PAG - Earnings call transcript Q3 2018 | Penske Automotive Group, Inc.

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Operator

Good afternoon, ladies and gentlemen. Welcome the Penske Automotive Group Third Quarter 2018 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through November 2, 2018 on a Company's website under the Investors tab at www.penskeautomotive.com. I will now introduce Anthony Pordon, the Company’s Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Anthony Pordon

Sean. you, Thank and everyone for us joining Good thank today. afternoon, you our detailing A morning, third on our a performance Penske in quarter assist release designed and along to presentation XXXX posted and this Group’s understanding issued Automotive press you with was financial is strategy. website results

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

Officer; we Controller. call Chairman; non-GAAP such J.D. share be Chief adjusted earnings amortization Financial taxes, and Joining On certain our Carlson, Corporate before earnings operations, the call, Penske, me depreciation and and are for EBITDA. financial Hulgrave, Roger or as will from today’s discussing adjusted per this Shelley continuing interest, continuing our measures, from income operations,

Penske As ended you Automotive three for XX, record September saw months the results in reported the morning, this Group XXXX. press release

from Our operations to and to related increased $XXX.X earnings XX% million increased XX.X% per share $X.XX. record record income continuing

from $XX.X quarter $X.XX continue to of Act. benefit enactment benefit operations income earnings related related of included the tax related and to income reconciliation the million XXXX and Tax tax Third Jobs Cuts of XXXX final U.S. per or the share per share

our press $XXX.X comparable income GAAP on measures adjusted the to Excluding comparable third record quarter in XX.X% to XXXX and prominently release morning's investor measures reconciled presented our which related the this and earnings GAAP We’ve available website, have $X.XX. and continuing this most in operations presentation, is non-GAAP measures. directly increased adjusted to per share benefit, XX.X% million record from increased the

today. the potential forward-looking and Additionally, operations, on our make earnings we may call statements about outlook

expectations. and materially which press actual cause Our results to actual may risks from uncertainties in outlined today's may release, results because vary the differ of

would SEC As cause I that always, additional at I to and over to to discussion you XX-K turn factors Penske. for Roger this call results differ could time, our like And the filings, including materially. Form to our direct

Roger Penske

grew for third XX.X% In you that used to and and as taxes for earnings Good said, XXX,XXX from quarter share Exchange PAG. dealerships, and and retailed you, generated investments including quarter record related were the to results we standalone Tony. third everyone, diversification, truck joining $XXX.X the billion The used the $XXX.X, adjusted Tony report income per pleased negatively quarter, our us. before continuing our share million. heavy-duty units grew the operations in $X.X increased for supercenters. earnings to the record by XX.X% Leasing And during impacted Thank to revenue in by thank per $X.XX adjusted earnings rates vehicle Truck $X.XX. results afternoon, automotive new I'm XXXX XX.X% quarter. driven Penske of third

vehicle, in a unit retail Additionally, and basis-point in new also vehicle, SQ&A service and profit in and and increase the business sold, used generated heavy-duty medium gross a automotive per truck basis-point in insurance improvement leverage. gross parts an XX margin, & finance increase increases sales XX XX.X%

retail basis. and same-store X.X% U.S. a units basis, vehicle On our new called procedures or in WLTP. X.X%; increased from a same-store X.X% light at but same-store for and Same-store new in availability were Total X.X% of declined our automotive the quarter. declined retail by on third shortage a X.X% units units Looking temporary and on the UK testing and total basis. impacted used the increased Germany revenue business X.X% units increased

X%. XX%; down Mercedes-Benz, XX%; brands led by BMW Harmonized unit Vehicle and performance. that obviously Light looking the September's Procedures into impacted third and XX%; quarter, in declined down revenue impacted in of declined XX.X% was the shortage. Bentley Europe. us German XX%; Just XX.X% had Porsche the down Worldwide Testing further and UK also September in down September, down many in Audi

availability the and UK. And due third on have the units by units So, unit certain in that impacted U.S. impact today impacted almost XXX XXX; on again, perspective, stop-sales in almost at Volkswagen, in XXX XXX; X,XXX the units, product sales with to were other From WLTP. WLTP approximately unit Audi significant our over and quarter. Porsche, we Mercedes, are a X,XXX;

side per On from unit the a other profit perspective.

profit up Our X.X% or new $XXX. vehicle was $X,XXX,

or was or used $X,XXX, or vehicle Our per at Finance and margin unit $X,XXX $XX $XX increased up insurance X.X%. to increase X.X%.

