PAG - Earnings call transcript Q4 2018 | Penske Automotive Group, Inc.

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Operator

Good afternoon, ladies and gentlemen. Welcome to the Penske Automotive Group Fourth Quarter 2018 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through February 14, 2019, on the 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

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

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

always, may have. you I'm follow-up any questions available As by for e-mail or phone

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

and the presented the today. may Also comparable and potential call investor we prominently the reconciled our operations, the in morning's on measures and available most forward-looking make to is earnings outlook some GAAP comparable our press on have this have website directly presentation, release statements measures about non-GAAP measures. We GAAP which

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

to to you always, I over including that XX-K our Form additional SEC As direct discussion cause to Roger. our turn differ call now the filings, results for could factors and materially. I'll

Roger Penske

to report PAG used PAG of and and you in retailed this quarter thank I'm for another everyone, new afternoon, pleased results us units. XXX,XXX Good XXXX, best and joining record In history. year the afternoon.

X.X% the acquisitions per leading paid approximately new providing dividend revenue. earned operations that earnings XX% or to increased taxes increased We we $XXX income generated $X.XX our from to million share. continuing billion, before and a revenue representing Our each $XX sector in was shareholders $XXX in We million. million yield. almost by in by estimated annualized quarter We dealerships, $XXX completed and earnings opened

our Standard history. November. auto, $XXX Leasing watch truck such our or again positive our and to both periods, this leading million Penske To and per through continuing million, while Results XX% dividends. earnings exclude investment. our the & were XX% and $XXX investment, our and the to to continue Truck work like in to was equity adjusted businesses through team and and dedication We highlight XX% Moody's, in a in and also used, retail, of up X.Xx Poor's we ratio leverage increased XXXX. X.Xx improved of share diversification before versus our XX%, placed Penske taxes XX% by commercial Leasings rating distribution to shareholders returned raised on earnings generated rating repurchases BAX credit Truck in average income XXXX. Also the standalone We In XXXX, from on to our truck share company return We of hard income year of XX% presentation, press in are noted tables operations release for company's earnings retail which through items up our in Australia from and best increased as New for to their PAG past commercial comparable the Zealand. in I'd all thank the through the year, one-time year, operations XX%. nonautomotive from our XX% strategy

units, few up its X%. turn of Let fourth highlights. retailed and to me We a now quarter the XXX,XXX

and income in fourth million, income detailed per was impact with from reconciliation as basis, up per continuing from of PAG related revenue foreign is There release, our $XX adjusted continuing and share. in the the an non-GAAP earnings was operations growth share XX% had quarter quarter. a press operations $X.X both was On record during no X%. And Our billion, exchange earnings $X.XX.

was declined in a by QX. On our light the shortages store used international vehicle QX. the harmonization and to same of basis. businesses product in called testing and new in in product X%, procedures, was store new automotive business store worldwide X%. but X% mix an WLTP, ongoing down impacted details units sales Same on up unit by retail X%. Turning which Total Same increased is

Specifically, in QX, the down was was in down XX%, U.K. Porsche XX%. Audi

these and profit shortages at In the $X And million down our Audi down just up approximately or fact, numbers $X, operations impacted in business had We by in which if retail X.X%. XXXX, Customer gross X,XXX a you increased the look was unit, XX%. revenue finance up rest us a and was Western parts and per January, reported pay $X,XXX about Same Europe. on was basis. retail $XXX. fourth at store X.X% we in gave which the down vehicle similar U.K. ongoing was $XX. estimate product approximately same $X.XX share XX% of Porsche & up our the store $X,XXX, is Used units. Service quarter, was $X,XXX was insurance

was our X.X%. shop was warranty and down X.X% up Our body

revenue standalone operated, in Looking supercenter business, before, as in X in U.K.; one priced are X as U.S.; X before, plus no-haggle dealerships; center reconditioning U.K. said said we at approach. the XX and our unit we $XX,XXX, through at operations, we the per on $X,XXX, we price used and vehicle variable a the These return transaction was and of margin XXXX average of supercenters X.X%. for about the billion is gross XXXX, in XX,XXX and retailed generated a nearly The XX.X%. vehicles these $X.X sales in

