PAG - Earnings call transcript Q3 2019 | Penske Automotive Group, Inc.

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Operator

Good afternoon, ladies and gentlemen. Welcome to the Penske Automotive Group Third Quarter 2019 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion, through Tuesday, November 5, 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

Laurie. you, Thank and everyone, for us joining Good thank today. afternoon, you

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

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

Controller. call Carlson, Shelley for today's are Corporate our Hulgrave, Financial me our J.D. Roger Joining Chairman; and Chief Officer; our Penske,

On be from measures, operations, from this will amortization such as before adjusted share or financial call, certain non-GAAP and earnings we discussing per taxes, and adjusted continuing continuing depreciation EBITDA. interest, income operations, earnings

Tax third noted income the a press the release, included XXXX in million the income share tax and and benefit XXXX the Jobs we of was from of $X.XX $XXX.X $X.XX. reconciliation per our to last U.S. in income related quarter third related and from quarter million per earnings excluding share $XX.X benefit share tax year, results, per continuing As the million operations was Cuts or Act, from final of adjusted $XX.X earnings continuing operations

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

differ expectations. direct SEC our discussion may outlined that for today's vary Form results and our press may uncertainties from filings, cause release, actual to which I to the results XX-K, because results cause differ in to could including additional of materially. and risks factors you actual Our materially

will turn to call now Penske. Roger the over I

Roger Penske

per and good operations XX.X% in and The continuing related, an basis, PAG reported Tony, million was Today, same from was XX.X% this $XXX adjusted before afternoon billion, continuing year. increase from taxes, earnings share third On X% the the quarter Income increased million. of quarter Income in $XXX to operations of was revenues rate in everyone. $X compared earnings you, last to record period X.X%. Thank tax third $X.XX. effective year

$XX.X from the third would You have tax effective year, XX.X%. million tax the the exclude last benefit been quarter rate

earnings Additionally, foreign negatively by exchange rates, share penny. impacted one per

result performance the third quarter. We year, considering U.K., last $X.XX market the new were our oversupply earnings margins and impacted share weak a vehicle in overall are by vehicles, negatively pleased profit very Brexit by share used which of per in with conditions when of compared the per and the impacted approximately as largely to gross and

operations. quarter Despite this our earnings impact, truck the we strong the auto of in and from retail commercial and before taxes grew revenue third U.S. performance

for our SG&A by was earnings provided same-store in strong in to Centers In The was by in fact, XX% points our XXX Leasing the our typically to investment American gross certainly profit, positive of Parts, overall gross Truck operations. continues basis of North reoccurring The acquisition us. to stream generate Service declined Truck revenue positive, quarter. XX% Penske which and and support Warner

times, During in $XXX In million operations, increase billion for and $X.X $XXX acquired repurchased from CapEx, year, and allowing of our million we year, the net for X annualized the shares revenue. months X.X%. into million. $XXX We -- business flow dividend invested our quarter, we million repurchased of us stock we first the in we nine cash the three to currently generated which yields

while times increasing continuing our million. back $XX.X to operations XXXX, compounded we've million Looking grown to four $XXX from revenue nearly our billion, XX% from $XXX to $X.X from billion income annually,

third the was retailed revenue of X.X. third and the and -- at used dealership profit. automotive X.X% details was and quarter, used businesses XX% franchise In X.X% down units represented XXX,XXX retail new up units, same-store we increased at quarter, total new the Looking gross

Our increases used is used certified versus XX% used X X.X to new when sales franchise ratio and to at dealerships unit auto nearly XXXX. the supercenters the including X, X.XX to in franchised X of our U.S. in to the our pre-owned. in were dealerships,

Same-store retail increased foreign impact When increased automotive same-store X.X%. the revenue you revenue exchange, of exclude X.X%.

X.X%, New F&I X%, was used up was X.X%. was up up

FX, parts X.X%. revenue and increased service Excluding same-store

pay customer warranty and up was Our X.X%. XX.X% total up X.X%, up

$XX increased U.S. per $XXX insurance increase and including finance $X,XXX, unit in to per the Our unit

profit Our gross was $XXX. unit per a $X,XXX, variable decline of

or $X,XXX $X,XXX $XXX, and $XXX excluding international However declined to the exchange. increased foreign to U.S. $XXX

move on used supercenters. vehicle Now to let's our

U.K. six know, in you in one U.S., center nine U.K. here As we the reconditioning in operate the dealerships, the plus, XX

quarter, During a month third Mills, profitable in and quarter, in it to the full supercenter opened pleased we're in Glen second the of we report was new operation. the

our revenue, X.X% New of gross and X.X% overall supercenters represented of our profit.

generated and revenue. third million the the in vehicle In retailed nearly nearly superstores quarter, XX,XXX $XXX vehicles used

X% X.X%, was store Our unit including a up on volume same basis.