revenue Our a on service and X.X% increased same-store basis. parts

into the UK brands market and Moving XX in third return market-leading car and points of the of PAG's vehicle decline due the sports result and revenue to in used core representing approximately market. higher UK the the the produced that brands basis Premium and the This market on outstanding share. availability business by position a brands the in diversification in market our the UK on UK increased a a capital. to Despite luxury mix over largest luxury challenges of due UK and XX%, one used of continue XX%, brand quarter of market. UK the and as fact quarter third super a record UK. franchise includes is brand to premium, experienced on to our are certain XX.X% market. in performance our outperform basis segment the in leading take the year-to-date luxury provide EBT our vehicles, strategy retailer and sales management dealership operators our and Premiums vehicle typically These another quarter foundation a team. standalone of highly and mix, is car during

as vehicle grow the XX,XXX pressures standalone to turn standalone The the well many to business continue OEM UK grown consumers its has formats. to ratio X.XX new and retail used. and to used our Used not platform to in As from supercenter subject continues in expect are through used used-to-new great used particularly X economic XXXX. perform UK to has in cars evolve, supercenters units presence, to downturns to a over

highlight the a the record business in these and e-commerce potential well-established of units in space. the EBT and approximately the I’d year, additional we the over car to with our between supermarkets, next the sales years. This further website used great is be to delivered used business the example expand auction new plan despite source and volume the year-to-date. an in UK. result, grow has operate used like synergies units in footprint providing X.X% X retail the retailed, by differentiation our UK we and XX% declining a per used in year-to-date, One of car chain franchise business As through both no-cost footprint, supermarket invaluable an Over vehicle dealership supermarket providing car supermarket registration used exciting of as be have XX,XXX half a QX the our wholesale is these X our to UK our which can further stock car in of U.S. opportunity to the our Many point UK to

perceived As auto pressures. unique, vulnerable a much to vehicle UK is market believe it business retail making -- result, less we vehicle new our

X.X%. move retailed almost $X approximately generate retail more the dealerships These price, operate Let’s highlight the nearly XX,XXX we one five We XX through XX,XXX for nine $X.X XX,XXX UK, is standalone The including will the XXXX, operations return and margin on no approach. and transaction in in generated plus little U.S. revenue. in used use unit gross revenue used units, and billion the one variable supercenters, profit to on is of and the average in billion Year-to-date, the variable UK. standalone of per a XX.X%. on the expect In a supercenters haggle and vehicles price in gross $X,XXX center supercenters. approximately sales reconditioning a

market We XXXX. latter expect standalone business the combination process of We're new and developing expect the standalone in the to open new sites, to a through e-commerce grow of introductions. initiatives used which four half we in of

and truck conditions our remain to including truck Build market This experience -- rates business. rates. dealership increasing. retail improved including market commercial freight the industry continues utilization is metrics to backlog Turning and strong and strong

look If XX%. XXXX heavy-duty Data, an of ACT on it year-over-year at forecasts Class truck the basis XXX,XXX, would increase VIII North at American represent which sales you

million over all during return new, revenue, truck X%. sales generated the retail increased sales For in the premier and quarter. parts a to had and quarter, our Same-store XX.X% units, on on margin gross increased almost service our group represented X,XXX XX.X%; increased $XXX growing and our total used, unit revenue all nearly our gross of strong fixed XXX% total continue and business of drive market profitability. conditions profit will of covered costs operating help XX% and sales these believe XXX.X% and of our and improved Service parts We of costs. with

back $XXX of an generally in in associated XXXX with XX.X% turn PTL our for with and tax initial additional Penske PAG investment does quarterly million our in made cash benefits accelerated million equity investment. Truck PTL own $XXX depreciation. approximately Leasing me We -- investment of XXXX. with Let XXXX distribution and We July to earnings,

business When received in So, another contracts million it firm escalators XX%. today, main at Truck think To-date, with cash benefits lease, $XXX long-term XX% economic logistics to rental X-year operates lease of full-service three our equity Leasing, approximately at XX%; million million. Full-service investment we’ve income. logistics and have revenue; typically units: about across X $XXX we providing and Penske is stability. and $XXX almost in

operating XXXX, earnings revenue quarter XX, Accordingly, $XX.X million we million. three of in in of sales at third PAG $X.X and PTL return For the on ended equity billion and months the recognize income generated September X.X%. of $XXX

was had $X.X $XX approximately of $XX balance flat with had million, the year. representing end the September at inventory million stop-sale. million in By Looking sheet, on way, at our vehicles, XXX we last we cash; the September,

was year. supply and days year; supply new vehicle days days this days Our XX last XX XX and the year versus last vehicles is used XX

to was was Debt the our $X.X XX% our plan which fixed floor XXXX. $X.X debt million, compared our leverage non-vehicle was rates. of capitalization, at and ratio X.X, XX.X is at Our billion end and to X.X was

expenditures, in in $XXX completed our this we and shareholders. for September, acquisitions continue liquidity, plan we future invested returning developments. of We’ve million, continue for to dry for the by providing plenty We of $XXX dividend, and So, mortgages. non-vehicle the growing to $XX to first At our $XX the million million we also $XX repurchased we’ve capital $XXX X.X year, shares powder reduced million business. debt including million in million, long-term reduced months million. end cash $XX land We expanding debt by million increase nine far in had million $XX floor

we year, $XXX the over Additionally, the international have tax-free basis. at in of the with end the law million repatriate to a operations ability on cash tax from change

record at of million. was model. quarter diversified of Excluding our XXXX the the provided first third In closing, US$XX months demonstrate probably quarter benefit floor service plan, around our transportation debt nine end results the for the the by PAG's and

much PAG to just more business. sales that vehicle than continue new the We business monthly demonstrate is a