initiatives second new with used grow combination of and in anticipate through expect sites, development We track on which opening of remain the of standalone the the X half year. new standalone introduction. a business the We market we to e-commerce

continue continue truck Net increased experience XXX,XXX X sales with and market profitability in market help in build duty Looking December, and retail compared this sales heavy-duty end will to of medium in business, retail XXXX. record backlog XX% North our believe strong an our XXX,XXX XXXX. the strong condition units the business all-time earlier a to rates of We and to X growing was 'XX at remained America Class The orders drive nearly year XXX,XXX. conditions. strong Class rose commercial improved in at units.

units Premier X,XXX $XXX in quarter and the XXX% XX.X%. represented units, of on parts of increased Group. And basis total the the our return were sales margin increased gross revenue for the results cost X.X%. million generated fixed that in retail to our a business quarter The Looking in Truck a quarter. store of by service Same XX% covered revenue total that and and XX% fourth and the up business of profit XXX and during point, of at

associated ownership depreciation. distributions accelerated cash earnings, Turning equity provides with to and A Truck Penske quarterly PAG XX.X% benefits Leasing. generally tax with

December generated return billion million $X.X revenue on operating PTL and months X X.X%. income of ended XX, of in the $XXX sales XXXX, For and a

earnings of million For the made $XXX year, of XXXX. accordingly in recognized quarter fourth the million, they $XX.X equity

PAG our sheet cash. the in at Looking end at of balance million We $XX December. approximately had

inventory $X vehicle year. had last $X.X compared to XX $XX.X vehicle We of of end was to was at basis. And XXX representing the XX worldwide on compared sale. total million billion billion on stop days new December supply Our vehicles our a

last days Our this supply of used was year year. compared to XX XX

$X.X debt rates. with our billion fixed is plan was nonvehicle billion, floor $X.X at was Our and XX%

luxury end the for the year land to million facility XX.X%. million to liquidity. record had brand, in $XXX dealership business ability -- capitalization of XXXX PAG's December, used CI demonstrate model a In strength the car growth $XXX Further, acquisitions $XXX benefit Leasing Further, premium future on repatriate operation the the our we for at closing, today, development cash expenditures the through operations included about in generated development in America from our had we strength we we tax-free earnings supercenters, have our of the ability I our think Penske in basis our for XX% our capital the our was provided the by future. million Truck debt million total company and and the North $XX gross expansion. get of investment. and our diversified of Our nearly parts for And service and, The from XXXX. in certainly, in profit and international of and benefits and truck

is more PAG monthly has Our demonstrate a new than business vehicle much SAAR. associated sales to continued with that

fact, X In you at have look pillars. really company if in we detail, the

the at in obviously, car pillar, and first international. both The new sales is used the and U.S. retail,

be standalone used car business. pillar our would second The

and Leasing. Truck third The business, in U.S. Australia both and Penske the the truck And Zealand. fourth, in be New our would pillar investment our is obviously,

we today, such, remain business. our about confident as and we'll and the the call So us up future of operator. joining optimistic again it for with the open Thanks

Operator

[Operator Instructions].

Merrill John with Murphy go of America line Bank First, to Lynch. of we'll the

John Murphy

VW as bit out? are the there a break Just be really, when But as in is or that logjam disruption still you deliveries you to little on is will WLTP a the the It that fourth question But sounds like from January units? going anything do seeing on quarter. tough. worked think clearances first far quick hopefully

Roger Penske

says But our they hurdle that. the hope emission European that driving of real they back all of testing and understanding thing think to those is did which where end feel RDE, people tests communication that's come that Audi I I heard a the Well, statistics end the X. that One with bench that's be and to the take road the be the QX. meet of compared quarter. most WLTP that have they for vehicles think manufacturers by the that normal emissions, compare ahead to And haven't they and by Porsche about both will another my that the driving to have third the from they're on the it's to

you wait didn't during on QX number But and obviously, control. expect, I units the in didn't think we'll that margin we to So most we EPS. vehicles have high as are the these quarter. again, significant with gross and -- of made had we're units, And under But have our guess, we earnings a see. have I of would impact