the U.K., and of decline the gross values, vehicle in a in However, significant used profit. oversupply impacted vehicles, market

profit up $X,XXX $XXX, In unit. the per supercenter to U.S., but U.K., we $XXX $X,XXX. per unit per the was to down almost variable down gross unit were in Our we $XXX were

in to dealership expect process at four We our have sites open and to planning to five U.K. we December, another forward in time. this Bristol look

the Warner dealerships. Group quarter, in will approximately of which unit increased $XXX million. third related truck quarter, in retail estimated XX Lake acquisition and Centers XX%, We unit The commercial third our freightliner the an is annualized revenue billion. largest increase North revenue contribute XX% retail and In Star to in dealerships sales commercial now are the $X.X sales increased in we our Salt truck of the and to Western to in revenue America. Turning Dealership Truck operate

increase increased same-store gross parts the in quarter, profit. and X.X% and service in the During increase X.X% and revenue, a revenue a X% related

In X% backlog XX,XXX was the Class The retail Parts expected and to Class truck increased in is in and gross retail over the At September, profit market XXXX. North of XX% X XXX,XXX fixed the end X quarter. Service units. QX, represented our units. of XXX,XXX units to American XXX% of costs total our covered sales

is research forecasting to result Class XX%. of I more decline, environment think next normal ACT X potential approximately year, demand sales in truck which XX% While to a will return of a

in in order would good Coupled customer Warner business book recent forward still we Our the our with remains expect well July, shape. acquisition to of perform in XXXX.

an have market, it high truck Additionally, few used the may the new caused trucks in and deliveries future of trucks of used past values over truck down pressuring impact years sales. oversupply

generated service revenue $X.X and industrial Australia, system during the Turning quarter. the increase million, XX% to of distribution EBT gross million in business which $X.X represent defense, In markets. on-highway, the our $XXX an profit our in of parts We commercial profit. gross power marine, of and serves business, total power and truck million this generation

PTL's on System. has Moving brand vehicle earnings, X.X% The of earnings, third the PTS now X.X% increased of or we of new million XX.X% to benefits. for Solution better $XX.X to Penske or breadth the is our A year. Truck Accordingly investment, made quarterly business capabilities. Penske provides the Penske quarter $XXX an become equity Epes earnings logistics, Truck universal to Leasing the name Leasing, lines. over change articulate various Transportation Transport and equity services, ownership company's In PAG the cash million recognized distributions, million. its third quarter of PTL last tax increase and $X.X with

in our provided cash XX vehicles. of savings. last is $XX the months, at a now over fleet cash Looking through million has investment tax distribution of PTL PTL benefits managing XXX,XXX and

initiatives. couple make on, comments I will digital of a on Moving

purchase. engage improve and of processing that to sources. in locations the complete customers a enhance funding remain securing ready XX% for by to We continue Across of rollout XX,XXX all end our docuPAD approximately enterprise, track quarter, from our electronically. interactive We the we the U.S. originated to and this our unit us U.S. an new In year. digitally, have the by creating third vehicles allows were used of tool online This technology and capabilities. transaction digital on of is sales our to

while customers, overall transparency, operational customer experience, this an efficiencies a For results our improved time investment for transaction business. quicker greater in our creating and

approximately The and months been first XX% service investment service is we for online introduced This almost of the has well. which, to continue XXXX. tools during online for nine company, payments appointment, scheduling, $X self-service million customers for a enhanced department of our expensed perform

and increased in As appointments payments XX% XX%, increased online third quarter. a result, online the

capabilities Our for videos, tools are digital our encouraged updates technologies, continued estimating tools centers, has Their dealer and to action. have retailing improve customer sales success the collision new us for pilot of Online additional part network. that the service pictures digital throughout experience. to through

websites digital to continue Preferred Purchase tool make penskecars.com. enhancements We through at existing to our dealer our

have launch Further, over in sold vehicles occur are active resulting purchase a this proprietary U.K. auction and new our We piloting site the used bidders will in phases dealerships U.K. through we complete closed online nearly vehicle This a continue bid Today, capability ultimately, enhance XXX% our we total online in XX,XXX to process. franchise online. year-to-date the dealership digital platform. to X,XXX

the of at cash. to remained Looking year. we million our flat December at Total balance last sheet $XX at September, of end inventory of $X had compared billion

the days, at end XX $X.X was billion, days debt fixed at Floor non-vehicle which XX% XX $X.X was billion, was rates. and vehicles is used of new of of September. supply Our was plan

long-term of million year, September of low approximately last This $XXX of interest we advantage properties rates. mortgaged to take the

was our X.X At X.X opportunities for and Our under approximately compared million was December. and agreements. of liquidity end other in debt-to-capitalization dividends, ratio at $XXX to September, the our leverage end of share we repurchases had credit XX.X%, corporate existing the acquisitions,

Penske for recently by Best to I'd to XX congratulate Work Automotive listing. Before News, Dealership US I were the like close, dealerships the XXX that named to

year dealerships in in than the for country. have number other Turnersville XXXX six dealerships on ranking. the one automotive Audi retailer list including in any row, We at the this more a was the top ranked second

thank accomplishment. a work commitment our shows by We I'd capital. all the depth for. contribution making and are company to of this honored their of to team employees the and This our best human like for effort one our is

turn joining closing, to for the on like call. it operator. In I'd today thanks over us our to

Operator

[Operator Instructions].