VIII Class in We strength automotive the luxury growing in remain economy strong continuing and heavy are brand continue Leasing’s vehicle truck about and and the the a market U.S. duty mix, America, used Penske premium Truck we receive the confident standalone We optimistic operation strength to continued investments. our North business. of and future our benefits of from of

by to Dealerships XXX Before Best the year I other like a XX close, any to Work more for This dealerships congratulate in Penske row. Automotive is I’d the than News to U.S. group listing. second recently the named for

the Additionally, in as a Automotive Turnersville X one of Also Penske our Acura for Penske at work list. best XX dealership top Dealership. number the on the to that the had was named country

for. best We’re would this for best and the time, over call effort. thank company our our turn place contributions, At for I back making to I'll to all a to operator, up questions. team this on of one open their employees by as the it for today. work This Sean, joining of us the honored is Thanks accomplishment. like

Operator

Albertine come James you. Please from the will line Instructions] Thank of [Operator go with first ahead. Our question ConsumerEdge.

James Albertine

margin the pretty Thanks of maybe also used higher? per ask gross Thanks. topline, then, help bit think gentlemen. Can like we’re just retailed. a in drive side. solid X.X% terms year-over-year in I you seeing It question. vehicles? for for vehicle Great. some the you taking profit I expansion, what's articulate Good to demand helping us wanted it through seeing sort walk afternoon, vehicle that was acceleration little used looks on same-store in And of what but you're

Roger Penske

we’re Well, our of looking to UK, the on X I strategy, used. our at think you at when look business, X.X part certainly in

which because of a the decided months to some is take But, to supercenters. X U.S. luxury there miles, to operation. anywhere we’ve is premium the we’re vehicles out from the loaner So, in our focus, tailwind from side, probably X X,XXX on getting X

vehicle any put So, you that XX% from in your about into OEM base, when you got gives the reduction a cost standpoint anything plus service. you that

just look used you particular So, brand. with vehicles. BMW X.X new new these at at X by young, to are When that itself, we’re to

our pretty most much through carries of that think premium luxury. I

give premium We all vehicle on that that a get the new finance either is from and them we a programs customer, lease get obviously or perspective, So, side. available, focus for good. we the finance a are

that's So, I profit. key. think locations, us are we've and reconditioning gross on gone, cost to lower I a base Also, us which key, Jamie, think more to which consolidated reconditioning gain gives allows

to business at certainly looking Double that you internet internet also, we the you a So, e-commerce when means look the really have used me, also that’s big And discounting for of with being key. discounting. are automotive, a part at double and price.

your is on the first Someone salesperson a discount. internet price and thing him in comes does give

seen both you’ve new Double that team. during has used really your to the our helped profit, and quarter. used increase gross maintain us discounting managing as -- and it's think, I So,

be the To to coming through key would points. now, at when e-commerce, of up So, e-commerce. me, those we’re look XX% some you

James Albertine

maybe And lot you’re grabbing terms just a a to delineate maybe via used you the as could sourcing trade-in auctions, vehicles, of where kind remind just of you help us in it from? supply sourcing of us sort of breakdown versus provide some relates

Roger Penske

to get do it would options want key. curb give would maybe I trade-ins of of purchases acquisition but on buy And the lease you tremendous -- ‘XX, those. coming back can percentage But, cars the Then, that we here, but be on don’t can’t obviously vehicles, coming is wave of of customers used. to we’ve into that key. that I be would by then, ‘XX. Buying I later. Tony communicate the think level first And say from we and back, amount not opportunity I ‘XX on about are to the make returns lease returns talked only we internet, in big beyond which have

broad UK, between the I vehicles. and and know good X,XXX in at vehicles the mix sometimes very a pricing buy which fact, a them In time they X,XXX gives of

with the is turn And be right would us that think fundamentals the I the ability acquisition. those what this on are we U.S. technology UK, in what our price location what us they've key. it’s house, of of the the buy car buy both the at for vehicle the the to I And supercenters, used key the technology in in that developed, have given areas So, with give and inventory. to the think in and we

James Albertine

just And quick a if can ask question, strategic possible. if I

I As can the we is across so? on but Where acquisitions you heavy the duty the of think lines from, wanted terms about your first, dealerships majority business, the the seller franchise in provide truck main there used starting with any expectations? year you coming over call of brick-and-mortar dealers of guess, also it and touch possible, do if the next see standalone. or to update growth

Roger Penske

many mandating have out can Well, of implementing -- the I that the been maybe some the and value the by across to OEMs we're seeing -- operators who’ve that other think complexity of in complexity, older CI the of the business the monetize they in of the businesses. there's with but brands,

