PAG - Earnings call transcript Q3 2020 | Penske Automotive Group, Inc.

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Operator

Good afternoon, ladies and gentlemen. Welcome to the Penske Automotive Group Third Quarter 2020 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through November 4, 2020 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

Jason. you, Thank and everyone for us joining Good thank today. afternoon you website Penske Press and quarter our Company's presentation results. Automotive understanding XXXX you detailing to is with assist designed financial on morning third the this Group's release in the issued results posted along was

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

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

earnings include conditions measures Our also future statements the forward-looking potential, discussion taxes, operations, and business outlook, non-GAAP such growth our of COVID-XX may interest, before in depreciation liquidity plans, financial today earnings discuss certain may events, amortization about and EBITDA. of as pandemic. assessments We light or

presented the measures. comparable have available press the this morning's on and measures, most non-GAAP GAAP the and to in directly prominently investor which reconciled release GAAP comparable our We presentation is measures have website

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

Roger Penske

from share XXX% thank various XX% increased Legislation continuing Tony. for earnings taxes $X.XX. our benefit results related million. million. record for XX% increased Thank the to I'm excluding afternoon After joining a changes, earnings continuing U.S. increased per per to increased increased report Foreign $XXX from related share and before $XXX and operations and you, $X.XX. time all million pleased operations And to Income Tax to you business. earnings everyone adjusted Good income $XXX.X us to XXX% tax XXX% this afternoon. to quarter from In

as by increase in vehicle new the retail automotive Exchange earnings outstanding operation and income XXX% fixed all by quarter segment in was financing, margins driven insurance $X.XX. primarily this Foreign vehicle, Obviously, benefited expanded. performance used

and of X,XXX in million Our SG&A percentage quarter declined profit $XX improved the as SG&A a expense points to XX.X%. gross

reduced attributed personnel XX,XXX in in entertainment, and workforce initially can a to furloughed costs. costs efforts, advertising, success businesses. the X% this remained or today in as by and quarter We million or maintenance, million headcount XX,XXX we've various in people approximately vehicle $XXX Our XX% been of $XXX approximately furlough, our to above our reduced of administrative end approximately area the approximately we on to travel X,XXX At across worldwide. employees March. of Through XX% our estimate third have costs be reduction the

the $XXX first in months continuing operations. cash nine million generated we from flow During

million Our $XX net expenditures to year. compared CAPEX down when last year-to-date period same the were

the proceeds sub future refinancing utilize $XXX the $XXX X.XX $XXX our $XXX annually. estimate a maturity refinance new we of During note of balances. due the approximately down to notes temporarily from notes and We pay revolver and will revolver we our expense million In U.S. the senior X. on subordinated X.X% October mortgage interim, $XX reduce by repayment XXXX sub million floorplan, senior notes interest sub the and new repaid the million X.X% the notes at million we in from the use X.XX% our proceeds XXXX. by X.XX% million due notes We'll issuing senior to of quarter, redeem a notes

down which XX. XX.X% forma at of to from to compared a As $X.XX we X, December million On debt, on basis $XXX is XX.X% XX, of December non-vehicle have capitalization was September approximately XX. debt billion pro October

is million inventory last of and inventory used $X.X $XXX $X.X approximately inventory vehicle look good million. down million, billion down point. Let's vehicle the in this December down from approximately truck inventories at $XXX balance It's sheet new $XXX total year, at down our billion, commercial shape

day is and Our unused XX. supply day on supply new XX is

reductions, automotive and quarter increased Total overall inventory Let QX. unit the turn increased administrative costs increased lower the to by retailed. performance retail QX declined debt and gross to due same-store and In reduction unit Retail now new interest automotive on profit in same-store to Selling, X.X%. XXX% expense you and income general in an levels. X.X% and same-store used per revenue increase retail segment XX.X%. lower profit give gross me was driven

XX% or same-store the gross quarter, unit increased profit retail For per automotive to variable $XXX $X,XXX.