Our of Bank with the line Merrill first of Lynch. Murphy America ahead. John go question Please from

John Murphy

Good afternoon, Roger.

maybe question U.K. an pressure the first seems issue pond there. GPUs, like on and across pond the in it we about from looking U.K. there over coming across think used seemed a it turn the inventory high, the of Just in the kind or

So just to be continued And in can just business, reduce streamline that. the you that if and uncertainty and the then the curious market? given costs on actions also and you some volatility, U.K. may taking comment pressure

Roger Penske

costs in the talk first U.K. me, Let about

days. We plan That's XXXX. of probably million under Managing Director. a XX the over action plan, that an last have of now. to the Edwards, way got take out established beginning by £XX XX cost We've Darren our the base to We

action at when up overall an basis SG&A our down to U.K. to part the growth £XXX margins, because that's you up plan, business, So in was and new and of £XXX course, of used. on and look that was gross the XXX were our points XXX, comp

I double-digit actions, about times I up. a in So quarter. from $X.X a when per had and that, plans know £XXX looking we looking go take used XX,XXX have think the think during But certainly And come unit, the cost gross SG&A we'll with at the all margins it's units, you at our car we to separately, we base million. business the increase down, and of will that the that standpoint the action see negative

So significant impact.

you actions the we superstores' X,XXX in over obviously if week XX% impacted were SG&A what's our when that look at inventory gross. taken back XX, place, those of had So But you vehicles days. and go to XX to

and are approximately vehicles of units we got week we've since XX% today, down XX to over happened XX% that's about X,XXX XX days. our What's where are

reduce the So at really allowed at what it to it the dealing lot of We're but moment stabilized, as pricing think inventory us turns. through, March, today, what we a when back to the didn't. used with the and is market go to expecting a higher Brexit happened that's really, car market was do, not end destabilized get go you least everyone

were used X% high April, went and our vehicles to in overstocked through this we anywhere we us with values. X% pricing a a position a March, saw So put in we we drop market that too had And I month, were as from we car precipitous where -- think June. May

loss, took we quarter, to of vehicles them, to them our reduced third margins. selling these some which down, and the action at we during by a course cases reduced the So take really

So our inventories are in better shape.

we better, are that, terms will and very side about will superstore good feel -- we the turn on this. Our fact the we that

months. margin that in what building slowly to previous Now doing we had is we're back now

during in December. impact some have the quarter. in Bristol, also We're We store new opening a

overhead So point. we're carrying some of this that at

John Murphy

and then able and scared, owners get think like at I acts, down what side, the XX%, general, would is might also, helpful. little to remind mean I better available curious in so the then better environment you at you and do you to of new acquisition of if concerned the seems these might coverage and fixed a XX% that very volume the truck about mean look the the because mean I on side. on that some on bit just about that more just skeptic I'm this? there? be prices be But can next pretty that's running a deals case, truck Okay, Is forecast year in dealerships is it. us, it it ops

Roger Penske

acquisition on talk let's Well, side. the

it before. we've As mentioned you I know, think

framework continue the grow that have us to to framework Freightliner We agreement. under agreement a allows

activity, see opportunity Salt us a a We they great fortunate had to we've in a us, buyer. So us contacting gives country. lot the footprint buy Lake, Warner which people across as the had of

truck our XX less look And of you when XX% on to probably than profit luxury it at service. dealership months, multiples it, would out a the dealership. over I are increase that all comes next be to the would that and And gross on So news XX% footprint. to good think think the XX% that a premium XX goal the parts of is, I be

in coverage it when this XXX%. the the on to was mid-range we down an which I utilization delivery day showing of delivery better XX% that one I the because And vans, with the we And be of our same coming and market -- at So that quarter, is tractors, is obviously as rental look the with think had see time to smaller XX% that and John, also as I all same certainly opportunity. I and think up. have you going thousands the stabilize Internet, seeing think because certainly we're those, market,

So a positive, I only coming we've be, delivered the flood side to I to customers, marketplace see truck with now new and all would some depressed me, these the to -- or you're trucks at of that's in on possible going certainly with the think worry about would the market, trucks thing prices. used

combination from profit combination bit the had of have we just and impact the we the on the that now the the used. growth we've SG&A of Premier company, network, of could to standpoint that SG&A. and -- But more little on into gross premier take existing So out a ability of and that an customers Warner see as a have the

it In same-store. calculation we fact a overall, is not did

basis Our SG&A XXX down almost have been points. would

that's So, how going shake to out?

was get QX, number. time that's through we -- early an I the know, it don't By but just

talked SG&A coverage. that see course, see you So truck We drop of heavy margins the about we we duty positively, new side, the pretty have much having trucks, see we stable. on the not would and mid-range fixed

PTL, our to -- don't because there year five escalators. with standpoint we most from -- PTL four that, the slowdown on see think of impact have the of to we economic three any customers I contracts

think that XX% rental and down will in So lease be the business grew we the impact X% versus that is And we only year-to-date. there I came our good quarter on think have we in overall, business quarter. the X%

slowing, able able we is do is, trucks. rental defleet and business what sale repositioning rental to to we'll side, do -- through the or again that see be the can you So we'll which on be those will

a shape. great good in We there. we're think quarter I had So

John Murphy

lastly, and are it from then leaner -- U.K. used, much real going as rates there sounds there a a on is that declining, also in an side about how and quick real inventory we both floorplan And just opportunity rate expense is like of then when expense, mean, interest interest specifically on you're getting the I plan forward? the on floor think should opportunity