John Murphy

through take, will when end fair so assume first we'll think be it give to this? you of around that -- the quarter, it or of is the So worst probably is be the

Roger Penske

would I certainly be QX the make, of would a point would by to yes. Yes, good say -- be end

John Murphy

a used then And Okay. initiative just on second here. the question

newer us more you the a coming bit little in X I in a the stores stores when efforts wondering update of timing if they there. if there's curious detail And two on bit the here little the in productive. anything the Just online and you of around and also could slipped would a to on And U.S. just comment give be on be us U.K., used. was e-commerce

Roger Penske

now we a right used perspective, have one to Wilmington, Delaware close Well, business that that's under construction. from

hope shopping be that in online that Home refurb. another have of we We we under have of negotiating we're refurb to up been center then And buy, do which have year. will end will to done quarter, Depot-type the the construction for which another U.K., process and should some business. then the we has And store, in here the It Nottingham we're early the when in in before a And Bristol. closed. CarShop at look we that

I business. too the of XXXX. we many, in websites that think that our U.S., into a to the that Purchase almost get these But both to we new at those we international. And in really when almost from the e-mobile for growth shape. that used, have the our really profitable are good the about no marketing question in the that to that we U.S. overall, sites because we upgrade So activate continue continue are and we've on from all get cadence at think have. X from look have look smartphones. which this Preferred hire our with our been not as half far we're XX,XXX and in and out. of Basically, land end -- e-commerce have we our basis that. months day, U.K. think standpoint after functionality we we purchase. when purchased from product. we is, in there's We we pattern these, and become the feel will we're want And want we And have shape that and think train that other And history, in to good to both the initial of the to be and to I at as online, and I and people good perspective, on X also see we now, today, to using, an how hope both of future, business the is been vehicles worldwide has And traffic coming our what we ready have a is Today, our

a fees, the We names, obviously, taxes And that has have payment have tools. that certainly a but other the final consumer. still you the that of get and the information calculations, we the our has to time got to other But end this, $X.XX see all the for names. transparent when it been We've and with locally. People customers. And are use obviously, provides to the to the be personal to down authorities, state real chat of have we because there available. customers connection both

And want we still do have signatures. to some business lenders of the wet

but out, while take XX% and want to are online people line I There process, buying the with that prefer to buy that, dealer, I'm closer, more think partners to of getting steps from start are XX% to likely the a buying online. but that paperwork want study sign dealership. during obviously, they again, working that's said But take with be going the at more -- to we're XX% they with XXXX. they CoC on but was are a sure our familiar not to consumers

the at this particularly, at think or cars e-commerce office customers. in day, our And we we We about home X% continuing, the those are an car the delivery. superstores, at I there the U.S. we at of used we that that business the on. we one look And a if special was at perspective, customers end there's our sold U.S., sold made look the that in from of business, capability X,XXX in at going So to you only delivery for lot our online. XXX,XXX look look

that relocations online have could obviously, So locations valuable some Penske we future having to want the with that, have Leasing we that's the to don't for remember, business, very from Truck in our we if impact be an negatively. associated see us But XXX business.

So an in we that the asset that's have really bank.

John Murphy

a look quick. over Okay. impact curious I the is just slows maybe real service at just business, parts parts That's when as if cycle in of truck very at mean, helpful. it percent I'm bit in lighter a little future. we that time how truck and in that And quarter. a the and mix should the lastly, was service fourth the business about the mix we and just retro think point some as the

Roger Penske

up. it a look used XX% a it's mix so lower high and was margins, it you when or at so the as XX%, high XX%. the been was as much business Well, it, because in but It's new revenue drives