through an under on The locations a the quarter. the and sourcing just on approximately average using online per vehicle used internally SuperCenter to per sourcing million management the approximately the $X inventory unit sold unit as The to $XXX had operate XX,XXX of return from we acquired inventory U.K. in improve third our XX% auction. or during increased our sales our average sales grosses result at third business, move me our SuperCenter are of in XX,XXX. X,XXX is XX through To $X,XXX. improved price We and Let scale XX% selling X.X%. sold units units a quarter SuperCenter of

your total increased by sold. XX% XX% vehicle U.S. car represented now the purchases in and While of our

in of to at profitable and in in approximately X,XXX open year. units our Pennsylvania per forecasted The X,XXX in the we approximately As two outperformed expansion Both retail per and location ‘XX operation. initial expectation. month forecasted Glen locations is openings stores The successful Mills units year. to U.K. their third look both we had Bristol store retail were

in retail XX,XXX Brunswick, will in We QX XXX six count forecast which XX%. XXX,XXX initiatives. December vehicles store store move XXXX. vehicles SuperCenter in development Nottingham to two have on process I plan Jersey additional sites in XXXX. planning We’ll and early the open New open up and in XXXX digital We our the by increase will our with in U.K.

expand We vehicles introduction continue We of technologies. our to XX,XXX enhance the tools digital currently have grow, including footprint new online. and and

quarter. channels efforts XX% of the Our the sales our our on in digital in represented U.S. unit third

and quarter to income with component personalization documents with now digital creating our our either X% online exchange represents their May. of the many F&I purchase can complete customer flexible our our to online. retailing physical the Vehicle Using transactions customers room, X,XXX buying by digital pilot connection car our U.S. sales U.K., over on A digitally completed a efforts the Used signing journey. documents. buying our or drive in preferred the customers. launching is has in approach Preferred since docuPAD F&I digital fully wherever our to of marketing Our focuses sign transaction key purchase by higher Further, can were are XXX% no buying multichannel in continues system customer those accommodate the they in online approximately purchase In our here process facilitated using preferred tool tool In of U.K.

retailing by initiative online new We working technology investment. buying automate strengthen brand our future the are new will on that also our digital and process, enabling a enhance

on We omni-channel business model. an focus continue to

and dealership operate XX medium the duty and business, truck retail across to we U.S. Turning heavy Canada. dealerships

the representing of During sold sequential X,XXX to XX%. QX, improvement we new second compared in quarter Unused a Trucks X,XXX

third quarter, the North which American favorably XX.X% same-store the during was declined period. truck same unit sales retail Class market For XX% compares X declined to the

this a XXX,XXX, was on return In Class expected. X%. be which Retail North X had expected $XXX year. revenue fact, stronger sales million be are QX, of XXX,XXX we originally previously American to expected is Sales to our we than up had almost from appears market In and

represented profit parts our the Right total operations is and Our was XXX% cost fixed strong. and now the XX% absorption quarter. nearly of freight gross the freight, in market service

QX XXXX. We as leasing truck expect and we go forward strong tailwinds businesses commercial to in will our this provide truck and

of Turning $XXX PTS QX, sales. to generated Penske in Solutions or and million X.X% on billion Transportation $X.X revenue in income PTS total

In $XX.X has XXs year-over-year, second to a low our to volumes customers our in After logistics expected returned As utilization declined quarter rental Full-service demand to continues the returned higher sales compared or improve. all grocery our have utilization equity result, of a the rates up operations million retail year. to now automotive levels. are rental earnings operating last XX% than contract are previous XX%. of and the leasing in at fleet were to and over QX

notes the all the future. is a our offering of for interest foreseeable rate PTS point additionally, reflecting strong an in of remain This quality week, X at to this operation million company. for the X.X% expect bond $XXX in securing We completed years

Australia, we The have billion opportunities Australia a years. generated and Penske on the revenue, in million about growth quarter has dollars Australian for defense over this excited XX energy sectors. XXX the return budgeted the to in market the $XXX I'm in defense over future mining, during sales Australian next Government especially Turning and of spending in profitability, X.X%. and

power contracts frigates and service We vehicles, vessels, offshore equipment combat for and have submarines. petrol to supply systems

thank to times. engines system $XXX unprecedented mining In I'd to key and addition, like worth closing, significant power during team signed we effort million work operators. recently contracts the for their In to supplies our these

I our diversified confident forward across am I about enterprise. opportunities the see look As future in I the

to Our Retail to cost growth Australian significant future remains leverage of XXXX. and in automotive on drive our our periods. horizon marketplace. reach benefit million new commercial poised expense locations disciplined XXX,XXX approach There new on SuperCenter’s driving million and truck $XXX opportunities goal we're many for to The will strong to $XXX businesses. is reductions to focused business, in from the are units recovering business help a

operator you thank And to I'll turn our call for it us today. me the on for Let back joining questions.