Roger Penske

almost We think annualized when points basis. think here. on it's $XX I on probably basis based Well, level our an million current look XX at inventory you

you week, look inventories, me review the was at our you that's, September. We at a flat to inventory we inventory, So look last did saw good. end total -- of our at

since has about includes down have think that now even we inventory didn't and of last I year, acquisition last it crept million that year. $XXX

doing to inventory. our aging, job I great are have looking So -- be. which guys on a at think we We're is

I getting as those our rid think used coming the focus aging 'XXs in shape, car great me and obviously see now we is -- the XXXXs and is the the to selling will onboard. be of we

Operator

Our next go ahead. question JPMorgan. with from Rajat Gupta Please

Rajat Gupta

Hi wanted sweet. the Tony on and just again Freedom I Medal real of to congratulate awarded, Roger.

Roger Penske

you. Thank

Rajat Gupta

in up follow you saw past, I the and supercenters, dissect you mix initiative the auction. U.K. on us Could about helping versus mix on that talked from to that how especially wanted follow-up? the how a an in U.S. there And GPUs U.S. and update you that have their, retail retail the versus specifically from increasing the sourcing growth you progressed Just well? as your Could give has in is

Roger Penske

here the we Well when were and I from at were standpoint you think remarks, in X,XXX. at look we the I the in it my of margin, said X% in I CarSense quarter, up U.K. think

Mills longer do even again CarSense. doing those an Pennsylvania. locations can U.K., hasn't Then opportunity and -- the really been see opened in in positive us reconditioning that do probably term, in we're our we parts we -- I are service. for that in remember which quite we're significant tapped, in these that and probably stronger also service, up locations. and parts think opening And that's We think So Glen we

good. cadence that the So But as we're think maybe on fast them open as we can. is now, that we can't others

at of our because it's store per was Again, and has of When no get think overall was a opening, that growth in and points. action honestly, us, down I MSRP, we and we a XXX X,XXX, were units new and as and as I taken the don't XX%. U.K., Bristol, for the But we the again, I when those place in all back. talked about XX margin days. But team and a the you because over unit variable units look X,XXX quite from Those dropped where up going up that at, because We think there we capability margin I look about inventory the numbers not every items $X,XXX. one lost the have down the focused, opportunity lower X.X%. almost to -- question certainly our tough see look vehicle the day, to $XXX basis revenue many turns is to it, talked inventory the are have in gross, is earlier you and in certainly I said team to think U.S. at up it's taken the

Rajat Gupta

on from level, worse of think looking not what right just might are given SG&A Got coming to with going incrementally it. normalized the growth SG&A, see here? I of up markets, truck kind And question benefits wanted And What is restructuring the from or well in. from into mean, previous assuming actions as of in an as the what's the U.K. a in the opportunity does to more on like the about, kind get potential follow U.K. year? which coupled Warner we perspective next you on kind then, what's going range

Roger Penske

front fourth the have year points. me But the in we don't had was of quarter. in know, it at you XX I basis SG&A what Well, number last

to with XX points the want and Here as homogenize fourth the we certainly XX maybe impact to to year. that then costs get And gross the £XX basis could lower profit, basis business, I forecast quarter. me, goal. get be hope truck start increased let's we that would consolidate we hope we U.K.'s I million next our don't see would to but XXX of points, that, XX could in

Operator

question from Northcoast Research. with Please have go we a And John Healy ahead.

John Healy

side able it made -- U.K. on be market, to that the offering. the your or a ask is to offer I believe about you digital where said retail side? Wanted Roger. Hey transaction wholesale completely you about you'd Was comment

Roger Penske

and John, have that units on already goes we there. We've day. about done Auction, day after Sytner the Electronic XX,XXX

etcetera. building a to able on we're with be that used We're capability to then new. signatures migrate and So online we starting capability a we proprietary will would that all have complete

John Healy

that size about bringing think And or just to the type given difficult the do you footprint? the too to U.S. that of over operation do, ever of market, is

Roger Penske

here that Well, the these vendors is I with for of of think have don't we news have some good opportunity the the that some you tools.

look proactive that very are that a we'll closely got them the now interfacing look that's we've into that's our the Auction. all guys whatever we is We're other have ultimately, business everybody bucket bring to a products Electronic what I is our which very do team -- integrating our CarShop, think for at transaction capability built and me U.K., are We'll here; building can in of in and the So is all time. these IT peers goal that that do, we transportable because to online.

of -- zone Now from certain the states here in we and perspective, cases, But end some because need requirements. are needs certain that's documents wet for signed we us. my limited

we're things certain And in the what can can that we test sites. maybe take in I and able U.K. the do think they to them we do,

not take to and there even foolish is me, we and to would that better. make be relationship ought advantage of that, very we So to close a

our Now of away. with this to we're things business the right from that their we're when dealership. we platform Warner, Went buy right away consolidate truck getting, some to able