From Tennessee; growing. West went the we there's a that out no up in side in coming standpoint the the number I to So, our buy acquisition. that the sure have of we're grown market, we that premium other people went brand to since and the with where have public Georgia would we’re first have of a seeing retailers, the to we nicely Texas; we’re where Canada we say volume capital. scale, question to and ability trucks, us -- in we we maybe business But to have seem strategically, there's and forward. primarily are heavy-duty Obviously, I’m

And it’s particular grow we who we significantly to, be grow and that see with OEM framework So, will will landscape that have operating continued nicely before that we business to a any in. to us that we’re allows our Freightliner, we them, a get -- me agreement it cap. committed because

also, in locations Jersey two we’ll XXXX. hope which one we on. have and we and in to one So, grow I I in in used continue one New next cars, UK, And car we’ll the which will announce add a think Nottingham, Pennsylvania, asked one up perspective, open used in about we’ll Bristol, think year; from to you have during

forward. that real see we So, as opportunities going

Operator

Thank you.

of the We question Benjamin line go from have SunTrust. ahead. Stephanie a with Please

Stephanie Benjamin

was I know despite I just kind just to talk Definitely during could good year-over-year. the decisions improvement comes saw that the of some hoping maybe SG&A if some And you the increase performance XXX(k). of to quarter.

improvement speak of the So, driving could what’s just kind you if there. to

Roger Penske

really marketing core thing has costs looking some our mix at Well, digital, and the during of more particularly, shift, at advertising taken which I higher think, main advertising one looked quarter. we’ve the out a probably price

side core overheads I help think, XX%, $X through. at of is also added from flow think when the $X XXX we not million and which yard million. which points certainly the tackling now The added the used the impact Also, big I our you truck those helped flow and that perspective, car and truck main standpoint growth costs our from can as XXX(k), be lot. our quarter through certainly on look have we've blocking our the with basis businesses to probably supporting it our supercenters as duplications profit business, in a the the we increased headwind a those, to had both gross

have and tackling. So, I think But, that blocking better we headwind. it's

look used and certainly profit, the discipline has at F&I our side than more I growth new and XX, When perspective. up a think generated on truck the you car gross on it’s up gross gross profits. profit from XXX

on I XXX%, a side. think I the had we it, that truck see coverage can You mentioned

did our to overall, top, cost the our look this when flat which I growth business. is we and think pretty we're based on of SG&A, growing sustain nicely, much able we the part So, at

Operator

We Please from from Rick ahead. have a question Nelson go line Stephens. of

Rick Nelson

UK I market. would like on to follow up

Some new you guess challenge you of emissions had and think with on and you that do in fourth timing the -- inventory think you do I on getting up some those the make back, inventory requirements, those of what’s much how quarter? can certification here

Roger Penske

models is That's they diesel Light the explain. implemented vehicle and happened all see past, much what all because the is grade scandals, very come now say opportunity Worldwide and that What a test it obviously them in are of a through and line, to those procedures. problem mission those number is, requirement class. in they're the one of Procedures. us. taking control Let testing test. and call model valuable they’ve that the just doing and in available Well, constrained. are us stringent lower Europe Testing tighter the test in are high and the upper priced putting What's will The me for why and is through Vehicle might they happened a in S that vehicle vehicles benches the The UK future capability.

brought In to U.S. to certify. able certain be the fact, has I vehicles Porsche, to know

I a temporary through this probably come expect ball whole the of first wouldn’t I But, the So, tube that quarter. to see situation. end here before

of the here And unit had also nameplates. U.S. of September German Xst, in to XX%, going effect our saw our the first in the both through also impacted probably earlier, September and September, think, September to impact, you was Everything internationally, on till deal XX% mentioned At Xst. good highly XX%, we with remember, on sales. by effect And it I I go which on started Xst. month think the take some I revenue up just it's quarter. were and the

Rick Nelson

getting trucks, think growth. that an that strength, for of the big business, you XXXX? color. on that’s of Any into clouds Thanks kind do been for Commercial area horizon

Roger Penske

really XXX,XXX. and almost think which booked, here over today a last XXX,XXX think and I was when of orders the units, you new September only XX record have a end net the months, XXXX, record. early backlog, new about over the October, we Look, sit that rate XXXX, XXX,XXX, there's as been at it, been the XXX,XXX nine-month was build was is And

they estimating XXX,XXX think are XXX,XXX. about to I

government means I out is know are and to could So, again, of year. question about on electronic time to logging they with his letters the forecast ‘XX driver for two that electronic what's all and happening typically gone people XXX,XXX be would drive logbooks; had there's And used filled the phone probably XXX, sales That ELD think they three where don’t retail the has have up devices. XX% XXX,XXX by. the them. units no report hit sales every Well is to that's federal to next

of the operator. So, there's owner equipment, a been shortage

in to buy that's our in trucks. perspective. on rental We've PTL fleets pressure utilization from put running even So, seen a mid-XXs business order these the had

with either out there commerce, put pressure you at medium percentage over Freightliner that in service this in certainly miles, you by next the that’s the to XX% on So, all the anywhere think for XX% look will trucks are be on the or one-day give Then, light, is which just The is puts it. goods when a two-day and and delivery, of news because byproduct of about really the e-commerce. basis Today, it. pressure will sweet operation parts through business to from XXX,XXX these XXX,XXX this. market, trucks, flow heavy-duty, is us typically it us is spot X for those delivered highest key. the comes run and with and good parts obviously follow-up of us us strong longer-term Units a service this of and with on a X years