Operator

Instructions]. [Operator Excellent.

to moment for compile the pause Q&A roster. will We a just

John of from Bank Your America. first from question line of Murphy the comes

Your line is open.

John Murphy

Good afternoon, Roger.

Roger Penske

John. Hey,

John Murphy

questions, A potential on the business. growth couple of firstly, used

doing you SuperCenter’s look -- physical puzzle at other them you're I by is you're what you efforts Transportation over the in as know what look that you're this, if Vehicle got growing I like at you the you have, online, there dealerships, doing the But us with with XX%. time, your a mean publicly online, Solutions. opportunities you it and startups even it or least, pieces, franchise have and with together just are If just the a of haven't little tying a this And some up the of just are actually are it after get seems Used Penske quite you more at of seems you going you what retail [indiscernible] the And pure got maybe lot will of sort a explicitly? pieces. like other in lot folks footprint what

Roger Penske

looking of sold a portion when continue new forward. go John. also working our to was a start, ratio two market through we at can all to we're we'll know, online and have pronged of go to And But we need the standpoint without really we we I'd number at units things and called pure look tools quarter focusing an creating number we And the that think think at if And all I we delivering as at -- I our brand say can’t obviously, way the our journey. that to it's used a the first the on, the let's we're customization, SuperCenter’s. pivot the the X. how obviously and our using online on. we have approach and we X.X with new that, delivery. technology have And outside XX,XXX you the approach, all we one through our online something from pure a personalize with certainly we customer for that's that a as And bricks-and-mortar of in it, SuperCenter’s. connection to Well, that got And we're way approach, look that

easy of or and a and here looking that months, have can leasing truck locations things country. at next first quarter Now maybe pure those a across at. have PTS, are we're the locations it online country the use it, couple the we we'll from that that into I'm across very the be things with at, to connected would over look X,XXX would model probably looking the standpoint test to sites that delivery of But we be one pilot have of Penske of one the the

truck personal be So that car to front a experience. customer different a pick the in coming up up door to versus he better maybe location I have might bought online show his feel a his at

forward. to think to and that certain at looking I want be from we're And able the in that, going functionality what be to we're exactly we'll we more it areas. open we would and going a technology So pilot that do that use standpoint

think I but right, not we're So behind. you're

come out I just to trying we think a fastest when we're come car out. with

John Murphy

sort growth and just of we very PTS if of [indiscernible] curious incremental of, helpful. And as look more that that I'm capital even offering all the like to drive PAG, there's growth? really going growth, then that out PTS access when at just to can capital capital bond you the think can, at kind on good PTS and through of out have raise somewhat way and because handle an capital That's forward, low it to organic, cost means internal really well for you you go often, are X% Do pretty or you're you the responsibly businesses maybe go in there do have plans as any like PAG, can generation? create cash and free seems you there incredibly entrepreneur some you

Roger Penske

sure. to we are for if the generate interest guess look low going in and whether at, can hand, cash a the on has got to I $XXX $XXX other Fed But, XXXX. Well, year we between duplicate million, while. net rates I'm not for million we the that be said

other the what's are that also, with adjacent to coming taxes right dealership truck to be us would in retail I pause And be? look election, there might are think What real now going and acquisitions the when buy the also we're what situation. up at at looking COVID I are the PTS. and dealerships, opportunities for things us, things at to obviously we

the pay gives interest keep costs to can acquisition to make sheet, we time if down going and a ‘XX. was debt And be bought to. we because a and to the pivot growth $X think $X at that flow we're considerable or our in our a purchasing lower, continue to obviously ‘XX standpoint in I So us mode want and the balance but buy strong billion in we'd a we particular from billion cash so strong still want

that I look people that PAG, from can our we up the of a what its not safe you move the we street us. flexibility. but doesn't PAG, But gives us at think my strong just XX% if pretty would certainly of And itself, and we hurt something think the secure interest realized to quickly. that So and own now, right when in perspective, a comes being PTS us need paper, on, company, and indication I've give about through move

goal were our or take let's ‘XX. position we'd a down, my again, be debt, which is go So to be positive almost be to would position our we equal back where ‘XX a ‘XX. to in costs to going we interest into then, probably And in have obviously where