And of up on had That was points -- the a it we about service So fixed the again, when and that goes fixed there. only think you expenses. difference We XXX% for business, that's basis means parts strong year covered were XXX our our margin. XXX% coverage. that our

business So the in in year the very QX. was strong also and

Operator

Our question with Stephens. Nelson Rick is from next

Nels Nelson

them fourth of ask like you Or consumer, U.K. challenge uncertainty. I'd up how Brexit And you to with do related car was to think the unit? you in the about the size quarter buyer, entirely it the the is Brexit? this

Roger Penske

U.K. of is we current the is we look quarter, look days. the backlog Well, the January. -- And couple quite during The in last up X.X% We on to in our let's And I registration numbers moving the was and to nicely. mark beginning which we're March. at our fill see honestly, at up customers think data have. only

then we at feel, without obviously, is is during And is moment, no But we at the and is XX, question on premium/luxury having seeing exit then the really But in fourth And some the in is business, moment, other And of supposed only quarter. of slowdown obviously, XX. lot agreement our than forward. I and back occur cancel vehicles get One know in an the January. to extending going to obviously, So possible the certainly, -- most referendum. going our we're vehicles that, a we've X all really momentum I the I March. up at at And WLTP into case. Brexit up occur X end some year. the we're not the scenarios. in Article had on Brexit impact don't look customers. to car -- then, our there's Article that side what likely stock There's we have deliver -- to XXXX uncertainty. not pick used

certainly So we'll that of for QX. the and rest in rolls how see the year

Nels Nelson

like also ask I'd the right. All to environment. about acquisition you

a of point fourth You've open up and in quarter. stores Lexus couple the picked here

opportunities along If you more could those comment on do lines. to the

Roger Penske

guess, then and that, strategically, people tuck that up we'll the one like their was hands seller we our do. XXXX as we and lots truck Canada. we're businesses, to in which in in to Englewood. Well, purchased capability our Ontario, buyer, but Lamborghini buy third buyer that what meaning, to premier sold for we East on see really two -- did an opportunity and the to with had a And already point, can about continue were it Bridgewater. U.K. location number supercenter Eastern stores: section, and we a dealerships Lexus, the back-office Lexus has purchased, I Jersey Bologna, in in the business, two New X Edison, There's XXXX. had had JLR added pipeline. before, these in look have said business, committed to one business we two foreign we're had businesses BMW in X we the obviously, in the We have in to And Austin, Coast. with the those we And brands. we a where we there. then market added to of certainly, we have in we the had where of of a and And business that We in the going quarter million a And a then $XXX we in was strong Italy, things we Texas, which buying our where BMW QX. open And contiguous Mercedes-Benz

when the at the cash. have. returned for we're priority back dividend, we look you year, during XXXX. shareholders hand, the at And so we to $XXX obviously, last for have other looking we the when want to to opportunity use really this, maintain similar our million -- a And we at On which, think our we'd expect to pay far, look to -- shareholders. And our I

we from and hearing seeing look Brexit, So stores, in which are a the These today. run we're we good even some mentioned balance my lot of market at deal the I sheet with. of to going are buy But some we're tariffs, on we're the metrics remarks, before about, what very impact, have a of out that things shape. to perspective,

think the we're at don't we're have, I the those at divestiture. or be domestically certainly, the area where here that We'll looking other we possible internationally doing, both market fit really assets underperforming that ones and have for the we don't and, our looking scale. that

So overall, again, there. But be we're out selective. there's going to opportunities

Nels Nelson

much Okay. to these How divestitures tied was in the revenue Northeast?

Roger Penske

Probably -- $XXX and -- about $XXX overall, between million probably somewhere million.

