for That's the truck business, am sales, flow rapidly year commercial curious life service back and service then think base. UIO parts business base do here. have we into I forward. the second or you that? the a should

Roger Penske

with the start XX% let's Well, Freightliner's markets. of

So over what of to or that's An increased probably a XX% certainly They’ve in not tried tractor miles buy. owners. will to news. or consolidate, XXX,XXX really run are on has XXX,XXX of million warranties and number average the the they’ve last XXX,XXX the you good really today depending the market the Freightliner three locations years, so had and

hood and be there's open and it everything care service. a that's stream certified for So complexity you to really looks service one parts thing them dealerships this remember, order trucks else you think of really when the through if I these technician, driving of all take to business today, have and the as to the have a electrician we very that to in income good and OEM

stream XXX%. when my about So in prepared that a I and we I you this see comments, as were mentioned fixed think revenue coverage,

real got parts in in generated generated expenses, think operating all service about about the than benefit you they're Oklahoma that made not a that up we the with area, and Amarillo out Worth mix Fort and hot very is and you up So over see look and a very purchase Midland into service I at you and market. Toronto Permian a the Basin and we're major the markets look which when parts that just markets we've XXX% our in in good our Dallas at Tennessee, in some and think and we of as Odessa

got of remember by XX% by that intermodal. not or freight is it's moving transportation on and airplane will way and need these So been all not that continue, and to people trucks

I multiples the you this the several minimal next we great benefit to if of is when a key also and say XX% me, requirement parts up would real about to the for goodwill part QX and the compared was So that's is and us business a moment, that me, here In business think gives reasonable. thing were and building years long-term a dealership it. our CapEx are service certainly our and at

John Murphy

great couple talk last just crossovers can the That's and ease you're to coming pretty like it's want of that's some on into years, the last a deal to crossovers? up ramp the I trade with it introductions speed. it but just how product to German one that like you then going opportunity mean about seems some today you’ve weakness question, challenges you the trucks or little these a bit to underweighted lots back and going try with the people of being sort say it in with as real had good however in going seems to of is in on and

Roger Penske

don’t it as some You have you the XX% didn't real don’t go will if probably XX% competition have flipped, be they hit I QX good we have remember it's about us, looked Audi, have trucks be BMW, got XX to that but SUVs, now their because create versus very to market that XX% right of benefit Porsche. think a the into head because that's on for in some them to I it they also don’t

all all with Mercedes-Benz, have more don’t Lexus, and SUVs. You

by between is traditional So all sedans core that the brands be some be think within but will the won't and sudden, sedans battlefield it certainly of product. the SUV I of a not good the

sedans the I think took out mix XXXX of we it's XX,XXX go one opportunity. me, they their as of for forward think to us, in maybe brands but an

is mention an obviously a deal thing with that's has I of comes these going the XX%. that back on is hopefully to and John lower mix least that in Now and individual parts and do many we which to is how remember a one customer unit to be basis have has

the the that residual It's isn’t on risk themselves. customer. So really on individual

down So bit. to mitigates that me, little a

as got ridging luxury difference there electric, So that's from at think make think it the and about let's fully more is a standpoint I premium I think of say when also you to hybrids lot and going we go be that with to to electric. going technology a forward we look to

John Murphy

much. very That's you very Thank Great. helpful.

Roger Penske

John. Thanks

Operator

And next we'll with Research. Please go Northcoast go ahead. to Healy John

John Healy

can Thanks. the us line. with there and Roger that you quarter or on thought got was know maybe this of the jus some need throughout the incentives, leverage kind the Tony. see given revenue I to what and leverage that reform, was the I hoping SG&A it guys some perspective highlight employees even you to sort got that growth you keep persist? that in of post of maybe the leverage you’ve how to year do tax maybe remainder the to and of the we business I

Roger Penske

be me let Well honest.

business, to certainly the out the our that over the of specific, out we look that. has we in being of We the We back helped. out at at at truck enterprise helped I which think doing first We've in targeted generated more And us. increase more we've of us cost the and helped think as some and that Brexit then sitting certainly some I international has of for gross I be at very U.K. taken certainly targeted way looming opportunity be that taking business. to might that started as look had the quarter. costs We've there looked things the about PTG the take and When us. by proved across beneficial out. also started the marketing we're think cost our and drive strong you just profit

out you we think I at our cost, targeting came basis. a and some in gross nonperforming we look on no that our the at global marketing, think quarter us I looking when also question help there's higher it's businesses it sold So then obviously which our would