John Murphy

forward, comp, cost how think if curious on is SG&A And a real very costs. portion is truly lastly, then and I'm you just thank might of I how think, that back come much you permanent? mean sticky this impressive. you over for quickly just time? reduction variable much would you that is sales how And of it

Roger Penske

at same Well, we reductions, is seeing not that, being a things, from mechanics. would helped We're sales the the thing. solid. the down, sales growth we from I quite down. personnel us come look other force, been have quality we're best of getting pretty only come productivity we've variable I that's salespeople, sale compensation see sales from with growth But is think reducing better productivity obviously, perspective. comp has cost we're a by when perspective, but honestly, And left and our what And what sales getting

will solid, much the And quarter, know the I think when at will dollars. with all cars, shop loaner Zoom XXX is you on quality, out. I'm our experienced that what to advertising in to think using for back, major which the better quicker, more X%, I as we'll big think that our was pretty portion what but less so got able less them. about perspective, million rate come but John, as travel area, several need have that T&E maintenance, pieces using there'll tools. again, get vehicle sure vehicle deal say continue the reduce say a connect our then still a think a and would people, I it be through have those use about see the because I digital entertainment was is our time maintenance we're But cars be personnel significantly, ability lower not And policy our probably we it less good an I to based we we've back and customers. We on back, of today think I we to people from

probably give gross is. would we us So the profit, SG&A move confidence XX% to some that it at move a able area And XX%. XX. into or off I in be that $XXX us right the should looked we $X,XXX XX%, the where it's now if model, can an think to it took We

that where to it So cost on as on affects our model, as strong the going pretty at we reduction, we're think I be look we're SG&A.

John Murphy

you helpful. very Roger. Thank That's very much,

Roger Penske

John. Thanks,

Operator

next of Stephanie Benjamin line the question from comes from Your SunTrust.

Your open. is line

Roger Penske

Hi, Stephanie.

Stephanie Benjamin

I dealer there's that a expectations also afternoon. curious, for your about bit to front. business. comment, are truck now and OEM touch for constraints where In wanted seeing units about some I'm good on Hi, made productions commercial little XXX,XXX the I'm you reports in Roger particular, a XXXX. because

maybe, you the business So supply a little side current about talk in demand and of could bit that if environment? the

Roger Penske

look Well orders for the were you September, the XX,XXX. if at numbers

that, XXX. annualize would be that you If

there's I So demand they're definitely that back a out to there. capacity. up know freightliner

however, of chain, Some not demand. with up these the supply kept is

are we forward coming in back. orders we're beginning market and coming now people more really chain. the at retail these production cancelled plus maybe orders is which a are us for back because of people a placing to the of to good not be at expectations good So standpoint me, some because OEM that the I of and really And we're constraint coming into the the base as supply there'll situation look a that seeing truck the from supply market, think business. now of their pausing of ‘XX our lower year, back on But in lot fleets, because

side now. the we're right on I the So curve of think right

Stephanie Benjamin

Great, about positioned? And quarter. how so and that how you thank feel thus I gears, then performance, is bit that to the you you've can you to speak a the little October, U.K. want What in it switching how far much. throughout Maybe business. progressed talk business seen