So think happening having the we I vehicle U.K., new think interfaced a could a without I -- purchase certainly same customer. one online see with thing and today, no the vehicle in that

John Healy

about the with, that work you've guys CarSense toyed you the maybe allow through a there more their -- path? maybe question CarSense guys down stores, on Okay. of certified to your any CPO pre-owned set sort outlets? manufacturers Have approached program little you get that the willingness opportunity with selling of the kind you any -- to Is out of so in bit opportunity of U.S. one And then to just on ahead

Roger Penske

think CPO, are primary used me remember of of CPO those selling, you you these Really if mine. most cars, think the about a $X,XXX premium or And quite we're hit tell those, add the And Let premium. you honestly, when start young XX used when cars you super luxury, hot-button be our cost. about XX% would used to almost maybe to on basically, are new you cars. $X,XXX And XX group of cars, months. to maybe roughly

So another miles, $X,XXX CPO. limiting the I maybe We today, to are a metrics to XX,XXX But meet on or on standpoint that's CPO a for about to me, put $X,XXX miles car think balance. OEMs gross it's you margin. need X,XXX think yourself when on certain opportunity cars if really with advance the you you rates of to make from the on

it's guys our I balance. cars. I rebuilding want So think don't a

at a balance CPO. And I you said look XX% day, were at got that's think the mistake. the end I we've think think and I when of ours, a good we

talked not to OEMs. CarSense have we a the perspective From

well you programs on working have warranty our they our for when think and own about margin those, $X,XXX I supercenters. in in think We that are all

So certified. a I It's like priority. not

us gross. good a I able like as manufacturers going you're lower that, but the be think Maybe increase maybe but on think to to a models, I I certain mark at might a our not see way that. it's to that for probably see

John Healy

ultimately, the are terms and do Okay. of for vehicles And demand of Any mix? bringing to me, the some those luxury initial on question overall bring vehicles kind any last they what of the sort think view of initial in electric vehicles to thoughts market? types those you nameplates Roger, of margins gross for the in

Roger Penske

in. I we've -- think business, when seen it's come about you IPs think the

with there I no they has significant think that those. is on there the they've that cancellations e-tron lift had been expected, not question Audi,

I $XX,XXX these in think more really aggressive from at thought gets affordable, The QX. $X,XXX you're payment, customers looking like that But it a sticker vehicle when there -- It's OEM is shock. an standpoint. a some the would be

orders they're in e-tron. a California. for Porsche. addressing of there have But seen that Barcelona this. hope We've got these. think cancellations Taycan we amount from today. won't comes relaunch kick-off to They're they here Northern in that as out we've in the sit on their be tremendous I We going

they're think I fine. So

There today residual going range end. what's to is and the value has be at question the anxiety, to no they're me everyone and expensive,

So people car have the there's of about it's the premium have lots -- in questions, luxury most think garage. it, when but one you vehicle another

the is slow. to So going be growth

be in interesting Tesla the think haven't for a gotten been a done good obviously number they but They've a has I it'll return. job. market years, still of

margin I the I good units still think I six them. and in XX support got are we're cost stock. will honestly, high. has sell of California are the going quite one From and products Northern to month, And seven our think in probably batteries a standpoint, this know of stores or

So pressure that certainly has on margin.

Operator

go Our line next question ahead. Please is Stanley. from the of Morgan Armintas with Sinkevicius

Armintas Sinkevicius

taking Great. question. Thank the you for

the how delivery you hurdle think with wet signatures? and person. question a much vehicle someone delivering of digital a the Because sign if signatures, on of can initiatives for are wet Just the I vehicle, the the a

the understood So just wanted I to nuance make sure there?

Roger Penske

opportunity. that's Well certainly an

by they or delivery, that bring is have of truck have got that to to the to by dealership, states. it not OEM think want maybe place, driver. and complexity I made think than person In At we've deliver some figure make there sales got point, And I at a dealership just you a just captive, from the out. registered to different it's the truck the driver you. more be to this the

trying that things are to those navigate. So, we're

Armintas Sinkevicius

months, path XX next side? about for your think XX the you digital you the to have as And the what on agenda do Okay. to from attack

Roger Penske

the our of parts online the to from scheduling, through we're the payments take will continue growing that continue service. Well, BDCs that doing. about about X,XXX standpoint inquiries Today, we and we talked and the want things and Internet, to we and do we through

at we're for look doing -- bodywork. now our you As estimating

be to in try continue over going pond. to portable obviously area service what talked we the Sytner would and to We'll and we the bring we're grow then across at those parts will So and those U.S. do we initial about the standpoint, from

So opportunities online, think to on of a not and we're is have, there me, I transactions we focusing just mostly leads. different that lot

Armintas Sinkevicius

since thoughts then generators on And Okay. as here, you are just as your leads, return far bring the on what the lead up etcetera. and investment

Roger Penske

Well, websites, I that that and are by the ones on think OEMs. the we the our us best get are given leads own

Operator

we'll ahead. Thank Please go Global. you. to Seaport Ward And go Michael with

Michael Ward

taking Is afternoon average, business parts looking the to that business, Roger. Good industry for for and U.S., your your there out come or the your that your at above. but structure growth is with of something makes service look if that I afternoon below way? structure at your When Good same-store Tony. with the Thanks well dealerships we're margins question.