John Healy

color the a you and about income going I might that the wanted wondering of leasing was give the causing net about but growth revenue Nakamura I and ask deck think to talked on top of slide I balanced? XX% going Great. growth truck kind guys mid think be there, the you of more of And maybe on then the single-digit. just business, what's in bit mix what's of could side line cost the more the line terms us business or bottom little if

Roger Penske

think selling equipment one to of again on you I during the depending you're of quarter units or Well, thing have is. and a on that look sale what number on depends for margin the annual year that

Now expensive, have trucks gotten as more our margin gone down. the has

look business versus 'XX you a If million $X we perspective, gain QX on the QX at between less. 'XX from had sale

margin when X%. if was to X% back, our a there's you competitor, he you quarter X% at around EBIT and and and that be have margin largest compare add grew was for So probably would at our X.X that we at grew that the our XX% business

are. good we where So we about feel

over year We Rental charts. XX%. off just that more rental this up business last added substantially. the over year X,XXX grew logistics and trucks is Our is

to also in to because the we've that So bottom impact the we but market had have and rate fleet we climbs fleet per is shape. up also great interest me lately the here are because we're of costs will that got our interest obviously consider higher line, that unit

have to a was the quarter. me a our very fleet, QX remember Now benefit We good year. one-way I out we're don’t going of but get low think to

John Healy

you, guys. Thank Okay.

Roger Penske

John. Thanks

Operator

Research. And Ward next go Michael Ward with Transportation ahead. we'll Please to go

Michael Ward

acquire on Two Good the Greenfield much. superstores, used very things, a cheaper site? car open up is or afternoon. Thanks to it

Roger Penske

requirement sales that we to don't have be a on we guess that versus to right what two, you in or out-of-the-box if look probably if what CapEx the we to eight you at Mercedes times, is and store happening you're in buy on depending seven, the could a four at looking invested it's know X% one particular have. The something market. capital trying and multiple your five times I Well XX% you're look certainly basically return at you return and a

the I fixed our total So think think CapEx CapEx as The these are bought reasonable. multiples assets I and minimal. we or

lines real estate the but a the available buy equity think the cover standpoint of benefits in a of and in so the banking we out. our we'll do those have U.S. our available from did Car We it's office plan our of lowest SG&A sale-leaseback. back we capital overall get we to acquisition, that who that that was equation the at had that properties, consolidating take a we chance because obviously the People do us we then and use build floor very and wouldn’t good the Now decided to and rates I capital. I can We were

So the that's to least me what we at six has probably opening months, new is think indication point, the been.

have done us Car We that it in here black. but U.S. months we People haven’t the the and took about six to into get

us. of us together the probably better bought it get the team is business a an you much for in U.S. you a better a open equation takes traditional to by in and the year it's time think a that your think me here than excuse background build service I me to if I So market build you because

see have we standalone, The So at a I it. about good but up is a time. pretty these that of good new feel news we as some engine we'll running open good

Michael Ward

So business by XXXX? $X it's unreasonable not superstore assume to billion $X could be that that billion

Roger Penske

the it, see Well to XXXX, double did we're and there's reason make continue to not didn't by I maybe and would can't I a fast realize no we we terrific. going been but XX take here my good very this have and business there, a has like or out last business head XX the to out what's years is would built over CarMax, acquisitions as look as we'll I that these which say but they’ve

who the brand, about trying guess some same the a We're have the U.S., well. that's to that at really together really, single to company I think U.K. they in great the when and in in the large team sanitized is key time. a our people discipline all people bigger you adapt So All for ourselves day business. every team stores, stayed news here we and business. have running and from here be done the still been CarSense formula then good to we're builders learning the all long the they're with They're good

Michael Ward

service these the you're of increase to the business in big Turning on some insulation advanced side, the automotive seeing A, of rate components. the

manufacturers at just more You there that, are business Are that or that to is or companies service. change is vehicle status comments point the insurance the any or it assume some doing quo. on dealers that drives that anything for the they will making

Roger Penske

the more Well let me much are in than we're past. step vehicles sophisticated back, the

So warranty. wherein to they're and the think going to back when come have going I back to come customer of out they're is

I they're going going drive So that. to think to

margin businesses paramount both past, thought OEM our car trying of us customer OEM, with never and customer satisfaction I in our not going cars know Now side, on that off one but parts or revenue and to look to turn retention revenue they're customer at they new can dealer. the of really used to We I'm OEMs and all our as the I work certainly going that technically share overall to on in the opportunities, on build because and about forward. business. put the things go get get But for it they stream that and things is cases a but with That on probably most see as the sure look service of in our the don't we we that. might in our turn really are the be are that retention.

Michael Ward

you very much. good. Very Thank

Roger Penske

right. Thanks All Mike.