Roger Penske

September, half look so really and demand. pent July, were let's for demand When up up September, you The quarter, the at the July, Well, in some closed August X%, at X.X%. registration there. looking during in down think were pent the you business, to and down Remember, a the some we market was the but that two August the And almost forward goes we represent. I actually market that's we at look probably because V when had at look month probably you look when it's July. up in brands months

outperformed we market. brands, we outperform So the the and

So homogenized I pretty we very think it had to much And months. -- quarter. good was overall, three a that three we the think

the Brexit that interests Now and in look both talking they'll same registration, and the moratorium I of of look they our the continuing to point, forward. you let have there certain in Brexit it. standpoint our question. tariff, trade also in in OEMs might have the Australia. a obviously I But if the but And got country, if out But up hangs a they're of sides the business. look parts tariffs And both at like fourth have come a we mitigate to in of a The some that like March business. won't any overall this hopefully when going we to have the perspective, those think future, we are this, And deal at at is some look to we we a look about because we're have the strike it is of it's hits Canada, bang things COVID from they're confidence disrupting on what think But deal. be they know the negotiations deals no internally some this to not particular any at handle of at at there getting it about how talk look where I time, which think like from we we there. looks But September. quarter don't the

October, November good a December. for look and we So

car year outperform think superstores. will our certainly I it last business did that used are what

So that see today positive quarter on what should a the can we us, through we are give windshield. based where

Stephanie Benjamin

as U.S., then hear vehicle and that think side of again. we thoughts Got to a mean in your conversations lastly, back a about Roger I'd will well And of it. kind market. love just maybe strength constraints the what lot the new on your for thoughts, level when inventory state the about production pick that market to the of start and high used here up levels then the of And might

Roger Penske

about, Toyota talk just across saw node few to just XX%. now let's last the Well, we at up hours come a in is here

see short question a really to vehicles premium obviously and get And going the are their I to vehicles U.S. would premium SUVs make hard vehicles personal that standpoint, a even happening, think of got vehicle mobility. no to market hard sell, going are that what's still -- thing not placed. on they're supply, one, So where money the number on. think think to at XXXX going could want we on we QX those is we're XXX%. socially to have the supply we and market the but pretty see mix here there's we're the plans hand our really a to pressure we're we that right point say side I to the from overall continue with That's into much other trucks. I then luxury get through the get a certainly bit in little And We a

with for the is of enough Detroit, we we some living cities cities. country of San trucks order and things get Leasing Seattle, what's of Angeles, into can't Solutions going public of these the We back Portland, of Francisco, benefit One parts the mobility, the Los in Truck in York different New coming people those get being of with as people and in see on Penske the out.

day-after-day out that it people metro look out seeing country areas, are into out because at the we're it the demand of or So from there's into truck we areas other perspective. our definitely and can moving

want you go to what determine we In probably demand can have doing the are I -- it to $X. things a you from to for rent fact, the truck is. Cleveland, mean, we're if these try a to Chicago

where way, So should and more think I not cars transportation us cars that's transit, or softness three in to cars more personal would sales on a for it's some I will that car, create the which combined demand public also use you high two think different if going both But daily we people think needed because are which and there's a whether I together, whether and transportation, in a drive or mean, transit, cars. new businesses, mobility I in new it's use Uber now, rental a Lyft, basis luxury drive it's automotive some used. whether those

I issues there's these gives think could definitely us wrong. dealing things future. a part auto be that insight. be Maybe that And safety, in some not personal business good I But I the But are share that's a people of use, to are with that flight cities. the the of So help answer. you some think, will because of bigger these drive bigger the a in

Stephanie Benjamin

those lines to your think of the the said And located Did I I in that's quantify percentage get something in along in that have its been provided No, -- the this or areas your think past? really are the suburban doing, mind helpful. past. you've locations you you

Roger Penske

interstates be big not maybe need that haven't, San leasing placed there's the the to the a we few inside you're highway. think rental really about businesses business, to in when cities, but the but we're we are truck located would because the Francisco, No close well and have out We're by I airport. and we

wouldn't down of in be we some deep areas. metro So the

have that get we I'll to few so probably But that, that we locations. you. for would get a Now legacy get Tony the can

Stephanie Benjamin

Got much, everybody. so it. Thanks

Roger Penske

Thanks. Thanks.

Operator

next comes Stephens. Nelson a Your line from from question Rick of

is line open. Your

Roger Penske

Hi, Rick.

Rick Nelson

afternoon. Good Roger, Thanks. Tony.

Anthony Pordon

Hi, Rick.

Rick Nelson

for about Question here you supplies.