Leasing And at a less shape. So, And Number to me fuel a amazing. I in looking emissions spends seeing of we’re because they for economy. are people And is to mind one, reasons. better having And and the $X.X couple year that driven also equipment. emissions, who can look more from more go at to equipment. capability we’re in I that's and on billion complicated; XXXX. new a pretty new also my Penske think to XXXX, much the Truck about question good me, no in standpoint I'm There's

our to up this XX% fleet in utilization point. at We’re

Operator

you. Thank

Sinkevicius We from line Armintas from go Stanley. of the have Please Morgan a ahead. question

Armintas Sinkevicius

had When in stock traction front market, sort then curve, for model, the I investments, mind in think about the pushing as dealer disruption that's in some And far some that year. for innovation. of as you've of innovation made looking this there's a and

some are that Just about, of most areas that you the innovation about excited would of interesting. if you could be talk

Roger Penske

might go from at Well, how the And are there’s online value we’re we’re I be look the case look with cars transaction, our as today customer order you e-commerce, you think we’re in business perspective, money some get the selling expect car, a think because proposition, what's when our when and and successful people what but real got buy really about delivered. the when maybe we only time play, is we online some of question are happens important cars. the of It we investing that at space profitable the experience customer looking not where dividend. business today -- At the us be customers, that, the at easy, is, that a win. what's through the associated more then in and do e-commerce, what and taking you from some shareholders that looking customer. is experience. makes a information logistics pay end that, day the And to to the this also do to The

how with inventory perspective. that that. the are And across logistics the marketing the I at car how deliver forward -- you we that. a that going And we can't what’s without looking know having not overall, are is does some management, Also, not? think Is go as that costs place the from costs pay think and our tie consumer take country that's into marketing key. do for our associated we to to I

used when think Then sell it we're is We’re probably year. every XXX,XXX doing going pricing. cars this to day you

dynamic financing think And that the the point, that do. do say we When online they you it's earlier then, capability. double at which think today. have can understand we there's I this look discounting talked the some about financing, We pricing, the at that I important think pricing certainly operators I dynamic we financing place that takes online.

the think to point, infrastructure And an opportunity, very what day looking quality at as at again, of I of because end the standpoint we it. credit that the at knowledge that's that, risk the through to we perspective. think continue scoring our that we’re in are there's robust from they this it’s and have the sort the that experience be that's an credit they taking have in and from you infrastructure captive, market. at process -- key. of will going online to look a When we the go at I handle obviously superstores. look certainly into win tied technology, And this But, how and we already of

our online. use basis, We in be will big Purchase a good which where we people a social certainly cars approach we if these playing think longer-term Remember, can our used new So, and Youtube, penskecars.com, that we’ve and sites Preferred will and this car those final is certainly have also, be part media bricks is of the Facebook, to dealer a this note, day. buy our for and had sites, shape. our we car on mortar sites single every people and Twitter, on are monitoring And primarily sites. that Instagram

give will save million will than XX% next pieces a XX have maybe paperless the docuPAD, transaction, to us which have some -- we us XX give or maybe cycle months time, for XX a out the We’re or $X state. to the transaction paper XX% paperless It taking investing in maybe of months, that. over other XX%

-- vehicle us leaves pay for the longer-term standpoint, from some our a us in the can finance our help it’ll the So financing sources, cases customer documentation before store.

we’re commitment, I And it very, lots think that opportunities very country. installing me can forward. we fully we decision. that We’ve made in Rentals to that online rentals. the had looked do of So, docuPAD, We that different as we strong. at see across go also with retailers

and this. we make what in I’m certainly our day, win we’re we to all making shareholder and and a of shareholders, return. have the But at money that interested I’m are the So, company do this big end over a for

Armintas Sinkevicius

last what with to talked plans where your provide you are some you quarter it your Can of months us And a you and six call are an about update of ecommerce next, year? sort the on initiatives. in

Roger Penske

when think, -- have sites, to our today. that's all and our I look from are of of you think smartphones over we're e-mobile comes continuing I Well, because traffic half today,

most are our leads of -- Our leads organic.