Operator

SunTrust the Humphrey. go we Robinson Stephanie with to Next, Benjamin

Stephanie Benjamin

just but more would to environment, of incentive up what down just I that be think I focused overall a color -- follow I wanted terms it's on the in And you're helpful. premium/luxury. some year-over-year. know around just in seeing But bit

Roger Penske

you were normally SUVs are when about look on And for premium/luxury. a XX% at at look is overall, We it in we on guess, X%. think, and the almost incentives, at XX%. big were they I trucks Well, which pullback month And year, did XX% when was incentives, see December, premium/luxury us a MSRP. car about and the to the I last

on of our it's didn't that some variety. cars has so big and downward our some a some we get -- or in I is strong we really through, it's had area think which that other strong December, because pressure mix reasons, maybe the incentives impact But didn't brands, as of us on in a margins. the the either have allocation WLTP German

excuse a of buying on looking somewhere incentives at it. look things But the can an foreign, me, -- You retail. advertising, I or support XX% will as drive the overall, number around we're think bonus

Operator

with to Next, Stanley. Armintas we'll go Sinkevicius Morgan

Armintas Sinkevicius

up, for the order commercial about truck for backlog strong about retail square business. How XX,XXX talked digits Class Research North the sales you from for XXX,XXX, single estimates X that low versus is do One year? ACT the America we

Roger Penske

into and out with on at think Freightliner and order share And market about that, year. a right you we're think at if been these is And like as has lots nice into added has where That's think year area we Hopefully, XXX,XXX, Worth, later in Freightliner there's a running us like their in to up board going Texas, and a what than I what look Tennessee tied in We that of XXX,XXX slots at And growing from been XXX,XXX manufacturer those have markets. up you oiler got in we Dallas we're and when going we've when has some XX%. our the store the be And the construction we've continue. and Canada. entirely now, backlog point. to certainly, these Georgia, really increase. will businesses matured, on, allocated Well, team we've -- really the in brand. the Oklahoma open to our last and XXX,XXX -- larger this been look we're over same our going good in for basis, year. and Fort just, is markets board, markets, order Freightliner And our West to of

Armintas Sinkevicius

that digit growth right. able then XXXX? into good some Leasing Any to All continue to seeing wouldn't Penske be And grow there. why Truck you reason double

Roger Penske

that's when think just big we so grew we to about XXX,XXX that continue business. from at and And increase in units that in went a Well, right you we're XXX,XXX, -- XXXX units. about, we grow to think that

and billion know, profitability million. an $XXX that almost look last million the if from to billion about X a our about you grown $X from at $XXX the over to you business overall revenue As years, we've from take standpoint, $X

X- or put put see typically a these these we we on we continuing to term. that annual that on customers an because, remember, X-year growth So that are products -- basis

ability have the would continue Then have to escalators we logistics And cycle So into be economic of that business the we accrue contracts. these the the that tied through have transaction. will side, also on on and contracts. lease

stronger. come the understanding, ownership of the business complexity roughly ability So the the locations think can have hire trucks, of we ability the a the us get our to technicians see we good people very the that of the to service a across out because cost that We to ability position the XXX leadership continue think we're with our to to grow. position. gives and we in captive vehicles And country trucks,

Operator

we'll Research. Next, to Derek Edge go Consumer Glynn with

Derek Glynn

So can than I gross see as it to could grow standalone mean, what relates that how time? and we from in expect think parts do stores, time much to over used how today? contribution less fast service given XX% you and over it's profit

Roger Penske

Well, locations. is tell existing now, of U.K, reconfiguring I in we're thing can all the right you the one

about, you our GP. it's only when typical have in overall even it's We other in it to for opportunity we service to come some from going because rather today, of they about quick done of buy you night, when the and revenue inviting have on think our have they're some take profit. and cases, area. U.K., And be the bricks-and-mortar a our an a the need for areas. in in than XX% what our them gross X% these draw U.S. we over places, customer of you to business, think much the when plant, And vehicles basis, XX%, and where fitter we won't local more into service XX% it's the And

as because drive-in, sites. have locations, have locations. building new new a have been margin them, the opportunity real it's supercenter in we what all also. we're And focused we this of retail those reception, available see high to on So the We'll in similar auto our a having

Derek Glynn

it. Got

some years, Okay. achieved over the That's so you've in just helpful. growth and secondly, then U.K. the And good scale

for the the leg attractive auto if sense retail the the view geographic that expansion. regions make wondering, business, U.S. of and next any outside would countries that as Just you there's U.K. as