And this expense think normal. shakeout we which levels? is? ratios where at we going level got You go pre-COVID pay a or, you we How higher the to little are GP better do forward? to Yes, used as the back you would move do a into be potentially take than

Roger Penske

to really is then just in selling think have what has the them. at them will we look Well, take going posture have inventory, you're to don't there's vehicles can't if the into be you on going question with more I I no what want right inventory, I to And there the because comment to OEMs be to QX dispose -- don't OEM you made be so don't But we see are have good think think, to because I longer the XXXX. hope setting targets not I dealers and the unrealistic, that internationally, I OEMs, discipline, memories, we need it give cars we've about away. at the up we these board. XXX been when getting across And new we used can we've been obviously, look get margins both that on and

be probably some at So for deterioration. question. answer The is this no can we there'll level? me, there's What be think that I No, no.

going sure SG&A have to an maintain we've so the perspective, that taken. from be So we out to cost we're

basis $X,XXX at me, points if reduction So look based test. did And to Tony, XXX on it looking I gross at we it probably margin. I think situation. think current overall, SG&A a and for you a our about did $XXX adds in the

Rick Nelson

That’s helpful. Okay, great.

a lot off throwing you're of cash. free So

pile You reducing have more recognize been free dividends. you're we that after the debt of to I of levels. got the same reduced Should that into continue of to expect cash sheet the pull debt going balance reinstated you new costs a you lot out. a

a but so are we before more to are they're be plans acquisition, going the So see cash that'll, eminent? of some your think you while take

Roger Penske

said XXXX, let's really, when got down pencils at but we think to, I we we liquidity. Well, at mid-March were we and certainly look when not acquisition no mode to put our this in point, started

marketplace our generating been our balance how that see now, did at that the sheet at looked to million $XXX And standpoint seeing look next and benefits our free take standpoint we year the dividend finance flow million of and question, team from there's at that of could our the no down. sheet. we we point reengineer we at look And of balance that And is from we our think net the then furthermore, that. back, Let's free I is -- successfully debt cash to we're back. million we'll $XXX $XXX able has to the had, XXX-K

we the be some look I our we're when controlled still capital to $X year, somewhere are we I share generate or areas buybacks, probably to the that'll in at CapEx $X.X got we that that'll additional million got give to traditionally used that opportunity, to me, these other at do think to But look invest So so continue levers know. all us of they SuperCenter’s, And next quarter around utilize you we those, utilize. going can if things dividends, you million. will well but of we've car as think

So the to a million about $XX million $XX XX% investment. is on return

we piece, that and certainly because a our is of say where execute an perspective, at our going be however, they on of we're fits larger that's pure that. this, footprint would we to truck digital because some to can't we I to we key that scale We fact is the there's out reconditioning, peers, have will just and sticky area wanted then if have today, in anything of be and So to to they our obviously take meeting have online grow from this get certainly that want have retail we're we're going referral. to have the markets interested we're focusing the very that more that capital, repeat which our there, speed service execute. other some but it building technology model, cannot And sites, invest brands already

position to. would in look to have those of go-to-the-market So as we're but able even more get a capital be we if all opportunities, to we at

Rick Nelson

Great, thanks.

near-term might if how question, a ask I tracking? Finally, could sales October be

Roger Penske

Well, sales, a I to that the be. hard say would time October it's to month we're where time going say this of

I hot think we of a, off came very September. a

right probably down just vehicles. our more absolutely some we of we're are because so out would be look out if obviously, which you vehicles brands looked We numbers, somewhat. might But we're now, at like of single-digits,

everybody's talked about going tell I that don't that's So availability. go you it's to I again. think But over And too I really soon think need where to be. to

Rick Nelson

it. Presumably rock lot. Thanks solid. Appreciate GPU is a

Roger Penske

Yes. Thanks Rick, yes.

Operator

the line question next Morgan. JP Your from comes of Rajat Gupta from

is Your line open.

Roger Penske

Hi, Rajat.