Roger Penske

you reconditioning for group. because -- And is vehicles the up of is relate numbers, X.X% on our lot and there peer we've the we across use realize, really are you our some U.S., is that which change of our take premium office, premium would But or look the X.X%, When when allocate that when side you way the of what side, look some that international a was XX.X%, I mostly the course can cost in people we business, -- of the got to me -- I think maintenance. can't margin vehicles majority parts within the to at there's not were the the at are the could high. service sell business leased our group luxury I up at and and overall these in quarter call X.X%. a peer routine look we and Well, month, -- excuse for was or of

Michael Ward

Right, OK.

because it a in going fairly And the see steady premium I that revenue standpoint forward, so don't much sits, from your and changing equation way look -- those as the leased/owned luxury? you benefit should business be

Roger Penske

with XX by that those out, most that But we on thing have touch will I about the premium build not I can I a country stay who a margin but same underwater, or to that's I But impact I going doing across think is and in California, anywhere service cars to and they you because a the parts at I XX% big manage a to think having these a lease use of profit that is, back and to and look come that Audi measure think good starting customer in they you know that opportunity me, be to might running BMW lease, think about news, to gross we for the mix which be have that us XX% give the us we also we're footprint an coming luxury, to they and California. across help because side, warranty, think -- we us. also high-margin. probably and that XX% mentioned, help new about don't CSI. news of leases one service, at coming Mercedes. dealership, We're with loaner today. have, be you a hasn't differently that the to tried from cars on have They at contract, with the is we might that. And our there luxury allow in during mix go think brands, when of an luxury them new And each go a to back customers six as look we're increase to eight when in them to mine our getting the the level turn them going they're premium when in customers months in to we talked the loyalty the come not, good parts you been are really the able metrics for have to -- our months. act to total whether back people and labor, are loyal that us XX, with and service, people to about that's at or think sell that'll these going the and a OEM, and and the business even

Michael Ward

goes service Those the loaner cars, that cost into and of those parts?

Roger Penske

we -- as it service you it percentage of profit. Absolutely. at at gross a and parts look Today, when look

the a would if expense. from for call cases XX% even X% our be company profit we're I and what in looking those So we say, parts service -- we're gross to at vehicle costs to would XX%, running in loaner. X% and some X%, anywhere

X.X% certify anywhere have we X.X%, to from to that. luxury to which So days. cars continue backbone are of us, these depreciate our premium we at and We these for it's the don't them and look used really great business

us loaner the key overall are to cars So, with customer. for our our loyalty

Michael Ward

Absolutely. car were used one pre-owned? certified number. of I dealers missed I at thought mentioned, your you your what sales percentage

Roger Penske

XX%.

Michael Ward

that is XX%. Is just that or consolidated? U.S.

Roger Penske

U.S. the just That's

Michael Ward

Just you much. Well, very thank U.S.

Operator

Stephens. with ahead. go to Rick Nelson we'll Please go And

Rick Nelson

Thanks. Good afternoon.

follow would It good there. Roger, quarter like I had PTL. to another on

as PPL's your into different could more outlook what of One XXXX? about had and curious, challenge peers talk push there I'm business the about and public if you is we forward

Roger Penske

that Rick, years back had XXX Well, units. when to we I XX company go

you capital, the So we look we've when service, and length and got grow. of great team, the to a human I at continue think

the of think I customer ability this not had The ownership. new business brand of in I a to ability lot out we've conquest us a looking for in -- the think everybody there's that customers, ironically, there's interest lot that And come we're people that. in our for of I do -- business. think and want to to -- we're

in XX,XXX when end a year, tractors have to have on Obviously I in and those run us for which us, -- some almost we periods. the one-way rental business. UPS fleet. FedEx use need good But has a of at lease overall, business, it gives a trucks the of quite flexibility fleet it's focus high equipment. which because the We our been demand think We our

customers, for Now we're obviously, to pulling trucks delivered been us, back defleet we can because so -- that. new for our that have the

have maintenance. manage we obviously, options on the we way competitors contract it's we our think business, the I like do, have and

dedicated a We that carriage. with can have we logistics do of this. warehousing, in lot things There's

a full our have rental, say contract commercial consumer we so And -- full maintenance, our and our Logistics. through I of capabilities would envelope lease,

repair, we PMs have computing. cloud going our we things go have guided are And and with that as are technology I today that voice on sharpening I forward. really a we advantages activated What think we've these got on, our we call predictive Today, maintenance.

ahead been trying. These We perspective to were to things and it's on our were for and LED We that over able and customer. brakes. with that's things to giving truck headlights. are with that with value our do create better the electronic me stickiness like engines, guidance business So we've anti-skid been of we've first able are first to standard this order from that be customers, lane equipment, years, a maintenance, a them the being in

Rick Nelson

from your saw slides $XXX helpful cash the through Thanks Also very nine of operations, also. on million one months.