Operator

Sponheimer Brian Gabelli Next & go ahead. with Company. we'll go Please to

Roger Penske

you? Brian. How Hey are

Brian Sponheimer

you locations to and versus vehicle Freightliner when much that a had pure you're a bit running was for business when side as intermediary how commercial question you on your you're selling fleet a of the those curious of just retail to I I are business the of of your selling customers?

Roger Penske

would of I Well, both. it's a say, sum

warranty their us We on have a people expected cases, people for Schneider [ph] Max couple on our and us many Knight doing embedded in rely fleets maintenance. we rely those their like like supply, for their have U.S. parts to preventive that fleets and do their covenant PM, in work to give and

linked XXX,XXX very, down the is months. come or was we're less XX, in than From in together very many too now market last standpoint, the So probably an XX,XXX. there it's from XX business, closely. a parts overall and probably say tractors what's service happened That

think that's year. the I freight forward. or quarter and we looking as earlier the when driving you're X.X% as said last in freight, tractor truck really road momentum, growth was up So go the because Plus the on this up new I at X% it it's of

country So as a the lot truck. this mode benefit that that's driving this in were and this growth, on using of with is of we that primarily kind again transportation

now and question these that of buy tax think many carriers driving is the on spending am this the and reform, are So fuel the is we've we me, driving freight approving no that their economy some money got taking to and all question strong We've seeing have trends. and on got which there's then I that I trucks to there's benefit the CapEx new want guys safety that the market. equipment no of

Brian Sponheimer

forward now thinking I appreciate forms going strategically, the this do of that, free to flow back forearms then and your kind relative weigh, there you how here. business, really how cash for turning

Roger Penske

is to let's dividends that at at I we talked be to shareholder Well, look our how there When first looking that which we today. is return capital and allocation would key. think our we would were that is looking we at look are, be about no know question our and you

used at standalone capital, no both XX the look think use I our think we we CI quarter had of we and and and you’ve of that dealers at an requirements certainly opportunistic we looking question also consecutive then got and share from our XX or and acquisition our some key look today buyer standpoint also we're cars the we're I an will repurchase. for is there have as opportunities course which and be the

that So start be would to with.

business, I that grow take these will truck, investment, can when each the and the you what one at truck Now generation is at on in areas, own. the its look when do look generation cash of retail the you we think capital

debt I off think including at $XX worth year 'XX or of of really they pay million was that they'll real XXXX floor plan only end this and the estate. had that

we're look and business generating to continue question and could but the to at about superstores want business pillars truck grow business if It PTL go most have be to what. opportunity X.XX has and There's to cash to forward that. think XXXX, to who's you same going car and in auto at four I got then will X.X you retail benefit We've ones X us opportunity look cash enough people were certainly they flow grow. good of to do are am back we're opportunity, guess flow at that's that operate So used the generate that the a today continue no a X.X, the used the go really the with a you that and got and this we've I think but to gives X. we to when where real great the X.X, allocate good car standalone it X.X businesses

allocate we're we'll were we and three continue there. in So times capital to than almost back 'XX

Brian Sponheimer

guys Congratulations on a great quarter to and impress. continue you

Roger Penske

much. very you Thank

Operator

with Next ahead. Morningstar. question Whiston is Please go from David

Roger Penske

David. Hey

David Whiston

guess Tony side, vehicle publics so was the of down hey X.X% Roger, That GPU from automotive was be used far. than on first things two seems better some same-store. Hey the X% vehicle nearly on other have me, retail used up reported is only to and main

you perhaps? So guys I Or better? procuring it is your the mix wanted are unique just to on maybe pricing something premium brand know

Roger Penske

those give us bigger, they bigger service loaner you would of they're mix into the I to doing, additional if as our at and capital put they're when look car our used we brand premium money. the deliver us get some car we that guys, we additional vehicles the giving say premium what in businesses, because

new car if additional So a service in XXXX customer good there miles take and in you loaner, there's it it and then support. XXXX a take put real it out retail get you to stream a to to retail

Internet target next on come stores they I door. being I and not of are through customers probably in to the come we deal business say X.X managed to with three within got we've to think term before It's a automatically new in for They looked what when the price. BMW with they used they commit some our a thought double but the the the to especially stores everyone XX% about impact is today that at have by car, Internet the our on think a probably say that we've X new give also of the discount about, where on to we the we're a because that and of on had our and walk him haven't discounting. So strength the deal our discipline gross

service best We're we our So are managing drive to effective we discounting we our through lane want manage trying for also the rate discounting. double to as on grow can. labor the

key. question. no that's There think I is

David Whiston

you a your your likely is subscription your to can thoughts given something and Okay. probably pursue customers you to be willing do plan, to premium get And also more about of type vehicles mix. depreciation want trying month doing a really to on that talk can scale? brand you $XXXX manage there Are