Rajat Gupta

to vehicles afternoon one you my Hi, their dealer impacted I No just source your in good the broader had see Hi a price? but be think be is I’m new do mean, changes vehicle new just forward? profile? side? Do GM doing going into a a any some to profitability? about, still website. – change to taking key offer income, more how disruption? services trying be this the sales start Tony. As electric I talked you will how make could vehicle go may you efficiencies? afternoon likely good Roger. on question of a OEMs think for yesterday new Good will Thanks profitability channel questions. afternoon. On haggle the do a more Maybe GMC channel.

curious as you a do just follow-up? I Thanks. to, how So playing And this have see out?

Roger Penske

get get to more, XX to Tesla taken it's say or profitability. to have you'd billion to are where today they guess I

difficult. journey to service, to be and a in it's manufacturer franchise laws network, look total point, from when They it the have we to this franchise with you complete top think would from the delivery they're difficult U.S. not bottom, I at a using very meaning the have at

a I go think scale. be it would difficult that to on full

all know I order not GM in out would brands perspective, these certain boutique excluding think to other they be it. And utilize coming things might you these Now, I qualify. have they all are about Hummer, don't from but you think maybe a and that remember, our there vehicles are I sell but electrification, to have that the when volume. have of low maybe there's the But dealerships to might for stipulations qualify you about would leverage have that

And If you you the got a expect. I sold you to support And XX OEM think they're or take think then month, or or the it's you either don't XX a a XX lot would and facility. service, have having return have to parts going of capital. you get directly, that that going to to about no XX

think each overall car with when the that we it's X are still in XX% XX% good still think some I think to going and or boutique market. there vehicles a price. or see high long vehicles electrification. we We is but out be the XXX in XX We're be of electrification very me, million going it's years, I before to park to at that look it So going they're time be to the there, in typically investing where moment at

And If other values again, residual on maybe seeing price high And you if these? Volkswagen, look we're these infrastructure. what's before we're seeing think the are new these the at the premium luxury to finance people large to primarily lots Who going a is they captive where going So channel. go a to there's residual? questions of going I separate entrants, you're than support company? to have

Rajat Gupta

that. And SuperCenters. the used Thanks enough. just for Fair on

stores the gave the and us they're economics of tracking. how You numbers around some

third Like a looks peers about XX% here or also so. in above return one You're XX%, the quarter, they've stand-alone of like business, profile your for XX% used talked around that the has SuperCenters. meaning it XX%, is returns the like

might like we could something Just your Just are to that, curious as to and what Why thoughts or missing that you... the as something you be? then on curious, difference replicate there?

Roger Penske

I do dealerships, maybe they're sites might be we that of are using already some what used think previous existing is These those. have the to sites. car of they and repositioning these have as peers some

path. different a have We

As have to have we mortar we and ability the say going sites are significant that for service. bricks

larger. it think also reconditioning I and mentioned before be I and they'll

now and year, that continue think and I three build and then not we but and running will least and got mature the and want they're years to I three it's a overall, for say that to profitability, a consistent. growing, to not at it. come but with I'd a Remember, we've we've four think the on over-commit months, them we seen it we've to profitable been been So mature, takes last two business back path. don't

thing talking great to going have but one’s at we tougher. term business look will it's there on get help we And longer some now, prices bigger be finance is will is margin vehicles. go is, against lower with the to acquisition we'd help to able acquisition. acquisition, our talking a about use how think this No everybody's of that up or get about residuals I The car new OEMs. only bumping the still the companies on again benefit

country. I think you be certainly XX% overall we do that bunch at me to if I and not certainly can we that that it such of unless business at a you've the some has good So to think we're locations of grow And we're XXX cases it CarMax XXX that's the when kind at stores, that at we standpoint and vehicles would smaller from in sustain most the particular this model, somewhere speed building have XXX few size successful return that domestically. on look in network of using, hold these been internationally for can time me, locations. but both a a around proper the seen have and They don't their basis. of very very, stores building to our

when there. going go norm to know XXXX. grow vehicles what's you be I in going November and SuperCenters the And at can and as XXXX now because in we happen, that we five, want transportation, want four our through from what's So into to look new through again, start to three, don't now forecasting sell a etc, we'll I XXX,XXX to and

Rajat Gupta

Understood, luck. good makes a and sense. Thanks lot

Roger Penske

Rajat right, thanks. All

Operator

Instructions]. [Operator

comes Whiston of Your Morningstar. from from line question next David the

is line Your open.