debt your If alternatives? how talk you see you them up about see those about cash authorization, don't directed flows, I could future if are retirement, you stepped acquisitions. how you thinking buyback where you know

Roger Penske

months, which Well, million think with was, number let's nine $XXX our and showed it nine first X -- deck I months. look number or for at in the the slide slide X,

Brexit now, a in not I of the have think standpoint we OEMs, CapEx to this for the allocations that, know because and U.K. many pushing a that ways, to commitment situation, expensive these from with from cash right going today. obviously ops, overhang We're whole in that we're flow on we certainly today as of we make CapEx. Brexit back the think

to for that's continue So back. be requirement going to But we're a going us. to push

with and to dividends XX like our I we've is had policy. too, the continue our consecutive and I I'm quarters raised think when X.X%. want the continue We've dividend, dividend think I with we dividend, we'll a today think return shareholder I

pretty So those given. well are

standpoint, an going to From selective. acquisition be we're

it don't. a I of look we'll an then our work, at on the plan locations, said return, looking Ones to that basically of action our that if before, I our divestiture. really businesses. of going together meet standpoint ones that dealership all hurdle have all We're we're think from doesn't to put

side, that generate will will the that on capital. some obviously be So where

hand, year, sold we in as bought two we last did On and Austin. in Lexus New stores other two Jersey the

that. So we the which basis. opportunistically already, important have do continue of where on course, going a where was we'll to us increased, certainly to buyback, forward capability the And then authorization

no we're is that. the portion we Do me, tax line, to So change. cash it's and without based generate what That's on bank will at during of a big got I a from try to goal working We've look tax my retire be of take looking $XXX that the enough do August XXXX. the market? -- -- ability the with think bond And to to have which back capital million in bring on then bond able plenty We've going to really personal got capability. that. we at back U.K. -- what is to going capital can we do our based our to did of covenants due,

So it's on an based open door back to it. that bring

bring can I pre-tax we income. back our think of XX%

this you will that give opportunity, the plus operations some So -- we can us see as what had from year.

would focus the bond say I on in So XXXX.

going definitely we meet anticipations at continue obviously to big at We on and shareholders' will on look back -- a at the moment. push stock we're will buyback, look our CapEx to dividend, and hopefully

Rick Nelson

Thanks good good. Sounds and luck.

Roger Penske

Thank Rick. you,

Operator

Research. next Please Derek Our from line go with Edge Glynn ahead. the Consumer question of

Roger Penske

Hey Derek.

Derek Glynn

Hey the Freedom good award. receiving afternoon, and on Medal as in Roger, well of I will my congratulations throw

Roger Penske

times, continues me around the and about I support But the Thank my for family. experience as to it's team whole us. humbling you. that Very many said world

that here, role, I So I in particular wouldn't without be guess. that,

Derek Glynn

an quite accomplishment. Yes,

just and U.S. and the you the deck, on new, puts and variable on same the do is X% in takes as low basis. are that sustainable? end then single-digit the up gross in store there F&I, saw relates about growth you How it I So front used in think a the thinking to

Roger Penske

And on the continues down $XX. This what not about unit, the I grow. auto side, Well, looking side, on per $XX I the we the were were and to up about on at guess F&I supercenter we our is remember side. I'm new -- think

have Now premium sell on flats warranty XX, get we XX to and the ability three-year we're don't and are the customers lot not leases, lease. our a in or XXXX, up because we a extended of those on

we're side, We're the some and used the standpoint from our just products, a -- but better CarSense we're from made to from And to think worked online, our able So it the things on perspective, of climbing well. to certainly CarShop, that's at of getting acquisition. technology has that got think docuPAD I learned going big a today take trying that's people in I to continue the of to we've standpoint keeps from standpoint used. be and the sell difference grow, certain

I me we're vehicles. the secret sauces buy on, is, of and think these And focusing as that's of people's everybody acquisition let rest CarMax is now, of one has that car. your the

at we So variable think that I top total to the list. negative call during will going we're that kind hopefully. that continue When a of lot used U.K. certainly the do But gross, you impact at quarter, the with that's the back we'll are look impact, of our something in vehicle. the to enhance certainly of and

Derek Glynn

And it. supercenter. follow-up then just got Mills on the Glen Okay, a

just how just I you mentioned into think able some could it second on And just provide site on remind built was profitability that profitable out quickly? or its so us you're greenfield operation. you also that if you in of to convert store expand a there month was context there? Can you

Roger Penske

It are -- we there, contiguous the you'd end first this half, the Pennsylvania site. XXX to we its standpoint really XXX,XXX. or our about the -- at Philadelphia from greenfield lost But you that a really and between look XXX the or focusing we and month which month to -- a that between made Wilmington, market got was open, it halfway we Turnpike. us market, a one, deliver guess probably will say, we've But And anywhere half units. full, we're number we We've business month build at the for cars about base near I reconditioning there when we ready. first service. are getting really XX of XX help months of facility, the a grow unit Well, in over took that to and us it day, got the was XX about

we continue that. So to see

think, some $X takes it data So were a other people first full to really, maybe we where the up. or open I so month million read profit. in

some to that ahead that I people right on we come during hoping things have with that we're very would was, us bringing time. the projections somewhere have will that interesting $XXX,XXX the brand, at the is even the build able new to Mills, rent that is of there our for think these beating thing better are across we and we're that that to no do question of say and for a time, it us we'd maybe that the almost drag we be there understand growth I in, here quickly, to board country, its now have we and into our But and carry, opportunity surprised and probably was mature here Glen $XXX,XXX between have markets a at more business.