Over every said that from of look have before. to party. come online. I than those one less at think is third of time, now And our cars I a I XX% as we think

So, the a is to access to which continue service point consumer has the will we miss. want that And that. ability don't a we perspective, from

We are the appointment through online taking at look when that by our of over seeing made XX% the online. online our be now BDCs, And and would you XX% appointments now BDC. -- customer are and service are

coming deals of XX% our overall So, digital. from are

that's quarter. increasing every So single

Operator

Thank you.

Healy North We have a Coast Research. of from John ahead. from the go question line Please

John Healy

Thank you. the Roger, business. a I PTL wanted bit little to about ask

or a you of just dive driving the well the bit and ‘XX, may more or I little pay given ‘XX of little as economic the that what's a on durability move success in Just, think that how maybe maybe back, in addressing business really revenues may as shaky. sensitivity bit the of could not today, kind some kind we business of is and into more as those

Roger Penske

rental XX%, in now, escalator. business, earlier, that's leasing have five-year typically in economic XX% excluding mentioned contracts four our truck I XX% as with and logistics to think I

those. and So, have take us, are that for we contracts vehicles, to our commit people solid

comes of that fleet, of supporting customers. our a about the revenue lease from today is would be Now, XX% and existing our revenue, half which rental rental

the in battery maybe the people As wintertime. trucks want people Coca-Cola an summertime, trucks the want the in extra extra example,

locations from a gives So, profitability business. covering would buy the ownership balance of which trucks, resources. pretty us our a hard mechanics. good a And across business be complexity I forcing trucks we to look to a XX,XXX we’re XXX a a the the the ability buying standpoint people would But conquesting me, self. people have capability or new from of of because hope gives U.S. that When our they in service cost the success The standpoint that our that in other have leasing but is sustain not competitors that for part getting that XX,XXX have year, been has of better trucks now we to time are the

to trucks the customers we the XXX,XXX all-digital, thousands rental XX-hour, And Fed today. XXX ability XXX a the which by week fact service about contracts, have owned us have in own at with look earlier, the over not service is when is probably in the this or seasonality, November, a on will revenue months that's a I'm people. think we you Express writing this today, of road, it that emergency operated out these a business say not seven-day to two XX% capability locations one last very particularly units real advantage of operated market. and we also gives I SOS have is over us UPS. service; that. And rental December, online a have and sophisticated the And of quarter, We This and when people. road XX% our supporting for business talk the think with goes we then sure the over I with mentioned And about coin

So, they us. on count

have allows Penske with to get phone trucks the you rental one which across country We one call.

cash. flex to margins to because have the that it’s those. is the cycle long-term ability gives a which depreciation And tax of fleet, within a we economic on us to return through X.X% in perspective rental we a we again, we you business. those our robust fleet. business. this sell or the giving I we quarter, in And a ability at talked our we profitability look have about it the generates that, people with going me an us lower the that sales our gain drive the feel succession we fleet, reduce think very fleet, off So, a reduce that when view is to units us to And chance have of planning business, have lot our for accelerated from ability And when the really

So, you really a for that, -- it’s when about us. think comes it positive

really is nine our up income For months, XX.X%.

going had we going ‘XX -- year ‘XX. a way out and same solid project good into So, and we

John Healy

final one for just And me. question

Is states into be able those your them retail potentially in the to create then begin through standalone you differentiated opportunity manufacturers at you from curious the program an locations. them a enter may to the Is there CPO standalone and As you just lease just franchise base. concept look -- that here that used come how or that the allowed the standalone the logistically a product on lease at concept? might take framework standpoint because be but to look by to returns, returns the

Roger Penske

that's Number -- in about car that remember, and anywhere half a say talking certify XX,XXX. four average one, years two to old from and when we we’re

many benefit to vehicle supercenters when that I get can't allow to too and miles vehicles I warranty you to a think I not certified don't get nose you it, we that cost do. my has that rebuild that's that and something today car sell -- would OEMs you that and on but certified the tell take think of would you follows high. then, So, get that our us move the them certifying into said a vehicle. the [ph] for don't that start at sure,

Operator

Williams our then, final question come will Please the go Ward Thank from of ahead. from you. line Michael Research. And

Michael Ward

just a strategy. the can I if used, on we wondered talk standalone about bit your little

existing you build they’re you sites after next that So, them presumably stores? locations model new coming stores will Greenfield four Will new the have up. you year,

Roger Penske

to is the an in you the in a have in UK month. just go. actually XXX has similar cars I And Warrington or estate, is take at last People we we’ve some opportunity, complete in done year in like to IKEA that Car then, One months. sites two think site, there there's XX UK. or XXX Greenfield one site, a XXX as ways to the have look real so done which stock,

could be Greenfield. locations CI a at probably real from those which on put look our that than have them would even major lease we that use, would estate we we space rather So, a less building might expense,

as that date of one we’ve standalone business I go is on know Wilmington, estate in and And we think we to capital into that we’ve two Jersey And we invested seen and earlier, that And strategies So, activate we can have which return site sales X%. of purchased outside will those of is Presently overall, both I I the on again, sites the we Philadelphia New we U.S., XX%. ‘XX. ‘XX the another and that in there's question real mentioned UK. the bringing have in returning think online. no also we have