Roger Penske

used think to take you grow. Then on to was need where to a focus we Well, we think, car business. now, see Northern a Ireland, certainly and at It's and have right Germany that, U.K. continue I have superstore where you look -- the opportunistic grow continue the where us are in scale. our Italy, acquisitions. I ability obviously, would we And we

We have the a in BMW business, Barcelona. business small

in that growing again, the potentially, you'd at here this in think, can the Spain, businesses. it domestically give or not with by will that on have more U.K. there's would I in even point, that that our we market us scale. something have existing glue But impact,

Operator

Instructions]. [Operator

to Next, with we'll go Morningstar. David Whiston

David Whiston

I anything joined did EBIT the any impact this, that? there's If if you Brexit EPS, late, financial call giving XX, so hard I a kind March about disclosures you apologize on of but impact like are address or

Roger Penske

that. the No, we've at and the not be if what that market calls, look here, about we'd impact, mean, addressed a all. amount talked I in have would at to we've I future down, think, was certain go back take a

handle But discussions And partners. unlikely. pushed orders end service. up forward we do. case, have think think to the we and got just or the either ability really out. parts we're will stock our with our in we what day, don't so OEM parts, it's we've pulled that, We I of the think that our at on certainly That's be

David Whiston

impact was just you strong as Okay. Model in the or December normally December is. of any rise business? mentioned X And obviously, on And premium/luxury down having of the issue. U.S., WLTP as you inventory is not But that think is do shortage the an

Roger Penske

leadership the there's Well, certain when you definitely markets, taken in look there It's so side. you Model in at statistics Coast. And the question. the -- to look on is got West no X premium/luxury just at

they're reservation Now way some an of bank they from couple had their through working process, that. order hundred the and thousand, think, I

a up building pricing to I Now know. And X. their had don't that that last impact see to the I them, the XX on over But days. Model see reduce the on have is they've that'll -- inventory thousand couple we dollars what week

in the though, really the in marketplace. good I into see, million that, and night about be vehicles, the and -- million which U.S. or every think got other has bringing is X.X what these done EV about market. $XXX of job. so cars EV in we take marketplace credit someone premium/luxury sales that's happens. the going talk times vehicles Obviously, a those to it's XXXX, and the to of XX fast-forward the X, entire [indiscernible] that away, But you total They've And we an say electric we So And one and to with million said if in take XXXX, a vehicle customer have you dynamics the vehicles side. and all vehicle, are of premium/luxury the

would still million ICEs $XX million, we -- be million going that going million think of service on I would to have take get it are departments. for $X.X that out, that 'XX. $X to be, point. that would $XXX come it's don't what really away Still You to And our

So the of about it's that when gets from and the Audi, already the talking it's at you that when be primarily And the most what? you about. going the day, Mercedes got are from the because to people coming think is I range. I-PACE, think which to Taycan, XX%, look happening, And the luxury of that, e-tron at side end here. And in is winner one got guess you into coming the XX% not impact you what's EQ the

to going the that's forward. here real going race So be

the Cadillac. You lower see from put to shift of GM against technology vehicle didn't kind MSRP their

guys we're So the XXX% all I don't race the electric. for think several years. And I being see see premium/luxury to here it luxury be going of next a

So you on of that sense gives impact service. a

positive We'll these them the and complex think a local other dealership. I see cars won't to them going are more see the hand, also. But into coming a that's service shop. On

Operator

Rajat Gupta JPMorgan. And next, go with to we'll

Rajat Gupta

year. Just of solid The here, expect continue peak I having execution or has F&I of follow-up. have had initiative near on precluding vehicle you the somewhat new new pretty it's and on been a Do that level this to a a the flattening And obviously a environment? a question environment. your context initiative

Roger Penske

or And we the transaction. I of we've -- look Well, the think think is got undervalued Remember, many a here and total a at car our to that really could we you've that got calls this upward missed thing then car we yes, talk -- key I got on got overvalued you've F&I capability. F&I. margin, about when trade-in in be transaction, the you've