Derek Glynn

the it. Okay, for commentary all got guys. Thanks

Roger Penske

you. Thank

Operator

And we'll go ahead. Chris go to with Armes Buckingham Research. Please

Roger Penske

Chris. Hey

Chris Armes

I then here, roughly think Hey, environment you viewing on guys good one provide the guys. on number? you A auto sold, color how think quick side? also was second franchises you're for an I some XX so that Can us can give just it afternoon on update quarter acquisitions the the had auto And year-to-date. you

Roger Penske

acquisitions. Let me with start

people now, think of But I high. some is there a right of asks us. the I contacting are think lot

Lexus. trying the I all where said, scale. are the in us looking think I look we market which as for did stores, We're to of opportunistic we carefully, are have

to look is now, from action -- and From there seems we existing of the we my but continue biggest in would the The values, sales standpoint that. stores evaluating right opportunistically. today, platforms on Arkansas. I sold side think out we perspective, focus a and me more probably look to truck realistic would at

in get number U.K., that I us store Birmingham just have with I'll think I that to for get store Tony that the during don't a closed the BMW you. we today. quarter. have a we

Chris Armes

you. thank helpful, Very Great.

Roger Penske

you. Thank

Operator

And from go ahead. with SunTrust. Please Stephanie Benjamin our next question

Roger Penske

Hi Stephanie.

Stephanie Benjamin

improved not I color in vehicle to what's question the of seen, kind as going the afternoon. have you be really year on of you any final know good just I XXXX, thinking you your new of opinion -- just the unit of as and the on given only here new Hi, what get in just performance with overseas. the get side -- rates on a But the your you wanted full improvement on pockets too? and had as to you're as, provided on kind sum state Thanks. seeing throughout of the industry well of might overall just the look up we've then U.S. I market lot own year, kind as outperformance well,

Roger Penske

looked I've to month, we again Well, SAR, say numbers XXXX. million I since see the now, added I but at our here I the quite we've month this for -- never me was since let business, first a looking $XX from been a seen U.S. this, divided the positive the project about probably all quarter, think the and certainly of probably in guy just mean you it when today market

car So I'm I'm not used seeing certainly is a business active. seeing certainly downturn, very

and is captives still look So the rate into and at I really strong. look at the We year, think from as our I peers, the unemployment our our perspective, next X.X%, from economy credit and provide availability of big many a jumping the business. there, that's interesting side is plan of the but not floor a in and a subprime. of out player number always people there's We're of in subprime,

a to been these car even going be course to some focus see in an to the X that most not me, to in used or U.K., in to But going overall, get cases U.S. that that's used forward. been think continue special going a to X sites, of That's business. I phenomenon to to have and a have seems X.X normal in of of day And it's everyone new interest the you're we here us then

act So I think pushed million place. unless six sometime off maybe takes perspective, months. or some think is million now, will tariff some -- year, until now And to I I $XX market tariff would next been that from the there a that's for be $XX.X in say other right

President I that off. the had pushed think

to I or not. me, So if going don't to happen that's know

sedans. and at don't these slowing talk see have will trucks. XX% Today, all and be -- thing down and Toyota look we still now. marketplace like have, we're I will that electric, will let's the you of almost itself, people that Honda When the some about SUV mix. People some of that SUVs

has these. mix factories converted Everybody their So got that to changed. has build

to grab market certainly Big in I going so But the as some to think they're SUV that's the get pressure going this have So us. might have the who's the OEM, to all on are in. be pressure some probably They by share They're marketplace, guys. X, market. pressure to there'll all premium

we when market about, U.K. Today, coming sedans residual Then look And that. to be that is we values back. are what like these at things think the of got the going and certainly, down. diesels, to way-way

to and I and And that the -- XX think new, the on below on today. seeing, the So on a side. don't again, have from $XX million is one loyalty service one focus X% to $XX are focus maintaining retailers I that month that -- more parts -- million I a that. term think realistic, from big to on I we We're we like the used think

leasing I like that better. to So me, why the

to want they a buy down. So still is overall, unemployment car. and money, think People are good, is market making I

red some is availability right delinquencies are could up, there to be now from that herring that That Now new -- or banks moving any into look as a have cross OEMs credit maybe our at. knowledge impact the year. will the got we we on the

Operator

speakers our to back for it turn will closing any I remarks.

Anthony Pordon

our having everybody much Thank to we'll forward after you very today for QX. look talking to and you I call. thank everybody. Thanks online

Operator

conclude may will our now conferencing Thank you disconnect. for teleconference today. ladies using and AT&T this Thank for gentlemen and you, you

Penske Automotive (PAG) 29 Oct 192019 Q3 Earnings call transcript