I when look we're XX. you at think on business, return at a of truck looking our capital

do the think homework. how earlier. differentiation going And into Penske we a talked along that number And we at people the gone I really focusing look the be are mortar. said Truck looking hit investment this through in So, us you to bricks is at we've at we’re And we’re business. of the car question able as also there's as that that. to are no key. that space. earlier in will and there's And have I think and going to there's the these from e-retailing balance, retailing Leasing, Strategically, pure businesses do looking as I win about on here we I standalone we’re between at our be transportation initiatives used future a near

Michael Ward

UK on growth have you leverage of vehicles off vehicle expertise and something new docuPAD go financing with it? the It Is have probably also seems to that you equal to a both on opportunities U.S. side, -- using greater opportunity me that assumption, side. else everything some that the the the correct all like you’re relationships in is and your and bank the used your to the that

Roger Penske

leasing car have the domestically that past, to up. a in used that and us down, finance, goes for market a billion any internationally, superstores. goes the used tremendous car we've being gives that asset car source $X in when the remember, both about think But about, we retail the seen outstanding and you talk finance When new market

But price, When a at with are no this might question X So, when think And in positioned no it. to double X, to with you even about be you margin, and over looking at in I X.X our from business overall, the that XXXX is capability driving the cars, margins UK, And used embedded a over There's we're the UK, we’re XXXX. that haggle. a already U.S. we bricks-and-mortar, think you of I think when that from it get a again, went when almost And XX%. mix I look you both again, at including think look to on here perfectly. we in used new superstore going ratio, people's one used look in is to that, see at to even X.XX, car we X.X. we’re

Michael Ward

are the brand names, carrying you same CarSense, And CarShop?

Roger Penske

the the U.S.; and Yes. CarSense is in here Car UK. People CarShop in

there's it And one having office many the initiatives announcement driven our marketing I been name, that UK yet. has we combining had the brand in SG&A think I the a at of back we look and taken leverage think the quarter. an in haven't going have down great SG&A combination, to by we’re

can infrastructure. markets. UK international brand technology because one the have representing we of have, name us the scale and We Remember, we the in anywhere this

you costs from from a a when about profitability take one. are think me, today, think got before by we that could and Hatfield Pittsburgh or OEM, we a the months months. it the an Warrington least profitability. less. Greenfield or business into years can UK X So, lot the at [ph] site think generate X took And two a to day ones I about eight This into in they And to profitability get

positive will be timeframe, So, we that think a creating within EBT. businesses XX-month these

Michael Ward

in revenue standalone of the next the double three you years? Can two years, used vehicle the

Roger Penske

XX,XXX, that’s up up, year-over-year at and that's probably, what Tony, We’re what XX%?

Anthony Pordon

Yes. at for least Car People.

Roger Penske

Car Yes, People.

Anthony Pordon

months. now for $X We’re billion right nine in revenue at

Roger Penske

growth. organic And the

would the tell ability ability, potentially we going other right on I But and do. our So, basis, to obviously our you, certainly we’re at make where now, going you international is can and something be the the That list to top when but it’s of to that. acquisitions double not at goal. think we’re a look

that double chance new to growth revenue. give the a will sites organic us plus plus acquisitions So

Michael Ward

It were ‘XXs. dealer the way the in like back sounds vehicles locations new

Roger Penske

think. don’t got I Look, be to we’ve multifaceted.

technology there's people that available want to to If mortar. docuPAD There's that can there's that have to experience. better, are the us still and buying no cars, question… new bricks going make of We’re and use we no some question experience

Michael Ward

relationships. And the bank

Roger Penske

Exactly.

compared look that transactions the when when quarter contracts And today looked year-to-date the a at fund when ‘XX funding, really electronic money the XX%. you I for up. funding, you tied in transit, thinks were to revenue, amount third ‘XX ability And at customer about the think of number on have us I XX%. before you a up we basis up look to at on just here, is

million So, from a to billion. $X $XXX

is -- I your could number think realistic. be So,

Operator

one final I question from the Murphy We ahead. from America. John And do apologize. of have line of Please Bank go

John Murphy

here. of Roger, just two kind follow-ups

on of in going there. you kind decisions little rates, your this Mike cap historically you on it forward. existing go higher some lower anything to your return I and need going it this, pretty returns benefit ways looks allocations to you through just the is as there have that look of is think be and in the release how had might has and which like portfolio went push just -- kind a at and in You cap flexible. to more you that’s is these number -- allocation But, return But, portfolio do think diversification of a and mean, better opportunity capital might way and detailed there bit different make about