Roger Penske

David. Hi,

David Whiston

Tony. Roger. Hey, Hey,

Anthony Pordon

Hi, David.

David Whiston

see it It Just, when be the haven't I'll point pent-up that? to yet, back? or coming come keep the all must orders. demand, the And huge questions first incrementally back in for haven't it's one on do There the positive like you that you year-over-year dealers seems agree do at with customers back least come service.

Roger Penske

in we've fires some that's the going are the that miles at at We have northern, on some north place -- to think western the driven. to miles again of But I and of I'm sure part country is that got My know looking the impact look service for down, from parts Well, understanding data etc. is business our some where that's it. down. up

of exactly impact warranty that the all at business look California are drag -- I work again, you we'll think the of in off do is more at obviously we a will we in service for we know us driven, our when a Body on shop. different what been customer take level the to out and And pay and get look cost in home, If number and see be to but the us will months. social shops we've change And guess get and go work miles until be going process fires for ready of that at miles the for take people XX%. impact. us body aggregate that's able productivity. get continue of I are key, knowing I as forward, but working data few think over had driven not about be more to we fill people pieces, we be, what have next we'll that on the But

and the warranty flat down for was pay our Our quarter. X% about customer was

David Whiston

some And concern public on recently comments about Brexit. a impact you. of a there's thank then Okay, a no-deal been

Is Should XXXX? recently. for I think be a estimate there an in there raised get alarm Brexit? was particular kind could Mercedes that it any you no-deal of EPS

Roger Penske

you get with to try any have to some maybe I'd Tony now. data and up come with don't that. I get of

to going we're look there if think is I tariffs.

is used where XX% But is that dealers is that. OEM, We the to of in comes impacted. the X-to-X we're XX% or business business going I our the that remember the it so be talking used-to-new cars obviously of opportunity a could as U.K., take part about think is of when customer. new-to-used so our

So that away. just touched

increase higher Guzzler cost we're Remember, been had swallow able and too. maybe the So going I OEMs situation that we've when real -- premium luxury of that. without and somewhat they've because at Gasoline, any think the got part where look there mitigate that that And even of I point. and is other taxes we we be to customer cushion of take a this at to might issue

David Whiston

question the so New -- premium, all is just trucks. developing pickup Vehicle that's new Okay. now on segments And a of electric kind

there's the also looked and Hummer as, in Bollinger touch mean, in great, Rivian, hear opinion with really on your We love which itself. space. unveiled have segment a this to the lot demand I premium week Tesla my they're you're thoughts vehicle Do there's and you very in this the if that customer? on for just segment Hummer luxury expensive, but this of think

Roger Penske

won't and of lot Lamborghini make be on That standpoint sure, these drivers the And Porsche vehicles. and money they? the So are we in of will these Well them Ferrari those luxury. everyday boutique a call for I look, from etc. premium

Lincoln that think for well, off Remember obviously I this. didn't that niche had it but a when so electric. go there's certain a wasn't truck

be what's to they sell to buy to think lot they ultimately of some again customers our and lease residual it's difficult the then I once And without value them. going a on those premium incentives. going that go cars is be

rates know Is Are these, be the our what are the was other. on that, some again, lease bottom a make they're don't channel a think air. like? going in on separate? one today those going will dealers? distribution but But it and what's to the look there going be know they're the brands all won't of line don't I question I we to smaller handle Now, that's on up really boutique big they difference way earlier I or volume to

them, those I that think for dividend be make stickers them. they'll but that, don't pay the OEMs think, profits on will and good the obviously on big I will

David Whiston

And I the call. have checked before this should

Sorry, but have you franchise? a GMC do

Roger Penske

we Yes, do.

David Whiston

thank guys. Okay, you

Roger Penske

All right. you. Thank

Operator

for There turn this are closing the no further to Penske Mr. questions at time. I’ll back remarks. call

Roger Penske

with Jason we've carry QX everybody and come on to thanks of and great we the for support it success year. rest expect in the QX through the to and

you to talking to the forward look at So you. Thank quarter. next

Operator

today's concludes That conference call.

disconnect. You now may

Penske Automotive (PAG) 22 Oct 202020 Q3 Earnings call transcript