XXXX. wholesale. $XX, then all out -- U.S., look doing in gross and at first this fleet take our we and was used $XX. $XX car you when time, was up at $XX. and today what we was about $X,XXX XXX,XXX we're without up in, up units all in put finance without internationally, and our we're gross, And gross sold, we that it about for of the that We're $X,XXX, and and was I'll In that at So car number look new the

can perspective, because money work vehicles our And which we should you and And the from probably flats our a get in of can at XX% and we my or the on our basically case, you in we number put look could in things less income, you so more back -- more total, end, number leased, our F&I the are So those. finance is the XX% premium/luxury, do. that's U.S., of There's at. trade. of margin the that's overall when it's look you at look only of you

our we the the from paperless down this products. of rentals of also transparent quarter think I half up customer, from time are standpoint probably think, from standpoint the more it's put add-on which as a the reason docuPAD of the this I the standpoint product, And the in F&I, So is transaction for in, we process. we're it where is cuts

March that a a customer. those on made we've of some along product. People the things of our we very pay the these and all But our tie-in at if partners, go to has So build this numbers, things, to you continue a cancellations difference. sometimes, on with do way really, OEM with training high been rates forward. that's we as of slow they to off Also F&I, get transparent in look

So we're trying along manage process. the to that

Rajat Gupta

was on question just G&A Another execution. your

think part could it still solid, 'XX? G&A during 'XX is entering the do investments ratio think still of see making declines here. business, was that I Or profit docuPAD you early? environment you're to the gross you again uncertain then too obviously, the in pretty And including in U.K., your in and

Roger Penske

on got around for But benefit year, basis I tax turned and No, we out put where the us, we and are technicians we all added points as XXX(k), last now, a to to a really, because points. put which basis sales a provided our benefit giving of SG&A had We to think recruiters our employees. as basis target we've the We XX of a probably target XXX XXX good people. our that recruiting consultants.

And So we through really before recruit technology think leveraging dedicated making potential communicate ever through to we've big trying employee the can where and this last And I now, them. to resources. schools added on difference. think XX the campuses. We've I months, we're technology we the now made even we're XX that calls got with we're hire using talk a can of technical in have those in technology which we

we for quick ago openings a that And process this apply. it's use XXX. XXX. about us, We you get our can of time when technician -- it's look at So quicker. today, done through a was at year And the as what

So we've and is. grown our business. We know service how parts important

this assets an a top have that have there's continue still opportunity recruiting these are we SG&A out say, F&I, would take that we going SG&A, and and priority. is have to again, from we're us cost to and to these So for that I obviously, perspective, training do. to the a But from make on continue things to we

Rajat Gupta

Understood.

allocation. Just your one on last one capital

Moody's, you deal? X.X. basis, with. to right probably leverage X.X, looking definitely like for for do much leverage rating. more But Your roughly your at believe, on Xx, you declined. to as Moody's Or it's you're looking if lease-adjusted that's looks a how the It -- the leverage expand that upgraded But X more I comfortable much how credit more level have? could you're a capacity

Roger Penske

X.X leverage, look you look return I shareholder, GE, and you at we dividend a in PTL company, think, I back, think of a to from I last add been the bought think, up be payout you had look XX% I the return X.X X.X interested of I'm in But the ago. do when XXXX, high follow? can it piece at you and been as we shareholder at when capital X.X%, versus We've from said leases would year If allocation a as I you it's expect -- our when think X.X, we strong. the year as that. our X.Xx standpoint, was ago. sure I think at it's they And leverage, our

that on So tax to you free, we're we've in quarters to good over shape it. not businesses from repatriate million a the international heard balance and the I'm sheet we several next -- the the the to got our it U.S. ability call, we if from $XXX ability have across bring sure perspective. need

the debt think I our was very there end year. over the small at of

when than working less was million in XXX capital also it think the real you the GBP I and estate add line.

Operator

further no Mr. Penske, queue. in And questions

Roger Penske

thank you us, and Thank next in All you right, the people, we'll see for quarter. you, joining John.

Operator

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

disconnect. now may You

Penske Automotive (PAG) 7 Feb 192018 Q4 Earnings call transcript