Roger Penske

think that looking that returns. our not I perspective, peers about but now question only giving on that international we businesses talking we are that, I are hear too. no talked from not There's us And an about the domestic

based environment that a area, And it underperforming to do then have of cost compete start driving in the $X $XX And spend million, locations. have we and the because what's of they particular our at we on there's are of can that retail CI is that in or OEMs. we to look discussions the because the to bring return there lot up, is question need to that's no expectations today have market determine, facility; what that and We million a you our on deteriorating investments that. we a

a invest or dealership maybe in something We’re that much else. better to off truck

today cars CI the months fixed we're car a We that. have invest at look And the the they've day think CI investment, trucks from investment. used at to really I across country. mid-XXs delivery, space. the about manage, our with levers their more at certainly We the a good or superstores, about think to supply some cash. we vehicles don’t I in with freight It’s probably road. and bit a to that by And all new much it's put -- being else about the of in to ability the talked that? stable you’re third time -- XXX% and We’ve go a a talking white Who can standpoint you give a really a of running multiple because will we of a cost, FedEx little just distribution period. not We when cyclical. just lot more have commitments XXX%, think. PTL think think truck Asia Zealand. continue to have about X% So, advantage. It Mike, a pull, a on talked counter to business, And do look to the our then, new just thousands truck not used generated there's those UK service building for in We to more on which premier, I can I now, in be in their the the two with return a going key. forward it's almost on I stores network retailers forcing own you and X.X. business. basis, on Then, next lower CarMax, more commercial X% business. job they us certainly UPS, to or sales lot in roll we the these absorption the we so quarter would continue would talked one XXX as all of seeing the in people to And think at the New And the at about for haven't in us great But I'm don't ratio on as done that our vehicles talked business ability we’re competitive specifically over give today peak at to when much extra sales. in a And XXX like look when I which and cars. locations and Australia of I really total going is with is And assume and a to invest that will is our then, certainly

be Detroit and done Western a then grow. continues land taking trucks, of And relationship you the become Our diesel, having position lifecycle we prime our business the we distribution prime a contractor on and defense XX continued basis. of expense, then many and in applications. in both business on billion see typically of maintenance to a are our engines over supply a this place to the on years with next that And sea source and to $XXX with government X the the MAN will for we MTU Star Australia. because And

to I year-to-date that on a in do going returned I think vehicles buybacks raised think we standalone, certainly commercial row or our position. PTL, forward obviously stock at a $XX And we’ll used have I and XX lever. that quarters cars, want looking we talked So, we've we Then, dividend continue, in we're I also think about to basis. and we great but our million got think a continue

John Murphy

you on Roger, their now distribute they I going their And you just of one and going that are follow-up there discussion we're the hey, give they we When last work I want on that's make point would reached beginning to buy. to kind say, mean you here, some automakers some someone the where thing product, by on listen, the else. a hearing the a to listen, money about what's think going can Roger, service more automakers like funding with coveted like might the lose happen because of automakers on any someplace is say, to you. lot business site. we're to economics automakers partner hey, customers Have this. a better is with partner in are you, dealers that you like many you a

Roger Penske

out accolades. only concern, about having no is OEMs the line Well, question. when today gives the let the look, there that agreement, you're there's but about trying things some then because that we And with many tell discussions appreciate return it run partners question think and OEMs I'm the saying that to themselves. franchise the around doing not And CI who my customer are there. with are subscriptions overall, is But are the that you are this no about on -- that That the the the but there's they business of many when you there warranty requirements, to need there from satisfaction Look, peers all on good ones vibration is the the we do when there myself this capital. required, have not some that can customer I have that. are standpoint the of is marketplace. the requesting, touching me and because me

online is I'm that at there's business, in million very no afford the a $XX look, to looking look, to advertising So, question spend answer can And And business it an carefully. big day, customer is shareholder quarter a at this the business I changing. generate to of a because end care have we about return. profitable piece and the want and it the company. have no earlier, the of said I I we to

those Lincoln that done think in to consistent whole that good you’re the out lots of be the in have that as better business country great I in think might seeing themselves, Lincoln But, was are the know there But knowledge sure dealer sure, don't they’ve of end business this support, on they're by across out. opportunities out day, I because the to a there and make working together. it’s became for -- OEMs. more the capital has put what be. done will But I’m have partnership I'm that brand have and I people of opportunities all the [indiscernible] So, see the the as know. for for CSI, discussions. stores into Germany in to more California, Europe, at job. a And the We gotten and sure, get getting you and OEMs all a profitable. sure market, the you're going people not I’m right or them of

And So, at the today, that's looking why business guess changing. business diversification. I the end of is we’re at

Operator

further no questions. have ahead. I time, this at Please go And

Anthony Pordon

right. for us to All everybody John. joining today. Thanks, Thanks

We quarter. of will see the next you at the end All best.

Operator

Thank ladies teleconference. conclude conference for that for participation using for AT&T you. our and And Thank executive gentlemen, today. does you and

You may disconnect. now

Penske Automotive (PAG) 25 Oct 182018 Q3 Earnings call transcript