Roger Penske

seat do front this. in everybody I'm Look the watching sitting

in a months. done we've at the we can commercial car now X is the… to over this opportunity today of sharing that no got trying when through next XX maybe bit but we've not about we the subscription. done that one I'm from into dealer car I us focus to a people precludes going We've that's I think so it sure big etcetera, point, thing really. think join to look being the model make in but less us subscription, about and business any I is team for is little an getting understand At this not a had mature subscriptions thing money, nice The which healing, are this to

are OEMs work too. we'll with that to on So us going have an opportunity and the

thing trying across locations. in but look service utilize can of a that's the country? can all to do even we know think at we What this you What I we're business. take bigger to our key,

We captive we XXX that we and have operate our here. with where from leasing shops stores got truck

car a also now. if basis we're focus So question at you on bigger healing car impact we no on a right the and we and a there can sharing is trying that is here have to look global

David Whiston

on last accounting one and half and because down move helpful just coming question QX for did over me of it's that's out QX. Thanks something by from equity

Roger Penske

the That's of the the of only their difference. first leasing to XX% that's in truck Penske fourth XX% profit the versus XX% dose about quarter, in quarter biggest timing the

David Whiston

will ramp later it sort Now up the in of year.

Roger Penske

Yeah.

for is always that quarter First the lowest business.

David Whiston

Okay. Thanks guys.

Operator

David Lim go Wells Please Fargo. from next with The ahead. is question

David Lim

was whatever model. follow-up be subscription up guys guys just afternoon by Tony. like being wanted it it better that on money? then of model. the make whether vehicles lease it good that? or Hey, another to the Is it to cleaning an dollar and but I Cadillac do you want next guys that that the luxury and I Roger How thought is of a the kind additional other to get customer. some simply stuff of just off you for lot handed like program understand sponsored before you it's or subscription or just I get OEMs two before these

Roger Penske

you’ve Cadillac the, this. guess got of doing the got I silver car is and you’ve Well, the some

maybe may it day it whatever one they I that I one I multiple a and day vehicles they're but be if it's be to when to might to Laufer doing serviced. directly to Ferrari that they're a think customer’s need Jeep want sure we think be going a

So in we're area. going to that play

that year Now only right the to point looking out these now look we own, question with have this any, I that part is if not I making don't am it. the don’t at got no I've laws and the millions subscription they in have don't think and to I would very but my there, around there's dollars, force the have, that a in this. viable into that it's that state of end But you some I at the be day, that's franchise business at a of go at start play we I concerned we us quarter for new quarter businesses. all shareholder, when moment, me because my rate put in, maybe at year a got commercially OEMs but task too of these the to to business

take the United we've we but it, got service good think capability. do certainly the remember we and from States the this a I expertise the get got and at got real capital, in look can footprint to business have we a in best we've how

David Lim

Aren't these OEMs their relying for retail subscription model? on the network

Roger Penske

for into the saying sure, I'm not involved the I'm are. I'm vehicles. they're they Well, and point. dealer this service not any of dialed providing in

glove So on I is then third-parties the together I the doing you is in hand it subscription a specifics, too. think but give but, can't there there

David Lim

bit little a that color rising in affect that a us give environment affect if retail environment how How would How rising you more a scenario. on -- rate rate mix would interest interest also will? you man? can operate Understood, the automotive will

Roger Penske

if Well, that on customer the don't looking $XX XX I side basis I a a to side, premium at luxury on XX of over to next overall no we over points and least think think we're $X XX at that. have affect premium month today is question to business. luxury months economy XX say There's strong going the with XX% is lease to a

I So take think to going it. that's to some me of care of

be become and doesn't residual Now the on want and the to prevalent and really more will months take it his He XX or lease gas customer and XX come go. and risk leasing back move at just make that for where point choice. will

We're points. no I basis impacts. my cost is seen from million $XX and at talking were have impact interest So XXX today, a The don't rates we're think XX they're time we've only jumps quarter. talking of I about up about the not

standpoint, do that our payment I So on the don't I see feel but it the from to customer. impact

David Lim

for questions. Thanks my answering Great.

Roger Penske

will be thanks. that Yeah, super

Operator

queue. And no are Mr. questions in Penske further there

Roger Penske

bye. right, Bye, us. quarter. next everybody joining you All to Thanks John See thanks. for

Operator

for Ladies and Thank your conference gentlemen, today. participation. for that you conclude your does

You may now disconnect.

Penske Automotive (PAG) 26 Apr 182018 Q1 Earnings call transcript